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 labo
ring 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 maybe 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


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


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


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 anyone 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


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 maybe 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


Lands, 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 these 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.