Book II: Chapter 1

CHAPTER I.

OF THE DIVISION OF STOCK.

When the stock which a man possesses is no more than sufficient to maintain
him for a few days or a few weeks, he seldom thinks of deriving any revenue
from it. He consumes it as sparingly as he can, and endeavours, by his
labour, to acquire something which may supply its place before it be
consumed altogether. His revenue is, in this case, derived from his labour
only. This is the state of the greater part of the labouring poor in all
countries.

But when he possesses stock sufficient to maintain him for months or years,
he naturally endeavours to derive a revenue from the greater part of it,
reserving only so much for his immediate consumption as may maintain him
till this revenue begins to come in. His whole stock, therefore, is
distinguished into two parts. That part which he expects is to afford him
this revenue is called his capital. The other is that which supplies his
immediate consumption, and which consists either, first, in that portion of
his whole stock which was originally reserved for this purpose; or,
secondly, in his revenue, from whatever source derived, as it gradually
comes in ; or, thirdly, in such things as had been purchased by either of
these in former years, and which are not yet entirely consumed, such as a
stock of clothes, household furniture, and the like. In one or other, or all
of these three articles, consists the stock which men commonly reserve for
their own immediate consumption.

There are two different ways in which a capital may be employed so as to
yield a revenue or profit to its employer.

First, it maybe employed in raising, manufacturing, or purchasing goods, and
selling them again with a profit. The capital employed in this manner yields
no revenue or profit to its employer, while it either remains in his
possession, or continues in the same shape. The goods of the merchant yield
him no revenue or profit till he sells them for money, and the money yields
him as little till it is again exchanged for goods. His capital is
continually going from him in one shape, and returning to him in another ;
and it is only by means of such circulation, or successive changes, that it
can yield him any profit. Such capitals, therefore, may very properly be
called circulating capitals.

Secondly, it may be employed in the improvement of land, in the purchase of
useful machines and instruments of trade, or in such like things as yield a
revenue or profit without changing masters, or circulating any further. Such
capitals, therefore, may very properly be called fixed capitals.

Different occupations require very different proportions between the fixed
and circulating capitals employed in them.

The capital of a