For a country it is unsafe to increase too rapidly the amount of fixed capital. If this be done there results a crisis such as that of 1847 in Europe, and those of 1856 and 1873 in America, all of which arose from the construction of too many railways.

J. S. Mill was inaccurate in his assertion, "industry is limited by capital." On the contrary, certain inventions, and even certain combinations, have the effect of greatly increasing the power of industry by diminishing the amount of capital it need employ. Thus, as we have seen, the division of labour permits a great economy of implements. A steam engine, again, for navigation, while obtaining the same motive power, costs and burns much less than thirty years ago. It is especially by the more scientific employment of the forces of nature that the power of industry has been increased.

Capital by immobilising the labour of to-day saves that of to-morrow. In primitive times a Rebecca goes to the well to fetch water which she carries in a pitcher on her head. Here the pitcher is the only capital employed, but the journey to and fro consumes much time. Later on, a well is dug and a pump built. The capital sunk is greater, but the daily labour much less. At last, and at considerable cost, waterworks are constructed. The capital employed in making the conduits, &c., is now ten or twenty times greater; but a tap has only to be turned, and more water is procured than Rebecca could have fetched if she had run about all day.

§ 2. The Formation of Capital.

Capital is the offspring of saving. If the means of subsistence for three days are procured by the labour of one, and the two days of leisure are employed in making a spade, with which more produce can be obtained from the earth and in less time, the amount of spare time will be further increased, and it will be more easy to construct fresh implements. Every step in advance renders it easier to make still greater strides. This example supplies a key to all the mysteries of the creation of capital. For the spade to be made, the previous labour must have left a surplus, which is the net produce, and for this surplus to be employed, not in idle enjoyment, but in the construction of a useful implement, the labourer must possess the virtue of prudence to induce him to sacrifice a present enjoyment to a future gain.

To put by wealth for the future constitutes saving, but to consume this wealth in making an article which will enable future commodities to be produced with less exertion is the best form which saving can take. To save by creating capital is thus no mere abstention from consumption, it is consumption so regulated as to give birth to an instrument which will increase production, and consequently consumption also. During the two days devoted to making the spade sustenance is consumed. If the time had been passed in amusement, exactly the

same amount would have been consumed. The difference is that the saver, thanks to his spade, is better off for the future, while the spendthrift must continue to scratch the earth with his hands. The error is thus manifest of those who believe that the saving which creates capital is a check on the consumption and circulation of wealth, or, in the popular phrase, is "bad for trade."

The crowd curses the avaricious miser and praises the spendthrift with its usual folly. Miser and spendthrift are alike foolish, but the first only wrongs himself, the second harms others also.

The creation of capital by saving will increase with every increase of the productiveness of labour and of men's inclination to thrift. Where a day's labour produces a bare day's sustenance, the creation of capital by saving is an impossibility. As soon, however, as labour becomes more productive so that one day's work produces enough sustenance for three, there is a net produce available of food for two days. This food can be made the means of producing instruments of labour, and it will be used for this purpose if the owner of it is disposed to save. This disposition is the result of habits acquired in childhood, at school for instance, of the customs of the country, of public opinion, of the safety and facility of investment, and lastly of the profits which investments can return.

Saving is permanent and really useful to society only when it results in the creation of fresh capital.

The greater the destitution of an individual or country, the greater are at once the necessity, and the difficulty of saving. Hence the obstacles a poor nation has to encounter in escaping from its destitution. On the other hand, the possession of a capital to begin with, by increasing the productiveness of labour, facilitates the acquisition of fresh capital. Hence the increase of national wealth advances at an accelerating speed, and "to him who hath, more is given."

It is the spirit of economy shown in the creation of capital which has successively raised Holland, England, and the United States to power. It is an ignorant prodigality, shown in the destruction of capital, which completed the ruin of Spain from the time of Philip II. to the end of the last century.

§ 3. Tools and Machinery.

Among the objects which constitute capital it is especially tools and machines that render labour productive. Aristotle speaks of man as a "political animal," i.e. as suited for a social life. Adam Smith remarked that man is the only animal that makes exchanges. Franklin speaks of him as "a toolmaking animal." Thus it is from association, from exchange, and from tools that mankind derives its power over nature, or, in other words, its welfare and civilisation.

Everything over and above man's teeth and nails,

that assists labour, is a tool. A machine is a tool, only it is a tool set in motion, no longer by human muscles, but by the forces of nature, by a "motor." Thus, as has been shown, the history of the progress of tools is the history of the progress of civilisation.

Industry has had recourse to motors of ever increasing power, and ever better adapted to its needs, first to the domesticated animals, then to water, then to wind, then to steam, then to electricity, which last is as yet in its infancy.

The advantages of machines are many and great. They may be briefly enumerated follows:

as

(i.) They bring into man's service forces of almost limitless extent. It is reckoned that the power of the machinery worked by steam in the civilised countries is equivalent to that of fourteen million horses, or of more than two hundred and eighty million slaves. Besides this there are in the world locomotives with a total power of twenty million horses, and steam vessels of another four million. The horse power of these calculations is equal to that of at least two real horses, and thus we have an equivalent for forty-eight million horses working at the transport of men and their goods. In fixed machinery, France possesses three million horse power, and Belgium half a million. Reckoning this unit of horse power as equal to the power of twenty-one men, we find that to each French and