Article I. Preliminary Notions

388. Various opinions concerning the genesis of value. There has been no less dispute, and manifold error, concerning the genesis of value than concerning its nature. We shall briefly review here the various opinions that have found favor in this matter; they are closely connected with the conclusion to be handed down.

For a long time, especially in the sixteenth and seventeenth centuries, statesmen were deceived by this error, which manifested itself more in deeds than in theories: they placed the wealth of a nation in an abundance of money. The value of money varies according to the quantity of things that can be obtained by means of it, so that it has the common character of other merchandise. Therefore, they said that where gold mines or silver mines were lacking, commerce and those arts by which the value of things is increased were to be favored; and that care was to be taken through laws, and particularly through customs duties, that the sum of things sold exceed purchases. This opinion greatly harmed Spain; and because Colbert, minister of King Louis XIV, defended it in France, it was called in French Colbertisme [Colbertism]. It is also called the Système mercantile [mercantile system].

As if from the opposite side, Quesnay, physician to Louis XV, attributed to nature alone the power of increasing value, since the arts added nothing to the stock of things already existing. Therefore, he said that agriculture and the fostering of pastures were especially to be favored. That system is called the agrarian system; its patrons, however, are called Physiocrats, or also Economists, because scientific method then first began to be applied to these matters.

This theory was succeeded by the doctrine of Adam Smith, who taught toward the close of the eighteenth century and is regarded as the father of the economic school which is called classical, or also liberal, because its adherents began to proclaim complete liberty of labor, commerce, and so forth, from which, with zeal for gain and profit impelling men’s minds, they hoped for the greatest temporal happiness of peoples. Their formula is famous: Laissez faire, laissez passer [Let things be done, let things pass]. Those who today belong to this family are sometimes called orthodox. Now Smith attributed such a principal role in acquiring wealth to human labor and industry that there were afterward some who ascribed every new value to labor as its sole cause. The system of the liberal school, to which many still adhere, is also distinguished by the other name of Industrialism.

Moreover, that the whole power of generating value must be referred to human industry alone as its adequate cause could not fail to please the socialists. They contend, besides, that as much of the fruits which per se belong to the workers is taken away from them as accrues from profitable business to those who have contributed money. Cf. no. 176, p. 193, and no. 343.2.

389. On wealth and capital. 1. The word wealth has a broader extension among economists than among the people. For while, according to common popular usage, only those who abound in resources are called wealthy, things which are capable of valuation at a price are already, individually, designated by experts in economics with the name of wealth.

2. They are accustomed to subject two kinds of things to the word capital, according as it is used properly or metaphorically.

a) Properly. Not even then is there one meaning of the word. But:

α) In the broader acceptation, any things capable of valuation at a price, or any wealth destined for profitable use, are called capital goods. Thus natural goods and powers (agents naturels [natural agents]) are understood in addition to those already acquired by another exertion of men,¹ and capital is opposed only to labor or human industry. And it is in this sense that we take the word in the present matter.

¹ Nevertheless, because the powers of nature do not ordinarily effect anything separately, and almost every kind of wealth demands at once the conjoined operations of men and nature, some wealth is therefore called natural and other wealth artificial, not because the former is the offspring of nature alone and the latter of art alone, but because the former offers utility in its natural species—gold, animals—while the latter offers it insofar as changed by art—various machines, garments.

β) In a stricter sense, capital designates a thing acquired by prior labor and assigned anew to the generation of wealth. In this manner a field, for example, is not capital insofar as it is naturally fertile, but only insofar as by human industry it has acquired greater fruitfulness. Hence they then distinguish, in a profitable business, nature (les agents naturels [natural agents]), labor, and capital (richesse épargnée en vue de la production [wealth saved with a view to production]).

Moreover, they distinguish this capital into fixed, or permanent or immovable, which comprises buildings, instruments both inanimate and animate, the acquired fertility of the land, and whatever is not consumed in the very genesis of value; and mobile, or transitory (circulant [circulating]), which is consumed by the business: material to be transformed (matière première [raw material]), things produced but not yet sold, and food procured in advance and the other things sufficient for sustenance and incidental expenses. These latter are often represented by money and constitute the money to be kept in circulation, le fonds de roulement [working capital]. Sometimes this money more especially retains the name of capital.

b) Metaphorically, in an entirely different usage, capital today not rarely signifies sums of money, claims, and securities (titres de rente, créances, actions [rent securities, claims, shares]) which are bought, sold, and exchanged, insofar as they confer an annual return upon their possessor.

In the former manner a capitalist is one who possesses an estate or the instruments of industry; in the latter, he is one who possesses certain active rights or claims.

And the word capitalism, adapted to either sense, signifies either the prevalent use of machines in producing things, or the very great importance which securities of this kind have today. These, indeed, are assembled in great quantity by skillful and not always honest arts and then sold off, so that men may abound in wealth without labor and themselves exercise very great influence in society.

390. On partnership. This contract has as its object that two or more persons contribute a thing or labor to a community of use, or especially of profit. It therefore contains some community of the thing or business, and consequently of risk and profit.

Nevertheless, a partnership can be entered into in various ways. For either a perfect community of risk obtains among the partners, or, by a certain insurance, the risk, either adequately or inadequately, is transferred to some of them, to whom this hazard is compensated by different advantages. Accordingly, the fact that a worker receives a fixed and certain wage does not prevent his being admitted as a partner. For the wage will be fixed if the manufacturer, for example, provides the worker a twofold security: by paying him the stipulated sum, he removes from him the danger of losing as it were his principal—his labor-capital (capital-travail)—and, in place of an uncertain profit, promises him a smaller but certain one. Provision can be made for these things even in the case of a partner by entering into the contract which they call triple. Cf. above, no. 385. But if the one who is master in the partnership enters into that hazard only inadequately, there will fall to the worker, besides the predetermined part of the wage, another part which will vary according to the profit.

Partnership, therefore, will be indicated if the portions which fall to each person are defined, not from the common price of the thing or labor which is contributed according to a universal rationale, but from the proper rationales of the business being conducted, whether they are estimated beforehand from expectation or from the outcome after the business is completed.

391. On letting and hiring. By this agreement one party (the letter) promises to the other (the hirer), for a definite price and for a definite time, the utility of a thing or a person. Therefore the letting of things is distinguished from the letting of labor, which concerns the labors of a human person. In this contract, therefore, the worker remains alien to the ownership and fruit of the business, so that those things which, according to justice strictly so called, he can acquire for himself through the business are circumscribed by the just price of the labor let.

From the letting and hiring of labor strictly understood, distinguish the letting of a work, that is, an agreement by which the worker promises not so much labor as a work to be effected by his industry or labor. Then the worker himself rather hires or undertakes, by taking it upon himself, a definite work which another commits to him to be performed and as it were lets or sells. Therefore, if we attend to the proper force of the words, the worker is called the hirer, the contractor for the work (redemptor operis), and he who promises the price is called the letter.

In factories they are now accustomed to approach this rationale of contract,² when the wage is determined not so much from time (travail au temps [time work]) as from the quantity of things produced (travail à la pièce [piecework]).

² They approach it, I say; for it is generally only an indirect manner of valuing labor, by which the diligence of the workers may be stimulated.

392. Economic, industrial, and civil fruit. Economic fruit is temporal profit made by labor or capital. It is industrial if it is gathered by a partner in the business, but civil if it is the price of a utility granted to another, that is, of a thing or industry that has been let.

The enjoyment of the thing itself transcends the economic order.