I therefore call it the variable part of capital, or, shortly, _variable capital_.

_IV.--Acc.u.mulation of Capital_

The first condition of the acc.u.mulation of capital is that the capitalist must have contrived to sell his commodities, and to re-convert the greater portion of the money thus received into capital.

Whatever be the proportion of surplus-value which the industrial capitalist retains for himself or yields up to others, he is the one who, in the first instance, appropriates it.

The process of production incessantly converts material wealth into capital, into means of creating more wealth and means of enjoyment for the capitalist. On the other hand, the labourer, on quitting the process, is nothing more than he was when he began it. He is a source of wealth, but has not the slightest means of making wealth his own. The product of the labourer is incessantly converted not only into commodities, but into capital, into means of subsistence that buy the labourer, and into means of production that command the producers.

The capitalist as constantly produces labour-power; in short, he produces the labourer, but as a wage-labourer. This incessant reproduction, this perpetuation of the labourer, is the _sine qua non_ of capitalist production.

From a social point of view, the working-cla.s.s is just as much an appendage of capital as the ordinary instruments of labour. The appearance of independence is kept up by means of a constant change of employers, and by the legal fiction of a contract. In former times capital legislatively enforced its proprietary rights over the free labourer.

Capitalist production reproduces and perpetuates the condition for exploiting the labourer. The economical bondage of the labourer is both caused and hidden by the periodic sale of himself to changing masters.

Capitalist production, under its aspect of a continuous connected process, produces not only commodities, not only surplus value, but it also produces and reproduces the capitalist relation; on the one side the capitalist, on the other the wage-labourer.

Capital pre-supposes wage-labour, and wage-labour pre-supposes capital.

One is a necessary condition to the existence of the other. The two mutually call each other into existence. Does an operative in a cotton-factory produce nothing but cotton goods? No, he produces capital. He produces values that give fresh command over his labour, and that, by means of such command, create fresh values.

Every individual capital is a larger or smaller concentration of means of production, with a corresponding command over a larger or smaller labour-army. Every acc.u.mulation becomes the means of new acc.u.mulation.

The growth of social capital is affected by the growth of many individual capitals.

With the acc.u.mulation of capital, therefore, the number of capitalists grows to a greater or less extent. Two points characterise this kind of concentration which grows directly out of, or rather is identical with, acc.u.mulation. First, the increasing concentration of the social means of production in the hands of individual capitalists is, other things remaining equal, limited by the degree of increase of social wealth.

Secondly, the part of social capital domiciled in each particular sphere of production is divided among many capitalists who face one another as independent commodity-producers competing with each other.

Acc.u.mulation and the concentration accompanying it are, therefore, not only scattered, but the increase of each functioning capital is thwarted by the formation of new and the subdivision of old capitals.

Acc.u.mulation, therefore, presents itself on the one hand as increasing concentration of the means of production and of the command over labour; on the other, as repulsion of many individual capitalists one from another.

JOHN STUART MILL

Principles of Political Economy

John Stuart Mill, the eldest son of the philosopher, James Mill, was born in London on May 20, 1806. His early education was remarkable. At the age of fourteen he had an extensive knowledge of Greek, Latin, and mathematics, and had begun to study logic and political economy. In 1823 he received an appointment at the India Office, and in the same year he became a member of a small Utilitarian society which met at Jeremy Bentham"s house, and soon became the leader of the Utilitarian school. Mill"s great work on the "Principles of Political Economy," with some of their "Applications to Social Philosophy," embodies the results of many years of study, disputation and thought. It is built upon foundations laid by Ricardo and Malthus, and has itself formed the basis of all subsequent work in England. Throughout, it manifests a belief in the possibility of great social improvement to be achieved upon individualistic lines. It was begun late in 1845, and superseded a contemplated work to be called "Ethnology." Mill"s extensive familiarity with the problems of political economy enabled him to compose the work with rapidity unusual in his production. Thus, before the end of 1847, the last sheet of the ma.n.u.script was in the hands of the printer, and early in the following year the treatise was published. Mill died at Avignon on May 8, 1873.

_I.--The Production of Wealth_

In every department of human affairs, practice long precedes science.

The conception, accordingly, of political economy as a branch of science is extremely modern; but the subject with which its inquiries are conversant--wealth--has, in all ages, const.i.tuted one of the chief practical interests of mankind. Everyone has a notion, sufficiently correct for common purposes, of what is meant by "wealth." Money, being the instrument of an important public and private purpose, is rightly regarded as wealth; but everything else which serves any human purpose, and which nature does not supply gratuitously, is wealth also. Wealth may be defined as all useful or agreeable things which possess exchangeable value.

