A Treatise on Political Economy
OF THE CONSUMPTION OF WEALTH
BOOK III, CHAPTER I
OF THE DIFFERENT KINDS OF CONSUMPTION.
In the course of my work, I have frequently been obliged to anticipate the explanation of terms and notions which in the natural order should have been postponed to a later period of the investigation. Thus I was obliged in the first book to explain the sense, in which I used the term, consumption, because production cannot be effected without consumption.
My reader will have seen from the explanation there given, that, in like manner as by production is meant the creation, not of substance, but of utility, so by consumption is meant the destruction of utility, and not of substance, or matter. When once the utility of a thing is destroyed, there is an end of the source and basis of its value;—an extinction of that, which made it an object of desire and of demand. It thenceforward ceases to possess value, and is no longer an item of wealth.
Thus, the terms, to consume, to destroy the utility, to annihilate the value of any thing, are as strictly synonymous as the opposite terms to produce, to communicate utility, to create value, and convey to the mind precisely the same idea. Consumption, then, being the destruction of value, is commensurate, not with the bulk, the weight, or the number of the products consumed, but with their value. Large consumption is the destruction of large value, whatever form that value may happen to have assumed.
Every product is liable to be consumed; because the value, which can be added to, can likewise be subtracted from, any object. If it has been added by human exertion or industry, it may be subtracted by human use, or a variety of accidents. But it cannot be more than once consumed; value once destroyed cannot be destroyed a second time. Consumption is sometimes rapid, sometimes gradual. A house, a ship, an implement of iron, are equally consumable as a loaf, a joint of meat, or a coat. Consumption again may be but partial. A horse, an article of furniture, or a house when re-sold by the possessor, has been but partially consumed; there is still a residue of value, for which an equivalent is received in exchange on the re-sale. Sometimes consumption is involuntary, and either accidental, as when a house is burnt, or a vessel shipwrecked, or contrary to the consumer's intention, as when a cargo is thrown overboard, or stores set on fire to prevent their falling into enemies' hands.
Value may be consumed, either long after its production, or at the very moment, and in the very act of production, as in the case of the pleasure afforded by a concert, or theatrical exhibition. Time and labour may be consumed; for labour, applicable to an useful purpose, is an object of value, and when once consumed, can never be consumed again.
Whatever cannot possibly lose its value is not liable to consumption. A landed estate cannot be consumed; but its annual productive agency may; for when once that agency has been exerted, it cannot be exerted again. The improvements of an estate may be consumed, although their value may possibly exceed that of the estate itself; for these improvements are the effect of human exertion and industry; but the land itself is inconsumable.*1
So likewise it is with any industrious faculty. One may consume a labourer's day's work, but not his faculty of working; which, however, is liable to destruction by the death of the person possessing it.
All products are consumed sooner or later; indeed they are produced solely for the purpose of consumption, and, whenever the consumption of a product is delayed after it has reached the point of absolute maturity, it is value inert and neutralized for the time. For as all value may be employed re-productively, and made to yield a profit to the possessor, the withholding a product from consumption is a loss of the possible profit, in other words, of the interest its value would have yielded, if usefully employed.*2
But, products being universally destined for consumption, and that too in the quickest way, how, it may be asked, can there be ever an accumulation of capital, that is to say, of values produced?
I answer—that value may be accumulated, without being necessarily vested all the while in the same identical product, provided only it be perpetuated in some product or other. Now, values employed as capital are perpetuated by reproduction; the various products of which capital consists, are consumed like all other products: but their value is no sooner destroyed by consumption, than it re-appears in another, or a similar substance. A manufactory can not be kept up, without a consumption of victuals and clothes for the workmen, as well as of the raw material of manufacture; but, while value in those forms is undergoing consumption, new value is communicated to the object of manufacture. The items that composed the capital so expended, are consumed and gone; but the capital, the accumulated value, still exists and re-appears under a new form, applicable to a second course of consumption. Whereas, if consumed unproductively, it never re-appears at all.
The annual consumption of an individual, is, the aggregate of all the values consumed by that individual within the year. The annual consumption of a nation is, the aggregate of values consumed within the year by all the individuals and communities, whereof the nation consists.
In the estimate of individual or national consumption, must be included every kind of consumption, whatever be its motive or consequence, whether productive of new value or not; in like manner, as the estimate of the annual production of a nation comprises the total value of its products raised within the year. Thus, a soap manufactory is said to consume such or such a quantity or value of alkali in a year, although this value be re-produced from the manufactory in the shape of soap; on the other hand, it is said to produce annually such and such a quantity or value of soap, although the production may have cost the destruction of a great variety of values, which, if deducted, would vastly reduce the apparent product. By annual production, or consumption, national or individual, is therefore meant, the gross and not the net amount.*3
Whence it naturally follows, that all the commodities, which a nation imports, must be reckoned as a part of its annual product, and all its exports as part of its annual consumption. The trade of France consumes the total value of the silk it exports to the United States; and produces, on the other hand, the total value of cotton received in return. And, in like manner, the manufacture of France consumes the value of alkali employed by the soap-boiler, and produces the value of soap derived from the concern.
