A Treatise on Political Economy

Jean-Baptiste Say
Say, Jean-Baptiste
Display paragraphs in this book containing:
C. R. Prinsep, trans. and Clement C. Biddle., ed.
First Pub. Date
Philadelphia: Lippincott, Grambo & Co.,
Pub. Date
6th edition. Based on the 4th-5th editions.
15 of 46




In the foregoing chapter, I have shown how productive capital, though kept, during the progress of production, in a continual state of employment, and subject to perpetual change and wear, is yet ultimately reproduced in full value, when the business of production is at an end. Since, then, wealth consists in the value of matter or substance, not in the substance or matter itself, I trust my readers have clearly comprehended, that the productive capital employed, notwithstanding its frequent transmutations, is all the while the same capital.


It will be conceived with equal facility, that, inasmuch as the value produced has replaced the value consumed, that produced value may be equal, inferior, or superior in amount, to the value consumed, according to circumstances. If equal, the capital has been merely replaced and kept up; if inferior, the capital has been encroached upon; but if superior, there has been an actual increase and accession of capital. This is precisely the point to which we traced the cultivator, cited by way of an example in the preceding chapter. We supposed him, after the complete re-establishment of his capital, so as to put him in a condition to begin the new year's cultivation with equal means at his disposal, to have netted a surplus produce beyond his consumption of some value or other; say of 1000 dollars.


Now, let us observe the various methods, in which he may dispose of his surplus of 1000 dollars; for simple as the matter may appear to be, there is no point upon which more error has prevailed, or which has greater influence upon the condition of mankind.


Whatever kind of produce this surplus, which we have valued at 1000 dollars, may consist of, the owner may exchange it for gold or silver specie, and bury it in the earth till he wants it again. Does the national capital suffer a loss of 1000 dollars by this operation? Certainly not; for we have just seen, that the value of that capital was before completely replaced. Has any one been injured to that amount? By no means; for he has neither robbed nor cheated any body, and has received no value whatever, without giving an equivalent. It may be said, perhaps, he has given wheat in exchange for the dollars he has thus buried, which wheat was very soon consumed; yet the 1000 dollars still continue withdrawn from the capital of the community. But I trust it will be recollected, that wheat, as well as silver or gold, may compose a part of the national capital; indeed, we have seen that national capital must necessarily consist, in a great measure, of wheat and such like substances, liable to either partial or total consumption, without any diminution of capital thereupon; for, in short, that reproduction completely replaces the value consumed, including the profits of the producers, whose productive agency is part of the value consumed. Wherefore, the instant that the cultivator has fully replaced his capital, and begins again with the same means as before, the 1000 dollars may be thrown into the sea without reducing the national capital.


But let us trace the disposal of this surplus of 1000 dollars to every imaginable destination. Suppose, for instance, that instead of being buried, they have been spent by the cultivator upon an elegant entertainment. In this case, this whole value has been destroyed in an afternoon; a sumptuous feast, a ball, and fireworks, will have swallowed up the whole. The value thus destroyed exists no longer in the community: it no longer forms an item in the aggregate of wealth; for those persons, into whose hands the identical pieces of silver have come, have given an equivalent in wines, refreshments, eatables, gunpowder, &c., all which values are reduced to nothing; the gross national capital, however, is no more diminished in this case than in the former. A surplus value had been produced; and this surplus is all that has been destroyed, so that things remain just as they were.


Again, suppose these 1000 dollars to have been spent in the purchase of furniture, plate, or linen. Still there is no reduction of national productive capital; although it must be allowed there is no accession; for in this case, nothing more is gained than the additional comforts the cultivator and his family derive from the newly purchased moveables.


Fourthly and lastly, suppose the cultivator to add this excess of 1000 dollars to his productive capital, that is to say, to re-employ it in increasing the productive powers of his farm as circumstances may require, in the purchase of more beasts of husbandry, or the hire and support of more labourers; and in consequence, at the end of the year, to gather produce enough to replace the full value of the 1000 dollars, with a profit, in such manner, as to make them capable of yielding a fresh product the year after, and so on every year to eternity. It is then, and then only, that the productive capital of the community is really augmented to that extent.


