Chapter 10 Chapter 9 Capital and Profit

The increase or decrease of social wealth not only determines the increase or decrease of labor wages, but also determines the increase or decrease of capital profits.However, the impact of wealth status on the two is quite different. The increase of capital raises the wages of labour, and at the same time lowers the profit of the employer.If many wealthy merchants invest their capital in the same trade, the profits of that trade must be diminished by intense competition; and if this increase of capital is extended to all the trades of the community, the profits of all trades will also be diminished by competition.

I have already said that it is not easy to ascertain the average wages of labor at any given time in a particular place, but only the general wages.But now, it is difficult for us to even determine the profit of ordinary capital.Because capital profits fluctuate greatly, even if an operator in a particular industry is asked to tell his average annual profit, he may not be able to say it.Factors that affect profits include not only changes in commodity prices, but also the number of competitors, customers' desire to buy, and the number of accidents encountered during transportation or storage.Therefore, the rate of profit is constantly changing, and it is difficult for us to determine the average profit of various trades and professions in a large country, let alone the average profit of capital in the past or the present.

Though it is impossible to ascertain with any degree of exactness past or present profits, we may get some idea of ​​them from the interest of money.When more profit can be obtained from the use of money, the rate of interest on money can generally be increased; when less profit can be obtained from the use of money, the rate of interest on money can be lowered.From this, we can be sure of one thing: a change in the general rate of interest in a country's market will inevitably affect the general profit of capital in that country, making profits rise and fall synchronously with the rise and fall of the rate of interest.Therefore, we can get a little idea of ​​the changes in profits through the changes in interest.

In the thirty-seventh year of his reign, Henry VIII regulated all interest within ten percent by decree.It can be seen that the previous interest rate has reached more than 10%.Later Edward VI, because of his zeal for religion, forbade all interest.It is said, however, that this prohibition, like others of a like character, instead of lessening the evils of usury, increased it.Thus, in the eighth decree of Queen Elizabeth's thirteenth year, the decree of Henry VIII was restored. Since then, the legal rate of interest is generally 10%, and it was not reduced to 8% until the 21st year of James I, and then reduced to 6% shortly after the Restoration, and even 10% in the 12th year of Queen Anne. reduced to five percent.The market rates of interest prescribed by these laws, being fixed after, not before, borrowings by persons of good credit, seem most appropriate.Since the days of Queen Anne, the statutory rate of interest has been five per cent, which seems to be higher than the market rate.Before the latest war, the government borrowed at three per cent, while in the capital, and in many other places, some good credit borrowed at three and a half per cent, four per cent, per cent. Four point five.

Ever since Henry VIII the wealth and income of England seem to have increased gradually, and more rapidly, every day.During this period, labor wages continued to increase.The profits of capital, however, have gradually diminished in the greater part of industry and commerce. A greater capital is often required to carry on a trade in a metropolis than in a country.The capital thus invested in the various trades of the metropolitan cities will be greater, and the rate of profit on urban capital will be lower than that of rural capital, amidst the competition of many rich competitors.But in terms of labor wages, cities are higher than those in rural areas.Because, in a prosperous metropolis, laborers are often in short supply.Those who possess large productive capitals compete with each other by raising the wages of labour, in order to employ as many laborers as they require, and the profits of capital are lowered.And in those remote places, since the employers do not have sufficient capital to employ all the laborers, the common people prefer to lower the wages of labor in order to obtain employment, thus increasing the profit of capital.

In Scotland the statutory rate of interest is as high as in England, and the market rate of interest is somewhat higher.In Scotland, even a person of good credit cannot borrow less than five per cent.For example, in Edinburgh, you can enjoy four per cent interest at any time when you go to a private bank to cash all or part of a promissory note.In London, however, funds deposited in private banks do not earn interest.Almost all trades are operated with less capital in Scotland than in England.The ordinary rate of profit is therefore higher in Scotland than in England.We know that the wages of labor are lower in Scotland than in England.Not only that, but Scotland is much poorer than England; and though it is also clearly advancing, it is advancing much more slowly than England.

