CAPITAL

From Agepedia

Jump to: navigation , search

CAPITAL, in political economy, is the stock of valuable exchangeable commodities possessed by individuals or a community. This is the usual and more limited meaning of the term ; for, in comparing the capital of one individual with that of another, we have in mind the amount of money for which the stock of each can be exchanged. The market value is in view. In estimating the capital of any individual, we necessarily take into consideration the debts due to and from him; and many men of large capital are only possessed of claims upon others; their whole stock is in the hands of others at interest; and they have only promises for a certain amount of money, and actually possess neither lands nor goods to any considerable value; while others possess large quantities of both, and yet have little or no capital, since they owe, in money, the value of the greater part or the whole of their possessions. Now it is plain that no individual can undertake production, to any large extent, without an extensive stock. He must have land to cultivate, or materials to work up, and implements to work with. Even a savage must have a capital, such as his hut, clothes, cooking utensils, food enough to support him until he can obtain a new supply, and implements, such as a hatchet, gun, canoe, fishing gear, with which to procure this supply. The first effort of industry is to supply the implements, apparatus and machinery for his own employment; and as society and the arts advance, and the operations of industry are extended, the implements, apparatus, machinery and materials, requisite in conducting the processes of production, mustbe proportionally accumulated ; and these will constitute a part of the capital of a community, and also of an individual, which is essential to success in productive processes. And these can be commanded by any one in proportion to the extent of his individual capital; or, if he have credit, then his resources for production will depend upon the capital of others in other words, that of the community to which he belongs.In considering the aggregate capital of a community, we may put out of the question all the debts due from any of the members to others ; for, whether these be great or small, and they will vary according as the practice of giving credit is more or less in use, still the capital of the community will consist in its lands, buildings, ships, machinery, materials on hand, implements; in short, in all those things which bear a value in the market. Provided the community owes no debts abroad, these will constitute its aggregate capital; and, if its members are indebted abroad, we find its actual net capital, as in the case of an individual, by deducting the amount of its debts from the value of its possessions, without regarding the debts due from some of its members to others.In comparing the capital or wealth of two communities, we may be led into an error by comparing the value of their possessions in gold and silver, since the value of these metals is well known to differ in different countries, by whatever standard the comparison be made. IfJ for instance, we compare the value of the metals in reference to the wages of a common day laborer, we find he has 2 or 3 pence a day in Egypt, and from 50 to 72 pence in the U. States. We shall find the same diversity in other things. If we take a horse, of the same beauty and serviceable qualities, for an example, we shall find his price, in money, to be twice as great in one place as in another. In order, therefore, to make such a comparison through the medium of the metals, or by adopting them as a common measure, we should, in the first place, correct the measure itself, and ascertain whether an ounce of gold, in one of the places between which the comparison is to be made, is worth a half of an ounce or an ounce and a half in the other; and the way of correcting the standard would be, to take equal quantities of a great number of articles of the same quality, in the two places, or equivalent quantities of equivalent articles, as nearly as their equivalence can be ascertained, and com pare their money prices in the two places. But this correction of the common measure is not very easily made. The means of comparing the value of money at successive periods, in the same community, are very defective ; and the only attempt, at any scale of value, of this description; known to the writer of this article, is that of Mr. Evelyn, published in the Transactions of the royal society of London for 1798, and corrected, since, by Mr. Colquhoun. But suppose the comparative value of money, in two states or kingdoms, to be ascertained, and then a valuation of all tbe property in each, of every description, to be made, the capital of each and the comparative capital of the two are thus ascertained. But this comparison would not show the comparative resources of the two, either for war or for production. This will appear from the obvious fact, that a river like the Hudson is a greater facility to transportation than the Languedoc canal; yet, in making a return of the property, or the estimation of the capital of France, the Languedoc canal would be a great item, whereas the Hudson river, though of equal or greater utility, would not appear as constituting a part of the capital of New York. Tbe inhabitants are the great agents of production in every country; and, though their productive efficiency will be influenced, very essentially, by the amount of capital, fertility of the soil, quality of its products, facilities of transportation, and arrangements of industry, still the character, habits and skill of the agents themselves are the most important circumstances in estimating the productive resources of a community. Industry and skill will rapidly create capital. Mr. Phillips, in his Manual of Political Economy, estimates that the whole value of the capital of a country is consumed and reproduced every three or four years. But the training of a population, and forming its character and habits, is a work of many years. The most important ingredient in the national resources is, therefore, not only no part of its capital, but is a thing of very slow growth, and results from the combined and longcontinued influence of a thousand causes, moral, physical and political, too complicated to be disentangled, and so blended that the action of each cannot be distinctly traced. Economists have confined their viewTs of production too much to considerations of capital, and neglected, or, at least, not given sufficient weight to, the other economical capacities and resources.Capital is distinguished uito floating, or movable, midflxed; the former consisting of things that may be moved, and are susceptible of manual delivery ; the latter, of those confined to one place, as a house or piece of land. We use the terms in a different sense when applied to any particular establishment, by the floating capital of which is meant that which remains afterpayment is made for all their apparatus and the implements of their business, and which is usually invested in the materials to be manufactured or transported, or to pass through the process, whatever it is, which constitutes the business conducted. Thus one carrying on a flouringmill wants a floating or disposable capital, over and above the cost of his works, to be invested in wheat to be floured, and flour not yet disposed of. This instance illustrates what is meant by the floating or disposable capital of a whole community being that movable, exchangeable stock of things on hand, over and above the fixtures and apparatus of production, including lands, buildings, ships, working animals, all the implements of the arts, with necessary food, clothing, and a stock of seed sufficient for the time requisite for reproduction. What remains over these is the disposable capital, and, in a flourishing community, the disposable floating capital is constantly invested in new fixed capital, implements and apparatus of production. A declining community, on the contrary, consumes a part of its implements and apparatus of industry, or, what is, in effect, the same thing, it does not repair and replace the damage of use and decay. The idea is held out in many economical treatises, that a community cannot have a surplus capital; that is, it cannot have more capital than it can make use of in its consumption and reproduction. As no grounds whatever are given for this doctrine, it seems to be hardly entitled to a consideration ; for the position is certainly, at the first view, very improbable, since we know very well that men may accumulate; and why they may not, in any possible case, accumulate a surplus, does not appear by any plausible reason ; and whether such surplus accumulation may be useful or not, will depend entirely upon the kind of articles of which such accumulation consists. If it consist in articles the value of which depends on the prices in foreign markets, the excess may be of no value at all; for it may so depress the foreign prices as to countervail all the indirect advantage arising from the cheaper sup ply, lor a time, of the domestic demand. Fictitious capital generally means nothing more nor less than excessive credits, which throw the management and disposition of a great deal of property into the hands of persons who are not able to answer for the risks of loss from its bad management, or other causes, A whole community, in the aggregate, can have fictitious capital only in case of its members having an excessive credit in a foreign country. But the members may, among themselves, have a fictitious capital, by too great facility of credits in their dealings with each other, and the fiction, in this case, is in their false promises of payment.