It must on no account be overlooked, that, in one way or other, a saving such as that we have been speaking of, whether expended productively or unproductively, still is in all cases expended and consumed; and this is a truth, that must remove a notion extremely false, though very much in vogue—namely, that saving limits and injures consumption. No act of saving subtracts in the least from consumption, provided the thing saved be re-invested or restored to productive employment. On the contrary, it gives rise to a consumption perpetually renovated and recurring; whereas there is no repetition of an unproductive consumption.*3


It must be observed, too, that the form in which the value saved is so saved and re-employed productively, makes no essential difference. The saving is made with more or less advantage, according to the circumstances and intelligence of the person making it. Nor is there any reason why this portion of capital should not have been accumulated, without ever having for a moment assumed the form of specie. It may be that an actual product of the farm has been saved and resown or planted, without having undergone any transmutation; perhaps the wood, that might have been used as firing to warm superfluous apartments, may have been converted into palings or other carpenter's work; and what was cut down in the first instance as an item of revenue, be so employed, as to become an item of capital.


Now, the only way of augmenting the productive capital of individuals, as well as the aggregate productive capital of the community, is by this process of saving; in other words, of re-employing in production more products created than have been consumed in their creation. Productive capital cannot be accumulated by the mere scraping together of values without consuming them; nor any otherwise, than by withdrawing them from unproductive, and devoting them to reproductive consumption. There is nothing odious in the real picture of the accumulation of capital; we shall presently see its happy consequences.


The form under which national capital is accumulated, is commonly determined by the respective geographical position, the moral character, and the peculiar wants of each nation. The accumulations of a society in its early stages consist, for the most part, of buildings, implements of husbandry, live stock, improvements of land; those of a manufacturing people chiefly of raw materials, or such as are still in the hands of its workmen, in a more or less finished state; and in some part, of the necessary manufacturing tools and machinery. In a nation devoted to commerce, capital is mostly accumulated in the form of wrought or unwrought goods, that have been bought by the merchant for the purpose of re-sale.


A nation that at the same time directs its energies to all three branches of industry, namely, agriculture, manufactures, and commerce, has a capital compounded of all three different forms of production; of that amazing quantity of stores of every kind, that we find civilized society actually possessed of; and which, by the intelligent use that is made of them, are constantly renovated, or even increased, in spite of their enormous consumption, provided that the industry of the community produces more than is destroyed by its consumption.


I do not mean to say, that each nation has produced and laid by the identical article that composes its actual capital. Values, in some shape or other, have been produced and laid by; and these, through various transmutations, have assumed the form most convenient for the time being. A bushel of wheat saved will feed a mason as well as a worker in embroidery. In the one case, the bushel of wheat will be reproduced in the shape of the masonry of a house; in the other, under that of a laced suit.


Every adventurer in industry, that has a capital of his own embarked in it, has ready means of employing his saving productively; if engaged in husbandry, he buys fresh parcels of land; or, by judicious outlays and improvements, augments the productive powers of what already belongs to him; if in trade, he buys and sells a greater quantity of merchandise. Capitalists have nearly the same advantage: they invest their whole savings in the same manner as their former capital is invested, and increase it pro tanto, or look out for new ways of investment, which they are at no loss to discover; for the moment they are known to be possessed of loose funds, they seldom have to wait for propositions for the employment of them; whereas the proprietors of lands let out to farm, and individuals that live upon fixed income, or the wages of their personal labour, have not equal facility in the advantageous disposal of their savings, and can seldom invest them till they amount to a good round sum. Many savings are therefore consumed, that might otherwise have swelled the capitals of individuals, and consequently of the nation at large. Banks and associations, whose object is to receive, collect, and turn to profit the small savings of individuals, are consequently very favourable to the multiplication of capital, whenever they are perfectly secure.