In France in this century, the statutory rate of interest is generally independent of the market rate of interest.The legal rate of interest in France fell from one-twentieth to one-fiftieth (that is, from five per cent to two per cent) in 1720, and was raised to one-thirtieth in 1724 ( That is, 3.3 percent), and in 1725 it was restored to one-twentieth.In 1766, under Lafferte's administration, this statutory rate of interest was reduced to one twenty-fifth (or four per cent).Later, Father Trey, who was in power, restored the legal interest rate to the original five percent. The general object of government in so forcibly suppressing the statutory rate of interest, is to lower the rate of interest on the public debt, and it sometimes does achieve this object.Judging from the current situation, France may not be as rich as Britain.In general, the statutory interest rate in France is lower than that in the UK, but the market interest rate is higher than that in the UK.The reason is that France, like some other countries, has the means to circumvent the law safely and easily.As British businessmen who do business in England and France say, commercial profits in France are higher than those in England.Because of this, many British people do not want to invest in their own country, but are willing to invest in France, which is light on business.

At the same time, the wages of labor in France were lower than those in England.If you have been to Scotland and England, you can fully understand the difference in the social conditions of the two countries from the difference in the dress and complexion of the common people in these two countries; and if you return to England from France, you will feel this difference. The contrast is more stark.Obviously, France is not richer than Scotland, but France does not seem to be progressing as fast as Scotland.Compared with Scotland, France is generally or even universally considered to be regressing.However, this view is manifestly unfounded.If a person were to visit Scotland again after a lapse of twenty or thirty years, he would never have such a view.

On the contrary, in terms of territorial area and population ratio, the Netherlands is richer than England.In the Netherlands, the government borrows at two percent interest, and those with good credit at three percent.The wages of labor are also said to be higher in Holland than in England.We know that the commercial profits of the Dutch are the lowest among European countries.In some people's eyes, Dutch business is in decline.This, perhaps, has indeed occurred in some branches of commerce. However, from the symptoms mentioned above, we can see that the country's so-called "business recession" seems to be different from the general business recession.Merchants complain of declining business because profits have been reduced.But the reduction of profits is just the natural consequence of commercial prosperity, that is, of investing more capital than before.Taking advantage of the recent Anglo-French war, the Dutch obtained all of France's transportation business, and have not completely withdrawn until today.In addition, the Dutch also own a large property of British and French debt.It is said that the national debt of Great Britain alone amounts to about forty million pounds.However, I think the amount may not be that large.Moreover, the Dutch loaned huge sums of money to foreign private individuals at higher interest rates than their own.

Judging from these facts, the Netherlands is undoubtedly capital surplus.In other words, they have invested more capital in the proper production of their own country than can be afforded a fair profit on that capital.This recession is not a business recession.When the amount of private capital available to operate a particular trade increases to such an extent that no more profit can be made by investing in it, there may still be more capital to continue to invest.This situation is more common in large countries. Labor wages, interest on money, and profits on capital were higher in British North America and West Indies colonies than in England.In the various colonies the legal and market rates of interest were approximately six to eight per cent.In the new colonies there were also high wages of labor and high profits on capital.However, this phenomenon occurs only under special circumstances and is rarely seen elsewhere.

