IF only the orthodox Political Economy could be got rid of altogether, and could be laid on the shelf once and for all, like the theory and practice of perpetual motion scheming which, as we shall see later, it so much resembles, but which the Physicists and Mechanicians have fortunately no longer to consider before they can set to work, the reconstruction of the Science of Political Economy would be a comparatively simple affair, and, would not give us much trouble. But as this unfortunately is not so, and as the old Economy still lives and flourishes in academic haunts, perpetuating itself there from generation to generation, and by its subtle interfusion of Politics and political Power at every point, infecting the mind of each generation in turn with its fallacies and illusions, like old Theology, so that they neither really believe in it, nor yet dare altogether repudiate it, it is necessary for us to chase these fallacies from point to point until we run them separately to earth, in spite of the tax which we must put on the reader's patience in the process.

Now one of the major illusions of this kind, which has been fraught with the most disastrous and far-reaching consequences, as we shall presently see, is that the Economists have constructed their Science which professes to be true for the world as a whole, or for a nation as a whole, from the practices which regulate and determine the increase of wealth of individuals. But before we can grapple with this fallacy successfully, as we hope to do in a later chapter, it is necessary to clear the ground for it as far as possible. And as we are still engaged in considering what the laws of the Applied Science are for a nation standing alone in the world, and especially in trying to determine what things in a nation so situated are to be regarded as part of its fixed capital from which its savings, and so its increase of wealth are drawn, and what are to be classed under the category of consumable goods already implicitly included in that fixed capita), it is necessary to consider more closely than we have yet done a question still remaining over, namely as to where precisely and under what category are to be placed such instruments of exchange as gold and silver, bank notes, credit notes, etc.; and to what extent in a nation standing by itself they are to be regarded as an addition to the wealth of that nation.

The point is a more or less complicated one, and each aspect of it will require to be threaded out separately.

Now gold and silver in themselves, when regarded like other metals for their use in the arts, or when sought after as ornaments for the person, are of course simply commodities like other consumable goods circling around the wheel of wealth, and are already implicitly counted in the fixed capital; and their value follows the ordinary laws of value in general. But it is different when we regard them as part of the currency and recognised medium of exchange of a country. In this capacity their position is a somewhat ambiguous one, like the position of the amphibians in the animal kingdom, which belong neither altogether to the water nor to the land; they are neither altogether on the wheel of wealth nor altogether off it; they neither altogether follow the general laws of the wheel nor are they altogether exempt from their influence; they are neither altogether fixed capital nor altogether consumable goods implicitly contained in that capital. In a sense they have to be counted as capital, inasmuch as without them the consumable goods on the wheel would no more get circulated than if there were no railways, bridges, or canals, but only the ordinary facilities of the wandering and circuitous turnpike roads.

But railroads, bridges, and canals are parts of the fixed capital of a country, and are, by their saving of time (and so accelerating the speed of the revolutions of the wheel), a definite asset and addition to the wealth of a country. In that sense, then, gold and silver as circulating medium may be said to be quite as much as the railways and canals a part of the fixed capital of a country. But they are not fixed capital in the sense that the more you increase them the more wealth will you liberate, and the more you decrease them the less wealth will you produce to be consumed and enjoyed. On the contrary if you increased them out of proportion to the rest of the fixed capital, they would only lose their value. On the other hand, if you had no gold or silver currency at all, but still retained your other forms of fixed capital, although owing to the obstruction to the circulation of commodities the wheel as a whole would slow and wealth decrease, still you could manage to get on somehow, better or worse, with some form of barter, whereas you would starve on a mountain of gold as quickly as on a granite Alpine peak.

But money has another function still more important than its function as a means of circulation and transport, like that of a railway or canal. It is the standard or measure of value as well, of all other commodities whatever, whether fixed capital or consumable goods, and without it nothing but chaos and waste of wealth through waste of time would ensue. Things would rot before they got apportioned, and would lie helpless in a heap, as.a corn crop would, for example, if you had to count its separate grains on your fingers, instead of in definite weights or measures of capacity by the rules of arithmetic, before it could get distributed; or as the bricks of a house would if you had no standard of measurement to mark out where and in what relation to each other they were to be placed in building operations.

But would it not be better if we classed money under the category of consumable goods, if we cannot get it strictly to fall under that of fixed capital? Yes, and No. On the one hand it resembles consumable goods inasmuch as, unlike fixed capital, it is actually en the wheel of wealth, and circulates around it; and passes from hand to hand like other consumable goods. Like consumable goods, too, if its circulation is impeded from any cause, as panic for example, it will slow the movement of the whole wheel by preventing the full utilisation of the fixed capital, and, in consequence, of the free economic gifts of the powers of Nature which that fixed capital can, according to its capacity, liberate at all times when called upon. But on the other hand, again, while consumable goods in the aggregate cannot be increased too much, inasmuch as they constitute the very wealth itself which is the end and aim of all production; money, in a nation standing alone by itself, if increased beyond a certain amount would not only not increase wealth, as we have seen, but if produced in any great excess would rather, by the extra labour involved in its production and circulation, diminish it.