Looking at the entire industrial system, it is clear that every increase of capital judiciously invested adds to the total product of industry and so to the number of present goods. The increase of capital is gradual, and therefore the increase of present goods is continuous. The true conception of the capitalist or man who saves is not that of a man who does without things, but rather that of the inventive work man who is constantly finding better methods, using more efficient tools, accomplishing greater results with the same personal cost, so that there is a constant surplus fund for the accu mulation of capital. The whole of this surplus, it is true, might be spent on immediate pleas ures, and in that sense personal abstinence is necessary ; but we should make a serious mis take if we supposed that capital is saved as a rule by any cutting down of pleasures pre viously enjoyed, and that in any given com munity those who save are, as a rule, compelled to deprive themselves of pleasures enjoyed by the thriftless.
Although capital is a permanent fund, yet capi tal goods must be constantly replaced. One additional fact concerning capital requires statement. It is partially expressed in the third of Mill's fundamental propositions on capital, where he says that capital, though saved, is consumed. This paradoxical theorem Mill regards as one of the most elementary truths of political economy. He who saves must spend as freely as he who consumes, but he purchases future instead of present goods. He builds a factory instead of a yacht. He employs labor ers instead of servants. He studies the wants of other consumers instead of his own. He makes goods instead of consuming them. He does use up materials and so productively con sumes them, but only that an augmented value may reappear in the product. Any wealth which lies entirely unemployed is for that length of time not capital. It is a part of the idea of capital that it should be continually active. It may appear inactive at intervals, because some industrial processes are intermit tent in their nature, and the product may ripen but slowly. Except by miscalculation, no cap ital is consumed except productively, and no capital is productively consumed except in such ways as result in an increase of value. The concrete goods are completely destroyed or worn out, but new goods of greater value have taken their place. The capitalist cannot retain his wealth except by turning it over, changing its form, substituting new goods for old. As the river remains while the water of which it is made flows on and is ever replaced, as the body continues its existence though its parts are con tinually renewed, as the State remains though citizens are born and die and are succeeded by others, so the capital fund is permanent though capital goods must be constantly replaced.
The efficiency of industry depends upon an economy of skill. The great object of the divi sion of labor is to put each person at the task for which he is best fitted. The strongest in
dictment which can be brought against the existing social order is that it does not invaria bly secure this result. It is possible that the same objection can be urged with equal or greater force against any other general plan for the organization of society. We may expect, however, that society will become less and less indifferent to the social loss from this source. The aggregation of workers in factories where differences in capacity may be observed, the gathering of merchants in markets where dif ferences in commercial efficiency are exposed, and the improvements in transportation which make easier comparison of industrial qualities and of industrial products —all promote the economy of skill. But the chief agency in se curing it is the modern organization of indus trial enterprises on a large scale under the control of captains of industry whose resources enable them to scour the earth in search of persons best fitted for each part of their work.
No doubt favoritism, compassion, and chance still play a certain part in the selection of men for the different grades of work ; but real effi ciency is more and more the determining factor.
An efficient industrial organization demands that it be controlled by its most efficient members. The truth of this is so obvious that demonstra tion is unnecessary. It is the main reliance of those who defend the competitive features of the present system. It is probable that the competition does secure a very high degree of success in the selection of the best organizers and managers of industry. But perhaps sufficient attention has not been given to the features which prevent effective competition. Important municipal franchises are sometimes adminis tered, not by those who can make the best use of them, but by those who are ready to bargain for them on corrupt terms. By inheritance capital passes from the hands of those who have accumulated and have probably used it wisely, into the hands of less worthy descendants or rela tives who squander or misuse it. The surplus which springs from the growth of population, the development of markets, the progress of society, passes into the hands of those who have made lucky ventures or secured property rights which grew up under older conditions and which should be modified to meet the social changes. In all these ways beneficent competition is defeated and the interests of society suffer. Whether by the present competitive processes, modified by such positive institutions as exist, or by a system of more complete laissezfaire, or by a system of State socialism in which posi tive regulation by the State would be extended to cover the whole field of industry, it should be the aim to place and keep in control of the in dustrial mechanism the persons who can manage it best. What reward should be given for such service is a different question.