The production of wealth--the extraction of the instruments of human subsistence and enjoyment from the materials of the globe--is evidently not an arbitrary thing. It has its necessary conditions.

The requisites of production are two--labour and appropriate natural objects. Labour is either bodily or mental. Of the other requisite it is to be remarked that the objects supplied by nature are, except in a few unimportant cases, only instrumental to human wants after having undergone some transformations by human exertion.

Nature does more, however, than supply materials; she also supplies powers. Of natural powers, some are practically unlimited, others limited in quant.i.ty, and much of the economy of society depends on the limited quant.i.ty in which some of the most important natural agents exist, and more particularly land. As soon as there is not so much of a natural agent to be had as would be used if it could be obtained for the asking, the ownership or use of it acquires an exchangeable value. Where there is more land wanted for cultivation than a place possesses of a certain quality and advantages of situation, land of that quality and situation may be sold for a price, or let for an annual rent.

Labour employed on external nature in modes subservient to production is employed either directly, or indirectly, in previous or concomitant operations designed to facilitate, perhaps essential to the possibilities of, the actual production. One of the modes in which labour is employed indirectly requires particular notice, namely, when it is employed in producing subsistence to maintain the labourers while they are engaged in the production. This previous employment of labour is an indispensable condition to every productive operation. In order to raise any product there are needed labour, tools, and materials, and food to feed the labourers. But the tools and materials can be remunerated only from the product when obtained. The food, on the contrary, is intrinsically useful, and the labour expended in producing it, and recompensed by it, needs not to be remunerated over again from the produce of the subsequent labour which it has fed.

The claim to remuneration founded on the possession of food is remuneration for abstinence, not for labour. If a person has a store of food, he has it in his power to consume it himself in idleness. If, instead, he gives it to productive labourers to support them during their work, he can claim a remuneration from the produce. He will, in fact, expect his advance of food to come back to him with an increase, called, in the language of business, a profit.

Thus, there is necessary to productive operations, besides labour and natural agents, a stock, previously acc.u.mulated, of the products of labour. This acc.u.mulated stock is termed capital. Capital is frequently supposed to be synonymous with money, but money can afford no a.s.sistance to production. To do this it must be exchanged for other things capable of contributing to production. What capital does for production is to afford the shelter, tools, and materials which the work requires, and to feed and otherwise maintain the labourers during the process. Whatever things are destined for this use are capital. That industry is limited by capital is self-evident. There can be no more industry than is supplied with materials to work up and food to eat. Nevertheless, it is often forgotten that the people of a country are maintained and have their wants supplied, not by the produce of present labour, but of past, and it long continued to be believed that laws and governments, without creating capital, could create industry.

All capital is the result of saving. Somebody must have produced it, and forborne to consume it, or it is the result of an excess of production over consumption. Although saved, and the result of saving, it is nevertheless consumed--exchanged partly for tools which are worn out by use, partly for materials destroyed in the using, and by consumption of the ultimate product; and, finally, paid in wages to productive labourers who consume it for their daily wants. The greater part, in value, of the wealth now existing in England has been produced by human hands within the last twelve months. A very small proportion, indeed, was in existence ten years ago. The land subsists, and is almost the only thing that subsists. Capital is kept in existence, not by preservation, but by perpetual reproduction.

_II.--The Distribution of Wealth_

The laws and conditions of the production of wealth partake of the character of physical truths. There is nothing optional or arbitrary about them. It is not so with the distribution of wealth. That is a matter of human inst.i.tution solely.

Among the different modes of distributing the produce of land and labour which have been adopted, attention is first claimed by the primary inst.i.tution on which the economical arrangements of society have always rested--private property.

The inst.i.tution of property consists in the recognition, in each person, of a right to the exclusive disposal of the fruits of their own labour and abstinence, and implies the right of the possessor of the fruits of previous labour to what has been produced by others by the co-operation between present labour and those fruits of past labour--that is, the freedom of acquiring by contract.

We now proceed to the hypothesis of a threefold division of the produce, among labourers, landlords, and capitalists, beginning with the subject of wages.

Wages depend mainly upon the demand and supply of labour, or, roughly, on the proportion between population and capital. It is a common saying that wages are high when trade is good. Capital which was lying idle is brought into complete efficiency, and wages, in the particular occupation concerned, rise. But this is but a temporary fluctuation, and nothing can permanently alter _general_ wages except an increase or diminution of capital itself compared with the quant.i.ty of labour offering itself to be hired.

