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Full text of "The wealth of nations"

FRQM THE LIBRARY OF 

COLLEGE 

TORONTO 



EVERYMAN S LIBRARY 

413 
SCIENCE 



Everyman, I will go with thce, and be thy guide, 
In thy most need to go by thy side 



ADAM SMITH, born at Kirkcaldy, Fife, in 
1723. Educated at Glasgow and Oxford; 
appointed to the Chairs of Logic and Moral 
Philosophy at Glasgow University; resigned 
in 1762 and travelled on the Continent. 
Returned in 1766; elected Lord Rector at 
Glasgow in 1787 and died in 1790. 



ADAM SMITH 

THE WEALTH OF NATIONS 

IN TWO VOLUMES : VOLUME TWO 
INTRODUCTION BY 

PROFESSOR EDWIN R. A. SELIGMAN 




LONDON J. M. DENT & SONS LTD 
NEW YORK E.P. DUTTON & CO INC 



MAY 1 t 



All rights reserved 

by 

J. M. DENT & SONS LTD 

Aldine House Bedford Street London 

Made in Great Britain 

at 
The Aldine Press Letchworth Hem 

First published 1776-8 

First published in this edition 1910 

Last reprinted 1954 






CONTENTS 

BOOK IV. Continued 

CHAF. PACK 

IV. Of Drawbacks i 

V. Of Bounties ......... 6 

V l. Of Treaties of Commerce . . . . . -43 

VII Of Colonies ......... 54 

VIII. Conclusion of the Mercantile System .... 137 

IX. Of the Agricultural Systems, or of those Systems of Political 
Economy which represent the Produce of Land as either 
the sole or the principal Source of the Revenue and Wealth 

of every Country 156 



BOOK V 
Or THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH 

I. Of the Expense* of the Sovereign or Commonwalth . .182 
II. Of the Sources of the General or Public Revenue of the Society 198 

III. Ot Public Debts 389 

Appendix . . . . . . . . .431 

Index 41S 



AN INQUIRY 

INTO THE 

NATURE AND CAUSES OF THE 
WEALTH OF NATIONS 

BOOK IV. Continued 

CHAPTER IV 

OF DRAWBACKS 

MERCHANTS and manufacturers are not contented with the 
monopoly of the home market, but desire likewise the most 
extensive foreign sale for their goods. Their country has no 
jurisdiction in foreign nations, and therefore can seldom procure 
them any monopoly there. They are generally obliged, there 
fore, to content themselves with petitioning for certain en 
couragements to exportation. 

Of these encouragements what are called Drawbacks seem to 
be the most reasonable. To allow the merchant to draw back 
upon exportation, either the whole or a part of whatever excise 
or inland duty is imposed upon domestic industry, can never 
occasion the exportation of a greater quantity of goods than 
what would have been exported had no duty been imposed. 
Such encouragements do not tend to turn towards any parti 
cular employment a greater share of the capital of the country 
than what would go to that employment of its own accord, but 
only to hinder the duty from driving away any part of that 
share to other employments. They tend not to overturn that 
balance which naturally establishes itself among all the various 
employments of the society; but to hinder it from being over 
turned by the duty. They tend not to destroy, but to preserve 
what it is in most cases advantageous to preserve, the natural 
division and distribution of labour in the society. 

The same thing may be said of the drawbacks upon the re 
exportation of foreign goods imported, which in Great Britain 



2 The Wealth of Nations 

generally amount to by much the largest part of the duty upon 
importation. By the second of the rules annexed to the act of 
parliament which imposed what is now called the old subsidy, 
every merchant, whether English or alien, was allowed to draw 
back half that duty upon exportation; the English merchant, 
provided the exportation took place within twelve months; 
the alien, provided it took place within nine months. Wines, 
currants, and wrought silks were the only goods which did not 
fall within this rule, having other and more advantageous 
allowances. The duties imposed by this act of parliament were 
at that time the only duties upon the importation of foreign 
goods. The term within which this and all other drawbacks 
could be claimed was afterwards (by 7 Geo. I. chap. 21, sect. 10) 
extended to three years. 

The duties which have been imposed since the old subsidy- 
are, the greater part of them, wholly drawn back upon exporta 
tion. This general rule, however, is liable to a great number of 
exceptions, and the doctrine of drawbacks has become a much 
less simple matter than it was at their first institution. 

Upon the exportation of some foreign goods, of which it was 
expected that the importation would greatly exceed what was 
necessary for the home consumption, the whole duties are drawn 
back, without retaining even half the old subsidy. Before the 
revolt of our North American colonies, we had the monopoly of 
the tobacco of Maryland and Virginia. We imported about 
ninety-six thousand hogsheads, and the home consumption was 
not supposed to exceed fourteen thousand. To facilitate the 
great exportation which was necessary, in order to rid us of the 
rest, the whole duties were drawn back, provided the exportation 
took place within three years. 

We still have, though not altogether, yet very nearly, the 
monopoly of the sugars of our West Indian Islands. If sugars 
are exported within a year, therefore, all the duties upon im 
portation are drawn back, and if exported within three years 
all the duties, except half the old subsidy, which still continues 
to be retained upon the exportation of the greater part of goods. 
Though the importation of sugar exceeds, a good deal, what is 
necessary for the home consumption, the excess is inconsiderable 
in comparison of what it used to be in tobacco. 

Some goods, the particular objects of the jealousy of our own 
manufacturers, are prohibited to be imported for home con 
sumption. They may, however, upon paying certain duties, be 
imported and warehoused for exportation. But upon such 



Drawbacks 3 

exportation, no part of these duties are drawn back. Our 
manufacturers are unwilling, it seems, that even this restricted 
importation should be encouraged, and are afraid lest some part 
of these goods should be stolen out of the warehouse, and thus 
come into competition with their own. It is under these regu 
lations only that we can import wrought silks, French cambrics 
and lawns, callicoes painted, printed, stained or dyed, etc. 

We are unwilling even to be the carriers of French goods, and 
choose rather to forego a profit to ourselves than to suffer those, 
whom we consider as our enemies, to make any profit by our 
means. Not only half the old subsidy, but the second twenty- 
five per cent., is retained upon the exportation of all French 
goods. 

By the fourth of the rules annexed to the old subsidy, the 
drawback allowed upon the exportation of all wines amounted 
to a great deal more than half the duties which were, at that 
time, paid upon their importation; and it seems, at that time, 
to have been the object of the legislature to give somewhat more 
than ordinary encouragement to the carrying trade in wine. 
Several of the other duties too, which were imposed either at 
the same time, or subsequent to the old subsidy what is called 
the additional duty, the new subsidy, the one-third and two- 
thirds subsidies, the impost 1692, the coinage on wine were 
allowed to be wholly drawn back upon exportation. All those 
duties, however, except the additional duty and impost 1692, 
being paid down in ready money, upon importation, the interest 
of so large a sum occasioned an expense, which made it un 
reasonable to expect any profitable carrying trade in this article. 
Only a part, therefore, of the duty called the impost on wine, 
and no part of the twenty-five pounds the ton upon French 
wines, or of the duties imposed in 1745, in 1763, and in 1778, 
were allowed to be drawn back upon exportation. The two 
imposts of five per cent., imposed in 1779 and 1781, upon all 
the former duties of customs, being allowed to be wholly drawn 
back upon the exportation of all other goods, were likewise 
allowed to be drawn back upon that of wine. The last duty 
that has been particularly imposed upon wine, that of 1780, is 
allowed to be wholly drawn back, an indulgence which, when 
so many heavy duties are retained, most probably could never 
occasion the exportation of a single ton of wine. I*hese rules 
take place with regard to all places of lawful exportation, 
except the British colonies in America. 

The 1 5th Charles II. ch. 7, called An Act for the Enoourage- 

*4M 



4 The Wealth of Nations 

ment of Trade, had given Great Britain the monopoly of supplying 
the colonies with all the commodities of the growth or manu 
facture of Europe; and consequently with wines. In a country 
of so extensive a coast as our North American and West Indian 
colonies, where our authority was always so very slender, and 
where the inhabitants were allowed to carry out, in their own 
ships, their non-enumerated commodities, at first to all parts of 
Europe, and afterwards to all parts of Europe south of Cape 
Finisterre, it is not very probable that this monopoly could ever 
be much respected ; and they probably, at all times , found means 
of bringing back some cargo from the countries to which they 
were allowed to carry out one. They seem, however, to have 
found some difficulty in importing European wines from the 
places of their growth, and they could not well import them from 
Great Britain where they were loaded with many heavy duties, 
of which a considerable part was not drawn back upon exporta 
tion. Madeira wine, not being a European commodity, could 
b imported directly into America and the West Indies, countries 
which, in all their non-enumerated commodities, enjoyed a free 
trade to the island of Madeira. These circumstances had prob 
ably introduced that general taste for Madeira wine, which our 
officers found established in all our colonies at the commence 
ment of the war, which began in 1755, and which they brought 
back with them to the mother-country, where that wine had 
not been much in fashion before. Upon the conclusion of that 
war, in 1763 (by the 4th Geo. III. chap. 15, Sect. 12), all the 
duties, except 3 ios., were allowed to be drawn back upon the 
exportation to the colonies of all wines, except French wines, 
to the commerce and consumption of which national prejudice 
would allow no sort of encouragement. The period between the 
granting of this indulgence and the revolt of our North American 
colonies was probably too short to admit of any considerable 
change in the customs of those countries. 

The same act, which, in the drawback upon all wines, except 
French wines, thus favoured the colonies so much more than 
other countries; in those upon the greater part of other com 
modities favoured them much less. Upon the exportation of 
the greater part of commodities to other countries, half the old 
subsidy was drawn back. But this law enacted that no part 
of that duty should be drawn back upon the exportation to the 
colonies of any commodities, of the growth or manufacture 
either of Europe or the East Indies, except wines, white callicoes, 
and muslins. 



Drawbacks 5 

Drawbacks were, perhaps, originally granted for the encourage 
ment of the carrying trade, which, as the freight of the ships is 
frequently paid by foreigners in money, was supposed to be 
peculiarly fitted for bringing gold and silver into the country. 
But though the carrying trade certainly deserves no peculiar 
encouragement, though the motive of the institution was perhaps 
abundantly foolish, theinstitutionitself seems reasonable enough. 
Such drawbacks cannot force into this trade a greater share of 
the capital of the country than what would have gone to it of 
its own accord had there been no duties upon importation. 
They only prevent its being excluded altogether by those duties. 
The carrying trade, though it deserves no preference, ought not 
to be precluded, but to be left free like all other trades. It is a 
necessary resource for those capitals which cannot find employ 
ment either in the agriculture or in the manufactures of the 
country, either in its home trade or in its foreign trade of con 
sumption. 

The revenue of the customs, instead of suffering, profits from 
such drawbacks by that part of the duty which is retained. If 
the whole duties had been retained, the foreign goods upon which 
they are paid could seldom have been exported, nor consequently 
imported, for want of a market. The duties, therefore, of which 
a part is retained would never have been paid. 

These reasons seem sufficiently to justify drawbacks, and 
would justify them, though the whole duties, whether upon the 
produce of domestic industry, or upon foreign goods, were 
always drawn back upon exportation. The revenue of excise 
would in this case, indeed, suffer a little, and that of the customs 
a good deal more; but the natural balance of industry, the 
natural division and distribution of labour, which is always more 
or less disturbed by such duties, would be more nearly re 
established by such a regulation. 

These reasons, however, will justify drawbacks only upon 
exporting goods to those countries which are altogether foreign 
and independent, not to those in which our merchants and 
manufacturers enjoy a monopoly. A drawback, for example, 
upon the exportation of European goods to our American 
colonies will not always occasion a greater exportation than 
what would have taken place without it. By means of the 
monopoly which our merchants and manufacturers enjoy there, 
the same quantity might frequently, perhaps, be sent thither, 
though the whole duties were retained. The drawback, there 
fore, may frequently be pure loss to the revenue of excise and 



6 The Wealth of Nations 

customs, without altering the state of the trade, or rendering 
it in any respect more extensive. How far such drawbacks can 
be justified, as a proper encouragement to the industry of our 
colonies, or how far it is advantageous to the mother-country, 
that they should be exempted from taxes which are paid by all 
the rest of their fellow-subjects, will appear hereafter when I 
come to treat of colonies. 

Drawbacks, however, it must always be understood, are useful 
only in those cases in which the goods for the exportation of which 
they are given are really exported to some foreign country ; and 
not clandestinely re-imported into our own. That some draw 
backs, particularly those upon tobacco, have frequently been 
abused in this manner, and have given occasion to many frauds 
equally hurtful both to the revenue and to the fair trader, is 
well known. 



CHAPTER V 

OF BOUNTIES 

BOUNTIES upon exportation are, in Great Britain, frequently 
petitioned for, and sometimes granted to the produce of par 
ticular branches of domestic industry. By means of them our 
merchants and manufacturers, it is pretended, will be enabled 
to sell their goods as cheap, or cheaper than their rivals in the 
foreign market. A greater quantity, it is said, will thus be 
exported, and the balance of trade consequently turned more in 
favour of our own country. We cannot give our workmen a 
monopoly in the foreign as we have done in the home market. 
We cannot force foreigners to buy their goods as we have done 
our own countrymen. The next best expedient, it has been 
thought, therefore, is to pay them for buying. It is in this 
manner that the mercantile system proposes to enrich the whole 
country, and to put money into all our pockets by means of the 
balance of trade. 

Bounties, it is allowed, ought to be given to those branches 
of trade only which cannot be carried on without them. But 
every branch of trade in which the merchant can sell his goods 
for a price which replaces to him, with the ordinary profits of 
stock, the whole capital employed in preparing and sending them 
to market, can be carried on without a bounty. Every such 
branch is evidently upon a level with all the other branches of 



Bounties 7 

trade which are carried on without bounties, and cannot there 
fore require one more than they. Those trades only require 
bounties in which the merchant is obliged to sell his goods for 
a price which does not replace to him his capital, together with 
the ordinary profit; or in which he is obliged to sell them for 
less than it really costs him to send them to market. The bounty 
is given in order to make up this loss, and to encouage him to 
continue, or perhaps to begin, a trade ef which the expense is 
supposed to be greater than the returns, of which every operation 
eats up a part of the capital employed in it, and which is of such 
a nature that, if all other trades resembled it, there would soon 
be no capital left in the country. 

The trades, it is to be observed, which are carried on by means 
of bounties, are the only ones which can be carried on between 
two nations for any considerable time together, in such a manner 
as that one of them shall always and regularly lose, or sell its 
goods for less than it really costs to send them to market. But 
if the bounty did not repay to the merchant what he would 
otherwise lose upon the price of his goods, his own interest would 
soon oblige him to employ his stock in another way, or to find 
out a trade in which the price of the goods would replace to him, 
with the ordinary profit, the capital employment in sending them 
to market. The effect of bounties, like that of all the other 
expedients of the mercantile system, can only be to force the 
trade of a country into a channel much less advantageous than 
that in which it would naturally run of its own accord. 

The ingenious and well-informed author of the tracts upon 
the corn trade has shown very clearly that, since the bounty 
upon the exportation of corn was first established, the price of 
the corn exported, valui-d moderately enough, has exceeded 
that of the corn imported, valued very high, by a much greater 
sum than the amount of the whole bounties which have been 
paid during that period. This, he imagines, upon the true 
principles of the mercantile system, is a clear proof that this 
forced corn trade is beneficial to the nation; the value of the 
exportation exceeding that of the importation by a much greater 
sum than the whole extraordinary expense whirh the public has 
been at in order to get it exported. He does not consider that 
this extraordinary expense, or the bounty, is the smallest part 
of the expense which the exportation of corn really costs the 
society. The capital which the farmer employed in raising it 
must likewise be taken into the account. Unless the price of 
the corn when sold in the foreign markets replaces, not only the 



8 The Wealth of Nations 

bounty, but this capital, together with the ordinary profits of 
stock, the society is a loser by the difference, or the national 
stock is so much diminished. But the very reason for which it 
has been thought necessary to grant a bounty is the supposed 
insufficiency of the price to do this. 

The average price of corn, it has been said, has fallen con 
siderably since the establishment of the bounty. That the 
average price of corn began to fall somewhat towards the end 
of the last century, and has continued to do so during the course 
of the sixty-four first years of the present, I have already en 
deavoured to show. But this event, supposing it to be as real 
as I believe it to be, must have happened in spite of the bounty, 
and cannot possibly have happened in consequence of it. It 
has happened in France, as well as in England, though in France 
there was not only no bounty, but, till 1764, the exportation 
of corn was subjected to a general prohibition. This gradual 
fall in the average price of grain, it is probable, therefore, is 
ultimately owing neither to the one regulation nor to the other, 
but to that gradual and insensible rise in the real value of silver, 
which, in the first book of this discourse, I have endeavoured 
to show has taken place in the general market of Europe during 
the course of the present century. It seems to be altogether 
impossible that the bounty could ever contribute to lower the 
price of grain. 

In years of plenty, it has already been observed, the bounty, 
by occasioning an extraordinary exportation, necessarily keeps 
up the price of corn in the home market above what it would 
naturally fall to. To do so was the avowed purpose of the 
institution. In years of scarcity, though the bounty is frequently 
suspended, yet the great exportation which it occasions in years 
of plenty must frequently hinder more or less the plenty of one 
year from relieving the scarcity of another. Both in years of 
plenty and in years of scarcity, therefore, the bounty neces 
sarily tends to raise the money price of corn somewhat higher 
than it otherwise would be in the home market. 

That, in the actual state of tillage, the bounty must neces 
sarily have this tendency will not, I apprehend, be disputed 
by any reasonable person. But it has been thought by many 
people that it tends to encourage tillage, and that in two 
different ways; first, by opening a more extensive foreign 
market to the corn of the farmer, it tends, they imagine, to 
increase the demand for, and consequently the production of 
that commodity; and secondly, by securing to him a better 



Bounties 9 

price than he could otherwise expect in the actual state of 
tillage, it tends, they suppose, to encourage tillage. This double 
encouragement must, they imagine, in a long period of years, 
occasion such an increase in the production of corn as may 
lower its price in the home market much more than the bounty 
can raise it, in the actual state which tillage may, at the end of 
that period, happen to be in. 

I answer, that whatever extension of the foreign market can 
be occasioned by the bounty must, in every particular year, be 
altogether at the expense of the home market; as every bushel 
of corn which is exported by means of the bounty, and which 
would not have been exported without the bounty, would have 
remained in the home market to increase the consumption and 
to lower the price of that commodity. The corn bounty, it is 
to be observed, as well as every other bounty upon exportation, 
imposes two different taxes upon the people; first, the tax 
which they are obliged to contribute in order to pay the bounty; 
and secondly, the tax which arises from the advanced price of the 
commodity in the home market, and which, as the whole body 
of the people are purchasers of corn, must, in this particular 
commodity, be paid by the whole body of the people. In this 
particular commodity, therefore, this second tax is by much 
the heavier of the two. Let us suppose that, taking one year 
with another, the bounty of five shillings upon the exportation 
of the quarter of wheat raises the price of that commodity in 
the home market only sixpence the bushel, or four shillings the 
quarter, higher than it otherwise would have been in the actual 
state of the crop. Even upon this very moderate supposition, 
the great body of the people, over and above contributing the 
tax which pays the bounty of five shillings upon every quarter 
of wheat exported, must pay another of four shillings upon 
every quarter which they themselves consume. But, accord 
ing to the very well-informed author of the tracts upon the corn 
trade, the average proportion of the corn exported to that 
consumed at home is not more than that of one to thirty-one. 
For every five shillings, therefore, which they contribute to the 
payment of the first tax, they must contribute six pounds four 
shillings to the payment of the second. So very heavy a tax 
upon the first necessary of life must either reduce the subsist 
ence of the labouring poor, or it must occasion some augmenta 
tion in their pecuniary wages proportionable to that in the 
pecuniary price of their subsistence. So far as it operates in 
the one way, it must reduce the ability of the labouring poor to 



io The Wealth of Nations 

educate and bring up their children, and must, so far, tend to 
restrain the population of the country. So far as it operates in 
the other, it must reduce the ability of the employers of the 
poor to employ so great a number as they otherwise might do, 
and must, so far, tend to restrain the industry of the country. 
The extraordinary exportation of corn, therefore, occasioned by 
the bounty, not only, in every particular year, diminishes the 
home, just as much as it extends the foreign, market and con 
sumption, but, by restraining the population and industry of 
the country, its final tendency is to stunt and restrain the gradual 
extension of the home market; and thereby, in the long run, 
rather to diminish, than to augment, the whole market and 
consumption of corn. 

This enhancement of the money price of corn, however, it has 
been thought, by rendering that commodity more profitable to 
the farmer, must necessarily encourage its production. 

I answer, that this might be the case if the effect of the bounty 
was to raise the real price of corn, or to enable the farmer, 
with an equal quantity of it, to maintain a greater number of 
labourers in the same manner, whether liberal, moderate, or 
scanty, that other labourers are commonly maintained in his 
neighbourhood. But neither the bounty, it is evident, nor any 
other human institution, can have any such effect. It is not 
the real, but the nominal price of corn, which can in any con 
siderable degree be affected by the bounty. And though the 
tax which that institution imposes upon the whole body of the 
people may be very burdensome to those who pay it, it is of 
very little advantage to those who receive it. 

The real effect of the bounty is not so much to raise the real 
value of corn as to degrade the real value of silver, or to make 
an equal quantity of it exchange for a smaller quantity, not 
only of corn, but of all other home-made commodities: for the 
money price of corn regulates that of all other home-made 
commodities. 

It regulates the money price of labour, which must always 
be such as to enable the labourer to purchase a quantity of 
corn sufficient to maintain him and his family either in the liberal, 
moderate, or scanty manner in which the advancing, stationary, 
or declining circumstances of the society oblige his employers 
to maintain him. 

It regulates the money price of all the other parts of the rude 
produce of land, which, in every period of improvement, must 
bear a certain proportion to that of corn, though this proportion 



Bounties i i 

is different in different periods. It regulates, for example, tin- 
money price of grass and hay, of butcher s meat, of horses, and 
the maintenance of horses, of land carriage consequently, or of 
the greater part of the inland commerce of the country. 

By regulating the money price of all the other parts of the 
rude produce of land, it regulates that of the materials of almost 
all manufactures. By regulating the money price of labour, it 
regulates that of manufacturing art and industry. And by 
regulating both, it regulates that of the complete manufacture. 
The money priceof labour, and of everything that is the produce 
either of land or labour, must necessarily cither rise or fall in 
proportion to the money price of corn. 

Though in consequence of the bounty, therefore, the farmer 
should be enabled to sell his corn for four shillings the bushel 
instead of three-and-sixpence, and to pay his landlord a mom v 
rent proportionable to this rise in the money price of his pro 
duce, yet if, in consequence of this rise in the price of corn, 
four shillings will purchase no more home-made goods of any 
other kind than three-and-sixpence would have done before, 
neither the circumstances of the farmer nor those of the land 
lord will be much mended by this change. The farmer will not 
be able to cultivate much better: the landlord will not be able 
to live much better. In the purchase of foreign commodities 
this enhancement in the price of corn may give them some little 
advantage. In that of home-made commodities it can give 
them none at all. And almost the whole expense of the farmer, 
and the far greater part even of that of the landlord, is in 
home-made commodities. 

That degradation in the value of silver which is the effect of 
the fertility of the mines, and which operates equally, or very 
near equally, through the greater part of the commercial world, 
is a matter of very little consequence to any particular country. 
The consequent rise of all money prices, though it does not make 
those who receive them really richer, does not make them really 
poorer. A service of plate becomes really cheaper, and every 
thing else remains precisely of the same real value as before. 

But that degradation in the value of silver which, being tin- 
effect either of the peculiar situation or of the political institu 
tions of a particular country, takes place only in that country, 
is a matter of very great consequence, which, far from tending 
to make anybody really richer, tends to make everybody really 
poorer. The rise in the money price of all commodities, which 
is in this case peculiar to that country, tends to discourage 



i 2 The Wealth of Nations 

more or less every sort of industry which is carried on within it, 
and to enable foreign nations, by furnishing almost all sorts of 
goods for a smaller quantity of silver than its own workmen 
can afford to do, to undersell them, not only in the foreign, but 
even in the home market. 

It is the peculiar situation of Spain and Portugal as pro 
prietors of the mines to be the distributors of gold and silver to 
all the other countries of Europe. Those metals ought natur 
ally, therefore, to be somewhat cheaper in Spain and Portugal 
than in any other part of Europe. The difference, however, 
should be no more than the amount of the freight and insurance; 
and, on account of the great value and small bulk of those 
metals, their freight is no great matter, and their insurance is 
the same as that of any other goods of equal value. Spain and 
Portugal, therefore, could suffer very little from their peculiar 
situation, if they did not aggravate its disadvantages by their 
political institutions. 

Spain by taxing, and Portugal by prohibiting the exportation 
of gold and silver, load that exportation with the expense of 
smuggling, and raise the value of those metals in other countries 
so much more above what it is in their own by the whole 
amount of this expense. When you dam up a stream of water, 
as soon as the dam is full as much water must run over the 
dam-head as if there was no dam at all. The prohibition of 
exportation cannot detain a greater quantity of gold and silver 
in Spain and Portugal than what they can afford to employ, 
than what the annual produce of their land and labour will 
allow them to employ, in coin, plate, gilding, and other orna 
ments of gold and silver. When they have got this quantity 
the dam is full, and the whole stream which flows in afterwards 
must run over. The annual exportation of gold and silver from 
Spain and Portugal accordingly is, by all accounts, notwith 
standing these restraints, very near equal to the whole annual 
importation. As the water, however, must always be deeper 
behind the dam-head than before it, so the quantity of gold and 
silver which these restraints detain in Spain and Portugal must, 
in proportion to the annual produce of their land and labour, 
be greater than what is to be found in other countries. The 
higher and stronger the dam-head, the greater must be the 
difference in the depth of water behind and before it. The 
higher the tax, the higher the penalties with which the prohibi 
tion is guarded, the more vigilant and severe the police which 
looks after the execution of the law, the greater must be the 



Bounties 1 3 

difference in the proportion of gold and silver to the annual 
produce of the land and labour of Spain and Portugal, and to 
that of other countries. It is said accordingly to be very con 
siderable, and that you frequently find there a profusion of 
plate in houses where there is nothing else which would, in 
other countries, be thought suitable or correspondent to this 
sort of magnificence. The cheapness of gold and silver, or what 
is the same thing, the dearness of all commodities, which is the 
necessary effect of this redundancy of the precious metals, dis 
courages both the agriculture and manufactures of Spain and 
Portugal, and enables foreign nations to supply them with many 
sorts of rude, and with almost all sorts of manufactured produce, 
for a smaller quantity of gold and silver than what they them 
selves can either raise or make them for at home. The tax and 
prohibition operate in two different ways. They not only lower 
very much the value of thepreciousmetals in Spain and Portugal; 
but by detaining there a certain quantity of those metals which 
would otherwise flow over other countries, they keep up their 
value in those other countries somewhat above what it other 
wise would be, and thereby give those countries a double advan 
tage in their commerce with Spain and Portugal. Open the 
flood-gates, and there will presently be less water above, and 
more below, the dam-head, and it will soon come to a level in 
both places. Remove the tax and the prohibition, and as the 
quantity of gold and silver will diminish considerably in Spain 
and Portugal, so it will increase somewhat in other countries, 
and the value of those metals, their proportion to the annual 
produce of land and labour, will soon come to a level, or very 
near to a level, in all. The loss which Spain and Portugal could 
sustain by this exportation of their gold and silver would be- 
altogether nominal and imaginary. The nominal value of their 
goods, and of the annual produce of their land and labour, 
would fall, and would be expressed or represented by a smaller 
quantity of silver than before; but their real value would 
be the same as before, and would be sufficient to maintain, 
command, and employ, the same quantity of labour. As the 
nominal value of their goods would fall, the real value of what 
remained of their gold and silver would rise, and a smaller 
quantity of those metals would answer all the same purposes of 
commerce and circulation which hail employed a greater quan 
tity before. The gold and silver which would go abroad would 
not go abroad for nothing, but would bring back an equal value 
of goods of some kind or another. Those goods, too, would not 



1 4 The Wealth of Nations 

be all matters of mere luxury and expense, to be consumed by 
idle people who produce nothing in return for their consump 
tion. As the real wealth and revenue of idle people would not 
be augmented by this extraordinary exportation of gold and 
silver, so neither would their consumption be much augmented 
by it. Those goods would, probably, the greater part of them, 
and certainly some part of them, consist in materials, tools, and 
provisions, for the employment and maintenance of industrious 
people, who would reproduce, with a profit, the full value of 
their consumption. A part of the dead stock of the society 
would thus be turned into active stock, and would put into 
motion a greater quantity of industry than had been employed 
before. The annual produce of their land and labour would 
immediately be augmented a little, and in a few years would, 
probably, be augmented a great deal; their industry being thus 
relieved from one of the most oppressive burdens which it at 
present labours under. 

The bounty upon the exportation of corn necessarily operates 
exactly in the same way as this absurd policy of Spain and 
Portugal. Whatever be the actual state of tillage, it renders 
our corn somewhat dearer in the home market than it other 
wise would be in that state, and somewhat cheaper in the 
foreign ; and as the average money price of corn regulates more 
or less that of all other commodities, it lowers the value of silver 
considerably in the one, and tends to raise it a little in the 
other. It enables foreigners, the Dutch in particular, not only 
to eat our corn cheaper than they otherwise could do, but 
sometimes to eat it cheaper than even our own people can do 
upon the same occasions, as we are assured by an excellent 
authority, that of Sir Matthew Decker. It hinders our own 
workmen from furnishing their goods for so small a quantity of 
silver as they otherwise might do; and enables the Dutch to 
furnish theirs for a smaller. It tends to render our manufac 
tures somewhat dearer in every market, and theirs somewhat 
cheaper than they otherwise would be, and consequently to 
give their industry a double advantage over our own. 

The bounty, as it raises in the home market not so much 
the real as the nominal price of our corn, as it augments, not 
the quantity of labour which a certain quantity of corn can 
maintain and employ but only the quantity of silver which it 
will exchange for, it discourages our manufactures, without 
rendering any considerable service either to our farmers or 
country gentlemen. It puts, indeed, a little more money into 



Bounties 1 5 

the pockets of both, and it will perhaps be somewhat difficult 
to persuade the greater part of them that this is not rendering 
them a very considerable service. But if this money sinks in 
its value, in the quantity of labour, provisions, and home-made 
commodities of all different kinds which it is capable of purchasing 
as much as it rises in its quantity, the service will be little more 
than nominal and imaginary. 

There is, perhaps, but one set of men in the whole common 
wealth to whom the bounty either was or could be essentiallv 
serviceable. These were the corn merchants, the exporters and 
importers of corn. In years of plenty the bounty necessarily 
occasioned a greater exportation than would otherwise have taken 
place; and by hindering the plenty of one year from relieving 
the scarcity of another, it occasioned in years of scarcity a 
greater importation than would otherwise have been necessary. 
It increased the business of the corn merchant in both; and in 
years of scarcity, it not only enabled him to import a greater 
quantity, but to sell it for a better price, and consequently with 
a greater profit than he could otherwise have made, if the plenty 
of one year had not been more or less hindered from relieving 
the scarcity of another. It is in this set of men, accordingly, 
that I have observed the greatest zeal for the continuance or 
renewal of the bounty. 

Our country gentlemen, when they imposed the high duties 
upon the importation of foreign corn, which in times of moderate 
plenty amount to a prohibition, and when they established the 
bounty, seem to have imitated the conduct of our manufacturers. 
By the one institution, they secured to themselves the monopoly 
of the home market, and by the other they endeavoured to 
prevent that market from ever being overstocked with their 
commodity. By both they endeavoured to raise its real value, 
in the same manner as our manufacturers had, by the like 
institutions, raised the real value of many different sorts of 
manufactured goods. They did not perhaps attend to the great 
and essential difference which nature has established between 
corn and almost every other sort of goods. When, either by 
the monopoly of the home market, or by a bounty upon exportu 
tion, you enable our woollen or linen manufacturers to sell their 
goods for somewhat a better price than they otherwise could 
get for them, you raise, not only the nominal, but the real price 
of those goods. You render them equivalent to a greater 
quantity of labour and subsistence, you increase not only the 
nominal, but the real profit, the real wealth and revenue of thos 



1 6 The Wealth of Nations 

manufacturers, and you enable them either to live better them 
selves, or to employ a greater quantity of labour in those 
particular manufactures. You really encourage those manu 
factures, and direct towards them a greater quantity of the 
industry of the country than what would probably go to them 
of its own accord. But when by the like institutions you raise 
the nominal or money-price of corn, you do not raise its real 
value. You do not increase the real wealth, the real revenue 
either of our farmers or country gentlemen. You do not 
encourage the growth of corn, because you do not enable them 
to maintain and employ more labourers in raising it. The 
nature of things has stamped upon corn a real value which 
cannot be altered by merely altering its money price. No 
bounty upon exportation, no monopoly of the home market, 
can raise that value. The freest competition cannot lower it. 
Through the world in general that value is equal to the quantity 
of labour which it can maintain, and in every particular place 
it is equal to the quantity of labour which it can maintain in the 
way, whether liberal, moderate, or scanty, in which labour is 
commonly maintained in that place. Woollen or linen cloth 
are not the regulating commodities by which the real value of 
all other commodities must be finally measured and determined; 
corn is. The real value of every other commodity is finally 
measured and determined by the proportion which its average 
money price bears to the average money price of corn. The 
real value of corn does not vary with those variations in its 
average money price, which sometimes occur from one century 
to another. It is the real value of silver which varies with them. 
Bounties upon the exportation of any home-made commodity 
are liable, first, to that general objection which may be made 
to all the different expedients of the mercantile system; the 
objection of forcing some part of the industry of the country 
into a channel less advantageous than that in which it would 
run of its own accord: and, secondly, to the particular objection 
of forcing it, not only into a channel that is less advantageous, 
but into one that is actually disadvantageous; the trade which 
cannot be carried on but by means of a bounty being necessarily 
a losing trade. The bounty upon the exportation of corn is 
liable to this further objection, that it can in no respect promote 
the raising of that particular commodity of which it was meant 
to encourage the production. When our country gentlemen, 
therefore, demanded the establishment of the bounty, though 
they acted in imitation of our merchants and manufacturers, 



Bounties 17 

they did not act with that complete comprehension of their own 
interest which commonly directs the conduct of those two other 
orders of people. They loaded the public revenue with a very 
considerable expense; they imposed a very heavy tax upon the 
whole body of the people; but they did not, in any sensible 
degree, increase the real value of their own commodity; and 
by lowering somewhat the real value of silver, they discouraged 
in some degree, the general industry of the country, and, instc.ul 
of advancing, retarded more or less the improvement of their 
own lands, which necessarily depends up i the general industry 
of the country. 

To encourage the production of any commodity, a bounty 
upon production, one should imagine, would have a more direct 
operation than one upon exportation. It would, besides, 
impose only one tax upon the people, that which they must 
contribute in order to pay the bounty. Instead of raising, it 
would tend to lower the price of the commodity in the home 
market; and thereby, instead of imposing a second tax upon 
the people, it might, at least, in part, repay them for what they 
had contributed to the first. Bounties upon production, how 
ever, have been very rarely granted. The prejudices established 
by the commercial system have taught us to believe that 
national wealth arises more immediately from exportation than 
from production. It has been more favoured accordingly, as 
the more immediate means of bringing money into the country. 
Bounties upon production, it has been said too, have been found 
by experience more liable to frauds than those upon exportation. 
How far this is true, I know not. That bounties upon exporta 
tion have been abused to many fraudulent purposes is very 
well known. But it is not the interest of merchants and manu 
facturers, the great inventors of all these expedients, that the 
home market should be overstocked with their goods, an event 
which a bounty upon production might sometimes occasion. 
A bounty upon exportation, by enabling them to send abroad 
the surplus part, and to keep up the price of what remains in the 
home market, effectually prevents this. Of all the expedients 
of the mercantile system, accordingly, it is the one of which 
they are the fondest. I have known the different undertakers 
of some particular works agree privately among themselves to 
give a bounty out of their own pockets upon the exportation of 
a certain proportion of the goods which they dealt in. This 
expedient succeeded so well that it more than doubled the price 
of their goods in the home market, notwithstanding a very 



i 8 The Wealth of Nations 

considerable increase in the produce. The operation of the 
bounty upon corn must have been wonderfully different if it 
has lowered the money price of that commodity. 

Something like a bounty upon production, however, has been 
granted upon some particular occasions. The tonnage bounties 
given to the white-herring and whale fisheries may, perhaps, 
be considered as somewhat of this nature. They tend directly, 
it may be supposed, to render the goods cheaper in the home 
market than they otherwise would be. In other respects their 
effects, it must be acknowledged, are the same as those of 
bounties upon exportation. By means of them a part of the 
capital of the country is employed in bringing goods to market, 
of which the price does not repay the cost together with the 
ordinary profits of stock. 

But though the tonnage bounties of those fisheries do not 
contribute to the opulence of the nation, it may perhaps be 
thought that they contribute to its defence by augmenting the 
number of its sailors and shipping. This, it may be alleged, may 
sometimes be done by means of such bounties at a much smaller 
expense than by keeping up a great standing navy, if I may use 
such an expression, in the same way as a standing army. 

Notwithstanding these favourable allegations, however, the 
following considerations dispose me to believe that, in granting 
at least one of these bounties, the legislature has been very 
grossly imposed upon. 

First, the herring buss bounty seems too large. 

From the commencement of the winter fishing, 1 7 7 1, to the end 
of the winter fishing, 1781, the tonnage bounty upon the herring 
buss fishery has been at thirty shillings the ton. During these 
eleven years the whole number of barrels caught by the herring 
buss fishery of Scotland amounted to 378,347. The herrings 
caught and cured at sea are called sea-sticks. In order to render 
them what are called merchantable herrings, it is necessary to 
repack them with an additional quantity of salt; and in this 
case, it is reckoned that three barrels of sea-sticks are usually 
repacked into two barrels of merchantable herrings. The 
number of barrels of merchantable herrings, therefore, caught 
during these eleven years will amount only, according to this 
account, to 252, 231 J. During these eleven years the tonnage 
bounties paid amounted to 155,463 us. or to 8s. ajd. upon 
every barrel of sea-sticks, and to 125. 3fd. upon every barrel of 
merchantable herrings. 

The salt with which these herrings are cured is sometimes 



Bounties 19 

Scotch and sometimes foreign salt, both which are delivered 
free of all excise duty to the fish-curers. The excise duty upon 
Scotch salt is at present is. 6d., that upon foreign salt IDS. the 
bushel. A barrel of herrings is supposed to require about one 
bushel and one-fourth of a bushel foreign salt. Two bushels 
are the supposed average of Scotch salt. If the herrings are 
t-ntered for exportation, no part of this duty is paid up; if 
entered for home consumption, whether the herrings were cured 
with foreign or with Scotch salt, only one shilling the barrel 
is paid up. It was the old Scotch duty upon a bushel of salt, 
the quantity which, at a low estimation, had been supposed 
necessary for curing a barrel of herrings. In Scotland, foreign 
salt is very little used for any other purpose but the curing of 
fish. But from the 5th April 1771 to the 5th April 1782, the 
quantity of foreign salt imported amounted to 936,974 bushels, 
at eighty-four pounds the bushel: the quantity of Scotch salt, 
delivered from the works to the fish-curers, to no more than 
168,226, at fifty-six pounds the bushel only. It would appear, 
therefore, that it is principally foreign salt that is used in the 
fisheries. Upon every barrel of herrings exported there is, 
besides, a bounty of 2s. 8d., and more than two-thirds of the bus^ 
caught herrings are exported. Put all these things together and 
you will find that, during these eleven years, even, barrel of 
buss caught herrings, cured with Scotch salt when exported, has 
cost government 175. nfd; and when entered for home con 
sumption 145. 3Jd.; and that every barrel cured with foreign 
salt, when exported, has cost government i 75. 5fd. ; and when 
entered for home consumption i 35. 9$ d. The price of a barrel 
of good merchantable herrings runs from seventeen and eighteen 
to four and five and twenty shillings, about a guinea at an 
average. 1 

Secondly, the bounty to the white-herring fishery is a tonnage 
bounty ; and is proportioned to the burden of the ship, not to her 
diligence or success in the fishery; and it has, I am afraid, been 
too common for vessels to fit out for the sole purpose of catching, 
not the fish, but the bounty. In the year 1759, when the bounty 
was at fifty shillings the ton, the whole buss fishery of Scotland 
brought in only four barrels of sea-sticks. In that year each 
barrel of sea-sticks cost government in bounties alone 113 155.; 
each barrel of merchantable herrings 159 75. 6d. 

Thirdly, the mode of fishing for which this tonnage bounty in 
the white-herring fishery has been given (by busses or decked 
1 Sre the accounts at the rnd of the volume. 



20 The Wealth of Nations 

vessels from twenty to eighty tons burthen), seems not so well 
adapted to the situation of Scotland as to that of Holland, from 
the practice of which country it appears to have been borrowed. 
Holland lies at a great distance from the seas to which herrings 
are known principally to resort, and can, therefore, carry on that 
fishery only in decked vessels, which can carry water and pro 
visions sufficient for a voyage to a distant sea. But the Hebrides 
or western islands, the islands of Shetland, and the northern and 
north-western coasts of Scotland, the countries in whose neigh 
bourhood the herring fishery is principally carried on, are every 
where intersected by arms of the sea, which run up a considerable 
way into the land, and which, in the language of the country, are 
called sea-lochs. It is to these sea-lochs that the herrings prin 
cipally resort during the seasons in which they visit those seas ; 
for the visits of this and, I am assured, of many other sorts of 
fish are not quite regular and constant. A boat fishery, there 
fore, seems to be the mode of fishing best adapted to the peculiar 
situation of Scotland, the fishers carrying the herrings on shore, 
as fast as they are taken, to be either cured or consumed fresh. 
l>ut ti.e great encouragement which a bounty of thirty shillings 
the ton gives to the buss fishery is necessarily a discouragement 
to the boat fishery, which, having no such bounty, cannot bring 
its cured fish to market upon the same terms as the buss fishery. 
The boat fishery, accordingly, which before the establishment 
of the buss bounty was very considerable, and is said to have 
employed a number of seamen not inferior to what the buss 
fishery employs at present, is now gone almost entirely to decay. 
Of the former extent, however, of this now ruined and abandoned 
fishery, I must acknowledge that I cannot pretend to speak 
with much precision. As no bounty was paid upon the outfit 
of the boat fishery, no account was taken of it by the officers 
of the customs or salt duties. 

Fourthly, in many parts of Scotland, during certain seasons of 
the year, herrings make no inconsiderable part of the food of 
the common people. A bounty, which tended to lower their 
price in the home market, might contribute a good deal to the 
relief of a great number of our fellow-subjects, whose circum 
stances are by no means affluent. But the herring buss bounty 
contributes to no such good purpose. It has ruined the boat 
fishery, which is, by far, the best adapted for the supply of the 
home market, and the additional bounty of 25. 8d. the barrel 
upon exportation carries the greater part, more than two-thirds, 
of the produce of the buss fishery abroad. Between thirty and 



Bounties 21 

forty years ago, before the establishment of the buss bounty, 
fifteen shillings the barrel, I have been assured, was the common 
price of white herrings. Between ten and fifteen years ago, 
before the boat fisher) was entirely ruined, the price is said to 
have run from seventeen to twenty shillings the barrel. For 
these last five years, it has, at an average, been at twenty-five 
shillings the barrel. This high price, however, may have been 
owing to the real scarcity of the herrings upon the coast of 
Scotland. I must observe, too, that the cask or barrel, which 
is usually sold with the herrings, and of which the price is included 
in all the foregoing prices, has, since the commencement of the 
American war, risen to about double its former price, or from 
about three shillings to about six shillings. I must likewise 
observe that the accounts I have received of the prices of forme; 
times have been by no means quite uniform and consistent; and 
an old man of great accuracy and experience has assured me 
that, more than fifty years ago, a guinea was the usual price of a 
barrel of good merchantable herrings; and this, I imagine, may 
still be looked upon as the average price. All accounts, however, 
I think, agree that the price has not been lowered in the home 
market in consequence of the buss bounty. 

