The Positive Theory of Capital

CHAPTER V

THE COMPETING CONCEPTIONS OF CAPITAL

AND now we may review the other conceptions of capital already mentioned, and see if any of them can better satisfy scientific requirements.

The conception which seems to me to come nearest to ours is that suggestive one which may be most concisely called the “National Subsistence Fund,” and which very much coincides with Turgot’s “Saved Stocks of Goods.” This conception embraces all material goods with the exception of land. Later on we shall have to make ourselves very accurately acquainted with it, and to avoid repetition I refrain from going farther into it here. I shall only say this much. The conception of the national subsistence fund is, like our own, a conception of great scientific suggestiveness, and is so as regards those very problems which connect themselves with the word capital In particular, as being so much in touch with the phenomenon of capitalist production (production carried on in lengthy processes and roundabout methods), it is even more happy than our conception of the Intermediate Products. The latter, indeed, embraces all those goods which come into existence during the production process, the goods which carry it on and help to complete it; but it does not embrace the initial fund of consumption goods needed to commence the process. It therefore leaves out the first link in the chain, which is a very important one, while the conception of the Subsistence Fund, as I understand it, embraces the entire group of goods by means of which the capitalist process is begun and carried through.

Notwithstanding the importance of this conception in the theory of capital, I put it second to the other for the following reasons. First, on account of the difficulty of sharply dividing between those funds of subsistence which serve for acquisition and production, and those which stand outside of any relation to acquisition and consequently have nothing at all to do with the scientific problem of capital,1 Second, that in any case the conception of “intermediate products” is so conspicuously important, that it is scarcely less worthy of being indicated and emphasised by the name of capital, than is the conception of the “national subsistence fund.” Third, that, as compared with the latter, the “intermediate products” appear to me to have in their favour the distinct and also the decisive advantage of being already familiar expressions. Capital, the factor of production, cannot again be left without a name, and for that reason the conception of “national subsistence fund” must come second.

Next in importance comes Eoscher’s conception. It is due as much to the high scientific position of this writer as to the widely spread acceptance of his doctrine that we should go more fully into the definition he gives of capital. Unfortunately, I am bound to say that it seems to me anything but happy. In the form of it Roscher appears to come very near to the same conception as lies at the basis of our definition, in claiming the designation capital for “every product saved for further production.”2 But in the very next lines, when enumerating the elements of a community’s capital, he veers round to Turgot’s conception, and includes dwelling-houses, “utensils of personal service,” and, in short, goods for immediate consumption. This vacillation is due to the fact that Roscher gives an unusually wide interpretation to the conception of “product” and “means of production.” He looks upon every satisfaction of a real want as the production of a “personal good,”3 and this causes him to recognise everything that serves to the satisfaction of human want (that is, simply, all goods) as means of production. Any unbiassed person can see how unfortunate this is. Without due cause it obliterates the very important opposition that exists between the production of goods which satisfy want, and their consumption. It christens, for example, the idler as a zealous producer, always thinking how he may produce the personal goods of satiety, of ease, of contentment, and so on. It leads, moreover, to a lamentable waste of terminology. When the conception “means of production” is made synonymous with the conception “good,” there is no name left for the true instrument of production. But the latter, as a highly important economic category, must be kept prominent and distinct from goods for immediate consumption, and so we fall from one confusion and ambiguity of terminology into another. This shows itself most significantly in Roscher’s own conception. He feels the very sensible need of distinguishing, inside his conception of capital, those goods which serve to the production of “material goods” from those other goods which serve simply to the production of “personal goods,” and he does this by designating the former as “productive capitals” and the latter as “use-capitals.” This expression is doubly unfortunate. First, in putting “use-capitals” in opposition to “productive capitals,” the capacity of being means of production is implicitly refused to “use-capitals”; while they found admittance to the conception of capital only on the ground of this very capacity, viz. as “products saved for further production.” And second, the same word “productive” is made to serve in the one breath as the predicate which binds together all capitals, and as the predicate which divides capital into two. Could any terminology be more unfortunate?4

But Roscher’s definition of capital is not only inappropriate; it is, in my opinion, logically unsound, inasmuch as it does not cover those things which Roscher means it to define. After he has christened all goods productive instruments, it might be thought that he would consider the totality of goods as capital, with the exception of land. The definition of “products saved for further production”—if the production of personal goods be included—seems to apply to them all. That, however, is not Roscher’s meaning. From his enumeration of the elements of a community’s capital, as well as from an expression used in § 43, where he puts the use-capital in opposition to objects of use which are not capital, it follows that, of consumption goods he will reckon as capital only those which are durable, such as houses, furniture, etc., and not those which are perishable (with the exception of the means of subsistence of roductive labourers). He justifies this by saying:—“On the other hand, the sharp line of division between the Use-Capital and those objects of consumption which are not capital rests, in conformity with our definition of capital, on the fact that the latter are not only more speedily consumed, but are always meant to be consumed; whereas, in the case of the former, the consumption is only the inevitable and the reverse side of the use.” These words cannot very well mean any-thing but that the speedy intentional consumption of goods is the direct opposite of “saving,” so that one characteristic demanded by Roscher’s definition is not present in perishable consumption goods. Suppose this granted, is the same defect not inherent in the perishable raw materials and auxiliary materials of production as in the means of subsistence of the productive labourers, which Roscher has expressly enumerated among the elements of the community’s capital? Is not “the coal at the forge,” the “gunpowder in the chase and in blasting operations,” the bread in the worker’s mouth, quickly and intentionally consumed? It is either, or——! Either speedy and intentional consumption is the opposite of “saving,” and takes away from such goods the property of being capital, in which case Roscher must also exclude the perishable raw and auxiliary materials of production and the maintenance of the producers; or speedy consumption is not a ground of exclusion from the conception of capital, in which case the perishable means of “production of personal goods ” cannot be refused admittance to the conception Roscher’s definition therefore fits either a wider or a narrower circle of things, but never exactly that circle which he meant to define as capital5

The conception of capital most closely allied to this—in so far as it also enumerates consumption goods along with acquisitive instruments—is that laid down by Knies. It is based on an idea which, from the point of theory, is as interesting as it is important. All the same, I think that, on closer examination, it will not be preferred to ours.

Knies defines as capital “that complex of goods available to a community which may be applied to the satisfaction of want in the future.” This definition, as we can easily see, agrees almost word for word with that of another conspicuously important and fundamental conception. If we leave out the words “in the future,’ it takes in all the goods in a community available for the satisfaction of want, and that is an amount which most writers are in the habit of calling the “wealth” ( Vermögen) of the community. If, like Knies,6 we emphasise the fact that wealth embraces only the net amount of goods after deduction of debts, we may perhaps call that amount the community’s “gross property”7 (Guterbesitz). In any case we have in this to deal with an independent amount bearing an independent name, with which “capital” neither coincides nor should coincide.

Now from this amount Knies would distinguish his conception of capital by adding the words “in the future.” Do these words really convey a distinction? In my opinion they do not; at least, if we strictly give them the meaning they naturally have. It is an attribute of all wealth without exception that it is used for the satisfaction of wants in the future. All accumulation of wealth is based on provision for future requirements. Every atom of wealth in my possession at this moment has been acquired at a previous point of time with the view of being spent at a future point of time. That point of time may not be far away; it may, perhaps, be the next day, or the next hour; but certainly it is still in the future. If, therefore, we take the word “future” in its strict sense, Knies’s formula has obviously defined not only Capital but Wealth; and his conception of capital coincides with the ordinary conception of wealth.

