Essays on some unsettled Questions of Political Economy Part 5

When these consequences of the purely arbitrary cla.s.sification to which we allude have been pointed out and complained of, the only answer which we have ever seen made to the objection is, that the line of demarcation must be drawn somewhere, and that in every cla.s.sification there are intermediate cases, which might have been included, with almost equal propriety, either in the one cla.s.s or in the other.

This answer appears to us to indicate the want of a sufficiently accurate and discriminating perception, what is the kind of inaccuracy which generally cannot be avoided in a cla.s.sification, and what is that other kind of inaccuracy, from which it always may be, and should be, exempt.

The cla.s.ses themselves may be, mentally speaking, perfectly definite, though it may not always be easy to say to which of them a particular object belongs. When it is uncertain in which of two cla.s.ses an object should be placed, if the cla.s.sification be properly made, and properly expressed, the uncertainty can turn only upon a matter of fact. It is uncertain to which cla.s.s the object belongs, because it is doubtful whether it possesses in a greater degree the characteristics of the one cla.s.s or those of the other. But the characteristics themselves may be defined and distinguished with the nicest exactness, and always ought to be so. Especially ought they in a case like the present, because here it is only the distinction between the ideas which is of any importance.

That we should be able with ease to portion out all employments between the two cla.s.ses, does not happen to be of any particular consequence.

It is frequently said that cla.s.sification is a mere affair of convenience. This a.s.sertion is true in one sense, but not if its meaning be, that the most proper cla.s.sification is that in which it is easiest to say whether an object belongs to one cla.s.s or to the other. The use of cla.s.sification is, to fix attention upon the distinctions which exist among things; and that is the best cla.s.sification, which is founded upon the most important distinctions, whatever be the facilities which it may afford of ticketing and arranging the different objects which exist in nature. In fixing, therefore, the meaning of the words productive and unproductive, we ought to endeavour to render them significative of the most important distinctions which, without too glaring a violation of received usage, they can be made to express.

We ought further, when we are restricted to the employment of old words, to endeavour as far as possible that it shall not be necessary to struggle against the old a.s.sociations with those words. We should, if possible, give the words such a meaning, that the propositions in which people are accustomed to use them, shall as far as possible still be true; and that the feelings habitually excited by them, shall be such as the things to which we mean to appropriate them ought to excite.

We shall endeavour to unite these conditions in the result of the following enquiry.

In whatever manner political economists may have settled the definition of productive and unproductive labour or consumption, the consequences which they have drawn from the definition are nearly the same. In proportion to the amount of the productive labour and consumption of a country, the country, they all allow, is enriched: in proportion to the amount of the unproductive labour and consumption, the country is impoverished. Productive expenditure they are accustomed to view as a gain; unproductive expenditure, however useful, as a sacrifice.

Unproductive expenditure of what was destined to be expended productively, they always characterise as a squandering of resources, and call it profusion and prodigality. The productive expenditure of that which might, without encroaching upon capital, be expended unproductively, is called saving, economy, frugality. Want, misery, and starvation, are described as the lot of a nation which annually employs less and less of its labour and resources in production; growing comfort and opulence as the result of an annual increase in the quant.i.ty of wealth so employed.

Let us then examine what qualities in expenditure, and in the employment of labour, are those from which all the consequences above mentioned really flow.

The end to which all labour and all expenditure are directed, is twofold. Sometimes it is _enjoyment_ immediately; the fulfilment of those desires, the gratification of which is wished for on its own account. Whenever labour or expense is not incurred _immediately_ for the sake of enjoyment, and is yet not absolutely wasted, it must be incurred for the purpose of enjoyment _indirectly_ or mediately; by either repairing and perpetuating, or adding, to the _permanent sources_ of enjoyment.

Sources of enjoyment may be acc.u.mulated and stored up; enjoyment itself cannot. The wealth of a country consists of the sum total of the permanent sources of enjoyment, whether material or immaterial, contained in it: and labour or expenditure which tends to augment or to keep up these permanent sources, should, we conceive, be termed productive.

Labour which is employed for the purpose of directly affording enjoyment, such as the labour of a performer on a musical instrument, we term unproductive labour. Whatever is consumed by such a performer, we consider as unproductively consumed: the acc.u.mulated total of the sources of enjoyment which the nation possesses, is diminished by the amount of what he has consumed: whereas, if it had been given to him in exchange for his services in producing food or clothing, the total of the permanent sources of enjoyment in the country might have been not diminished but increased.