The increase of capital is naturally slow of progress: for it can never take place without actual production of value, and the creation of value is the work of time and labour, besides other ingredients.*4 Since the producers are compelled to consume values all the while they are engaged in the creation of fresh ones, the utmost they can accumulate, that is to say, add to reproductive capital, is the value they produce beyond what they consume; and the sum of this surplus is all the additional wealth that the public or individuals can acquire. The more values are saved and reproductively employed in the year, the more rapid is the national progress towards prosperity. Its capital is swelled, a larger quantity of industry is set in motion, and saving becomes more and more practicable, because the additional capital and industry are additional means of production.


Every saving or increase of capital lays the groundwork of a perpetual annual profit, not only to the saver himself, but likewise to all those whose industry is set in motion by this item of new capital. It is for this reason that the celebrated Adam Smith likens the frugal man, who enlarges his productive capital but in a solitary instance, to the founder of an almshouse for the perpetual support of a body of labouring persons upon the fruits of their own labour; and on the other hand, compares the prodigal that encroaches upon his capital, to the roguish steward that should squander the funds of a charitable institution, and leave destitute, not merely those that derived present subsistence from it, but likewise all who might derive it hereafter. He pronounces, without reserve, every prodigal to be a public pest, and every careful and frugal person to be a benefactor of society.*5


It is fortunate, that self-interest is always on the watch to preserve the capital of individuals; and that capital can at no time be withdrawn from productive employment, without a proportionate loss of revenue.


Smith is of opinion, that, in every country, the profusion and ignorance of individuals and of the public authorities, is more than compensated by the prevalent frugality of the people at large, and by their careful attention to their own interests.*6 At least it seems undeniable, that almost all the nations of Europe are at this moment advancing in opulence; which could not be the case, unless each of them, taken in the aggregate, produced more than it consumed unproductively.*7 Even the revolutions of modern times appear to have been rather favourable than otherwise to the progress of opulence; for they are no longer, as in ancient days, followed by continued hostile invasion, or universal and protracted pillage; whereas, on the other hand, they have commonly overthrown the barriers of prejudice, and opened a wider field for talent and enterprise. But it is still a question, whether this frugality, which Smith gives individuals credit for, be not, in the most numerous classes of society, a forced consequence of a vicious political organization. Is it true, that those classes receive their fair proportion of the gross produce, in return for their productive exertions? How many individuals live in constant penury, in the countries considered as the most wealthy! How many families are there, both in town and country, whose whole existence is a succession of privations; who, with every thing around them to awaken their desires, are reduced to the satisfaction of the very lowest wants, as if they lived in an age of the grossest barbarism and national poverty!


Thus I am forced to infer, that, though unquestionably there is an annual saving of produce in almost all the nations of Europe, this saving is extorted much more commonly from urgent and natural wants, than from the consumption of superfluities, to which policy and humanity would hope to trace it. Whence arises a strong suspicion of some radical defect in the policy and internal economical systems of most of their governments.


Again, Smith thinks that the moderns are indebted for their comparative opulence, rather to the prevalence of individual frugality, than to the enlargement of productive power. I admit, that some absurd kinds of profusion are more rare now-a-days than formerly;*8 but it should be recollected, that such profusion can never be practised, except by a very small number of persons; and if we take the pains to consider how widely the enjoyment of a more abundant and varied consumption is diffused, particularly among the middle classes of society, I think it will be found, that consumption and frugality have increased both together; for they are by no means incompatible. How many concerns are there in every branch of industry, that, in times of prosperity, yield enough produce to the adventurers to enable them to enlarge both their expenses and their savings? What is true of one particular concern, may possibly be true of the national production in the aggregate. The wealth of France was progressively increasing during the first forty years of the reign of Louis XIV., in spite of the profusion, public and private, that the splendour of the court occasioned. The stimulus given to production by Colbert, multiplied her resources faster than the court squandered them. Some people supposed, that this very prodigality was the cause of their multiplication; the gross fallacy of which notion is demonstrated by the circumstance, that after the death of that minister, the extravagancies of the court continuing at the same rate, and the progress of production being unable to keep pace with them, the kingdom was reduced to an alarming state of exhaustion. The close of that reign was the most gloomy that can be imagined.


