modes of expending capital produce very distinct results, both as regards the interests of the indi vidual and of society, which will be examined under the second division of this article, where the application and uses of capital are considered; but here it must be observed that the accumulation of capital proceeds slowly or rapidly in proportion as one or other of these modes of expenditure is most prevalent. If men habitually consumed or wasted all the results of their industry, it is obvious that the effect of such conduct would be pre cisely the same to themselves, in prevent ing accumulation, as if they were unable to earn anything more than was absolutely necessary for their support. It is true that they would enjoy more of the luxuries of life, and, as will presently be seen, their expenditure would conduce, indirectly, to the accumulation of capital by others ; but still their labour would only suffice for their own support from year to year, and no part of the produce of last year's labour would be available, in the present year, either for their support or for any other purposes. But when a man, instead of spending the results of a whole year's labour within the year, subsists upon one-half of them, the other half remains to him in the succeeding year, and in the course of two years such economy will have placed him a whole year in ad vance.
As it is evident from these illustra tions, that capital must increase in the ratio in which the products of labour ex ceed the expense of subsistence, it would seem to follow as a necessary consequence that, when a certain amount of capital has already been produced, the higher the rate of profit which may be obtainable from such capital, the greater will be the means of further accumulation. [Pao rrrs.] It is not necessary, indeed, that larger savings should in fact be made, as that must depend upon the conduct of those who enjoy the profits. The larger their profits may be, the greater may be their personal expenditure; and a taste for luxury and display may be engen dered, the gratification of which may be more tempting than the desire of further accumulation. Nor can it be denied that, in practice, an unusually high rate of pro fits very often encourages an extravagant expenditure. It is, perhaps, more natural that it should produce self-indulgence rather than stimulate economy. The ac cumulation of savings is an act of self denial very necessary and profitable, it is tree, but not very pleasing when the sacri fice is about to be made ; and its necessity is less obvious when large profits are rapidly secured, than in less prosperous circumstances. When the profits arising from a man's capital, if expended, are already sufficient to satisfy his desires, we cannot wonder if he thinks less of the morrow.
Yet, whether savings proportionate to the means of saving be made or not, it is undeniable that a high rate of profit offers the best opportunity for augment ing capital. If three per cent. profit upon a man's stock will enable him to subsist as he has been accustomed, and to lay aside one per cent. annually as capi tal, the rise of profit to six per cent. would
at once give him the power of adding four per oent., instead of one, to his capi tal, so long as he made no change in his style of living : and thus the doubling of the rate of profit would add to the means of accumulation in the proportion of four to one.
Making all due allowances, therefore, for gream profusion of expenditure, the proposition that large profits are favour able to accumulation may be held as de monstrable; for, reverse the circumstances, and suppose that profits were so small as to disable those who were willing to save from retaining any surplus whatever, the result must be precisely the same to them selves as if they had voluntarily consumed the whole excess of their production ; while their poverty would not conduce indirectly to accumulation by others, as their expenditure of a surplus might have done.
But, apart from abstract reasoning, does the experience of different countries bear out the same conclusion ? In England, for example, was capital accumulated more rapidly while profits were high, than within the last few years ? These questions do not always receive the same answer. Mr. M'Culloch compares the progress of the United States of America, in wealth and population, with that of England and Holland, and ascribes the comparative rapidity of their advanee ment to the fact, that the rate of profit is generally twice as high in America as in either of the other countries. (Principle* V Pol. Ec., p. 107.) He adds (p. 110), that if the rates of profit have become comparatively low, the condition of a nation, "how prosperous soever in ap pearance, is bad and unsound at bottom." Professor Jones, on the other hand, denies this inference, and takes a more encou raging view of the state and prospects of our own country. He says, " That fall of the rate of profits, which is so common a phenomenon as to be almost a constant attendant on increasing population and wealth, is, it will be seen, so far from in dicating greater feebleness in any branch of industry, that it is usually accompanied by an increasing productive power in all, and by an ability to accumulate fresh resources more abundantly and more ra pidly. So far, therefore, is this circum stance from being, •as it has hastily been feared and described to be, an unerring symptom of national decay, that it will be shown to be one of the most constant accompaniments and indications of econo mical prosperity and vigour." (Distribu tion of Wealth, Preface, p. xxxii.) These opinions, apparently conflicting, upon matters of fact, may prove, upon ex amination, not to be wholly irreconcilable. It is doubtful whether the United States of America be a good example for the purpose of this inquiry, as there have been many concurrent circumstances in operation, m that country, all tending to the same result ; and of which high pro fits may be regarded as the effect rather than the cause. It will be safer, there fore, to confine the examination of the effects of high profits upon accumulation to our own country at different times.