Varieties of Active Capital Goods.—Mere hand tools act as armatures attached to the person of the worker, and they enable him effectively to attack resisting substances. The hammer fortifies the blacksmith's hand against the injuries it would suffer if he delivered blows with his fist, and it multiplies the efficiency of the blows. Machines, however, substitute themselves for the person of the worker and carry the tool through its movements. A steam hammer, so called, is an engine that gets power from a boiler and wields an armature, which is the real hammer, much as a smith would do it, though with far greater force and effect. Machines do rapidly and accurately what a manual laborer would, without them, have to do slowly and imperfectly, by carrying the armature in his own hand and moving it by his own muscular strength. Tools and machines impart "form utility" to materials. Vehicles which carry goods impart "place utility" to them by putting them where they are more useful than they would be elsewhere. Buildings protect goods and workers alike, and enable the operation of transforming them to go on successfully. They also make it possible to store goods at a time when they are not needed and take them out for use when they are needed. In doing this, buildings help to impart "time utility" to the merchandise that is put into them by keeping them intact till the time comes when they will be useful. Tools, machines, reservoirs of water, canals, roadways, buildings, and even land itself are active capital goods, and are, for that reason, component elements of that part of the permanent productive fund which is known as fixed capital. They aid workers in their efforts to bring materials into usable shapes, and this is as true of the hole in the earth in which a savage stores provisions as it is of a fireproof warehouse in a modern city.
Materials which are at first Passive and later pass into the Active State.—The hammer itself has to be made out of raw material, and, while it is in the making, the material that enters into it is as passive as anything else. While the ore is smelting and while the steel is forging, the future hammer is in a preliminary stage of its existence and is discharging a passive function. When it is completely finished, its period of activity begins, and from this time on it helps to manipulate other things. The materials which enter into consumers' goods go through no such transition. The leather remains passive till, in the form of a pair of shoes, it clothes its user's feet; and at this point it ceases to be a capital good at all. The steel of the hammer is first a passive good and later an active one.
The Use of Capital Goods Universal.—There is no doubt that capital goods are used in the most primitive industry. Implements existed in times too remote for tracing; and even if they had not been used, raw material would have been indispensable. People living in an economic stage so ultraprimitive as to use no mediate goods whatever could sustain life only by plucking wild fruit or gathering fish or other food stuff by hand, and so long as they could do this their industry might conceivably consist in getting consumers' goods by labor only. The rudest pick, shovel, or ax and the simplest hunting implement are early types of what, in "capitalistic production," is represented by mills with their intricate machines, ships, railroads, and the like. Primitive industry has capital but is not highly capitalistic, since labor and a little capital in simple forms are all that it requires. These primitive capital goods are still essential.
Capital.—It might seem that we have already described the nature of capital, but we have not. We have described the kinds of goods of which it consists. A sharp distinction is to be drawn between two ways of treating capital goods, and only one of these ways affords a treatment of capital properly so called. To attain that concept we must think of goods as in some way constituting a stock which abides as long as the business continues. And yet the things themselves separately considered do not abide. Goods are perishable things; no one lasts forever, and some last only a very short time. Raw materials best serve their purpose when they are quickly transformed into usable goods and taken out of the category of productive instruments. Tools may last longer, but they ultimately wear out and have to be replaced.
How Capital Goods Originate and Perish.—If you watch a particular mediate good of the passive kind, say wood in a growing tree, you see it beginning its career as an absolutely raw material, and then under the hand of labor, aided by tools, receiving utility till it takes its final form in some article for a consumer's use, say a dining table. Little labor is applied to it during the first stage of the process, that in which the tree is guarded and allowed to grow to a size that fits it for conversion into lumber; but the cutting, carrying, sawing, and fashioning are done by labor and tools, and under their manipulations the wood "ripens" in the economic sense—that is, it becomes quite fit for consumption. It is ready to serve a consumer as a table, and, when this service begins, the wood that up to this point has been a passive capital good, constantly receiving utilities, will cease to be a capital good at all and begin slowly to wear out in the service of its owner.[1]
The Transition of Goods from one State to Another.—The beginning of its service in the purchaser's dining room takes the wood of the table out of the category of producers' goods; but there is some raw material that is never destined to emerge from that category and enter another. Its last state of existence as a good will be that in which it is embodied, not in an article for consumers' use, but in an active tool. Our tree might have furnished some of its wood for a wheelbarrow, and if so, that part of it would have been a capital good until it ceased to be an economic good at all. If we watch it as it grows toward its economic maturity, we see it sawed, planed, and otherwise fashioned under the laborer's hand, and maintaining during all this time its passive attitude, just as does the wood that is destined to constitute a table. When the wheelbarrow is completed, it does not, like the table, begin to minister directly to consumers' wants, but begins actively to aid some laborer in a further productive operation. It carries mortar to the wall of an unfinished building and is thus taken out of the list of passive goods—recipients of utility—and is ranged with other active tools which impart utility. The same thing is true of the steel that is destined to compose the head of a modern woodman's ax or the stone that is in process of fashioning into the rude hatchet of some primitive savage. As raw or partly wrought material it is a passive capital good; later it becomes an instrument of the active sort.