After the death of Louis XIV., the public and private expenditure of France have been still further increasing;*9 and to me it appears indisputable, that her national wealth has advanced likewise: Smith himself admits that it did; and what is true of France is so of most of the other states of Europe in some degree or other.


Turgot*10 falls in with Smith's opinion. He expresses his belief, that frugality is more generally prevalent now than in former times, and gives the following reasons: that, in most European countries, the interest of money was, on the average, lower than it had ever before been, a clear proof of the greater abundance of capital; therefore, that greater frugality must have been exerted in the accumulation of that capital than at any former period; and, certainly, the low rate of interest proves the existence of more abundant capital: but it proves nothing with regard to the manner of its acquirement in fact, it may have been acquired just as well by enlarged production as by greater frugality, as I have just been demonstrating.


However, I am far from denying, that in many particulars, the moderns have improved the art of saving as well as that of producing. A man is not easily satisfied with less gratifications than he has been accustomed to: but there are many which he has learnt to procure at a cheaper rate. For instance, what can be more beautiful than the coloured furniture papers that adorn the walls of our apartments, combining the grace of design with the freshness of colouring? Formerly, many of those classes of society that now make use of paper hangings, were content with whitewashed walls, or a coarse ill-executed tapestry, infinitely dearer than the modern paperings. By the recent discovery of the efficacy of sulphuric acid in destroying the mucilaginous articles of vegetable oils, they have been rendered serviceable in lamps on the Argand principle of a double current of air, which before could only be lighted with fish oil, twice or thrice as dear. This discovery has of itself placed the use of those lamps, and the fine light they give, within reach of almost every class.*11


For this improvement in frugality, we are indebted to the advances of industry, which has, on the one hand discovered a greater number of economical processes; and, on the other, everywhere solicited the loan of capital, and tempted the holders of it, great or small, by better terms and greater security. In times when little industry existed, capital, being unprofitable, was seldom in any other shape than that of a hoard of specie locked up in a strong box, or buried in the earth as a reserve against emergency: however considerable in amount, it yielded no sort of benefit whatever, being in fact little else than a mere precautionary deposit, great or small. But the moment that this hoard was found capable of yielding a profit proportionate to its magnitude, its possessor had a double motive for increasing it, and that not of remote or precautionary, but of actual, immediate benefit; since the profit yielded by the capital might, without the least diminution of it, be consumed and procure additional gratifications. Thenceforward it became an object of greater and more general solicitude than before, in those that had none to create, and in those that had one to augment, productive capital; and a capital bearing interest began to be regarded as a property equally lucrative, and sometimes equally substantial with land yielding rent. To such as regard the accumulation of capital as an evil, insomuch as it tends to aggravate the inequality of human fortune, I would suggest, that, if accumulation has a constant tendency to the multiplying of large fortunes, the course of nature has an equal tendency to divide them again. A man, whose life has been spent in augmenting his own capital and that of his country, must die at last, and the succession rarely devolves upon a sole heir or legatee, except where the national laws sanction entails and the right of primogeniture. In countries exempt from the baneful influence of such institutions, where nature is left to its own free and beneficent action, wealth is naturally diffused by subdivision through all the ramifications of the social tree, carrying health and life to the furthest extremities.*12 The total capital of the nation is enlarged at the same time that the capital of individuals is subdivided.


Thus, the growing wealth of an individual, when honestly acquired and reproductively employed, far from being viewed with jealous eyes, ought to be hailed as a source of general prosperity. I say honestly acquired, because a fortune amassed by rapine or extortion is no addition to the national stock; it is rather a portion of capital transferred from the hands of one man, where it already existed, to those of another, who has exerted no productive industry. On the contrary, it is but too common, that wealth ill-gotten is ill-spent also.