If Knies had actually contemplated this, it would not be difficult to pronounce upon his conception of capital. We should have to accuse him of waste of terminology. It would evidently be a highly inappropriate duplication of terms to use the word capital as a synonymous expression for the familiar conception which already bears the name of wealth, while other weighty conceptions—as, for instance, certain groups of acquisitive instruments—have no name.8 But Knies had no thought of any such identification. Indeed, he repeatedly and emphatically says that his conception embraces only a part of the total possession of goods, and he opposes to it, as the second member of his division, those goods that serve for the satisfaction of “current present want.” This classification obviously assumes that the word “present” is not to be taken altogether literally. For if by the “present” were to be understood strictly that point of time which divides the past from the future, the goods which entered into employment in that moment of time would, of course, represent so insignificant an amount that it would not be worth while to speak of them, to say nothing of basing a scientific classification and a new conception on their short lease of life. If the second member of Knies’s classification is to be anything at all, the “present” must be extended from a point of time to a period of time, and this, naturally, can only be done at the expense of the future. By the “present” we must understand a period of time which goes beyond the narrow limits of the fleeting moment, and takes in some part, large or small, of the immediate or near future

Now, while it would be pedantic to say that such a deviation from strict literal exactness is inadmissible, it seems to me unfortunate if a scientific conception can only hold its own by allowing its most important, indeed its only characteristic feature, to be used in a loose sense; all the more so that Knies, in order to guard his conception of capital from merging into that of wealth, should have made the distinction between present and future into a sharp opposition. It is not too much to say that his conception of capital lives by the opposition between present and future, and this opposition must lose its strength whenever, and so far as, goods devoted to the service of a near future, but all the same a future, find their place not on the side of capital devoted to the future, but on the other!

But to look further: if we add a portion of the future to the present, how far is this addition to go? Is it to be the next hour, or the next day, or is it to be a longer period—say the current month or the economic year? This seems to me rather an important point to determine, but Knies himself has not said anything about it. If, in his place, we consider the different possibilities, it is easy to see that the addition of a short period, an hour or a day, does not secure the end contemplated. The amount of goods that a people consumes in a day is of its income, and is a much smaller fraction of its wealth. Now, very few people would think it appropriate to separate off a thousandth part from the total amount of goods which form the total wealth of a community in order to put the remaining together under one independent conception—particularly when that thousandth part is not divided off from the principal sum by a clear and well-marked opposition, but only by a conventional and somewhat metaphorical reading of the word “present” To put it shortly: a conception of capital which embraces roughly of the conception of wealth comes too close to the conception of wealth to have any scientific significance.

But if we add a longer period of time, say a month, we encounter new difficulties. Owing to this altered reading we shall now deduct from the conception of capital all goods that are destined to be consumed in the ordinary purposes of life during the current month. Good. But it is possible that I may make a profit out of these very goods previous to their consumption and without prejudice to it. For instance, a sum of money which I intend to dispose of finally on the fifteenth of the current month, I may lodge with a bank as an interest-bearing deposit from the first to the fifteenth, against a deposit receipt, or I may put it into open account. What then? Does this interest-bearing money belong to capital or does it not? Whatever the answer, we do not avoid serious difficulties. If we answer it in the affirmative, we lay ourselves open to the charge of being illogical; for, by hypothesis, the whole of the current month is a widened present. But if we answer it in the negative, we first put ourselves in a position of flagrant contradiction with firmly-established usage; then we commit ourselves to the strange doctrine that a thing which undoubtedly bears interest is not capital; and, finally, we give up what formed the strongest recommendation of Knies’s conception—its purpose of reconciliation. This conception of capital has been put forward by Knies with the express intention of uniting under it, as a higher and broader unity, all former and competing conceptions. In it Turgot’s “stocks of goods,” and Adam Smith’s “complex of acquisitive instruments,” and Hermann’s “goods of durable use” were to find ample room beside each other. But this mission of reconciliation, and with it the raison d’etre of Knies’s theory, disappears the moment that any one acquisitive instrument is denied recognition as capital—especially interest-bearing money, the first parent of the conception.9

In whatever way, then, it is looked at, we get no clear satisfaction from Knies’s conception. But, to be just to Knies, I must recognise emphatically that there is a deep and significant idea at the root of it, and that if his conception fails of its end it is only because of external defects, or, if I might say so, defects that belong to the technique of conception. As a fact their destination to the service of the future is a peculiarly important characteristic of the goods we call capital, indeed, a characteristic which gives us the key to the most important problems connected with the subject. Only it is not exactly the distinguishing characteristic, but one that capital shares with several other classes of goods which we have good reasons for not reckoning as capital; and for that reason—but only for that reason—it is not fitted to act as the constitutive and distinctive feature on which to base our definition.10

The conceptions of capital hitherto mentioned are distinguished, as a whole, from our conception in that they include consumption goods as well as acquisitive instruments. We come now to certain conceptions that agree with ours in reserving the name of capital for a complex of acquisitive instruments, but differ from it, and from each other, as to what this complex includes.

The widest of these would simply include under capital all acquisitive instruments—not only material but personal. Under different names it counts labour as capital. Many conceive of the work of the labourer as capital; others, of his labour power;11 others, again, of the entire person of the labourer.12 In itself of course there is nothing in the world to prevent the totality of things which serve in acquisition from being grouped together under one uniting conception, and called by one common name. This has already been done substantially in the conception and under the title of “acquisitive instruments,” or “productive goods,” or “goods of higher rank. But it is an entirely different question whether one is justified in claiming the name of “capital” for such a conception. I should say with all possible emphasis that one is not. First of all, if the title is given to the totality of all acquisitive instruments, it can only be at the cost of refusing it to any narrower group of acquisitive instruments which likewise claims it. Now the former conception is already sufficiently known by the above-mentioned names, while the narrower and rival conception is very important and has no other name but capital. Even were the question, then, in other respects an entirely open one, we should, on the ground of economy of terms, decide against the use of the word capital for the totality of acquisitive instruments. But it is not an open question; it is already prejudiced by universal usage. In political economy and in practical life generally we have long been accustomed to treat of certain great social problems as problems of capital, and in doing so we have had in our minds, not a conception which embraced labour, but a conception that opposed capital to labour. Capital and Labour, Capitalism and Socialism, Interest on capital and “Wages of labour, are certainly not harmless synonyms; they express the strongest conceivable social and economical contrasts.

Now what would be the consequence if people began all at once to call labour capital? In the most favourable circumstances it would be an innovation in terminology with little to recommend it. If all the world were to adapt itself to the innovation, and were to do so in full consciousness that it was an innovation in terminology and nothing more, it might remain perfectly clear that, in putting under one common name the real differences that separate labour from what has hitherto been called capital, these differences are not in the least reconciled. As before, everybody would notice these differences, and work without bias at the social problems to which they give rise. Economic theory would not then suffer any material injury beyond the inconvenience of having no name for the chief object of such inquiries; for, of course, from the moment that labour is reckoned capital we must cease to give the name of capital to its social opposite.

This, I say, might be the result in the most favourable circumstances; unfortunately such a result is most unlikely. It is much more probable that the blending of the names would bring confusion into the matter. We need not deceive ourselves on this point; names and catchwords always exert an immense influence over us. Most of us are very fond of slurring over inconvenient contradictions and smoothing down thorny problems. How could one resist the tempting opportunity which the new meaning of the word capital would offer? Between Capital and Labour, as these words were used formerly, there was discord, contrast, conflict. Now one single happy word unites all contrasts; what we thought opposites are really homogeneous; labour is capital; wage and interest are at bottom one!

