The modern industrial world, Mill explains, is built on Capital. He defines it simply as the product of saving, which is “abstinence from present consumption for the sake of a future good.” Capital is the surplus from past labour, reinvested to fund new production.

But what drove this new age of accumulation? Mill, ever the “social philosopher,” looked beyond mechanics to human motivation. He identified the powerful “accumulating propensity” in England as a social phenomenon: the passionate desire “to get out of one rank in society into the next above it.” This ambition, combined with new ways of organizing work, unlocked unprecedented productivity.

5.1. The Power of Co-operation

The key to this new productivity is what Mill calls “co-operation, or the combined action of numbers,” most famously expressed in the Division of Labour. Citing Adam Smith’s example of pin-making, he shows how ten specialized workers could produce forty-eight thousand pins in a day, while a single worker might not make twenty. Mill identifies two crucial advantages of this system:

• Increased Dexterity: A worker performing a single, repetitive task becomes exceptionally skilled and fast at that one action.
• Economical Distribution of Labour: A point Mill credits to the inventor Charles Babbage, this is the ability to class work according to capacity, ensuring that the precise skill and strength required for a task is used, and no more, preventing waste of high-level talent on simple operations.

5.2. The Future of the Labouring Classes

Mill did not see the sharp division between “employers and employed” as the final stage of progress. Looking to the future, he revealed his passionate moral conviction that this relationship must be overcome. He described it as “unsatisfactory,” a “standing feud” where the rich see the poor as “servants” and the poor see the rich as “prey and pasture.”

Here, Mill applies his foundational principle: while the production of wealth was now driven by capital and co-operation, the distribution of its fruits—the relationship between employer and employed—was a “matter of human institution solely” and therefore ripe for radical improvement. For Mill, the next step was not just an economic evolution but a necessary “moral revolution.”

He believed the employer-employee relationship would be “gradually superseded by partnership” in two forms: first, associations of labourers working with a capitalist, and finally, “association of labourers among themselves,” who would collectively own the capital and elect their own managers. This vision of worker co-operatives was the ultimate fulfillment of his project: a society where labourers were not mere tools, but self-governing partners in creating and sharing wealth.