The faculty of amassing capital, or, in other words, value, I apprehend to be one cause of the vast superiority of man over the brute creation. Capital, taken in the aggregate, is a powerful engine consigned to the use of man alone. He can direct towards any one channel of employment the successive accumulations of many generations. Other animals can command, at most, no more than their respective individual accumulations, scraped together in the course of a few days, or a season at the utmost, which can never amount to any thing considerable: so that, granting them a degree of intelligence they do not seem possessed of, that intelligence would yet remain ineffectual, for want of the materials to set it in motion.


Moreover, it may be remarked, that the powers of man, resulting from the faculty of amassing capital, are absolutely indefinable; because there is no assignable limit to the capital he may accumulate, with the aid of time, industry, and frugality.

Notes for this chapter

On the subject of saving, Sismondi, and after him our own Malthus, have adopted a different opinion. According to them, the powers of production have already outrun the desire and the ability to consume; consequently, every thing that tends to reduce that desire is injurious, because it is already too inert for the interests of production. Wherefore, inasmuch as the desire of accumulation is the direct opposite of that of consumption, it must of necessity be injurious in the highest degree. On these principles, it might be proved without difficulty, that the prodigality of public authority, war, or the poor law of England, is a national benefit: for all of them stimulate consumption. Indeed they leave their readers to draw this inevitable conclusion; for they maintain in plain terms, that the enlargement of the productive powers of man, by the use of machinery or otherwise, makes the existence of unproductive consumers a matter, not of mere possibility or probability, but of actual necessity and expedience. (Vide Sismondi, Nouv. Prin. liv. ii. c. 3. and liv. iv. c. 4. Malthus, Prin. of Pol. Econ.) These maxims would justify the prodigality of Louis XIV. of France, and of the Pitt system of England. But fortunately they are erroneous; and if the contrary principles laid down by our author here and infrà Chap. XV., needed further illustration or support, they have been rendered still more clear and convincing by his recent Lettres à M. Malthus.—It is true, that the enlargement of productive power naturally leads to the multiplication of unproductive consumers: why? because the desire of barren consumption, instead of being inert, is always active in the human breast. But that multiplication is not necessary; for the consumer may be made a producer, if not of material, at least of immaterial products, which latter are capable of infinitely more multiplication and variety, as well as of more general diffusion than material products. While this field remains open, a national administration never need despair of finding occupation for the human labour supplanted by machinery. And what is the parsimony of modern days? It is not the hoarding of coin or other valuables, which, though as our author observes, it subtracts nothing from the national capital, is yet a social mischief, because it suspends the utility of an existing product, or at any rate, prevents it from yielding the human gratification, which its barren consumption would afford. The accumulations of the miser are now either vested in reproduction which is beneficial, or in the ownership of the sources of production, land, &c. &c. which it matters not to public wealth who may be possessed of, or in the incumbrances of those sources, mortgages, national funds, &c. &c., which are but portions of that ownership, and to which the same observation applies. Translator.
The savings of a rich contractor, of a swindler or cheat, of a royal favourite, saturated with grants, pensions, and unmerited emoluments, are actual accumulations of capital, and are sometimes made with facility enough. But the values thus amassed by a privileged few, are, in reality, the product of the labour, capital, and land, of numbers, who might themselves have made the saving, and turned it to their own account, but for the spoliation of injustice, fraud, or violence.
Wealth of Nations, b. ii. c. 3. Lord Lauderdale, in a work entitled, "Enquiry into the Nature and Origin of Public Wealth," has proved, to his own conviction, in opposition to Smith, that the accumulation of capital is adverse to the increase of wealth: grounding his argument on the position that such accumulation withdraws from circulation values which would be serviceable to industry. But this position is untenable. Neither productive capital, nor the additions made to it, are withdrawn from circulation: otherwise they would remain inactive, and yield no profit whatever. On the contrary, the adventurer in industry, who makes use of it, employs, disposes of, and wholly consumes it, but in a way that reproduces it, and that with profit. I have noted this error of his lordship, because it has been made the basis of other works on political economy, which abound in false conclusions, having set out on this false principle.
Wealth of Nations, b. ii. c. 3.
Except during the continuance of ruinous wars, or excessive public extravagance, such as occurred in France under the domination of Napoleon. It cannot be doubted, that, at that disastrous period of her history, even in the moments of her most brilliant military successes, the amount of capital dilapidated exceeded the aggregate of savings. Requisitions and the havoc of war, in addition to the compulsory expenditure of individuals, and the pressure of exorbitant taxation, must unquestionably have destroyed more values than the exertions of individual economy could devote to reproductive investment. This sovereign, wholly ignorant of political economy himself, and consequently affecting to despise its suggestions, encouraged his courtiers, like himself, to squander the enormous revenues derived from his favour, in the apprehension that wealth might make them independent.*

