---
id: book-2-chapter-01
title: "OF THE DIVISION OF STOCK."
book: "2"
chapter: 1
artifact_type: content
---

CHAPTER I.
OF THE DIVISION OF STOCK.



      When the stock which a man possesses is no more than sufficient to
      maintain him for a few days or a few weeks, he seldom thinks of deriving
      any revenue from it. He consumes it as sparingly as he can, and
      endeavours, by his labour, to acquire something which may supply its place
      before it be consumed altogether. His revenue is, in this case, derived
      from his labour only. This is the state of the greater part of the
      labouring poor in all countries.

      But when he possesses stock sufficient to maintain him for months or
      years, he naturally endeavours to derive a revenue from the greater part
      of it, reserving only so much for his immediate consumption as may
      maintain him till this revenue begins to come in. His whole stock,
      therefore, is distinguished into two parts. That part which he expects is
      to afford him this revenue is called his capital. The other is that which
      supplies his immediate consumption, and which consists either, first, in
      that portion of his whole stock which was originally reserved for this
      purpose; or, secondly, in his revenue, from whatever source derived, as it
      gradually comes in; or, thirdly, in such things as had been purchased by
      either of these in former years, and which are not yet entirely consumed,
      such as a stock of clothes, household furniture, and the like. In one or
      other, or all of these three articles, consists the stock which men
      commonly reserve for their own immediate consumption.

      There are two different ways in which a capital may be employed so as to
      yield a revenue or profit to its employer.

      First, it may be employed in raising, manufacturing, or purchasing goods,
      and selling them again with a profit. The capital employed in this manner
      yields no revenue or profit to its employer, while it either remains in
      his possession, or continues in the same shape. The goods of the merchant
      yield him no revenue or profit till he sells them for money, and the money
      yields him as little till it is again exchanged for goods. His capital is
      continually going from him in one shape, and returning to him in another;
      and it is only by means of such circulation, or successive changes, that
      it can yield him any profit. Such capitals, therefore, may very properly
      be called circulating capitals.

      Secondly, it may be employed in the improvement of land, in the purchase
      of useful machines and instruments of trade, or in such like things as
      yield a revenue or profit without changing masters, or circulating any
      further. Such capitals, therefore, may very properly be called fixed
      capitals.

      Different occupations require very different proportions between the fixed
      and circulating capitals employed in them.

      The capital of a merchant, for example, is altogether a circulating
      capital. He has occasion for no machines or instruments of trade, unless
      his shop or warehouse be considered as such.

      Some part of the capital of every master artificer or manufacturer must be
      fixed in the instruments of his trade. This part, however, is very small
      in some, and very great in others, A master tailor requires no other
      instruments of trade but a parcel of needles. Those of the master
      shoemaker are a little, though but a very little, more expensive. Those of
      the weaver rise a good deal above those of the shoemaker. The far greater
      part of the capital of all such master artificers, however, is circulated
      either in the wages of their workmen, or in the price of their materials,
      and repaid, with a profit, by the price of the work.

      In other works a much greater fixed capital is required. In a great
      iron-work, for example, the furnace for melting the ore, the forge, the
      slit-mill, are instruments of trade which cannot be erected without a very
      great expense. In coal works, and mines of every kind, the machinery
      necessary, both for drawing out the water, and for other purposes, is
      frequently still more expensive.

      That part of the capital of the farmer which is employed in the
      instruments of agriculture is a fixed, that which is employed in the wages
      and maintenance of his labouring servants is a circulating capital. He
      makes a profit of the one by keeping it in his own possession, and of the
      other by parting with it. The price or value of his labouring cattle is a
      fixed capital, in the same manner as that of the instruments of husbandry;
      their maintenance is a circulating capital, in the same manner as that of
      the labouring servants. The farmer makes his profit by keeping the
      labouring cattle, and by parting with their maintenance. Both the price
      and the maintenance of the cattle which are bought in and fattened, not
      for labour, but for sale, are a circulating capital. The farmer makes his
      profit by parting with them. A flock of sheep or a herd of cattle, that,
      in a breeding country, is brought in neither for labour nor for sale, but
      in order to make a profit by their wool, by their milk, and by their
      increase, is a fixed capital. The profit is made by keeping them. Their
      maintenance is a circulating capital. The profit is made by parting with
      it; and it comes back with both its own profit and the profit upon the
      whole price of the cattle, in the price of the wool, the milk, and the
      increase. The whole value of the seed, too, is properly a fixed capital.
      Though it goes backwards and forwards between the ground and the granary,
      it never changes masters, and therefore does not properly circulate. The
      farmer makes his profit, not by its sale, but by its increase.

      The general stock of any country or society is the same with that of all
      its inhabitants or members; and, therefore, naturally divides itself into
      the same three portions, each of which has a distinct function or office.