The reader will perhaps think it a mere jest to put such words in the mouth of serious thinkers. Economic literature, unfortunately, witnesses to the earnest of it, as we see in the case of those writers who conceived the unlucky idea of rebaptizing labour as capital There is first M’Culloch. He represents the labourer as a piece of fixed capital, as a kind of machine. When he has thus torn down the partition wall between capital and labour he immediately goes on to the logical conclusion, and abolishes the distinction between Interest and Wage. To him they are homogeneous; but—and it is as significant as it is ridiculous—he does not very well know whether he should explain interest by wage, or wage by interest. He gets out of the difficulty by explaining each by the other. He first sets forth, at great length, how interest is essentially nothing else than the wage for “previously accumulated labour,” and then he tries to make the nature of wage clearer by explaining it as a profit of capital—“the common and ordinary rate of profit on his capital, exclusive of a sum to replace its wear and tear, earned by the machine called man.”13 It does not seem to have occurred to him that a see-saw like this does not really explain either of the phenomena.

M‘Culloeh’s ill-digested doctrines have nearly fallen into well-deserved oblivion. But if I am not mistaken, we are threatened with a resurrection of them in changed form. Quite lately we have had a number of views, closely related to the foregoing, put forward with that suddenness and abundance which is at all times a sign that the idea is, so to speak, in the air, and promises to be fashionable. We are told almost simultaneously, and in almost the same words, by Weiss, by Dargun, and by Ofner, that every labourer represents a capital equal to the cost of his upbringing—say, a thousand thalers for the unskilled, or three thousand thalers for the skilled labourer. Or, on another method of valuation, we are taught that the labourer is equal to the capitalised net return of his year’s labour. His wage, therefore, is peculiarly a kind of hire of capital, and must, like every other hire, contain at least the three following elements: (1) The replacement of the cost of necessary upkeep of the human machine, calculated at the minimum of existence; (2) a quota for amortisation, in premiums of assurance against old age; and (3) a net interest calculated on the capital value of the human machine at the ordinary interest rate.14

All honour to the motives which have given rise to this theory. It is devised in the interests of the poor, and for the reconciliation of all classes. Between the iron law of wages which takes away all hope from the worker of earning anything but bare necessaries, and the socialist theory which promises the labourers everything, and the propertied classes nothing, it steers a middle course; it leaves the owner of material capital his hard contested interest, but would have him share it with the owner of personal capital. Thus the joint capitalism of the worker becomes on this theory the magic formula that is to be followed by the golden fruits of reconciliation and humanity. The pity is that it is only a formula; a parade of words with no soul of truth in it. Very few people would deny that, in certain points, there is a real analogy between a worker, the cost of whose education and training in production has been advanced to him, and a piece of capital But how deep does this analogy go? On occasions when we wish to make use of it in making comparisons that are really instructive, or when nothing depends on scientific exactitude, the analogy goes deep enough to permit of using a figure of speech and calling the labourer a “capital,” just as capital also is often spoken of figuratively as “previous labour” or “stored-up labour.” But the analogy does not hold right through, and in particular it fails as regards wage and interest. That capital yields a profit or gain, rests on a quite peculiar ground—a ground that does not obtain in the case of labour, or does so very exceptionally. I hope to establish this with perfect clearness when we come to the theory of interest, but this much I may say meantime,—that a man must have curiously shifted his point of view if he thinks to make the essential nature of wage more intelligible by supporting it on the phenomenon of interest. Of the two phenomena, that of wage is by far the more simple and self-explanatory. One man gives the valuable good called labour, and another man gives him a price for it. Anything simpler cannot well be imagined. But the fact that capital yields an interest is much less easy to understand. Witness the many theories we had to discuss in Capital and Interest, none of which were ever able to state satisfactorily the essence of that phenomenon. To think of explaining the simple facts of wage by reading into them the much more involved and obscure facts of interest, is really to explain the church by the steeple. Moreover, the value of these forced interpretations receives a vivid illustration in the fact that, as we have seen, numerous writers are at the same time striving to get at a better understanding of the nature of interest by expounding it as a peculiar kind of wage. Where then the one sees the riddle, the other sees the solution. What an amount of vagueness as to the nature of the problems waiting solution is involuntarily betrayed in all this.15

To sum up. The inclusion of labour in the conception of capital would be, in the most favourable circumstances, inappropriate; in the more unfavourable, which unfortunately have been the real circumstances, it has been pernicious, calculated to perpetuate the confusion of terminology, to open door after door to false analogies, and to obscure and prevent clearness of thought in those very questions which are at once the most difficult and the most important in the social science of to-day. We shall therefore decide very emphatically and, I hope, unanimously, to exclude personal means of acquisition from the conception of Capital.16

The next stage of the controversy brings us to the question whether we are to give the name of capital only to the products of labour that serve for acquisition, the “previous stored up labour,” or are to include land. Both views claim for the name of capital a really important and fruitful conception. As contrasted with labour, land has so much in common with the “produced” acquisitive instruments of material nature that a union of them under one conception has good justification. So, too, the income which flows from the two kinds of acquisitive instruments has, in many essential respects, the same nature, and this likewise favours the uniting of them in one conception. On the other hand, in many essential respects land and capital take different ways. The former is immovable; the latter, for the most part, movable. The former is a gift of nature; the latter, a result of labour. The former cannot be increased, the latter can be. The landowner has a social and economical position essentially different from that of the capitalist; property in land is justified on essentially different grounds from property in movables. Land is the special object of a kind of production which is economically distinguished by many important peculiarities. Income from land, while subject to many laws in common with income from capital, obeys many distinct laws of its own—land rent, for instance, rising with economical development, while interest falls. On all these considerations, the number of which might easily be increased,17 it is most convenient to keep land quite distinct from the other kinds of productive wealth.

Thus the two competing conceptions are fairly well balanced in importance and suggestiveness, and if these properties were the only things to look to in deciding our controversy the decision might really be left very much to individual choice. If, however, we go on to compare the two in the light of the other rules we have laid down as regulating appropriate terminology, we find several points in which the “complex of produced acquisitive instruments” has a definite advantage over its competitor. The first is that of economy of terms. If we apply the word capital to all the material means of acquisition, then the narrower of the competing conceptions, and the branch of income that corresponds to it, remain, notwithstanding their importance, without any name at all. When we have disposed of the words capital and rent of capital otherwise, we have no correspondingly simple name, either for the group of produced acquisitive instruments, or for the income that comes from them. On the other hand, we avoid any such confusion of terminology by giving the name capital to the produced acquisitive instruments. The totality of all material acquisitive instruments may then, well and simply, be called “acquisitive wealth,” and all income flowing from it may, on Rodbertus’s precedent, be called Rent with its convenient subdivisions of land rent and capital rent.

The limitation of capital to “produced means of acquisition” has another advantage in being in accord with popular usage. Both scientific and popular language tell us unmistakably that they do not put land under capital, but oppose the two. The genius of our language plainly distinguishes between landowner and capitalist. No one will say that a nation that has an abundance of fruitful soil is possessed of great capital on that account. The name of interest is never applied by people generally to the income from land, and in scientific literature it is so applied only by an insignificant minority. And in the discussion of the great social problems, property in land and property in capital are generally attacked and defended by quite distinct people and by quite distinct methods. If we sum up all that has been said, the conclusion seems to be that while, for reasons repeatedly given, there can be no idea of an absolutely convincing argument, there is still a considerable balance in favour of defining capital as the “produced means of acquisition,” and against the inclusion of land.

Finally, such conceptions as would limit capital still more severely, may, I think, be easily and decidedly refuted. Kleinwächter would distinguish between the materials and the tools of production, and reckon only the latter as capital, on the ground that in production it is only the tools that actively co-operate and assist us, the materials of production being purely passive.18 But this assumption is not correct. The function of materials of production is not simply to serve as a “dead and plastic mass”; by means of the natural powers residing in them these materials take a share in the work of production which is, indeed, less prominent, but is, essentially, no less active. Kleinwächter’s view is, by his own confession, incorrect from the point of physical science,19 and as we have here to do with a question of productive technique, where political economy must take its stand on natural science, it is incorrect from the point of economics.