When the undertakers of fisheries, after such liberal bounties 
have been bestowed upon them, continue to sell their commodity 
at the same, or even at a higher price than they were accustomed 
to do before, it might be expected that their profits should be 
very great; and it is not improbable that those of some indi 
viduals may have been so. In general, however, I have even- 
reason to believe they have been quite otherwise. The usual 
effect of such bounties is to encourage rash undertakers to ad 
venture in a business which they do not understand, and what 
they lose by their own negligence and ignorance more than 
compensates all that they can gain by the utmost liberality of 
government. In 1750, by the same act, which first gave the 
bounty of thirty shillings the ton for the encouragement of the 
white-herring fishery (the 23rd Geo. II. chap. 24), a joint-stock 
company was erected, with a capital of five hundred thousand 
pounds, to which the subscribers (over and above all other 
encouragements, the tonnage bounty just now mentioned, the 
exportation bounty of two shillings and eightpence the barrel, 
the delivery of both British and foreign salt duty free) were, 
during the spare of fourteen years, for every hundred pounds 
which they subscribed and paid in to the stock of the society, 
entitled to three pounds a year, to be paid by the receiver 



22 The Wealth of Nations 

general of the customs in equal half-yearly payments. Besides 
this great company, the residence of whose governor and 
directors was to be in London, it was declared lawful to erect 
different fishing-chambers in all the different out-ports of the 
kingdom, provided a sum not less than ten thousand pounds 
was subscribed into the capital of each, to be managed at its 
own risk, and for its own profit and loss. The same annuity, 
and the same encouragements of all kinds, were given to the 
trade of those inferior chambers as to that of the great com 
pany. The subscription of the great company was soon filled 
up. and several different fishing-chambers were erected in the 
different out-ports of the kingdom. In spite of all these en 
couragements, almost all those different companies, both great 
and small, lost either the whole, or the greater part of their 
capitals; scarce a vestige now remains of any of them, and the 
white-herring fishery is now entirely, or almost entirely, carried 
on by private adventurers. 

If any particular manufacture was necessary, indeed, for the 
defence of the society, it might not always be prudent to depend 
upon our neighbours for the supply; and if such manufacture 
could not otherwise be supported at home, it might not be 
unreasonable that all the other branches of industry should be 
taxed in order to support it. The bounties upon the exportation 
of British - made sail-cloth and British - made gunpowder may, 
perhaps, both be vindicated upon this principle. 

But though it can very seldom be reasonable to tax the 
industry of the great body of the people in order to support 
that of some particular class of manufacturers, yet in the 
wantonness of great prosperity, when the public enjoys a greater 
revenue than it knows well what to do with, to give such 
bounties to favourite manufactures may, perhaps, be as natural 
as to incur any other idle expense. In public as well as in 
private expenses, great wealth may, perhaps, frequently be 
admitted as an apology for great folly. But there must surely 
be something more than ordinary absurdity in continuing such 
profusion in times of general difficulty and distress. 

What is called a bounty is sometimes no more than a draw 
back, and consequently is not liable to the same objections as 
what is properly a bounty. The bounty, for example, upon 
refined sugar exported may be considered as a drawback of the 
duties upon the brown and muscovado sugars from which it is 
nade. The bounty upon wrought silk exported, a drawback of 
the duties upon raw and thrown silk imported. The bounty 



Bounties 23 

upon gunpowder exported, a drawback of the duties upon 
brimstone and saltpetre imported. In the language of the 
customs those allowances only are called drawbacks which are 
given upon goods exported in the same form in which they are 
imported. When that form has been so altered by manufacture 
of any kind as to come under a new denomination, they are 
called bounties. 

Premiums given by the public to artists and manufacturers 
who excel in their particular occupations are not liable to the 
same objections as bounties. By encouraging extraordinary 
dexterity and ingenuity, they serve to keep up the emulation of 
the workmen actually employed in those respective occupations, 
and are not considerable enough to turn towards any one of 
them a greater share of the capital of the country than what 
would go to it of its own accord. Their tendency is not to 
overturn the natural balance of employments, but to render the 
work which is done in each as perfect and complete as possible. 
The expense of premiums, besides, is very trifling; that of 
bounties very great. The bounty upon corn alone has some 
times cost the public in one year more than three hundred 
thousand pounds. 

Bounties are sometimes called premiums, as drawbacks are 
sometimes called bounties. But we must in all cases attend to 
the nature of the thing without paying any regard to the word. 

DIGRESSION CONCERNING THE CORN TRADE AND 
CORN LAWS 

I cannot conclude this chapter concerning bounties without 
observing that the praises which have been bestowed upon the 
law which establishes the bounty upon the exportation of corn, 
and upon that system of regulations which is connected with it. 
are altogether unmerited. A particular examination of the 
nature of the corn trade, and of the principal British laws which 
relate to it, will sufficiently demonstrate the truth of this asser 
tion. The great importance of this subject must justify the 
length of the digression. 

The trade of the corn merchant is composed of four different 
branches, which, though they may sometimes l>e all carried on 
by the same person, arc in their own nature four separate and 
distinct trades. These are, first, the trade of the inland dealer ; 
secondly, that of the merchant importer for home consumption : 
thirdly, that of the merchant exporter of home produce for 



24 The Wealth of Nations 

foreign consumption; and, fourthly, that of the merchant 
carrier, or of the importer of corn in order to export it again. 

i. The interest of the inland dealer, and that of the great 
body of the people, how opposite soever they may at first sight 
appear, are, even in years of the greatest scarcity, exactly the 
same. It is his interest to raise the price of his corn as high 
as the real scarcity of the season requires, and it can never be 
his interest to raise it higher. By raising the price he dis 
courages the consumption, and puts everybody more or less, but 
particularly the inferior ranks of people, upon thrift and good 
management. If, by raising it too high, he discourages the 
consumption so much that the supply of the season is likely to 
go beyond the consumption of the season, and to last for some 
time after the next crop begins to come in, he runs the hazard, 
not only of losing a considerable part of his corn by natural 
causes, but of being obliged to sell what remains of it for much 
less than what he might have had for it several months before. 
If by not raising the price high enough he discourages the con 
sumption so little that the supply of the season is likely to fall 
short of the consumption of the season, he not only loses a part 
of the profit which he might otherwise have made, but he 
exposes the people to suffer before the end of the season, instead 
of the hardships of a dearth, the dreadful horrors of a famine. 
It is the interest of the people that their daily, weekly, and 
monthly consumption should be proportioned as exactly as 
possible to the supply of the season. The interest of the inland 
corn dealer is the same. By supplying them, as nearly as he 
can judge, in this proportion, he is likely to sell all his corn for 
the highest price, and with the greatest profit; and his know 
ledge of the state of the crop, and of his daily, weekly, and 
monthly sales, enable him to judge, with more or less accuracy, 
how far they really are supplied in this manner. Without 
intending the interest of the people, he is necessarily led, by a 
regard to his own interest, to treat them, even in years of 
scarcity, pretty much in the same manner as the prudent master 
of a vessel is sometimes obliged to treat his crew. When he 
foresees that provisions are likely to run short, he puts them 
upon short allowance. Though from excess of caution he should 
sometimes do this without any real necessity, yet all the incon 
veniences which his crew can thereby suffer are inconsiderable 
in comparison of the danger, misery, and ruin to which they 
might sometimes be exposed by a less provident conduct. 
Though from excess of avarice, in the same manner, the inland 



Bounties 25 

corn merchant should sometimes raise the price of his corn 
somewhat higher than the scarcity of the season requires, yet all 
the inconveniences which the people can suffer from this con 
duct, which effectually secures them from a famine in the end 
of the season, are inconsiderable in comparison of what they 
might have been exposed to by a more liberal way of dealing 
in the beginning of it. The corn merchant himself is likely to 
suffer the most by this excess of avarice; not only from the 
indignation which it generally excites against him, but, though 
he should escape the effects of this indignation, from the quan 
tity of corn which it necessarily leaves upon his hands in the 
end of the season, and which, if the next season happens to 
prove favourable, he must always sell for a much lower prkv 
than he might otherwise have had. 

Were it possible, indeed, for one great company of merchants 
to possess themselves of the whole crop of an extensive country, 
it might, perhaps, be their interest to deal with it as the Dutch 
are said to do with the spiceries of the Moluccas, to destroy or 
throw away a considerable part of it in order to keep up the 
price of the rest. But it is scarce possible, even by the violence 
of law, to establish such an extensive monopoly with regard to 
corn; and, wherever the law leaves the trade free, it is of all 
commodities the least liable to be engrossed or monopolised by 
the force of a few large capitals, which buy up the greater part 
of it. Not only its value far exceeds what the capitals of 
a few private men are capable of purchasing, but, supposing 
they were capable of purchasing it, the manner in which it is 
produced renders this purchase altogether impracticable. As in 
every civilised country it is the commodity of which the annual 
consumption is the greatest, so a greater quantity of industry 
is annually employed in producing corn than in producing any 
other commodity. When it first comes from the ground, too, it 
is necessarily divided among a greater number of owners than 
any other commodity ; and these owners can never be collected 
into one place like a number of independent manufacturers, but 
are necessarily scattered through all the different corners of the 
country. These first owners either immediately supply the 
consumers in their own neighbourhood, or they supply other 
inland dealers who supply those consumers. The inland dealers 
in corn, therefore, including both the farmer and the baker, are 
necessarily more numerous than the dealers in any other com 
modity, and their dispersed situation renders it altogether im 
possible for them to enter into any general combination. If in 



z6 The Wealth of Nations 

a year of scarcity, therefore, any of them should find that he had 
a good deal more corn upon hand than, at the current price, 
he could hope to dispose of before the end of the season, he 
woud never think of keeping up this price to his own loss, and 
to the sole benefit of his rivals and competitors, but would 
immediately lower it, in order to get rid of his corn before the 
new crop began to come in. The same motives, the same 
interests, which would thus regulate the conduct of any one 
dealer, would regulate that of every other, and oblige them all 
in general to sell their corn at the price which, according to the 
best of their judgment, was most suitable to the scarcity or 
plenty of the season. 

Whoever examines with attention the history of the dearths 
and famines which have afflicted any part of Europe, during 
either the course of the present or that of the two preceding 
centuries, of several of which we have pretty exact accounts, 
will find, I believe, that a dearth never has arisen from any 
combination among the inland dealers in corn, nor from any 
other cause but a real scarcity, occasioned sometimes perhaps, 
and in some particular places, by the waste of war, but in by 
far the greatest number of cases by the fault of the seasons; 
and that a famine has never arisen from any other cause but 
the violence of government attempting, by improper means, to 
remedy the inconveniences of a dearth. 

In an extensive corn country, between all the different parts 
of which there is a free commerce and communication, the 
scarcity occasioned by the most unfavourable seasons can never 
be so great as to produce a famine; and the scantiest crop, if 
managed with frugality and economy, will maintain through 
the year the same number of people that are commonly fed on 
a more affluent manner by one of moderate plenty. The seasons 
most unfavourable to the crop are those of excessive drought or 
excessive rain. But as corn grows equally upon high and low 
lands, upon grounds that are disposed to be too wet, and upon 
those that are disposed to be too dry, either the drought or the 
rain which is hurtful to one part of the country is favourable to 
another; and though both in the wet and in the dry season the 
crop is a good deal less than in one more properly tempered, 
yet in both what is lost in one part of the country is in some 
measure compensated by what is gained in the other. In rice 
countries, where the crop not only requires a very moist soil, 
but where in a certain period of its growing it must be laid 
inder water, the effects of a drought are much more dismal* 



Bounties 27 

Even in such countries, however, the drought is, perhaps, scarce 
ever so universal as necessarily to occasion a fiimine, if the 
government would allow a free trade. The drought in Bengal, 
a few years ago, might probably have occasioned a very great 
dearth. Some improper regulations, some injudicious restraints 
imposed by the servants of the East India Company upon the 
rice trade, contributed, perhaps, to turn that dearth into a 
famine. 

When the government, in order to remedy the inconveniences 
of a dearth, orders all the dealers to sell their corn at what it 
supposes a reasonable price, it either hinders them from bringing 
it to market, which may sometimes produce a famine even in 
the beginning of the season; or if they bring it thither, it 
enables the people, and thereby encourages them to consume it 
so fast as must necessarily produce a famine before the end of 
the season. The unlimited, unrestrained freedom of the corn 
trade, as it is the only effectual preventative of the miseries of 
a famine, so it is the best palliative of the inconveniences of a 
dearth; for the inconveniences of a real scarcity cannot be 
remedied, they can only be palliated. No trade deserves more 
the full protection of the law, and no trade requires it so much, 
because no trade is so much exposed to popular odium. 

In years of scarcity the inferior ranks of people impute their 
distress to the avarice of the corn merchant, who becomes the 
object of their hatred and indignation. Instead of making 
profit upon such occasions, therefore, he is often in danger of 
being utterly ruined, and of having his magazines plundered 
and destroyed by their violence. It is in years of scarcity, 
however, when prices are high, that the corn merchant expects 
to make his principal profit. He is generally in contract with 
some farmers to furnish him for a certain number of years with 
a certain quantity of corn at a certain price. This contract 
price is settled according to what is supposed to be the moderate 
and reasonable, that is, the ordinary or average price, which 
before the late years of scarcity was commonly about eight- 
and-twenty shillings for the quarter of wheat, and for that of 
other grain in proportion. In years of scarcity, therefore, the 
corn merchant buys a great part of his corn for the ordinary 
price, and sells it for a much higher. That this extraordinary 
profit, however, is no more than sufficient to put his trade upon 
a fair level with other trades, and to compensate the many 
losses which he sustains upon other occasions, both from tin- 
perishable nature of the commodity itself, and from the frequent 
m 3 8-15 



28 The Wealth of Nations 

and unforeseen fluctuations of its price, seems evident enough, 
from this single circumstance, that great fortunes are as seldom 
made in this as in any other trade. The popular odium, how 
ever, which attends it in years of scarcity, the only years in 
which it can be very profitable, renders people of character and 
fortune averse to enter into it. It is abandoned to an inferior 
set of dealers ; and millers, bakers, mealmen, and meal factors, 
together with a number of wretched hucksters, are almost the 
only middle people that, in the home market, come between 
the grower and the consumer. 

The ancient policy of Europe, instead of discountenancing 
this popular odium against a trade so beneficial to the public, 
seems, on the contrary, to have authorised and encouraged it. 

By the 5th and 6th of Edward VI. cap. 14, it was enacted, 
That whoever should buy any corn or grain with intent to sell 
it again, should be reputed an unlawful engrosser, and should, 
for the first fault, suffer two months imprisonment, and forfeit 
the value of the corn; for the second, suffer six months im 
prisonment, and forfeit double the value; and for the third, be 
set in the pillory, suffer imprisonment during the king s pleasure, 
and forfeit all his goods and chattels. The ancient policy of 
most other parts of Europe was no better than that of England. 

Our ancestors seem to have imagined that the people would 
buy their corn cheaper of the farmer than of the corn mer 
chant, who, they were afraid, would require, over and above 
the price which he paid to the farmer, an exorbitant profit to 
himself. They endeavoured, therefore, to annihilate his trade 
altogether. They even endeavoured to hinder as much as 
possible any middle man of any kind from coming in between 
the grower and the consumer; and this was the meaning of 
the many restraints which they imposed upon the trade of 
those whom they called kidders or carriers of corn, a trade 
which nobody was allowed to exercise without a licence ascer 
taining his qualifications as a man of probity and fair dealing. 
The authority of three justices of the peace was, by the statute 
of Edward VI., necessary in order to grant this licence. But 
even this restraint was afterwards thought insufficient, and by a 
statute of Elizabeth the privilege of granting it was confined to 
the quarter-sessions. 

The ancient policy of Europe endeavoured in this manner to 
regulate agriculture, the great trade of the country, by maxims 
quite different from those which it established with regard to 
manufactures, the great trade of the towns. By leaving the 



Bounties 29 

farmer no other customers but either the consumers or their 
immediate factors, the kidders and carriers of corn , it endeavours i 
to force him to exercise the trade, not only of a farmer, hut of a 
com merchant or corn retailer. On the contrary, it in many 
cases prohibited the manufacturer from exercising the tr.ide of 
a shopkeeper, or from selling his own goods by retail. It meant 
by the one law to promote the general interest of the country, 
or to render corn cheap, without, perhaps, its being well under 
stood how this was to be done. By the other it meant to 
promote that of a particular order of men, the shopkeepers, 
who would be so much undersold by the manufacturer, it was 
supposed, that their trade would be ruined if he was allowed to 
retail at all. 

The manufacturer, however, though he had been allowed to 
keep a shop, and to sell his own goods by retail, could not have 
undersold the common shopkeeper. Whatever part of his capital 
he might have placed in his shop, he must have withdrawn it 
from his manufacture. In order to carry on his business on a 
level with that of other people, as he must have had the profit 
of a manufacturer on the one part, so he must have had that of 
a shopkeeper upon the other. Let us suppose, for example, 
that in the particular town where he lived, ten per cent, was 
the ordinary profit both of manufacturing and shopkeeping 
stock; he must in this case have charged upon every piece of 
his own goods which he sold in his shop, a profit of twenty per 
cent. When he carried them from his workhouse to his shop, 
he must have valued them at the price for which he could have 
sold them to a dealer or shopkeeper, who would have bought 
them by wholesale. If he valued them lower, he lost a part of 
the profit of his manufacturing capital. When again he sold 
them from his shop, unless he got the same price at which a 
shopkeeper would have sold them, he lost a part of the profit 
of his shopkeeping capital. Though he might appear, therefore, 
to make a double profit upon the same piece of goods, yet as 
these goods made successively a part of two distinct capitals, 
he made but a single profit upon the whole capital employed 
about them ; and if he made less than his profit, he was a loser, 
or did not employ his whole capital with the same advantage 
as the greater part of his neighbours. 

What the manufacturer was prohibited to do, the farmer was 
in some measure enjoined to do; to divide his capital between 
two different employments ; to keep one part of it in his granaries 
and stack yard, for supplying the occasional demands of the 



30 The Wealth of Nations 

market ; and to employ the other in the cultivation of his land. 
But as he could not afford to employ the latter for less than the 
ordinary profits of farming stock, so he could as little afford to 
employ the former for less than the ordinary profits of mercantile 
stock. Whether the stock which really carried on the business of 
the corn merchant belonged to the person who was called a farmer, 
or to the person who was called a corn merchant, an equal profit 
was in both cases requisite in order to indemnify its owner for 
employing it in this manner; in order to put his business upon 
a level with other trades, and in order to hinder him from having 
an interest to change it as soon as possible for some other. The 
farmer, therefore, who was thus forced to exercise the trade of a 
corn merchant, could not afford to sell his corn cheaper than any 
other corn merchant would have been obliged to do in the case 
of a free competition. 

The dealer who can employ his whole stock in one single 
branch of business has an advantage of the same kind with the 
workman who can employ his whole labour in one single opera 
tion. As the latter acquires a dexterity which enables him, 
with the same two hands, to perform a much greater quantity 
of work; so the former acquires so easy and ready a method of 
transacting his business, of buying and disposing of his goods, 
that with the same capital he can transact a much greater 
quantity of business. As the one can commonly afford his work 
a good deal cheaper, so the other can commonly afford his goods 
somewhat cheaper than if his stock and attention were both 
employed about a greater variety of objects. The greater part 
of manufacturers could not afford to retail their own goods so 
cheap as a vigilant and active shopkeeper, whose sole business 
it was to buy them by wholesale and to retail them again. The 
greater part of farmers could still less afford to retail their own 
corn, to supply the inhabitants of a town, at perhaps four or five 
miles distance from the greater part of them, so cheap as a 
vigilant and active corn merchant, whose sole business it was to 
purchase corn by wholesale, to collect it into a great magazine, 
and to retail it again. 

The law which prohibited the manufacturer from exercising 
the trade of a shopkeeper endeavoured to force this division in 
the employment of stock to go on faster than it might otherwise 
have done. The law which obliged the farmer to exercise the 
trade of a corn merchant endeavoured to hinder it from going 
on so fast. Both laws were evident violations of natural liberty, 
and therefore unjust; and they were both, too, as impolitic as 



Bounties 3 1 

they were unjr.st. It is the interest of every society that things 
of this kind should never either be forced or obstructed. The 
man who employs either his labour or his stock in a greater 
variety of ways than his situation renders necessary can never 
hurt his neighbour by underselling him. He may hurt himself, 
and he generally does so. Jack of all trades will never be rich, 
says the proverb. But the law ought always to trust people 
with the care of their own interest, as in their local situations 
they must generally be able to judge better of it thin the 
legislator can do. The law, however, which obliged the farmer 
to exercise the trade of a corn merchant was by far the most 
pernicious of the two. 

It obstructed not only that division in the employment of 
stock which is so advantageous to every society, but it obstructed 
likewise the improvement and cultivation of the land. By 
obliging the farmer to carry on two trades instead of one, it 
forced him to divide his capital into two parts, of which one 
only could be employed in cultivation. But if he had been at 
liberty to sell his whole crop to a corn merchant as fast as he 
could thresh it out, his whole capital might have returned 
immediately to the land, and have been employed in buying 
more rattle, and hiring more servants, in order to improve and 
cultiva e it better. But by being obliged to sell his corn by 
retail, he was obliged to keep a great part of his capital in his 
granaries and stack yard through the year, and could not, there- 
lore, cultivate so well as with the same capital he might other 
wise have done. This law, therefore, necessarily obstructed the 
improvement of the land, and, instead of tending to render corn 
cheaper, must have tended to render it scarcer, and therefore 
dearer, than it would otherwise have been. 

After the business of the farmer, that of the corn merchant is 
in reality the trade which, if properly protected and encouraged, 
would contribute the most to the raising of corn. It would 
support the trade of the farmer, in the same manner as the trade 
of the wholesale dealer supports that of the manufacturer. 

The wholesale dealer, by affording a ready market to the 
manufacturer, by taking his goods off his hand as fast as he can 
make them, and by sometimes even advancing their price to him 
before he has made them, enables him to keep his whole capital, 
and sometimes even more than his whole capital, constantly 
employed in manufacturing, and consequently to manufacture 
a much greater quantity of goods than if he was obliged to 
dispose of them himself to the immediate consumers, or even 



32 The Wealth of Nations 

to the retailers. As the capital of the wholesale merchant, too, 
is generally sufficient to replace that of many manufacturers, 
this intercourse between him and them interests the owner of 
a large capital to support the owners of a great number of small 
ones, and to assist them in those losses and misfortunes which 
might otherwise prove ruinous to them. 

An intercourse of the same kind universally established 
between the farmers and the corn merchants would be attended 
with effects equally beneficial to the farmers. They would be 
enabled to keep their whole capitals, and even more than their 
whole capitals, constantly employed in cultivation. In case of 
any of those accidents, to which no trade is more liable than 
theirs, they would find m their ordinary customer, the wealthy 
corn merchant, a person who had both an interest to support 
them, and the ability to do it, and they would not, as at present, 
be entirely dependent upon the forbearance of their landlord, 
or the mercy of his steward. Were it possible, as perhaps it is 
not, to establish this intercourse universally, and all at once, 
were it possible to turn all at once the whole farming stock of 
the kingdom to its proper business, the cultivation of laud, 
withdrawing it from every other employment into which any 
part of it may be at present diverted, and were it possible, in 
order to support and assist upon occasion the operations of this 
great stock, to provide all at once another stock almost equally 
great, it is not perhaps very easy to imagine how great, how 
extensive, and how sudden would be the improvement which 
this change of circumstances would alone produce upon the whole 
face of the country. 

The statute of Edward VI., therefore, by prohibiting as much 
as possible any middle man from coming in between the grower 
and the consumer, endeavoured to annihilate a trade, of which 
the free exercise is not only the best palliative of the incon- 
veniencies of a dearth but the best preventative of that calamity: 
after the trade of the farmer, no trade contributing so much to 
the growing of corn as that of the corn merchant. 

The rigour of this law was afterwards softened by several 
subsequent statutes, which successively permitted the engross 
ing of corn when the price of wheat should not exceed twenty, 
twenty-four, thirty-two, and forty shillings the quarter. At 
last, by the i5th of Chnrles II. c. 7, the engrossing or buying of 
corn in order to sell it again, as long as the price of wheat did not 
exceed forty-eight shillings the quarter, and that of other grain 
in proportion, was declared lawful to all persons not being fore- 



Bounties 33 

stallers, that is, not selling again in the same market within 
three months. All the freedom which the trade of the inland 
corn dealer has ever yet enjoyed was bestowed upon it by this 
statute. The statute of the twelfth of the present king, which 
repeals almost all the other ancient laws against engrossers and 
forestallers, does not repeal the restrictions of this particular 
statute, which therefore still continue in force. 

This statute, however, authorises in some measure two very 
absurd popular prejudices. 

First, it supposes that when the price of wheat has risen so 
high as forty-eight shillings the quarter, and that of other grains 
in proportion, corn is likely to be so engrossed as to hurt the 
people. But from what has been already said, it seems evident 
enough that corn can at no price be so engrossed by the inland 
dealers as to hurt the people: and forty-eight shillings the 
quarter, besides, though it may be considered as a very high 
price, yet in years of scarcity it is a price which frequently takes 
place immediately afti-r harvest, when scarce any part of tl.e 
new crop can be sold off, and when it is impossible even for 
ignorance to suppose that any part of it can be so engrossed as 
to hurt the people. 

Secondly, it supposes that there is a certain price at which 
corn is likely to be forestalled, that is, bought up in order to be 
solo! again soon after in the same market, so as to hurt the 
people, lint if a merchant ever buys up corn, either going to 
a particular market or in a particular market, in order to sell 
it again soon after in the same market, it must be because he 
judges that the market cannot be so liberally supplied through 
the whole season as upon that particular occasion, and that the 
price, therefore, must soon rise. If he judges wrong in this, and 
if the price floes not rise, he not only loses the whole profit of 
the stock which he employs in this manner, but a part of tin- 
stock itself, by the expense and loss which necessarily attend 
the storir." and keepir.-: of corn. lie hurts himself, therefore, 
much more essentially than he can hurt even the particular 
people whom he may hinder from supplying themselves upon 
that particular market day, because they may afterwards supply 
themselves just as cheap upon any other market day. If he 
judges right, instead of hurting the great bo/iy of the people, 
he renders them a most important service. By making them 
feel the inconveniencies of a dearth somewhat earlier than they 
otherwise might do, he prevents their feeling them afterwards 
so severely as they certainly would do, if tl.e cheapness of price 



34 



The Wealth of Nations 



encouraged them to consume faster than suited the real scarcity 
of the season. When the scarcity is real, the best thing that can 
be done for the people is to divide the inconveniencies of it as 
equally as possible through all the different months, and weeks, 
and days of the year. The interest of the corn merchant makes 
him study to do this as exactly as he can: and as no other 
person can have either the same interest, or the same know 
ledge, or the same abilities to do it so exactly as he, this most 
important operation of commerce ought to be trusted entirely 
to him; or, in other words, the corn trade, so far at least as 
concerns the supply of the home market, ought to be left 
perfectly free. 

The popular fear of engrossing and forestalling may be com 
pared to the popular terrors and suspicions of witchcraft. The 
unfortunate wretches accused of this latter crime were not 
more innocent of the misfortunes imputed to them than those 
who have been accused of the former. The law which put an 
end to all prosecutions against witchcraft, which put it out of 
any man s power to gratify his own malice by accusing his 
neighbour of that imaginary crime, seems effectually to have 
put an end to those fears and suspicions by taking away the 
great cause which encouraged and supported them. The law 
which should restore entire freedom to the inland trade of corn 
would probably prove as effectual to put an end to the popular 
fears of engrossing and forestalling. 

The 1 5th of Charles II. c. 7, however, with all its imperfections, 
has perhaps contributed more both to the plentiful supply of the 
home market, and to the increase of tillage, than any other law 
in the statute book. It is from this law that the inland corn 
trade has derived all the liberty and protection which it has ever 
yet enjoyed; and both the supply of the home market, and the 
interest of tillage, are much more effectually promoted by the 
inland than either by the importation or exportation trade. 

The proportion of the average quantity of all sorts of grain 
imported into Great Britain to that of all sorts of grain con 
sumed, it has been computed by the author of the tracts upon 
the corn trade, does not exceed that of one to five hundred 
and seventy. For supplying the home market, therefore, the 
importance of the inland trade must be to that of the importa 
tion trade as five hundred and seventy to one. 

The average quantity of all sorts of grain exported from Great 
Britain does not, according to the same author, exceed the one- 
and-thirtieth part of the annual produce. For the encourage- 



Bounties 35 

ment of tillage, therefore, by providing a market for the home 
produce, the importance of the inland trade must be to that of 
the exporation trade as thirty to one. 

I have no great faith in political arithmetic, and I mean not 
to warrant the exactness of either of these computations. I 
mention them only in order to show of how much less con 
sequence, in the opinion of the most judicious and experienced 
persons, the foreign trade of corn is than the home trade. The 
great cheapness of corn in the years immediately preceding the 
establishment of the bounty may perhaps, with reason, be 
ascribed in some measure to the operation of this statute of 
Charles II., which had been enacted about five-and-twenty years 
before, and which had therefore full time to produce its effect. 

A very few words will sufficiently explain all that I have to 
say concerning the other three branches of the corn trade. 

II. The trade of the merchant importer of foreign corn for 
home consumption evidently contributes to the immediate 
supply of the home market, and must so far be immediately 
beneficial to the great body of the people. It tends, indeed, to 
lower somewhat the average money price of corn, but not to 
diminish its real value, or the quantity of labour which it is 
capable of maintaining. If importation was at all times free, 
our farmers and country gentlemen would, probably, one year 
with another, get less money for their corn than they do at 
present, when importation is at most times in effect prohibited; 
but the money which they got would be of more value, would 
buy more goods of all other kinds, and would employ more 
labour. Their real wealth, their real revenue, therefore, would 
be the same as at present, though it might be expressed by a 
smaller quantity of silver; and they would neither be disabled 
nor discouraged from cultivating corn as much as they do at 
present. On the contrary, as the rise in the real value of silver, 
in consequence of lowering the money price of corn, lowers some 
what the money price of all other commodities, it gives the 
industry of the country, where it takes place, some advantage 
n all foreign markets, and thereby tends to encourage and 
increase that industry. But the extent of the home market for 
corn must be in proportion to the general industry of the country 
where it grows, or to the number of those who produce some 
thing else, and therefore have something else, or what comes to 
the same thing, the price of something else, to give in exchange 
for corn. But in every country the home market, as it is the 
nearest and most convenient, so is it likewise the greatest and 



36 The Wealth of Nations 

most important market for corn. That rise in the real value 
of silver, therefore, which is tiie effect of lowering the average 
money price of corn, tends to enlarge the greatest and most 
important market for corn, and thereby to encourage, instead 
of discouraging, its growth. 

By the 22nd of Charles II. c. 13, the importation of wheat, 
whenever the price in the home market did not exceed fifty- 
three shillings and fourpence the quarter, was subjected to a 
duty of sixteen shillings the quarter; and to a duty of eight 
shillings whenever the price did not exceed four pounds. The 
former of these two prices has, for more than a century past, 
taken place only in times of very great scarcity; and the latter 
has, so far as I know, not taken place at all. Yet, till wheat 
had risen above this latter price, it was by this statute sub 
jected to a very high duty; and, till it had risen above the 
former, to a duty which amounted to a prohibition. The im 
portation of other sorts of grain was restrained at rates, and by 
duties, in proportion to the value of the grain, almost equally 
high. 1 Subsequent laws still further increased those duties. 

The distress which, in years of scarcity, the strict execution 
of those laws might have brought upon the people, would prob 
ably have been very great. But, upon such occasions, its 
execution was generally suspended by temporary statutes, which 
permitted, for a limited time, the importation of foreign corn. 
The necessity of these temporary statutes sufficiently demon 
strates the impropriety of this general one. 

These restraints upon importation, though prior to the estab 
lishment of the bounty, were dictated by the same spirit, by 
the same principles, which afterwards enacted that regulation. 
How hurtful soever in themselves, these or some other restraints 
upon importation became necessary in consequence of that 

1 Before the i3th of the present king, the following were the duties pay 
able upon the importation of the different sorts of grain: 

Grain. Duties. Duties. Duties. 

Beans to 2$s. per qr. IQS. iod. after till 405. . ids. 8d. then i2d. 

Barley to 285. 195. iod. 32s. . i6s. i2d. 

Malt is prohibited by the annual Malt-tax Bill. 

Oats to i6s. 55. iod. after 9^d. 

Pease to 405. i6s. iod. after g|d. 

Rye to 365. 195. iod. till 405. . i6s. 8d. then i2d. 

Wheat to 445. 2 is. gd. till 535. 4d. 175. then 8s. 

till 4 1. and after that about is. 4d. 

Buck wheat to 325. per qr. to pay i6s. 

These different duties were imposed, partly by the 22nd of Charles II., in 
place of the Old Subsidy, partly by the New Subsidy, by tne Une-third and 
two-thirds Subsidy, and by the Subsidy 1747. 



Bounties 37 

regulation. If, when wheat was either below forty-eurht shillings 
the quarter, or not much above it, foreign corn could have been 
imported cither duty free, or upon paying only a small duty, it 
might have been exported again, with the benefit of the bounty, 
to the great loss of the public revenue, and to the entire per 
version of the institution, of which the object was to extend the 
market for the home growth, not that for the growth of foreign 
countries. 

III. The trade of the merchant exporter of corn for foreign 
consumption certainly does not contribute directly to the 
plentiful supply of the home market. It does so, however, 
indirectly. Krom whatever source this supply may be usually 
drawn, whether from home growth or from foreign importation. 
unless more corn is either usually grown, or usually imported 
into the country, than what is usually consumed in it, the supply 
of the home market can never be very plentiful. But unless 
the surplus can in all ordinary cases be exported, the growers 
will be careful never to grow more, and the importers never to 
import more, than what the bare consumption of the home 
market requires. That market will very seldom be overstocked ; 
but it will generally be understocked, the people whose business 
it is to supply it being generally afraid lest their goods should 
be left noon their hands. The prohibition of exportation limits 
the ii pr >vement and cultivation of the country to what the 
supph o its own inhabitants requires. The freedom of ex 
portation enables it to extend cultivation for the supply of 
foreign nations. 

By the i2th of Charles II. c. 4, the exportation of corn was 
permitted whenever the price of wheat did not exceed forty 
shillings the quarter, and that of other grain in proportion. By 
the 1 5th of the same prince, this liberty was extended till the 
price of wheat exceeded forty-eight shillings the quarter; and 
by the 22nd, to all higher prices. A poundage, indeed, was to 
be paid to the king upon such exportation. But all grain was 
rated so low in the book of rates that this poundage amounted 
only upon wheat to a shilling, upon oats to fourpence, and upon 
all other grain to sixpence the quarter. By the ist of William 
and Mary, the act which established the bounty, this small duty 
was virtually taken off whenever the price of wheat did not 
exceed fortv-eight shillings the quarter; and by the nth and 
I2th of \Vi ilium III. c. 20, it was expressly taken of! at all 
higher prices. 

The trade of the merchant exporter was, in this manner, not 



38 The Wealth of Nations 

only encouraged by a bounty, but rendered much more free than 
that of the inland dealer. By the last of these statutes, corn 
could be engrossed at any price for exportation, but it could 
not be engrossed for inland sale except when the price did 
not exceed forty-eight shillings the quarter. The interest of the 
inland dealer, however, it has already been shown, can never be 
opposite to that of the great body of the people. That of the 
merchant exporter may, and in fact sometimes is. If, while his 
own country labours under a dearth, a neighbouring country 
should be afflicted with a famine, it might be his interest to 
carry corn to the latter country in such quantities as might 
very much aggravate the calamities of the dearth. The plenti 
ful supply of the home market was not the direct object of 
those statutes; but, under the pretence of encouraging agricul 
ture, to raise the money price of corn as high as possible, and 
thereby to occasion, as much as possible, a constant dearth in 
the home market. By the discouragement of importation, the 
supply of that market, even in times of great scarcity, was con 
fined to the home growth; and by the encouragement of ex 
portation, when the price was so high as forty-eight shillings 
the quarter, that market was not, even in times of considerable 
scarcity, allowed to enjoy the whole of that growth. The 
temporary laws, prohibiting for a limited time the exportation 
of corn, and taking off for a limited time the duties upon its 
importation, expedients to which Great Britain has been obliged 
so frequently to have recourse, sufficiently demonstrate the 
impropriety of her general system. Had that system been good, 
she would not so frequently have been reduced to the necessity 
of departing from it. 

Were all nations to follow the liberal system of free exporta 
tion and free importation, the different states into which a great 
continent was divided would so far resemble the different pro 
vinces of a great empire. As among the different provinces of 
a great empire the freedom of the inland trade appears, both 
from reason and experience, not only the best palliative of a 
dearth, but the most effectual preventative of a famine; so 
would the freedom of the exportation and importation trade be 
among the different states into which a great continent was 
divided. The larger the continent, the easier the communica 
tion through all the different parts of it, both by land and by 
water, the less would any one particular part of it ever be 
exposed to either of these calamities, the scarcity of any one 
country being more likely to be relieved by the plenty of some 



Bounties 39 

other. But very few countries have entirely adopted this liberal 
system. The freedom of the corn trade is almost everywhere 
more or less restrained, and, in many countries, is confined by 
such absurd regulations as frequently aggravate the unavoidable 
misfortune of a dearth into the dreadful calamity of a famine. 
The demand of such countries for corn may frequently become 
so great and so urgent that a small state in their neighbour 
hood, which happened at the same time to be labouring under 
some degree of dearth, could not venture to supply them without 
exposing itself to the like dreadful calamity. The very bad 
policy of one country may thus render it in some measure 
dangerous and imprudent to establish what would otherwise be 
the best policy in another. The unlimited freedom of exporta 
tion, however, would be much less dangerous in great states, in 
which the growth being much greater, the supply could seldom 
be much affected by any quantity of corn that was likely to 
be exported. In a Swiss canton, or in some of the little states 
of Italy, it may perhaps sometimes be necessary to restrain 
the exportation of corn. In such great countries as France or 
England it scarce ever can. To hinder, besides, the farmer from 
sending his goods at all times to the best market is evidently 
to sacrifice the ordinary laws of justice to an idea of public 
utility, to a sort of reasons of state; an act of legislative 
authority which ought to be exercised only, which can be 
pardoned only in cases of the most urgent necessity. The price 
at which the exportation of corn is prohibited, if it is ever to 
be prohibited, ought always to be a very high price. 

The laws concerning corn may everywhere be compared to 
the laws concerning religion. The people feel themselves so 
much interested in what relates either to their subsistence in 
this life, or to their happiness in a life to come, that govern 
ment must yield to their prejudices, and, in order to preserve 
the public tranquillity, establish that system which they approve 
of. It is upon this account, perhaps, that we so seldom find a 
reasonable system established with regard to either of those two 
capital objects. 

IV. The trade of the merchant carrier, or of the importer of 
foreign corn in order to export it again, contributes to the 
plentiful supply of the home market. It is not indeed the direct 
purpose of his trade to sell his corn there. But he will generally 
be willing to do so, and even for a good deal less money than 
he might expect in a foreign market; because he saves in this 
manner the expense of loading and unloading, of freight and 



40 The Wealth of Nations 

insurance. The inhabitants of the country which, by means of 
the carrying trade, becomes the magazine and storehouse for 
the supply of other countries can very seldom be in want them 
selves. Though the carrying trade might thus contribute to 
reduce the average money price of corn in the home market, 
it would not thereby lower its real value. It would only raise 
somewhat the real value of silver. 

The carrying trade was in effect prohibited in Great Britain, 
upon all ordinary occasions, by the high duties upon the im 
portation of foreign corn, of the greater part of which there 
was no drawback; and upon extraordinary occasions, when a 
scarcity made it necessary to suspend those duties by temporary 
statutes, exportation was always prohibited. By this system 
of laws, therefore, the carrying trade was in effect prohibited 
upon all occasions. 

That system of laws, therefore, which is connected with the 
establishment of the bounty, seems to deserve no part of the 
praise which has been bestowed upon it. The improvement and 
prosperity of Great Britain, which has been so often ascribed 
to those laws, may very easily be accounted for by other causes. 
That security which the laws in Great Britain give to every 
man that he shall enjoy the fruits of his own labour is alone 
sufficient to make any country flourish, notwithstanding these 
and twenty other absurd regulations of commerce; and this 
security was perfected by the revolution much about the same 
time that the bounty was established. The natural effort of 
every individual to better his own condition, when suffered to 
exert itself with freedom and security, is so powerful a principle 
that it is alone, and without any assistance, not only capable 
of carrying on the society to wealth and prosperity, but of 
surmounting a hundred impertinent obstructions with which the 
folly of human laws too often incumbers its operations; though 
the effect of these obstructions is always more or less either 
to encroach upon its freedom, or to diminish its security. In 
Great Britain industry is perfectly secure; and though it is far 
from being perfectly free, it is as free or freer than in any other 
part of P^urope. 

Though the period of the greatest prosperity and improve 
ment of Great Britain has been posterior to that system of laws 
which is connnected with the bounty, we must not upon that 
account impute it to those laws. It has been posterior likewise 
to the national debt. But the national debt has most assuredly 
not been the cause of it. 



Bounties 41 

Though the system of laws which is connected with the 
bounty has exactly the same tendency with the police of Spain 
and Portugal, to lower somewhat the value of the precious 
metals in the country where it takes place, yet Great Britain 
is certainly one of the richest countries in Europe, while Spain 
and Portugal are perhaps among the most beggarly. This 
difference of situation, however, may easily be accounted for 
from two different causes. First, the tax in Spain, the prohibi 
tion in Portugal of exporting gold and silver, and the vigilant 
police which watches over the execution of those laws, must, 
in two very poor countries, which between them import annually 
upwards of six millions sterling, operate not only more directly 
but much more forcibly in reducing the value of those metals 
there than the corn laws can do in Great Britain. And. 
secondly, this bad policy is not in those countries counter 
balanced by the general liberty and security of the pee. pie. 
Industry is there neither free nor secure, and the civil and 
ecclesiastical governments of both Spain and Portugal are such 
as would alone be sufficient to perpetuate their present state of 
poverty, even though their regulations of commerce were as 
wise as the greater part of them arc absurd and foolish. 

The i^th of the present king, c. 43, seems to have established 
a new system with regard to the corn laws, in many respects 
better than the ancient one, but in one or two respects perhaps 
not quite so good. 

By this statute the high duties upon importations for home 
consumption are taken off so soon as the price of middling wheat 
rises to forty-eight shillings the quarter; that of middling rye, 
pease or beans, to thirty-two shillings ; that cf barley to twenty- 
four shillings; and that of oats to sixteen shillings; and instead 
of them a small duty is imposed of only sixpence upon the 
quarter of wheat, and upon that of other grain in proportion. 
With regard to all these different sorts of grain, but particularly 
with regard to wheat, the home market is thus opened to foreign 
supplies at prices considerably lower than before. 

By the same statute the old bounty of five shillings upon the 
exportation of wheat ceases so soon as the price rises to forty- 
four shillings the quarter, instead of forty-eight, the price at 
which it ceased before; that of two shillings and sixpence upon 
the exportation of barley ceases so soon as the price rises to 
twenty-two shillings, instead of twenty-four, the price at which 
it ceased before; that of two shillings and sixpence upon the 
exportation of oatmeal ceases so soon as the price rises to 



42 The Wealth of Nations 

fourteen shillings, instead of fifteen, the price at which it ceased 
before. The bounty upon rye is reduced from three shillings 
and sixpence to three shillings, and it ceases so soon as the price 
rises to twenty-eight shillings instead of thirty-two, the price 
at which it ceased before. If bounties are as improper as I 
have endeavoured to prove them to be, the sooner they cease, 
and the lower they are, so much the better. 

The same statute permits, at the lowest prices, the importa 
tion of corn, in order to be exported again duty free, provided 
it is in the meantime lodged in a warehouse under the joint locks 
of the king and the importer. This liberty, indeed, extends to 
no more than twenty-five of the different ports of Great Britain. 
They are, however, the principal ones, and there may not, 
perhaps, be warehouses proper for this purpose in the greater 
part of the others. 