      The first is that portion which is reserved for immediate consumption, and
      of which the characteristic is, that it affords no revenue or profit. It
      consists in the stock of food, clothes, household furniture, etc. which
      have been purchased by their proper consumers, but which are not yet
      entirely consumed. The whole stock of mere dwelling-houses, too,
      subsisting at any one time in the country, make a part of this first
      portion. The stock that is laid out in a house, if it is to be the
      dwelling-house of the proprietor, ceases from that moment to serve in the
      function of a capital, or to afford any revenue to its owner. A
      dwelling-house, as such, contributes nothing to the revenue of its
      inhabitant; and though it is, no doubt, extremely useful to him, it is as
      his clothes and household furniture are useful to him, which, however,
      make a part of his expense, and not of his revenue. If it is to be let to
      a tenant for rent, as the house itself can produce nothing, the tenant
      must always pay the rent out of some other revenue, which he derives,
      either from labour, or stock, or land. Though a house, therefore, may
      yield a revenue to its proprietor, and thereby serve in the function of a
      capital to him, it cannot yield any to the public, nor serve in the
      function of a capital to it, and the revenue of the whole body of the
      people can never be in the smallest degree increased by it. Clothes and
      household furniture, in the same manner, sometimes yield a revenue, and
      thereby serve in the function of a capital to particular persons. In
      countries where masquerades are common, it is a trade to let out
      masquerade dresses for a night. Upholsterers frequently let furniture by
      the month or by the year. Undertakers let the furniture of funerals by the
      day and by the week. Many people let furnished houses, and get a rent, not
      only for the use of the house, but for that of the furniture. The revenue,
      however, which is derived from such things, must always be ultimately
      drawn from some other source of revenue. Of all parts of the stock, either
      of an individual or of a society, reserved for immediate consumption, what
      is laid out in houses is most slowly consumed. A stock of clothes may last
      several years; a stock of furniture half a century or a century; but a
      stock of houses, well built and properly taken care of, may last many
      centuries. Though the period of their total consumption, however, is more
      distant, they are still as really a stock reserved for immediate
      consumption as either clothes or household furniture.

      The second of the three portions into which the general stock of the
      society divides itself, is the fixed capital; of which the characteristic
      is, that it affords a revenue or profit without circulating or changing
      masters. It consists chiefly of the four following articles.

      First, of all useful machines and instruments of trade, which facilitate
      and abridge labour.

      Secondly, of all those profitable buildings which are the means of
      procuring a revenue, not only to the proprietor who lets them for a rent,
      but to the person who possesses them, and pays that rent for them; such as
      shops, warehouses, work-houses, farm-houses, with all their necessary
      buildings, stables, granaries, etc. These are very different from mere
      dwelling-houses. They are a sort of instruments of trade, and may be
      considered in the same light.

      Thirdly, of the improvements of land, of what has been profitably laid out
      in clearing, draining, inclosing, manuring, and reducing it into the
      condition most proper for tillage and culture. An improved farm may very
      justly be regarded in the same light as those useful machines which
      facilitate and abridge labour, and by means of which an equal circulating
      capital can afford a much greater revenue to its employer. An improved
      farm is equally advantageous and more durable than any of those machines,
      frequently requiring no other repairs than the most profitable application
      of the farmer’s capital employed in cultivating it.

      Fourthly, of the acquired and useful abilities of all the inhabitants and
      members of the society. The acquisition of such talents, by the
      maintenance of the acquirer during his education, study, or
      apprenticeship, always costs a real expense, which is a capital fixed and
      realized, as it were, in his person. Those talents, as they make a part of
      his fortune, so do they likewise that of the society to which he belongs.
      The improved dexterity of a workman may be considered in the same light as
      a machine or instrument of trade which facilitates and abridges labour,
      and which, though it costs a certain expense, repays that expense with a
      profit.

      The third and last of the three portions into which the general stock of
      the society naturally divides itself, is the circulating capital, of which
      the characteristic is, that it affords a revenue only by circulating or
      changing masters. It is composed likewise of four parts.

      First, of the money, by means of which all the other three are circulated
      and distributed to their proper consumers.

      Secondly, of the stock of provisions which are in the possession of the
      butcher, the grazier, the farmer, the corn-merchant, the brewer, etc. and
      from the sale of which they expect to derive a profit.

      Thirdly, of the materials, whether altogether rude, or more or less
      manufactured, of clothes, furniture, and building which are not yet made
      up into any of those three shapes, but which remain in the hands of the
      growers, the manufacturers, the mercers, and drapers, the
      timber-merchants, the carpenters and joiners, the brick-makers, etc.

      Fourthly, and lastly, of the work which is made up and completed, but
      which is still in the hands of the merchant and manufacturer, and not yet
      disposed of or distributed to the proper consumers; such as the finished
      work which we frequently find ready made in the shops of the smith, the
      cabinet-maker, the goldsmith, the jeweller, the china-merchant, etc. The
      circulating capital consists, in this manner, of the provisions,
      materials, and finished work of all kinds that are in the hands of their
      respective dealers, and of the money that is necessary for circulating and
      distributing them to those who are finally to use or to consume them.