Marx, again, would confine the conception of capital to those productive instruments which are to be found in the hands of persons other than the labourers themselves, and are used to exploit the labourers. With him, therefore, capital is the same thing as “means of exploitation;” This distinction would be quite an important and suggestive one if the Exploitation theory itself were correct. But since, as has been shown in my former work,20 it is not, the justification of the distinction based on that theory falls with it.

Jevons’s notion of capital is that of “the aggregate of those commodities which are required for sustaining labourers of any kind or class engaged in work”; “the wages of labour either in its transitory form of money, or its real form of food and other necessaries of life.”21 If this were correct, every land would be rich in capital in proportion as its wages were high and its means of subsistence cheap. An African tribe that has neither industry, nor machinery, nor factories, nor railways, but lives under a tropical sun, where the necessaries of life are poured forth without stint, would be the richest in capital! Obviously, of course, the idea that Jevons had in his mind was a perfectly correct one, but the expression he gave it was unfortunate. He confused a condition of the formation of capital with capital itself. The way of capitalist production is long and roundabout, and man cannot enter upon it unless he is provided with the means of subsistence for the time that must intervene before he reaps the return. But it is not the means of subsistence, and, in particular, it is not the means of subsistence alone, that constitutes capital. Capital only comes into existence when man actually enters upon the profitable roundabout journey that the means of subsistence have made possible; when he builds machines, tools, railways, factories, raises raw materials, and so on. However abundant the means of subsistence were, if the workers were to consume them in living from hand to mouth, the community would evidently never accumulate capital at all.

Finally, there remain those conceptions which see in capital not a complex of goods, but an abstract quantity hovering over goods, as it were; as, for instance, Kühnast’s “sum of value,” or M’Leod’s “circulating power.” I have, generally speaking, a very poor opinion of such idealisations of economic conceptions. They are usually cheap expedients for getting round difficulties. If in any difficult subject there occurs some troublesome, angular kind of conception that corresponds with real life and will not fit in to the particular line of explanation, there are always certain theorists ready to disembody it, whereby, of course, it loses its unmannerly angles and edges, but, at the same time, its strength and truth. It becomes a phrase and leads to phrases. “We have an instance of this here. If we were to take the sponsors of those definitions at their word, and ask them whether they would seriously say that an immaterial sum of value or circulating power can grind corn, or spin yarn, or plough up land, or carry a load; or whether it is not the case that these good things are done by the common material goods called mills, looms, ploughs, locomotives, they would be very much perplexed. For, asking at their own consciousness, they could scarcely deny that, under the name capital, they have always and peculiarly thought of that something which helps man to work in his production; and the rude materiality of this something agrees but ill with the high-sounding abstract definition of “sum of value” or “circulating power.” It is very significant, as regards this group of definitions of capital, that their origin may be traced to a slipshod expression of a writer who was always too careless about the way in which he stated his conceptions—J. B. Say. Say first—and quite correctly—gives the name of capital to certain results of labour that serve as tools to further production, such as Seed, Dye-stuffs, Wool, Tools, Machines, Buildings, Cattle, etc., and calls their total value Capital Value. Later on he makes the remark that a capital value may take very different forms, such as money, houses, utensils, commodities, etc., and this gives him occasion to call “this value a capital, so soon as it is contained in objects, whatever they be, which are destined to productive activity.”22 Evidently a careless and contradictory expression, which, however, his economical disciples made the basis of a serious theory!23

Thus, of all the many readings of the conception of capital, there is only one left on the field,—only one, of which it can be said that it has stood all the tests. It is that which, by capital, understands an aggregate of products destined, not for immediate consumption or use, but to serve as means of acquisition. It is a conception which meets all our logical and terminological requirements. Logically it is unassailable, and it is suggestive; so suggestive that it distances the most of its competitors, and is distanced by none of them. And, terminologically, its investiture with the title of capital best economises our terms, and agrees with that usage which has taken most general and firm root in economics and in popular speech. Finally, it is the conception which most exactly coincides with the object of those great social problems of our time which people are in the habit of discussing as problems of capital. In its one division, as “Social Capital,” it indicates the third instrument of economical production in the triad of Nature, Labour, and Capital; and in its other division, as “Private Capital,” it indicates the third source of the economical acquisition of goods by individuals in the triad Rent of land, Wage of labour, Interest on capital. If, then, unbiassed people are ever to agree on a conception of capital, we may expect that this will be the one chosen.

24 I do not care to waste more words than necessary here on things which will become clear of themselves as we go on, bat I may make one remark. For reasons that Rodbertus (Das Kapital, p. 801) has seen through tolerably correctly, and which will be fully explained later, it is by no means my meaning to emphasise only the subsistence advanced to productive labourers, and reckon it capital. Either the conception of capital is limited to goods which serve immediately in production, and therefore to productive goods proper,—in which case means of subsistence in general, and also the means of subsistence of labourers, have no share. Or, besides “intermediate products,” such finished consumption goods are taken into the conception as serve indirectly by their existence to production,—in which case, as will be shown in the proper place, certain advances of subsistence given to landowners and capitalists must be included. But then we are at once met with the difficulty suggested in the text of fixing definitely, when the advances of subsistence, given to people who do not themselves produce, are of indirect assistance to production, and when they occupy no relation to it.

25 Grundlagen der Nationalökonomie, § 42.

26 Grundlagen der Nationalökonomie, § 211.

27 See also the acute criticism of Knies, Das GM, p. 46.

28 In latest editions Koscher, evidently under the influence of what Knies has said on the subject, formally widens his definition of capital to some extent by an addition. It now runs: “Every product which is destined to further economical production (even to systematic later use) we call capital.” This addition, however, does not materially widen the conception, as Roscher, independent of this, has already included every use—therefore every “systematic later use”—in the production of (material or personal) goods.

29 Das Geld, pp. 83 and 92.

30 For the community as a whole, moreover, which, naturally, has neither claims nor debts, its material property, according to Knies’s definition, completely coincides with its wealth.

31 Knies himself has pronounced this opinion in saying (Das Geld, p. 22) that no one would claim that “capital is identical with economic goods.”

32 It needs no showing that the group of short-dated money claims, although the most obvious, is by no means the only example that might be given in proof of the objection urged in the text.

33 Among others Ricca-Salerno (Sulla Teoria del Capitale, Milan, 1877, p. 58) and lately Emil Sax (Grundlegung der theoretischen Staatswirthschaft, p. 310) have criticised Knies on this point. Sax’s criticism of the weaknesses of Knies’s conception is both trenchant and substantially correct, but he does not recognise the kernel of truth that is in it, and ends by a judgment which, on the whole, is rather rudely expressed.

34 For instance, Adam Smith, ii. 1; Umpfenbach, Das Kapital in seiner Kul-turbedeutung, 1879, p. 19; Say, Cours Complet, part i. chap. x.

35 Thus Say, Cours Complet, part i. chap. xiii.; M‘Culloch, Principles, first edition, p. 319; fifth edition, p. 294; Walras, Eléments d’Economie Politique, p. 217.

36 See my Capital and Interest, p. 99.

37 Fr. Albert Maria Weiss, Ord.-Priester, Die Gesetze der Berechnung von Kapitalzins und Arbeitslohn, Freiburg, 1883. Quoted by Schäffle in Tübinger Zeitschrift, vol. xli. p. 225. Dargun, Arbeitskapital und Normalerwerb, Tübinger Zeitschrift, vol. xl. p. 514, and specially pp. 530-535. Ofner, Ueber das Bechtsprincip des Arbeitslohnes nach herrschendem System, Juristische Blätter, 1884, Kos. 3 and 4. Engel, Der Werth des Menschen, 1883.