So far this law seems evidently an improvement upon the 
ancient system. 

But by the same law a bounty of two shillings the quarter is 
given for the exportation of oats whenever the price does not 
exceed fourteen shillings. No bounty had ever been given 
before for the exportation of this grain, no more than for that of 
pease or beans. 

By the same law, too, the exportation of wheat is prohibited 
so soon as the price rises to forty-four shillings the quarter; 
that of rye so soon as it rises to twenty-eight shillings; that of 
barley so soon as it rises to twenty-two shillings; and that of 
oats so soon as they rise to fourteen shillings. Those several 
prices seem all of them a good deal too low, and there seems to 
be an impropriety, besides, in prohibiting exportation altogether 
at those precise prices at which that bounty, which was given 
in order to force it, is withdrawn. The bounty ought certainly 
either to have been withdrawn at a much lower price, or ex 
portation ought to have been allowed at a much higher. 

So far, therefore, this law seems to be inferior to the ancient 
system. With all its imperfections, however, we may perhaps 
say of it what was said of the laws of Solon, that, though not the 
best in itself, it is the best which the interests, prejudices, and 
temper of the times would admit of. It may perhaps in due 
time prepare the way for a better. 



Treaties of Commerce 43 



CHAPTER VI 

OF TREATIES OK COMMERCE 

WHEN a nation binds itself by treaty either to permit the entry 
of certain goods from one foreign country which it prohibits 
from all others, or to exempt the goods of one country from 
duties to which it subjects those of all others, the country, or 
at least the merchants and manufacturers of the country, whose 
commerce is so favoured, must necessarily derive great ad 
vantage from the treaty. Those merchants and manufacturers 
enjoy a sort of monopoly in the country which is so indulgent to 
them. That country becomes a market both more extensive 
and more advantageous for their goods : more extensive, because 
the goods of other nations being either excluded or subjected to 
heavier duties, it takes off a greater quantity of theirs: more 
advantageous, because the merchants of the favoured country, 
enjoying a sort of monopoly there, will often sell their goods for 
a better price than if exposed to the free competition of all 
other nations. 

Such treaties, however, though they may be advantageous to 
the merchants and manufacturers of the favoured, are necessarily 
disadvantageous to those of the favouring country. A monopoly 
is thus granted against them to a foreign nation; and they must 
frequently buy the foreign goods they have occasion for dearer 
than if the free competition of other nations was admitted. 
That part of its own produce with which such a nation purchases 
foreign goods must consequently be sold cheaper, because when 
two things are exchanged for one another, the cheapness of the 
one is a necessary consequence, or rather is the same thing with 
the dearness of the other. The exchangeable value of its annual 
produce, therefore, is likely to be diminished by every such 
treaty. This diminution, however, can scarce amount to any 
positive loss, but only to a lessening of the gain which it might 
otherwise make. Though it sells its goods cheaper than it other 
wise might do, it will not probably sell them for less than they 
cost; nor, as in the case of bounties, for a price which will not 
replace the capital employed in bringing them to market, 
together with the ordinary profits of stock. The trade could 
not go on long if it did. Kven the favouring country, therefore, 
may still gain by the trade, though less than if there was a free 
competition. 



44 The Wealth of Nations 

Some treaties of commerce, however, have been supposed 
advantageous upon principles very different from these ; and a 
commercial country has sometimes granted a monopoly of this 
kind against itself to certain goods of a foreign nation, because 
it expected that in the whole commerce between them, it would 
annually sell more than it would buy, and that a balance in 
gold and silver would be annually returned to it. It is upon 
this principle that the treaty of commerce between England and 
Portugal, concluded in 1703 by Mr. Methuen, has been so much 
commended. The following is a literal translation of that treaty, 
which consists of three articles only. 

ART. I. 

His sacred royal majesty of Portugal promises, both in his 
own name, and that of his successors, to admit, for ever here 
after, into Portugal, the woollen cloths, and the rest of the 
woollen manufactures of the British, as was accustomed, till 
they were prohibited by the law; nevertheless upon this 
condition: 

ART. II. 

That is to say, that her sacred royal majesty of Great Britain 
shall, in her own name, and that of her successors, be obliged, 
for ever hereafter, to admit the wines of the growth of Portugal 
into Britain; so that at no time, whether there shall be peace 
or war between the kingdoms of Britain and France, anything 
more shall be demanded for these wines by the name of custom 
or duty, or by whatsoever other title, directly or indirectly, 
whether they shall be imported into Great Britain in pipes or 
hogsheads, or other casks, than what shall be demanded for the 
like quantity or measure of French wine, deducting or abating a 
third part of the custom or duty. But if at any time this 
deduction or abatement of customs, which is to be made as 
aforesaid, shall in any manner be attempted and prejudiced, it 
shall be just and lawful for his sacred royal majesty of Portugal, 
again to prohibit the woollen cloths, and the rest of the British 
woollen manufactures. 

ART. III. 

The most excellent lords the plenipotentiaries promise and 
take upon themselves, that their above-named masters shall 
ratify this treaty; and within the space of two months the 
ratifications shall be exchanged. 



Treaties of Commerce 45 

By this treaty the crown of Portugal becomes bound to admit 
the English woollens upon the same footing as before the pro 
hibition ; that is, not to raise the duties which had been paid 
before that time. But it does not become bound to admit 
them upon any better terms than those of any other nation, of 
France or Holland for example. The crown of Great Britain, 
on the contrary, becomes bound to admit the wines of Portugal 
upon paying only two-thirds of the duty which is paid for those 
of France, the wines most likely to come into competition with 
them. So far this treaty, therefore, is evidently advantageous 
to Portugal, and disadvantageous to Great Britain. 

It has been celebrated, however, as a masterpiece of the 
commercial policy of England. Portugal receives annually 
from the Brazils a greater quantity of gold than can be employed 
in its domestic commerce, whether in the si. ape of coin or of 
plate. The surplus is too valuable to be allowed to lie idle 
and locked up in coffers, and as it can find no advantageous 
market at home, it must, notwithstanding any prohibition, be 
sent abroad, and exchanged for something for which there is a 
more advantageous market at home. A large share of it comes 
annualiv to England, in return either for English goods, or for 
those of other European nations that receive their returns 
throiiL h England. Mr. Baretti was informed that the weekly 
packet-boat from Lisbon brings, one week with another, more 
than fifty thousand pounds in gold to England. The sum had 
probably been exaggerated. It would amount to more than 
two millions six hundred thousand pounds a year, which i.; more 
than the Brazils are supposed to afford. 

Our merchants were some years ago out of humour with the 
crown of Portugal. Some privileges which had been granted 
them, not by treaty, but by the free grace of that crown, at the 
solicitation indeed, it is probable, and in return for much greater 
favours, defence and protection, from the crown of Great Britain 
had been either infringed or revoked. The people, tlu-refore, 
usually most interested in celebrating the Portugal trade were 
then rather disposed to represent it as l<si advantageous than 
it had commonly been imagined. The far greater part, almost 
the whole, they pretended, of this annual importation of gold, 
was not on account of Great Britain, but of other European 
nations; the fruits and wines of Portugal annually imported 
into Great Britain nearly compensating the value of the British 
goods sent thither. 

Let us suppose, however, that the whole was on account of 



46 The Wealth of Nations 

Great Britain, and that it amounted to a still greater sum than 
Mr. Barctti seems to imagine; this trade would not, upon that 
account, be more advantageous than any other in which, for the 
same value sent out, we received an equal value of consumable 
goods in return. 

It is but a very small part of this importation which, it can be 
supposed, is employed as an annual addition either to the plate 
or to the coin of the kingdom. The rest must all be sent abroad 
and exchanged for consumable goods of some kind or other. 
But if those consumable goods were purchased directly with the 
produce of English industry, it would be more for the advantage 
of England than first to purchase with that produce the gold of 
Portugal, and afterwards to purchase with that gold those con 
sumable goods. A direct foreign trade of consumption is always 
more advantageous than a round-about one; and to bring the 
same value of foreign goods to the home market, requires a 
much smaller capital in the one way than in the other. If a 
smaller share of its industry, therefore, had been employed in 
producing goods fit for the Portugal market, and a greater in 
producing those fit for the other markets, where those con 
sumable goods for which there is a demand in Great Britain are 
to be had, it would have been more for the advantage of England. 
To procure both the gold, which it wants for its own use, and 
the consumable goods, would, in this way, employ a much 
smaller capital than at present. There would be a spare capital, 
therefore, to be employed for other purposes, in exciting an 
additional quantity of industry, and in raising a greater annual 
produce. 

Though Britain were entirely excluded from the Portugal 
trade, it could find very little difficulty in procuring all the 
annual supplies of gold which it wants, either for the purposes 
of plate, or of coin, or of foreign trade. Gold, like every other 
commodity, is always somewhere or another to be got for its 
value by those who have that value to give for it. The annual 
surplus of gold in Portugal, besides, would still be sent abroad, 
and though not carried away by Great Britain, would be carried 
away by some other nation, which would be glad to sell it again 
for its price, in the same manner as Great Britain does at present. 
In buying gold of Portugal, indeed, we buy it at the first hand; 
whereas, in buying it of any other nation, except Spain, we 
should buy it at the second, and might pay somewhat dearer. 
This difference, however, would surely be too insignificant to 
deserve the public attention. 



Treaties of Commerce 47 

Almost all our gold, it is said, comes from Portugal. With 
other nations the balance of trade is either against us, or not 
much in our favour. But we should remember that the more 
gold we import from one country, the less we must necessarily 
import from all others. The effectual demand for gold, like 
that for every other commodity, is in every country limited to 
a certain quantity. If nine-tenths of this quantity are imported 
from one country, there remains a tenth only to be imported 
from all others. The more gold besides that is annually im 
ported from some particular countries, over and above what 
is requisite for plate and for coin, the more must necessarily be 
exported to some others; and the more that most insignificant 
object of modern policy, the balance of trade, appears to be in 
our favour with some particular countries, the more it must 
necessarily appear to be against us with many others. 

It was upon this silly notion, however, that England could 
not subsist without the Portugal trade, that, towards the end 
of the late war, France and Spain, without pretending either 
offence or provocation, required the King of Portugal to exclude 
all British ships from his ports, and for the security of this 
exclusion, to receive into them French or Spanish garrisons. 
Had the king of Portugal submitted to those ignominious terms 
which his brother-in-law the king of Spain proposed to him, 
Britain would have been freed from a much greater incon- 
veniency than the loss of the Portugal trade, the burden of 
supporting a very weak ally, so unprovided of everything for 
his own defence that the whole power of England, had it been 
directed to that single purpose, could scarce perhaps have de 
fended him for another campaign. The loss of the Portugal 
trade would, no doubt, have occasioned a considerable embar 
rassment to the merchants at that time engaged in it, who 
might not, perhaps, have found out, for a year or two, any 
other equally advantageous method of employing their capitals; 
and in this would probably have consisted all the inconveniency 
which England could have suffered from this notable piece of 
commercial policy. 

The great annual importation of gold and silver is neither for 
the purpose of plate nor of coin, but of foreign trade. A round 
about foreign trade of consumption can be carried on more 
advantageously by means of these metals than of almost any 
other goods. As they are the universal instruments of com 
merce, they are more readily received in return for all com 
modities than any other goods; and on account of their small 



48 The Wealth of Nations 

bulk and great value, it costs less to transport them backward 
and forward from one place to another than almost any other 
sort of merchandise, and they lose less of their value by being 
so transported. Of all the commodities, therefore, which are 
bought in one foreign country, for no other purpose but to be 
sold or exchanged again for some other goods in another, there 
are none so convenient as gold and silver. In facilitating all 
the different round-about foreign trades of consumption which 
are carried on in Great Britain consists the principal advantage 
of the Portugal trade ; and though it is not a capital advantage, 
it is no doubt a considerable one. 

That any annual addition which, it can reasonably be sup 
posed, is made either to the plate or to the coin of the kingdom, 
could require but a very small annual importation of gold and 
silver, seems evident enough; and though we had no direct 
trade with Portugal, this small quantity could always, some 
where or another, be very easily got. 

Though the goldsmiths trade be very considerable in Great 
Britain, the far greater part of the new plate which they annually 
sell is made from other old plate melted down; so that the 
addition annually made to the whole plate of the kingdom 
cannot be very great, and could require but a very small annual 
importation. 

It is the same case with the coin. Nobody imagines, I 
believe, that even the greater part of the annual coinage, 
amounting, for ten years together, before the late reformation 
of the gold coin, to upwards of eight hundred thousand pounds 
a year in gold, was an annual addition to the money before 
current in the kingdom. In a country where the expense of 
the coinage is defrayed by the government, the value of the 
coin, even when it contains its full standard weight of gold and 
silver, can never be much greater than that of an equal quantity 
of those metals uncoined; because it requires only the trouble 
of going to the mint, and the delay perhaps of a few weeks, to 
procure for any quantity of uncoined gold and silver an equal 
quantity of those metals in coin. But, in every country, the 
greater part of the current coin is almost always more or less 
worn, or otherwise degenerated from its standard. In Great 
Britain it was, before the late reformation, a good deal so, the 
gold being more than two per cent, and the silver more than 
eight per cent, below its standard weight But if forty-four 
guineas and a half, containing their full standard weight, a pound 
weight of gold, could purchase very little more than a pound 



Treaties of Commerce 49 

weight of uncoined gold, forty-four guineas and a half wanting 
a part of their weight could not purchase a pound weight, and 
something was to be added in order to make up the deficiency. 
The current price of gold bullion at market, therefore, instead 
of being the same with the mint price, or 46 14*. 6d., was 
then about 47 145. and sometimes about 48. When the 
greater part of the coin, however, was in this degenerate 
condition, forty-four guineas and a half, fresh from the mint, 
would purchase no more goods in the market than any other 
ordinary guineas, because when they came into the coffers of 
the merchant, being confounded with other money, they could 
not afterwards be distinguished without more trouble than the 
difference was worth. Like other guineas they were worth no 
more than 46 145. 6d. If thrown into the melting pot, how 
ever, they produced, without any sensible loss, a pound weight 
of standard gold, which could be sold at any time for between 
47 145. and 48 either in gold or silver, as fit for all the pur 
poses of coin as that which had been melted down. There was 
an evident profit, therefore, in melting down new coined money, 
and it was done so instantaneously, that no precaution of 
government could prevent it. The operations of the mint were, 
upon this account, somewhat like the web of Penelope; the 
work that was done in the day was undone in the night. The 
mint was employed, not so much in making daily additions to 
the coin, as in replacing the very best part of it which was daily 
melted down. 

Were the private people, who carry their gold and silver to 
the mint, to pay themselves for the coinage, it would add to 
the value of those metals in the same manner as the fashion 
does to that of plate. Coined gold and silver would be more 
valuable than uncoined. The seignorage, if it was not exorbi 
tant, would add to the bullion the whole value of the duty; 
because, the government having everywhere the exclusive 
privilege of coining, no coin can come to market cheaper than 
they think proper to afford it. If the duty was exorbitant 
indeed, that is, if it was very much above the real value of tin- 
labour and expense requisite for coinage, false coiners, both at 
home and abroad, might be encouraged, by the great difference 
between the value of bullion and that of coin, to pour in so great 
a quantity of counterfeit money as might reduce the value of 
the government money. In France, however, though the 
seignorage is eight per cent., no sensible inconveniency of this 
kind is found to arise from it. The dangers to which a false 



50 The Wealth of Nations 

coiner is everywhere exposed, if he lives in the country of which 
he counterfeits the coin, and to which his agents or corre 
spondents are exposed if he lives in a foreign country, are by 
far too great to be incurred for the sake of a profit of six or 
seven per cent. 

The seignorage in France raises the value of the coin higher 
than in proportion to the quantity of pure gold which it con 
tains. Thus by the edict of January 1726, the l mint price of 
fine gold of twenty-four carats was fixed at seven hundred and 
forty livres nine sous and one denier one-eleventh, the mark of 
eight Paris ounces. The gold coin of France, making an allow 
ance for the remedy of the mint, contains twenty-one carats 
and three-fourths of fine gold, and two carats one-fourth of 
alloy. The mark of standard gold, therefore, is worth no more 
than about six hundred and seventy-one livres ten deniers. 
But in France this mark of standard gold is coined into thirty 
Louis-d ors of twenty-four livres each, or into seven hundred 
and twenty livres. The coinage, therefore, increases the value 
of a mark of standard gold bullion, by the difference between 
six hundred and seventy-one livres ten deniers, and seven 
hundred and twenty livres; or by forty-eight livres nineteen 
sous and two deniers. 

A seignorage will, in many cases, take away altogether, and 
will, in all cases, diminish the profit of melting down the new 
coin. This profit always arises from the difference between the 
quantity of bullion which the common currency ought to con 
tain, and that which it actually does contain. If this difference 
is less than the seignorage, there will be loss instead of profit. 
If it is equal to the seignorage, there will neither be profit nor 
loss. If it is greater than the seignorage, there will indeed be 
some profit, but less than if there was no seignorage. If, before 
the late reformation of the gold coin, for example, there had 
been a seignorage of five per cent, upon the coinage, there would 
have been a loss of three per cent, upon the melting down of 
the gold coin. If the seignorage had been two per cent, there 
would have been neither profit nor loss. If the seignorage had 
been one per cent, there would have been a profit, but of one 
per cent, only instead of two per cent. Wherever money is 
received by tale, therefore, and not by weight, a seignorage is 
the most effectual preventative of the melting down of the coin, 

1 Soe Dictionaire dcs Monnoies, torn. ii. article Seigneurae;e, p. 489, par 
M. Abot de Bazinghen, Conseiller-Comissaire en la Cour des Monnoies a 
Paris. 



Treaties of Commerce 5 i 



and, for the same reason, of its exportation. It is the best and 
heaviest pieces that are commonly either melted down or 
exported; because it is upon such that the largest profits are 
made. 

The law for the encouragement of the coinage, by rendering 
it duty-free, was first enacted during the reign of Charles II. for 
a limited time; and afterwards continued, by diuorent pro 
longations, till 1769, when it was rendered perpetual. The 
Bank of England, in order to replenish their coflers with money, 
are frequently obliged to carry bullion to the mint; and it was 
more for their interest, they probably imagined, that the coinage 
should be at the expense of the government than at their own. 
It was probably out of complaisance to this great company that 
the government agreed to render this law perpetual. Should 
the custom of weighing gold, however, come to be disused, as 
it is very likely to be on account of its inconveniency; should 
the gold coin of England come to be received by tale, as it was 
before the late recoinage, this great company may, perhaps, 
find that they have upon this, as upon some other occasions, 
mistaken their own interest not a little. 

Before the late recoinage, when the gold currency of England 
was two per cent, below its standard weight, as there was no 
seignorage, it was two per cent, below the value of that quantity 
of standard gold bullion which it ought to have contained. 
When this great company, therefore, bought gold bullion in 
order to have it coined, they were obliged to pay for it two per 
cent, more than it was worth after the coinage. But if there 
had been a seignorage of two per cent, upon the coinage, the 
common gold currency, though two per cent, below its standard 
weight, would notwithstanding have been equal in value to the 
quantity of standard gold which it ought to have contained; 
the value of the fashion compensating in this case the diminution 
of the weight. They would indeed have had the seignorage to 
pay, which being two per cent., their loss upon the whole trans 
action would have been two per cent, exactly the same, but no 
greater than it actually was. 

If the seignorage had been five per rent., and the gold currency 
only two per cent, below its standard weight, the bank wou!;l in 
this case have gained three per cent, upon the price of the 
bullion; but as they would have had a seignorage of five per 
cent, to pay upon the coinage, their loss upon the whole trans 
action would, in the same manner, have been exactly two per 
cent. 



52 The Wealth of Nations 

If the seignorage had been only one per cent, and the gold 
currency two per cent, below its standard weight, the bank would 
in this case have lost only one per cent, upon the price of the 
bullion; but as they would likewise have had a seignorage of one 
per cent, to pay, their loss upon the whole transaction would have 
been exactly two per cent, in the same manner as in all other 
cases. 

If there was a reasonable seignorage, while at the same time 
the coin contained its full standard weight, as it has done very 
nearly since the late recoinage, whatever the bank might lose 
by the seignorage, they would gain upon the price of the bullion; 
and whatever they might gain upon the price of the bullion, they 
would lose by the seignorage. They would neither lose nor gain, 
therefore, upon the whole transaction, and they would in this, 
as in all the foregoing cases, be exactly in the same situation 
as if there was no seignorage. 

When the tax upon a commodity is so moderate as not to 
encourage smuggling, the merchant who deals in it, though he 
advances, does not properly pay the tax, as he gets it back in 
the price of the commodity. The tax is finally paid by the last 
purchaser or consumer. But money is a commodity with regard 
to which every man is a merchant. Nobody buys it but in 
order to sell it again; and with regard to it there is in ordinary 
cases no last purchaser or consumer. When the tax upon coin 
age, therefore, is so moderate as not to encourage false coining, 
though everybody advances the tax, nobody finally pays it; 
because everybody gets it back in the advanced value of the 
coin. 

A moderate seignorage, therefore, would not in any case 
augment the expense of the bank, or of any other j . ivate persons 
who carry their bullion to the mint in order to be coined, and 
the want of a moderate seignorage does not in any case diminish 
it. Whether there is or is not a seignorage, if the currency 
contains its full standard weight, the coinage costs nothing to 
anybody, and if it is short of that weight, the coinage must 
always cost the difference between the quantity of bullion which 
ought to be contained in it, and that which actually is contained 
in it. 

The government, therefore, when it defrays the expense of 
coinage, not only incurs some small expense, but loses some 
small revenue which it might get by a proper duty; and neither 
the bank nor any other private persons are in the smallest degree 
benefited by this useless piece of public generosity. 



Treaties of Commerce 53 

The directors of the bank, however, would probably be un 
willing to agree to the imposition of a sci;:norage upon the 
authority of a speculation which promises them no gain, but 
only pretends to insure them from any loss. In the present 
state of the gold coin, and as long as it continues to be received 
by weight, they certainly would gain nothing by such a change. 
But if the custom of weighing the gold coin should ever go into 
misuse, as it is very likely to do, and if the gold coin should ever 
fall into the same state of degradation in which it was before the 
late recoinage, the gain, or more properly the savings of the 
bank, in consequence of the imposition of a scignorage, would 
probably be very considerable. The Bank of England is the 
only company which sends any considerable quantity of bullion 
to the mint, and the burden of the annual coinage falls entirely, 
or almost entirely, upon it. If this annual coinage had nothing 
to do but to repair the unavoidable losses and necessary wear 
and tear of the coin, it could seldom exceed fifty thousand or 
at most a hundred thousand pounds. But when the coin is 
degraded below its standard weight, the annual coinage must, 
besides this, fill up the large vacuities which exportation and 
the melting pot are continually making in the current coin. It 
was upon this account that during the ten or twelve years 
immediately preceding the late reformation of the gold coin, 
the annual coinage amounted at an average to more than eight 
hundred and fifty thousand pounds. But if there had been a 
seginorage of four or live per cent, upon the gold coin, it would 
probably, even in the state in which things then were, have put 
an effectual stop to the business both of exportation and of the 
melting pot. The bank, instead of losing -very year about two 
and a half per cent, upon the bullion which was to be coined into 
more than eight hundred and fifty thousand pounds, or incurring 
an annual loss of more than twenty-one thousand two hundred 
and Liiv pounds, would not probably have incurred the tenth 
part of that loss. 

The revenue allotted by parliament for defraying the expense 
of the roina. re is but fourteen thousand pounds a year, and the 
real expense v, iiirh it costs the government, or the fees of the 
officers of the mint, do not upon ordinary occasions, I am 
assured, exceed the half of that sum. The savinir of so very 
small a sum, or even the gaining of anotlvr which could not 
well be much larger, are objects too inconsiderable, it may be 
thought, to deserve the serious attention of government. But 
the saving of eighteen or twenty thousand pounds a year in c;is (> 



54 The Wealth of Nations 

of an event which is not improbable, which has frequently 
happened before, and which is very likely to happen again, is 
surely an object which well deserves the serious attention even 
of so great a company as the Bank of England. 

Some of the foregoing reasonings and observations might 
perhaps have been more properly placed in those chapters of the 
first book which treat of the origin and use of money, and of the 
difference between the real and the nominal price of commodities. 
But as the law for the encouragement of coinage derives its 
origin from those vulgar prejudices which have been introduced 
by the mercantile system, I judged it more proper to reserve 
them for this chapter. Nothing could be more agreeable to the 
spirit of that system than a sort of bounty upon the production 
of money, the very thing which, it supposes, constitutes the 
wealth of every nation. It is one of its many admirable ex 
pedients for enriching the country. 



CHAPTER VII 

OF COLONIES 
PART FIRST 

Oj the Motives for establishing neic Colonies 

THE interest which occasioned the first settlement of the different 
European colonies in America and the West Indies was not 
altogether so plain and distinct as that which directed the 
establishment of those of ancient Greece and Rome. 

All the different states of ancient Greece possessed, each of 
them, but a very small territory, and when the people in any 
one of them multiplied beyond what that territory could easily 
maintain, a part of them were sent in quest of a new habitation 
in some remote and distant part of the world; the warlike 
neighbours who surrounded them on all sides, rendering it diffi 
cult for any of them to enlarge very much its territory at home. 
The colonies of the Dorians resorted chiefly to Italy and Sicily, 
which, in the times preceding the foundation of Rome, were 
inhabited by barbarous and uncivilised nations: those of the 
lonians and Eolians, the two other great tribes of the Greeks, 
to Asia Minor and the islands of the Egean Sea, of which the 
inhabitants seem at that time to have been pretty much in the 



Colonies 55 

same state as those of Sicily and Italy. The mother city, 
though she considered the colony as a child, at all times entitled 
to grout favour and assistance, and owing in return much grati 
tude and respect, yet considered it as an emancipated child 
over whom she pretended to claim no direct authority or 
jurisdiction. The colony settled its own form of government, 
enacted its own laws, elected its own magistrates, and made 
peace or war with its neighbours as an independent state, which 
had no occasion to wait for the approbation or consent of the 
mother city. Nothing can be more plain and distinct than the 
interest which directed even- such establishment. 

Rome, like most of the other ancient republics, was originally 
founded upon an Agrarian law which divided the public territory 
in a certain proportion among the different citizens who com 
posed the state. The course of human affairs by marriage, by 
succession, and by alienation, necessarily deranged this original 
division, and frequently threw the lands, which had been 
allotted for the maintenance of many different families, into the 
possession of a single person. To remedy this disorder, for such 
it was supposed to be, a law was made restricting the quantity 
of land which any citizen could possess to five hundred jugera, 
about three hundred and fifty English acres. This law, how 
ever, though we read of its having been executed upon one or 
two occasions, was either neglected or evaded, and the inequality 
of fortunes went on continually increasing. The greater part of 
the citizens had no land, and without it the manners and customs 
of those times rendered it difficult for a freeman to maintain his 
independency. In the present times, though a poor man has no 
land of his own, if he has a little stock he may either farm the 
lands of another, or he may carry on some little retail trade; 
and if he has no stock, he may find employment eiti.cr as a 
country labourer or as an artificer. But among the ancient 
Romans the lands of the rich were all cultivated by slaves, who 
wrought under an overn-cr who was likewise a slave; so that a 
poor freeman had little chance of being employed either as a 
farmer or as a labourer. All trades and manufactures too, even 
the retail trade, were carried on by the slaves of the rich for the 
benefit of their masters, whose wealth, authority, and protection 
made it difficult for a poor freeman to maintain the competition 
against them. The citizens, therefore, who had no land, had 
scarce any other means of subsistence but the bounties of the 
candidates at the annual elections. The tribunes, when they 
had a mind to animate the people against the rich and the 



56 The Wealth of Nations 

great, put them in mind of the ancient division of lunds, and 
represented that law which restricted this sort of private pro 
perty as the fundamental law of the republic. The people 
became clamorous to get land, and the rich and the great, we 
may believe, were perfectly determined not to give them any 
part of theirs. To satisfy them in some measure, therefore, they 
frequently proposed to send out a new colony. But conquering 
Rome was, even upon such occasions, under no necessity of 
turning out her citizens to seek their fortune, if one may say so, 
through the wide world, without knowing where they were to 
settle. She assigned them lands generally in the conquered 
provinces of Italy, where, being within the dominions of the 
republic, they could never form any independent state; but 
were at best but a sort of corporation, which, though it had the 
power of enacting bye-laws for its own government, was at all 
times subject to the correction, jurisdiction, and legislative 
authority of the mother city. The sending out a colony of this 
kind not only gave some satisfaction to the people, but often 
established a sort of garrison, too, in a newly conquered province, 
of which the obedience might otherwise have been doubtful. 
A Roman colony therefore, whether we consider the nature of 
thr: establishment itself or the motives for making it, was alto 
gether different from a Greek one. The words accordingly, 
which in the original languages denote those different establish 
ments, have very different meanings. The Latin word (Colonia) 
signifies simply a plantation. The Greek word (a7roiKia\ on 
the contrary, signifies a separation of dwelling, a departure 
from home, a going out of the house. But, though the Roman 
colonies were in many respects different from the Greek ones, 
the interest which prompted to establish them was equally plain 
and distinct. Both institutions derived their origin either from 
irresistible necessity, or from clear and evident utility. 

The establishment of the European colonies in America and 
the West Indies arose from no necessity : and though the utility 
which has resulted from them has been very great, it is not 
altogether so clear and evident. It was not understood at their 
first establishment, and was not the motive either of that 
establishment or of the discoveries which gave occasion to it, 
and the mture, extent, and limits of that utility are not, 
perhaps, \\vll understood at this day. 

The Venetians, during the fourteenth and fifteenth centuries, 
carried on a very advantageous commerce in spiceries, and 
other East India goods, which they distributed among the other 



Colonies 57 

nations of Europe. They purchased them chiefly in Egypt, at 
that time under the dominion of the Mamelukes, the enemies 
of the Turks, of whom the Venetians were the enemies; and 
this union of interest, assisted by the money of Venice, formed 
such a connection as gave the Venetians almost a monopoly 
of the trade. 

The great profits of the Venetians tempted the avidity of the 
Portuguese. They had been endeavouring, during the course 
of the fifteenth century, to find out by sea a way to the countries 
from which the Moors brought them ivory and gold dust across 
the desert. They discovered the Madeiras, the Canaries, the 
Azores, the Cape de Verde Islands, the coast of Guinea, that of 
Loango, Congo, Angola, and Benguela, and, finally, the Cape of 
Good Hope. They had long wished to share in the profitable 
traffic of the Venetians, and this last discovery opened to them 
a probable prospect of doing so. In 1497, Vasco de Gama sailed 
from the port of Lisbon with a fleet of four ships, and after u 
navigation of eleven months arrived upon the coast of Indostan, 
and thus completed a course of discoveries which had been 
pursued with great steadiness, and with very little interruption, 
for nearly a century tog-tl,er. 

Some years before this, while the expectations of Europe were, 
in suspense about the projects of the Portuguese, of which tin- 
success appeared yet to be doubtful, a Genoese pilot formed the 
yet more daring project of sailing to the East Indies by the 
West. The situation of those countries was at that time very 
imperfectly known in Europe. The few European travellers 
who had been there had magnified the distance, perhaps through 
simplicity and ign >runce, what was really very great appearing 
almost infinite to those who could not measure it; or, perhaps, 
in order to increase somewhat more the marvellous of their own 
adventures in visiting regions so immensely remote from Europe. 
The longer the way was by the East, Columbus very justly 
concluded, the shorter it would be by the West. He proposed, 
.therefore, to take that way, as both the shortest and the surest, 
and he had the good fortune to convince Isabella of Castile of 
the probability of his project. He sailed from the port of 
Palos in August 1492, nearly five years before the expedition of 
Vasco de Gama set out from Portugal, and, after a voyage of 
between two and three months, discovered first some of the small 
Bahama or Lucayan islands, and afterwards the great island of 
St. Domingo. 

But the countries which Columbus discovered, either in this 



5 8 The Wealth of Nations 

or in any of his subsequent voyages, had no resemblance to 
those which he had gone in quest of. Instead of the wealth, 
cultivation, and populousness of China and Indostan, he found, 
in St. Domingo, and in all the other parts of the new world 
which he ever v sited, nothing but a country quite covered with 
wood, uncultivated, and inhabited only by some tribes of naked 
and miserable savages. He was not very willing, however, to 
believe that they were not the same with some of the countries 
described by Marco Polo, the first European who had visited, or 
at least had left behind him, any description of China or the 
East Indies; and a very slight resemblance, such as that which 
he found between the name of Cibao, a mountain in St. Domingo, 
and that of Cipango mentioned by Marco Polo, was frequently 
sufficient to make him return to this favourite prepossession, 
though contrary to the clearest evidence. In his letters to 
Ferdinand and Isabella he called the countries which he had 
discovered the Indies. He entertained no doubt but that they 
were the extremity of those which had been described by Marco 
Polo, and that they were not very distant from the Ganges, or 
from the countries which had been conquered by Alexander. 
Even when at last convinced that they were different, he still 
flattered himself that those rich countries were at no great 
distance, and, in a subsequent voyage, accordingly, went in 
quest of them along the coast of Terra Firma, and towards the 
Isthmus of Darien. 

In consequence of this mistake of Columbus, the name of the 
Indies has stuck to those unfortunate countries ever since; and 
when it was at last clearly discovered that the new were alto 
gether different from the old Indies, the former were called the 
West, in contradistinction to the latter, which were called the 
East Indies. 

It was of importance to Columbus, however, that the countries 
which he had discovered, whatever they were, should be repre 
sented to the court of Spain as of very great consequence; and, 
in what constitutes the real riches of every country, the animal 
and vegetable productions of the soil, there was at that time 
nothing which could well justify such a representation of them. 

The Cori, something between a rat and a rabbit, and sup 
posed by Mr. Buffon to be the same with the Aperea of Brazil, 
was the largest viviparous quadruped in St. Domingo. This 
species seems never to have been very numerous, and the dogs 
and cats of the Spaniards are said to have long ago almost 
entirely extirpated it, as well as some other tribes of a still 



Colonies 59 

smaller size. These, however, together with a pretty large 
lizard, called the Ivana, or Iguana, constituted the principal 
part of the animal food which the land afforded. 

The vegetable food of the inhabitants, though from their 
want of industry not very abundant, was not altogether so 
scanty. It consisted in Indian corn, yams, potatoes, banan is, 
etc., plants which were then altogether unknown in Europe, and 
which have never since been very much esteemed in it, or sup 
posed to yield a sustenance equal to what is drawn from the 
common sorts of grain and pulse, which have been cultivated 
in this part of the world time out of mind. 

The cotton plant, indeed, afforded the material of a very 
important manufacture, and was at that time to Europeans 
undoubtedly the most valuable of all the vegetable productions 
of those islands. But though in the end of the fifteenth century 
the muslins and other cotton goods of the East Indies were 
much esteemed in every part of Europe, the cotton manufacture 
itself was not cultivated in any part of it. Even this production, 
therefore, could not at that time appear in the eyes of Europeans 
to be of very great consequence. 

Finding nothing either in the animals or vegetables of the 
newly discovered countries which could justify a very advan 
tageous representation of them, Columbus turned his view 
towards their minerals; and in the richness of the productions 
of this third kingdom, he flattered himself he had found a full 
compensation for the insignificancy of those of the other two. 
The little bits of gold with which the inhabitants ornamented 
their dress, and which, he was informed, they frequently found 
in the rivulets and torrents that fell from the mountains, were 
sufficient to satisfy him that those mountains abounded with 
the richest gold mines. St. Domingo, therefore, was repre 
sented as a country abounding with gold, and, upon that 
account (according to the prejudices not only of the present 
times, but of those times) an inexhaustible source of real wealth 
to the crown and kingdom of Spain. When Columbus, upon 
his return from his first voyage, was introduced with a sort of 
triumphal honours to the sovereigns of Castile and Arragon, the 
principal productions of the countries which he had discovered 
were carried in solrnen procession before him. The only valu 
able part of them consisted in some little fillets, bracelets, and 
other ornaments of gold, and in some bales of cotton. The 
rest were mere objects of vulgar wonder and curiosity; some 
reeds of an extraordinary size, some birds of a very beautiful 
c : > 



60 The Wealth of Nations 

plumage, and some stuffed skins of the huge alligator and 
manati; all of which were preceded by six or seven of the 
wretched natives, whose singular colour and appearance added 
greatly to the novelty of the show. 

In consequence of the representations of Columbus, the 
council of Castile determined to take possession of countries of 
which the inhabitants were plainly incapable of defending them 
selves. The pious purpose of converting them to Christianity 
sanctified the injustice of the project. But the hope of finding 
treasures of gold there was the sole motive which prompted him 
to undertake it; and to give this motive the greater weight, it 
was proposed by Columbus that the half of all the gold and 
silver that should be found there should belong to the crown. 
This proposal was approved of by the council. 

As long as the whole or the far greater part of the gold, 
which the first adventurers imported into Europe, was got by 
so very easy a method as the plundering of the defenceless 
natives, it was not perhaps very difficult to pay even this heavy 
tax. But when the natives were once fairly stripped of all that 
they had, which, in St. Domingo, and in all the other countries 
discovered by Columbus, was done completely in six or eight 
years, and when in order to find more it had become necessary 
to dig for it in the mines, there was no longer any possibility of 
paying this tax. The rigorous exaction of it, accordingly, first 
occasioned, it is said, the total abandoning of the mines of St. 
Domingo, which have never been wrought since. It was soon 
reduced therefore to a third; then to a fifth; afterwards to a 
tenth; and at last to a twentieth part of the gross produce of 
the gold mines. The tax upon silver continued for a long time 
to be a fifth of the gross produce. It was reduced to a tenth 
only in the course of the present century. But the first adven 
turers do not appear to have been much interested about silver. 
Nothing less precious than gold seemed worthy of their attention. 

All the other enterprises of the Spaniards in the new world, 
subsequent to those of Columbus, seem to have been prompted 
by the same motive. It was the sacred thirst of gold that 
carried Oieda, Nicuessa, and Vasco Nugnes de Balboa, to the 
Isthmus of Darien, that carried Cortez to Mexico, and Almagro 
and Pizzarro to Chili and Peru. When those adventurers 
arrived upon any unknown coast, their first inquiry was always 
if there was any gold to be found there; and according to the 
information which they received concerning this particular, they 
determined either to quit the country or to settle in it. 



Colonies 61 

Of all those expensive and uncertain projects, however, which 
bring bankruptcy upon the greater part of the people who 
engage in them, there is none perhaps more perfectly ruinous 
than the search after new silver and gold mines. It is perhaps 
the most disadvantageous lottery in the world, or the one in 
which the gain of those who draw the prizes bears the 
least proportion to the loss of those who draw the blanks: 
for though the prizes are few and the blanks many, the 
common price of a ticket is the whole fortune of a very rich 
man. Projects of mining, instead of replacing the capital em 
ployed in them, together with the ordinary profits of stock, 
commonly absorb both capital and profit. They are the pro 
jects, therefore, to which of all others a prudent lawgiver, who 
desired to increase the capital of his nation, would least choose 
to give any extraordinary encouragement, or to turn towards 
them a greater share of that capital than what would go to 
them of its own accord. Such in reality is the absurd confi 
dence which almost all men have in their own good fortune 
that, wherever there is the least probability of success, too great 
a share of it is apt to go to them of its own accord. 

But though the judgment of sober reason and experience 
concerning such projects has always been extremely unfavour 
able, that of human avidity has commonly been quite otherwise. 
The same passion which has suggested to so many people the 
absurd idea of the philosopher s stone, has suggested to others 
the equally absurd one of immense rich mines of gold and silver. 
They did not consider that the value of those metals has, in all 
ages and nations, arisen chiefly from their scarcity, and that 
their scarcity has arisen from the very small quantities of them 
which nature has anywhere deposited in one place, from the 
hard and intractable substances with which she has almost 
everywhere surrounded those small quantities, and consequently 
from the labour and expense which are everywhere necessary in 
order to penetrate to and get at them. They flattered them 
selves that veins of those metals might in many places be found 
as large and as abundant as those which are commonly found 
of lead, or copper, or tin, or iron. The dream of Sir Walter 
Raleigh concerning the golden city and country of Eldorado, 
may satisfy us that even wise men are not always exempt from 
such strange delusions. More than a hundred years after the 
death of that great man, the Jesuit Gumila was still convinced 
of the reality of that wonderful country, and expressed with 
great warmth, and I dare to say with great sincerity, how 



62 The Wealth of Nations 

happy he should be to carry the light of the gospel to a people 
who could so well reward the pious labours of their missionary. 

In the countries first discovered by the Spaniards, no gold or 
silver mines are at present known which are supposed to be 
worth the working. The quantities of those metals which the 
first adventurers are said to have found there had probably 
been very much magnified, as well as the fertility of the mines 
which were wrought immediately after the first discovery. 
What those adventurers were reported to have found, however, 
was sufficient to inflame the avidity of all their countrymen. 
Every Spaniard who sailed to America expected to find an 
Eldorado. Fortune, too, did upon this what she has done upon 
very few other occasions. She realised in some measure the 
extravagant hopes of her votaries, and in the discovery and 
conquest of Mexico and Peru (of which the one happened about 
thirty, the other about forty years after the first expedition of 
Columbus), she presented them with something not very unlike 
that profusion of the precious metals which they sought for. 

A project of commerce to the East Indies, therefore, gave 
occasion to the first discovery of the West. A project of con 
quest gave occasion to all the establishments of the Spaniards 
in those newly discovered countries. The motive which excited 
them to this conquest was a project of gold and silver mines; 
and a course of accidents, which no human wisdom could foresee, 
rendered this project much more successful than the under 
takers had any reasonable grounds for expecting. 

The first adventurers of all the other nations of Europe who 
attempted to make settlements in America were animated by 
the like chimerical views ; but they were not equally successful. 
It was more than a hundred years after the first settlement of 
the Brazils before any silver, gold, or diamond mines were dis 
covered there. In the English, French, Dutch, and Danish 
colonies, none have ever yet been discovered; at least none 
that are at present supposed to be worth the working. The 
first English settlers in North America, however, offered a fifth 
of all the gold and silver which should be found there to the 
king, as a motive for granting them their patents. In the 
patents to Sir Walter Raleigh, to the London and Plymouth 
companies, to the council of Plymouth, etc., this fifth was 
accordingly reserved to the crown. To the expectation of 
finding gold and silver mines, those first settlers, too, joined 
that of discovering a north-west passage to the East Indies. 
They have hitherto been disappointed in both. 



Colonies 63 



PART SECOND 
Causes of the Prosperity of Nnr Colonies 

THE colony of a civilised nation which takes possession either 
of a waste country, or of one so thinly inhabited that the natives 
easily give place to the new settlers, advances more rapidly to 
weal tli and greatness than any other human society. 

The colonists cam out with them a knowledge of agriculture 
and of other useful arts superior to what can grow up of its 
own accord in the course of many centuries among savage and 
barbarous nations. They carry out with them, too, the habit 
of subordination, some notion of the regular government which 
takes place in their own country, of the system of laws which 
support it, and of a regular administration of justice; and they 
naturally establish something of the same kind in the new settle 
ment. But among savage and barbarous nations, the natural 
progress of law and government is still slower than the natural 
progress of arts, after law and government have been so far 
established as is necessary for their protection. Every colonist 
gets more land than he can possibly cultivate. He has no rent, 
and scarce any taxes to pay. No landlord shares with him in 
its produce, and the share of the sovereign is commonly but a 
trifle. He has every motive to render as great as possible a 
produce, which is thus to be almost entirely his own. But his 
land is commonly so extensive that, with all his own industry, 
and with all the industry of other people whom he can get to 
employ, he can seldom make it produce the tenth part of what 
it is capable of producing. He is eager, therefore, to collect 
labourers from all quarters, and to reward them with the most 
liberal wages. But those liberal wages, joined to the plenty and 
cheapness of land, soon make those labourers leave him, in order 
to become landlords themselves, and to reward, with equal 
liberality, other labourers, who soon leave them for the same 
reason that they left their first master. The liberal reward of 
labour encourages marriage. The children, during the tender 
years of infancy, are well fed and properly taken care of, and 
when they are grown up, the value of their labour greatly over 
pays their maintenance. When arrived at maturity, the high 
price of labour, and the low price of land, enable them to 
establish themselves in the same manner as their fathers did 
before them. 