The ratio of capital to territorial area, and population to capital, must, for a certain period, be lower in the neo-colonies than in most countries.The capital which the farmer possesses is necessarily insufficient to till all the land.They were therefore obliged to invest their capital in the fertile and well-placed seashores, and all along the banks of navigable rivers.Such land, moreover, can often be bought at a price below the value of its natural produce.Therefore, if such lands are purchased and improved, great profits can be obtained.At this time, even if the interest is very high, farmers can afford it.The farmers are thus able to rapidly accumulate still greater capitals, and keep the new colonies in short supply of hired labourers, with capital invested in this favorable employment.Thus the farmers paid high wages to the labourers of the new colonies.At the same time, capital profits will gradually decrease as the colony expands. As all the fertile and well-situated land is taken up, some farmers are obliged to cultivate the worse lands, and so their profits are less.And the interest on capital employed in land is naturally lower.Because of this, the statutory and market rates of interest have been greatly reduced in most of the English colonies during this century.The rate of interest has been markedly lowered under the influence of increased wealth, improved employment, and increased population.At the same time, labor wages did not fall.The demand for labor increases with the increase of capital, and it is not affected by the profit of capital at all.Although profits have fallen, capital has increased, and more rapidly, than before.At this point, it is the same whether it is an industrious country or an industrious individual.Compared with high-profit small capital, although the profit of large capital is lower, the profit growth rate is also faster. As the saying goes, money makes money.Even with very little money, you can make more money.The hardest part is how to get the initial little money.The relation of increased capital to increased business (that is to say, to increased demand for effective labour) has been partly shown by me before, and will be more fully explained later in my treatment of the accumulation of capital. Even a country which is rapidly increasing in wealth will increase the profits of capital, and increase the interest on money, by the acquisition of new territories or the development of new trades of business.Since the country's national capital cannot meet the needs of these new fields, it can only choose those industries with the greatest profits to invest.The capital that can satisfy these new industries must be part of the capital that was previously invested in other industries and has now been withdrawn.In this way, the competition in the old industries will not be as fierce as before, and the market supply of various goods will also be reduced. The reduction in the supply of goods is bound to raise the price of goods more or less.As a result, the profit of the operator will be greater, and the interest rate on his borrowed funds will be higher than before.In the immediate immediate aftermath of the war, people of good credit, even some of the big London firms, borrowed at five per cent.And the interest they paid before the war generally did not exceed 4% or 4.5%.This phenomenon is not the result of the reduction of our British wealth, but the increase of British territory and commerce after the British occupation of North America and the West Indies.Since many new businesses have been added, and the capital is still the original old capital, the amount of capital in many industries will inevitably decrease due to the addition of new businesses.As a consequence, the competition in those old trades will be lessened, and their profits must therefore be increased.I believe, therefore, that the means of Great Britain have not been diminished by the great expense of the recent war.The reason why I am so sure, I will explain later. The reduction of social assets used to maintain industry will reduce labor wages and increase capital profits and monetary interest.As the wages of labor have been lowered, the remaining owners of capital supply less money to the market in the form of goods than before, and they sell them at a higher price.Less wages were expended, and goods sold at a higher price, both of which greatly increased the profits of the farmer.As a result, interest rates have risen accordingly. In Bengal and other British colonies in the East Indies, huge assets could be acquired very easily and quickly.This fact proves that poor areas have very high labor wages, very large capital profits, and very high money interest rates.In Bangladesh, farmers often borrow funds at interest rates of 40, 50, or even 60 percent, in addition to using the next harvest as collateral.If the landlord wants to obtain such high-interest profits, he must advance almost all the land rent and most of the profits in advance.Everywhere, before the fall of the Roman Republic, interest seems to have been equally high, owing to the tyranny of the doge.We know from the Tablets of Cicero that even the virtuous Brutus once borrowed money in the island of Cyprus at a rate of forty-eight per cent. If a country has made the most of its soil, its climate, and its relative position, it is hardly possible to increase its wealth.If it is still in a state of not regressing, it is likely that its labor wages and capital profits will be very low.If the population of a country has fully reached the limit that its territory or capital can support, then the competition for occupations in the country at this time must also be quite fierce.In this way the wages of labor will be reduced to a level which is only sufficient to maintain the subsistence of the present laborers, and the population will be too dense to increase.When the capital of a country exceeds that required by the various trades which must be carried on in the country, each trade employs as much capital as the nature and extent of its trade will permit.In this way the competition of localities would be as great as it can be, and their common profits reduced to a minimum. However, there seems to be no country with this level of national wealth.China, which seems to have been at rest for a long time, may have long ago become as rich as the country's legal system allows.If China changes its legal system, perhaps its national wealth will exceed what its current soil, climate and location will allow.If it does not ignore or despise foreign commerce, and allow foreign ships to sail into its ports, it may conduct those kinds of transactions which it can only conduct under a system different from its present legal system. In addition, if the rich or big capitalists in a country enjoy a large degree of security, while the poor or small capitalists are not only insecure, but may be forcibly plundered by