10. Capital and is the result of saving, and by saving is meant the production of more income than the producer consumes. It is evi dent that if a farmer consumes each year all that he produces lie will not increase in wealth. If, however, he increases his effort to produce larger crops and practises economy, he may find in the fall that he has several hogs and steers more than he will need for the winter supply of food for his fainily. These hogs and steers constitute his savings. They are wealth, but he cannot save the wealth to advantage in that form. What he wants to save is not the hogs and steers but the value embodied in them, so he sells them for $500 and deposits the money in a bank. In the course of time the hogs and steers become the food of other people, but to the economist the im portant thing is that the farmer who produced them did not consume them, but instead saved their value and added it to the country's store of capital. The bank will seek to lend the $500 to some man who can use it profitably.
Without saving of the kind Ave have here illus trated there can be no increase in a country's capital or business. Saving is, therefore, a most important economic function ; important to the individual, for if he does not save he makes no provision for sickness or old age and does not equip himself for the conduct of larger enterprises ; important to society, for if a country's stock of capital does not increase there will be no expansion and no increase in the produc tion of wealth unless men work harder and for longer hours. Any increase of the population in the country where the/capital supply is not also increasing is al most certain to be attended by a lowering of the stan dard of living and by a, decline of wages.
The economist believes quite properly that too much emphasis cannot be put upon saving or thrift. Its practice should be thought of not as a negative value to be stigmatized as meanness or stinginess, but as a positive virtue contributing to the welfare of society. A man helps increase the country's wealth quite as much when lie saves as when he works.
How much any man shall save is a question each in dividual must decide for himself. Our incomes are produced for our enjoyment. We have numerous wants and we do not really live unless many of them are gratified. Thus the problem of saving is really part of the problem of living.
11. Iniportance of we have said in the previous section, the enlargement of a country's industry or business is dependent upon the increase of its stock of capital, and in any country the capital of which is not increasing there can be no increase of population without severe suffering among the poor and the unskilled.
The truth of the foregoing propositions may be easily illustrated if you take the concrete case of a single farmer. If he has only one horse, one plow, one cultivator, one reaper and so on thru the list of farm implements, it is evident that he cannot employ to advantage more than one hired man, no matter how large his farm. If he has a tillable farm of 160 acres he will not be able to cultivate it all. His lack of capital will compel him to turn much of it into pasture.
If an entire community is made up of farmers of this sort ana if all of them are equally poor and thriftless, producing barely enough to support them selves and their families, there will be no increase in the demand for labor in that community. But if gradually other farmers come in to buy these farms and, by using better methods of production, are able to get larger crops and, by the practice of economy in living, are able to have a surplus at the end of the season, before long some shrewd man will open a bank in that community and many of those farmers will be able to borrow even more money than they have saved and buy more implements, cultivate larger fields and hire more men.
What is true of this imaginary farming commun ity is equally true of any industrial community. There cannot be more factories in the future and employment for more labor unless people today con sume less than they produce and so create a capital fund. A shoemaker with only one bench and one set of tools cannot hire an assistant no matter how g,reat the demand for his services. He must first save enough to buy another bench and set of tools or bor TOW from somebody else who has saved.
12. Capital demands labor.—As John Stuart Mill very clearly pointed out in his "Political Economy," the existence of unemployed capital is a prerequisite to any increase in a country's demand for labor. Mill stated this truth in what seemed a paradox as follows: "A demand for commodities is not a demand for labor." Inasmuch as the whole object of labor is to produce commodities for which there is a demand, this statement by Mill gave rise to much controversy and was quite commonly misunderstood.
He meant merely that there could be no demand for labor unless men had the capital necessary for the equipment of laborers with the needed tools and ma terials. The existing demand for commodities would surely determine the nature of the occupations in which the labor could be most profitably employed.