In other countries, rent and profit eat up wages, and the two 



64 The Wealth of Nations 

superior orders of people oppress the inferior one. But in new 
colonies the interest of the two superior orders obliges them to 
treat the inferior one with more generosity and humanity; at 
least where that inferior one is not in a state of slavery. Waste 
lands of the greatest natural fertility are to be had for a trifle. 
The increase of revenue which the proprietor, who is always the 
undertaker, expects from their improvement, constitutes his 
profit which in these circumstances is commonly very great. 
But this great profit cannot be made without employing the 
labour of other people in clearing and cultivating the land ; and 
the disproportion between the great extent of the land and the 
small number of the people, which commonly takes place in new 
colonies, makes it difficult for him to get this labour. He does 
not, therefore, dispute about wages, but is willing to employ 
labour at any price. The high wages of labour encourage 
population. The cheapness and plenty of good land encourage 
improvement, and enable the proprietor to pay those hiph wages. 
In those wages consists almost the whole price of the land; and 
though they are high considered as the wages of labour, they 
are low considered as the price of what is so very valuable. 
What encourages the progress of population and improvement 
encourages that of real wealth and greatness. 

The progress of many of the ancient Greek colonies towards 
wealth and greatness seems accordingly to have been very 
rapid. In the course of a century or two, several of them appear 
to have rivalled, and even to have surpassed their mother cities. 
Syracuse and Agrigentum in Sicily, Tarentum and Locri in Italy, 
Ephesus and Miletus in Lesser Asia, appear by all accounts to 
have been at least equal to any of the cities of ancient Greece. 
Though posterior in their establishment, yet all the arts of 
refinement, philosophy, poetry, and eloquence seem to have 
been cultivated as early, and to have been improved as highly 
in them as in any part of the mother country. The schools of 
the two oldest Greek philosophers, those of Thales and Pytha 
goras, were established, it is remarkable, not in ancient Greece, 
but the one in an Asiatic, the other in an Italian colony. All 
those colonies had established themselves in countries inhabited 
by savage and barbarous nations, who easily gave place to the 
new settlers. They had plenty of good land, and as they were 
altogether independent of the mother city, they were at liberty 
to manage their own affairs in the way that they judged was 
most suitable to their own interest. 

The history of the Roman colonies is bv no means so brilliant. 



Colonies 65 

Some of them, indeed, such as Florence, have in the course of 
many ages, and after the fall of the mother city, grown up to be 
considerable states. But the progress of no one of them seems 
ever to have been very rapid. They were all established in 
conquered provinces, which in most cases had been fully in 
habited before. The quantity of land assigned to each colonist 
was seldom very considerable, and as the colony was not in 
dependent, they were not always at liberty to manage their 
own affairs in the way that they judged was most suitable to 
their own interest. 

In the plenty of good land, the European colonies established 
in America and the West Indies resemble, and even greatly 
surpass, those of ancient Greece. In their dependency upon 
the mother state, they resemble those of ancient Rome ; but 
their great distance from Europe has in all of them alleviated 
more or less the effects of this dependency. Their situation 
has placed them less in the view and less in the power of their 
mother country. In pursuing their interest their own way, 
their conduct has, upon many occasions, been overlooked, either 
because not known or not understood in Europe; and upon 
some occasions it has been fairly suffered and submitted to, 
because their distance rendered it difiicult to restrain it. Even 
the violent and arbitrary government of Spain has, upon many 
occasions, been obliged to recall or soften the orders which had 
been given for the government of her colonies for fear of a 
general insurrection. The progress of all the European colonies 
in wealth, population, and improvement, has accordingly been 
very great. 

The crown of Spain, by its share of the gold and silver, derived 
some revenue from its colonies from the moment of tlu-ir first 
establishment. It was a revenue, too, of a nature to excite in 
human avidity the most extravagant expectations of still greater 
riches. The Spanish colonies, therefore, from the moment of 
their first establishment, attracted very much the attention of 
their mother country, while those of the other European nations 
were for a long time in a great measure neglected. The former 
did not, perhaps, thrive the better in consequence of this 
attention; nor the latter the worse in consequence of this 
neglect. In proportion to the extent of the country which they 
in some measure possess, the Spanish colonies are considered as 
less populous and thriving than those of almost any other 
European nation. The progress even of the Spanish colonies, 
however, in population and improvement, has certainly been 



66 The Wealth of Nations 

very rapid and very great. The city of Lima, founded since the 
conquest, is represented by Ulloa as containing fifty thousand 
inhabitants near thirty years ago. Quito, which had been but 
a miserable hamlet of Indians, is represented by the same author 
as in his time equally populous. Gemelli Carreri, a pretended 
traveller, it is said, indeed, but who seems everywhere to have 
written upon extremely good information, represents the city of 
Mexico as containing a hundred thousand inhabitants ; a number 
which, in spite of all the exaggerations of the Spanish writers, 
is, probably, more than five times greater than what it contained 
in the time of Montezuma. These numbers exceed greatly those 
of Boston, New York, and Philadelphia, the three greatest cities 
of the English colonies. Before the conquest of the Spaniards 
there were no cattle fit for draught either in Mexico or Peru. 
The lama was their only beast of burden, and its strength seems 
to have been a good deal inferior to that of a common ass. The 
plough was unknown among them. They were ignorant of the 
use of iron. They had no coined money, nor any established 
instrument of commerce of any kind. Their commerce was 
carried on by barter. A sort of wooden spade was their principal 
instrument of agriculture. Sharp stones served them for knives 
and hatchets to cut with; fish bones and the hard sinews of 
certain animals served them for needles to sew with; and these 
seem to have been their principal instruments of trade. In 
this state of things, it seems impossible that either of those 
empires could have been so much improved or so well cultivated 
as at present, when they are plentifully furnished with all sorts 
of European cattle, and when the use of iron, of the plough, and 
of many of the arts of Europe, has been introduced among them. 
But the populousness of every country must be in proportion to 
the degree of its improvement and cultivation. In spite of the 
cruel destruction of the natives vh di followed the conquest, 
these two great empires are, probably, more populous now than 
they ever were before: and the people are surely very different; 
for we must acknowledge, I apprehend, that the Spanish Creoles 
are in many respects superior to the ancient Indians. 

After the settlements of the Spaniards, that of the Portuguese 
in Brazil is the oldest of any European nation in America. But 
as for a long time after the first discovery neither gold nor 
silver mines were found in it, and as it afforded, upon that 
account, little or no revenue to the crown, it was for a long time 
in a great measure neglected; and during this state of neglect 
it grew up to be a great and powerful colony. While Portugal 



Colonies 67 

was under the dominion of Spain, Brazil was attacked by the 
Dutch, who got possession of seven of the fourteen provinces 
into which it is divided. They expected soon to conquer the 
other seven, when Portugal recovered its independency by the 
elevation of the family of Braganza to the throne. The Dutch 
then, as enemies to the Spaniards, became friends to the Portu 
guese, who were likewise the enemies of the Spaniards. They 
agreed, therefore, to leave that part of Brazil, which they had 
not conquered, to the King of Portugal, who agreed to leave 
that part which they had conquered to them, as a matter not 
worth disputing about with such good allies. But the Dutch 
government soon began to oppress the Portuguese colonists, 
who, instead of amusing themselves with complaints, took arms 
against their new masters, and by their own valour and resolu 
tion, with the connivance, indeed, but without any avowed 
assistance from the mother country, drove them out of Brazil. 
The Dutch, therefore, rinding it impossible to keep any part 
of the country to themselves, were contented that it should be 
entirely restored to the crown of Portugal. In this colony there 
are said to be more than six hundred thousand people-, either 
Portuguese or descended from Portuguese, Creoles, mulattoes, 
and a mixed race beteween Portuguese and Brazilians. No one 
colony in America is supposed to contain so great a number of 
people of European extraction. 

Towards the end of the fifteenth, and during the greater part 
of the sixteenth century, Spain and Portugal were the two great 
naval powers upon the ocean; for though the commerce of 
Venice extended to every part of Europe-, its fleets had scarce 
ever sailed beyond the Mediterranean. The Spaniards, in virtue 
of the first discovery, claimed all America as their own ; and 
though they could not hinder so great a naval power as that 
of Portugal from settling in Brazil, such was, at that time, the 
terror of their name, that the greater part of the other nations 
of Europe were afraid to establish themselves in any other part 
of that great continent. The French, who attempted to settle 
in Florida, were all murdered by the Spaniards. Hut the de 
clension of the naval power of this latter iv.it i >n, in consequence 
of the defeat or miscarriage of what they called their Invincible 
Armada, which happened towards the end of the sixteenth 
cent iry, put it out of their power to obstruct any longer the 
settlements of the other European nations. In the rours? of 
the seventeenth century, therefore, the Erv .lish, I rench, Dutch, 
Danes, :md Swedes, all the great nations who had any ports 

*C43 



68 The Wealth of Nations 

upon the ocean, attempted to make some settlements in the new 
world. 

The Swedes established themselves in New Jersey; and the 
number of Swedish families still to be found there sufficiently 
demonstrates that this colony was very likely to prosper had 
it been protected by the mother country. But being neglected 
by Sweden, it was soon swallowed up by the Dutch colony of 
New York, which again, in 1674., fell under the dominion of the 
English. 

The small islands of St. Thomas and Santa Cruz are the only 
countries in the new world that have ever been possessed by 
the Danes. These little settlements, too, were under the govern 
ment of an exclusive company, which had the sole right, both 
of purchasing the surplus produce of the colonists, and of supply 
ing them with such goods of other countries as they wanted, 
and which, therefore, both in its purchases and sales, had not 
only the power of oppressing them, but the greatest temptation 
to do so. The government of an exclusive company of merchants 
is, perhaps, the worst of all governments for any country what 
ever. It was not, however, able to stop altogether the progress 
of these colonies, though it rendered it more slow and languid. 
The late King of Denmark dissolved this company, and since 
that time the prosperity of these colonies has been very great. 

The Dutch settlements in the West, as well as those in the 
East Indies, were originally put under the government of an 
exclusive company. The progress of some of them, therefore, 
though it has been considerable, in comparison with that of 
almost any country that has been long peopled and established, 
has been languid and slow r in comparison with that of the greater 
part of new colonies. The colony of Surinam, though very 
considerable, is still inferior to the greater part of the sugar 
colonies of the other European nations. The colony of Nova 
Belgia, now divided into the two provinces of New York and 
New Jersey, would probably have soon become considerable too, 
even though it had remained under the government of the Dutch. 
The plenty and cheapness of good land are such powerful causes 
of prosperity that the very worst government is scarce capable 
of checking altogether the efficacy of their operation. The great 
distance, too, from the mother country would enable the colonists 
to evade more or less, by smuggling, the monopoly which the 
company enjoyed against them. At present the company 
allows all Dutch ships to trade to Surinam upon paying two 
and a half per cent, upon the value of their cargo for a licence; 



Colonies 69 

and only reserves to itself exclusively the direct trade from 
Africa to America, which consists almost entirely in the slave 
trade. This relaxation in the exclusive privileges of the com 
pany is probably the principal cause of that degree of prosperity 
which that colony at present enjoys. Curacoa and Eustatia, the 
two orincipal islands belonging to the Dutch, are free ports open 
lo the ships of all nations, anu this freedom, in the midst of 
better colonies whose ports are open to those of one nation only, 
has been the great cause of the prosperity of those two barren 
islands. 

The French colony of Canada was, during the greater part of 
the last century, and some part of the present, under the 
government of an exclusive company. Under so unfavourable 
an administration its progress was necessarily very slow in 
comparison with that of other new colonies; but it became 
much more rapid when this company was dissolved after the 
fall of what is called the Mississippi scheme. When the English 
got possession of this country, they found in it near double the 
number of inhabitants which Father Charlevoix had assigned to 
it between twenty and thirty years before. That Jesuit had 
travelled over the whole country, and had no inclination to 
represent it as less considerable than it really was. 

The French colony of St. Domingo was established by pirates 
and freebooters, who, for a long time, neither required the pro 
tection, nor acknowledged the authority of France; and when 
that race of banditti became so far citizens as to acknowledge 
this authority, it was for a long time necessary to exercise it 
with very great gentleness. During this period the population 
and improvement of this colony increased very fast. Even the 
oppression of the exclusive company, to which it was for some 
time subjected, with all the other colonies of France, though it 
no doubt retarded, had not been able to stop its progress alto 
gether. The course of its prosperity returned as soon as it was 
relieved from that oppression. It is now the most important of 
the sugar colonies of the West Indies, and its produce is said to 
be greater than that of all the English sugar colonies put 
together. The other sugar colonies of France are in general all 
very thriving. 

But there are no colonies of which the progress has been 
more rapid than that of the English in North America. 

Plenty of good land, and liberty to manage their own affairs 
their own way, seem to be the two great causes of the prosperity 
of all new colonies. 



70 The Wealth of Nations 

In the plenty of good land the English colonies of North 
America, though no doubt very abundantly provided, are how 
ever inferior to those of the Spaniards and Portuguese, and not 
superior to some of those possessed by the French before the 
late war. But the political institutions of the English colonies 
have been more favourable to the improvement and cultivation 
of this land than those of any of the other three nations. 

First, the engrossing of uncultivated land, though it has by 
no means been prevented altogether, has been more restrained 
in the English colonies than in any other. The colony law 
which imposes upon every proprietor the obligation of im 
proving and cultivating, within a limited time, a certain pro 
portion of his lands, and which in case of failure, declares those 
neglected lands grantable to any other person, though it has 
not, perhaps, been very strictly executed, has, however, had 
some effect. 

Secondly, in Pennsylvania there is no right of primogeniture, 
and lands, like movables, are divided equally among all the 
children of the family. In three of the provinces of New 
England the oldest has only a double share, as in the Mosaical 
law. Though in those provinces, therefore, too great a quan 
tity of land should sometimes be engrossed by a particular 
individual, it is likely, in the course of a generation or two, to 
be sufficiently divided again. In the other English colonies, 
indeed, the right of primogeniture takes place, as in the law of 
England. But in all the English colonies the tenure of the 
lands, which are all held by free socage, facilitates alienation, 
and the grantee of any extensive tract of land generally finds it 
for his interest to alienate, as fast as he can, the greater part of 
it, reserving only a small quit-rent. In the Spanish and Portu 
guese colonies, what is called the right of Majorazzo l takes 
place in the succession of all those great estates to which any 
title of honour is annexed. Such estates go all to one person, 
and are in effect entailed and unalienable. The French colonies, 
indeed, are subject to the custom of Paris, which, in the inherit 
ance of land, is much more favourable to the younger children 
than the law of England. But in the French colonies, if any 
part of an estate, held by the noble tenure of chivalry and 
homage, is alienated, it is, for a limited time, subject to the 
right of redemption, either by the heir of the superior or by the 
heir of the family; and all the largest estates of the country 
are held by such noble tenures, which necessarily embarrass 

1 Jus Majoratus. 



Colonies 71 

alienation. But in a new colony a great uncultivated estate 
is likely to be much more speedily divided by alienation than 
by succession. The plenty and cheapness of good land, it has 
already been observed, are the principal causes of the rapid 
prosperity of new colonies. The engrossing of land, in effect, 
destroys this plenty and cheapness. The engrossing of unculti 
vated land, besides, is the greatest obstruction to its improve 
ment. But the labour that is employed in the improvement 
and cultivation of land affords the greatest and most valuable 
produce to the society. The produce of labour, in this case, 
pays not only its own wages, and the profit of the stock which 
employs it, but the rent of the land too upon which it is em 
ployed. The labour of the English colonists, therefore, being 
more employed in the improvement and cultivation of land, is 
likely to afford a greater and more valuable produce than that 
of any of the other three nations, which, by the engrossing of 
land, is more or less diverted towards other employments. 

Thirdly, the labour of the English colonists is not only likely 
to afford a greater and more valuable produce, but, in conse 
quence of the moderation of their taxes, a greater proportion of 
this produce belongs to themselves, which they may store up 
and employ in nutting into motion a still greater quantity of 
labour. The English colonists have never yet contributed any 
thing towards the defence of the mother country, or towards 
the support of its civil government. They themselves, on the 
contrary, have hitherto been defended almost entirely at the 
expense of the mother country. But the expense of fleets and 
armies is out of all proportion greater than the necessary 
expense of civil government. The expense of their own civil 
government has always been very moderate. It has generally 
been confined to what was necessary for paying competent 
salaries to the governor, to the judges, and to some other officers 
of police, and for maintaining a few of the most useful public 
works. The expense of the civil establishment of Massachusetts 
Bay, before the commencement of the present disturbances, used 
to be but about 18,000 a year. That of New Hampshire and 
Rhode Island, {3500 each. That of Connecticut, 4000. That 
of New York and Pennsylvania, /4Soo each. That of New 
Jersey, i 200. That of Virginia and South Carolina, 8000 each. 
The civil establishment of Nova Scotia and Georgia are partly 
supported by an annual grant of parliament. But Nova 
Scotia pays, besides, about /yooo a year towards the public 
expenses of the colony; and Georgia about 2500 a year. All 



72 The Wealth of Nations 

the different civil establishments in North America, in short, 
exclusive of those of Maryland and North Carolina, of which no 
exact account has been got, did not, before the commencement 
of the present disturbances, cost the inhabitants above 64,700 
a year; an ever-memorable example at how small an expense 
three millions of people may not only be governed, but well 
governed. The most important part of the expense of govern 
ment, indeed, that of defence and protection, has constantly 
fallen upon the mother country. The ceremonial, too, of the 
civil government in the colonies, upon the reception of a new 
governor, upon the opening of a new assembly, etc., though 
sufficiently decent, is not accompanied with any expensive pomp 
or parade. Their ecclesiastical government is conducted upon 
a plan equally frugal. Tithes are unknown among them; and 
their clergy, who are far from being numerous, are maintained 
either by moderate stipends, or by the voluntary contributions 
of the people. The power of Spain and Portugal, on the con 
trary, derives some support from the taxes levied upon their 
colonies. France, indeed, has never drawn any considerable 
revenue from its colonies, the taxes which it levies upon 
them being generally spent among them. But the colony 
government of all these three nations is conducted upon a 
much more expensive ceremonial. The sums spent upon the 
reception of a new viceroy of Peru, for example, have frequently 
been enormous. Such ceremonials are not only real taxes paid 
by the rich colonists upon those particular occasions, but they 
serve to introduce among them the habit of vanity and expense 
upon all other occasions. They are not only very grievous 
occasional taxes, but they contribute to establish perpetual 
taxes of the same kind still more grievous; the ruinous taxes 
of private luxury and extravagance. In the colonies of all 
those three nations too, the ecclesiastical government is ex 
tremely oppressive. Tithes take place in all of them, and are 
levied with the utmost rigour in those of Spain and Portugal. 
All of them, besides, are oppressed with a numerous race of 
mendicant friars, whose beggary being not only licensed but 
consecrated by religion, is a most grievous tax upon the poor 
people, who are most carefully taught that it is a duty to give, 
and a very great sin to refuse them their charity. Over and 
above all this, the clergy are, in all of them, the greatest 
engrossers of land. 

fourthly, in the disposal of their surplus produce, or of 
what is over and above their own consumption, the English 



Colonies 73 

colonies have been more favoured, and have been allowed a 
more extensive market, than those of any other European 
nation. Every European nation has endeavoured more or less 
to monopolise to itself the commerce of its colonies, and, upon 
that account, has prohibited the ships of foreign nations from 
trading to them, and has prohibited them from importing 
European goods from any foreign nation. But the manner in 
which this monopoly has been exercised in different nations has 
l>een very different. 

Some nations have given up the whole commerce of their 
colonies to an exclusive company, of whom the colonists were 
obliged to buy all such European goods as they wanted, and to 
whom they were obliged to sell the whole of their own surplus 
produce. It was the interest of the company, therefore, not 
only to sell the former as dear, and to buy the latter as cheap 
as possible, but to buy no more of the latter, even at this low 
price than what they could dispose of for a very high price 
in Europe. It was their interest, not only to degrade in all 
cases the value of the surplus produce of the colony, but in many 
cases to discourage and keep down the natural increase of its 
quantity. Of all the expedients that can well be contrived to 
stunt the natural growth of a new colony, that of an exclusive 
company is undoubtedly the most effectual. This, however, 
has been the policy of Holland, though their company, in the 
course of the present century, has given up in many respects the 
exertion of their exclusive privilege. This, too, was the policy 
of Denmark till the reign of the late king. It has occasionally 
been the policy of France, and of late, since 1755, after it had 
been abandoned by all other nations on account of its absurdity, 
it has become the policy of Portugal with regard at least to two 
of the principal provinces of Brazil, Fernambuco and Marannon. 

Other nations, without establishing an exclusive company, 
have confined the whole commerce of their colonies toaparticular 
port of the mother country, from whence no ship was allowed to 
sail, but either in a fleet an<l at a particular season, or, if single, 
in consequence of a paricular licence, which in most cases was 
very well paid for. This policy opened, indeed, the trade of the 
colonies to all the natives of the mother country, provided they 
traded from the proper port, at the proper season, and in the 
proper vessels. But as all the different merchants, who joined 
their stocks in order to fit out those licensed vessels, would find 
it for their interest to act in concert, the trade which w:i* carried 
on in this manner would necessarily be conducted very nearly 



74 The Wealth of Nations 

upon the same principles as that of an exclusive company. The 
profit of those merchants would be almost equally exorbitant 
and oppressive. The colonies would be ill supplied, and would 
be obliged both to buy very dear, and to sell very cheap. This, 
however, till within these few years, had always been the policy 
of Spain, and the price of all European goods, accordingly, is 
said to have been enormous in the Spanish West Indies. At 
Quito, we are told by Ulloa, a pound of iron sold for about four 
and sixpence, and a pound of steel for about six and ninepence 
sterling. But it is chiefly in order to purchase European goods 
that the colonies part with their own produce. The more, there 
fore, they pay for the one, the less they really get for the other, 
and the clearness of the one is the same thing with the cheapness 
of the other. The policy of Portugal is in this respect the same 
as the ancient policy of Spain with regard to all its colonies, 
except Fernambuco and Marannon, and with regard to these 
it has lately adopted a still worse. 

Other nations leave the trade of their colonies free to all their 
subjects who may carry it on from all the different ports of the 
mother country, and who have occasion for no other licence 
than the common despatches of the custom-house. In this case 
the number and dispersed situation of the different traders 
renders it impossible for them to enter into any general com 
bination, and their competition is sufficient to hinder them from 
making very exorbitant profits. Under so liberal a policy the 
colonies are enabled both to sell their own produce and to buy 
the goods of Europe at a reasonable price. But since the dis 
solution of the Plymouth company, when our colonies were but 
in their infancy, this has always been the policy of England. It 
has generally, too, been that of France, and has been uniformly 
so since the dissolution of what, in England, is commonly called 
their Mississippi company. The profits of the trade, therefore, 
which France and England carry on with their colonies, though 
no doubt somewhat higher than if the competition was free to 
all other nations, are, however, by no means exorbitant ; and the 
price of European goods accordingly is not extravagantly high 
in the greater part of the colonies of either of those nations. 

In the exportation of their own surplus produce too, it is only 
with regard to certain commodities that the colonies of Great 
Britain are confined to the market of the mother country. 
These commodities having been enumerated in the act of 
navigation and in some other subsequent acts, have upon that 
account been called enumerated commodities. The rest are called 



Colonies 75 

non-enumerated ; and may be exported directly to other countries 
provided it is in British or Plantation ships, of which the owners 
and three-fourths of the mariners are British subjects. 

Among the non-enumerated commodities are some of the 
most important productions of America and the West Indies; 
grain of all sorts, lumber, salt provisions, fish, sugar, and rum. 

Grain is naturally the first and principal object of the culture 
of all new colonies. By allowing them a very extensive market 
for it, the law encourages them to extend this culture much 
beyond the consumption of a thinly inhabited country, and thus 
to provide beforehand an ample subsistence for a continually 
increasing population. 

In a country quite covered with wood, where timber con 
sequently is of little or no value, the expense of clearing the 
ground is the principal obstacle to improvement. By allowing 
the colonies a very extensive market for their lumber, the law 
endeavours to facilitate improvement by raising the price of a 
commodity which would otherwise be of little value, and thereby 
enabling them to make some profit of what would otherwise be 
mere expense. 

In a country neither half-peopled nor half-cultivated, cattle 
naturally multiply beyond the consumption of the inhabitants, 
and are often upon that account of little or no value. But it 
is necessary, it has already been shown, that the price of cattle 
should bear a certain proportion to that of corn before the 
greater part of the lands of any country can be improved. By 
allowing to American cattle, in all shapes, dead and alive, a 
very extensive market, the law endeavours to raise the value 
of a commodity of which the high price is so very essential to 
improvement. The good effects of this liberty, however, must 
be somewhat diminished by the 4th of George III. c. 15, which 
puts hides and skins among the enumerated commodities, and 
thereby tends to reduce the value of American cattle. 

To increase the shipping and naval power of Great Britain, 
by the extenison of the fisheries of our colonies, is an object 
which the legislature seems to have had almost constantly in 
view. Those fisheries, upon this account, have had all the 
encouragement which freedom can give them, and they have 
flourished accordingly. The New England fishery in particular 
was, before the late disturbances, one of the most important, 
perhaps, in the world. The whale-fishery which, notwithstand 
ing an extravagant bounty, is in Great Britain carried on to so 
little purpose that in the opinion of many people (which I do 



76 The Wealth of Nations 

not, however, pretend to warrant) the whole produce does not 
much exceed the value of the bounties which are annually paid 
for it, is in New England carried on without any bounty to a 
very great extent. Fish is one of the principal articles with 
which the North Americans trade to Spain, Portugal, and the 
Mediterranean. 

Sugar was originally an enumerated commodity which could 
be exported only to Great Britain. But in 1731, upon a repre 
sentation of the sugar-planters, its exportation was permitted 
to all parts of the world. The restrictions, however, with which 
this liberty was granted, joined to the high price of sugar in 
Great Britain, have rendered it, in a great measure, ineffectual. 
Great Britain and her colonies still continue to be almost the 
sole market for all the sugar produced in the British plantations. 
Their consumption increases so fast that, though in consequence 
of the increasing improvement of Jamaica, as well as of the 
Ceded Islands, the importation of sugar has increased very 
greatly within these twenty years, the exportation to foreign 
countries is said to be not much greater than before. 

Rum is a very important article in the trade which the 
Americans carry on to the coast of Africa, from which they 
bring back negro slaves in return. 

If the whole surplus produce of America in grain of all sorts, 
in salt provisions and in fish, had been put into the enumera 
tion, and thereby forced into the market of Great Britain, it 
would have interfered too much with the produce of the industry 
of our own people. It was probably not so much from any 
regard to the interest of America as from a jealousy of this 
interference that those important commodities have not only 
been kept out of the enumeration, but that the importation into 
Great Britain of all grain, except rice, and of salt provisions, 
has, in the ordinary state of the law, been prohibited. 

The non-enumerated commodities could originally be ex 
ported to all parts of the world. Lumber and rice, having been 
once put into the enumeration, when they were afterwards 
taken out of it, were confined, as to the European market, to 
the countries that lie south of Cape Finisterre. By the 6th of 
George III. c. 52, all non-enumerated commodities were sub 
jected to the like restriction. The parts of Europe which lie 
south of Cape Finisterre are not manufacturing countries, and 
we were less jealous of the colony ships carrying home from 
them any manufactures which could interfere with our own. 

The enumerated commodities are of two sorts: first, such as 



Colonies 77 

are either the peculiar produce of America, or as cannot he 
produced, or at least are not produced, in the mother country. 
Of this kind are molasses, coffee, cocoa-nuts, tobacco, pimento, 
ginger, whale-fins, raw silk, cotton-wool, beaver, and other peltry 
of America, indigo, fustic, and other dying woods; secondly, 
such as are not the peculiar produce of America, but which arc 
and may be produced in the mother country, though not in 
such quantities as to supply tht greater part of her demand, 
which is principally supplied from foreign countries. Of this 
kind are all naval stores, masts, yards, and bowsprits, tar, pitch, 
and turpentine, pig and bar iron, copper ore, hides and skins, 
pot and pearl ashes. The largest importation of commodities 
of the first kind could not discourage the growth or interfere 
with the sale of any part of the produce of the mother country. 
By confining them to the home market, our merchants, it was 
expected, would not only be enabled to buy them cheaper in 
the plantations, and consequently to sell them with a better 
profit at home, but to establish between the plantations and 
foreign countries an advantageous carrying trade, of which 
Great Britain was necessarily to be the centre or emporium, as 
the European country into which those commodities were first 
to be imported. The importation of commodities of the second 
kind might be so managed too, it was supposed, as to interfere, 
not with the sale of those of the same kind which were produced 
at home, but with that of those which were imported from 
foreign countries; because, by means of proper duties, they 
might be, rendered always somewhat dearer than the former, 
and yet a good deal cheaper than the latter. By confining such 
commodities to the home market, therefore, it was proposed to 
discourage the produce, not of Great Britain, but of some foreign 
countries with which the balance of trade was believed to be 
unfavourable to Great Britain. 

The prohibition of exporting from the coloni/s, to any other 
country but Great Britain, masts, yards, and bowsprits, tar, 
pitch, and turpentine, naturally tended to lower the price of 
timber in the colonies, and consequently to increase the expense 
of clearing their lands, the principal obstacle to their improve 
ment. But about the beginning of the present century, in 
1703, the pitch and tar company of Sweden endeavoured to 
raise the price of their commodities to Great Britain, by pro 
hibiting their exportation, except in their own ships, at their 
own price, and in such quantities as they thought proper. In 
order to counteract this notable piece of mercantile policy, and 



78 The Wealth of Nations 

to render herself as much as possible independent, not only of 
Sweden, but of all the other northern powers, Great Britain 
gave a bounty upon the importation of naval stores from 
America, and the effect of this bounty was to raise the price of 
timber in America much more than the confinement to the 
home market could lower it; and as both regulations were 
enacted at the same time, their joint effect was rather to en 
courage than to discourage the clearing of land in America. 

Though pig and bar iron too have been put among the 
enumerated commodities, yet as, when imported from America, 
they are exempted from considerable duties to which they are 
subject when imported from any other country, the one part of 
the regulation contributes more to encourage the erection of 
furnaces in America than the other to discourage it. There is 
no manufacture which occasions so great a consumption of wood 
as a furnace, or which can contribute so much to the clearing 
of a country overgrown with it. 

The tendency of some of these regulations to raise the value 
of timber in America, and thereby to facilitate the clearing of 
the land, was neither, perhaps, intended nor understood by the 
legislature. Though their beneficial effects, however, have been 
in this respect accidental, they have not upon that account 
been less real. 

The most perfect freedom of trade is permitted between the 
British colonies of America and the West Indies, both in the 
enumerated and in the non-enumerated commodities. Those 
colonies are now become so populous and thriving that each of 
them finds in some of the others a great and extensive market 
for ever) 1 part of its produce. All of them taken together, they 
make a great internal market for the produce of one another. 

The liberality of England, however, towards the trade of her 
colonies has been confined chiefly to what concerns the market 
for their produce, either in its rude state, or in what may be 
called the very first stage of manufacture. The more advanced 
or more refined manufactures even of the colony produce, the 
merchants and manufacturers of Great Britain choose to reserve 
to themselves, and have prevailed upon the legislature to prevent 
their establishment in the colonies, sometimes by high duties, 
and sometimes by absolute prohibitions. 

While, for example, Muskovado sugars from the British planta 
tions pay upon importation only 6s. 4d. the hundredweight; 
white sugars pay i is. id.; and refined, either double or 
single, in loaves 4 as. 5</ () d. When those high duties were 



Colonies 79 

imposed, Great Britain was the sole, and she still continues to 
be the principal market to which the sugars of the British 
colonies could be exported. They amounted, therefore, to a 
prohibition, at first of claying or refining sugar for any foreign 
market, and at present of claying or refining it for the market, 
which takes off, perhaps, more than nine-tenths of the whole 
produce. The manufacture of claying or refining sugar accord 
ingly, though it has flourished in all the sugar colonies of France, 
has been little cultivated in any of those of England except for 
the market of the colonies themselves. While Grenada was in 
the hands of the French there was a refinery of sugar, by clay 
ing at least, upon almost every plantation. Since it fell into 
those of the English, almost all works of this kind have been 
given up, and there are at present, October 1773, I am assured, 
not above two or three remaining in the island. At present, 
however, by an indulgence of the custom-house, clayed or 
refined sugar, if reduced from loaves into powder, is commonly 
imported as Muskovado. 

While Great Britain encourages in America the manufactures 
of pig and bar iron, by exempting them from duties to which 
the like commodities are subject when imported from any other 
country, she imposes an absolute prohibition upon the erection 
of steel furnaces and slitmills in any of her American plantations. 
She will not suffer her colonists to work in those more refined 
manufactures even for their own consumption; but insists upon 
their purchasing of her merchants and manufacturers all goods 
of this kind which they have occasion for. 

She prohibits the exportation from one province to another 
by water, and even the carriage by land upon horseback or in 
a cart, of hats, of wools and woollen goods, of the produce of 
America; a regulation which effectually prevents the establish 
ment of any manufacture of such commodities for distant sale, 
and confines the industry of her colonists in this way to such 
coarse and household manufactures as a private family com 
monly makes for its own use or for that of some of its neigh 
bours in the same province. 

To prohibit a great people, however, from making all that 
they can of every part of their own produce, or from employing 
their stock and industry in the way that they judge most 
advantageous to themselves, is a manifest violation of the most 
sacred rights of mankind. Unjust, however, as such pro 
hibitions may be, they have not hitherto been very hurtful to 
the colonies. Land is still so cheap, and, consequently, labour 



8o The Wealth of Nations 

so dear among them, that they can import from the mother 
country almost all the more refined or more advanced manu 
factures cheaper than they could make them for themselves. 
Though they had not, therefore, been prohibited from establish 
ing such manufactures, yet in their present state of improve 
ment a regard to their own interest would, probably, have 
prevented them from doing so. In their present state of im 
provement those prohibitions, perhaps, without cramping their 
industry, or restraining it from any employment to which it 
would have gone of its own accord, are only impertinent badges 
of slavery imposed upon them, without any sufficient reason, 
by the groundless jealousy of the merchants and manufacturers 
of the mother country. In a more advanced state they might 
be really oppressive and insupportable. 

Great Britain too, as she confines to her own market some 
of the most important productions of the colonies, so in com 
pensation she gives to some of them an advantage in that market, 
sometimes by imposing higher duties upon the like productions 
when imported from other countries, and sometimes by giving 
bounties upon their importation from the colonies. In the first 
way she gives an advantage in the home market to the sugar, 
tobacco, and iron of her own colonies, and in the second to their 
raw silk, to their hemp and flax, to their indigo, to their naval 
stores, and to their building timber. This second way of en 
couraging the colony produce by bounties upon importation, is, 
so far as I have been able to learn, peculiar to Great Britain. 
The first is not. Portugal does not content herself with im 
posing higher duties upon the importation of tobacco from any 
other country, but prohibits it under the severest penalties. 

With regard to the importation of goods from Europe, England 
has likewise dealt more liberally with her colonies than any 
other nation. 

Great Britain allows a part, almost always the half, generally 
a larger portion, and sometimes the whole of the duty which is 
paid upon the importation of foreign goods, to be drawn back 
upon their exportation to any foreign country. No independent 
foreign country, it was easy to foresee, would receive them if 
they came to it loaded with the heavy duties to which almost all 
foreign goods are subjected on their importation into Great 
Britain. Unless, therefore, some part of those duties was drawn 
back upon exportation, there was an end of the carrying trade; 
a trade so much favoured by the mercantile system. 

Our colonies, however, are by no means independent foreign 



Colonies 8 1 

countries; and Great Britain having assumed to herself the 
exclusive right of supplying them with all goods from Europe, 
might have forced them (in the same manner as other countries 
have done their colonies) to receive such goods, loaded with all 
the same duties which they paid in the mother country. But, 
on the contrary, till 1763, the same drawbacks were paid upon 
the exportation of the greater part of foreign goods to our 
colonies as to any independent foreign country. In 1763, 
indeed, by the 4th of George III. c. 15, this indulgence was a 
good deal abated, and it was enacted, " That no part of the duty 
called the old subsidy should be drawn back for any goods of 
the growth, production, or manufacture of Europe or the East 
Indies, which should be exported from this kingdom to any 
British colony or plantation in America; wines, white callicoes 
and muslins excepted." Before this law, many different sorts 
of foreign goods might have been bought cheaper in the planta 
tions than in the mother country; and some may still. 

Of the greater part of the regulations concerning the colony 
trade, the merchants who carry it on, it must be observed, have 
been the principal advisers. We must not wonder, therefore, 
if, in the greater part of them, their interest has been more con 
sidered than either that of the colonies or that of the mother 
country. In their exclusive privilege of supplying the colonies 
with all the goods which they wanted from Europe, and of 
purchasing all such parts of their surplus produce as could not 
interfere with any of the trades which they themselves carried 
on at home, the interest of the colonies was sacrificed to the 
interest of those merchants. In allowing the same drawbacks 
upon the re-exportation of the greater part of European and 
East India goods to the colonies as upon their re-exportation to 
any independent country, the interest of the mother country 
was sacrificed to it, even according to the mercantile ideas ol 
that interest. It was for the interest of the merchants to pay 
as little as possible for the foreign goods which they sent to the 
colonies, and, consequently, to get back as much as possible of 
the duties which they advanced upon their importation into 
Great Britain. They might thereby be enabled to sell in the 
colonies either the same quantity of goods with a greater profit, 
or a greater quantity with the same profit, and, consequently, 
to gain something either in the one way or the other. It was 
likewise for the interest of the colonies to get all such goods as 
cheap and in as great abundance as possible. But this might 
not always be for the interest of the mother country. She might 



82 The Wealth of Nations 

frequently suffer both in her revenue, by giving back a great 
part of the duties which had been paid upon the importation of 
such goods ; and in her manufactures, by being undersold in the 
colony market, in consequence of the easy terms upon which 
foreign manufactures could be carried thither by means of those 
drawbacks. The progress of the linen manufacture of Great 
Britain, it is commonly said, has been a good deal retarded by 
the drawbacks upon the re-exportation of German linen to the 
American colonies. 

But though the policy of Great Britain with regard to the 
trade of her colonies has been dictated by the same mercantile 
spirit as that of other nations, it has, however, upon the whole, 
been less illiberal and oppressive than that of any of them. 

In everything, except their foreign trade, the liberty of the 
English colonists to manage their own affairs their own way is 
complete. It is in every respect equal to that of their fellow- 
citizens at home, and is secured in the same manner, by an 
assembly of the representatives of the people, who claim the 
sole right of imposing taxes for the support of the colony 
government. The authority of this assembly overawes the 
executive power, and neither the meanest nor the most obnoxious 
colonist, as long as he obeys the law, has anything to fear from 
the resentment, either of the governor or of any other civil or 
military officer in the province. The colony assemblies though, 
like the House of Commons in England, are not always a 
very equal representation of the people, yet they approach 
more nearly to that character; and as the executive power 
either has not the means to corrupt them, or, on account of the 
support which it receives from the mother country, is not under 
the necessity of doing so, they are perhaps in general more 
influenced by the inclinations of their constituents. The councils 
which, in the colony legislatures, correspond to the House of 
Lords in Great Britain, are not composed of an hereditary 
nobility. In some of the colonies, as in three of the govern 
ments of New England, those councils are not appointed by 
the king, but chosen by the representatives of the people. In 
none of the English colonies is there any hereditary nobility. In 
all of them, indeed, as in all other free countries, the descendant 
of an old colony family is more respected than an upstart of 
equal merit and fortune; but he is only more respected, and he has 
no privileges by which he can be troublesome to his neighbours. 
Before the commencement of the present disturbances, the 
colony assemblies had not only the legislative but a part of 



Colonies 83 

the executive power. In Connecticut and Rhode Island, they 
elected the governor. In the other colonies they appointed the 
revenue officers who collected the taxes imposed by those 
respective assemblies, to whom those officers were immediately 
responsible. There is more equality, therefore, among the 
English colonists than among the inhabitants of the mother 
country. Their manners are more republican, and their govern 
ments, those of three of the provinces of New England in 
particular, have hitherto been more republican too. 

The absolute governments of Spain, Portugal, and France, on 
the contrary, take place in their colonies; and the discretionary 
powers which such governments commonly delegate to all their 
inferior nff.rcrs are, on account of the great distance, naturally 
exercised there with more than ordinary violence. Under all 
absolute governments there is more liberty in the capital than 
in any other part of the country. The sovereign himself can 
never have either interest or inclination to pervert the order of 
justice, or to oppress the great body of the people. In the 
capital his presence overawes more or less all his inferior officers, 
who in the remoter provinces, from whence the complaints of 
the people are less likely to reach him, can exercise their tyranny 
with much more safety. But the European colonies in America 
are more remote than the most distant provinces of the greatest 
empires which had ever been known before. The government 
of the English colonies is perhaps the only one which, since the 
world began, could give perfect security to the inhabitants of 
so very distant a province. The administration of the French 
colonies, however, has always been conducted with more gentle 
ness and moderation than that of the Spanish and Portuguese. 
This superiority of conduct is suitable both to the character of 
the French nation, and to what forms the character of every 
nation, the nature of their government, which though arbitrary 
and violent in comparison with that of Great Britain, is legal 
and free in comparison with those of Spain and Portugal. 

It is in the progress of the North American colonies, however, 
that the superiority of the English policy chiefly appears. The 
progress of the sugar colonies of France has been at least equal, 
perhaps superior, to that of the greater part of those of England, 
and yet the sugar colonies of England enjoy a free government 
nearly of the same kind with that which takes place in her 
colonies of North America. But the sugar colonies of France 
are not discouraged, like those of England, from refining their 
own sugar; and, what is of still greater importance, the genius 



84 The Wealth of Nations 

of their government naturally introduces a better management 
of their negro slaves. 

In all European colonies the culture of the sugar-cane is 
carried on by negro slaves. The constitution of those who have 
been born in the temperate climate of Europe could not, it is 
supposed, support the labour of digging the ground under the 
burning sun of the West Indies; and the culture of the sugar 
cane, as it is managed at present, is all hand labour, though, in 
the opinion of many, the drill plough might be introduced into 
it with great advantage. But, as the profit and success of the 
cultivation which is carried on by means of cattle, depend very 
much upon the good management of those cattle, so the profit 
and success of that which is carried on by slaves must depend 
equally upon the good management of those slaves; and in the 
good management of their slaves the French planters, I think it 
is generally allowed, are superior to the English. The law, so 
far as it gives some weak protection to the slave against the 
violence of his master, is likely to be better executed in a colony 
where the government is in a great measure arbitrary than in 
one where it is altogether free. In every country where the 
unfortunate law of slavery is established, the magistrate, when 
he protects the slave, intermeddles in some measure in the 
management of the private property of the master; and, in a 
free country, where the master is perhaps either a member of 
the colony assembly, or an elector of such a member, he dare 
not do this but with the greatest caution and circumspection. 
The respect which he is obliged to pay to the master renders it 
more difficult for him to protect the slave. But in a country 
where the government is in a great measure arbitrary, where it 
is usual for the magistrate to intermeddle even in the manage 
ment of the private property of individuals, and to send them, 
perhaps, a lettre de cachet if they do not manage it according to 
his liking, it is much easier for him to give some protection to 
the slave; and common humanity naturally disposes him to do 
so. The protection of the magistrate renders the slave less 
contemptible in the eyes of his master, who is thereby induced 
lo consider him with more regard, and to treat him with more 
gentleness. Gentle usage renders the slave not only more 
faithful, but more intelligent, and therefore, upon a double 
account, more useful. He approaches more to the condition of 
a free servant, and may possess some degree of integrity and 
attachment to his master s interest, virtues which frequently 
belong to free servants, but which never can belong to a slave 



Colonies 85 

who is treated as slaves commonly are in countries where the 
master is perfectly free and secure. 