Again, high prices can only raise wages if the producers and dealers, receiving more, are induced to add to their capital or, at least, to their purchases of labour. But high prices of this sort, if they benefit one cla.s.s of labourers, can only do so at the expense of others, since all other people, by paying those high prices, have their purchasing power reduced by an equal degree.

Another common opinion, which is only partially true, is that wages vary with the price of food, rising when it rises and falling when it falls.

In times of scarcity, people generally compete more violently for employment, and lower the labour market against themselves. But dearness or cheapness of food, when of a permanent character, may affect wages.

If food grows permanently dearer without a rise of wages, a greater number of children will prematurely die, and thus wages will ultimately be higher; but only because the number of people will be smaller than if food had remained cheap. Certain rare circ.u.mstances excepted, high wages imply restraints on population.

As the wages of the labourer are the remuneration of labour, so the profits of the capitalist are properly the remuneration of abstinence.

They are what he gains by forbearing to consume his capital for his own uses and allowing it to be consumed by productive labourers for their uses. Of these gains, however, a part only is properly an equivalent for the use of the capital itself; namely, so much as a solvent person would be willing to pay for the loan of it. This, as everybody knows, is called interest. What a person expects to gain who superintends the employment of his own capital is always more than this. The rate of profit greatly exceeds the rate of interest. The surplus is partly compensation for risk and partly remuneration for the devotion of his time and labour. Thus, the three parts into which profit may be regarded as resolving itself, may be described, respectively, as interest, insurance, and wages of superintendence.

The requisites of production being labour, capital, and natural agents, the only person besides the labourer and the capitalist whose consent is necessary to production is he who possesses exclusive power over some natural agent. The land is the princ.i.p.al natural agent capable of being so appropriated, and the consideration paid for its use is called rent.

It is at once evident that rent is the effect of a monopoly. If all the land of the country belonged to one person he could fix the rent at his pleasure. The whole people would be dependent on his will for the necessaries of life. But even when monopolised--in the sense of being limited in quant.i.ty--land will command a price only if it exists in less quant.i.ty than the demand, and no land ever pays rent unless, in point of fertility and situation, it belongs to those superior kinds which exist in less quant.i.ty than the demand.

Any land yields just so much more than the ordinary profits of stock as it yields more than what is returned by the worst land in cultivation.

The surplus is what is paid as rent to the landlord. The standard of rent, therefore, is the excess of the produce of any land beyond what would be returned to the same capital if employed on the worst land in cultivation, or, generally, in the least advantageous circ.u.mstances.

_III.--Of Exchange and Value_

Of the two great departments of political economy, the production of wealth and its distribution, value has to do with the latter alone. The conditions and laws of production would be unaltered if the arrangements of society did not depend on, or admit of, exchange.

Value always means in political economy value in exchange, the command which its possession gives over purchasable commodities in general; whereas, by the price of a thing is understood its value in money.

That a thing may have value in exchange two conditions are necessary. It must be of some use--that is, it must conduce to some purpose, and secondly, there must be some difficulty in its attainment. This difficulty is of three kinds. It may consist in an absolute limitation of supply, as in the case of wines which can be grown only in peculiar circ.u.mstances of soil, climate, and exposure; in the labour and expense requisite to produce the commodity; or, thirdly, the limitation of the quant.i.ty which can be produced at a given cost, to which cla.s.s agricultural produce belongs, increased production beyond a certain limit entailing increased cost.

When the production of a commodity is the effect of labour and expenditure, there is a minimum value, which is the essential condition of its permanent production, and must be sufficient to repay the cost of production, and, besides, the ordinary expectation of profit. This may be called the _necessary_ value. When the commodity can be made in indefinite quant.i.ty, this necessary value is also the maximum which the producers can expect. If it is such that it brings a rate of profit higher than is customary, capital rushes in to share in this extra gain, and, by increasing the supply, reduces the value. Accordingly, by the operation of supply and demand the values of things are made to conform in the long run to the cost of production.

The introduction of money does not interfere with the operation of any of the laws of value. Things which by barter would exchange for one another will, if sold for money, sell for an equal amount of it, and so will exchange for one another, still through the process of exchanging them will consist of two operations instead of one. Money is a commodity, and its value is determined like that of other commodities, temporarily by demand and supply and permanently by cost of production.