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Chapter III
OF THE ACCUMULATION OF CAPITAL, OR OF PRODUCTIVE AND UNPRODUCTIVE LABOUR

Vocabulary for this chapter

Betoken - To indicate; signify
Declension - A decline or decrease; deterioration.
Ecclesiactical - Of or relating to a church, especially as an organized institution.
Entrepot - A port where merchandise can be imported and re-exported with paying import duties; a mart or place where merchandise is deposited.
Gewgaws - A decorative trinket; a bauble.
Impertinence - The quality of exceeding the limits of propriety or good manners; improperly forward or bold
Parsimony - Unusual or excessive frugality; extreme economy or stinginess.
Prodigality - Extravagant wastefulness. Profuse generosity. Extreme abundance; lavishness.
Profusion - Lavish or unrestrained expense; extravagance.
Quit-rent - This is a form of rent that amounted to a tax that exempted the payer from optional service in feudal times.


Chapter summary

There are two types of labor. The first is that of somebody who makes something. They take raw materials and add value to it producing a valuable commodity, and this is called productive labor. The second is somebody who provides a service and does not add value to anything, this is called unproductive labor.

Unproductive labor though is not useless labor, and the two should not be confused. Professions from soldiers, clergy, doctors, lawyers, and musicians all practice unproductive labor, but they do have their place. So while a doctor after they cure a patient has no physical item which they can sell, they did valuable work and deserve to be compensated. Same with a musician, as soon as they finish playing their note, their labor is gone.

Then unproductive labor does not support anybody, only productive labor does, and productive labor makes up the entire annual produce. Therefore if more people are productive, then there will be more left over, and the next year will be even more productive. And as seen earlier, the produce of labor is divided into three parts. One, the largest, will replace the stock, pay for wages, pay for repairs etc. The second and third then go to rent and profits. The first one will also ONLY maintain productive labor, while the second and third will maintain unproductive labor. Thus when somebody employs their capital, the employ only in productive labor. As soon as they take any of their capital and put it towards unproductive labor, it is no longer capital, and becomes stock reserved for immediate consumption.

Thus it is obvious that the only way to get funding towards the unproductive laborers would be indirectly through rent and profits. Granted workers who earn a wage might every once in a while spend some money on unproductive laborers, and they pay taxes into the military, but most of the funds going towards unproductive laborers come from wealthy landowners and wealthy merchants. Therefore in wealthy countries, there is a higher proportion of profits, and thus a higher proportion of unproductive hands then in poor countries.

In ancient times, the rent of the land given to the feudal lord was generally the entire produce of the land, and this was because the landlord could dispose of his tenants at will. Now as things have changed, and the land has improved, the value of the rent paid is many times more then in feudal times, but in proportion it is much smaller.

When the interest rates in Europe were high, there was little capital employed in trade and manufacture, and because of the high rates, their profits must have been high. Now there is much more capital employed, and the interest rates are lower as well as the profits. But more unproductive hands can be employed because while the total profit is greater, because so much more is invested. Thus where there is more capital invested in an area, there will be more productive people, but where more money is put towards prodigality, there will be more idleness. Thus the proportion of money reinvested drives industry, while when taken for profits, it drives idleness.

For the wasteful, it does not matter if the waste is local or imported, as it is still capital that could have gone towards supporting productive hands. That and when the capital of a country that is destined for productive hands declines, there will be less money needed for the circulation of goods, and that excess money will therefore go to another country. This exodus of money will continue until the production of the country begins to increase, requiring more money for circulation. Therefore it can also be seen that even if the wealth of a nation is judged by how much money it has (which is false), wastefulness, as well as bad business decision which also waste capital,  is against the common good.

But it is seldom true that the wastefulness of individuals can affect a nation, as it is always offset by the frugal. This is because being frugal is integral in human nature, and while there are times when people are wasteful, most times they save. It is also true that there are more successful ventures, then failures, and so private citizens always will contribute positively to a nation.

The government on the other hand is the only institution that can deplete the wealth of a nation. This is because governments only support unproductive hands, such as the court, religion, and the army. All of which waste capital that could be put into productive hands. Private desire for frugality will however, almost always trump the errors of government.

For a entrepreneur to increase production, they need more capital to both increase the number of productive individuals, and improve the productivity of each individual. Thus when it is found that productivity has increased, it has always been started with an increase in capital. Thus because the vast majority of frugal citizens in a nation build up capital, it must be that a nation will gradually increase in it's wealth over the years, despite some setbacks or geographical irregularities, and this was seen in England over the course of it's history.

Even though governments may try to limit the spending of individuals with various laws such as those against the import of foreign luxury goods, those government officials are truly the the bane of society, and the real danger, as the private citizens can not and will not ruin a nation like the government.

While those that do not accumulate capital, but just maintain themselves, do not contribute to frugality or wastefulness of the society, their decisions do have an impact. So somebody who spends their revenue on modest functional things, will in the end be richer then somebody who spends that same amount on frivolous things that have no value later in their life. Again then, what is best for the individual is also best for the nation, as if useful things are purchased, even when discarded by those who purchased them, they become of use to the general public.

Another advantage of utilitarian goods versus frivolous is that if one exceeds their spending limit, it is much harder to cut back on the frivolous because then people will take note and realize that an individual overspent. But in the case of one who spends in utilitarian goods, a cut back is seen as having satisfied ones desires for those goods. In addition, a great feast will waste half the food that is served during it, but if that food were employed to hire productive hands, not only would the food not be wasted, but in return there would be goods left over from their work. Thus even frivolous purchases have a hierarchy. While spending on a great feast shows a very generous and liberal spirit, and purchasing a magnificent wardrobe shows a selfish spirit, the wardrobe will at least employ a number of productive hands in producing something of permanent value and thus contribute slightly to the good of society.

Chapter II<---- ---->Chapter IV