That the condition of a slave is better under an arbitrary 
than under a free government is, I believe, supported by the 
history of all apes and nations. In the Roman history, the first 
time we read of the magistrate interposing to protect the slave 
from the violence of his master is under the emperors. When 
Vedius Pollio, in the presence of Augustus, ordered one of his 
slaves, who had committed a slight fault, to be cut into pieces 
and thrown into his fish pond in order to feed his fishes, the 
emperor commanded him, with indignation, to emancipate 
immediately, not only that slave, but all the others that belonged 
to him. Under the republic no magistrate could have had 
authority enough to protect the slave, much less to punish the 
master. 

The stock, it is to be observed, which has improved the sugar 
colonies of France, particularly the great colony of St. Domingo, 
has been raised almost entirely from the gradual improvement 
and cultivation of those colonies. It has been almost altogether 
the produce of the soil and of the industry of the colonists, or. 
what comes to the same thing, the price of that produce gradual! v 
accumulated by good management, and employed in raising a 
still greater produce. But the stock which has improved and 
cultivated the sugar colonies of England has, a great part of it, 
been sent out from England, and has by no means been alto 
gether the produce of the soil and industry of the colonists. 
The prosperity of the English sugar colonies has been, in a great 
measure, owing to the great riches of England, of which a part 
has overflowed, if one may say so, upon those colonies. But 
the prosperity of the sugar colonies of France has been entirely 
owing to the good conduct of the colonists, which must there 
fore have had some superiority over that of the English; and 
this superiority has been remarked in nothing so much as in 
the good management of their slaves. 

Such have been the general outlines of the policy of the 
different European nations with regard to their colonies. 

The policy of Europe, therefore, has very little to boast of, 
either in the original establishment or, so far as concerns 
their internal government, in the subsequent prosperity of the 
colonies of America. 

Folly and injustice seem to have been the principles which 
presided over and directed the first project of establishing those 
colonies; the folly of hunting after gold and silver mines, and 



86 The Wealth of Nations 

the injustice of coveting the possession of a country whose 
harmless natives, far from having ever injured the people of 
Europe, had received the first adventurers with every mark of 
kindness and hospitality. 

The adventurers, indeed, who formed some of the later estab 
lishments, joined to the chimerical project of finding gold and 
silver mines other motives more reasonable and more laudable; 
but even these motives do very little honour to the policy of 
Europe. 

The English puritans, restrained at home, fled for freedom to 
America, and established there the four governments of New 
England. The English Catholics, treated with much greater 
injustice, established that of Maryland; the Quakers, that of 
Pennsylvania. The Portuguese Jews, persecuted by the in 
quisition, stripped of their fortunes, and banished to Brazil, 
introduced by their example some sort of order and industry 
among the transported felons and strumpets by whom that 
colony was originally peopled, and taught them the culture of 
the sugar-cane. Upon all these different occasions it was not 
the wisdom and policy, but the disorder and injustice of the 
European governments which peopled and cultivated America. 

In effectuating some of the most important of these estab 
lishments, the different governments of Europe had as little 
merit as in projecting them. The conquest of Mexico was the 
project, not of the council of Spain, but of a governor of Cuba; 
and it was effectuated by the spirit of the bold adventurer to 
whom it was entrusted, in spite of everything which that 
governor, who soon repented of having trusted such a person, 
could do to thwart it. The conquerors of Chili and Peru, and 
of almost all the other Spanish settlements upon the continent 
of America, carried out with them no other public encourage 
ment, but a general permission to make settlements and con 
quests in the name of the king of Spain. Those adventures 
were all at the private risk and expense of the adventurers. 
The government of Spain contributed scarce anything to any of 
them. That of England contributed as little towards effec 
tuating the establishment of some of its most important colonies 
in North America. 

When those establishments were effectuated, and had become 
so considerable as to attractthe attention of the mother country, 
the first regulations which she made with regard to them had 
always in view to secure to herself the monopoly of their com 
merce; to confine their market, and to enlarge her own at their 



Colonies 87 

expense, and, consequently, rather to damp and discourage 
than to quicken and forward the course of their prosperity. In 
the different ways in which this monopoly has been exercised 
consists one of the most essential differences in the policy of the 
different European nations with regard to their colonies. The 
best of them all, that of England, is only somewhat less illiberal 
and oppressive than that of any of the rest. 

In what way, therefore, has the policy of Europe contributed 
either to the first establishment, or to the present grandeur of 
the colonies of America? In one way, and in one way only, 
it has contributed a good deal. Magna virum Mater I It bred 
and formed the men who were capable of achieving such great 
actions, and of laying the foundation of so great an empire ; and 
there is no other quarter of the world of which the policy is 
capable of forming, or has ever actually and in fact formed such 
men. The colonies owe to the policy of Europe the education 
and great views of their active and enterprising founders; and 
some of the greatest and most important of them, so far as 
concerns their internal government, owe to it scarce anything 
else. 

PART THIRD 

Of the Advantages which Europe has derived from the Discovery 
of America, and from that of a Passage to the East Indies by 
the Cape of Good Hope. 

SUCH are the advantages which the colonies of America have 
derived from the policy of Europe. 

What are those which Europe has derived from the discovery 
and colonisation of America? 

Those advantages may be divided, first, into the general 
advantages which Europe, considered as one great country, 
has derived from those great events; and, secondly, into the 
particular advantages which each colonising country has derived 
from the colonies which particularly belong to it, in consequence 
of the authority or dominion which it exercises over them. 

The general advantages which Europe, considered as one great 
country, has derived from the discovery and colonisation of 
America, consist, first, in the increase of its enjoyments; and, 
secondly, in the augmentation of its industry. 

The surplus produce of America, imported into Europe, 
furnishes the inhabitants of this great continent with a variety 
of commodities which they could not otherwise have possessed ; 



8$ The Wealth of Nations 

some for conveniency and use, some for pleasure, and some for 
ornament, and thereby contributes to increase their enjoyments. 

The discovery and colonisation of America, it will readily be 
allowed, have contributed to augment the industry, first, of all 
the countries which trade to it directly, such as Spain, Portugal, 
France, and England; and, secondly, of all those which, with 
out trading to it directly, send, through the medium of other 
countries, goods to it of their own produce; such as Austrian 
Flanders, and some provinces of Germany, which, through the 
medium of the countries before mentioned, send to it a con 
siderable quantity of linen and other goods. All such countries 
have evidently gained a more extensive market for their surplus 
produce, and must consequently have been encouraged to 
increase its quantity. 

But that those great events should likewise have contributed 
to encourage the industry of countries, such as Hungary and 
Poland, which may never, perhaps, have sent a single com- 
m idity of their own produce to America, is not, perhaps, 
altogether so evident. That those events have done so, how 
ever, cannot be doubted. Some part of the produce of America 
is consumed in Hungary and Poland, and there is some demand 
th TC for the sugar, chocolate, and tobacco of that new quarter 
of the world. But those commodities must be purchased with 
something which is either the produce of the industry of Hungary 
and Poland, or with something which had been purchased with 
some part of that produce. Those commodities of America are 
new values, new equivalents, introduced into Hungary and 
Poland to be exchanged there for the surplus produce of those 
countries. By being carried thither they create a new and more 
extensive market for that surplus produce. They raise its value, 
and thereby contribute to encourage its increase. Though no 
part of it may ever be carried to America, it may be carried to 
other countries which purchase it with a part of their share of 
the surplus produce of America; and it may find a market by 
means of the circulation of that trade which was originally put 
into motion by the surplus produce of America. 

Those great events may even have contributed to increase 
the enjoyments, and to augment the industry of countries which 
not only never sent any commodities to America, but never 
received any from it. Even such countries may have received 
a greater abundance of other commodities from countries of 
which the surplus produce had been augmented by means of 
the American trade. This greater abundance, as it must neces- 



Colonies 89 

sarily have increased their enjoyments, so it must likewise have 
augmented their industry. A greater number of new equivalents 
of some kind or other must have been presented to them to be 
exchanged for the surplus produce of that industry. A more 
extensive market must have been created for that surplus 
produce so as to raise its value, and thereby encourage its 
increase. The mass of commodities annually thrown into the 
great circle of European commerce, and by its various revolu 
tions annually distributed among all the different nations com 
prehended within it, must have been augmented by the whole 
surplus produce of America. A greater share of this greater 
mass, therefore, is likely to have fallen to each of those nations, 
to have increased their enjoyments, and augmented their 
industry. 

The exclusive trade of the mother countries tends to diminish, 
or, at least, to keep down below what they would otherwise 
rise to, both the enjoyments and industry of all those nations 
in general, and of the American colonies in particular. It is a 
dead weight upon the action of one of the great springs which 
puts into motion a great part of the business of mankind. By 
rendering the colony produce dearer in all other countries, it 
lessens its consumption, and thereby cramps the industry of the 
colonies, and both the enjoyments and the industry of all other 
countries, uliich both enjoy less when they pay more for what 
they enjoy, and produce less when they get less for what they 
produce. By rendering the produce of all other countries dearer 
in the colonies, it cramps, in the same manner, the industry of all 
other countries, and both the enjoyments and the industry of 
the colonies. It is a clog which, for the supposed benefit of 
some particular countries, embarrasses the pleasures and en 
cumbers the industry of all other countries; but of the colonies 
more than of any other. It not only excludes, as much as 
possible, all other countries from one particular market; but it 
confines, as much as possible, the colonies to one particular 
market; and the difference is very great between being excluded 
from one particular market, when all others are open, and being 
confined to one particular market, when all others are shut up. 
The surplus produce of the colonies, however, is the original 
source of all that increase of enjoyments and industry which 
Europe derives from the discovery and colonisation of America; 
and the exclusive trade of the mother countries tends to render 
this source much less abundant than it otherwise would be. 

The particular advantages which each colonising country 



90 The Wealth of Nations 

derives from the colonies which particularly belong to it are 
of two different kinds; first, those common advantages which 
every empire derives from the provinces subject to its dominion; 
and, secondly, those peculiar advantages which are supposed 
to result from provinces of so very peculiar a nature as the 
European colonies of America. 

The common advantages which every empire derives from the 
provinces subject to its dominion consist, first, in the military 
force which they furnish for its defence; and, secondly, in the 
revenue which they furnish for the support of its civil govern 
ment. The Roman colonies furnished occasionally both the 
one and the other. The Greek colonies, sometimes, furnished a 
military force, but seldom any revenue. They seldom acknow 
ledged themselves subject to the dominion of the mother city. 
They were generally her allies in war, but very seldom her 
subjects in peace. 

The European colonies of America have never yet furnished 
any military force for the defence of the mother country. Their 
military force has never yet been sufficient for their own defence; 
and in the different wars in which the mother countries have 
been engaged, the defence of their colonies has generally occa 
sioned a very considerable distraction of the military force of 
those countries. In this respect, therefore, all the European 
colonies have, without exception, been a cause rather of weak 
ness than of strength to their respective mother countries. 

The colonies of Spain and Portugal only have contributed 
any revenue towards the defence of the mother country, or the 
support of her civil government. The taxes which have been 
levied upon those of other European nations, upon those of 
England in particular, have seldom been equal to the expense 
laid out upon them in time of peace, and never sufficient to 
defray that which they occasioned in time of war. Such colonies, 
therefore, have been a source of expense and not of revenue 
to their respective mother countries. 

The advantages of such colonies to their respective mother 
countries consist altogether in those peculiar advantages which 
are supposed to result from provinces of so very peculiar a 
nature as the European colonies of America; and the exclusive 
trade, it is acknowledged, is the sole source of all those peculiar 
advantages. 

In consequence of this exclusive trade, all that part of the 
surplus produce of the English colonies, for example, which 
consists in what are called enumerated commodities, can be 



Colonies 9 1 

sent to no other country but England. Otru-r countries must 
afterwards buy it of her. It must be cheaper therefore in 
England than it can be in any other country, and must con 
tribute more to increase the enjoyments of England than those 
of any other country. It must likewise contribute more to 
encourage her industry. For all those parts of her own surplus 
produce which England exchanges for those enumerated com 
modities, she must get a better price than any other countries 
can get for the like parts of theirs, when they exchange them 
for the same commodities. The manufactures of England, for 
example, will purchase a greater quantity of the sugar and 
tobacco of her own colonies than the like manufactures of 
other countries can purchase of that sugar and tobacco. So far, 
therefore, as the manufactures of England and those of other 
countries are both to be exchanged for the sugar and tobacco 
of the English colonies, this superiority of price gives an en 
couragement to the former beyond what the latter can in these 
circumstances enjoy. The exclusive trade of the colonies, 
therefore, as it diminishes, or at least keeps down below what 
they would otherwise rise to, both the enjoyments and the 
industry of the countries which do not possess it; so it gives an 
evident advantage to the countries which do possess it over 
those other countries. 

This advantage, however, will perhaps be found to be rather 
what may be called a relative than an absolute advantage; and 
to give a superiority to the country which enjoys it rather by 
depressing the industry and produce of other countries than by 
raising those of that particular country above what they would 
naturally rise to in the case of a free trade. 

The tobacco of Maryland and Virginia, for example, by means 
of the monopoly which England enjoys of it, certainly comes 
cheaper to England than it can do to France, to whom England 
commonly sells a considerable part of it. But had France, and 
all other European countries been, at all times, allowed a free 
trade to Maryland and Virginia, the tobacco of those colonies 
might, by this time, have come cheaper than it actually does, 
not only to all those other countries, but likewise to England. 
The produce of tobacco, in consequence of a market so much 
more extensive than any which it has hitherto enjoyed, might, 
and probably would, by this time, have been so much increased 
as to reduce the profits of a tobacco plantation to their natural 
level with those of a corn plantation, which, it is supposed, they 
are still somewhat above. The price of tobacco might, and 



92 The Wealth of Nations 

probably would, by this time, have fallen somewhat lower than 
it is at present. An equal quantity of the commodities either 
of England or of those other countries might have purchased 
in Maryland and Virginia a greater quantity of tobacco than it 
can do at present, and consequently have been sold there for 
so much a better price. So far as that weed, therefore, can, 
by its cheapness and abundance, increase the enjoyments or 
augment the industry either of England or of any other country, 
it would, probably, in the case of a free trade, have produced 
both these effects in somewhat a greater degree than it can do 
at present. England, indeed, would not in this case have had 
any advantage over other countries. She might have bought 
the tobacco of her colonies somewhat cheaper, and consequently 
have sold some of her own commodities somewhat dearer than 
she actually does. But she could neither have bought the one 
cheaper nor sold the other dearer than any other country might 
have done. She might, perhaps, have gained an absolute, but 
she would certainly have lost a relative advantage. 

In order, however, to obtain this relative advantage in the 
colony trade, in order to execute the invidious and malignant 
project of excluding as much as possible other nations from 
any share in it, England, there are very probable reasons for 
believing, has not only sacrificed a part of the absolute advantage 
which she, as well as every other nation, might have derived 
from that trade, but has subjected herself both to an absolute 
and to a relative disadvantage in almost every other branch of 
trade. 

When, by the act of navigation, England assumed to herself 
the monopoly of the colony trade, the foreign capitals which had 
before been employed in it were necessarily withdrawn from it. 
The English capital, which had before carried on but a part of 
it, was now to carry on the whole. The capital which had 
before supplied the colonies with but a part of the goods which 
they wanted from Europe was now all that was employed to 
supply them with the whole. But it could not supply them 
with the whole, and the goods with which it did supply them 
were necessarily sold very dear. The capital which had before 
bought but a part of the surplus produce of the colonies, was 
now all that was employed to buy the whole. But it could not 
buy the whole at anything near the old price, and, therefore, 
whatever it did buy it necessarily bought very cheap. But in 
an employment of capital in which the merchant sold very dear 
and bought very cheap, the profit must have been very great, 



Colonies 



93 



and much above the ordinary level of profit in other brunches 
of trade. This superiority of profit in the colony trade could 
not fail to draw from other branches of trade a part of the capital 
which had before been employed in them. But this revulsion of 
capital, as it must have gradually increased the competition of 
capitals in the colony trade, so it must have gradually diminished 
that competition in all those other branches of trade; as it 
must have gradually lowered the profits of the one, so it must 
have gradually raised those of the other, till the profits of all 
came to a new level, different from and somewhat higher than 
that at which they had been before. 

This double effect of drawing capital from all other trades, 
and of raising the rate of profit somewhat higher than it other 
wise would have been in all trades, was not only produced by 
this monopoly upon its first establishment, but has continued 
to be produced by it ever since. 

First, this monopoly has been continually drawing capital 
from all other trades to be employed in that of the colonies. 

Though the wealth of Great Britain has increased very much 
since the establishment of the act of navigation, it certainly has 
not increased in the same proportion as that of the colonies. 
But the foreign trade of every country naturally increases in 
proportion to its wealth, its surplus produce in proportion to its 
whole produce; and Great Britain having engrossed to herself 
almost the whole of what may be called the foreign trade of the 
colonies, and her capital not having increased in the same pro 
portion as the extent of that trade, she could not carry it on 
without continually withdrawing from other branches of trade 
some part of the capital which had before been employed in 
them as well as withholding from them a great deal more which 
would otherwise have gone to them. Since the establishment of 
the act of navigation, accordingly, the colony trade has l>een 
continually increasing, while many other branhces of foreign 
trade, particularly of that to other parts of Europe, have 
been continually decaying. Our manufactures for foreign sale, 
instead of being suited, as before the act of navigation, to the 
neighbouring market of Europe, or to the more distant one of 
the countries which lie round the Mediterranean Sea, have, the 
greater part of them, been accommodated to the still more 
distant one of the colonies, to the market in which they have 
the monopoly rather than to that in which they have many 
competitors. The causes of decay in other branches of foreign 
trade, which, by Sir Matthew Decker and other writers have 



94 The Wealth of Nations 

been sought for in the excess and improper mode of taxation, in 
the high price of labour, in the increase of luxury, etc., may all 
be found in the over-growth of the colony trade. The mercantile 
capital of Great Britain, though very great, yet not being infinite, 
and though greatly increased since the act of navigation, yet not 
being increased in the same proportion as the colony trade, that 
trade could not possibly be carried on without withdrawing some 
part of that capital from other branchesof trade, nor consequently 
without some decay of those other branches. 

England, it must be observed, was a great trading country, 
her mercantile capital was very great and likely to become still 
greater and greater every day, not only before the act of naviga 
tion had established the n.onopoly of the colony trade, but before 
that trade was very considerable. In the Dutch war, during 
the government of Cromwell, her navy was superior to that of 
Holland; and in that which broke out in the beginning of the 
reign of Charles II., it was at least equal, perhaps superior, to the 
united navies of France and Holland. Its superiority, perhaps, 
would scarce appear greater in the present times; at least if the 
Dutch navy was to bear the same proportion to the Dutch 
commerce now which it did then. But this great naval power 
could not, in either of those wars, be owing to the act of 
navigation. During the first of them the plan of that act had 
been but just formed; and though before the breaking out of 
the second it had been fully enacted by legal authority, yet no 
part of it could have had time to produce any considerable effect, 
and least of all that part which established the exclusive trade 
to the colonies. Both the colonies and their trade were incon 
siderable then in comparison of what they are now. The island 
of Jamaica was an unwholesome desert, little inhabited, and less 
cultivated. New York and New Jersey were in the possession 
of the Dutch : the half of St. Christopher s in that of the French. 
The island of Antigua, the two Carolinas, Pennsylvania, Georgia, 
and Nova Scotia were not planted. Virginia, Maryland, and 
New England were planted; and though they were very thriving 
colonies, yet there was not, perhaps, at that time, either in 
Europe or America, a single person who foresaw or even 
suspected the rapid progress which they have since made in 
wealth, population, and improvement. The island of Barbadoes, 
in short, was the only British colony of any consequence of 
which the condition at that time bore any resemblance to what 
it is at present. The trade of the colonies, of which England, 
even for some time after the act of navigation, enjoyed but a 



Colonies 95 

part (for the act of navigation was not very strictly executed 
till several years after it was enacted), could not at that time 
be the cause of the great trade of England, nor of the great 
naval power which was supported by that trade. The trade 
which at that time supported that great naval power was the 
trade of Europe, and of the countries which lie round the 
Mediterranean Sea. But the share which Great Britain at 
present enjoys of that trade could not support any such great 
naval power. Had the growing trade of the colonies been left 
free to all nations, whatever share of it might have fallen to 
Great Britain, and a very considerable share would probably 
have fallen to her, must have been all an addition to this great 
trade of which she was before in possession. In consequence of 
the monopoly, the increase of the colony trade has not so much 
occasioned an addition to the trade which Great Britain had 
before as a total change in its direction. 

Secondly, this monopoly has necessarily contributed to keep 
up the rate of profit in all the different branches of British trade 
higher than it naturally would have been had all nations been 
allowed a free trade to the British colonies. 

The monopoly of the colony trade, as it necessarily drew 
towards that trade a greater proportion of the capital of Great 
Britain than what would have gone to it of its own accord; so 
by the expulsion of all foreign capitals it necessarily reduced 
the whole quantity of capital employed in that trade l>elow 
what it naturally would have been in the case of a tree trade. 
But, by lessening the competition of capitals in that branch of 
trade, it necessarily raised the rate of profit in that branch. By 
lessening, too, the competition of British capitals in all other 
branches of trade, it necessarily raised the rate of British profit 
in ail those other branches. Whatever may have been, at any 
particular period, since the establishment of the act of naviga 
tion, the state or extent of the mercantile capital of Great 
Britain, the monopoly of the colony trade must, during the 
continuance of that state, have raised the ordinary rate of 
British profit higher than it otherwise would have been both 
in that and in all the other branches of British trade. If, since 
the establishment of the act of na* gation, the ordinary rate of 
British profit has fallen considerably, as it certainly has, it must 
have fallen still lower, had not the monopoly established by 
that act contributed to keep it up. 

But whatever raises in any country the ordinary rate of profit 
higher than it otherwise would be, necessarily subjects that 



96 The Wealth of Nations 

country both to an absolute and to a relative disadvantage in 
every branch of trade of which she has not the monopoly. 

It subjects her to an absolute disadvantage; because in such 
branches of trade her merchants cannot get this greater profit 
without selling dearer than they otherwise would do both the 
goods of foreign countries which they import into their own 
and the goods of their own country which they export to foreign 
countries. Their own country must both buy dearer and sell 
dearer; must both buy less and sell less; must both enjoy less 
and produce less, than she otherwise would do. 

It subjects her to a relative disadvantage; because in such 
branches of trade it sets other countries which are not subject 
to the same absolute disadvantage either more above her or 
less below her than they otherwise would be. It enables them 
both to enjoy more and to produce more in proportion to what 
she enjoys and produces. It renders their superiority greater 
or their inferiority less than it otherwise would be. By raising 
the price of her produce above what it otherwise would be, it 
enables the merchants of other countries to undersell her in 
foreign, markets, and thereby to jostle her out of almost all 
those branches of trade, of which she has not the monopoly. 

Our merchants frequently complain of the high wages of 
British labour as the cause of their manufactures being under 
sold in foreign markets, but they are silent about the high 
profits of stock. They complain of the extravagant gain of 
other people, but they say nothing of their own. The high 
profits of British stock, however, may contribute towards 
raising the price of British manufactures in many cases as much, 
and in some perhaps more, than the high wages of British 
labour. 

It is in this manner that the capital of Great Britain, one may 
justly say, has partly been drawn and partly been driven from 
the greater part of the different branches of trade of which she 
has not the monopoly; from the trade of Europe in particular, 
and from that of the countries which lie round the Mediterranean 
Sea. 

It has partly been drawn from those branches of trade by 
the attraction of superior profit in the colony trade in con 
sequence of the continual increase of that trade, and of the 
continual insufficiency of the capital which had carried it on 
one year to carry it on the next. 

It has partly been driven from them by the advantage which 
the high rate of profit, established in Great Britain, gives to 



Colonies 97 

other countries in all the different branches of trade of which 
Great Britain has not the monopoly. 

As the monopoly of the colony trade has drawn from those 
other branches a part of the British capital which would other 
wise have been employed in them, so it has forced into them 
many foreign capitals which would never have gone to them 
had they not been expelled from the colony trade. In those 
other branches of trade it has diminished the competition of 
British capital, and thereby raised the rate of British profit 
higher than it otherwise would have been. On the contrary, 
it has increased the competition of foreign capitals, and thereby 
sunk the rate of foreign profit lower than it otherwise would 
have been. Both in the one way and in the other it must 
evidently have subjected Great Britain to a relative disadvant 
age in all those other branches of trade. 

The colony trade, however, it may perhaps be said, is 
more advantageous to Great Britain than any other; and the 
monopoly, by forcing into that trade a greater proportion of 
the capital of Great Britain than what would otherwise have 
gone to it, has turned that capital into an employment more 
advantageous to the country than any other which it could 
have found. 

The most advantageous employment of any capital to the 
country to which it belongs is that which maintains there the 
greatest quantity of productive labour, and increases the most 
the annual produce of the land and labour of that country. 
But the quantity of productive labour which any capital em 
ployed in the foreign trade of consumption can maintain is 
exactly in proportion, it has been shown in the second book, to 
the frequency of its returns. A capital of a thousand pounds, 
for example, employed in a foreign trade of consumption, of 
which the returns are made regularly once in the year, can keep 
in constant employment, in the country to which it belongs, a 
quantity of productive labour equal to what a thousand pounds 
can maintain there for a year. If the returns are made twice 
or thrice in the year, it can keep in constant employment a 
quantity of productive lab ,-ur equal to what two or three thou 
sand pounds can maintain there for a year. A foreign trade of 
consumption carried on with a neighbouring country is , upon this 
account, in general more advantageous than one carried on with 
a distant country ; and for the same reason a direct foreign 
trade of consumption, as it has likewise been shown in the 



9 8 



The Wealth of Nations 



second book, is in general more advantageous than a round 
about one. 

But the monopoly of the colony trade, so far as it has operated 
upon the employment of the capital of Great Britain, has in all 
cases forced some part of it from a foreign trade of consumption 
carried on with a neighbouring, to one carried on with a more 
distant country, and in many cases from a direct foreign trade 
of consumption to a round-about one. 

First, the monopoly of the colony trade has in all cases forced 
some part of the capital of Great Britain from a foreign trade 
of consumption carried on with a neighbouring to one carried 
on with a more distant country. 

It has, in all cases, forced some part of that capital from the 
trade with Europe, and with the countries which lie round the 
Mediterranean Sea, to that with the more distant regions of 
America and the West Indies, from which the returns are neces 
sarily less frequent, not only on account of the greater distance, 
but on account of the peculiar circumstances of those countries. 
New colcnics, it has already been observed, are always under 
stocked. Their capital is always much less than what they 
could employ with great profit and advantage in the improve 
ment and cultivation of their land. They have a constant 
demand, therefore, for more capital than they have of their own; 
and, in order to supply the deficiency of their own, they en 
deavour to borrow as much as they can of the mother country, 
to whom they are, therefore, always in debt. The most common 
way in which the colonists contract this debt is not by borrow 
ing upon bond of the rich people of the mother country, though 
they sometimes do this too, but by running as much in arrear 
to their correspondents, who supply them with goods from 
Europe, as those correspondents will allow them. Their annual 
returns frequently do not amount to more than a third, and 
sometimes not to so great a proportion of what they owe. The 
whole capital, therefore, which their correspondents advance to 
them is seldom returned to Britain in less than three, and some 
times not in less than four or five years. But a British capital 
of a thousand pounds, for example, which is returned to Great 
Britain only once in five years, can keep in constant employ 
ment only one-fifth part of the British industry which it could 
maintain if the whole was returned once in the year; and, 
instead of the quantity of industry which a thousand pounds 
could maintain for a year, can keep in constant employment the 
quantity only which two hundred pounds can maintain for a 



Colonies 99 

year. The planter, no doubt, by the high price which he pays 
for the goods from Kurope, by the interest upon the bills which 
he grants at distant dates, and by the commission upon the 
renewal of those which he grants at near dates, makes up, and 
probably more than makes up, all the loss which his corre 
spondent can sustain by this delay. But though he may make 
up the loss of his correspondent, he cannot make up that of 
(ireat Britain. In a trade of which the returns are very distant, 
the profit of the merchant may be as great or greater than in 
one in which they are very frequent and near; but the advant 
age of the country in which he resides, the quantity of pro 
ductive labour constantly maintained there, the annual produce 
of the land and labour must always be much less. That the 
returns of the trade to America, and still more those of that to 
the West Indies are, in general, not only more distant but more 
irregular, and more uncertain too, than those of the trade to 
any part of Europe, or even of the countries which lie round 
the Mediterranean Sea, will readily be allowed, I imagine, by 
everybody who has any experience of those different branches 
of trade. 

Secondly, the monopoly of the colony trade has, in many 
cases, forced some part of the capital of Great Britain from a 
direct foreign trade of consumption into a round-about one. 

Among the enumerated commodities which can be sent to no 
other market but Great Britain, there are several of which the 
quantity exceeds very much the consumption of Great Britain, 
and of which a part, therefore, must be exported to other 
countries. But this cannot be done without forcing some part 
of the capital of Great Britain into a round-about foreign trade 
of consumption. Maryland and Virginia, for example, send 
annually to (ireat Britain upwards of ninety-six thousand hogs 
heads of tobacco, and the consumption of Great Britain is said 
not to exceed fourteen thousand. Upwards of eighty-two thou 
sand hogsheads, therefore, must be exported to other countries, 
to France, to Holland, and to the countries which lie round the 
Baltic and Mediterranean Seas. But that part of the capital 
of Great Britain which brings those eighty-two thousand hogs 
heads to (ireat Britain, which re-exports them from thence to 
those other countries, and which brings back from those other 
countries to Great Britain either goods or money in return, is 
employed in a round-about foreign trade of consumption ; and 
is necessarily forced into this employment in order to dispose of 
this great surplus. If we would compute in how many years 



ioo The Wealth of Nations 

the whole of this capital is likely to come back to Great Britain, 
we must add to the distance of the American returns that of 
the returns from those other countries. If, in the direct foreign 
trade of consumption which we carry on with America, the 
whole capital employed frequently does not come back in less 
than three or four years, the whole capital employed in this 
round-about one is not likely to come back in less than four or 
five. If the one can keep in constant employment but a third 
or a fourth part of the domestic industry which could be main 
tained by a capital returned once in the year, the other can 
keep in constant employment but a fourth or a fifth part of that 
industry. At some of the out-ports a credit is commonly given 
to those foreign correspondents to whom they export their 
tobacco. At the port of London, indeed, it is commonly sold 
for ready money. The rule is, Weigh and pay. At the port of 
London, therefore, the final returns of the whole round-about 
trade are more distant than the returns from America by the 
time only which the goods may lie unsold in the warehouse; 
where, however, they may sometimes lie long enough. But 
had not the colonies been confined to the market of Great 
Britain for the sale of their tobacco, very little more of it would 
probably have come to us than what was necessary for the 
home consumption. The goods which Great Britain purchases 
at present for her own consumption with the great surplus of 
tobacco which she exports to other countries, she would in this 
case probably have purchased with the immediate produce of 
her own industry, or with some part of her own manufactures. 
That produce, those manufactures, instead of being almost en 
tirely suited to one great market, as at present, would probably 
have been fitted to a great number of smaller markets. Instead 
of one great round-about foreign trade of consumption, Great 
Britain would probably have carried on a great number of small 
direct foreign trades of the same kind. On account of the 
frequency of the returns, a part, and probably but a small part; 
perhaps not above a third or a fourth of the capital which at 
present carries on this great round-about trade might have been 
sufficient to carry on all those small direct ones, might have 
kept in constant employment an equal quantity of British 
industry, and have equally supported the annual produce of the 
land and labour of Great Britain. All the purposes of this 
trade being, in this manner, answered by a much smaller capital, 
there would have been a large spare capital to apply to other 
purposes: to improve the lands, to increase the manufactures, 



Colonies 101 

and to extend the commerce of Great Britain; to come into 
competition at least with the other British capitals employed in 
all those different ways, to reduce the rate of profit in them 
all, and thereby to give to Great Britain, in all of them, a 
superiority over other countries still greater than what she at 
present enjoys. 

1 he monopoly of the colony trade, too, has forced some part 
of the capital of Great Britain from all foreign trade of con 
sumption to a carrying trade; and consequently, from support 
ing more or less the industry of Great Britain, to be employed 
altogether in supporting partly that of the colonies and p.irtly 
that of some other countries. 

The goods, for example, which are annually purchased with 
the great surplus of eighty-two thousand hogsheads of tobacco 
annually re-exported from Great Britain are not all consumed 
in Great Britain. Part of them, linen from Germany and 
Holland, for example, is returned to the colonies for their par 
ticular consumption. But that part of the capital of Great 
Britain which buys the tobacco with which this linen is after 
wards bought is necessarily withdrawn from supporting the 
industry of Great Britain, to be employed altogether in sup 
porting, partly that of the colonies, and partly that of the 
particular countries who pay for this tobacco with the produce 
of their own industry. 

The monopoly of the colony trade besides, by forcing towards 
it a much greater proportion of the capital of Great Britain 
than what would naturally have gone to it, seems to have 
broken altogether that natural balance which would otherwise 
have taken place among all the different branches of British 
industry. The industry of Great Britain, instead of being 
accommodated to a great number of small markets, has been 
principally suited to one great market. Her commerce, instead 
of running in a great number of small channels, has been taught 
to run principally in one great channel. But the whole system 
of her industry and commerce has thereby been rendered less 
secure, the whole state of her body politic less healthful than 
it otherwise would have been. In her present condition, Great 
Britain resembles one of those unwholesome bodies in which 
ome of the vital parts are overgrown, and which, upon that 
account, are liable to many dangerous disorders scarce incident 
to those in which all the parts are more properly proportioned. 
A small stop in that great blood-vessel, which has been arti 
ficially swelled beyond its natural dimensions, and through 



IO2 The Wealth of Nations 

which an unnatural proportion of the industry and commerce 
of the country has been forced to circulate, is very likely to 
bring on the most dangerous disorders upon the whole body 
politic. The expectation of a rupture with the colonies, accord 
ingly, has struck the people of Great Britain with more terror 
than they ever felt for a Spanish armada, or a French invasion. 
It was this terror, whether well or ill grounded, which rendered 
the repeal of the stamp act, among the merchants at least, a 
popular measure. In the total exclusion from the colony 
market, was it to last only for a few years, the greater part of 
our merchants used to fancy that they foresaw an entire stop 
to their trade; the greater part of our master manufacturers, 
the entire ruin of their business; and the greater part of our 
workmen, an end of their employment. A rupture with any of 
our neighbours upon the continent, though likely, too, to occasion 
some stop or interruption in the employments of some of all 
these different orders of people, is foreseen, however, without 
any such general emotion. The blood, of which the circulation 
is stopped in some of the smaller vessels, easily disgor ^s itself 
into the greater without occasioning any dangerous disorder; 
but, when it is stopped in any of the greater vessels, convul 
sions, apoplexy, or death, are the immediate and unavoidable 
consequences. If but one of those overgrown manufactures, 
which, by means either of bounties or of the monopoly of the 
home and colony markets, have been artificially raised up to an 
unnatural height, finds some small stop or interruption in its 
employment, it frequently occasions a mutiny and disorder 
alarming to government, and embarrassing even to the delibera 
tions of the legislature. How great, therefore, would be the 
disorder and confusion, it was thought, which must necessarily 
be occasioned by a sudden and entire stop in the employment 
of so great a proportion of our principal manufacturers ? 

Some moderate and gradual relaxation of the laws which give 
to Great Britain the exclusive trade to the colonies, till it is 
rendered in a great measure free, seems to be the only expedient 
which can, in all future times, deliver her from this danger, 
which can enable her or even force her to withdraw some part 
of her capital from this overgrown employment, and to turn it, 
though with less profit, towards other employments; and which, 
by gradually diminishing one branch of her industry and gradu 
ally increasing all the rest, can by degrees restc e all the different 
branches of it to that natural, healthful, and proper proportion 
which perfect liberty necessarily establishes, and which perfect 



Colonies 



10 3 



liberty can alone preserve. To open the colony trade all at 
once to all nations might not only occasion some transitory 
inconveniency, but a great permanent loss to the greater part 
of those whose industry or capital is at present engaged in it. 
The sudden loss of the employment even of the ships which 
import the eighty-two thousand hogsheads of tobacco, which 
are over and above the consumption of Great Britain, might 
alone be felt very sensibly. Such are the unfortunate effects of 
all the regulations of the mercantile system! They not only 
introduce very dangerous disorders into the state of the body 
politic, but disorders which it is often difficult to remedy, with 
out occasioning, for a time at least, still greater disorders. In 
what manner, therefore, the colony trade ought gradually to be 
opened; what are the restraints which ought first, and what 
are those which ought last to be taken away; or in what manner 
the natural system of perfect liberty and justice ought gradually 
to be restored, we must leave to the wisdom of future statesmen 
and legislators to determine. 

Five different events, unforeseen and unthought of, have 
very fortunately concurred to hinder Great Britain from feeling. 
so sensibly as it was generally expected she would, the total 
exclusion which has now taken place for more than a ye ir (from 
the first of December, 1774) from a very important branch of 
the colony trade, that of the twelve associated provinces of 
North America. First, those colonies, in preparing themselves 
for their non-importation agreement, drained Great Britain 
completely of all the commodities which were fit for their 
market; secondly, the extraordinary demand of the Spanish 
Flota has, this year, drained Germany and the North of many 
commodities, linen in particular, which used to come into com 
petition, even in the British market, with the manufactures of 
Great Britain; thirdly, the peace between Russia and Turkey 
has occasioned an extraordinary demand from the Turkey 
market, which, during the distress of the country, and while 
a Russian fleet was cruising in the Archipelago, had been very 
poorly supplied; fourthly, the demand of the North of Europe 
for the manufactures of Great Britain has been increasing from 
year to year for some time past; and fifthly, the late partition 
and consequential pacification of Poland, by opening the market 
of that great country, have this year added an extraordinary 
demand from thence to the increasing demand of the North. 
These events are all, except the fourth, in their nature transitory 
and accidental, and the exclusion from so important a branch 



1 04 The Wealth of Nations 

of the colony trade, if unfortunately it should continue much 
longer, may still occasion some degree of distress. This distress, 
however, as it will come on gradually, will be felt much less 
severely than if it had come on all at once; and, in the mean 
time, the industry and capital of the country may find a new 
employment and direction, so as to prevent this distress from 
ever rising to any considerable height. 

The monopoly of the colony trade, therefore, so far as it has 
turned towards that trade a greater proportion of the capital of 
Great Britain than what would otherwise have gone to it, has 
in all cases turned it, from a foreign trade of consumption with 
a neighbouring into one with a more distant country; in many 
cases, from a direct foreign trade of consumption into a round 
about one; and in some cases, from all foreign trade of con 
sumption into a carrying trade. It has in all cases, therefore, 
turned it from a direction in which it would have maintained 
a greater quantity of productive labour into one in which it 
can maintain a much smaller quantity. By suiting, besides, to 
one particular market only so great a part of the industry and 
commerce of Great Britain, it has rendered the whole state of 
that industry and commerce more precarious and less secure 
than if their produce had been accommodated to a greater 
variety of markets. 

We must carefully distinguish between the effects of the 
colony trade and those of the monopoly of that trade. The 
former are always and necessarily beneficial; the latter always 
and necessarily hurtful. But the former are so beneficial that 
the colony trade, though subject to a monopoly, and notwith 
standing the hurtful effects of that monopoly, is still upon the 
whole beneficial, and greatly beneficial ; though a good deal less 
so than it otherwise would be. 

The effect of the colony trade in its natural and free state is 
to open a great, though distant, market for such parts of the 
produce of British industry as may exceed the demand of the 
markets nearer home, of those of Europe, and of the countries 
which lie round the Mediterranean Sea. In its natural and free 
state, the colony trade, without drawing from those markets 
any part of the produce which had ever been sent to them, 
encourages Great Britain to increase the surplus continually by 
continually presenting new equivalents to be exchanged for it. 
In its natural and free state, the colony trade tends to increase 
the quantity of productive labour in Great Britain, but without 
altering in any respect the direction of that which had been 



Colonies 105 

employed there before. In the natural and free state of the 
colony trade, the competition of all other nations would hinder 
the rate of profit from rising above the common level either in 
the new market or in the new employment. The new market, 
without drawing anything from the old one, would create, if one 
may say so, a new produce for its own supply; and that new 
produce would constitute a new capital for carrying on the new 
employment, which in the same manner would draw nothing 
from the old one. 

The monopoly of the colony trade, on the contrary, by exclud 
ing the competition of other nations, and thereby raising the 
rate of profit both in the new market and in the new employ 
ment, draws produce from the old market and capital from the 
old employment. To augment our share of the colony trade 
beyond what it otherwise would be is the avowed purpose of 
the monopoly. If our share of that trade were to be no greater 
with than it would have been without the monopoly, there 
could have been no reason for establishing the monopoly. But 
whatever forces into a branch of trade of which the returns 
are slower and more distant than those of the greater part of 
other trades, a greater proportion of the capital of any country 
than what of its own accord would go to that branch, necessarily 
renders the whole quantity of productive labour annually main 
tained there, the whole annual produce of the land and labour 
of that country, less than they otherwise would be. It keeps 
down the revenue of the inhabitants of that country below 
what it would naturally rise to, and thereby diminishes their 
power of accumulation. It not only hinders, at all times, their 
capital from maintaining so great a quantity of productive 
labour as it would otherwise maintain, but it hinders it from 
increasing so fast as it would otherwise increase, and conse 
quently from maintaining a still greater quantity of productive 
labour. 

The natural good effects of the colony trade, however, more 
than counterbalance to Great Britain the bad effects of the 
monopoly, so that, monopoly and all together, that trade, even 
as it is carried on at present, is not only advantageous, but 
greatly advantageous. The new market and the new employ 
ment which are opened by the colony trade are of much greater 
extent than that portion of the old market and of the old 
employment which is lost by the monopoly. The new produce 
and the new capital which has been created, if one may say so, 
by the colony trade, maintain in Great Britain a greater quantity 



io6 The Wealth of Nations 

of productive labour than what can have been thrown out of 
employment by the revulsion of capital from other trades of 
which the returns are more frequent. If the colony trade, how 
ever, even as it is carried on at present, is advantageous to Great 
Britain, it is not by means of the monopoly, but in spite of the 
monopoly. 

It is rather for the manufactured than for the rude produce 
of Europe that the colony trade opens a new market. Agri 
culture is the proper business of all new colonies; a business 
which the cheapness of land renders more advantageous than 
any other. They abound, therefore, in the rude produce of land, 
and instead of importing it from other countries, they have 
generally a large surplus to export. In new colonies, agriculture 
either draws hands from all other employments, or keeps them 
from going to any other employment. There are few hands to 
spare for the necessary, and none for the ornamental manu 
factures. The greater part of the manufactures of both kinds 
they find it cheaper to purchase of other countries than to make 
for themselves. It is chiefly by encouraging the manufactures 
of Europe that the colony trade indirectly encourages its agri 
culture. The manufactures of Europe, to whom that trade gives 
employment, constitute a new market for the produce of the 
land; and the most advantageous of all markets, the home 
market for the corn and cattle, for the bread and butcher s 
meat of Europe, is thus greatly extended by means of the trade 
to America. 

But that the monopoly of the trade of populous and thriving 
colonies is not alone sufficient to establish, or even to maintain 
manufactures in any country, the examples oi Spain and 
Portugal sufficiently demonstrate. Spain and Portugal were 
manufacturing countries before they had any considerable 
colonies. Since they had the richest and most fertile in the 
world, they have both ceased to be so. 

In Spain and Portugal the bad effects of the monopoly, 
aggravated by other causes, have perhaps nearly overbalanced 
the natural good effects of the colony trade. These causes 
seem to be other monopolies of different kinds; the degradation 
of the value of gold and silver below what it is in most other 
countries; the exclusion from foreign markets by improper 
taxes upon exportation, and the narrowing of the home market, 
by still more improper taxes upon the transportation of goods 
from one part of the country to another; but above all, that 
irregular and partial administration of justice, which often 



Colonies 107 

protects the rich and powerful debtor from the pursuit of his 
injured creditor, and which makes the industrious part of the 
nation afraid to prepare goods for the consumption of those 
haughty and great men to whom they dare not refuse to sell 
upon credit, and from whom they are altogether uncertain of 
repayment. 