The performer on the musical instrument then is, so far as respects that act, not a productive, but an unproductive labourer. But what shall we say of the workman who made the musical instrument? He, most persons would say, is a productive labourer; and with reason; because the musical instrument is a permanent source of enjoyment, which does not begin and end with the enjoying, and therefore admits of being acc.u.mulated.

But the _skill_ of the musician is a permanent source of enjoyment, as well as the instrument which he plays upon: and although skill is not a material object, but a quality of an object, viz., of the hands and mind of the performer; nevertheless skill possesses exchangeable value, is acquired by labour and capital, and is capable of being stored and acc.u.mulated. Skill, therefore, must be considered as wealth; and the labour and funds employed in acquiring skill in anything tending to the advantage or pleasure of mankind, must be considered to be productively employed and expended.

The skill of a productive labourer is a.n.a.logous to the machinery he works with: neither of them is enjoyment, nor conduces directly to it, but both conduce indirectly to it, and both in the same way. If a spinning-jenny be wealth, the spinner's skill is also wealth. If the mechanic who made the spinning-jenny laboured productively, the spinner also laboured productively when he was learning his trade: and what they both consumed was consumed productively, that is to say, its consumption did not tend to diminish, but to increase the sum of the permanent sources of enjoyment in the country, by effecting a new creation of those sources, more than equal to the amount of the consumption.

The skill of a tailor, and the implements he employs, contribute in the same way to the convenience of him who wears the coat, namely, a remote way: it is the coat itself which contributes immediately. The skill of Madame Pasta, and the building and decorations which aid the effect of her performance, contribute in the same way to the enjoyment of the audience, namely, an immediate way, without any intermediate instrumentality. The building and decorations are consumed unproductively, and Madame Pasta labours and consumes unproductively; for the building is used and worn out, and Madame Pasta performs, immediately for the spectators' enjoyment, and without leaving, as a consequence of the performance, any permanent result possessing exchangeable value: consequently the epithet unproductive must be equally applied to the gradual wearing out of the bricks and mortar, the nightly consumption of the more perishable "properties" of the theatre, the labour of Madame Pasta in acting, and of the orchestra in playing.

But notwithstanding this, the architect who built the theatre was a productive labourer; so were the producers of the perishable articles; so were those who constructed the musical instruments; and so, we must be permitted to add, were those who instructed the musicians, and all persons who, by the instructions which they may have given to Madame Pasta, contributed to the formation of her talent. All these persons contributed to the enjoyment of the audience in the same way, and that a remote way, viz., by the production of a _permanent source of enjoyment_.

The difference between this case, and the case of the cotton spinner already adverted to, is this. The spinning-jenny, and the skill of the cotton spinner, are not only the result of productive labour, but are themselves productively consumed. The musical instrument and the skill of the musician are equally the result of productive labour, but are themselves unproductively consumed.

Let us now consider what kinds of labour, and of consumption or expenditure, will be cla.s.sed as productive, and what as unproductive, according to this rule.

The following are always productive:

Labour and expenditure, of which the direct object or effect is the creation of some material product useful or agreeable to mankind.

Labour and expenditure, of which the direct effect and object are, to endow human or other animated beings with faculties or qualities useful or agreeable to mankind, and possessing exchangeable value.

Labour and expenditure, which without having for their direct object the creation of any useful material product or bodily or mental faculty or quality, yet tend indirectly to promote one or other of those ends, and are exerted or incurred solely for that purpose.

The following are partly productive and partly unproductive, and cannot with propriety be ranged decidedly with either cla.s.s:

Labour or expenditure which does indeed create, or promote the creation of, some useful material product or bodily or mental faculty or quality, but which is not incurred or exerted for that sole end; having also for another, and perhaps its princ.i.p.al end, enjoyment, or the promotion of enjoyment.

Such are the labour of the judge, the legislator, the police-officer, the soldier; and the expenditure incurred for their support. These functionaries protect and secure mankind in the exclusive possession of such material products or acquired faculties as belong to them; and by the security which they so confer, they indirectly increase production in a degree far more than equivalent to the expense which is necessary for their maintenance. But this is not the only purpose for which they exist; they protect mankind, not merely in the possession of their permanent resources, but also in their actual enjoyments; and so far, although highly useful, they cannot, conformably to the distinction which we have attempted to lay down, be considered productive labourers.

