The Formation and Distribution of Wealth: Reflections on Capitalism by Anne-Robert Turgot (Translated and Edited by Kenneth Jupp) is an important treatise on the early foundations of capitalism. Turgot traces the development of early capitalism from its inception through to the recapitulation of the five basic uses of capital.
Turgot believed that capital was useful to buy land with earning power, to invest in agricultural enterprises by farming the land, to invest in trade or industry, to invest in commercial enterprise and to lend in order to bring in a profit greater than the revenue invested in the same sum as invested in land.
Turgot embraced the notion of thrift when he stated that thrift increases capital, increases the number of lenders, and reduces the number of borrowers. Extravagance produces the converse. Furthermore, the lowering of the rate of interest proves that thrift has usually prevailed over extravagance. Since interest on money has declined in Europe for centuries, the conclusion is that thrift rather than extravagance has been the general rule, according to Turgot.
The author believed that there were two great subdivisions in society. These subdivisions encompassed producers and wage earners. Producers extract from the earth to furnish the whole of society with subsistence and raw materials. Wage earners turn the raw materials into practical use by applying labor in exchange for subsistence living. Herein lies an important negation in early capitalism.
Turgot explained the foundations of capitalism with considerable clarity, although the capitalism of the 1700′s has evolved into an improved (although imperfect) model today. At present, many workers receive compensation over the bare subsistence level. Examples are municipal union workers, federal government employees, workers who have access to profit sharing, workers who invest, as well as workers who inherit legacies of property and other valuables. Lastly, today’s workers have access to franchise forms of organizations, as well as alternative business models like affiiliates and partnerships.
The Formation and Distribution of Wealth is an excellent reference on the foundations of early capitalism. The book provides an important explanation of capitalism’s basic premise. The idea of subsistence living in exchange for labor needs to be reworked in order to have utility in the world of today.