lower-level officials at any time under the pretext of enforcing the law, then the domestic investment in each The capital of the industry will also be difficult to meet the limits that the nature and scope of the industry can accommodate.In whatever trade, if the poor are oppressed, the rich must monopolize the trade, and thereby reap great profits.In China, therefore, the ordinary profits of capital must be sufficient to cover the ordinary rate of interest, which is said to be as high as twelve per cent. If the laws of a country are defective, the rate of interest may sometimes thereby be raised much higher than its state of wealth requires.If the contract is not legally binding, then almost all borrowers can be dishonest, just like those bankrupts or people with bad credit in a country with a clear legal system.When a bankrupt borrows money from a lender, and the lender is not sure whether he will be able to recover the loan, the lender will charge the bankrupt the high interest rates that the bankrupt usually pays on the loan.The peoples who invaded the western parts of the Roman Empire were generally uncivilized peoples.For a long time, the contracts of these nations have been fulfilled by the reputation of the parties concerned, and few court referees have intervened.This circumstance may have been one of the reasons why the rate of interest was so high at that time. However, if the law completely prohibits the collection of interest, then the desired effect will not be achieved either.In this way, many people will borrow funds; and the lenders will demand considerable compensation from the borrowers, and will demand considerable compensation from the borrowers in order to avoid the risk of violating the law.Montesquieu said that the reasons why all Islamic countries charge high interest rates are firstly that the law prohibits interest; secondly, it is difficult to recover the loaned money, which has nothing to do with their poverty. It is easy to encounter accidental losses when investing. At this time, the lowest ordinary profit rate needs to have a surplus after removing the accidental losses.Because only this surplus is the investor's net profit or net profit.This surplus, together with the part in which it replaces accidental losses, constitutes the ordinary gross profit.Only pure profit is proportional to the interest that the borrower can pay. Even if you lend your funds with great care, you may suffer unexpected losses.The minimum ordinary rate of interest, therefore, requires, as well as the minimum ordinary rate of profit, a surplus after deducting the accidental losses which lending is liable to encounter.Of course, if the borrower lends out of charity or friendship, then he does not have to charge the interest. The ordinary rate of net profit, and the ordinary market rate of interest which this profit can bear, will be low in a country where the national wealth has been reached to the extreme, and the capital invested in every trade has been maximized.In this way, the only people who can live on the interest of money are the very rich; while the small and middle property owners have to personally supervise the use of the capital they own; It is necessary to become an industrialist engaged in a certain industry. A similar situation also occurs in the Netherlands today.In the Netherlands today, only the industrialist is considered fashionable.Almost everyone is used to operating a certain industry because of the needs of life.This custom dominates local fashion.If a person wears different clothes or does a different business than others, he will be laughed at.An idle idler among a company of industrialists is as embarrassed, and even despised, as a civil servant in an army. The highest ordinary rate of profit, perhaps, is that which, after subtracting the rent part of the price of the greater part of commodities, remains enough to pay the minimum wages of labour, which are necessary to produce and bring them to market.Landlords want laborers to work, so they have to find ways to feed them.However, the laborers' maintenance expenses are not necessarily paid by the landlords.In Bengal the rate of profit obtained by the clerks of the East India Company in conducting their commerce is perhaps the highest.The rise and fall of profits must generally affect the proportion of the market rate of interest to the ordinary rate of pure profit.In the eyes of English merchants, a moderate and reasonable profit is twice the interest.This moderate and reasonable profit, I think, is ordinary profit.If the ordinary net rate of profit in a country is eight or ten per cent, it may be reasonable for the borrower to return half his profit as interest to the borrower.It is the borrower who insures the lender, not the lender, who bears the capital risk.The ordinary rate of net profit of four or five per cent. will, in most trades, be a sufficient return to compensate for the laborious employment of capital, and the risks involved in bearing this insurance.But in a country where the ordinary rate of profit is very low or very high, the proportion of interest to net profit cannot be such as has been aforesaid.If the rate of profit is low, the interest may be less than half the profit; and if it is high, it may exceed half the profit. If the wealth of a country increases rapidly, its high wages of labor may be compensated by the low profits of many commodities.Thus they can sell their commodities as cheaply as those of their neighbours, who are less prosperous and less wages of labour. In fact, high profits raise the prices of produce more than high wages.If, for instance, the daily wages of the carders, spinners, weavers, etc., of the linen-manufacturer, were increased by twopence, then a bolt of linen would have to be increased in price by an amount equal to twopence and the number of laborers who produced it. , the product of the number of working days.The wage part of the price of commodities increases in arithmetic progression as the stages of manufacture advance.But if the profits of all employers were raised five per cent., the profit part of the price of commodities would increase exponentially as the stages of manufacture advanced.That is to say, the price at which the employer of the carder sells the hemp is the total value of the materials advanced by the employer and the wages of the labourers, plus five per cent.The same applies to the employers of spinners and weavers. Increases in wages, therefore, do to raise the prices of commodities, as simple interest does to the accumulation of debts; and increases in profits do what compound interest does.English merchants and manufacturers grumble about the "evil consequences" of high wages, because they raise prices, and thereby reduce the sale of goods at home and abroad; I have benefited.These merchants and manufacturers, as soon as they see others benefit, cry out about the "evil consequences" resulting from it.