In England, on the contrary, the natural good effects of the 
colony trade, assisted by other causes, have in a great measure 
conquered the bad effects of the monopoly. These causes seem 
to be: the general liberty of trade, which, notwithstanding some 
restraints, is at least equal, perhaps superior, to what it is in 
any other country ; the liberty of exporting, duty free, almost 
all sorts of goods which are the produce of domestic industry to 
almost any foreign country ; and what perhaps is of still greater 
importance, the unbounded liberty of transporting them from 
any one part of our own country to any other without being 
obliged to give any account to any public office, without being 
liable to question or examination of any kind; but above all, 
that equal and impartial administration of justice which renders 
the rights of the meanest British subject respectable to the 
greatest, and which, by securing to every man the fruits of his 
own industry, gives the greatest and most effectual encourage 
ment to every sort of industry, 

If the manufactures of Great Britain, however, have been 
advanced, as they certainly have, by the colony trade, it has 
not been by means of the monopoly of that trade but in spite 
of the monopoly. The effect of the monopoly has been, not to 
augment the quantity, but to alter the quality and shape of a 
part of the manufactures of Great Britain, and to accommodate 
to a market, from which the returns are slow and distant, 
what would otherwise have been accommodated to one from 
which the returns are frequent and near. Its effect has con 
sequently been to turn a part of the capital of Great Britain 
from an employment in which it would have maintained a greater 
quantity of manufacturing industry to one in which it main 
tains a much smaller, and thereby to diminish, instead of 
increasing, the whole quantity of manufacturing industry main 
tained in Great Britain. 

The monopoly of the colony trade, therefore, like all the other 
mean and malignant expedients of the mercantile system, 
depresses the industry of all other countries, but chiefly that of 
the colonies, without in the least increasing, but on the contrary 
diminishing that of the country in whose favour it is established. 



io8 The Wealth of Nations 

The monopoly hinders the capital of that country, whatever 
may at any particular time be the extent of that capital, from 
maintaining so great a quantity of productive labour as it would 
otherwise maintain, and from affording so great a revenue to 
the industrious inhabitants as it would otherwise afford. But 
as capital can be increased only by savings from revenue, the 
monopoly, by hindering it from affording so great a revenue as 
it would otherwise afford, necessarily hinders it from increasing 
so fast as it would otherwise increase, and consequently from 
maintaining a still greater quantity of productive labour, and 
affording a still greater revenue to the industrious inhabitants 
of that country. One great original source of revenue, there 
fore, the wages of labour, the monopoly must necessarily have 
rendered at all times less abundant than it otherwise would 
have been. 

By raising the rate of mercantile profit, the monopoly dis 
courages the improvement of land. The profit of improvement 
depends upon the difference between what the land actually 
produces, and what, by the application of a certain capital, it 
can be made to produce. If this difference affords a greater 
profit than what can be drawn from an equal capital in any 
mercantile employment, the improvement of land will draw 
capital from all mercantile employments. If the profit is less, 
mercantile employments will draw capital from the improve 
ment of land. Whatever, therefore, raises the rate of mercantile 
profit, either lessens the superiority or increases the inferiority 
of the profit of improvement; and in the one case hinders capital 
from going to improvement, and in the other draws capital from 
it. But by discouraging improvement, the monopoly neces 
sarily retards the natural increase of another great original 
source of revenue, the rent of land. By raising the rate of profit, 
too, the monopoly necessarily keeps up the market rate of 
interest higher than it otherwise would be. But the price of 
land in proportion to the rent which it affords, the number of 
years purchase which is commonly paid for it, necessarily falls 
as the rate of interest rises, and rises as the rate of interest 
falls. The monopoly, therefore, hurts the interest of the land 
lord two different ways, by retarding the natural increase, first, 
of his rent, and secondly, of the price which he would get for 
his land in proportion to the rent which it affords. 

The monopoly indeed raises the rate of mercantile profit, 
and thereby augments somewhat the gain of our merchants. 
But as it obstructs the natural increase of capital, it tends 



Colonies 109 

rather to diminish than to increase the sum total of the revenue 
which the inhabitants of the country derive from the profits of 
stock ; a small profit upon a great capital generally affording a 
greater revenue than a great profit upon a small one. The 
monopoly raises the rate of profit, but it hinders the sum of 
profit from rising so high as it otherwise would do. 

All the original sources of revenue, the wages of labour, the 
rent of land, and the profits of stock, the monopoly renders 
much less abundant than they otherwise would be. To promote 
the little interest of one little order of men in one country, it 
hurts the interest of all other orders of men in that country, 
and of all men in all other countries. 

It is solely by raising the ordinary rate of profit that the 
monopoly either has proved or could prove advantageous to any 
one particular order of men. But besides all the bad effects to 
the country in general, which have already been mentioned as 
necessarily resulting from a high rate of profit, there is one 
more fatal, perhaps, than all these put together, but which, if 
we may judge from experience, is inseparably connected with 
it. The high rate of profit seems everywhere to destroy that 
parsimony which in other circumstances is natural to the char 
acter of the merchant. When profits are high that sober virtue 
seems to be superfluous and expensive luxury to suit better the 
affluence of his situation. But the owners of the great mer 
cantile capitals are necessarily the leaders and conductors of the 
whole industry of every nation, and their example has a much 
greater influence upon the manners of the whole industrious 
part of it than that of any other order of men. If his employer 
is attentive and parsimonious, the workman is very likely to be 
so too; but if the master is dissolute and disorderly, the servant 
who shapes his work according to the pattern which his master 
prescribes to him will shape his life too according to the example 
which he sets him. Accumulation is thus prevented in the 
hands of all those who are naturally the most disposed to 
accumulate, and the funds destined for the maintenance of 
productive labour receive no augmentation from the revenue of 
those who ought naturally to augment them the most. The 
capital of the country, instead of increasing, gradually dwindles 
away, and the quantity of productive labour maintained in it 
grows every day less and less. Have the exorbitant profits of 
the merchants of Cadiz and Lisbon augmented the capital of 
Spain and Portugal? Have they alleviated the poverty, have 
they promoted the industry of those two beggarly countries? 



i 10 The Wealth of Nations 

Such has been the tone of mercantile expense in those two 
trading cities that those exorbitant profits, far from augment 
ing the general capital of the country, seem scarce to have been 
sufficient to keep up the capitals upon which they were made. 
Foreign capitals are every day intruding themselves, if I may 
say so, more and more into the trade of Cadiz and Lisbon. It 
is to expel those foreign capitals from a trade which their own 
grows every day more and more insufficient for carrying on 
that the Spaniards and Portuguese endeavour every day to 
straighten more and more the galling bands of their absurd 
monopoly. Compare the mercantile manners of Cadiz and 
Lisbon with those of Amsterdam, and you will be sensible how 
differently the conduct and character of merchants are affected 
by the high and by the low profits of stock. The merchants of 
London, indeed, have not yet generally become such magni 
ficent lords as those of Cadiz and Lisbon, but neither are they 
in general such attentive and parsimonious burghers as those of 
Amsterdam. They are supposed, however, many of them, to 
be a good deal richer than the greater part of the former, and 
not quite so rich as many of the latter. But the rate of their 
profit is commonly much kwer than that of the former, and a 
good deal higher than that of the latter. Light come, light go, 
says the proverb; and the ordinary tone of expense seems every 
where to be regulated, not so much according to the real ability 
of spending, as to the supposed facility of getting money to 
spend. 

It is thus that the single advantage which the monopoly 
procures to a single order of men is in many different ways 
hurtful to the general interest of the country. 

To found a great empire for the sole purpose of raising up a 
people of customers may at first sight appear a project fit only 
for a nation of shopkeepers. It is, however, a project altogether 
unfit for a nation of shopkeepers; but extremely fit for a nation 
whose government is influenced by shopkeepers. Such states 
men, and such statesmen only, are capable of fancying that they 
will find some advantage in employing the blood and treasure 
of their fellow-citizens to found and maintain such an empire. 
Say to a shopkeeper, Buy me a good estate, and I shall always 
buy my clothes at your shop, even though I should pay some 
what dearer than what I can have them for at other shops ; and 
you will not find him very forward to embrace your proposal. 
But should any other person buy you such an estate, the shop 
keeper would be much obliged to your benefactor if he would 



Colonies i i i 

enjoin you to buy all your clothes at his shop. England pur 
chased for some of her subjects, who found themselves uneasy 
at home, a great estate in a distant country. The price, indeed, 
was very small, and instead of thirty years purchase, the ordi 
nary price of land in the present times, it amounted to little 
more than the expense of the different equipments which made 
the first discovery, reconnoitred the coast, and took a fictitious 
possession of the country. The land was good and of great 
extent, and the cultivators having plenty of good ground to 
work upon, and being for some time at liberty to sell their 
produce where they pleased, became in the course of little more 
than thirty or forty years (between 1620 and 1660) so numerous 
and thriving a people that the shopkeepers and other traders 
of England wished to secure to themselves the monopoly of 
their custom. Without pretending, therefore, that they had 
paid any part, either of the original purchase-money, or of the 
subsequent expense of improvement, they petitioned the parlia 
ment that the cultivators of America might for the future be 
confined to their shop; first, for buying all the goods which 
they wanted from Europe; and, secondly, for selling all such 
parts of their own produce as those traders might find it con 
venient to buy. For they did not find it convenient to buy 
eveiy part of it. Some parts of it imported into England might 
have interfered with some of the trades which they themselves 
carried on at home. Those particular parts of it, therefore, 
they were willing that the colonists should sell where they 
could the farther of! the better; and upon that account pur 
posed that their market should be confined to the countries 
south of ("ape Einisterre. A clause in the famous act of naviga 
tion established this truly shopkeeper proposal into a law. 

The maintenance of this monopoly has hitherto been the 
principal, or more properly perhaps the sole end and purpose of 
the dominion which (jreat Britain assumes over her colonies. 
In the exclusive trade, it is supposed, consists the groat advan 
tage of provinces, which have never yet afforded either revenue 
or military force for the support of the civil government, or the 
defvnce of the mother country. The monopoly is the principal 
badge of their dependency, and it is the sole fruit which has 
hitherto been gathered from that dependency. Whatever ex 
pense (ireat Britain has hitherto laid out in maintaining this 
dependency has really been laid out in order to support this 
monopoly. The expense of the ordinary peace establishment 
of the colonies amounted, before the commencement of tin- 



i i 2 The Wealth of Nations 

present disturbances, to the pay of twenty regiments of foot; 
to the expense of the artillery, stores, and extraordinary pro 
visions with which it was necessary to supply them; and to the 
expense of a very considerable naval force which was constantly 
kept up, in order to guard, from the smuggling vessels of other 
nations, the immense coast of North America, and that of our 
West Indian islands. The whole expense of this peace estab 
lishment was a charge upon the revenue of Great Britain, and 
was, at the same time, the smallest part of what the dominion 
of the colonies has cost the mother country. If we would know 
the amount of the whole, we must add to the annual expense 
of this peace establishment the interest of the sums which, in 
consequence of her considering her colonies as provinces subject 
to her dominion, Great Britain has upon different occasions laid 
out upon their defence. We must add to it, in particular, the 
whole expense of the late war, and a great part of that of the 
war which preceded it. The late war was altogether a colony 
quarrel, and the whole expense of it, in whatever part of the 
world it may have been laid out, whether in Germany or the 
East Indies, ought justly to be stated to the account of the 
colonies. It amounted to more than ninety millions sterling, 
including not only the new debt which was contracted, but the 
two shillings in the pound additional land tax, and the sums 
which were every year borrowed from the sinking fund. The 
Spanish war, which began in 1739, was principally a colony 
quarrel. Its principal object was to prevent the search of the 
colony ships which carried on a contraband trade with the 
Spanish main. This whole expense is, in reality, a bounty 
which has been given in order to support a monopoly. The 
pretended purpose of it was to encourage the manufactures, and 
to increase the commerce of Great Britain. But its real effect 
has been to raise the rate of mercantile profit, and to enable 
our merchants to turn into a branch of trade, of which the 
returns are more slow and distant than those of the greater part 
of other trades, a greater proportion of their capital than they 
otherwise would have done; two events which, if a bounty 
could have prevented, it might perhaps have been very well 
worth while to give such a bounty. 

Under the present system of management, therefore, Great 
Britain derives nothing but loss from the dominion which she 
assumes over her colonies. 

To propose that Great Britain should voluntarily give up all 
authority over her colonies, and leave them to elect their own 



Colonies i i 3 

magistrates, to enact their own laws, and to make peace and 
war as they might think proper, would be to propose such a 
measure as never was, and never will be adopted, by any nation 
in the world. No nation ever voluntarily gave up the dominion 
of any province, how troublesome soever it might be to govern 
it, and how small soever the revenue which it afforded might be 
in proportion to the expense which it occasioned. Such sacri 
fices, though they might frequently be agreeable to the interest, 
are always mortifying to the pride of every nation, and what is 
perhaps of still greater consequence, they are always contrary 
to the private interest of the governing part of it, who would 
thereby be deprived of the disposal of many places of trust and 
profit, of many opportunities of acquiring wealth and distinc 
tion, which the possession of the most turbulent, and, to the 
great body of the people, the most unprofitable province seldom 
fails to afford. The most visionary enthusiast would scarce be 
capable of proposing such a measure with any serious hopes at 
least of its ever being adopted. If it was adopted, however, 
Great Britain would not only be immediately freed from the 
whole annual expense of the peace establishment of the colonies, 
but might settle with them such a treaty of commerce as would 
effectually secure to her a free trade, more advantageous to the 
great body of the people, though less so to the merchants, than 
the monopoly which she at present enjoys. By thus parting 
good friends, the natural affection of the colonies to the mother 
country which, perhaps, our late dissensions have well ni^h 
extinguished, would quickly revive. It might dispose them not 
only to respect, for whole centuries together, that treaty of 
commerce which they had concluded with us at parting, but to 
favour us in war as well as in trade, and, instead of turbulent 
and factious subjects, to become our most faithful, affectionate, 
and generous allies; and the same sort of parental affection on 
the one side, and filial respect on the other, might revive b tween 
Great Britain and her colonies, which used to subsist b tween 
those of ancient Greece and the mother city from which they 
descended. 

In order to render any province advantageous to the empire 
to which it belongs, it ought to afford, in time of peace, a 
revenue to the public sufficient not only for defraying the whole 
expense of its own peace establishment, but for contributing its 
proportion to the support of the general government of the 
empire. Every province necessarily contributes, more or less, 
to increase the expense of that general government. If any 



i 14 The Wealth of Nations 

particular province, therefore, does not contribute its share 
towards defraying this expense, an unequal burden must be 
thrown upon some other part of the empire. The extraordinary 
revenue, too, which every province affords to the public in time 
of war, ought, from parity of reason, to bear the same propor 
tion to the extraordinary revenue of the whole empire which its 
ordinary revenue does in time of peace. That neither the ordi 
nary nor extraordinary revenue which Great Britain derives 
from her colonies, bears this proportion to the whole revenue of 
the British empire, will readily be allowed. The monopoly, it 
has been supposed, indeed, by increasing the private revenue of 
the people of Great Britain, and thereby enabling them to pay 
greater taxes, compensates the deficiency of the public revenue 
of the colonies. But this monopoly, I have endeavoured to 
show, though a very grievous tax upon the colonies, and though 
it may increase the revenue of a particular order of men in 
Great Britain, diminishes instead of increasing that of the great 
body of the people; and consequently diminishes instead of 
increasing the ability of the great body of the people to pay 
taxes. The men, too, whose revenue the monopoly increases, 
constitute a particular order, which it is both absolutely impos 
sible to tax beyond the proportion of other orders, and extremely 
impolitic even to attempt to tax beyond that proportion, as I 
shall endeavour to show in the following book. No particular 
resource, therefore, can be drawn from this particular order. 

The colonies may be taxed either by their own assemblies, 01 
by the parliament of Great Britain. 

That the colony assemblies can ever be so managed as to 
levy upon their constituents a public revenue sufficient not 
only to maintain at all times their own civil and military estab 
lishment, but to pay their proper proportion of the expense of 
the general government of the British empire seems not very 
probable. It was a long time before even the parliament of 
England, though placed immediately under the eye of the 
sovereign, could be brought under such a system of manage 
ment, or could be rendered sufficiently liberal in their grants for 
supporting the civil and military establishments even of their 
own country. It was only by distributing among the particular 
members of parliament a great part either of the offices, or of 
the disposal of the offices arising from this civil and military 
establishment, that such a system of management could be 
established even with regard to the parliament of England. 
But the distance of the colony assemblies from the eye of the 



Colonies 1 1 ; 



sovereign, their number, their dispersed situation, and their 
various constitutions, would render it very difficult to manage 
them in the same manner, even though the sovereign hail the 
same means of doing it; and those means are wanting. It 
would be absolutely impossible to distribute among all the lead 
ing members of all the colony assemblies such a share, either of 
the ortices or of the disposal of the offices arising from the 
general government of the British empire, as to dispose them to 
give up their popularity at home, and to tax their constituent > 
for the support of that general government, of which almost the 
whole emoluments were to be divided among people who were 
strangers to them. The unavoidable ignorance of administra 
tion, l>esides, concerning the relative importance of the different 
members of those different assemblies, the offences which must 
frequently be given, the blunders which must constantly be 
committed in attempting to manage them in this manner, seems 
to render such a system of management altogether impracticable 
with regard to them. 

The colony assemblies, besides, cannot be supposed the proper 
judges of what is necessary for the defence ano! support of the 
whole empire. The care of that defence and support is not 
entrusted to them. It is not their business, and they have no 
regular means of information concerning it. The assembly of 
a province, like the vestry of a parish, may judge very properly 
concerning the affairs of its own particular district; but can 
have no proper means of judging concerning those of the whole 
empire. It cannot even judge properly concerning the pro 
portion which its own province bears to the whole empire; or 
concerning the relative degree of its wealth and importance 
compared with the other provinces; because those other pro 
vinces are not under the inspection and superintendency of the 
assembly of a particular province. What is necessary for the 
defence and support of the whole empire, and in what pro 
portion each part ought to contribute, can be judged of only 
by that assembly which inspects and superintends the affairs 
of the whole empire. 

It has been proposed, accordingly, that the colonies should l>e 
taxed by requisition, the parliament of Great Britain determin 
ing the sum which each colony ought to pay, and the provincial 
assembly assessing and levying it in the way that suited best 
the circumstances of the province. What concerned the whole 
empire would in this way be determined by the assembly which 
inspects and superintends the affairs of the whole empire; and 



i i 6 The Wealth of Nations 

the provincial affairs of each colony might still be regulated by 
its own assembly. Though the colonies should in this case 
have no representatives in the British parliament, yet, if we 
may judge by experience, there is no probability that the 
parliamentary requisition would be unreasonable. The parlia 
ment of England has not upon any occasion shown the smallest 
disposition to overburden those parts of the empire which are 
not represented in parliament. The islands of Guernsey and 
Jersey, without any means of resisting the authority of parlia 
ment, are more lightly taxed than any part of Great Britain. 
Parliament in attempting to exercise its supposed right, whether 
well or ill grounded, of taxing the colonies, has never hitherto 
demanded of them anything which even approached to a just 
proportion to what was paid by their fellow-subjects at home. 
If the contribution of the colonies, besides, was to rise or fall 
in proportion to the rise or fall of the land tax, parliament could 
not tax them without taxing at the same time its own con 
stituents, and the colonies might in this case be considered as 
virtually represented in parliament. 

Examples are not wanting of empires in which all the different 
provinces are not taxed, if I may be allowed the expression, in 
one mass; but in which the sovereign regulates the sum which 
each province ought to pay, and in some provinces assesses and 
levies it as he thinks proper; while in others, he leaves it to be 
assessed and levied as the respective states of each province 
shall determine. In some provinces of France, the king not 
only imposes what taxes he thinks proper, but assesses and levies 
them in the way he thinks proper. From others he demands a 
certain sum, but leaves it to the states of each province to assess 
and levy that sum as they think proper. According to the 
scheme of taxing by requisition, the parliament of Great Britain 
would stand nearly in the same situation towards the colony 
assemblies as the King of France does towards the states of 
those provinces winch still enjoy the privilege of having states 
of their own, the provinces of France which are supposed to be 
the best governed. 

But though, according to this scheme, the colonies could have 
no just reason to fear that their share of the public burdens 
should ever exceed the proper proportion to that of their fellow- 
citizens at home; Great Britain might have just reason to fear 
that it never would amount to that proper proportion. The 
parliament of Great Britain has not for some time past had the 
same established authority in the colonies, which the French 



Colonies 117 

king has in those provinces of France which still enjoy the 
privilege of having states of their own. The colony assemblies, 
if they were not very favourably disposed (and unless more 
skilfully managed than they ever have been hitherto, they are 
noi very likely to be so) might still find many pretences for 
evading or rejecting the most reasonable requisitions of parlia 
ment. A French war breaks out, we shall suppose ; ten millions 
must immediately be raised in order to defend the seat of the 
empire. This sum must be borrowed upon the credit of some 
parliamentary fund mortgaged for paying the interest. Part 
of this fund parliament proposes to raise by a tax to be levied 
in Great Britain, and part of it by a requisition to all the different 
colony assemblies of America and the West Indies. Would 
people readily advance their money upon the credit of a fund, 
which partly depended upon the good humour of all those 
assemblies, far distant from the seat of the war, and sometimes, 
perhaps, thinking themselves not much concerned in the event 
of it? Upon such a fund no more money would probably be 
advanced than what the tax to be levied in Great Britain might 
be supposed to answer for. The whole burden of the debt 
contracted on account of the war would in this manner fall, as 
it always has done hitherto, upon Great Britain; upon a part 
of the empire, and not upon the whole empire. Great Britain 
is, perhaps, since the world began, the only state which, as it 
has extended its empire, has only increased its expense without 
once augmenting its resources. Other states have generally 
disburdened themselves upon their subject and subordinate 
provinces of the most considerable part of the expense of defend 
ing the empire. Great Britain has hitherto suffered her subject 
and subordinate provinces to disburden themselves upon her of 
almost this whole expense. In order to put Great Britain upon 
a footing of equality with her own colonies, which the law has 
hitherto supposed to be subject and subordinate, it seems 
necessary, upon the scheme of taxing them by parliamentary 
requisition, that parliament should have some means of render 
ing its requisitions immediately effectual, in case the colony 
assemblies should attempt to evade or reject them; and what 
those means are, it is not very easy to conceive, and it has not 
yet been explained. 

Should the parliament of Great Britain, at the same time, 
be ever fully established in the right of taxing the colonies, even 
independent of the consent of their own assemblies, the im 
portance of those assemblies would from that moment be at an 



i i 8 The Wealth of Nations 

end, and with it, that of all the leading men of British America. 
Men desire to have some share in the management of public 
affairs chiefly on account of the importance which it gives them. 
Upon the power which the greater part of the leading men, the 
natural aristocracy of every country, have of preserving or 
defending their respective importance, depends the stability 
and duration of every system of free government. In the 
attacks which those leading men are continually making upon 
the importance of one another, and in the defence of their own, 
consists the whole play of domestic faction and ambition. The 
leading men of America, like those of all other countries, desire 
to preserve their own importance. They feel, or imagine, that 
if their assemblies, which they are fond of calling parliaments, 
and of considering as equal in authority to the parliament of 
Great Britain, should be so far degraded as to become the 
humble ministers and executive officers of that parliament, the 
greater part of their own importance would be at end. They 
have rejected, therefore, the proposal of being taxed by parlia 
mentary requisition, and like other ambitious and high-spirited 
men, have rather chosen to draw the sword in defence of their 
own importance. 

Towards the declension of the Roman republic, the allies of 
Rome, who had borne the principal burden of defending the 
state and extending the empire, demanded to be admitted to 
all the privileges of Roman citizens. Upon being refused, the 
social war broke out. During the course of that war, Rome 
granted those privileges to the greater part of them one by 
one, and in proportion as they detached themselves from the 
general confederacy. The parliament of Great Britain insists 
upon taxing the colonies; and they refuse to be taxed by a 
parliament in which they are not represented. If to each 
colony, which should detach itself from the general confederacy, 
Great Britain should allow such a number of representatives 
as suited the proportion of what is contributed to the public 
revenue of the empire, in consequence of its being subjected to 
the same taxes, and in compensation admitted to the same 
freedom of trade with its fellow-subjects at home; the number 
of its representatives to be augmented as the proportion of its 
contribution might afterwards augment; a new method of 
acquiring importance, a new and more dazzling object of 
ambition would be presented to the leading men of each colony. 
Instead of piddling for the little prizes which are to be found 
in what may be called the paltry raffle of colony faction; they 



Colonies i 19 

might then hope, from the presumption which men naturally 
have in their own ability and good fortune, to draw some of the 
great prizes which sometimes come from the wheel of the great 
state lottery of British politics. Unless this or some other 
method is fallen upon, anil there seems to be none more obvious 
than this, of preserving the importance and of gratifying the 
ambition of the leading men of America, it is not very probable 
that they will ever voluntarily submit to us; and we ought to 
consider that the blood which must be shed in forcing them to 
do so is, every drop of it, the blood either of those who are, or 
of those whom we wish to have for our fellow-citizens. They 
are very weak who flatter themselves that, in the state to which 
things have come, our colonies will be easily conquered by force 
alone. The persons who now govern the resolutions of what 
they call their continental congress, feel in themselves at this 
moment a degree of importance which, perhaps, the greatest 
subjects in Europe scarce feel. From shopkeepers, tradesmen, 
and attornies, they are become statesmen and legislators, and 
are employed in contriving a new form of government for an 
extensive empire, which, they flatter themselves, will become, 
and which, indeed, seems very likely to become, one of the 
greatest and most formidable that ever was in the world. Five 
hundred different people, perhaps, who in different ways act 
immediately under the continental congress: and five hundred 
thousand, perhaps, who act under those five hundred, all feel in 
the same manner a proportionable rise in their own importance. 
Almost even, individual of the governing party in America 
fills, at present in his own fancy, a station superior, not only 
to what he had ever filled before, but to what he had ever 
expected to fill; and unless some new object of ambition is 
presented either to him or to his leaders, if he has the ordinary 
spirit of a man, he will die in defence of that station. 

It is a remark of the president Henaut, that we now read 
with pleasure the account of many little transactions of the 
Ligue, which when they happened were not perhaps considered 
as very important pieces of news. But every man then, says 
he, fancied himself of some importance; and the innumerable 
memoirs which have come down to us from those times, were, 
the greater part of them, written by people who took pleasure 
in recording and magnifying events in which, they flattered 
themselves, they had been considerable actors. How obstinately 
the city of Paris upon that occasion defended itself, what a 
dreadful famine it supported rather than submit to the best 



I 20 The Wealth of Nations 

and afterwards to the most beloved of all the Frencli kings, is 
well known. The greater part of the citizens, or those who 
governed the greater part of them, fought in defence of their own 
importance, which they foresaw was to be at an end whenever 
the ancient government should be re-established. Our colonies, 
unless they can be induced to consent to a union, are very likely 
to defend themselves against the best of all mother countries 
as obstinately as the city of Paris did against one of the best 
of kings. 

The idea of representation was unknown in ancient times. 
When the people of one state were admitted to the right of 
citizenship in another, they had no other means of exercising 
that right but by coming in a body to vote and deliberate with 
the people of that other state. The admission of the greater 
part of the inhabitants of Italy to the privileges of Roman 
citizens completely ruined the Roman republic. It was no 
longer possible to distinguish between who was and who was 
not a Roman citizen. No tribe could know its own members. 
A rabble of any kind could be introduced into the assemblies of 
the people, could drive out the real citizens, and decide upon the 
affairs of the republic as if they themselves had been such. But 
though America were to send fifty or sixty new representatives 
to parliament, the doorkeeper of the House of Commons could 
not find any great difficulty in distinguishing between who 
was and who was not a member. Though the Roman con 
stitution, therefore, was necessarily ruined by the union of 
Rome with the allied states of Itaiy, there is not the least 
probability that the British constitution would be hurt by the 
union of Great Britain with her colonies. That constitution, 
on the contrary, would be completed by it, and seems to be 
imperfect without it. The assembly which deliberates and 
decides concerning the affairs of every part of the empire, in order 
to be properly informed, ought certainly to have representatives 
from every part of it. That this union, however, could be easily 
effectuated, or that difficulties and great difficulties might ndt 
occur in the execution, I do not pretend. I have yet heard of 
none, however, which appear insurmountable. The principal 
perhaps arise, not from the nature of things, but from the 
prejudices and opinions of the people both on this and on the 
other side of the Atlantic. 

We, on this side the water, are afraid lest the multitude of 
American representatives should overturn the balance of the 
constitution, and increase too much either the influence of the 



Colonies 121 

crown on the one hand, or the force of the democracy on the 
other. But if the number of American representatives were to 
be in proportion to the produce of American taxation, the 
number of people to be managed would increase exactly in 
proportion to the means of managing them; and the means of 
managing to the number of people to be managed. The 
monarchical and democratical parts of the constitution would, 
after the union, stand exactly in the same degree of relative 
force with regard to one another as they had done before. 

The people on the other side of the water are afraid lest their 
distance from the seat of government might expose them to 
many oppresssions. But their representatives in parliament, of 
which the number ought from the first to be considerable, would 
easily be able to protect them from all oppression. The distance 
could not much weaken the dependency of the representative 
upon the constituent, and the former would still feel that he 
owed his seat in parliament, and all the consequences which he 
derived from it, to the good will of the latter. It would be the 
interest of the former, therefore, to cultivate that goodwill by 
complaining, with all the authority of a member of the legislature, 
of ever> outrage which any civil or military officer might be 
guilty of in those remote parts of the empire. The distance of 
America from the seat of government, besides, the natives of 
that country might flatter themselves, with some appearance 
of reason too, would not be of very long continuance. Such 
has hitherto been the rapid progress of that country in wealth, 
population, and improvement, that in the course of little more 
than a century, perhaps, the produce of American might exceed 
that of British taxation. The seat of the empire would then 
naturally remove itself to that part of the empire which con 
tributed most to the general defence and support of the whole. 

The discovery of America, and that of a passage to the East 
Indies by the Cipe of Good Hope, are the two greatest and most 
important events recorded in the history of mankind. Their 
consequences have already been very great; but, in the short 
period of between two and three centuries which has elapsed 
since these discoveries were made, it is impossible that the whole 
extent of their consequences can have been seen. What benefits 
or what misfortunes to mankind may hereafter result from those 
great events, no human wisdom can foresee. By uniting, in 
some measure, the most distant parts of the world, by enabling 
them to relieve one another s wants, to increase one another s 
enjoyments, and to encourage one another s industry, their 



122 The Wealth of Nations 

general tendency would seem to be beneficial. To the natives 
however, both of the East and West Indies, all the commercial 
benefits which can have resulted from those events have been 
sunk and lost in the dreadful misfortunes which they have 
occasioned. These misfortunes, however, seem to have arisen 
rather from accident than from anything in the nature of those 
events themselves. At the particular time when these dis 
coveries were made, the superiority of force happened to be so 
great on the side of the Europeans that they were enabled to 
commit with impunity every sort of injustice in those remote 
countries. Hereafter, perhaps, the natives of those countries 
may grow stronger, or those of Europe may grow weaker, and 
the inhabitants of all the different quarters of the world may 
arrive at that equality of courage and force which, by inspiring 
mutual fear, can alone overawe the injustice of independent 
nations into some sort of respect for the rights of one another. 
But nothing seems more likely to establish this equality of force 
than that mutual communication of knowledge and of all sorts 
of improvements which an extensive commerce from all countries 
to all countries naturally, or rather necessarily, carries along 
with it. 

In the meantime one of the principal effects of those dis 
coveries has been to raise the mercantile system to a degree of 
splendour and glory which it could never otherwise have attained 
to. It is the object of that system to enrich a great nation 
rather by trade and manufactures than by the improvement 
and cultivation of land, rather by the industry of the towns 
than by that of the country. But, in consequence of those 
discoveries, the commercial towns of Europe, instead of being 
the manufacturers and carriers for but a very small part of the 
world (that part of Europe which is washed by the Atlantic 
Ocean, and the countries which lie round the Baltic and Medi 
terranean seas), have now become the manufacturers for the 
numerous and thriving cultivators of America, and the carriers, 
and in some respects the manufacturers too, for almost all the 
different nations of Asia, Africa, and America. Two new worlds 
have been opened to their industry, each of them much greater 
and more extensive than the old one, and the market of one 
of them growing still greater and greater every day. 

The countries which possess the colonies of America, and 
which trade directly to the East Indies, enjoy, indeed, the whole 
show and splendour of this great commerce. Other countries, 
however, notwithstanding all the invidious restraints by which 



Colonies 123 

it is meant to exclude them, frequently enjoy a greater share of 
the real benefit of it. The colonies of Spain and Portugal, for 
example-, give more real encouragement to the industry of other 
countries than to that of Spain and Portugal. In the single 
article of linen alone the consumption of those colonies amounts, 
it is said, but I do not pretend to warrant the quantity, to more 
than three millions sterling a year. But this great consumption 
is almost entirely supplied by France. Flanders, Holland, and 
Germany. Spain and Portugal furnish but a small part of it. 
The capital which supplies the colonies with this great quantity 
of linen is annually distributed among, and furnishes a revenue 
to the inhabitants of, those other countries. The profits of it 
only are spent in Spain and Portugal, where they help to support 
the sumptuous profusion of the merchants of Cadi/, and Lisbon. 
Even the regulations by which each nation endeavours to 
secure to itself the exclusive trade of its own colonies are 
frequently more hurtful to the countries in favour of which 
they are established than to those against which they are 
established. The unjust oppression of the industry of other 
countries falls back, if I may say so, upon the heads of the 
oppressors, and crushes their industry more than it do-s that 
of those other countries. By those regulations, for tx.unple, 
the merchant of Hamburg must send the linen which he 
destines for the American market to London, and lie must 
bring back from thence the tobacco which he destines for the 
German market, because he can neither send the one directly 
to America nor bring back the other directly from thence. By 
this restraint he is probably obliged to sell the one somewhat 
cheaper, and to buy the other somewhat dearer than he other 
wise might have done; and his profits are probably somewhat 
abridged by means of it. In this trade, however, between 
Hamburg and London, he certainly receives the returns of his 
capital much more quickly than he could possibly have done 
in the direct trade to America, even though we should suppose, 
what is by no means the case, that the payments of America 
were as punctual as those of London. In the trade, therefore, 
to which those regulations confine the merchant of Hamburg, 
his capital can keep in constant employment a much greater 
q lantity of German industry than it possibly could have done 
in the trade from which he is excluded. Though the one employ 
ment, therefore, may to him perhaps be less profitable than the 
other, it cannot be less advantageous to his country. It is 
quite otherwise with the employment into which the monopoly 



i 24 The Wealth of Nations 

naturally attracts, if I may say so, the capital of the London 
merchant. That employment may, perhaps, be more profitable 
to him than the greater part of other employments, but, on 
account of the slowness of the returns, it cannot be more advan 
tageous to his country. 

After all the unjust attempts, therefore, of every country in 
Europe to engross to itself the whole advantage of the trade of 
its own colonies, no country has yet been able to engross to itself 
anything but the expense of supporting in time of peace and 
of defending in time of war the oppressive authority \vhich it 
assumes over them. The inconveniencies resulting from the 
possession of its colonies, every country has engrossed to itself 
completely. The advantages resulting from their trade it has 
been obliged to share with many other countries. 

At first sight, no doubt, the monopoly of the great commerce 
of America naturally seems to be an acquisition of the highest 
value. To the undiscerning eye of giddy ambition, it naturally 
presents itself amidst the confused scramble of politics and war 
as a very dazzling object to fight for. The dazzling splendour 
of the object, however, the immense greatness of the commerce, 
is the very quality which renders the monopoly of it hurtful, or 
which makes one employment, in its own nature necessarily less 
advantageous to the country than the greater part of other 
employments, absorb a much greater proportion of the capital 
of the country than what would otherwise have gone to it. 

The mercantile stock of every country, it has been shown in 
the second book, naturally seeks, if one may say so, the employ 
ment most advantageous to that country. If it is employed in 
the carrying trade, the country to which it belongs becomes the 
emporium of the goods of all the countries whose trade that stock 
carries on. But the owner of that stock necessarily wishes to 
dispose of as great a part of those goods as he can at home. He 
thereby saves himself the trouble, risk, and expense of exporta 
tion, and he will upon that account be glad to sell them at home, 
not only for a much smaller price, but with somewhat a smaller 
profit than he might expect to make by sending them abroad. 
He naturally, therefore, endeavours as much as he can to turn 
his carrying trade into a foreign trade of consumption. If his 
stock, again, is employed in a foreign trade of consumption, he 
will, for the same reason, be glad to dispose of at home as great 
a part as he can of the home goods, which he collects in order to 
export to some foreign market, and he will thus endeavour, as 
much as he can, to turn his foreign trade of consumption into a 



Colonies 125 

home trade. The mercantile stock of every country naturally 
courts in this manner the near, and shuns the distant employ 
ment; naturally courts the employment in which the returns 
are frequent, and shuns that in which they are distant and slow : 
naturally courts the employment in which it can maintain the 
greatest quantity of productive labour in the country to which 
it belongs, or in which its owner resides, and shuns that in which 
it can maintain there the smallest quantity. It naturally courts 
the employment which in ordinary cases is most advantageous, 
and shuns that which in ordinary cases is least advantageous 
to that country. 

But if in any of those distant employments, which in ordinary 
cases are less advantageous to the country, the profit should 
happen to rise somewhat higher than what is sufficient to balance 
the natural preference which is given to nearer employments, this 
superiority of profit will draw stock from tho.se nearer employ 
ments, till the profits of all return to their proper level. This 
superiority of profit, however, is a proof that, in the actual 
circumstances of the society, those distant employments are 
somewhat understocked in proportion to other employments, 
and that the stock of the society is not distributed in the 
properest manner among all the different employments carried 
on in it. It is a proof that something is either bought cheaper 
or sold dearer than it ought to be, ;:nd that some particular class 
of citizens is more or less oppressed either by paying more or by- 
getting less than what is suitable to that equality which ought 
to take place, and which naturally does take place among all 
the diflerent classes of them. Though the same capital never 
will maintain the same quantity of productive labour in a distant 
as in a near employment, yet a distant employment may be as 
necessary for the welfare of the society as a near one; the goods 
which the distant employment deals in being necessary, perhaps, 
for carrying on many of the nearer employments. But if the 
profits of those who deal in such goods are above their proper 
level, those goods will be sold dearer thar they ought to be, or 
somewhat above their natural price, and all those engaged in the 
nearer employments will be more or less oppressed by this high 
price. Their interest, therefore, in this case requires that some 
stock should be withdrawn from those nearer employments, 
and turned towards that distant one, in order to reduce its 
profits to their proper level, and the price of the goods which it 
deals in to their natural price. In this extraordinary case, the 
public interest requires that some stock should be withdrawn 



i 26 The Wealth of Nations 

from those employments which in ordinary cases are more 
advantageous, and turned towards one which in ordinary cases 
is less advantageous to the public; and in this extraordinary 
case the natural interests and inclinations of men coincide as 
exactly with the public interest as in all other ordinary cases, and 
lead them to withdraw stock from the near, and to turn it 
towards the distant employment. 

It is thus that the private interests and passions of individuals 
naturally dispose them to turn their stock towards the employ 
ments which in ordinary cases are most advantageous to the 
society. But if from this natural preference they should turn 
too much of it towards those employments, the fall of profit in 
them and the rise of it in all others immediately dispose them 
to alter this faulty distribution. Without any intervention of 
law, therefore, the private interests and passions of men natur 
ally lead them to divide and distribute the stock of every 
society among all the different employments carried on in it 
as nearly as possible in the proportion which is most agreeable 
to the interest of the whole society. 

All the different regulations of the mercantile system neces 
sarily derange more or less this natural and most advantageous 
distribution of stock. But those which concern the trade to 
America and the East Indies derange it perhaps more than any 
other, because the trade to those two great continents absorbs 
a greater quantity of stock than any two other branches of 
trade. The regulations, however, by which this derangement 
is effected in those two different branches of trade are not 
altogether the same. Monopoly is the great engine of both; 
but it is a different sort of monopoly. Monopoly of one kind 
or another, indeed, seems to be the sole engine of the mercantile 
system. 

In the trade to America every nation endeavours to engross 
as much as possible the whole market of its own colonies by 
fairly excluding all other nations from any direct trade to them. 
During the greater part of the sixteenth century, the Portuguese 
endeavoured to manage the trade to the East Indies in the same 
manner, by claiming the sole right of sailing in the Indian seas, 
on account of the merit of having first found out the road to 
them. The Dutch still continue to exclude all other European 
nations from any direct trade to their spice islands. Monopolies 
of this kind are evidently established against all other European 
nations, who are thereby not only excluded from a trade to 
which it might be convenient for them to turn some part of 



Colonies 127 

their stock, but are obliged to buy the goods which that trade 
deals in somewhat dearer than if they could import them 
themselves directly from the countries which produce them. 

Cut since the fall of the power of Portugal, no European 
nation has claimed the exclusive right of sailing in the Indian 
seas, of which the principal ports are now open to the ships of 
all European nations. Except in Portugal, however, and within 
these few years in France, the trade to the East Indies has in 
every European country been subjected to an exclusive com 
pany. Monopolies of this kind are properly established against 
the very nation which erects them. The greater part of that 
nation are thereby not only excluded from a trade to which it 
might be convenient for them to turn some part of their stock. 
but are obliged to buy the goods which that trade deals in 
somewhat dearer than if it was open and free to all tlu:ir country 
men. Since the establishment of the English East India Com 
pany, for example, the other inhabitants of England, over and 
above being excluded from the trade, must have paid in the 
price of the East India goods which they have consumed, not 
only for all the extraordinary profits which the company may 
have made upon those goods in consequence of their monopoly, 
but for all the extraordinary waste which the fraud and abuse, 
inseparable from the management of the affairs of so great a 
company, must necessarily have occasioned. The absurdity of 
this second kind of monopoly, therefore, is much more manifest 
than that of the first. 

Both these kinds of monopolies derange more or less the 
natural distribution of the stock of the society; but they do 
not always derange it in the same way. 

Monopolies of the first kind always attract to the particular 
trade in which they are established a greater proportion of the 
stock of the society than what would go to that trade of its 
own accord. 

Monopolies of the second kind may sometimes attract stock 
towards the particular trade in which they are established, and 
sometimes repel it from that trade according to different cir 
cumstances. In poor countries they naturally attract towards 
that trade more stock than would otherwise go to it. In rich 
countries they naturally repel from it a good deal of stock 
which would otherwise go to it. 

Such poor countries as Sweden and Denmark, for example, 
would probably have never sent a single ship to the East Indies 
had not the trade been subjected to an exclusive company. 



128 The Wealth of Nations 

The establishment of such a company necessarily encourages 
adventurers. Their monopoly secures them against all com 
petitors in the home market, and they have the same chance 
for foreign markets with the traders of other nations. Their 
monopoly shows them the certainty of a great profit upon a 
considerable quantity of goods, and the chance of a considerable 
profit upon a great quantity. Without such extraordinary 
encouragement, the poor traders of such poor countries would 
probably never have thought of hazarding their small capitals 
in so very distant and uncertain an adventure as the trade to 
the East Indies must naturally have appeared to them. 

Such a rich country as Holland, on the contrary, would prob 
ably, in the case of a free trade, send many more ships to the 
East Indies than it actually does. The limited stock of the 
Dutch East India Company probably repels from that trade 
many great mercantile capitals which would otherwise go to it. 
The mercantile capital of Holland is so great that it is, as it 
were, continually overflowing, sometimes into the public funds 
of foreign countries, sometimes into loans to private traders and 
adventurers of foreign countries, sometimes into the most 
round-about foreign trades of consumption, and sometimes into 
the carrying trade. All near employments being completely 
filled up, all the capital which can be placed in them with any 
tolerable profit being already placed in them, the capital of 
Holland necessarily flows towards the most distant employ 
ments. The trade to the East Indies, if it were altogether free, 
would probably absorb the greater part of this redundant capital. 
The East Indies offer a market both for the manufactures of 
Europe and for the gold and silver as well as for several other 
productions of America greater and more extensive than both 
Europe and America put together. 