The Ultimate Perishability of all Kinds of Goods artificially Made.—In the end both kinds of material will cease to be capital goods. The raw stuff that goes into food, clothing, furnishings, or the like will become consumers' goods, while the raw material of tools will, in its final form, the tools themselves, have one more lease of life as capital goods. In the end, however, as wheelbarrows, axes, hatchets, and the whole long list of active implements are used up, they cease to be capital goods because they cease to be economic goods at all. They are as truly ordained to be ultimately used up as are food and clothing, and this is true of the most durable things that are artificially made. Walls, roadways, bridges, and buildings slowly deteriorate till the time comes when for productive purposes their room is worth more than their company.
Why the Perishability of Capital Goods does not put Capital out of Existence.—Perishability is the most striking trait of capital goods. Each particular one comes and goes, but there is always a stock of them on hand; for when one is on the point of going, another is ready to take its place and keep up the succession. New tools replace old tools; new materials replace those that are finished and withdrawn, and so it comes about that a stock of such things abides forever. Not one of the individual instruments is permanent, for each one only does its part in keeping up an endless procession. It is the procession that is always there—a moving series of individual goods, not one of which has more than a transient economic career. Each one helps to keep up the supply of permanent capital just as each man, taking his turn in an endless succession of laborers, serves during his brief life to keep up the permanent force of laboring humanity. Men come and go, but "labor"—a mass of working humanity—abides; and so capital goods come and go, but a stock of them abides, kept up by perpetual replacement. We may trace the career of any single instrument from a beginning to an end; but we may, on the other hand, cease to look at any instruments that we single out and identify and look rather at the procession of them; and if we do this, we look at a body which never wastes away, though the things that compose it are, separately considered, forever wasting.
There are many kinds of transient things which, by the same process of renewal, constitute permanent entities. Composing a human body at this moment are certain tissues that can be separately identified; and if we watch any one of them, we shall see it going in a short time to destruction. Yet the body lasts while life continues. Indeed, the evidence of the life itself is the discarding and replacing of the tissues. A living body is a durable thing, though the particular tissues that at any one time compose it are not so. In a like way drops of water make a river, and this is a permanent thing, however rapidly its composition changes. The waterfall that drives the machinery of a mill is permanent, though no particular particle of water remains in it for more than a moment. Society is permanent, though the men who compose it are short-lived. In an exactly similar way a body of capital goods is maintained as a perpetual instrumentality of production. This is capital properly so called. It is, as it were, a quasi-living body, perpetuated by the constant replacement of the component parts, which are destroyed as its normal activities go on.
The Difference between Capital Goods and Capital Summarized.—The distinction between capital goods, on the one hand, and capital, on the other, is, then, like that between particular tissues and a living body, or like that between particular particles of water in the river and the river that flows forever. We can single out and watch certain drops of the water as they flow from a spring, and we can trace them through their brief careers, and say truly that the river is composed of fickle and transient stuff; but we cannot say that the river is transient. That is perpetuated by the renewing of the supply of water as the original drops disappear. We can mentally watch a particular man, as he enters the social force of workmen, labors for a time, and drops out of the line, and can see that society is composed of transient material; but society itself is an abiding thing. So we can study a particular bit of ore or wool or leather or a particular hammer or spindle or sewing machine, and in those cases we shall be studying capital goods and finding how perishable they are; but we shall also see that a stock of them always abides as the capital of economic society. We can cease to look at individual things and study the permanent fund of productive wealth, which is made up of goods like ore, wool, leather, hammers, spindles, and sewing machines. The identity of the things which make up this stock is forever changing. The same list of things we shall never find in the stock on any two dates, but a supply of similar things forever abides. Capital is this permanent fund of productive goods, the identity of whose component elements is forever changing. Capital goods are the shifting component parts of this permanent aggregate. They are the particular instruments that, each during its own brief economic lifetime, take their places in the endless procession of things which in its entirety is an abiding productive agent—the co-worker of labor and its perpetual assistant in creating consumers' wealth.