      Of these four parts, three—provisions, materials, and finished work,
      are either annually or in a longer or shorter period, regularly withdrawn
      from it, and placed either in the fixed capital, or in the stock reserved
      for immediate consumption.

      Every fixed capital is both originally derived from, and requires to be
      continually supported by, a circulating capital. All useful machines and
      instruments of trade are originally derived from a circulating capital,
      which furnishes the materials of which they are made, and the maintenance
      of the workmen who make them. They require, too, a capital of the same
      kind to keep them in constant repair.

      No fixed capital can yield any revenue but by means of a circulating
      capital. The most useful machines and instruments of trade will produce
      nothing, without the circulating capital, which affords the materials they
      are employed upon, and the maintenance of the workmen who employ them.
      Land, however improved, will yield no revenue without a circulating
      capital, which maintains the labourers who cultivate and collect its
      produce.

      To maintain and augment the stock which may be reserved for immediate
      consumption, is the sole end and purpose both of the fixed and circulating
      capitals. It is this stock which feeds, clothes, and lodges the people.
      Their riches or poverty depend upon the abundant or sparing supplies which
      those two capitals can afford to the stock reserved for immediate
      consumption.

      So great a part of the circulating capital being continually withdrawn
      from it, in order to be placed in the other two branches of the general
      stock of the society, it must in its turn require continual supplies
      without which it would soon cease to exist. These supplies are principally
      drawn from three sources; the produce of land, of mines, and of fisheries.
      These afford continual supplies of provisions and materials, of which part
      is afterwards wrought up into finished work and by which are replaced the
      provisions, materials, and finished work, continually withdrawn from the
      circulating capital. From mines, too, is drawn what is necessary for
      maintaining and augmenting that part of it which consists in money. For
      though, in the ordinary course of business, this part is not, like the
      other three, necessarily withdrawn from it, in order to be placed in the
      other two branches of the general stock of the society, it must, however,
      like all other things, be wasted and worn out at last, and sometimes, too,
      be either lost or sent abroad, and must, therefore, require continual,
      though no doubt much smaller supplies.

      Land, mines, and fisheries, require all both a fixed and circulating
      capital to cultivate them; and their produce replaces, with a profit not
      only those capitals, but all the others in the society. Thus the farmer
      annually replaces to the manufacturer the provisions which he had
      consumed, and the materials which he had wrought up the year before; and
      the manufacturer replaces to the farmer the finished work which he had
      wasted and worn out in the same time. This is the real exchange that is
      annually made between those two orders of people, though it seldom happens
      that the rude produce of the one, and the manufactured produce of the
      other, are directly bartered for one another; because it seldom happens
      that the farmer sells his corn and his cattle, his flax and his wool, to
      the very same person of whom he chuses to purchase the clothes, furniture,
      and instruments of trade, which he wants. He sells, therefore, his rude
      produce for money, with which he can purchase, wherever it is to be had,
      the manufactured produce he has occasion for. Land even replaces, in part
      at least, the capitals with which fisheries and mines are cultivated. It
      is the produce of land which draws the fish from the waters; and it is the
      produce of the surface of the earth which extracts the minerals from its
      bowels.

      The produce of land, mines, and fisheries, when their natural fertility is
      equal, is in proportion to the extent and proper application of the
      capitals employed about them. When the capitals are equal, and equally
      well applied, it is in proportion to their natural fertility.

      In all countries where there is a tolerable security, every man of common
      understanding will endeavour to employ whatever stock he can command, in
      procuring either present enjoyment or future profit. If it is employed in
      procuring present enjoyment, it is a stock reserved for immediate
      consumption. If it is employed in procuring future profit, it must procure
      this profit either by staying with him, or by going from him. In the one
      case it is a fixed, in the other it is a circulating capital. A man must
      be perfectly crazy, who, where there is a tolerable security, does not
      employ all the stock which he commands, whether it be his own, or borrowed
      of other people, in some one or other of those three ways.

      In those unfortunate countries, indeed, where men are continually afraid
      of the violence of their superiors, they frequently bury or conceal a
      great part of their stock, in order to have it always at hand to carry
      with them to some place of safety, in case of their being threatened with
      any of those disasters to which they consider themselves at all times
      exposed. This is said to be a common practice in Turkey, in Indostan, and,
      I believe, in most other governments of Asia. It seems to have been a
      common practice among our ancestors during the violence of the feudal
      government. Treasure-trove was, in those times, considered as no
      contemptible part of the revenue of the greatest sovereigns in Europe. It
      consisted in such treasure as was found concealed in the earth, and to
      which no particular person could prove any right. This was regarded, in
      those times, as so important an object, that it was always considered as
      belonging to the sovereign, and neither to the finder nor to the
      proprietor of the land, unless the right to it had been conveyed to the
      latter by an express clause in his charter. It was put upon the same
      footing with gold and silver mines, which, without a special clause in the
      charter, were never supposed to be comprehended in the general grant of
      the lands, though mines of lead, copper, tin, and coal were, as things of
      smaller consequence.
