Capital may be used 1. procuring rude produce, 2. manufacture commodities from rude produce, 3. transporting commodities, or 4. dividing commodities into salable proportions (retail). Each of these is necessary for the other, and for society as a whole.
Note: Smith does love to divide things up into categories, doesn’t he? I suspect he studied Aristotle.
Page 302: …if it was produced spontaneously, it would be no value in exchange…”
Page 303: “It is not the multitude of ale-houses, to give the most suspicious example, that occasions a general disposition to drunkenness among the common people; but that disposition arising from other causes necessarily gives employment to a multitude of ale-houses.” I can’t help but wonder if the relationship isn’t more dialectical than he expresses; but that is only in passing. His point, in terms of prime cause, is certainly valid.
“The persons whose capitals are employed in any of those four ways are themselves productive laborers.” This is interesting, because he here uses a far broader definition of ‘laborer’ than he has used anywhere else in the book so far; where before he made a distinction between the laborer and the one who owned the tools and the raw produce upon which the laborer worked, here he says the latter is also a laborer. Interesting change, and one that gives the impression of someone palming a card, though for what purpose I can’t yet see.
Page 304: “His capital employs too the sailors and carriers who transport his goods from one place to another, and it augments the price of those goods by the value, not only of his profits, but of their wages.” In other words, transporting a commodity to a place where it can be sold adds value. This appears to contradict his earlier explanation of value which is something inherent in the commodity itself; because if it is, as he says, inherent in the commodity, then moving it to a different, more profitable market, ought not to change it’s value (even though, it will naturally change it’s price). I wonder if he will resolve this contradiction later, or if he even realizes it is there.
Page 305: Here he discusses nature as laborer, which broadens the definition even more, as now labor is not an exclusively human characteristic, but nature “labors” as it causes plants to grow. Compare this with his discussion of labor in book one. “This rent may be considered as the produce of those powers of nature, the use of which the landlord lends to the farmer.” Now ground-rent is payment for the labor of nature! Yet earlier, ground-rent was it’s, unique attribute, one of the categories (along with wages and profit) that go to make up the cost of a commodity. Labor must, indeed, labor mightily to do all of these things, some of which contradict each other.
Page 306:” Of all the ways in which a capital can be employed, it [agriculture] is by far the most advantageous to society.” This was almost certainly true at one time, but it is far from universal.
Page 309:”Where the Americans, either by combination or by any other sort of violence, to stop the importation of European manufactures, and, by thus giving a monopoly to such of their own countrymen as could ;manufacture the like goods, divert any considerable part of their capital into this employment, they would retard instead of accelerating the further increase in the value of their annual produce, and would obstruct instead of promoting the progress of their country towards real wealth and greatness.” Uh…not so much.
Page 313: “That part of the capital of any country which is employed in the carrying trade, is altogether withdrawn from supporting the productive labor of that particular country, to support that of some foreign countries.” Not sure about this. If France pays an English shipping country to bring goods to China, is not the capital invested in the English shipping company, for which the company makes a profit, increasing the wealth of England? Or am I missing his point?
Page 314: “The number of sailors and shipping which any particular capital can employ, does not depend upon the nature of the trade, but partly upon the bulk of goods in proportion to their value, and partly upon the distance of the ports between which they are to be carried; chiefly upon the former…The capital, therefore, employed in the home-trade of any country will generally give encouragement and support to a greater quantity of productive labor in that country, and increase the value of its annual produce more than an equal capital employed in this latter trade of consumption; and the capital employed in this latter trade has in both these respects a still greater advantage of an equal capital employed in the carrying trade.”
In the last chapter, I spoke of Smith, in some sense, having predicted the world wars, or at least pointing out the significant factors that lead to them. Here it is even more strongly, on page 315: “When the produce of any particular branch of industry exceeds what the demand of the country requires, the surplus must be sent abraod, and exchanged for something for which there is a demand at home. Without such explortation, a part of the productive labor of the country must cease, and the value of its annual produce diminish.”
Page 316: “The carrying trade is the natural effect and symptom of great national wealth; but it does not seem to be the cause of it.” This makes perfect sense. If a nation is producing much, then it will generate businesses for exporting that much.