ESSAY IV.

ON PROFITS, AND INTEREST.


The profits of stock are the surplus which remains to the capitalist
after replacing his capital: and the ratio which that surplus bears to
the capital itself, is the _rate_ of profit.

This being the definition of profits, it might seem natural to adopt, as
a sufficient theory in regard to the rate of profit, that it depends
upon the productive power of capital. Some countries are favoured beyond
others, either by nature or art, in the means of production. If the
powers of the soil, or of machinery, enable capital to produce what is
necessary for replacing itself, and twenty per cent more, profits will
be twenty per cent; and so on.

This, accordingly, is a popular mode of speaking on the subject of
profits; but it has only the semblance, not the reality, of an
explanation. The "productive power of capital," though a common, and,
for some purposes, a convenient expression, is a delusive one. Capital,
strictly speaking, has no productive power. The only productive power is
that of labour; assisted, no doubt, by tools, and acting upon materials.
That portion of capital which consists of tools and materials, may be
said, perhaps, without any great impropriety, to have a productive
power, because they contribute, along with labour, to the accomplishment
of production. But that portion of capital which consists of wages, has
no productive power of its own. Wages have no productive power; they are
the price of a productive power. Wages do not contribute, along with
labour, to the production of commodities, no more than the price of