Large scale production involves the lengthening of the period of production

This is of special significance to social production as a whole

The possibility of the indirect or "roundabout" process of production depends upon the existence of what we call "capital" Capital for our purposes may be considered wealth that has been made available for further production, or perhaps even more generally, wealth which from the viewpoint of the ultimate source of its value, has not reached the hands of the final consumer. The buildings, machines and tools, the raw material in the various stages of completion, the finished goods in the warehouse of the manufacturer or on the shelves of the wholesaler or the retailer - all represent stored-up wealth belonging to somebody but temporarily surrendered for further production or better adaptation to final want satisfaction. Without such stores of wealth large-scale production would be impossible. Capital implements in the form of stones fashioned into hammers, or of sticks into instruments for cultivating the soil have, of course, been employed by mankind since the first rude beginnings of industry. But today with minute division of labor, with widespread use of machinery, with production on such a large scale and so "roundabout" so much stored-up wealth is necessary that capital has become increasingly important as one of the "factors of production." Success for the individual business man along most lines today depends largely upon ability to control adequate supplies of this factor, and those who are in control of large quantities of their own or someone's else capital are as "capitalists" most powerful personages. Indeed, so widespread is the recognition of this importance of capital that the whole economic scheme as now organized is referred to as the "capitalistic" system.

The first condition necessary to the creation of capital is "abstinence." Wealth can be stored for use in further production only in so far as those who have a rightful claim to it elect not to consume such wealth immediately, but, for some adequate consideration, to devote it to further production. Not all wealth, however, can be used in further production. If goods of final consumption be created and be not consumed they remain useless and tend to deteriorate. Hence, the creation of capital as a rule involves more than mere abstinence from consumption. It involves as well the creation of "capital goods," of those goods namely, which, like tools, etc., are serviceable in further wealth production.

Lengthening the period of production grows out of the existence of capital

This is true for the isolated individual and for a highly complex economic organization of human society. If an isolated Crusoe is to supply himself with a capital equipment he must devote to the production of the tools, implements, etc., which are to constitute such equipment, a part of the time that would otherwise be devoted to the production of immediately enjoyable goods or that might, perhaps, simply be devoted to pleasurable recreation. Exactly the same is true of organized society. Society as a whole, like the isolated individual, can get its capital equipment only by abstaining for a season from pleasurable recreation, or from the production of goods destined for immediate consumption, and by devoting the time and energy so saved to the production of the desired capital implements. The nature of the process in society is somewhat obscured by the fact that the "abstainer" and the producer of capital goods are rarely the same persons; but through the use of "money" or a generally acceptable medium of exchange, virtually the same result is attained.

It is almost trite to say that our present-day economic life is based on the use of money. What the individual is after in all his economic endeavor today is the control of "money," or what is recognized as its equivalent. To make money is the goal of the business man and the dream of the youth. He who is wealthy is said to possess quantities of "money," while, according to the moralist, the love of "money" is the root of all evil. But it is obvious that money itself is useful only when it is parted with, and when other things are obtained for it; but because it enters directly or indirectly as a medium into almost all exchange transactions, and because it comes, therefore, to be employed as the general standard or measure of value, we come to think of it as standing for all the desirable things which its possession permits us to command. Money is the representative of all other wealth. The total social income is, of course, the totality of enjoyable goods that are made available during a given period, but the individual's claim to a share in that social income is allotted to him first in terms of money, and, according as his money income is great or small, he can command a larger or smaller proportion of the social income as a whole. We use money also as a "store of value" and speak of "saving money" when we wish to accumulate a fund that we can draw upon to meet some future contingency. From beginning to end the notion of money permeates our economic thinking and not without reason, for the prevailing economic system would be impossible without it.

"Abstinence" is essential as the first step in the creation of capital butit does not alone suffice

The actual process in modern society is obscured by the use of money

Today, therefore, "abstinence," which was said to be the first step in the creation of capital, is reflected in what we call "saving money." The individual who receives a money income may elect to "spend" it or to "save" it. If he "spends" his entire income he is thought of as using it in the purchase of immediately enjoyable goods and services which, after they are "consumed" or destroyed, leave nothing, perhaps, but pleasant recollections behind them. If, however, he elects to save a part of his income he may save it in several ways. He may hoard the money itself, he may put it into a bank of some kind, he may use it to purchase an investment security like a mortgage, or a bond, or a certificate of stock, he may lend it to some other individual or he may "put it back" into his own business, if he has one, in the form of payments for wages, for equipment, or for raw material.