Note 63 — APPENDIX

The case may also be put in another way. Interest is the product of capital quâ capital, as opposed to the product of ability as distinct from capital. But the bulk of modern capital is historically the creation of ability, which has miraculously multiplied the few loaves and fishes existing at the close of the last century. Interest may therefore be called the secondary or indirect product of ability, whilst earnings and profits may be called the direct product of ability. Any one who is living on interest at the present moment is almost sure to be living, not on his own ability, but on the products of the ability of some member of his own family who has added to the national wealth within the past two generations. Suppose a man who died in 1830 left a fortune of two hundred thousand pounds, which he made, as Salt did, by the invention and production of some new textile fabric; and suppose that this fortune is now in the hands of a foolish and feeble grandson, who enjoys eight thousand pounds a year. This is evidently not the product of the grandson’s ability; but it is the product of the ability of the grandfather. The truth of this may be easily seen by altering the supposition thus—by supposing that the original maker of the fortune, instead of dying in 1830, is alive now, but as imbecile as we supposed his grandson to be. He has, we will say, long retired from business, and lives on the interest of the capital he made when his faculties were in their vigour. Would any one say that he is not living on his own ability? The only difference is—and it is a difference which, from many points of view, is of the greatest importance—that formerly he was living on the direct product of his ability, and he is now living on its indirect product.