38 It is very significant that none of the authors who explain wage by interest makes any attempt to explain interest itself. They simply accept it as a given fact—with the exception of M‘Culloch, who, with amazing naivete, repeats the trick again in the opposite way, and explains interest by wage. It is very gratifying to me to note that Schäffle holds himself aloof from the theories just criticised, although his social and political tendencies must certainly lie in their direction (Tübinger Zeitschrift, vol. xli. p. 225).

39 See also Schmoller, whose conclusions agree with mine (Lehre vom Einkommen in ihrem Zusammenhang mit den Grundprincipien der Steuerlehre, Tübinger Zeitsehrift, 1863, p. 24); Knies, Das Geld, pp. 15-22; Ricca-Salerno, as before, p. 28; and Cossa, La Nozione del Capitalo, in the Saggi di Ec. Pol., 1878, p. 163. What Cossa says against the passion for immoderately widening the conception of capital is well worth noting. He is remarking that one very often feels the want of an expression which would indicate without ambiguity just those products which serve immediately for production, and he continues:—“Se il concetto del capitale si allarga di troppo, comprendendovi altri prodotti, o altri fattori della produzione, esso o sfuma del tutto, o non ha più la sua ragione di essere. Si contruisce, per dir la cosa in altro modo, uno strumento od imperfetto o superfluo, il quale o non serve punto, o non serve bene. E tali categorie debbonsi senz’ altro espellere, e nongiá moltiplicare nelle investigazioni economiche, se non vogliamo che la scienza si isterilisca in polemiche oziose e puramente nominali,” p. 168.

40 See Knies, Das Geld, p. 33; Schönberg, Handbuch, second edition, vol. i. p. 210; Roscher, Grundlagen, § 42, note 1.

41 Die Grundlagen und Ziele des sog. wissenschaftlichen Sozialismus, Innsbruck, 1885, p, 185.

42 “In the strict physical sense, of course, this is not correct” (p. 192).

43 Capital and Interest, book vi. p. 813.

44 Theory of Political Economy, second edition, pp. 242, 263.

45 Cours Complet, part i. chap. viii. It may be added that Say, in this and other passages formerly quoted, gives no less than four contradictory readings of the conception of capital. In one place, chapter viii., he explains it as products of labour which serve towards production; and in the same chapter he speaks of it as the value of these products. In chapter x. (see above, p. 50) he makes it the talents and skill of the labourers; and in chapter xiii., again, the persons of the labourers!

46 That theories of such doubtful value should commend themselves to the recognition of eminent jurists like Kühnast may, perhaps, be explained by pointing out that jurists, as having to deal in their systems, to a very great extent, with abstract persons and objects, have, generally, a strong tendency to hypostatize conceptions; a practice which may be quite suitable for their special field of investigation, but is certainly misapplied in political economy.