The total annual consumption of a nation, or an individual, is a very different thing from the aggregate of capital. A capital may be wholly or partially consumed several times a year. When a shoemaker buys leather, and cuts and works it up into shoes, there is so much capital consumed and reproduced. Every time he repeats the operation, there is so much more capital consumed. Suppose the leather purchased to amount to 40 dollars, and the operation to be repeated 12 times in the year, there will have been an annual consumption of 480 dollars upon a capital of 40 dollars. On the other hand, there may be portions of his capital, implements of trade, for instance, which it may take several years to consume. Of this part of his capital he may consume annually but 1-4 or 1-10 perhaps.
In each country the wants of the consumer determine the quality of the product. The product most wanted is most in demand; and that which is most in demand yields the largest profit to industry, capital, and land, which are therefore employed in raising this particular product in preference; and, vice versâ, when a product becomes less in demand, there is a less profit to be got by its production; it is, therefore, no longer produced. All the stock on hand falls in price; the low price encourages the consumption, which soon absorbs the stock on hand.
The total national consumption may be divided into the heads of public consumption, and private consumption; the former is effected by the public, or in its service; the latter by individuals or families. Either class may be productive or unproductive.
In every community each member is a consumer; for no one can subsist, without the satisfaction of some necessary wants, however confined and limited; on the other hand, all, who do not live on mere charity, or gratuitous bounty, contribute somehow to production, by their industry, their capital, or their land; wherefore, the consumers may be said to be themselves the producers; and the great bulk of consumption takes place amongst the middling and poorer classes, whose numbers more than counterbalance the smallness of the share allotted to each.*4
Opulent, civilised, and industrious nations, are greater consumers than poor ones, because they are infinitely greater producers. They annually, and in some cases, several times in the course of the year, re-consume their productive capital, which is thus continually renovated; and consume unproductively, the greater part of their revenues, whether derived from industry, from capital, or from land.
It is not uncommon to find authors proposing, as the model for imitation, those nations whose wants are few; whereas, it is far preferable to have numerous wants, along with the power to gratify them. This is the way at once to multiply the human species, and to give to each a more enlarged existence.
Stewart*5 extols the Lacedæmonian policy, which consisted in practising the art of self-denial in the extreme, without aiming at progressive advancement in the art of production. But herein the Spartans were rivalled by the rudest tribes of savages, which are commonly neither numerous nor amply provided. Upon this principle, it would be the very acme of perfection to produce nothing and to have no wants; that is to say, to annihilate human existence.
Notes for this chapter
Some materials are capable of receiving and discharging the same kind of value many times over; as linen, which will undergo repeated washing. The cleanliness given it by the laundress, is a value wholly consumed on each occasion, along with a part of that of the linen itself.
The values not consumed sooner or later in a useful way are of little moment; such are provisions spoiled by keeping, products lost accidentally, and those whose use has become obsolete, or which have never been used at all, owing to the failure of the demand for them, wherein value originates. Values buried, or concealed, are commonly withdrawn but for a time from consumption; when found, it is always the interest of the finder to turn them to account, which he cannot do without submitting them to consumption. In this case, the only loss is that of the profit derivable from them during the period of their disappearance, and may be reckoned equivalent to the interest for that time.
The same observation applies to the minute savings, successively laid by until the moment of investment, the aggregate of which is, doubtless, considerable. The loss, resulting from this inertness of capital, may be partially remedied by moderating the duties on transfer, by extending to the utmost the facility of circulation, and by the establishment of banks of deposite, in which capita may be safely vested, and whence it may readily be withdrawn. In times of political confusion, and under an arbitrary government, many will prefer to keep their capital inactive, concealed, and unproductive, either of profit or gratification, rather than run the risk of its display. This latter evil is never felt under a good government.
For the distinction between the gross and the net product, vide suprà, Book II. chap. 5.
It is probable, that, in all countries, anywise advanced in industry, the revenues of industry exceed those of capital and land united, and, consequently, that the consumption of those deriving income solely from industry, and wholly dependent for subsistence upon their personal faculties, exceeds that of both capitalists and landlords together. It is not uncommon to meet with a manufactory, that, with a capital, say of 120,000 dollars, will pay daily in wages to its people, 60 dollars, which, with the deduction of Sundays and holidays, makes 18,000 dollars per annum; if to this be added, 4000 dollars more for the net profits of personal superintendence and management, it will give a total of 22,000 dollars per annum, for the revenue of industry alone. The same capital, vested in land at but 20 years' purchase would yield a revenue of 6000 dollars only.
The cultivation by métayers, the very lowest description of farmers, gives to them, and their subordinate labourers' industry, a revenue equal to that of the land jointly with the capital, which is advanced by the proprietor.
Book II. chap. 14.
Book III, Chapter II
End of Notes
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