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they consist of the elements adapted for food or any other kind of element, have to undergo the ordeal or the process of social law, by which value, value in exchange, is imparted, before they can be constituted a part of the general capital.

The result which the process involves, if successfully conducted, is, that whatever value is abstracted from the general stock of capital for the purpose of procuring another or more production, shall be returned to it with an increase. Thus, we are brought to a consideration of an important branch of the subject or stage in the process. This is Cost-Cost of Production. This consists in that quantity or amount in value of the possessed capital, as is consumed in acquiring the production. After this we have the value of the production so acquired. So much as the value of the matter produced, or perhaps I ought rather to say, reproduced, exceeds the value of the matter consumed, just so much constitutes an addition to the aggregate stock, or capital. In the process, therefore, there is involved the cost of producing, and the profit connected with the commodity produced; the cost being the value abstracted, and the profit being an addition to the value abstracted, and so constituting - increase. It is by this increase alone, which is called profit, that the power of improving the condition of a people, and of maintaining a larger number of people, can be acquired. All labour, employment, production, investment of capital and projects, that do not eventuate in the result now explained, serve only to derange and to destroy capital already possessed; for, instead of being a creation of capital, the result is an uncreation of capital.

In order to exhibit the state and quality of the facts which I have adduced, in a point of view still more precise and convincing, I will call attention to that actual working of things with which every person who is engaged in trade, even in the

smallest sphere, must have become conversant. I will suppose, then, that a person is desirous of making some commodity for sale. For this purpose he purchases, in the first instance, a quantity of some material whereon to work, which material is known generally by the term raw material, being so called because it is not far removed from that transposition and conjunction of natural elements, which every early stage of production presents. Let him consider the inherent character of this raw material, or the process by which its attained form has been effected. By reflecting on, and considering, the necessary course, he will see that the commodity has been procured by means of preceding labour; and that the persons by whose labour it was procured, must have received certain wages, or an assignment of commodities, for their consumption and support. This raw material, then, presents to him, in value, that which has been consumed by labourers in the production of it, and also the profit accruing to the capitalist whose property was expended, or sunk, as it is called, in the process of producing. On this mass of raw material he will commence his operations, its cost having been abstracted from pre-existing substance, or capital, whilst the cost to him who is the buyer, or second possessor, is the value given by him for it, which value included the original cost, or the matter consumed, together with the profit of the seller or producer. On this raw material thus acquired he sets labourers to work, so to change or modify it as to make out of it a commodity still more useful. Now, to the cost of this raw material he has to add the cost incurred by him in the payment of wages to the labourers engaged. These wages, then, being of certain amount, comprise a given quantity of essential facts, all of which are derived from pre-existing substance, stock, or capital; and they consist of the commodities consumed by those persons whose labour is so engaged. Thus there will be the food consumed, then the fuel,

then the proportion of clothes, then that of house-rent, and so onwards, until all things are annumerated which enter into the consumption of the labourers and their families. These things, as I have before maintained, are all abstracted from pre-existing substance, stock, or capital, and amount to the wages paid for the labour bestowed. All these facts, when added together, make the gross amount of which the cost of the manufactured commodity will consist. Up to this point no addition whatever has accrued to the projector of the work, or to the community, excepting the profit on the raw material. The only addition which can accrue, will consist in the profit arising from the sale of the commodity when manufactured and received for consumption. Of the course and character which I have now delineated, the general process of producing consists. All projects for acquiring production are placed, by natural law, in subordination to this process; and, all projects eventuating in production have a beneficial or injurious action, the one upon the other, in proportion as they interfere not, or do interfere, the one with the other. If a project resulting in production displaces another production, so much is abstracted from a national capital, and the fund for supporting human existence is, in such degree, diminished.

We see, then, by the close and correct working out of the facts which production and consumption, when formed into a system of just exchanges, comprise, how important it is that the LAW on which the whole of my constructive reasoning rests, should be regarded and kept in operation, in order that the aggregate capital of a nation, or the fund for maintaining a whole people, may not only be preserved from sustaining diminution, but may be kept increasing in that degree which is required for an increasing people.

By the reasoning which has been substantiated it will be evident that profit constitutes the only certain criterion of the

sustaining and judicious application of all capital. As all preceding and existing capital must have been derived by profit accruing from commercial exchanges, under which may be included all investment of capital; so, beneficial employment, or an increase of capital, cannot be realised by any other The larger the degree of general profit is, the larger will be the augmentation of the general fund; the smaller the rate of profit, so much smaller will be the augmentation of this fund.


Every person who is conversant with the practice of commerce, and every student of Social and Political Economy, even though he may not have advanced far within the field of science, cannot fail to see, and to admit, the importance of keeping in view the two points of which I have just treated. These are cost and profit. Profit will be recognised and admitted by them as the great object to which all commercial exertions are directed, and by which alone the increase of capital is determined. Although this branch of national economy presents a character so important, and is, as a great result, so obvious, yet it is a matter calculated to excite great surprise, that it has not been treated of clearly and substantially by those writers from whom an especial and substantial treatment of the subject was to have been expected; for, amongst the chief authorities there is one only who so clearly discerned the true character of profit as to assign to it its allessential office. This writer is Mr. M'Culloch. Adam Smith, Malthus, and Ricardo wrote amidst such confusion of ideas as to prevent approximation to a demonstration being attained. The confusion of ideas and of reasonings, to which I allude, will be accounted for when it is remembered that neither of these writers was able to discover, and to establish, the cause of value; nor has any writer, since their time, succeeded in establishing this fundamental truth. Mr. M'Culloch, although

labouring under the same deficiency of perception as to the course by which profit is to be acquired, as that which prevailed with his fellow-labourers in the same school, to whom I have just referred, yet perceived and acknowledged the true character of profit. This is shown by his having assigned to profit its true position, and by declaring it to be the GREAT RESULT. It happened with this writer, as it has happened with many other writers, which was,- that he was able to see clearly enough the END, though he was not able to define accurately either the beginning, or the middle, that is, the course by which the end was to be attained. The following passages will substantiate the assertions which I have here advanced :"Had it been a law of nature that the quantity of produce obtained from industrial undertakings should merely suffice to replace that which had been expended in carrying them on, society could have made no progress, and man must have continued in the state in which he was originally placed. But such is not the established order of things. It is so constituted that, in the vast majority of cases, more wealth or produce is obtained through the agency of a given quantity of labour, than is required to enable it to be performed. This surplus, or excess of produce, has been denominated profit; and it is from it that all capital has been derived."*

Again:-"Seeing, therefore, that capital is formed out of the excess of the produce realised by those who engage in industrious undertakings over and above the produce necessarily expended in carrying them on; it plainly follows, that the means of amassing capital will be greatest where this excess is greatest; or, in other words, that they will be greatest where the rate of profit is greatest. This is so obvious a proposition as hardly to require illustration.” †

Principles of Political Economy, by J. R. M'Culloch, pp. 106, 107. † Ibid.

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