Such, also, are the labour and the wages of domestic servants. Such persons are entertained mainly as subservient to mere enjoyment; but most of them occasionally, and some habitually, render services which must be considered as of a productive nature; such as that of cookery, the last stage in the manufacture of food; or gardening, a branch of agriculture.

The following are wholly unproductive:

Labour exerted, and expenditure incurred, directly and exclusively for the purpose of enjoyment, and not calling into existence anything, whether substance or quality, but such as begins and perishes in the enjoyment.

Labour exerted and expenditure incurred uselessly, or in pure waste, and yielding neither direct enjoyment nor permanent sources of enjoyment.

It may be objected, that expenditure incurred even for pure enjoyment promotes production indirectly, by inciting to exertion. Thus the view of the splendour of a rich establishment is supposed by some writers to produce upon the mind of an indigent spectator an earnest desire of enjoying the same luxuries, and a consequent purpose of working with vigour and diligence, and saving from his earnings, thus increasing the productive capital of the country.

It is true that mankind are, for the most part, excited to productive industry solely by the desire of subsequently consuming the result of their labour and acc.u.mulation. The consumption called unproductive, viz., that of which the direct result is enjoyment, is in reality the end, to which production is only the means; and a desire for the end, is what alone impels any one to have recourse to the means.

But, notwithstanding this, it is of the greatest importance to mark the distinction between the labour and the consumption which have enjoyment for their immediate end, and the labour and the consumption of which the immediate end is reproduction. Though the sight of the former may still further stimulate that desire for the enjoyments afforded by wealth, which the mere knowledge, without the immediate view, would suffice to excite (and without dwelling on the consideration that if the example of a large expenditure excites one individual to acc.u.mulation, it encourages two to prodigal expense); still, if we look only to the effects which are intended, or to those which immediately follow from the consumption, and whose connexion with it can be distinctly traced, it evidently renders a country poorer in the permanent sources of enjoyment; while reproductive consumption leaves the country richer in these same sources. Besides, if what is spent for mere pleasure promotes indirectly the increase of wealth, it can only be by inducing others _not_ to expend on mere pleasure.

Before quitting the subject, one more observation should be added. It must not be supposed that what is expended upon unproductive labourers is necessarily, the whole of it, unproductively consumed. The unproductive labourers may save part of their wages, and invest them in a productive employment.

It is not unusual to speak of what is paid in wages to a labourer as being thereby _consumed_, as if all profit and loss to the nation were to be seen in the capitalist's account-book. What is paid for productive labour is said to be productively consumed; what is paid for unproductive labour is said to be consumed unproductively. It would be proper to say, not that it is productively or unproductively _consumed_, but productively or unproductively _expended_; otherwise, we shall be obliged to say that it is consumed twice over; the first time unproductively, perhaps, and the second, it may be, productively.

To p.r.o.nounce in which way the wages of the labourer are consumed, we must follow them into the labourer's own hands. As much as is necessary to keep the productive labourer in perfect health and fitness for his employment, may be said to be consumed productively. To this should be added what he expends in rearing children to the age at which they become capable of productive industry. If the state of the market for labour be such as to afford him more, this he may either save, or, as the common expression is, he may spend it. If he saves any portion, this (unless it be merely h.o.a.rded) he intends to employ productively, and it will be productively consumed. If he spends it, the consumption is for enjoyment immediately, and is therefore unproductive.

This suggests another correction in the established language. Political economists generally define the "net produce" to be that portion of the gross annual produce of a country which remains after replacing the capital annually consumed. This, as they proceed to explain, consists of profits and rent; wages being included in the other portion of the gross produce, that which goes to replace capital. After this definition, they usually proceed to tell us that the net produce, and that alone, const.i.tutes the fund from which a nation can acc.u.mulate, and add to its capital, as also that which it can, without retrograding in wealth, expend unproductively, or for enjoyment. Now, it is impossible that both the above propositions can be true. If the net produce is that which remains after replacing capital, then net produce is not the only fund out of which acc.u.mulation may be made: for acc.u.mulation may be made from wages; this is in all countries one of the great sources, and in countries like America perhaps the greatest source of acc.u.mulation. If, on the other hand, it is desirable to reserve the name of net produce to denote the fund available for acc.u.mulation or for unproductive consumption, we must define net produce differently. The definition which appears the best adapted to render the ordinary doctrines relating to net produce true, would be this:

The net produce of a country is whatever is annually produced beyond what is necessary for maintaining the stock of materials and implements unimpaired, for keeping all productive labourers alive and in condition for work, and for just keeping up their numbers without increase. What is required for these purposes, or, in other words, for keeping up the productive resources of the country, cannot be diverted from its destination without rendering the nation as a whole poorer. But all which is produced beyond this, whether it be in the hands of the labourer, of the capitalist, or of any of the numerous varieties of rent-owners, may be taken for immediate enjoyment, without prejudice to the productive resources of the community; and whatever part of it is not so taken, const.i.tutes a clear addition to the national capital, or to the permanent sources of enjoyment.

ESSAY IV.

ON PROFITS, AND INTEREST.

The profits of stock are the surplus which remains to the capitalist after replacing his capital: and the ratio which that surplus bears to the capital itself, is the _rate_ of profit.

This being the definition of profits, it might seem natural to adopt, as a sufficient theory in regard to the rate of profit, that it depends upon the productive power of capital. Some countries are favoured beyond others, either by nature or art, in the means of production. If the powers of the soil, or of machinery, enable capital to produce what is necessary for replacing itself, and twenty per cent more, profits will be twenty per cent; and so on.

This, accordingly, is a popular mode of speaking on the subject of profits; but it has only the semblance, not the reality, of an explanation. The "productive power of capital," though a common, and, for some purposes, a convenient expression, is a delusive one. Capital, strictly speaking, has no productive power. The only productive power is that of labour; a.s.sisted, no doubt, by tools, and acting upon materials.

That portion of capital which consists of tools and materials, may be said, perhaps, without any great impropriety, to have a productive power, because they contribute, along with labour, to the accomplishment of production. But that portion of capital which consists of wages, has no productive power of its own. Wages have no productive power; they are the price of a productive power. Wages do not contribute, along with labour, to the production of commodities, no more than the price of tools contributes along with the tools themselves. If labour could be had without purchase, wages might be dispensed with. That portion of capital which is expended in the wages of labour, is only the means by which the capitalist procures to himself, in the way of purchase, the use of that labour in which the power of production really resides.

The proper view of capital is, that anything whatever, which a person possesses, const.i.tutes his capital, provided he is able, and intends, to employ it, not in consumption for the purpose of enjoyment, but in possessing himself of the means of production, with the intention of employing those means productively. Now the means of production are labour, implements, and materials. The only productive power which anywhere exists, is the productive power of labour, implements, and materials.

We need not, on this account, altogether proscribe the expression, "productive power of capital;" but we should carefully note, that it can only mean the quant.i.ty of real productive power which the capitalist, by means of his capital, can command. This may change, though the productive power of labour remains the same. Wages, for example, may rise; and then, although all the circ.u.mstances of production remain exactly as they were before, the same capital will yield a less return, because it will set in motion a less quant.i.ty of productive labour.

We may, therefore, consider the capital of a producer as measured by the means which he has of possessing himself of the different essentials of production: namely, labour, and the various articles which labour requires as materials, or of which it avails itself as aids.

The ratio between the price which he has to pay for these means of production, and the produce which they enable him to raise, is the _rate_ of his _profit_. If he must give for labour and tools four-fifths of what they will produce, the remaining fifth will const.i.tute his profit, and will give him a rate of one in four, or twenty-five per cent, on his outlay.

It is necessary here to remark, what cannot indeed by any possibility be misunderstood, but might possibly be overlooked in cases where attention to it is indispensable, viz., that we are speaking now of the _rate_ of profit, not the gross profit. If the capital of the country is very great, a profit of only five per cent upon it may be much more ample, may support a much larger number of capitalists and their families in much greater affluence, than a profit of twenty-five per cent on the comparatively small capital of a poor country. The _gross_ profit of a country is the actual amount of necessaries, conveniences, and luxuries, which are divided among its capitalists: but whether this be large or small, the rate of profit may be just the same. The rate of profit is the proportion which the profit bears to the capital; which the surplus produce after replacing the outlay, bears to the outlay. In short, if we compare the _price paid_ for labour and tools with what that labour and those tools will _produce_, from this ratio we may calculate the rate of profit.