Every derangement of the natural distribution of stock is 
necessarily hurtful to the society in which it takes place; 
whether it be by repelling from a particular trade the stock 
which would otherwise go to it, or by attracting towards a 
particular trade that which would not otherwise come to it. If, 
without any exclusive company, the trade of Holland to the 
East Indies would be greater than it actually is, that country 
must suffer a considerable loss by part of its capital being 
excluded from the employment most convenient for that part. 
And in the same manner, if, without an exclusive company, the 
trade of Sweden and Denmark to the East Indies would be less 
than it actually is, or, what perhaps is more probable, would 



Colonies 129 

not exist at all, those two countries must likewise suffer a 
consi lerable loss by part of their capital being drawn into an 
empl >yment which must be more or less unsuitable to their 
prese.it circumstances. Better for them, perhaps, in their pre 
sent circumstances, to buy East India goods of other nations, 
even though they should pay somewhat dearer, than to turn so 
great a part of their small capital to so very distant a trade, in 
which the returns are so very slow, in which that capital can 
maintain so small a quantity of productive labour at home, 
where productive labour is so much wanted, where so little is 
done, and where so much is to do. 

Though without an exclusive company, therefore, a particular 
country should not be able to carry on any direct trade to the 
East Indies, it will not from thence follow that such a company 
light to be established there, but only that such a country ought 
not in these circumstances to trade directly to the East Indies. 
That such companies are not in general necessary for carrying 
on the East India trade is sufficiently demonstrated by the 
experience of the Portuguese, who enjoyed almost the whole of 
it for more than a century together without any exclusive 
company. 

No private merchant, it has been said, could well have capital 
sufficient to maintain factors and agents in the different ports 
of the East Indies, in order to provide goods for the ships 
which he might occasionally send thither; and yet, unless he 
was able to do this, the difficulty of finding a cargo might fre 
quently make his ships lose the season for returning, and the 
expense of so long a delay would not only eat up the whole 
profit of the adventure, but frequently occasion a very con 
siderable loss. This argument, however, if it proved anything 
at all, would prove that no one great branch of trade could be 
carried on without an exclusive company, which is contrary to 
the experience of all nations. There is no great branch of trade 
in which the capital of any one private merchant is sufficient 
for carrying on all the subordinate branches which must be 
carried on, in order to carry on the principal one. But when a 
nation is ripe for any great branch of trade, some merchants 
naturally turn their capitals towards the principal, and some 
towards the subordinate branches of it; and though all the 
different branches of it are in this manner carried on, yet it 
very seldom happens that they are all carried on by the capital 
of one private merchant. If a nation, therefore, is ripe for the 
East India trade, a certain portion of its capital will naturally 



i 30 The Wealth of Nations 

divide itself among all the different branches of that trade. 
Some of its merchants will find it for their interest to reside in 
the East Indies, and to employ their capitals there in providing 
goods for the ships which are to be sent out by other merchants 
who reside in Europe. The settlements which different Euro 
pean nations have obtained in the East Indies, if they were 
taken from the exclusive companies to which they at present 
belong and put under the immediate protection of the sove 
reign, would render this residence both safe and easy, at least 
to the merchants of the particular nations to whom those settle 
ments belong. If at any particular time that part of the capital 
of any country which of its own accord tended and inclined, if 
I may say so, towards the East India trade, was not sufficient 
for carrying on all those different branches of it, it would be a 
proof that, at that particular time, that country was not ripe 
for that trade, and that it would do better to buy for some 
time, even at a higher price, from other European nations, the 
East India goods it had occasion for, than to import them itself 
directly from the East Indies. What it might lose by the high 
price of those goods could seldom be equal to the loss which it 
would sustain by the distraction of a large portion of its capital 
from other employments more necessary, or more useful, or 
more suitable to its circumstances and situation, than a direct 
trade to the East Indies. 

Though the Europeans possess many considerable settle 
ments both upon the coast of Africa and in the I^ast Indies, 
they have not yet established in either of those countries such 
numerous and thriving colonies as those in the islands and con 
tinent of America. Africa, however, as well as several of the 
countries comprehended un ler the general name of the East 
Indies, are inhabited by barbarous nations. But those nations 
were by no means so weak and defenceless as the miserable and 
helpless Americans; and in proportion to the natural fertility 
of the countries which they inhabited, they were besides much 
more populous. The most barbarous nations either of Africa or 
of the East Indies were shepherds; even the Hottentots were 
so. But the natives of every part of America, except Mexico 
and Peru, were only hunters; and the difference is very great 
between the number of shepherds and that of hunters whom 
the same extent of equally fertile territory can maintain. In 
Africa and the East Indies, therefore, it was more difficult to 
displace the natives, and to extend the European plantations 
over the greater part of the lands of the original inhabitants. 



Colonies 131 

The genius of exclusive companies, besides, is unfavourable, it 
has already been observed, to the growth of new colonies, and 
has probably been the principal cause of the little progress 
whirh they have made in the East Indies. The Portuguese 
carried on the trade both to Africa and the East Indies without 
any exclusive companies, and their settlements at Congo, Angola, 
and Benguela on the coast of Africa, and at Goa in the East 
Indies, though much depressed by superstition and every sort 
of bad government, yet bear some faint resemblance to the 
colonies of America, and are partly inhabited by Portuguese 
who have been established there for several generations. The 
Dutch settlements at the Cape of Good Hope and at Batavia 
are at present the most considerable colonies which the Euro 
peans have established either in Africa or in the East Indies, 
and both these settlements are peculiarly fortunate in their 
situation. The Cape of Good Hope was inhabited by a race of 
people almost as barbarous and quite as incapable of defending 
themselves as the natives of America. It is besides the half 
way house, if one may say so, between Europe and the East 
Indies, at which almost every European ship makes some stay, 
both in going and returning. The supplying of those ships with 
every sort of fresh provisions, with fruit and sometimes with 
wine, affords alone a very extensive market for the surplus 
produce of the colonists. What the Cape of Good Hope is 
between Europe and every part of the East Indies, Batavia is 
between the principal countries of the East Indies. It lies upon 
the most frequented road from Indostan to China and Japan, 
and is nearly about midway upon that road. Almost all the 
ships, too, that sail between Europe and China touch at Batavia; 
and it is, over and above all this, the centre and principal mart 
of what is called the country trade of the East Indies, not only 
of that part of it which is carried on by Europeans, but of that 
which is carried on by the native Indians; and vessels navigated 
by the inhabitants of China and Japan, of Tonquin, Malacca, 
Cochin-China, and the island of Celebes, are frequently to be 
seen in its port. Such advantageous situations have enabled 
those two colonies to surmount all the obstacles which the 
oppressive genius of an exclusive company may have occa 
sionally opposed to their growth. They have enabled Batavia 
to surmount the additional disadvantage of perhaps the most 
unwholesome climate in the world. 

The English and Dutch companies, though they have estab 
lished no considerable colonies, except the two above mentioned, 

*E4J 



i 32 The Wealth of Nations 

have both made considerable conquests in the East Indies. 
But in the manner in which they both govern their new sub 
jects, the natural genius of an exclusive company has shown 
itself most distinctly. In the spice islands the Dutch are said 
to burn all the spiceries which a fertile season produces beyond 
what they expect to dispose of in Europe with such a profit as 
they think sufficient. In the islands where they have no settle 
ments, they give a premium to those who collect the young 
blossoms and green leaves of the clove and nutmeg trees which 
naturally grow there, but which this savage policy has now, it 
is said, almost completely extirpated. Even in the islands 
where they have settlements they have very much reduced, it is 
said, the number of those trees. If the produce even of their 
own islands was much greater than what suited their market, 
the natives, they suspect, might find means to convey some part 
of it to other nations ; and the best way, they imagine, to secure 
their own monopoly is to take care that no more shall grow 
than what they themselves carry to market. By different arts 
of oppression they have reduced the population of several of the 
Moluccas nearly to the number which is sufficient to supply 
with fresh provisions and other necessaries of life their own 
insignificant garrisons, and such of their ships as occasionally 
come there for a cargo of spices. Under the government even 
of the Portuguese, however, those islands are said to have been 
tolerably well inhabited. The English company have not yet 
had time to establish in Bengal so perfectly destructive a system. 
The plan of their government, however, has had exactly the 
same tendency. It has not been uncommon, I am well assured, 
for the chief, that is, the first clerk of a factory, to order a 
peasant to plough up a rich field of poppies, and sow it with 
rice or some other grain. The pretence was, to prevent a 
scarcity of provisions; but the real reason, to give the chief an 
opportunity of selling at a better price a large quantity of 
opium, which he happened then to have upon hand. Upon 
other occasions the order has been reversed; and a rich field of 
rice or other grain has been ploughed up, in order to make room 
for a plantation of poppies; when the chief foresaw that extra 
ordinary profit was likely to be made by opium. The servants 
of the company have upon several occasions attempted to 
establish in their own favour the monopoly of some of the most 
important branches, not only of the foreign, but of the inland 
trade of the country. Had they been allowed to go on, it is 
impossible that they should not at some time or another have 



Colonies 133 

attempted to restrain the production of the particular articles 
of which they had thus usurped the monopoly, not only to the 
quantity which they themselves could purchase, but to that 
which they could expect to sell with such a profit as they 
might think sufficient. In the course of a century or two, 
the policy of the English company would in this manner 
have probably proved as completely destructive as that of 
the Dutch. 

Nothing, however, can be more directly contrary to the real 
interest of those companies, considered as the sovereigns of the 
countries which they have conquered, than this destructive plan. 
In almost all countries the revenue of the sovereign is drawn 
from that of the people. The greater the revenue of the people, 
therefore, the greater the annual produce of their land and 
labour, the more they can afford to the sovereign. It is his 
interest, therefore, to increase as much as possible that annual 
produce. But if this is the interest of every sovereign, it is 
peculiarly so of one whose revenue, like that of the sovereign of 
Bengal, arises chiefly from a land-rent. That rent must neces 
sarily be in proportion to the quantity and value of the produce, 
and both the one and the other must depend upon the extent 
of the m irkct. The quantity will always be suited with more or 
less exactness to the consumption of those who can afford to 
pay for it, and the price which they will pay will always be 
in proportion to the eagerness of their competition. It is the 
interest of such a sovereign, therefore, to open the most extensive 
market for the produce of his country, to allow the most perfect 
freedom of commerce, in order to increase as much as possible 
the number and the competition of buyers; and upon this 
account to abolish, not only all monopolies, but all restraints 
upon the transportation of the home produce from one part of 
the country to another, upon its exportation to foreign countries, 
or upon the importation of goods of any kind for which it can 
be exchanged. It is in this manner most likely to increase both 
the quantity and value of that produce, and consequently of 
his own share of it, or of his own revenue. 

But a company of merchants are, it seems, incapable of con 
sidering themselves as sovereigns, even after they have become 
such. Trade, or buying in order to sell again, they still consider 
as their principal business, and by a strange absurdity regard 
the character of the sovereign as but an appendix to that of 
the merchant, as something which ought to be made subservient 
to it, or by means of which they may be enabled to buy cheaper 



i 34 The Wealth of Nations 

in India, and thereby to sell with a better profit in Europe. 
They endeavour for this purpose to keep out as much as possible 
all competitors from the market of the countries which are 
subject to their government, and consequently to reduce, at 
least, some part of the surplus produce of those countries to 
what is barely sufficient for supplying their own demand, or to 
what they can expect to sell in Europe with such a profit as they 
may think reasonable. Their mercantile habits draw them in 
this manner, almost necessarily, though perhaps insensibly, to 
prefer upon all ordinary occasions the little and transitory profit 
of the monopolist to the great and permanent revenue of the 
sovereign, and would gradually lead them to treat the countries 
subject to their government nearly as the Dutch treat the 
Moluccas. It is the interest of the East India Company, con 
sidered as sovereigns, that the European goods which are carried 
to their Indian dominions should be sold there as cheap as 
possible; and that the Indian goods which are brought from 
thence should bring there as good a price, or should be sold 
there as dear as possible. But the reverse of this is their interest 
as merchants. As sovereigns, their interest is exactly the same 
with that of the country which they govern. As merchants 
their interest is directly opposite to that interest. 

But if the genius of such a government, even as to what 
concerns its direction in Europe, is in this manner essentially 
and perhaps incurably faulty, that of its administration in India 
is still more so. That administration is necessarily composed of 
a council of merchants, a profession no doubt extremely respect 
able, but which in no country in the world carries along with it 
that sort of authority which naturally overawes the people, 
and without force commands their willing obedience. Such a 
council can command obedience only by the military force with 
which they are accompanied, and their government is therefore 
necessarily military and despotical. Their proper business, 
however, is that of merchants. It is to sell, upon their masters 
account, the European goods consigned to them, and to buy 
in return Indian goods for the European market. It is to sell 
the one as dear and to buy the other as cheap as possible, and 
consequently to exclude as much as possible all rivals from the 
particular market where they keep their shop. The genius of the 
administration therefore, so far as concerns the trade of the 
company, is the same as that of the direction. It tends to make 
government subservient to the interest of monopoly, and con 
sequently to stunt the natural growth of some parts at least of 



Colonies 135 

the surplus produce of the country to what is barely sufficient 
for answering the demand of the company. 

All the members of the administration, besides, trade more 
or less upon their own account, and it is in vain to prohibit 
them from doing so. Nothing can be more completely foolish 
than to expect that the clerks of a great counting-house at ten 
thousand miles distance, and consequently almost quite out of 
sight, should, upon a simple order from their masters, give up 
at once doing any sort of business upon their own account, 
abandon for ever all hopes of making a fortune, of which they 
have the nr-ans in their hands, and content themselves with the 
moderate salaries which those masters allow them, and which, 
moderate as they are, can seldom be augmented, being commonly 
as large as the real profits of the company trade can afford. In 
such circumstances, to prohibit the servants of the company 
from trading upon their own account can have scarce any other 
effect than to enable the superior servants, under pretence of 
executing their masters order, to oppress such of the inferior 
ones as have had the misfortune to fall under their displeasure. 
The servants naturally endeavour to establish the same monopoly 
in favour of their own private trade as of the public trade of 
the company. If they are suffered to act as they could wish, 
they will establish this monopoly openly and directly, by fairly 
prohibiting all other people from trading in the articles in which 
they choose to deal; and this, perhaps, is the best and least 
oppressive way of establishing it. But if by an order from 
Kurope they are prohibited from doing this, they will, notwith 
standing, endeavour to establish a monopoly of the same kind, 
secretly and indirectly, in a way that is much more destructive 
to the country. They will employ the whole authority of govern 
ment, and pervert the administration of justice, in order to 
harass and ruin those who interfere with them in any branch of 
commerce, which by means of agents, either concealed, or at 
least not publicly avowed, they may choose to carry on. But 
the private trade of the servants will naturally extend to a 
much greater variety of articles than the public trade of the 
company. The public trade of the company extends no further 
than the trade with Kurope, and comprehends a part only of the 
foreign trade of the country. But the private trade of the 
servants may extend to all the different branches both of its 
inland and foreign trade. The monopoly of the company can 
tend only to stunt the natural growth of that part of the surplus 
produce which, in the case of a free trade, would be exported 



i 3 6 



The Wealth of Nations 



to Europe. That of the servants tends to stunt the natural 
growth of every part of the produce in which they choose to 
deal, of what is destined for home consumption, as well as of 
what is destined for exportation; and consequently to degrade 
the cultivation of the whole country, and to reduce the numbe r 
of its inhabitants. It tends to reduce the quantity of every 
sort of produce, even that of the necessaries of life, whenever 
the servants of the company choose to deal in them, to what 
those servants can both afford to buy and expect to sell with 
such a profit as pleases them. 

From the nature of their situation, too, the servants must be 
more disposed to support with rigorous severity their own 
interest against that of the country which they govern than 
their masters can be to support theirs. The country belongs 
to their masters, who cannot avoid having some regard for the 
interest of what belongs to them. But it does not belong to the 
servants. The real interest of their masters, if they were capable 
of understanding it, is the same with that of the country, 1 and 
it is from ignorance chiefly, and the meanness of mercantile 
prejudice, that they ever oppress it. But the real interest of 
the servants is by no means the same with that of the country, 
and the most perfect information would not necessarily put an 
end to their oppressions. The regulations accordingly which 
have been sent out from Europe, though they have been 
frequently weak, have upon most occasions been well-meaning. 
More intelligence and perhaps less good-meaning has sometimes 
appeared in those established by the servants in India. It is 
a very singular government in which every member of the 
administration wishes to get out of the country, and consequently 
to have done with the government as soon as he can, and to 
whose interest, the day after he has left it and carried his whole 
fortune with him, it is perfectly indifferent though the whole 
country was swallowed up by an earthquake. 

I mean not, however, by anything which I have here said, to 
throw any odious imputation upon the general character of the 
servants of the East India Company, and much less upon that 
of any particular persons. It is the system of government, the 
situation in which they are placed, that I mean to censure, not 
the character of those who have acted in it. They acted as 
their situation naturally directed, and they who have clamoured 

1 The interest of every proprietor of India stock, however, is by no 
means the same with that of the country in the government of which his 
vote gives him some influence. See book v. chap. i. part iii. 



Conclusion of the Mercantile System 137 

the loudest against them would probably not have acted better 
themselves. In war and negotiation, the councils of Madras 
and Calcutta have upon several occasions conducted themselves 
with a resolution and decisive wisdom which would have done 
honour to the senate of Rome in the best days of that republic. 
The members of those councils, however, had been bred to 
professions very different from war and politics. But their 
situation alone, without education, experience, or even example, 
seems to have formed in them all at once the great qualities 
which it required, and to have inspired them both with abilities 
and virtues which they trumselves could not well know that 
they possessed. If upon some occasions, therefore, it has 
animated them to actions of magnanimity which could not well 
have been expected from them, we should not wonder if upon 
others it has prompted them to exploits of somewhat a different 
nature. 

Such exclusive companies, therefore, arc nuisances in every 
respect; always more or less inconvenient to the countries in 
which they are established, and destructive to those which have 
the misfortune to fall under their government. 



CHAPTER VIII 

CONCLUSION OF THE MERCANTILE SYSTEM 

THOUGH the encouragement of exportation and the discourage 
ment of importation are the two great engines by which the 
mercantile system proposes to enrich every country, yet with 
regard to some particular commodities it seems to follow an 
opposite plan: to discourage exportation and to encourage im 
portation. Its ultimate object, however, it pretends, is always 
the same, to enrich the country by an advantageous balance of 
trade. It discourages the exportation of the materials of manu 
facture, and of the instruments of trade, in order to give our 
own workmen an advantage, and to enable them to undersell 
those of other nations in all foreign markets; and by restraining, 
in this manner, the exportation of a few commodities, of no 
great price, it proposes to occasion a much greater and more 
valuable exportation of others. It encourages the importation 
of the materials of manufacture in order that our own people 
may be enabled to work them up more cheaply, and thereby 



138 The Wealth of Nations 

prevent a greater and more valuable importation of the manu 
factured commodities. I do not observe, at least in our Statute 
Book, any encouragement given to the importation of the 
instruments of trade. When manufactures have advanced to a 
certain pitch of greatness, the fabrication of the instruments of 
trade becomes itself the object of a great number of very im 
portant manufactures. To give any particular encouragement 
to the importation of such instruments would interfere too 
much with the interest of those manufactures. Such importa 
tion, therefore, instead of being encouraged, has frequently been 
prohibited. Thus the importation of wool cards, except from 
Ireland, or when brought in as wreck or prize goods, was 
prohibited by the 3rd of Edward IV.; which prohibition was 
renewed by the 39th of Elizabeth, and has been continued 
and rendered perpetual by subsequent laws. 

The importation of the materials of manufacture has some 
times been encouraged by an exemption from the duties to 
which other goods are subject, and sometimes by bounties. 

The importation of sheep s wool from several different 
countries, of cotton wool from all countries, of undressed flax, 
of the greater part of dying drugs, of the greater part of un 
dressed hides from Ireland or the British colonies, of sealskins 
from the British Greenland fishery, of pig and bar iron from 
the British colonies, as well as of several other materials of 
manufacture, has been encouraged by an exemption from all 
duties, if properly entered at the custom house 1 . The private 
interest of our merchants and manufacturers may, perhaps, 
have extorted from the legislature these exemptions as well as 
the greater part of our other commercial regulations. They 
are, however, perfectly just and reasonable, and if, consistently 
with the necessities of the state, they could bo extended to all 
the other materials of manufacture, the public would certainly 
be a gainer. 

The avidity of our great manufacturers, however, has in some 
cases extended these exemptions a good deal beyond what can 
justly be considered as the rude materials of their work. By 
the 24 Geo. II. chap. 46, a small duty of only one penny th .: 
pound was imposed upon the importation of foreign brown linen 
yarn, instead of much higher duties to which it had been sub 
jected before, viz. of sixpence the pound upon sail yarn, of one 
shilling the pound upon all French and Dutch yarn, and of two 
pounds thirteen shillings and fourpence upon the hundredweight 
of all spruce or Muscovia yarn. But our manufacturers were 



Conclusion of the Mercantile System 139 

not long satisfied with this reduction. By the 29th of the same 
king, chap. 15, the same law which gave a bounty upon the 
exportation of British and Irish linen of which the price did not 
exceed eighteenpence the yard, even this small duty upon the 
importation of brown linen yarn was taken away. In the 
different operations, however, which are necessary for the pre 
paration of linen yarn, a good deal more industry is employed 
than in the subsequent operation of preparing linen cloth from 
linen yarn. To say nothing of the industry of the flax-growers 
and flax-dressers, three or four spinners, at least, are necessary 
in order to keep one weaver in constant employment; and more 
than four-fifths of the whole quantity of labour necessary for the 
preparation of linen cloth is employed in that of linen yarn; 
but our spinners are poor people, women commonly scattered 
about in all difTerent parts of the country, without support or 
protection. It is not by the sale of their work, but by that of 
the complete work of the weavers, that our great master manu 
facturers make their profits. As it is their interest to sell the 
complete manufacture as dear, so is it to buy the materials as 
cheap as possible. By extorting from the legislature bounties 
upon the exportation of their own linen, high duties upon the 
importation of all foreign linen, and a total prohibition of the 
home consumption of some sorts of French linen, they endeavour 
to sell their own goods as dear as possible. By encouraging the 
importation of foreign linen yarn, and thereby bringing it into 
competition with that which is made by our own people, they 
endeavour to buy the work of the poor spinners as cheap as 
possible. They are as intent to keep down the wages of their 
own weavers as the earnings of the poor spinners, and it is by 
no means for the benefit of the workman that they endeavour 
either to raise the price of the complete work or to lower that 
of the rude materials. It is the industry which is carried on for 
the benefit of the rich and the powerful that is principally 
encouraged by our mercantile system. That which is carried 
on for the benefit of the poor and the indigent is too often 
either neglected or oppressed. 

Both the bounty upon the exportation of linen, and the 
exemption from duty upon the importation of foreign yarn, 
which were granted only for fifteen years, but continued by two 
diiTerent prolongations, expire with the end of the session of 
parliament which shall immediately follow the 24th of June 
1786. 

The encouragement given to the importation of the materials 



140 The Wealth of Nations 

of manufacture by bounties has been principally confined to 
such as were imported from our American plantations. 

The first bounties of this kind were those granted about the 
beginning of the present century upon the importation of naval 
stores from America. Under this denomination were compre 
hended timber fit for masts, yards, and bowsprits ; hemp ; tar, 
pitch, and turpentine. The bounty, however, of one pound the 
ton upon masting-timber, and that of six pounds the ton upon 
hemp, were extended to such as should be imported into Eng 
land from Scotland. Both these bounties continued without 
any variation, at the same rate, till they were severally allowed 
to expire; that upon hemp on the ist of January 1741, and 
that upon masting-timber at the end of the session of parlia 
ment immediately following the 24th June 1781. 

The bounties upon the importation of tar, pitch, and tur 
pentine underwent, during their continuance, several altera 
tions. Originally that upon tar was four pounds the ton ; that 
upon pitch the same; and that upon turpentine, three pounds 
the ton. The bounty of four pounds the ton upon tar was 
afterwards confined to such as had been prepared in a parti 
cular manner; that upon other good, clean, and merchantable 
tar was reduced to two pounds four shillings the ton. The 
bounty upon pitch was likewise reduced to one pound; and 
that upon turpentine to one pound ten shillings the ton. 

The second bounty upon the importation of any of the 
materials of manufacture, according to the order of time, was 
that granted by the 21 Geo. II. chap. 30, upon the importation 
of indigo from the British plantations. When the plantation 
indigo vras worth three-fourths of the price of the best French 
indigo, it was by this act entitled to a bounty of sixpence the 
pound. This bounty, which, like most others, was granted 
only for a limited time, was continued by several prolongations, 
but was reduced to fourpcnce the pound. It was allowed to 
expire with the end of the session of parliament which followed 
the 25th March 1781. 

The third bounty of this kind was that granted (much about 
the time that we were beginning sometimes to court and some 
times to quarrel with our American colonies) by the 4 Geo. 
III. chap. 26, upon the importation of hemp, or undressed flax, 
from the British plantations. This bounty was granted for 
twenty-one years, from the 24th June 1764 to the 24th June 
1785. For the first seven years it was to be at the rate of eight 
pounds the ton, for the second at six pounds, and for the third 



Conclusion of the Mercantile System 141 

at four pounds. It was not extended to Scotland, of which the 
climate (although hemp is sometimes raised there in small 
quantities and of an inferior quality) is not very fit for that 
produce. Such a bounty upon the importation of Scotch flax 
into England would have been too great a discouragement to 
the native produce of the southern part of the united kingdom. 

The fourth bounty of this kind was that granted by the 
5 Geo. III. chap. 45, upon the importation of wood from 
America. It was granted for nine years, from the ist January 
1766 to the ist January 1775. During the first three years, 
it was to be for every hundred and twenty good deals, at the 
rate of one pound, and for every load containing fifty cubic feet 
of other squared timber at the rate of twelve shillings. For the 
second three years, it was for deals to be at the rate of fifteen 
shillings, and for other squared timber at the rate of eight 
shillings; and for the third three years, it was for deals to be 
at the rate of ten shillings, and for other squared timber at the 
rate of five shillings. 

The fifth bounty of this kind was that granted by the 9 Geo. 
III. chap. 38, upon the importation of raw silk from the British 
plantations. It was granted for twenty-one years, from the 
ist January 1770 to the ist January 1791. For the first seven 
years it was to be at the rate of twenty-five pounds for every 
liundred pounds value; for the second at twenty pounds; and 
for the third at fifteen pounds. The management of the silk 
worm, and the preparation of silk, requires so much hand 
labour, and labour is so very dear in America that even this 
great bounty, I have been informed, was not likely to produce 
any considerable effect. 

The sixth bounty of this kind was that granted by 2 Geo. 
III. chap. 50, for the importation of pipe, hogshead, and barrel 
staves and heading from the British plantations. It was granted 
for nine years, from ist January 1772 to the ist January 1781. 
For the first three years it was for a certain quantity of each 
to be at the rate of six pounds; for the second three years at 
four pounds; and for the third three years at two pounds. 

The seventh and last bounty of this kind was that granted 
by the 19 Geo. III. chap. 37, upon the importation of hemp 
from Ireland. It was granted in the same manner as that for 
the importation of hemp and undressed flax from America, for 
twenty-one years, from the 24th June 1779 to the 24th June 
1800. This term is divided, likewise, into three periods of seven 
years each; and in each of those periods the rate of the Irish 



142 The Wealth of Nations 

bounty is the same with that of the American. It does not, 
however, like the American bounty, extend to the importation 
of undressed flax. It would have been too great a discourage 
ment to the cultivation of that plant in Great Britain. When 
this last bounty was granted, the British and Irish legislatures 
were not in much better humour with one another than the 
British and American had been before. But this boon to Ireland, 
it is to be hoped, has been granted under more fortunate auspices 
than all those to America. 

The same commodities upon which we thus gave bounties 
when imported from America were subjected to considerable 
duties when imported from any other country. The interest of 
our American colonies was regarded as the same with that of 
the mother country. Their wealth was considered as our wealth. 
Whatever money was sent out to them, it was said, came all back 
to us by the balance of trade, and we could never become a 
farthing the poorer by any expense which we could lay out 
upon them. They were our own in every respect, and it was an 
expense laid out upon the improvement of our own property 
and for the profitable employment of our own people. It is 
unnecessary, I apprehend, at present to say anything further 
in order to expose the folly of a system which fatal experience 
has now sufficiently exposed. Had our American colonies really 
been a part of Great Britain, those bounties might have been 
considered as bounties upon production, and would still have 
been liable to all the objections to which such bounties are liable, 
but to no other. 

The exportation of the materials of manufacture is sometimes 
discouraged by absolute prohibitions, and sometimes by high 
duties. 

Our woollen manufacturers have been more successful than 
any other class of workmen in persuading the legislature that 
the prosperity of the nation depended upon the success and 
extension of their particular business. They have not only 
obtained a monopoly against the consumers by an absolute 
prohibition of importing woollen cloths from any foreign country, 
but they have likewise obtained another monopoly against the 
sheep farmers and growers of wool by a similar prohibition of 
the exportation of live sheep and wool. The severity of many 
of the laws which have been enacted for the security of the 
revenue is very justly complained of, as imposing heavy penalties 
upon actions which, antecedent to the statutes that declared 
them to be crimes, had always been understood to be innocent. 



Conclusion of the Mercantile System 143 

But the cruellest of our revenue laws, I will venture to affirm, 
are mild and gentle in comparison of some of those which the 
clamour of our merchants and manufacturers has extorted from 
the legislature for the support of their own absurd and oppressive 
monopolies. Like he laws of Draco, these laws may be said to 
be all written in blood. 

By the 8th of Elizabeth, chap. 3, the exporter of sheep, lambs, 
or rams was for the first offence to forfeit all his goods for 
ever, to suffer a year s imprisonment, and then to have his left 
hand cut off in a market town upon a market day, to be there 
nailed up; and for the second offence to be adjudged a felon, 
and to suffer death accordingly. To prevent the breed of our 
sheep from being propagated in foreign countries seems to have 
been the object of this law. By the i3th and i4th of Charles 
II. chap. 1 8, the exportation of wool was made felony, and the 
exporter subjected to the same penalties and forfeitures as a 
felon. 

For the honour of the national humanity, it is to be hoped 
that neither of these statutes were ever executed. The first 
of them, however, so far as I know, has never been directly 
repealed, and Serjeant Hawkins seems to consider it as still in 
force. It may however, perhaps, be considered as virtually 
repealed by the i2th of Charles II. chap. 32, sect. 3, which, 
without expressly taking away the penalties imposed by former 
statutes, imposes a ncu penalty, viz., that of twenty shillings 
for every sheep exported, or attempted to be exported, together 
with the forfeiture of the sheep and of the owner s share of the 
ship. Tlu s -rond of them was expressly repealed by the 7th 
and 8th of William HI. chap. 28, sect. 4. By which it is d -clared 
that, " Whereas the statute of the i3th and i4th of King Charles 
II., marie against the exportation of wool, among other things 
in the said act mentioned, doth enact the same to be deemed 
felony; by the severity of which penalty the prosecution of 
offenders hath not been so effectually put in execution: Be it, 
therefore, enacted by the authority forcsaid, that so much of 
the said act, which relates to the making the said offence felony, 
be repealed and made void." 

The penalties, however, which are either imposed by this 
milder statute, or whi< h, though imposed by former statutes, 
are not repealed 1-y this one, are still sufficiently severe. Besides 
the forfeiture of the goods, the exporter incurs the penalty of 
three shillings for every pound weight of wool either exported or 
attempted to be exported, that is about four or five times the 



14 f The Wealth of Nations 

value. Any merchant or other person convicted of this ofTence 
is disabled from requiring any debt or account belonging to 
him from any factor or other person. Let his fortune be what 
it will, whether he is or is not able to pay those heavy penalties, 
the law means to ruin him completely. But as the morals of 
the great body of the people are not yet so corrupt as those 
of the contrivers of this statute, I have not heard that any 
advantage has ever been taken of this clause. If the person 
convicted of this ofTence is not able to pay the penalties within 
three months after judgment, he is to be transported for seven 
years, and if he returns before the expiration of that term, he 
is liable to the pains of felony, \vithout benefit of clergy. The 
owner of the ship, knowing this offence, forfeits all his interest 
in the ship and furniture. The master and mariners, knowing 
this ofTence, forfeit all their goods and chattels, and suffer three 
months imprisonment. By a subsequent statute the master 
suffers six months imprisonment. 

In order to prevent exportation, the whole inland commerce 
of wool is laid under very burdensome and oppressive restrictions. 
It cannot be packed in any box, barrel, cask, case, chest, or any 
other package, but only in packs of leather or pack-cloth, on 
which must be marked on the outside the words wool or yarn, 
in large letters not less than three inches long, on pain of for 
feiting the same and the package, and three shillings for every 
pound weight, to be paid by the owner or packer. It cannot 
be loaden on any horse or cart, or carried by land within five 
miles of the coast, but between sun-rising and sun-setting, on 
pain of forfeiting the same, the horses and carriages. The 
hundred next adjoining to the sea-coast, out of or through 
which the wool is carried or exported, forfeits twenty pounds, 
if the wool is under the value of ten pounds; and if of greater 
value, then treble that value, together with treble costs, to be 
sued for within the year. The execution to be against any two 
of the inhabitants, whom the sessions must reimburse, by an 
assessment on the other inhabitants, as in the cases of robbery. 
And if any person compounds with the hundred for less than 
this penalty, he is to be imprisoned for five years; and any 
other person may prosecute. These regulations take place 
through the whole kingdom. 

But in the particular counties of Kent and Sussex, the 
restrictions are still more troublesome. Every owner of wool 
within ten miles of the sea-coast must give an account in 
writing, three days after shearing, to the next officer of the 



Conclusion of the Mercantile System 145 

customs, of the number of his fleeces, and of the places where 
they are lodged. And before he removes any part of them he 
must give the like notice of the number and weight of the 
fleeces, and of the name and abode of the person to whom they 
are sold, and of the place to which it is intended they should 
be carried. No person within fifteen miles of the sea, in the 
said counties, can buy any wool before he enters into bond to 
the king thuvt no part of the wool which he shall so buy shall 
be sold by him to any other person within fifteen miles of the 
sea. If any wool is found carrying towards the sea-side in the 
said counties, unless it has been entered and security given as 
aforesaid, it is forfeited, and the offender also forfeits three 
shillings for every pound weight. If any person lays any wool 
not entered as aforesaid within fifteen miles of the sea, it must 
be seized and forfeited; and if, after such seizure, any person 
claim the same, he must give security to the Exchequer that if 
he is cast upon trial he shall pay treble costs, besides all other 
penalties. 

When such restrictions are imposed upon the inland trade, 
the coasting trade, we may believe, cannot be left very free. 
Every owner of wool who carrieth or causeth to be carried any 
wool to any port or place on the sea-coast, in order to be from 
thence transported by sea to any other place or port on the 
coast, must first cause an entry thereof to be made at the port 
from whence it is intended to be conveyed, containing the 
weight, marks, and number of the packages, before he brings 
the same within five miles of that port, on pain of forfeiting 
the same, and also the horses, carts, and other carriages; and 
also of suffering and forfeiting as by the other laws in force 
against the exportation of wool. This law, however (i Will. 
III. chap. 32), is so very indulgent as to declare, that " this 
shall not hinder any person from carrying his wool home from 
the place of shearing, though it be within five miles of the sea, 
provided that in ten days after shearing, and before he remove 
the wool, he do under his hand certify to the next officer of the 
customs, the true numl>er of fleeces, and where it is housed; 
and do not remove the same, without certifying to such officer, 
under his hand, his intention so to do, three days before." 
Bond must be given that the wool to be carried coast-ways is 
to be landed at the particular port for which it is entered out 
wards ; and if any part of it is landed without the presence of 
an officer, not only the forfeiture of the wool is incurred as in 



146 The Wealth of Nations 

other goods, but the usual additional penalty of three shillings 
for every pound weight is likewise incurred. 

Our woollen manufacturers, in order to justify their demand 
of such extraordinary restrictions and regulations, confidently 
asserted that English wool was of a peculiar quality, superior 
to that of any other country; that the wool of other countries 
could not. without some mixture of it, be wrought up into any 
tolerable manufacture; that fine cloth could not be made with 
out it; that England, therefore, if the exportation of it could 
be totally prevented, could monopolise to herself almost the 
whole woollen trade of the world; and thus, having no rivals, 
could sell at what price she pleased, and in a short time acquire 
the most incredible degree of wealth by the most advantageous 
balance of trade. This doctrine, like most other doctrines 
which are confidently asserted by any considerable number of 
people, was, and still continues to be, most implicitly believed 
by a much greater number by almost all those who are either 
unacquainted with the woollen trade, or who have not made 
particular inquiries. It is, however, so perfectly false that 
English wool is in any respect necessary for the making of fine 
cloth that it is altogether unfit for it. Fine cloth is made 
altogether of Spanish wool. English wool cannot be even so 
mixed with Spanish wool as to enter into the composition with 
out spoiling and degrading, in some degree, the fabric of the 
cloth. 

It has been shown in the foregoing part of this work that the 
effect of these regulations has been to depress the price of 
English wool, not only below what it naturally would be in the 
present times, but very much below what it actually was in 
the time of Edward III. The price of Scots wool, when in 
consequence of the union it became subject to the same regula 
tions, is said to have fallen about one half. It is observed by 
the very accurate and intelligent author of the Memoirs of 
Wool, the Reverend Mr. John Smith, that the price of the best 
English wool in England is generally below what wool of a very 
inferior quality commonly sells for in the market of Amsterdam. 
To depress the price of this commodity below what may be 
called its natural and proper price was the avowed purpose of 
those regulations; and there seems to be no doubt of their 
having produced the effect that was expected from them. 

This reduction of price, it may perhaps be thought, by dis 
couraging the growing of wool, must have reduced very much 
the annual produce of that commodity, though not below what 



Conclusion of the Mercantile System 147 

it formerly was, yet below what, in the present state of things, 
it probably would have been, had it, in consequence of an open 
and free market, been allowed to rise to the natural and proper 
price. I am, however, disposed to believe that the quantity 
of the annual produce cannot have been much, though it may 
perhaps have been a little, affected by these regulations. The 
growing of wool is not the chief purpose for which the sheep 
farmer employs his industry and stock. He expects his profit 
not so much from the price of the fleece as from that of the 
carcase ; and the average or ordinary price of the latter must 
even, in many cases, make up to him whatever deficiency there 
may be in the average or ordinary price of the former. It has 
been observed in the foregoing part of this work that " What 
ever regulations tend to sink the price, either of wool or of raw 
hides, below what it naturally would be, must, in an improved 
and cultivated country, have some tendency to raise the price 
of butcher s meat. The price both of the great and small 
cattle which are fed on improved and cultivated land must be 
.sufficient to pay the rent which the landlord, and the profit 
which the farmer has reason to expect from improved and 
cultivated land. If it is not, they will soon cease to feed them. 
Whatever part of this price, therefore, is not paid by the wool 
and the hide must be paid by the carcase. The less there is 
paid for the one, the more must be paid for the other. In what 
manner this price is to be divided upon the different parts of 
the beast is indifferent to the landlords and farmers, provided it 
is all paid to them. In an improved and cultivated country, 
therefore, their interest as landlords and farmers cannot be 
much affected by such regulations, though their interest as 
consumers may by the rise in the price of provisions." Accord 
ing to this reasoning, therefore, this degradation in the price 
of wool is not likely, in an improved and cultivated country, to 
occasion any diminution in the annual produce of that com 
modity, except so far as, by raising the price of mutton, it may 
somewhat diminish the demand for. and consequently the pro 
duction of, that particular species of butcher s meat. Its effect, 
however, even in this way, it is probable, is not very considerable. 
But though its effect upon the quantity of the annual produce 
may not have been very considerable, its effect upon the quality, 
it may perhaps be thought, must necessarily have been very 
great. The degradation in the quality of English wool, if not 
below what it was in former times, yet below what it naturally 
would have been in the present state of improvement and culti- 



i 48 The Wealth of Nations 

vation, must have been, it may perhaps be supposed, very nearly 
in proportion to the degradation of price. As the quality 
depends upon the breed, upon the pasture, and upon the 
management and cleanliness of the sheep, during the whole 
progress of the growth of the fleece, the attention to these cir 
cumstances, it may naturally enough be imagined, can never be 
greater than in proportion to the recompense which the price of 
the fleece is likely to make for the labour and expense which 
that attention requires. It happens, however, that the good 
ness of the fleece depends, in a great measure, upon the health, 
growth, and bulk of the animal; the same attention which 
is necessary for the improvement of the carcase is, in some 
respects, sufficient for that of the fleece. Notwithstanding the 
degradation of price, English wool is said to have been improved 
considerably during the course even of the present century. 
The improvement might perhaps have been greater if the price 
had been better; but the lowness of price, though it may have 
obstructed, yet certainly it has not altogether prevented that 
improvement. 

The violence of these regulations, therefore, seems to have 
affected neither the quantity nor the quality of the annual 
produce of wool so much as it might have been expected to do 
(though I think it probable that it may have affected the latter 
a good deal more than the former); and the interest of the 
growers of wool, though it must have been hurt in some degree, 
seems, upon the whole, to have been much less hurt than could 
well have been imagined. 

These considerations, however, will not justify the absolute 
prohibition of the exportation of wool. But they will fully 
justify the imposition of a considerable taxupon that exportation. 

To hurt in any degree the interest of any one order of citizens, 
for no other purpose but to promote that of some other, is 
evidently contrary to that justice and equality of treatment 
which the sovereign owes to all the different orders of his sub 
jects. But the prohibition certainly hurts, in some degree, the 
interest of the growers of wool, for no other purpose but to 
promote that of the manufacturers. 

Every different order of citizens is bound to contribute to 
the support of the sovereign or commonwealth. A tax of five, 
or even of ten shillings upon the exportation of every ton of 
wool would produce a very considerable revenue to the sove 
reign. It would hurt the interest of the growers somewhat less 
than the prohibition, because it would not probably lower the 



Conclusion of the Mercantile System 149 

price of wool quite so much. It would afford a sufficient ad 
vantage to the manufacturer, because, though he might not buy 
his wool altogether so cheap as under the prohibition, he would 
still buy it, at least, five or ten shillings cheaper than any foreign 
manufacturer could buy it, besides saving the freight and 
insurance, which the other would be obliged to pay. It is 
scarce possible to devise a tax which could produce any con 
siderable revenue to the sovereign, and at the same time occasion 
so little inconveniency to anybody. 

The prohibition, notwithstanding all the penalties which guard 
it. does not prevent the exportation of wool. It is exported, it 
is well known, in great quantities. The great difference between 
the price in the home and that in the foreign market presents 
such a temptation to smuggling that all the rigour of the law 
cinnot prevent it. This illegal exportation is advantageous to 
nobody but the smuggler. A legal exportation subject to a tax, 
by affording a revenue to the sovereign, and thereby saving the 
imposition of some other, perhaps, more burdensome ;:nd in 
convenient taxes might prove advantageous to all the different 
subjects of the state. 

The exportation of fuller s earth or fuller s clay, supposed to 
be necessary for preparing and cleansing the woollen manufac 
tures, has been subjected to nearly the same penalties as the 
exportation of wool. Even tobacco-pipe clay, though acknow 
ledged to be different from fuller s clay, yet, on account of 
their resemblance, and because fuller s clay might sometimes 
be exported as tobacco-pipe clay, has been laid under the 
same prohibitions and penalties. 