• 1See my Capital and Interest, 1890, p. 111.
• 2The English word “Cattle,” as Knies (p. 7) has rightly remarked, has nothing in common derivatively with our conception.
• 3P. 219 (German edition, p. 266). See also my Hechte und Verhältnisse, p. 51. Innsbruck, 1881.
• 4Cossa [La Nozione del Capitale), Saggi di Ee. Pol., p. 157, has the definition: “Capitale è un prodotto impiegato nella produzione.” Ricca-Salerno (Sulla Teoria del Capitale, 1877, p. 51) says: “Il capitale è ricchezza prodotta applicata alla produzione.” Rodbertus, whose opinion I am inclined to put particularly high, because, although not altogether happy in his solution of the problems of capital, he had an insight into its essence such as scarcely any one before him had, explains (Das Kapital, p. 234, also Zur Beleuchtung der soz. Frage, p. 98) that “Capital (materials and tools) is product which serves for still further production.” A. Wagner, also, who has done good service in the theory of capital (Grundlegung, second edition, p. 38), calls capital a “Stock of economical goods, which serve as instruments to the making or acquiring of new economical goods.” In the most recent Italian monograph on capital, Supino (Il Capitale nell’ Organismo Economico e nell’ Economia Politica, 1886, pp. 9 and 17) defines capital again as “Il prodotto del lavoro passato che serve a produzione successiva,” or as “ricchezza impiegata produttivamente allo scopo di ricavarne un profitto.” Of other prominent modem writers may be mentioned Pierson (Leerboek der Staathuishoudkunde, Haarlem, 1884, p. 157); Schönberg (Handbuch, second edition, p. 209), “Capital is a material means of production, obtained by human labour, which, employed as such, is destined to give a return to its owner”; E. Sax (Grundlegung der theoretischen Staatswirth-schaft, pp. 115, 315, 323, etc.) Of recent French writers on the subject Gide (Principes d’Économie Politique, Paris, 1884) recognises the two varieties in the conception of capital with a clearness rare even in French literature, and distinguishes them as “capitaux simplement lucratifs” and “capitaux productifs.” “Les premiers,” he says, “sont ceux que rapportent un revenu á une personne; les seconds sont ceux qui prodnisent one richesse nouvelle dans le pays” (p. 148). His only failure is that he would recognise productive capitals alone as “true” capitals.In English literature our conception of capital (without, of course, any clear distinction being kept between its two varieties) is almost exclusively the prevailing one; this is so well known that I may spare quotations. Generally speaking, it is very significant of the state of “public opinion” in the matter that not long ago Kleinwächter (Schönberg’s Handbuch, second edition, p. 210) could explain “Common usage in political economy to-day considers it an essential characteristic of capital that it is a material means of production.” The only difference of opinion is as to whether land should be reckoned as capital or not. Finally, I think I may ventare to express the opinion that even the fore-most representative of a rival definition, Knies, is in opposition to us more in form than in matter. It is he at any rate who has, in a masterly manner, developed the idea—the really important one in our statement of the conception—that, in defining capital, we must define that which is the object of those problems that “have appeared on the scene under the name of capital” (Das Odd, p. 19).
• 5See Mill’s Principles, i. 1. 2.
• 6Das Geld, pp. 83 and 92.
• 7For the community as a whole, moreover, which, naturally, has neither claims nor debts, its material property, according to Knies’s definition, completely coincides with its wealth.
• 8If we were to carry our analysis of what man does in production a step further, we might appropriately distinguish three fundamental ways in which the producing man “moves things.” The first is what, for want of a better name, we may call simple movements or changes of place—where men transport entire objects from one locality to another. Thus the miner brings the ore from the depths of the shaft to the upper air; the merchant takes his goods from the place where they are produced to the place where they are demanded and used. The second embraces those movements of parts of one and the same object whereby it experiences a change of form, as when nails are made from iron, statues from marble, pipes from clay, dials from ivory, combs from caoutchouc, tumblers from glass, furniture from wood. The third, and much the most common way, is where different objects are brought together in space to form combinations of matter. These combinations may be merely temporary, or they may be lasting. Instances of the one are where the stamp falls on the coin, the chisel chips at the marble, the carving tool is applied to the wood, the ore put into the furnace, the yarn into the loom, the paper under the printing press, the stuff under the shears, the plough through the clods. Instances of the other are where we build a house out of wood, stone, lime, iron, etc.; where we put together a watch out of wheels, springs, pendula, weights, stop-action and many other things; in fact in manufacture generally. I must warn the reader that this division into three fundamental forms neither has, nor is meant to have, the character of strict scientific classification. Indeed, these forms merge in many instances into one another. Temporary combinations, for instance, are very often half-way to changes of form, and what I have called a simple change of place is at the same time, in a certain point of view, a material combination, a bringing together of the thing moved and the object (personal or impersonal) to which it is moved. This division, however, will make it easier to find our reckoning, and will prove too, if necessary, the correctness of the general characteristics which I have ascribed in the text to productive processes. I mean to say that it is easy to see that every productive activity which one can think of ranges itself under some one of these three fundamental forms, and to that extent it is proved that such an activity must, a fortiori, range itself also under the general formula given in the text, where we have described the nature and method of the production of material goods as the mastery of natural powers by means of putting objects in motion.
• 9Slaatswirthschafiliche Untersuchungen, Munich, 1832, p. 59, and similarly in the second edition of 1874, p. 111. On p. 56 he expressly calls capital “Wealth which brings in income.”
• 10Grundlagen und Ziele dea sog. wissenschaftlichen Sozialismus, 1885, p. 184.
• 11Theory of Political Economy, second edition, London, 1879, p. 242.
• 12Ibid. p. 242, and very emphatically p. 264: “The capital is not the railway, bat the food of those who made the railway.”
• 13Das Geld, first edition, p. 47. In the second edition (1885) the same conception is on the whole retained, but often formulated in a less exact manner. Accordingly, where I do not explicitly mention the contrary, I quote from the more distinct formulation of the first edition.
• 14“It does not represent commodities in any way whatever, but only the power its owner has of purchasing what he wants” (Elementi of Political Economy, 1858, pp. 66 and 69).
• 15Grundlagen, der Nationalökonomie, § 42.
• 16See also Schmoller, whose conclusions agree with mine (Lehre vom Einkommen in ihrem Zusammenhang mit den Grundprincipien der Steuerlehre, Tübinger Zeitsehrift, 1863, p. 24); Knies, Das Geld, pp. 15-22; Ricca-Salerno, as before, p. 28; and Cossa, La Nozione del Capitalo, in the Saggi di Ec. Pol., 1878, p. 163. What Cossa says against the passion for immoderately widening the conception of capital is well worth noting. He is remarking that one very often feels the want of an expression which would indicate without ambiguity just those products which serve immediately for production, and he continues:—“Se il concetto del capitale si allarga di troppo, comprendendovi altri prodotti, o altri fattori della produzione, esso o sfuma del tutto, o non ha più la sua ragione di essere. Si contruisce, per dir la cosa in altro modo, uno strumento od imperfetto o superfluo, il quale o non serve punto, o non serve bene. E tali categorie debbonsi senz’ altro espellere, e nongiá moltiplicare nelle investigazioni economiche, se non vogliamo che la scienza si isterilisca in polemiche oziose e puramente nominali,” p. 168.
• 17See Knies, Das Geld, p. 33; Schönberg, Handbuch, second edition, vol. i. p. 210; Roscher, Grundlagen, § 42, note 1.
• 18Die Grundlagen und Ziele des sog. wissenschaftlichen Sozialismus, Innsbruck, 1885, p, 185.
• 19“In the strict physical sense, of course, this is not correct” (p. 192).
• 20Capital and Interest, book vi. p. 813.
• 21Theory of Political Economy, second edition, pp. 242, 263.
• 22Cours Complet, part i. chap. viii. It may be added that Say, in this and other passages formerly quoted, gives no less than four contradictory readings of the conception of capital. In one place, chapter viii., he explains it as products of labour which serve towards production; and in the same chapter he speaks of it as the value of these products. In chapter x. (see above, p. 50) he makes it the talents and skill of the labourers; and in chapter xiii., again, the persons of the labourers!
• 23That theories of such doubtful value should commend themselves to the recognition of eminent jurists like Kühnast may, perhaps, be explained by pointing out that jurists, as having to deal in their systems, to a very great extent, with abstract persons and objects, have, generally, a strong tendency to hypostatize conceptions; a practice which may be quite suitable for their special field of investigation, but is certainly misapplied in political economy.
• 24When we are told that capital assists in the production of wealth, and then again that it assists in the obtaining of wealth for its owner, we are apt to jump to the conclusion that the two phenomena are intimately and essentially connected, and that the one is the immediate result of the other—that capital can bring wealth to its owner because capital assists in the production of wealth. As a fact, Political Economy has taken up this idea only too readily and too completely. Captivated by the deceptive symmetry that exists between the three great factors of production—Nature, Labour, Capital—and the three great branches of income—Rent, Wage, and Interest—the science, from Say’s day till the present, has taught that these three branches of income are nothing else than the payment for the three factors of production, and that Interest in particular is nothing else than the compensation which capital receives for its productive services when the product is divided out among society. Propounded by various interest theories in various forms this idea has found its most concise and, at the same time, its most naive expression, in the well-known “Productivity theories”—those theories which explain interest directly as the natural fruit of a productive power peculiar to and resident in capital.
• 25Originally the word Capital (Capitale from Caput) was used to signify the Principal of a money loan (Capitalis pars debiti) in opposition to the Interest. This usage; already foreshadowed in the Greek formation κεϕάλαιον, became firmly established in mediæval Latin, and appears to have remained the prevailing one for a very long time, even pretty far down in the new era. Here, therefore, Capital meant the same thing as “an interest-bearing sum of money.”
• 26The theory of the use of goods I have already gone into at length in Capital and Interest. I there showed that material goods are nothing else than such distinct forms of matter as admit of the natural powers residing in them being directed to human advantage. I showed how the “use” they afford is realised through concrete activities of these natural powers, and, therefore, by real forth putting of power. I showed how a use (Gebrauch or Nutzung) cannot be made of them otherwise than by taking the peculiar forms of the energy of the good at the proper moment, supplying the conditions necessary to render them available where they previously existed in an unavailable form, and then bringing these forms of energy into proper connection with that object in which the useful effect is to take place. On these considerations I based the conception of the “Material Services” (Nutzleistungen) which I believe to be the only one that corresponds with facts, and rejected certain shadowy ideas which connected the old theory of interest with the word “Uses” of goods. What remains for us here is, on the same lines, to lay down certain fundamental ideas as to the origin of material goods.
