a perpetual state of war both between peoples and tribes, just as among the Redskins of North America.

Throughout antiquity, and, despite the teaching of the Gospel, throughout the Middle Ages, the sword of the warrior was glorified, and the labourer's hoe despised. All these fatal errors still linger in men's minds, and from them proceed national antagonisms, war, and the spirit of war, and that curse, perhaps the greatest of all, an armed peace. This armed peace, it has been calculated, if the loss of the labour of some three millions of soldiers and sailors be included, costs the civilised countries some four hundred millions sterling a year. What a fruitful source of misery would be dried up if nations could be led to understand that they have no interest in ruining and enslaving themselves in order to filch a province or an estuary! A single error expelled from the brains of men, and, above all, of sovereigns, would suffice to transform the lot of mankind.

The obstacles to international trade, wars of tariffs, the unproductive and immoral expenditure of private persons, the abuses of speculation, the misconception of charity, bad taxes, the vicious distribution of wealth, the ill uses to which it is put by states and unions-all these are so many impediments to welfare which find their causes in as many economic errors. Peace, justice, and brotherhood are to the interests of all as soon as

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this truth shall be more clearly perceived, the causes of misery will diminish. Whoever is anxious for man's welfare should strive to dispel ignorance and root out error.

CHAPTER IV.

GROSS PRODUCT, NET PRODUCT, AND THE COST OF PRODUCTION.

GROSS product is the total of all the commodities produced by an individual or nation; net product, the amount which remains available, when deduction has been made for the consumption necessary to create fresh gross product. This deduction, these necessary advances, constitute the cost of production.

I harvest a hundred quarters of corn-this is my gross product. But in order to obtain a similar crop the next year, I must keep myself in food, and pay for clothing, hire of tools, manure and other articles I consume. These will cost me the price of fifty quarters-here we have my cost of production. Deducting then from my crop of one hundred quarters, fifty quarters for expenses, I shall have left fifty quarters, and these constitute my net product.

The productiveness of an industry varies with the amount of its net product; but, as Adam Smith has remarked, it is the gross product which is the more important for the nation, for it is on the mass of

commodities destined for consumption that the nation is supported. By dividing, in the case of any country, this total mass by the number of the population, a figure will be obtained which will give an idea of the average of individual welfare. The net, as distinguished from the gross product, is the support of all persons not directly engaged in any business, such as stockholders, officers of government, doctors, barristers, &c. It is in England that this net product is greatest, for it is in this country that the greatest number of people are found outside the occupations which have directly to do with matter. The net produce of a nation is that part of the total produce which is not necessary for reproduction. It is this part which economy can capitalise, i.e. turn into capital by using it to create fresh instruments of labour: it is this part which is so often frittered away in foolish extravagance.

CHAPTER V.

CAPITAL.

§ 1. Different Kinds of Capital.

THE third factor in production is capital, which may be defined as any product of labour saved and employed for fresh production. Capital is thus, as has been said, accumulated labour. A spade, a saw,

a plough are all capital: men's hands have made them, and now employ them for the creation of commodities.

All wealth is not capital. Thus the earth, our chief riches, cannot be reckoned as capital, since it is not the work of man. A beautiful hunter is wealth; it is not capital, since it is not employed in production. It is the character of the employment which determines whether a thing is or is not capital. Thus the same horse, if used for carrying letters, becomes capital, since it contributes to the production of commodities.

Capital is not productive of itself. Labour is the only active force. But labour cannot produce abundantly without the help of capital. If a man scratched the earth with his nails, he would never draw from it a subsistence; but armed with the spade or plough he need want for nothing. The qualities, aptitudes, and knowledge of the contributors to production may be considered as immaterial capital, since they are the results of past labour applied to new. Labour, which is often called "the poor man's capital," is not really capital. Labour is an act, capital the result of an act.

Capital is divided into fixed and circulating. Fixed or sunken capital is capital not consumed in each operation of production. It subsists, is used for successive operations, only renews itself slowly, and yields a profit without changing owners. This kind of capital comprehends: (i.) buildings destined for

manufactures; (ii.) machines and implements; (iii.) improvements absorbed by the soil, such as inclosures, hedges, galleries in mines, &c.

Circulating or floating capital is consumed at each operation and reappears transformed into new products. At each sale of these products the capital is represented in cash, and it is from its transformations that profit is derived. Floating capital includes: (i.) raw materials destined for fabrication, such as wool and flax; (ii.) products in the warehouses of manufacturers or merchants, such as cloth and linen; (iii.) money for wages, and stores.

On a farm the implements of husbandry and beasts of draught that work them are the fixed capital; the cattle for sale, the crops and the money in the cash-box, the circulating. The difference between the two forms of capital depends on the destination for which they are intended. Coin is fixed capital for a whole country, just as a railroad; for the manufacturer it is circulating capital. Wages to the master who pays them are circulating capital, to the workmen to whom they are paid they are merely incomings.

In each kind of industry a normal proportion exists between the two kinds of capital. A banker or a merchant possesses only circulating capital. On a railroad the capital is nearly all fixed.

It is unsafe for a manufacturer to have an insufficient floating capital, for this obliges him to depend largely on credit, which may be his ruin.