All this, of course, Adam Smith saw quite well, and the reason he denounced the Colonial trade was not so much because it was a monopoly, but because, as we have said, being a monopoly it drew capital away from the still greater wealth-producing employments of Agriculture, Manufactures, and the Home trade.

Now that Adam Smith should have imagined that the Colonial trade (protected against risk by its monopoly, and bringing home the enormous profits which as he frankly admits it did) could have withdrawn capital from anything, can only be explained when we fix our eyes on the second great illusion with which he was imbued, - that old and fundamental illusion of the orthodox Economists which they have nurtured and cherished to this hour, - the illusion, namely, that wealth in general is a fixed and statical rather than a dynamical and flowing thing, and that capital (the part of wealth set aside for production) is like a rigid rod of definite length or amount, divided and distributed among a number of employments, and each part functioning in definitely divided periods of time; so that the whole shows like a long-extended straight line, made up of separate items of wealth and capital, passing before the observer as the separate pictures in a panorama, but with no logical provision for their return; instead of being, as it really is, a circular movement, whereby as goods pass out of the front yard and doors of the factories and warehouses of the world, the return profits from their sale keep the stocks in the backyards constantly replenished and increased.

And in accordance with this illusion we find Adam Smith figuring the Colonial trade as a succession of ships passing in the night one by one into the outer darkness of the Colonies, on voyages of two, three, or five years duration, but with their return journeys and the wealth they brought with them either suppressed in his argument, or left vague and without logical recognition. For out of a divided and extended straight line, it is impossible to get a circular return movement; - and for this an entire reconstruction of the very basis of our science is necessary. And hence Adam Smith, after starting out his ships laden with a definite amount of capital, - which on his divided stick doctrine he represents as having been withdrawn from other more productive occupations, like agriculture, manufactures, and the home trade; - and finding that they do not return at the end of the year, asks the reader to note the circumstance; and when at the end of the second year they have still not returned, he begins to regard the situation as grave: until before the end of the four or five years period is up, he can no longer restrain himself, but demands whether there can now be any doubt that agriculture and the home trade are being bled to depletion; - so depleted, indeed, he thinks, that with their high famine prices they can no longer compete in the neutral markets of the world.

Now all this is a most obvious delusion. Had he seen that all economic operations whatever are flowing and continuous, and not rigid, fixed, and disconnected; and that they conform in their nature to dynamical and not statical laws, to the laws, in short, of a continuously running wheel, - he would have remembered without prompting that ships must be returning laden from the Colonies as fast as they were setting out; and further that owing to the monopoly of the trade by the mother country, for every pound of capital embarked in the departing ships, two pounds worth, say, were being brought home simultaneously by the returning ones. And as this excess of wealth brought into the country over what is going out of it can be turned into money, and as money is capital, and can be invested if necessary in that very Agriculture or Manufactures whose starved condition he is deploring, how or why, we ask, should or indeed could capital by any amount of it being invested in the foreign or Colonial trade, be withdrawn from the home trade, or from any trade or business whatever? When Adam Smith wrote, the Colonial trade had already been fully established for some generations, and if, as he declares. men were no longer putting their capital into agriculture and the home trade, or into the Baltic and the Mediterranean trades as formerly, the reason, among other things, was because they were not going to put it into a ten per cent, trade when an equally safe twenty per cent, one stood openly inviting them; but certainly not, as he thinks, because of any scarcity of capital.

For how can capital become scarcer in a country where any investment is bringing into it more than it carries away, and especially when it is reproducing itself with more, not less, than the usual rate of profit in every unit of time? How, indeed, could Adam Smith so persuade himself, unless in the background of his mind he had been in the habit of figuring wealth-production as if it were a definite length of rod from which if any part is cut off for investment in one employment, it must necessarily be so far withdrawn from every other? How, indeed, 1 repeat, unless he also figured Time itself as, like capital, split up into rigid definite divisions, on one or other of which he planted himself so firmly that if the world drew its money out of the bank for investment in the morning, and its returns had not come in by the evening, he could weep over it, as if the capital of the country had been forever lost to industry? And I cannot too strongly insist that if this fallacy, begun by Adam Smith, and propagated through the line of his orthodox successors to the present day, continue to be applied in economic reasoning, it will end (as we shall see increasingly illustrated in the writers whom we have still to pass under review) by economists taking up a position identical with that of those over subtle Greek philosophers, who if Achilles did not overtake the tortoise at once, were prepared to prove to you that he could not overtake it to all eternity!