• 27Again, the solution suggested is the most conservative one. Without laying any particular weight on the fact that the historical origin of the word Capital indicates a relation to an acquisition or a gain, and that our reading remains true to this, it preserves the double relation—the relation to acquisition of interest on the one side, and to production on the other—which was imported into the conception of capital by Adam Smith, and since his time has been adopted in scientific usage. It is no inconsiderable advantage, then, that we do not require to create a majority in its favour by a revolution in terminology; the majority is already with us, and the conception may easily be carried unanimously if we add some new unbiassed members. Here, too, it is worthy of particular attention that those writers who have occupied themselves professedly and most profoundly with the investigation of the conception of capital and its problems, have ended, almost without exception, by adopting exactly the same conception, or at least one which comes very close to it.
• 28If we look more closely at the way in which man assists natural processes, we find that his sole but ample contribution consists in the moving of things. “Putting objects in motion” is the idea which gives the key to all human production and its results;—to all man’s mastery over nature and its powers. And this is so simply because the powers reside in the objects. Now when man by his physical powers—the power of moving things—is able to dictate where the object shall be, he obtains a control over the place at which a natural power may become effective; and this means broadly a control over the way and over the time in which it may become effective.
• 29Knies defines as capital “that complex of goods available to a community which may be applied to the satisfaction of want in the future.” This definition, as we can easily see, agrees almost word for word with that of another conspicuously important and fundamental conception. If we leave out the words “in the future,’ it takes in all the goods in a community available for the satisfaction of want, and that is an amount which most writers are in the habit of calling the “wealth” ( Vermögen) of the community. If, like Knies, we emphasise the fact that wealth embraces only the net amount of goods after deduction of debts, we may perhaps call that amount the community’s “gross property” (Guterbesitz). In any case we have in this to deal with an independent amount bearing an independent name, with which “capital” neither coincides nor should coincide.
• 30Knies defines as capital “that complex of goods available to a community which may be applied to the satisfaction of want in the future.” This definition, as we can easily see, agrees almost word for word with that of another conspicuously important and fundamental conception. If we leave out the words “in the future,’ it takes in all the goods in a community available for the satisfaction of want, and that is an amount which most writers are in the habit of calling the “wealth” ( Vermögen) of the community. If, like Knies, we emphasise the fact that wealth embraces only the net amount of goods after deduction of debts, we may perhaps call that amount the community’s “gross property” (Guterbesitz). In any case we have in this to deal with an independent amount bearing an independent name, with which “capital” neither coincides nor should coincide.
• 31Again I say a control over the time in which a natural power may become effective. This proposition, also, must not be taken too literally. It must not be imagined that natural powers work intermittently; that man can sometimes bring them to a standstill, sometimes set them working again. On the contrary, natural powers are always at work; a natural power not active would be a contradiction in terms. But it is possible that several powers may be so combined that their activities may for a time mutually balance each other, and the resultant be rest—if not complete rest, still some movement so slight that, as regards human purposes, it may be neglected. When this is the case, before any new resultant can emerge that is of interest to man, there must be an entirely different combination of materials and powers. This suggests how man may get control of the point of time at which a definite resultant emerges. It is only necessary for him, by skilful use of his power to move objects, to provide the causes of the desired effect, all but one. So long as this one is not present the conditions are unfulfilled, and there cannot be the desired result. But when at the proper moment he adds the last condition, the movement hitherto held in leash, as it were, is suddenly set free, and the desired effect is obtained at the opportune time. Thus the sportsman moves powder and lead into the barrel of the gun; he shuts the breech; he raises the cock. Each of these things has for long possessed and expressed its peculiar powers. In the powder are present the molecular powers whose energy later on is to expel the shot from the barrel. The barrel now, as formerly, exerts its forces of cohesion and resistance. The trigger which is to let the cock smash down, strains and presses against the spring. Still the arrangement, the disposition of the collective powers, is such that the resultant of their mutual energies is rest. But the sportsman covers the wild fowl with the barrel: there is a slight pressure on the tongue, a little dislocation of the arrangements, and the shot flies.
• 32The variation which Hermann, however, has given must be considered an independent one, and is the fourth reading in arithmetical order given to the conception. He goes back to capital as the source of income, and makes this the object of his definition: Capital, he says, is “every durable foundation of a utility (Nutzung) which has exchange value.” In opposition to the last definition this one includes under the conception of Capital all land, and besides embraces such consumption goods as are durable, like furniture, houses, etc., even if they are personally used by the owners.
• 33A sixth variation comes from Kleinwächter. He finds it a characteristic mark of capital that it lightens the toil of acquisition or productive labour. Now this characteristic appears to him not to belong to all means of production, but only to one category of these, the tools of production, while the matter or materials of production are absolutely passive during the whole production process; they are worked up or used up but give no assistance in working. “Logically,” therefore, “the conception of capital should be limited to tools of production.”
• 34A seventh interpretation has Jevons for its author. It runs parallel to a certain extent with the foregoing. That is to say, Jevons also considers it proved that by capital is to be understood “wealth employed to facilitate production.” But he finds this characteristic in quite another group of concrete goods from that of Kleinwächter. “The single and all-important function of capital,” he says, “is to enable the labourer to await the result of any long lasting work—to put an interval between the beginning and the end of an enterprise” Capital, then, “consists merely in the aggregate of those commodities which are required for sustaining labourers of any kind or class engaged in work. A stock of food is the main element of capital; but supplies of clothes, furniture, and all the other articles in common daily use are also necessary parts of capital.” The true and only capital thus, according to Jevons, is the sustenance of the labourers.
• 35A seventh interpretation has Jevons for its author. It runs parallel to a certain extent with the foregoing. That is to say, Jevons also considers it proved that by capital is to be understood “wealth employed to facilitate production.” But he finds this characteristic in quite another group of concrete goods from that of Kleinwächter. “The single and all-important function of capital,” he says, “is to enable the labourer to await the result of any long lasting work—to put an interval between the beginning and the end of an enterprise” Capital, then, “consists merely in the aggregate of those commodities which are required for sustaining labourers of any kind or class engaged in work. A stock of food is the main element of capital; but supplies of clothes, furniture, and all the other articles in common daily use are also necessary parts of capital.” The true and only capital thus, according to Jevons, is the sustenance of the labourers.
• 36A ninth variation we owe to the distinguished critic of the theory of capital, Karl Knies. It originates in a well-meant attempt to settle the terribly tangled controversy to the satisfaction of everybody. To this end Knies endeavours to construct a conception of capital which will be so wide that the most important of the contending interpretations may find room in it beside each other. The uniting element in the conception he imagines he finds in the devotion of goods to the service of the future. Accordingly he defines the capital of a community as “its available stock of goods (whether for consumption, acquisition, or production) which may be applied to satisfying wants in the future” This definition does, as a fact, afford room both for Turgot’s “saved stocks of goods” and for the “produced means of production” of Adam Smith’s school, as also for all goods embraced in Hermann’s definition as affording the foundation of a durable—and therefore a con-spicuously future—utility.
• 37If the interpretations just mentioned are divided in opinion as to the goods which should be designated capital, they are, at any rate, all agreed that it is goods that are to bear that name. But, finally, an eleventh reading of the conception calls this in question, and, instead of making capital a real concrete quantity, distils out, as it were, some kind of abstraction as the essence of capital. Thus M’Leod, who sometimes recurs to a favourite metaphor of earlier writers and defines capital as a “stock of accumulated labour,” sometimes goes still deeper in abstraction and defines it as “purchasing power “or” circulating power.” These phrases are not meant as illustrations, but explanations given in full earnest; he gives us to understand this in the most emphatic way by saying, in one place, that the application of the word capital to goods is a simple metaphor, and on another occasion, in so many words, that capital does not represent goods in any way whatever. Quite recently too we have a strikingly similar conception in the suggestive work of a juristic writer, Kühnast. He also tells us emphatically that capital is of an immaterial nature, and does not consist of material objects at all—of goods themselves, that is to say—but only of their value. “Capital is … the value of the productive power contained in material goods … or a complex of productive material values.”