    * [We are told by Dr. Bowring and Mr. Villiers, in their valuable report on the Commercial Relations between France and Great Britain, published during the present year (1834), that the best authorities agree in declaring that the national riches of France were greatly diminished by the Imperial Régime, and, probably, a much larger amount was sacrificed in increased prices and diminished trade than was lost by the more direct operation of Napoleon's policy.] American Editor.
It is not, however, to be supposed, that the internal economy of ancient and of modern states is so widely different as some may be led to imagine. There is a striking similarity between the rise and fall of the opulent cities of Tyre, Carthage, and Alexandria, and those of the Venetian, Florentine, Genoese, and Dutch republics. The same cause must ever be attended with the same effect. We read of the wonderful riches of Crœsus, king of Lydia, even before his conquest of some neighbouring states: whence we may infer, that the Lydians were an industrious and frugal people; for a king can draw his resources solely from his subjects. The dry study of political economy would lead to this inference; but it happens to be also confirmed by the historical testimony of Justin, who calls the Lydians a people once powerful in the resources of industry; (gens industriâ quandam potens;) and gives a notion of their enterprising character, when he tells us that Cyrus did not complete their subjugation, until he had habituated them to indolence, gaming and debauchery. (Jussique cauponias et ludicras artes et lenocinia exercere.) It is clear, therefore, that they must have before been possessed of the opposite qualities. Had Crœsus not taken a turn for pomp and military renown, he would probably have remained a powerful monarch, instead of ending his days in misfortune. The art of connecting cause with effect, and the study of political economy, are probably as conducive to the personal welfare of kings, as to that of their subjects.
This increase of expenditure has not been altogether nominal, and consequential upon the reduction in the standard of the silver coinage of France; a greater quantity and variety of products were consumed, and those of a better and more expensive quality. And though refined silver is now intrinsically worth nearly as much as in the days of Louis XIV., since the same weight of silver is given for the same quantity of wheat; yet the same ranks of society now actually expend more silver in weight as well as in denomination.
Reflex sur la Form. et la Distrib. des Rich. § 81.
It is to be feared, that taxation will ultimately deprive the consumer of the advantage of such improvements. The increase of the internal taxes (droits reunis), of the stamps on patents, of the taxes and impediments affecting the internal transport of commodities, have already brought the price of these vegetable oils almost to a par with the article they had so beneficially supplanted.
It is to be regretted that people should be so little attentive to merit in their testamentary dispositions. There is always a degree of discredit thrown upon the memory of a testator, by his bounty to an unworthy object; and, on the contrary, nothing endears him more to the survivors than a bequest dictated by public spirit, or the love of private virtue. The foundation of a hospital, of an establishment for the education of the poor, of a perpetual premium for good actions, or a bequest to a writer of eminent merit, extends the influence of the wealthy beyond the limits of mortality, and enrols his name in the records of honour.*

    * This laudable ambition is always proportionate to the wealth, the civil liberty, and the intelligence of a nation. In England, scarcely a year passes over our heads without more than one instance of useful and extensive munificence. The bequests to the elder Pitt, to Wilberforce, and other public men, the frequent foundations and enlargements of institutions of relief or education, reflect equal honour on the character of the nation, and the memory of the individuals. Translator.

Book I, Chapter XII

End of Notes

15 of 46

Return to top