The Manufacturing Power and the Instrumental Powers (MaterialCapital) Of the NationThe nation derives its productive power from the mental andphysical powers of the individuals; from their social, municipal,and political conditions and institutions; from the naturalresources placed at its disposal, or from the instruments itpossesses as the material products of former mental and bodilyexertions (material, agricultural, manufacturing, and commercialcapital).In the last two chapters we have dealt with the influenceof manufactures on the three first-named sources of the nationalproductive powers; the present and the following chapter aredevoted to the demonstration of its influence on the one lastnamed.
That which we understand by the term 'instrumental powers' iscalled 'capital' by the school.It matters but little by what wordan object is signified, but it matters very much (especially withregard to scientific investigations) that the word selected shouldalways indicate one and the same object, and never more or less.Asoften, therefore, as different branches of a matter are discussed,the necessity for a distinction arises.The school now understandsby the term 'capital' not merely the material, but also all mentaland social means of and aids to production.It clearly ought,therefore, to specify wherever it speaks of capital, whether thematerial capital, the material instruments of production, or themental capital, the moral and physical powers which are inherent inindividuals, or which individuals derive from social, municipal,and political conditions, are meant.The omission of thisdistinction, where it ought to be drawn, must necessarily lead tofalse reasoning, or else serve to conceal false reasoning.
Meanwhile, however, as it is not so much our business to found anew nomenclature as to expose the errors committed under the coverof an inexact and inadequate nomenclature, we will adopt the term'capital,' but distinguish between mental and material capital,between material, agricultural, manufacturing, and commercialcapital, between private and national capital.
Adam Smith (by means of the common expression, capital) urgesthe following argument against the protective commercial policywhich is adopted to the present day by all his followers: 'Acountry can indeed by means of such (protective) regulationsproduce a special description of manufactures sooner than withoutthem; and this special kind of manufactures will be able to yieldafter some time as cheap or still cheaper productions than theforeign country.But although in this manner we can succeed indirecting national industry sooner into those channels into whichit would later have flowed of its own accord, it does not in theleast follow that the total amount of industry or of the incomes ofthe community can be increased by means of such measures.Theindustry of the community can only be augmented in proportion asits capital increases, and the capital of the community can onlyincrease in accordance with the savings which it gradually makesfrom its income.Now, the immediate effect of these measures is todecrease the income of the community.But it is certain that thatwhich decreases that income cannot increase the capital morequickly than it would have been increased by itself, if it, as wellas industry, had been left free.'(1*)As a proof of this argument, the founder of the school adducesthe well-known example, refuted by us in the previous chapter, howfoolish it would be to plant the vine in Scotland.
In the same chapter he states, the annual income of thecommunity is nothing else but the value in exchange of thoseobjects which the national industry produces annually.
In the above-named argument lies the chief proof of the schoolagainst the protective commercial policy.It admits that bymeasures of protection manufactories can be established and enabledto produce manufactured goods as cheap or even cheaper than theycan be obtained from abroad; but it maintains that the immediateeffect of these measures is to decrease the income of the community(the value in exchange of those things which the national industryproduces annually).It thereby weakens its power of acquiringcapital, for capital is formed by the savings which the nationmakes out of its annual income; the total of the capital, however,determines the total of the national industry, and the latter canonly increase in proportion to the former.It therefore weakens itsindustry by means of those measures -- by producing an industrywhich, in the nature of things, if they had been left to their ownfree course would have originated of its own accord.
It is firstly to be remarked in opposition to this reasoning,that Adam Smith has merely taken the word capital in that sense inwhich it is necessarily taken by rentiers or merchants in theirbook-keeping and their balance-sheets, namely, as the grand totalof their values of exchange in contradistinction to the incomeaccruing therefrom.
He has forgotten that he himself includes (in his definition ofcapital) the mental and bodily abilities of the producers underthis term.
He wrongly maintains that the revenues of the nation aredependent only on the sum of its material capital.His own work, onthe contrary contains a thousand proofs that these revenues arechiefly conditional on the sum of its mental and bodily powers, andon the degree to which they are perfected, in social and politicalrespects (especially by means of more perfect division of labourand confederation of the national productive powers), and thatalthough measures of protection require sacrifices of materialgoods for a time, these sacrifices are made good a hundred-fold inpowers, in the ability to acquire values of exchange, and areconsequently merely reproductive outlay by the nation.