(4.vii.9) Let us suppose that, first, be spends 500 l. of this income on the produce of fixedcapital; 500 l. on that of immediate labour.
(4.vii.10) In the first case be purchases commodities only; in the second case be purchaseseither commodities or services, but gives the same employment to labour whether he purchases the oneor the other If a man makes a basket in a day, for which you pay him a shilling, or weeds in yourgarden a day at a shillings wages; in both cases the demand you furnish for labour is preciselythe same. The 500 l. expended in the produce of immediate labour, is a demand for that numberof labourers, whose wages for a year amount to 500 l.; say for 1000 labourers.
(4.vii.11) If the commodities, made with fixed capital, on which he spends the other 500 l.,are made purely with fixed capital; an imaginary case, but which we may suppose, for the sake ofillustration; this portion of his income presents no demand for labour at all. The price of thecommodities which are thus purchased is wholly made up of profits. It is the result of labourformerly expended, and, with the portion of labour now in the market it has nothing to do.
(4.vii.12) Suppose that of this 500 l. one half is turned, by a change in the taste of the owner,from the purchase of commodities, the produce of fixed capital, to the purchase of the produceof immediate labour. Two things happen: a demand is created for 250 l. worth of mere labour: ademand is annihilated for 250 l. worth of the produce of fixed capital; that is to say, as much ofthe capital of the country as yielded 250 l. or profits, becomes useless. This is entirely distinctfrom a fall in the rate of profits. Such a fall may or may not accompany such a change in the twospecies of demand. This is a loss of capital. Capital, to this extent, ceasing to be employed,ceasing to be needed, is, to any useful purpose, destroyed. Along with it there is destroyed aproductive power to the extent of 250 l. per annum. This is not compensated by any newproduction; for by the supposition the number of labourers is not increased. Every labourer thatis employed, under the new application of this 250 l. of the supposed income, would have beenemployed if the new application had not taken place, if the capital had not been destroyed.
(4.vii.13) Under the new distribution of the 1000 l. income, as much is awarded to the classof labourers, as is taken from the class of capitalists. 250 l. were formerly awarded as profits, whichare now awarded as wages. So far, there is no absolute loss, as much being gained by one, as lostby another. The loss arises from this, that, while no new labour is brought into employment, andno addition is made to the productive powers of labour, nor of course to its produce, a portion ofcapital is thrown out of employment, its productive powers are lost, and the annual produce ofthe country is diminished.
(4.vii.14) This case is reversed when machinery is invented which performs the work ofimmediate labour. Let us make the same supposition of the extreme cases as before; that themachine invented performs the functions of labour without the aid of labour, that the produce ispurely the result of capital. Let us suppose a capital of 10,000 l.; wholly, in the first instance,employed in the payment of wages. Let us suppose that this 10,000 l. is afterwards expended inmaking a machine which produces the same commodity, and the same quantity of it. In this casethe whole of the labourers who received the 10,000 l. of wages, are deprived of their oldemployment. The consequence is, not that they are thrown out of employment, but that theyincrease the supply of labour in the market and reduce wages. The labourers, in this case, do notnecessarily cease to produce; they produce just as much as before. The whole of the produce ofthe machine, therefore, is a new production, an addition to the former amount of the annualproduce.
(4.vii.15) Compare now the two cases; the case where the demand for the produce of fixedcapital is diminished, and that for immediate labour is increased; and the case where the demandfor the produce of fixed capital is increased, and that for immediate labour is diminished. In thefirst there is a rise of wages, and a diminution of profits, and so far there is compensation: butthere is besides this a defalcation of production to the extent of the productive powers of all thecapital superseded; and this is a dead loss. In the second case, there is a fall of wages, and a riseof profits, so far again there is compensation; but in this case there is an increase of productionto the extent of the productive powers of the whole of the fixed capital created. This is a newfund for the employment of labour, and as far as it goes, prevents the fall of wages.
(4.vii.16) Having thus illustrated the only case in which an increase of demand for labourcan take place, without an increase in the amount of capital, which in the case before us is notsupposed, we are prepared to see where an increase of demand for labour, in consequence of atax upon wages, can, and where it cannot, exempt the labourer from the tax.
(4.vii.17) The effect of a tax upon wages, when wages are so high as to be capable of beingaffected by a tax, is, to transfer a certain power of commanding the produce of labour and capitalfrom the class of labourers to the government. With the amount of the tax, before it was takenfrom the labourers, they presented a demand for so much of the operations of fixed capital, somuch of those of immediate labour. Where the same amount is transferred to the government,the government presents in like manner a demand for so much of the operations of fixed capital,so much of those of immediate labour. If the proportions of the demand for the produce of fixedcapital and immediate labour were the same in both cases, there would be no alteration in thedemand for labour, in consequence of the tax, and the whole of it would fall upon the labourers.
