Chap 1a: Division of Stock


1 In the rude state of society, there is no division of labour and exchanges are seldom made.

  • Every man provides everything for himself
  • Stock does not need to be accumulated beforehand to carry on the business of society.
  • Every man supplies his own wants by his own industry.


2 But when the division of labour has been thoroughly introduced, the produce of a man’s own labour can supply only a few of his wants.

  • Most of them are supplied by the produce of other men’s labour.
    • He buys them with the price of his own produce.
    • But this purchase cannot be made until his produce has been sold.
  • Therefore, a stock of goods must be stored up to supply him with the materials and tools of his work until he can sell his produce.
    • A weaver must have enough stock to supply him with the materials and tools of his work, until he has sold his web.
      • This accumulation is a prerequisite for his work.

3 The accumulation of stock must be previous to the division of labour.

  • Labour can only be more subdivided according to the stock that has been more accumulated.
    • The amount of materials, which the same number of people can work up, increases greatly as labour becomes more subdivided.
    • Each worker’s operations becomes simpler.
    • New machines come to be invented for facilitating those operations.
  • As the division of labour advances, an equal stock of provisions and more materials and tools must be accumulated beforehand to give constant employment to the same workers.
    • But the number of workers in every business increases with the division of labour in that business.
    • The increase of the number of workers enables them to subdivide themselves.

4 The accumulation of stock leads to, and is necessary for, the great increase in productivity.

  • The employer wishes to employ his stock in the most efficient way.
    1. He arranges the most proper distribution of employment.
    2. He furnishes them with the best machines he can buy or invent.
  • His success in these two depend on the extent of his stock or the number of people it can employ.
  • Therefore, the amount of industry increases with the increase of the stock which employs it.
    • The increase in stock allows the same amount of industry to generate more work.

5 Such are the effects of the increase of stock on industry and productivity.

6 In Book 2, I explain:

  • the nature of stock
  • the effects of
    • its accumulation into different kinds of capitals
    • the different employments of those capitals

This book has five chapters.

  • Chap. 1 – I show the different branches which the stock of an individual or a society, naturally divides itself into.
  • Chap. 2 – I explain the nature and operation of money, as a branch of the stock of society.
    • Accumulated stock is called capital.
      • It may be:
        • employed by its owner or
        • lent to others.
  • Chap. 3 to 4 – I examine how money operates:
    • when it is employed by its owner and
    • when it is lent.
  • Chap. 5 –  I explore the immediate effects of the different employments of capital on:
    • the amount of national industry
    • the annual produce of land and labour


Chap 1: the Division of Stock

1 When a man’s stock can only maintain him for a few weeks, he seldom thinks of deriving any revenue from it.

  • He consumes it as sparingly as he can.
  • He tries to acquire new supplies before it is consumed altogether.
  • In this case, his revenue is derived from his labour only.

This is the state of most of the labouring poor in all countries.

2 But when he has stock sufficient to maintain him for months or years, he tries to derive a revenue from it.

  • He reserves some for his immediate consumption until this revenue begins to come in.
  • His whole stock is distinguished into two parts:
    1. Capital – the stock that gives him this revenue
    2. Stock for immediate consumption – consisting of:
      a. A part of his original stock reserved for immediate consumption
      b. The stock that becomes his revenue
      c. Stock which has not yet been consumed (clothes, furniture, etc.)

      • The stock for immediate consumption can be a mix of those three.

3 Capital may yield a revenue or profit to its employer in two ways:

  1. 4 It may be employed in raising, manufacturing, or buying goods and selling them again with a profit.
    • The capital employed this way yields no revenue or profit to its employer while it:
      • remains in his possession or
      • continues in the same shape
    • A merchant’s goods yield him no revenue or profit until he sells them for money.
      • The money yields him as little until it is again exchanged for goods.
      • His capital is continually going from him in one shape and returning to him in another.
      • Only such successive exchanges or circulation can yield him any profit.
    • Such capitals are ‘circulating capitals’.
  1. 5 It may be employed to yield a revenue or profit without changing masters or circulating any further, such as:
  • land improvements
  • the purchase of useful machines and instruments of trade

Such capitals are ‘fixed capitals’.

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

7 A merchant’s capital is a circulating capital.

  • He uses no machines or instruments of trade other than his shop or warehouse.

8 Some of the capital of every master artificer or manufacturer must be fixed in the tools of his trade.

  • This part may be very small in some while very great in others.
    • A tailor only requires needles as his tools.
    • A shoemaker needs more expensive tools.
    • A weaver needs more expensive tools than a shoemaker.
  • However, most of the capital of all such artificers is circulated in:
    • the wages of their workers, or
    • the price of their materials
  • They are repaid with a profit by the price of the work.

9 In other works, more fixed capital is required.

  • In a big iron-work, for example, the furnace, forge, and slit-mill are very expensive instruments.
  • In coal-works and mines, the machinery for drawing out the water is still more expensive.

10 A farmer’s instruments of agriculture is a fixed capital.

  • He makes a profit from his instruments by keeping them.

The wages and maintenance of his labouring servants are a circulating capital.

  • He profits from wages by by parting with it.

The price of his labouring cattle is a fixed capital.

  • The farmer profits by keeping them.

The maintenance of his cattle is a circulating capital.

  • He profits by parting with their maintenance.

Cattle, which are sold and not used for labour, are a circulating capital.

  • The farmer profits by parting with them.

A flock of sheep or a herd of cattle used for wool and milk is a fixed capital.

  • Profits are made by keeping and increasing them.
  • Their maintenance is a circulating capital.
  • The profit is made by parting with it.
    • It comes back with:
      • its own profit and
      • the profit from the whole price of the cattle, wool, and milk.

The whole value of the seed is a fixed capital.

  • It never changes masters even if it is planted in the ground and harvested into the granary.
  • It does not circulate.
  • The farmer profits by its increase, not by its sale.

Words: 1,200

Next: Book 2: Chapter 1b: Three Divisions of Stock

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