1.12 Unproductive Capital

It is incorrect to consider consumption to be destructive of value. While a physical item may be destroyed in the process of consuming it, it is only by the act of consumption that its value is delivered. Moreover, there is no act of production done for its own sake: products are intended, from the outset, to be consumed.

Hoarded capital is the only species that is truly unproductive. The hoarded of goods deprives himself of the benefit he would have received from using them, and withholds from society the profits and wages that might have been generated by the use of that capital in productive enterprises.

Consider the Ottoman Empire, in which the ruling class held a significant amount of wealth in hordes while the majority of people lived in misery. It is also true that even the common peasant hoarded what little wealth he had for fear of it being seized by the rulers. For capital, what is kept invisible is also inactive.

This is common to all countries where government is despotic and arbitrary: people hoard their valuables, engage in little exchange, and industry collapses. It is only in nations where the citizens are secure in their possessions that they do not feel inhibited from buying, selling, and engaging in productive activity.

Another side effect of previous ages is the "silly admiration bestowed by the lower orders on the display of idle and unproductive finery" as a symbol of status, but which is hostile to their own interests. To spend inordinate sums on luxuries is to deprive oneself of a greater number of more common items that would contribute more to the necessities and pleasures of life.