• 38Numerous as are these various readings of the conception, our list does not by any means exhaust the divisions and subdivisions that might be given. In addition to the above inter-pretations which differ in form—which are, that is, different definitions—there may be complete unanimity as to the formula of the definition, and yet a good deal of disagreement as to the essence of it. This might happen where a word employed in all the definitions as characteristic and distinctive was not used in all of them in the same sense. Not to speak of less important instances, there are two characteristic terms which, as capable of different readings, involve materially different interpretations of the conception of capital One of these is the word “good.” Of the many economists who were agreed in defining capital as a stock or group of goods, some, taking the word in its narrower sense, thought only of a supply of material goods; some, extending it to immaterial objects, thought of things like the state, peace, law, national honour, virtue; some again, under the same term, included useful personal properties and powers; while others took man himself into the conception. A similar ambiguity has attended the use of the characteristic term “means of production,” or simply “production.” While some economists, and those the majority, understood by production simply a pro-ducing of materials for the satisfaction of human want, others included the producing of what they called “inward goods,” the creation of satisfactory conditions for and in the human person. The consequence of this was that the significant term “means of production” lost every possible limitation, and that even goods for immediate enjoyment were received into the conception of capital on the ground of being instrumental in producing the “inward goods” of content, health, culture, etc. The greatest sinner in this respect is Roscher. He first defines capital to be “every product which is dedicated to further production,” but then divides this general conception into” Productive capital” and “Use capital,” according as these products affect the production of material goods or “the production of personal goods or useful relations.” Thus, notwith-standing the difference in definition, his conception of capital practically comes very near to that of Turgot.
• 39To sum up. The inclusion of labour in the conception of capital would be, in the most favourable circumstances, inappropriate; in the more unfavourable, which unfortunately have been the real circumstances, it has been pernicious, calculated to perpetuate the confusion of terminology, to open door after door to false analogies, and to obscure and prevent clearness of thought in those very questions which are at once the most difficult and the most important in the social science of to-day. We shall therefore decide very emphatically and, I hope, unanimously, to exclude personal means of acquisition from the conception of Capital.
• 40The next stage of the controversy brings us to the question whether we are to give the name of capital only to the products of labour that serve for acquisition, the “previous stored up labour,” or are to include land. Both views claim for the name of capital a really important and fruitful conception. As contrasted with labour, land has so much in common with the “produced” acquisitive instruments of material nature that a union of them under one conception has good justification. So, too, the income which flows from the two kinds of acquisitive instruments has, in many essential respects, the same nature, and this likewise favours the uniting of them in one conception. On the other hand, in many essential respects land and capital take different ways. The former is immovable; the latter, for the most part, movable. The former is a gift of nature; the latter, a result of labour. The former cannot be increased, the latter can be. The landowner has a social and economical position essentially different from that of the capitalist; property in land is justified on essentially different grounds from property in movables. Land is the special object of a kind of production which is economically distinguished by many important peculiarities. Income from land, while subject to many laws in common with income from capital, obeys many distinct laws of its own—land rent, for instance, rising with economical development, while interest falls. On all these considerations, the number of which might easily be increased, it is most convenient to keep land quite distinct from the other kinds of productive wealth.
• 41Finally, such conceptions as would limit capital still more severely, may, I think, be easily and decidedly refuted. Kleinwächter would distinguish between the materials and the tools of production, and reckon only the latter as capital, on the ground that in production it is only the tools that actively co-operate and assist us, the materials of production being purely passive. But this assumption is not correct. The function of materials of production is not simply to serve as a “dead and plastic mass”; by means of the natural powers residing in them these materials take a share in the work of production which is, indeed, less prominent, but is, essentially, no less active. Kleinwächter’s view is, by his own confession, incorrect from the point of physical science, and as we have here to do with a question of productive technique, where political economy must take its stand on natural science, it is incorrect from the point of economics.
• 42Finally, such conceptions as would limit capital still more severely, may, I think, be easily and decidedly refuted. Kleinwächter would distinguish between the materials and the tools of production, and reckon only the latter as capital, on the ground that in production it is only the tools that actively co-operate and assist us, the materials of production being purely passive. But this assumption is not correct. The function of materials of production is not simply to serve as a “dead and plastic mass”; by means of the natural powers residing in them these materials take a share in the work of production which is, indeed, less prominent, but is, essentially, no less active. Kleinwächter’s view is, by his own confession, incorrect from the point of physical science, and as we have here to do with a question of productive technique, where political economy must take its stand on natural science, it is incorrect from the point of economics.
• 43Marx, again, would confine the conception of capital to those productive instruments which are to be found in the hands of persons other than the labourers themselves, and are used to exploit the labourers. With him, therefore, capital is the same thing as “means of exploitation;” This distinction would be quite an important and suggestive one if the Exploitation theory itself were correct. But since, as has been shown in my former work, it is not, the justification of the distinction based on that theory falls with it.
• 44Jevons’s notion of capital is that of “the aggregate of those commodities which are required for sustaining labourers of any kind or class engaged in work”; “the wages of labour either in its transitory form of money, or its real form of food and other necessaries of life.” If this were correct, every land would be rich in capital in proportion as its wages were high and its means of subsistence cheap. An African tribe that has neither industry, nor machinery, nor factories, nor railways, but lives under a tropical sun, where the necessaries of life are poured forth without stint, would be the richest in capital! Obviously, of course, the idea that Jevons had in his mind was a perfectly correct one, but the expression he gave it was unfortunate. He confused a condition of the formation of capital with capital itself. The way of capitalist production is long and roundabout, and man cannot enter upon it unless he is provided with the means of subsistence for the time that must intervene before he reaps the return. But it is not the means of subsistence, and, in particular, it is not the means of subsistence alone, that constitutes capital. Capital only comes into existence when man actually enters upon the profitable roundabout journey that the means of subsistence have made possible; when he builds machines, tools, railways, factories, raises raw materials, and so on. However abundant the means of subsistence were, if the workers were to consume them in living from hand to mouth, the community would evidently never accumulate capital at all.
• 45Finally, there remain those conceptions which see in capital not a complex of goods, but an abstract quantity hovering over goods, as it were; as, for instance, Kühnast’s “sum of value,” or M’Leod’s “circulating power.” I have, generally speaking, a very poor opinion of such idealisations of economic conceptions. They are usually cheap expedients for getting round difficulties. If in any difficult subject there occurs some troublesome, angular kind of conception that corresponds with real life and will not fit in to the particular line of explanation, there are always certain theorists ready to disembody it, whereby, of course, it loses its unmannerly angles and edges, but, at the same time, its strength and truth. It becomes a phrase and leads to phrases. “We have an instance of this here. If we were to take the sponsors of those definitions at their word, and ask them whether they would seriously say that an immaterial sum of value or circulating power can grind corn, or spin yarn, or plough up land, or carry a load; or whether it is not the case that these good things are done by the common material goods called mills, looms, ploughs, locomotives, they would be very much perplexed. For, asking at their own consciousness, they could scarcely deny that, under the name capital, they have always and peculiarly thought of that something which helps man to work in his production; and the rude materiality of this something agrees but ill with the high-sounding abstract definition of “sum of value” or “circulating power.” It is very significant, as regards this group of definitions of capital, that their origin may be traced to a slipshod expression of a writer who was always too careless about the way in which he stated his conceptions—J. B. Say. Say first—and quite correctly—gives the name of capital to certain results of labour that serve as tools to further production, such as Seed, Dye-stuffs, Wool, Tools, Machines, Buildings, Cattle, etc., and calls their total value Capital Value. Later on he makes the remark that a capital value may take very different forms, such as money, houses, utensils, commodities, etc., and this gives him occasion to call “this value a capital, so soon as it is contained in objects, whatever they be, which are destined to productive activity.” Evidently a careless and contradictory expression, which, however, his economical disciples made the basis of a serious theory!
• 46Finally, there remain those conceptions which see in capital not a complex of goods, but an abstract quantity hovering over goods, as it were; as, for instance, Kühnast’s “sum of value,” or M’Leod’s “circulating power.” I have, generally speaking, a very poor opinion of such idealisations of economic conceptions. They are usually cheap expedients for getting round difficulties. If in any difficult subject there occurs some troublesome, angular kind of conception that corresponds with real life and will not fit in to the particular line of explanation, there are always certain theorists ready to disembody it, whereby, of course, it loses its unmannerly angles and edges, but, at the same time, its strength and truth. It becomes a phrase and leads to phrases. “We have an instance of this here. If we were to take the sponsors of those definitions at their word, and ask them whether they would seriously say that an immaterial sum of value or circulating power can grind corn, or spin yarn, or plough up land, or carry a load; or whether it is not the case that these good things are done by the common material goods called mills, looms, ploughs, locomotives, they would be very much perplexed. For, asking at their own consciousness, they could scarcely deny that, under the name capital, they have always and peculiarly thought of that something which helps man to work in his production; and the rude materiality of this something agrees but ill with the high-sounding abstract definition of “sum of value” or “circulating power.” It is very significant, as regards this group of definitions of capital, that their origin may be traced to a slipshod expression of a writer who was always too careless about the way in which he stated his conceptions—J. B. Say. Say first—and quite correctly—gives the name of capital to certain results of labour that serve as tools to further production, such as Seed, Dye-stuffs, Wool, Tools, Machines, Buildings, Cattle, etc., and calls their total value Capital Value. Later on he makes the remark that a capital value may take very different forms, such as money, houses, utensils, commodities, etc., and this gives him occasion to call “this value a capital, so soon as it is contained in objects, whatever they be, which are destined to productive activity.” Evidently a careless and contradictory expression, which, however, his economical disciples made the basis of a serious theory!