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CHAPTER IV.

MONEY INCOME.

"It hastens along, conflicting, strong,
Now striking and raging

As if a war raging

Its caverns and rocks among ;

Turning and twisting

Around and around,

Collecting, disjecting

With endless rebound;

And darting and parting,

And threading and spreading;

Recoiling, turmoiling, and toiling, and boiling,

And so never ending, but always descending;
Sounds and motions for ever and ever are blending,

All at once and all o'er, with a mighty uproar,

And this way the water comes down at Lodore.”—SOUTHEY.

Money Incomes from Foreign Trade.

In a country which draws the matter of its currency from abroad, money incomes cannot arise without exchanges. The exporter keeps, out of the gold brought home for his goods, the percentage of gain as his money income. The remainder of the gold travels on to the producing capitalist, leaves with him again a percentage as money income, and then flows on in separate streams into the money wages which labourers receive for their services. The several currents again flow off to dealers, reuniting at the different points, and leaving at each pausing place a deposit of profit, as money income.

Looking now at what is actually going on, and disregarding for the present official, funded, and professional incomes1, it is evident that the great mass of exchanges which give rise to incomes may be divided into two great classes: namely, those which give incomes to producers, and those which give incomes to distributors. We have now to see the manner in which the application of capital gives rise to the formation of these several classes of income, which, if understood, will make it plain in what manner the different investments of new capital operate upon the aggregate of income.

Origin of Income.

Historically, income is the parent of capital, for it could be only out of the gains of the first labour that the first capital was saved. We see the process at the gold-mines. The treasure which the miner digs up is the wages of his

In the analysis of incomes, a landlord may be considered as a sleeping partner with each of his tenants, who regularly receives their surplus profits, and sometimes a great deal more; but, practically, rents belong to that large mass of income which remains nearly stationary during the fluctuations of profits and wages. If we admit this, nearly one-half of the income assessed to the income tax, must be considered as absolutely or virtually fixed for long periods. Something like the following division of the aggregate would probably be found correct :

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From lands, tithes, and houses under long leases, say 63,000,000

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The aggregate of the incomes not assessed to the tax must be greater than that which is taxed, and contains a far larger proportion of variable incomes, the fluctuations in which, if they could be ascertained, would mark exactly the alternations of prosperity and depression.

labour, that is to say, income. As much as he saves at once becomes capital, which, however, never can be used as capital, without in whole or in part generating income. But in a state of society like England, it is more convenient and equally true, to make capital the starting point, and trace its course, as it flows off into income.

Capital applied to Production or Distribution.

Capital, then, may be applied to the production of material commodities or to their distribution. The classification is rough, but accords with real relations. Each great class is made up of subordinate classes, which ramify out and intermix; but the great trunks or stems can always be distinguished. The utility of the distinction depends first on this—that capital applied to production, as in agriculture, manufactures, railway-making, ship-building, must generally, though not always, be applied for a much longer period before obtaining a return, than in commerce, in which it may be used one week and withdrawn the next, according as the progress of sales disengages it;-but secondly, and chiefly, because capital applied to immediately productive operations passes more rapidly and largely into income than that which is applied immediately to commerce. The latter may take several steps before it gets much into income, and often only quickens the action of production at one period to retard it at another.

Distributive limited by Productive Capital.

Further, the capital that can be applied to commerce or distribution is limited by the capital that is applied to production, and, as the means of communication are progressively improved, tends to diminish rather than increase, in proportion to the amount of capital applied to production. For example, the aggregate of capital held by traders at this moment, in the

form of goods, is probably, in proportion to the aggregate of what is employed by the manufacturers, less than it was twenty years ago, because railway facilities enable a dealer to supply himself more quickly with what he wants, and therefore to effect the same number of sales with a smaller capital. There are also fewer goods on the road, as Mr. Wilson has shown in one of his excellent papers on the influence of railways. Mercantile capital, therefore, is clearly subordinate, and dependent upon productive capital.

The application of capital to productive operations will be more distinctly conceived by again breaking up the whole aggregate into parts, and considering the application of money capital

1. To the creation of fixed capital.

2. To agriculture and mines, including all the forms of extracting raw produce from the earth.

3. To manufactures, which, however, for the purpose immediately in hand, may be joined with agriculture.

Incomes arising from Creation of fixed Capital.

To the first class belong such operations as land drainage (which, of course, must be broadly separated from the raising of crops or rearing of cattle), the making of railways, docks, and canals, ship-building, and the erection of factories, buildings, and the greater machines. This class deserves to be considered first, because in it capital sweeps out into incomes with the most ample stream, and remains longest in those channels. The great peculiarity of this application of capital is, that those who lay it out expect, by way of return, not a greater sum in the same form, but some great instrument of production or transport from the use of which an annual revenue is expected. According to the common and correct acceptation, money capital in these cases is destroyed, or sunk for the parties investing it, because what it produces does not replace their outlay in the same form; but, in fact, it almost

immediately enters into one or more of the circles of commercial revolution which carry it back as the return to capital already invested in other branches of industry. It thus quickens the return, and tends to increase the profits of such capital. The stock of capital disposable, or waiting for employment, before the outlay on the dock or the railway, is by so much diminished, and the money capital operating in commerce by so much increased. It will be seen presently, that the generation of new money capital in the disposable form instantly recommences upon the destruction effected by the drainage or railway outlay; but it is still true, that in no other way does so sudden and large an alteration take place in the proportions between the amount of money used as income and that which is held as capital. If, therefore, the equilibrium of money capital and money income was previously disturbed, by a preponderance on the side of capital, the conversion of such capital, as it is called, into fixed capital, is the most potent means of producing a contrary oscillation.

Capital applied to land drainage dissolves at once in a shower of incomes, in wages and salaries, and goes very soon as demand against all kinds of goods, and thus takes off the surplus stocks, which were previously blocking up the channels of commerce. In docks and canals, and notably in railways, a considerable portion does not go off in income, but is paid for the purchase of land, and therefore still remains in the form of capital, disposable for new employment, unless where the seller is a spendthrift. But there are no other forms of industrial outlay in which a rapid conversion of capital into income is more certainly effected.

New Money Capital saved out of Incomes.

Before proceeding to the second and third classes of investments, it is necessary to trace the steps of that nice process, by which income from its excess again makes good the gap left in the fund of disposable capital. We may take the case of a railway,

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