Of Capital. 21
the country rather by those who produce luxuries, than by those who consume them; it must, however, be borne in mind that the demand of the consumer, and not the arbitrary caprice of the producer, determines the particular commodities which are manufactured. Luxuries, and other articles which cannot be devoted to reproductive employment, would not be brought into the market if it were not for the demand of the consumer. Enough has now been said to establish the proposition that an individual increases the capital of the country, not by spending his wealth on his own enjoyments, but by devoting it to reproductive employment. This is only another corroboration of what has been already stated, namely, that capital is the result of saving. For when wealth is saved, it is not hoarded, but invested; it is then productively employed, and as a consequence at once assumes the functions of capital.
The proposition just enunciated, that an individual diminishes the capital of a country by spending his wealth in luxuries, and increases the capital or the country by saving it, will lead us to another equally important proposition, which it is usual to express by the formula that a demand for commodities is not a demand for labour. Although this form of expression has been very generally adopted, yet we think that advantage will result from enunciating the principle in language which will appear less paradoxical. What is really intended to be asserted is that the purchase of commodities, which are unproductively consumed, does not exert the same influence in increasing the demand for labour as if the wealth with which the purchase was effected were used as capital, and were devoted to the employment of labour. It may be thought that no such difference to the labourer as that just indicated could result, because it may be urged that if a man spends a thousand pounds in the purchase of velvet, a large portion of this thousand pounds will be virtually expended in paying the wages of the operatives who make the velvet, and therefore it may be said, what difference, so far as the labourers are concerned, will it make whether a landowner spends a certain sum of money in the purchase of an article of luxury like velvet, or lays out the amount in employing
BOOK I.
CH. IV.