By the i3th and i4th of Charles II. chap. 7, the exportation, 
not only of raw hides, but of tanned leather, except in the shape 
of boots, shoes, or slippers, was prohibited ; and the law gave a 
monopoly to our bootmakers and shoemakers, not only against 
our graziers, but against our tanners. By subsequent statutes 
our tanners have got themselves exempted from this monopoly 
upon paying a small tax of only one shilling on the hundred 
weight of tanned leather, weighing one hundred and twelve 
pounds. They have obtained likewise the drawback of two- 
thirds of the excise duties imposed upon their commodity even 
when exported without further manufacture. All manufactures 
of leather may be exported duty free; and the exporter is 
besides entitled to the drawback of the whole duties of excise. 
Our graziers still continue subject to the old monopoly. Graziers 
separated from one another, and dispersed through all the 



5 



The Wealth of Nations 



different corners of the country, cannot, without great difficulty,, 
combine together for the purpose either of imposing monopolies 
upon their fellow-citizens, or of exempting themselves from such 
as may have been imposed upon them by other people. Manu 
facturers of all kinds, collected together in numerous bodies in 
all groat cities, easily can. Even the horns of cattle are pro 
hibited to be exported; and the two insignificant trades of the 
horner and combmaker enjoy, in this respect, a monopoly 
against the graziers. 

Restraints, either by prohibitions or by taxes, upon the 
exportation of goods which are partially, but not completely 
manufactured, are not peculiar to the manufacture of leather. 
As long as anything remains to be done, in order to fit any 
commodity for immediate use and consumption, our manufac 
turers think that they themselves ought to have the doing of it. 
Woollen yarn and worsted are prohibited to be exported under 
the same penalties as wool. Even white cloths are subject to a 
duty upon exportation, and our dyers have so far obtained a 
monopoly against our clothiers. Our clothiers would probably 
have been able to defend themselves against it, but it happens 
that the greater part of our principal clothiers are themselves 
likewise dyers. Watch-cases, clock-cases, and dial-plates for 
clocks and watches have been prohibited to be exported. Our 
clock-makers and watch-makers are, it seems, unwilling that 
the price of this sort of workmanship should be raised upon 
them by the competition of foreigners. 

By some old statutes of Edward III., Henry VIII., and 
Edward VI., the exportation of all metals was prohibited. Lead 
and tin were alone excepted probably on account of the great 
abundance of those metals, in the exportation of which a con 
siderable part of the trade of the kingdom in those days con 
sisted. For the encouragement of the mining trade, the 5th of 
William and Mary, chap. 17, exempted from the prohibition 
iron, copper, and mundic metal made from British ore. The 
exportation of all sorts of copper bars, foreign as well as British, 
was afterwards permitted by the Qth and loth of William III. 
chap. 26. The exportation of unmanufactured brass, of what 
is called gun-metal, bell-metal, and shrofl-metal, still continues 
to be prohibited. Brass manufactures of all sorts may be 
exported duty free. 

The exportation of the materials of manufacture, where it 
is not altogether prohibited, is in many cases subjected to 
considerable duties 



Conclusion of the Mercantile System i 5 i 

By the 8th George I. chap. 15, the exportation of all goods, 
the produce or manufacture of Great Britain, upon which any 
duties had been imposed by former statutes, was rendered duty 
free. The following goods, however, were excepted: alum, 
lead, lead ore, tin, tanned leather, copperas, coals, wool cards, 
white woollen cloths, lapis calaminaris, skins of all sorts, glue, 
coney hair or wool, hares wool, hair of all sorts, hor.scs, and 
litharge of lead. If you except horses, all these are either 
materials of manufacture, or incomplete manufactures (which 
may be considered as materials for still further manufacture), or 
instruments of trade. This statute leaves them subject to all 
the old duties which had ever been imposed upon them, the old 
subsidy and one p->r rent, outwards. 

By the same statute a great number of foreign drugs for 
dyers use are exempted from all duties upon importation. 
Each of them, however, is afterwards subjected to a certain 
duty, not indeed a very heavy one, upon exportation. Our 
dyers, it seems, while they thought it for their interest to en 
courage the importation of those drugs, by an exemption from 
all duties, thought it likewise for their interest to throw some 
small discouragement upon their exportation. The avidity. 
however, which suggested this notable piece of mercantile in 
genuity, most probably disappointed itself of its object. It 
necessarily taught the importers to be more careful than they 
might otherwise have been that their importation should not 
exceed what was necessary for the supply of the home market. 
The home market was at all times likely to be more scantily 
supplied; the commodities were at all times likely to be some 
what dearer there than they would have been had the exporta 
tion been rendered as free as the importation. 

liy the above-mentioned statute, gum senega, or gum arabic, 
being among the enumerated dying drugs, might be imported 
duty free. They were subjected, indeed, to a small poundage 
duty, amounting only to threepence in the hundredweight upon 
their re-exportation. France enjoyed, at that time, an exclusive 
trade to the country most productive of those drugs, that which 
lies in the neighbourhood of the Senegal; and the British market 
could not easily be supplied by the immediate importation of 
them from the place of growth. By the 25th George II., there 
fore, gum senega was allowed to be imported (contrary to the 
general dispositions of the act of navigation) from any part of 
Europe. As the law, however, did not mean to encourage this 
species of trade, so contrary to the general principles of the 



152 The Wealth of Nations 

mercantile policy of England, it imposed a duty of ten shillings 
the hundredweight upon such importation, and no part of this 
duty was to be afterwards drawn back upon its exportation. 
The successful war which began in 1755 gave Great Britain 
the same exclusive trade to those countries which France had 
enjoyed before. Our manufacturers, as soon as the peace was 
made, endeavoured to avail themselves of this advantage, and 
to establish a monopoly in their own favour both against the 
growers and against the importers of this commodity. By the 
5th George III., therefore, chap. 37, the exportation of gum 
senega from his Majesty s dominions in Africa was confined to 
Great Britain, and was subjected to all the same restrictions, 
regulations, forfeitures, and penalties as that of the enumerated 
commodities of the British colonies in America and the West 
Indies. Its importation, indeed, was subjected to a small duty 
of sixpence the hundredweight, but its re-exportation was sub 
jected to the enormous duty of one pound ten shillings the 
hundredweight. It was the intention of our manufacturers that 
the whole produce of those countries should be imported into 
Great Britain, and, in order that they themselves might be 
enabled to buy it at their own price, that no part of it should 
be exported again but at such an expense as would sufficiently 
discourage that exportation. Their avidity, however, upon 
this, as well as upon many other occasions, disappointed itself 
of its object. This enormous duty presented such a temptation 
to smuggling that great quantities of this commodity were 
clandestinely exported, probably to all the manufacturing 
countries of Europe, but particularly to Holland, not only from 
Great Britain but from Africa. Upon this account, by the 14 
George III. chap. 10, this duty upon exportation was reduced 
to five shillings the hundredweight. 

In the book of rates, according to which the old subsidy was 
levied, beaver skins were estimated at six shillings and eight- 
pence a piece, and the different subsidies and imposts, which 
before the year 1722 had been laid upon their importation, 
amounted to one-fifth part of the rate, or to sixteenpence upon 
each skin; all of which, except half the old subsidy, amounting 
only to twopence, was drawn back upon exportation. This duty 
upon the importation of so important a material of manufacture 
had been thought too high, and in the year 1722 the rate was 
reduced to two shillings and sixpence, which reduced the duty 
upon importation to sixpence, and of this only one half was to 
be drawn back upon exportation. The same successful war put 



Conclusion of the Mercantile System 153 

the country most productive of beaver under the dominion of 
Great Britain, and beaver skins being among the enumerated 
commodities, their exportation from America was consequently 
confined to the market of Great Britain. Our manufacturers 
soon bethought themselves of the advantage which they might 
make of this circumstance, and in the year 1764 the duty upon 
the importation of beaver-skin was reduced to one penny, but 
the duty upon exportation was raised to sevenpence each skin, 
without any drawback of the duty upon importation. By the 
same law, a duty of eighteenpence the pound was imposed upon 
the exportation of beaver- wool or wombs, without making anv 
alteration in the duty upon the importation of that commodity, 
which, when imported by Britain and in British shipping, 
amounted at that time to between fourpcnc-c :md fivepcnce the 
piece. 

Coals may be considered both as a material of manufacture 
and as an instrument of trade. Heavy duties, accordingly, 
have been imposed upon their exportation, amounting at present 
(1783) to more than five shillings the ton, or to more than 
fifteen shillings the chaldron, Newcastle measure, which is in 
most cases more than the original value of the commodity at 
the coal pit, or even at the shipping port for exportation. 

The exportation, however, of the instruments of trade, 
properly so called, is commonly restrained, not by high duties, 
but by absolute prohibitions. Thus by the 7th and 8th of 
William III. chap. 20, sect 8, the exportation of frames or 
engines for knitting gloves or stockings is prohibited under the 
penalty, not only of the forfeiture of such frames or engines so 
exported, or attempted to be exported, but of forty pounds, 
one half to the king, the other to the person who sh.ill inform 
or sue for the same. In the same manner, by the i4t.h George 
III. chap. 71, the exportation to foreign parts of any utensils 
made use of in the cotton, linen, woollen, and silk manufactures 
is prohibited under the penaltv, not only of the forfeiture of 
such utensils, but of two hundred pounds, to be paid by the 
person who shall offend in this manner, and likewise of two 
hundred pounds to be paid by the master of the ship who shall 
knowingly suffer such utensils to be loaded on board his ship. 

When such heavy penalties were imposed upon the exporta 
tion of the dead instruments of trade, it could not well be 
expected that the living instrument, the artificer, should be 
allowed to go free. Accordingly, by the 5th George I. ch::p. 27, 
the person who shall be convicted of enticing any artificer of, 



154 The Wealth of Nations 

or in any of the manufactures of Great Britain, to go into any 
foreign parts in order to practise or teach his trade, is liable 
for the first offence to be fined in any sum not exceeding one 
hundred pounds, and to three months imprisonment, and until 
the fine shall be paid; and for the second offence, to be fined 
in any sum at the discretion of the court, and to imprisonment 
for twelve months, and until the fine shall be paid. By the 23rd 
George II. chap. 13, this penalty is increased for the first offence 
to five hundred pounds for every artificer so enticed, and to 
twelve months imprisonment, and until the fine shall be paid ; 
and for the second offence, to one thousand pounds, and to two 
years imprisonment, and until the fine shall be paid. 

By the former of those two statutes, upon proof that any 
person has been enticing any artificer, or that any artificer has 
promised or contracted to go into foreign parts for the purposes 
aforesaid, such artificer may be obliged to give security at the 
discretion of the court that he shall not go beyond the seas, 
and may be committed to prison until he give such security. 

If any artificer has gone beyond the seas, and is exercising 
or teaching his trade in any foreign country, upon warning 
being given to him by any of his Majesty s ministers or consuls 
abroad, or by one of his Majesty s secretaries of state for the 
time being, if he does not, within six months after such warn 
ing, return into this realm, and from thenceforth abide and 
inhabit continually within the same, he is from thenceforth 
declared incapable of taking any legacy devised to him within 
this kingdom, or of being executor or administrator to any 
person, or of taking any lands within this kingdom by descent, 
device, or purchase. He likewise forfeits to the king all his 
lands, goods, and chattels, is declared an alien in every respect, 
and is put out of the king s protection. 

It is unnecessary, I imagine, to observe how contrary such 
regulations are to the boasted liberty of the subject, of which 
we affect to be so very jealous; but which, in this case, is so 
plainly sacrificed to the futile interests of our merchants and 
manufacturers. 

The laudable motive of all these regulations is to extend our 
own manufactures, not by their own improvement, but by the 
depression of those of all our neighbours, and by putting an 
end, as much as possible, to the troublesome competition of 
such odious and disagreeable rivals. Our master manufacturers 
think it reasonable that they themselves should have the 
monopoly of the ingenuity of all their countrymen. Though 



Conclusion of the Mercantile System 155 

by restraining, in some trades, the number of apprentices which 
can be employed at one time, and by imposing the necessity of 
a long apprenticeship in all trades, they endeavour, all of them, 
to confine the knowledge of their respective employments to as 
small a number as possible; they are unwilling, however, that 
any part of this small number should go abroad to instruct 
foreigners. 

Consumption is the sole end and purpose of all production : 
and the interest of the producer ought to be attended to only 
so far as it may be necessary for promoting that of the con 
sumer. The maxim is so perfectly self-evident that it would 
be absurd to attempt to prove it. But in the mercantile system 
the interest of the consumer is almost constantly sacrificed to 
that of the producer; and it seems to consider production, and 
not consumption, as the ultimate end and object of all industiy 
and commerce. 

In the restraints upon the importation of all foreign com 
modities which can come into competition with those of our 
own growth or manufacture, the interest of the home consumer 
is evidently sacrificed to that of the producer. It is altogether 
for the benefit of the latter that the former is obliged to pay 
that enhancement of price which this monopoly almost always 
occasions. 

It is altogether for the benefit of the producer that bounties 
are granted upon the exportation of some of his productions. 
The home consumer is obliged to pay, first, the tax which is 
necessary for paying the bounty, and secondly, the still greater 
tax which necessarily arises from the enhancement of the price 
of the commodity in the home market. 

By the famous treaty of commerce with Portugal, the con 
sumer is prevented by high duties from purchasing of a neigh 
bouring country a commodity which our own climate does not 
produce, but is obliged to purchase it of a distant country, 
though it is acknowledged that the commodity of the distant 
country is of a worse quality than that of the near one. The 
home consumer is obliged to submit to this inconveniency in 
order that the producer may import into the distant country 
some of his productions upon more advantageous terms than he 
would otherwise have been allowed to do. The consumer, too, 
is obliged to pay whatever enhancement in the price of those 
very productions this forced exportation may occasion in the 
home market. 

But in the system of laws which has been established for the 

K 4 3 



156 The Wealth of Nations 

management of our American and West Indian colonies, the 
interest of the home consumer has been sacrificed to that of the 
producer with a more extravagant profusion than in all our 
other commercial regulations. A great empire has been estab 
lished for the sole purpose of raising up a nation of customers 
who should be obliged to buy from the shops of our different 
producers all the goods with which these could supply them. 
For the sake of that little enhancement of price which this 
monopoly might afford our producers, the home consumers have 
been burdened with the whole expense of maintaining and de 
fending that empire. For this purpose, and for this purpose 
only, in the two last wars, more than two hundred millions have 
been spent, and a new debt of more than a hundred and seventy 
millions has been contracted over and above all that had been 
expended for the same purpose in former wars. The interest of 
this debt alone is not only greater than the whole extraordinary 
profit which it ever could be pretended was made by the 
monopoly of the colony trade, but than the whole value of that 
trade, or than the whole value of the goods which at an average 
have been annually exported to the colonies. 

It cannot be very difficult to determine who have been the 
contrivers of this whole mercantile system; not the consumers, 
we may believe, whose interest has been entirely neglected ; but 
the producers, whose interest has been so carefully attended to; 
and among this latter class our merchants and manufacturers 
have been by far the principal architects. In the mercantile 
regulations, which have been taken notice of in this chapter, 
the interest of our manufacturers has been most peculiarly 
attended to; and the interest, not so much of the consumers, 
as that of some other sets of producers, has been sacrificed to it. 



CHAPTER IX 

OF THE AGRICULTURAL SYSTEMS, OR OF THOSE SYSTEMS OF 
POLITICAL ECONOMY WHICH REPRESENT THE PRODUCE 
OF LAND AS EITHER THE SOLE OR THE PRINCIPAL SOURCE 
OF THE REVENUE AND WEALTH OF EVERY COUNTRY 

THE agricultural systems of political economy will not require 
so long an explanation as that which I have thought it necessary 
to bestow upon the mercantile or commercial system. 
That system which represents the produce of land as the sole 



The Agricultural Systems i 57 

source of the revenue and wealth of every country has, so far 
as I know, never been adopted by any nation, and it at present 
exists only in the speculations of a few men of great learning 
and ingenuity in France. It would not, surely, be worth while 
to examine at great length the errors of a system which never 
has done, and probably never will do, any harm in any part of 
the world. I shall endeavour to explain, however, as distinctly 
as I can, the great outlines of this very ingenious system. 

Mr. Colbert, the famous minister of Louis XIV., was a man 
of probity, of great industry and knowledge of detail, of great 
experience and acuteness in the examination of public accounts, 
and of abilities, in short, every way fitted for introducing method 
and good order into the collection and expenditure of the public 
revenue. That minister had unfortunately embraced all the 
prejudices of the mercantile system, in its nature and essence 
a system of restraint and regulation, and such as could scarce 
fail to be agreeable to a laborious and plodding man of business, 
who had been accustomed to regulate the different departments 
of public offices, and to establish the necessary checks and 
controls for confining each to its proper sphere. The industry 
and commerce of a great country he endeavoured to regulate 
upon the same model as the departments of a public office; 
and instead of allowing every man to pursue his own interest 
in his own way, upon the liberal plan of equality, liberty, and 
justice, he bestowed upon certain branches of industry extra 
ordinary privileges, while he laid others under as extraordinary 
restraints. He was not only disposed, like other European 
ministers, to encourage more the industry of the towns than that 
of the country; but, in order to support the industry of the 
towns, he was willing even to depress and keep down that of 
the country. In order to render provisions cheap to the in 
habitants of the towns, and thereby to encourage manufactures 
and foreign commerce, he prohibited altogether the exportation 
of corn, and thus excluded the inhabitants of the country from 
every foreign market for by far the most important part of the 
produce of their industry. This prohibition, joined to the 
restraints imposed by the ancient provincial laws of France 
upon the transportation of corn from one province to another, 
and to the arbitrary and degrading taxes which are levied upon 
the cultivators in almost all the provinces, discouraged and kept 
down the agriculture of that country very much below the state 
to which it would naturally have risen in so very fertile a soil 
and so very happy a climate. This state of discouragement 



158 The Wealth of Nations 

and depression was felt more or less in every different part of 
the country, and many different inquiries were set on foot con 
cerning the causes of it. One of those causes appeared to be 
the preference given, by the institutions of Mr. Colbert, to the 
industry of the towns above that of the country. 

If the rod be bent too much one way, says the proverb, in 
order to make it straight you must bend it as much the other. 
The French philosophers, who have proposed the system which 
represents agriculture as the sole source of the revenue and wealth 
of every country, seem to have adopted this proverbial maxim ; 
and as in the plan of Mr. Colbert the industry of the towns was 
certainly over-valued in comparison with that of the country; 
so in their system it seems to be as certainly undervalued. 

The different orders of people who have ever been supposed 
to contribute in any respect towards the annual produce of the 
land and labour of the country, they divide into three classes. 
The first is the class of the proprietors of land. The second is 
the class of the cultivators, of farmers and country labourers, 
whom they honour with the peculiar appellation of the pro 
ductive class. The third is the class of artificers, manufacturers, 
and merchants, whom they endeavour to degrade by the humiliat 
ing appellation of the barren or unproductive class. 

The class of proprietors contributes to the annual produce by 
the expense which they may occasionally lay out upon the 
improvement of the land, upon the buildings, drains, enclosures, 
and other ameliorations, which they may either make or main 
tain upon it, and by means of which the cultivators are enabled, 
with the same capital, to raise a greater produce, and con 
sequently to pay a greater rent. This advanced rent may be 
considered as the interest or profit due to the proprietor upon 
the expense or capital which he thus employs in the improve 
ment of his land. Such expenses are in this system called ground 
expenses (depenses foncieres.) 

The cultivators or farmers contribute to the annual produce 
by what are in this system called the original and annual 
expenses (depenses primitives et depenses annuelles) which they 
lay out upon the cultivation of the land. The original expenses 
consist in the instruments of husbandry, in the stock of cattle, 
in the seed, and in the maintenance of the farmer s family, 
servants, and cattle during at least a great part of the first year 
of his occupancy, or till he can receive some return from the 
land. The annual expenses consist in the seed, in the wear and 
tear of the instruments of husbandry, and in the annual main- 



The Agricultural Systems 159 

tenance of the farmer s servants and cattle, and of his family too, 
so far as any part of them can be considered as servants employed 
in cultivation. That part of the produce of the land which 
remains to him after paying the rent ought to be sufficient, first, 
to replace to him within a reasonable time, at least during the 
term of his occupancy, the whole of his original expenses, 
together with the ordinary profits of stock; and, secondly, to 
replace to him annually the whole of his annual expenses, 
together likewise with the ordinary profits of stock. Those two 
sorts of expenses are two capitals which the farmer employs in 
cultivation; and unless they are regularly restored to him, 
together with a reasonable profit, he cannot carry on his employ 
ment upon a level with other employments; but, from a regard 
to his own interest, must desert it as soon as possible and seek 
some other. That part of the produce of the land which is 
thus necessary for enabling the farmer to continue his business 
ought to be considered as a fund sacred to cultivation, which, if 
the landlord violates, he necessarily reduces the produce of his 
own land, and in a few years not only disables the farmer from 
paying this racked rent, but from paying the reasonable rent 
which he might otherwise have got for his land. The rent which 
properly belongs to the landlord is no more than the net 
produce which remains after paying in the cornpletest manner 
all the necessary expenses which must be previously laid out in 
order to raise the gross or the whole produce. It is because the 
labour of the cultivators, over and above paying completely all 
those necessary expenses, affords a net produce of this kind 
that this class of people are in this system peculiarly dis 
tinguished by the honourableappellation of the productive class. 
Their original and annual expenses are for the same reason 
called, in this system, productive expenses, because, over and 
above replacing their own value, they occasion the annual 
reproduction of this net produce. 

The ground expenses, as they are called, or what the landlord 
lays out upon the improvement of his land, are in this system, 
too, honoured with the appellation of productive expenses. Till 
the whole of those expenses, together with the ordinary profits 
of stock, have been completely repaid to him by the advanced 
rent which he gets from his land, that advanced rent ought to 
be regarded as sacred and inviolable, both by the church and 
by the king; ought to be subject neither to tithe nor to taxation. 
If it is otherwise, by discouraging the improvement of land the 
church discourages the future increase of her own tithes, and 



160 The Wealth of Nations 

the king the future increase of his own taxes. As in a well- 
ordered state of things, therefore, those ground expenses, over 
and above reproducing in the completest manner their own 
value, occasion likewise after a certain time a reproduction of a 
net produce, they are in this system considered as productive 
expenses. 

The ground expenses of the landlord, however, together with 
the original and the annual expenses of the farmer, are the only 
three sorts of expenses which in this system are considered as 
productive. All other expenses and all other orders of people, 
even those who in the common apprehensions of men are regarded 
as the most productive, are in this account of things represented 
as altogether barren and unproductive. 

Artificers and manufacturers in particular, whose industry, 
in the common apprehensions of men, increases so much the 
value of the rude produce of land, are in this system represented 
as a class of people altogether barren and unproductive. Their 
labour, it is said, replaces only the stock which employs them, 
together with its ordinary profits. That stock consists in the 
materials, tools, and wages advanced to them by their em 
ployer; and is the fund destined for their employment and 
maintenance. Its profits are the fund destined for the main 
tenance of their employer. Their employer, as he advances to 
them the stock of materials, tools, and wages necessary for their 
employment, so he advances to himself what is necessary for 
his own maintenance, and this maintenance he generally pro 
portions to the profit which he expects to make by the price of 
their work. Unless its price repays to him the maintenance 
which he advances to himself, as well as the materials, tools, 
and wages which he advances to his workmen, it evidently does 
not repay to him the whole expense which he lays out upon it. 
The profits of manufacturing stock therefore are not, like the 
rent of land, a net produce which remains after completely re 
paying the whole expense which must be laid out in order to 
obtain them. The stock of the farmer yields him a profit as 
well as that of the master manufacturer; and it yields a rent 
likewise to another person, which that of the master manufac 
turer does not. The expense, therefore, laid out in employing 
and maintaining artificers and manufacturers does no more than 
continue, if one may say so, the existence of its own value, and 
does not produce any new value. It is therefore altogether a 
barren and unproductive expense. The expense, on the con 
trary, laid out in employing farmers and country labourers, 



The Agricultural Systems 161 

over and above continuing the existence of its own value, 
produces a new value, the rent of the landlord. It is therefore 
a productive expense. 

Mercantile stock is equally barren and unproductive with 
manufacturing stock. It only continues the existence of its 
own value, without producing any new value. Its profits are 
only the repayment of the maintenance whicn its employer ad 
vances to himself during the time that he employs it, or till he 
receives the returns of it. They are only the repayment of a 
part of the expense which must be laid out in employing it. 

The labour of artificers and manufacturers never adds any 
thing to the value of the whole annual amount of the rude 
produce of the land. It adds, indeed, greatly to the value of 
some particular parts of it. But the consumption which in the 
meantime it occasions of other parts is precisely equal to the 
value which it adds to those parts; so that the value of the 
whole amount is not, at any one moment of time, in the least 
augmented by it. The person who works the lace of a pair 
of fine ruffles, for example, will sometimes raise the value of 
perhaps a pennyworth of flax to thirty pounds sterling. But 
though at first sight he appears thereby to multiply the value 
of a part of the rude produce about seven thousand and two 
hundred times, he in reality adds nothing to the value of the 
whole annual amount of the rude produce. The working of 
that lace costs him perhaps two years labour. The thirty 
pounds which he gets for it when it is finished is no more than 
the repayment of the subsistence which he advances to himself 
during the two years that he is employed about it. The value 
which, by every day s, month s, or year s labour, he adds to the 
flax does no more than replace the value of his own consump 
tion during that day, month, or year. At no moment of time, 
therefore, does he add anything to the value of the whole annual 
amount of the rude produce of the land: the portion of that 
produce which he is continually consuming being always equal 
to the value which he is continually producing. The extreme 
poverty of the greater part of the persons employed in this 
expensive though trifling manufacture may satisfy us that the 
price of their work does not in ordinary cases exceed the value 
of their subsistence. It is otherwise with the work of fanners 
and country labourers. The rent of the landlord is a valur 
which, in ordinary cases, it is continually producing, over and 
above replacing, in the most complete manner, the whole con- 



i 62 The Wealth of Nations 

sumption, the whole expense laid out upon the employment 
and maintenance both of the workmen and of their employer. 

Artificers, manufacturers, and merchants can augment the 
revenue and wealth of their society by parsimony only; or, as 
it is expressed in this system, by privation, that is, by depriving 
themselves of a part of the funds destined for their own sub 
sistence. They annually reproduce nothing but those funds. 
Unless, therefore, they annually save some part of them, unless 
they annually deprive themselves of the enjoyment of some 
part of them, the revenue and wealth of their society can never 
be in the smallest degree augmented by means of their industry. 
Farmers and country labourers, on the contrary, may enjoy 
completely the whole funds destined for their own subsistence, 
and yet augment at the same time the revenue and wealth of 
their society. Over and above what is destined for their own 
subsistence, their industry annually affords a net produce, of 
which the augmentation necessarily augments the revenue and 
wealth of their society. Nations therefore which, like France 
or England, consist in a great measure of proprietors and culti 
vators can be enriched by industry and enjoyment. Nations, 
on the contrary, which, like Holland and Hamburg, are com 
posed chiefly of merchants, artificers, and manufacturers can 
grow rich only through parsimony and privation. As the in 
terest of nations so differently circumstanced is very different, 
so is likewise the common character of the people: in those of 
the former kind, liberality, frankness, and good fellowship 
naturally make a part of that common character: in the latter, 
narrowness, meanness, and a selfish disposition, averse to all 
social pleasure and enjoyment. 

The unproductive class, that of merchants, artificers, and 
manufacturers, is maintained and employed altogether at the 
expense of the two other classes, of that of proprietors, and of 
that of cultivators. They furnish it both with the materials of 
its work and with the fund of its subsistence, with the corn and 
cattle which it consumes while it is employed about that work. 
The proprietors and cultivators finally pay both the wages of 
all the workmen of the unproductive class, and of the profits 
of all their employers. Those workmen and their employers are 
properly the servants of the proprietors and cultivators. They 
are only servants who work without doors, as menial servants 
woik within. Both the one and the other, however, are equally 
maintained at the expense of the same masters. The labour of 
both is equally unproductive. It adds nothing to the value of 



The Agricultural Systems 163 

the sum total of the rude produce of the land. Instead of 
increasing the value of that sum total, it is a charge and expense 
which must be paid out of it. 

The unproductive class, however, is not only useful, but 
greatly useful to the other two classes. By means of the in 
dustry of merchants, artificers, and manufacturers, the pro 
prietors and cultivators can purchase both the foreign goods 
and the manufactured produce of their own country which they 
have occasion for with the produce of a much smaller quantity 
of their own labour than what they would be obliged to employ 
if they were to attempt, in an awkward and unskilful manner, 
either to import the one or to make the other for their own 
use. By means of the unproductive class, the cultivators are 
delivered from many cares which would otherwise distract their 
attention from the cultivation of land. The superiority of pro 
duce, which, in consequence of this undivided attention, they 
are enabled to raise, is fully sufficient to pay the whole expense 
which the maintenance and employment of the unproductive 
class costs either the proprietors or themselves. The industry 
of merchants, artificers, and manufacturers, though in its own 
nature altogether unproductive, yet contributes in this manner 
indirectly to increase the produce of the land. It increases the 
productive powers of productive labour by leaving it at liberty 
to confine itself to its proper employment, the cultivation of 
land: and the plough goes frequently the easier and the better 
by means of the labour of the man whose business is most 
remote from the plough. 

It can never be the interest of the proprietors and cultivators 
to restrain or to discourage in any respect the industry of mer 
chants, artificers, and manufacturers. The greater the liberty 
which this unproductive class enjoys, the greater will be the 
competition in all the different trades which compose it, and the 
cheaper will the other two classes be supplied, both with foreign 
goods and with the manufactured produce of their own 
country. 

It can never be the interest of the unproductive class to 
oppress the other two classes. It is the surplus produce of the 
land, or what remains after deducting the maintenance, first, of 
the cultivators, and afterwards of the proprietors, that main 
tains and employs the unproductive class. The greater this 
surplus the greater must likewise be the maintenance and 
employment of that class. The establishment of perfect justice, 
of perfect liberty, and of perfect equality is the very simple 

*F4 3 



164 The Wealth of Nations 

secret which most effectually secures the highest degree of 
prosperity to all the three classes. 

The merchants, artificers, and manufacturers of those mer 
cantile states which, like Holland and Hamburg, consist chiefly 
of this unproductive class, are in the same manner maintained 
and employed altogether at the expense of the proprietors 
and cultivators of land. The only difference is, that those pro 
prietors and cultivators are, the greater part of them, placed 
at a most inconvenient distance from the merchants, artificers, 
and manufacturers whom they supply with the materials of their 
work and the fund of their subsistence, the inhabitants of 
other countries and the subjects of other governments. 

Such mercantile states, however, are not only useful, but 
greatly useful to the inhabitants of those other countries. They 
fill up, in some measure, a very important void, and supply the 
place of the merchants, artificers, and manufacturers whom the 
inhabitants of those countries ought to find at home, but whom, 
from some defect in their policy, they do not find at home. 

It can never be the interest of those landed nations, if I may 
call them so, to discourage or distress the industry of such 
mercantile states by imposing high duties upon their trade or 
upon the commodities which they furnish. Such duties, by 
rendering those commodities dearer, could serve only to sink 
the real value of the surplus produce of their own land, with 
which, or, what comes to the same thing, with the price of 
which those commodities are purchased. Such duties could 
serve only to discourage the increase of that surplus produce, 
and consequently the improvement and cultivation of their 
own land. The most effectual expedient, on the contrary, for 
raising the value of that surplus produce, for encouraging its 
increase, and consequently the improvement and cultivation 
of their own land, would be to allow the most perfect freedom 
to the trade of all such mercantile nations. 

This perfect freedom of trade would even be the most effectual 
expedient for supplying them, in due time, with all the artificers, 
manufacturers, and merchants whom they wanted at home, and 
for filling up in the properest and most advantageous manner 
that very important void which they felt there. 

The continual increase of the surplus produce of their land 
would, in due time, create a greater capital than what could be 
employed with the ordinary rate of profit in the improvement 
and cultivation of land; and the surplus part of it would 
naturally turn itself to the employment of artificers and manu- 



The Agricultural Systems 165 

facturers at home. But those artificers and manufacturers, 
finding at home both the materials of their work and the fund 
of their subsistence, might immediately even with much less art 
and skill be able to work as cheap as the like artificers and manu 
facturers of such mercantile states who had both to bring from 
a great distance. Even though, from want of art and skill, 
they might not for some time be able to work as cheap, yet, 
finding a market at home, they might be able to sell their work 
there as cheap as that of the artificers and manufacturers of 
such mercantile states, which could not be brought to that 
market but from so great a distance; and as their art and skill 
improved, they would soon be able to sell it cheaper. The 
artificers and manufacturers of such mercantile states, there 
fore, would immediately be rivalled in the market of those 
landed nations, and soon after undersold and jostled out of it 
altogether. The cheapness of the manufactures of those landed 
nations, in consequence of the gradual improvements of art and 
skill, would, in due time, extend their sale beyond the home 
market, and carry them to many foreign markets, from which 
they would in the same manner gradually jostle out many of the 
manufactures of such mercantile nations. 

This continual increase both of the rude and manufactured 
produce of those landed nations would in due time create a 
greater capital than could, with the ordinary rate of profit, be 
employed either in agriculture or in manufactures. The surplus 
of this capital would naturally turn itself to foreign trade, and 
be employed in exporting to foreign countries such parts of the 
rude and manufactured produce of its own country as exceeded 
the demand of the home market. In the exportation of the 
produce of their own country, the merchants of a landed nation 
would have an advantage of the same kind over those of 
mercantile nations which its artificers and manufacturers had 
over the artificers and manufacturers of such nations; the 
advantage of finding at home that cargo and those stores and 
provisions which the others were obliged to seek for at a 
distance. With inferior art and skill in navigation, therefore, 
they would be able to sell that cargo as cheap in foreign markets 
as the merchants of such mercantile nations; and with equal 
art and skill they would be able to sell it cheaper. They would 
soon, therefore, rival those mercantile nations in this branch of 
foreign trade, and in due time would jostle them out of it 
altogether. 

According to this liberal and generous system, therefore, the 



i 66 The Wealth of Nations 

most advantageous method in which a landed nation can raise 
up artificers, manufacturers, and merchants of its own is to 
grant the most perfect freedom of trade to the artificers, manu 
facturers, and merchants of all other nations. It thereby raises 
the value of the surplus produce of its own land, of which the 
continual increase gradually establishes a fund, which in due 
time necessarily raises up all the artificers, manufacturers, and 
merchants whom it has occasion for. 

When a landed nation, on the contrary, oppresses either by 
high duties or by prohibitions the trade of foreign nations, it 
necessarily hurts its own interest in two different ways. First, 
by raising the price of all foreign goods and of all sorts of manu 
factures, it necessarily sinks the real value of the surplus produce 
of its own land, with which, or, what comes to the same thing, 
with the price of which it purchases those foreign goods and 
manufactures. Secondly, by giving a sort of monopoly of the 
home market to its own merchants, artificers, and manufacturers, 
it raises the rate of mercantile and manufacturing profit in 
proportion to that of agricultural profit, and consequently either 
draws from agriculture a part of the capital which had before 
been employed in it, or hinders from going to it a part of what 
would otherwise have gone to it. This policy, therefore, dis 
courages agriculture in two different ways; first, by sinking the 
real value of its produce, and thereby lowering the rate of its 
profit; and, secondly, by raising the rate of profit in all other 
employments. Agriculture is rendered less advantageous, and 
trade and manufactures more advantageous than they otherwise 
would be; and every man is tempted by his own interest to 
turn, as much as he can, both his capital and his industry from 
the former to the latter employments. 

Though, by this oppressive policy, a landed nation should be 
able to raise up artificers, manufacturers, and merchants of its 
own somewhat sooner than it could do by the freedom of trade 
a matter, however, which is not a little doubtful yet it would 
raise them up, if one may say so, prematurely, and before it 
was perfectly ripe for them. By raising up too hastily one 
species of industry, it would depress another more valuable 
species of industry. By raising up too hastily a species of 
industry which only replaces the stock which employs it, 
together with the ordinary profit, it would depress a species 
of industry which, over and above replacing that stock with its 
profit, affords likewise a net produce, a free rent to the land 
lord. It would depress productive labour, by encouraging 



The Agricultural Systems 167 

too hastily that labour which is altogether barren and un 
productive. 

In what manner, according to this system, the sum total of 
the annual produce of the land is distributed among the three 
classes above mentioned, and in what manner the labour of the 
unproductive class does no more than replace the value of its 
own consumption, without increasing in any respect the value 
of that sum total, is represented by Mr. Quesnai, the very 
ingenious and profound author of this system, in some arith 
metical formularies. The first of these formularies, which by 
way of eminence he peculiarly distinguishes by the name of the 
Economical Table, represents the manner in which he supposes 
this distribution takes place in a state of the most perfect liberty 
and therefore of the highest prosperity in a state where the 
annual produce is such as to afford the greatest possible net 
produce, and where each class enjoys its proper share of the 
whole annual produce. Some subsequent formularies represent 
the manne* in which he supposes this distribution is made 
in different states of restraint and regulation; in which either 
the class of proprietors or the barren and unproductive class is 
more favoured than the class of cultivators, and in which either 
the one or the other encroaches more or less upon the share 
which ought properly to belong to this productive class. Every 
such encroachment, even- violation of that natural distribution, 
which the most perfect liberty would establish, must, according 
to this system, necessarily degrade more or less, from one year 
to another, ihe value and sum total of the annual produce, and 
must necessarily occasion a gradual declension in the real wealth 
and revenue of the society; a declension of which the progress 
must be quicker or slower, according to the degree of this en 
croachment, according as that natural distribution which the 
most perfect liberty would establish is more or less violated. 
Those subsequent formularies represent the different degrees 
of declension which, according to this system, correspond to the 
different degrees in which this natural distribution is violated. 

Some speculative physicians seem to have imagined that the 
health of the human body could be preserved only by a certain 
precise regimen of diet and exercise, of which every, the smallest, 
violation necessarily occasioned some degree of disease or dis 
order proportioned to the degree of the violation. Experience, 
however, would seem to show that the human body frequently 
preserves, to all appearance at least, the most perfect state of 
health under a vast variety of different regimens; even under 



i 68 The Wealth of Nations 

some which are generally believed to be very far from being 
perfectly wholesome. But the healthful state of the human 
body, it would seem, contains in itself some unknown principle 
of preservation, capable either of preventing or of correcting, 
in many respects, the bad effects even of a very faulty regimen. 
Mr. Quesnai, who was himself a physician, and a very specula 
tive physician, seems to have entertained a notion of the same 
kind concerning the political body, and to have imagined that 
it would thrive and prosper only under a certain precise regimen, 
the exact regimen of perfect liberty and perfect justice. He 
seems not to have considered that, in the political body, the 
natural effort which every man is continually making to better 
his own condition is a principle of preservation capable of 
preventing and correcting, in many respects, the bad effects of 
a political economy, in some degree, both partial and oppressive. 
Such a political economy, though it no doubt retards more or 
less, is not always capable of stopping altogether the natural 
progress of a nation towards wealth and prosperity, and still 
less of making it go backwards. If a nation could not prosper 
without the enjoyment of perfect liberty and perfect justice, 
there is not in the world a nation which could ever have prospered. 
In the political body, however, the wisdom of nature has for 
tunately made ample provision for remedying many of the bad 
effects of the folly and injustice of man, in the same manner 
as it has done in the natural body for remedying those of his 
sloth and intemperance. 

The capital error of this system, however, seems to lie in its 
representing the class of artificers, manufacturers, and merchants 
as altogether barren and unproductive. The following observa 
tions may serve to show the impropriety of this representation. 

First, this class, it is acknowledged, reproduces annually the 
value of its own annual consumption, and continues, at least, the 
existence of the stock or capital which maintains and employs 
it. But upon this account alone the denomination of barren or 
unproductive should seem to be very improperly applied to it. 
We should not call a marriage barren or unproductive though 
it produced only a son and a daughter, to replace the father and 
mother, and though it did not increase the number of the human 
species, but only continued it as it was before. Farmers and 
country labourers, indeed, over and above the stock which 
maintains and employs them, reproduce annually a net pro 
duce, a free rent to the landlord. As a marriage which affords 
three children is certainly more productive than one which 



The Agricultural Systems 169 

affords only two; so the labour of fanners and country labourers 
is certainly more productive than that of merchants, artificers, 
and manufacturers. The superior produce of the one class, 
however, does not render the other barren or unproductive. 

Secondly, it seems, upon this account, altogether improper 
to consider artificers, manufacturers, and merchants in the 
same light as menial servants. The labour of menial servants 
does not continue the existence of the fund which maintains and 
employs them. Their maintenance and employment is alto 
gether at the expense of their masters, and the work which they 
perform is not of a nature to repay that expense. That work 
consists in services which perish generally in the very instant 
of their performance, and does not fix or realise itself in any 
vendible commodity which can replace the value of their wages 
and maintenance. The labour, on the contrary, of artificers, 
manufacturers, and merchants naturally does fix and realise 
itself in some such vendible commodity. It is upon this account 
that, in the chapter in which I treat of productive and unpro 
ductive labour, I have classed artificers, manufacturers, and 
merchants among the productive labourers, and menial servants 
among the barren or unproductive. 

Thirdly, it seems upon every supposition improper to say 
that the labour of artificers, manufacturers, and merchants does 
not increase the real revenue of the society. Though we should 
suppose, for example, as it seems to be supposed in this system, 
that the value of the daily, monthly, and yearly consumption of 
this class was exactly equal to that of its daily, monthly, and 
yearly production, yet it would not from thence follow that its 
labour added nothing to the real revenue, to the real value of 
the annual produce of the land and labour of the society. An 
artificer, for example, who, in the first six months after harvest, 
executes ten pounds worth of work, though he should in the 
same time consume ten pounds worth of corn and other neces 
saries, yet really adds the value of ten pounds to tl e annual 
produce of the land and labour of the society. Whi e he has 
been consuming a half-yearly revenue of ten pounds worth of 
corn and other necessaries, he has produced an equal value of 
work capable of purchasing;, either to himself or to some other 
person, an equal half-yearly revenue. The value, therefore, of 
what has been consumed and produced during these six months 
is equal, not to ten, but to twenty pounds. It is possible, 
indeed, that no more than ton pounds worth of this value may 
over have existed at any one moment of time. But if the ten 



170 The Wealth of Nations 

pounds worth of corn and other necessaries, which were con 
sumed by the artificer, had been consumed by a soldier or by a 
menial servant, the value of that part of the annual produce 
which existed at the end of the six months would have been 
ten pounds less than it actually is in consequence of the labour 
of the artificer. Though the value of what the artificer produces, 
therefore, should not at any one moment of time be supposed 
greater than the value he consumes, yet at every moment of time 
the actually existing value of goods in the market is, in conse 
quence of what he produces, greater than it otherwise would be. 

When the patrons of this system assert that the consumption 
of artificers, manufacturers, and merchants is equal to the value 
of what they produce, they probably mean no more than that 
their revenue, or the fund destined for their consumption, is 
equal to it. But if they had expressed themselves more 
accurately, and only asserted that the revenue of this class 
was equal to the value of what they produced, it might readily 
have occurred to the reader that what would naturally be saved 
out of this revenue must necessarily increase more or less the 
real wealth of the society. In order, therefore, to make out 
something like an argument, it was necessary that they should 
express themselves as they have done ; and this argument, even 
supposing things actually were as it seems to presume them to 
be, turns out to be a very inconclusive one. 

Fourthly, farmers and country labourers can no more augment, 
without parsimony, the real revenue, the annual produce of the 
land and labour of their society, than artificers, manufacturers, 
and merchants. The annual produce of the land and labour of 
any society can be augmented only in two ways; either, first, 
by some improvement in the productive powers of the useful 
labour actually maintained within it; or, secondly, by some 
increase in the quantity of that labour. 

The improvement in the productive powers of useful labour 
depend, first, upon the improvement in the ability of the work 
man; and, secondly, upon that of the machinery with which 
he works. But the labour of artificers and manufacturers, as 
it is capable of being more subdivided, and the labour of each 
workman reduced to a greater simplicity of operation than that 
of farmers and country labourers, so it is likewise capable of 
both these sorts of improvement in a much higher degree. 1 In 
this respect, therefore, the class of cultivators can have no sort 
of advantage over that of artificers and manufacturers. 
1 See book i. chap. i. 



The Agricultural Systems 171 

The increase in the quantity of useful labour actually em 
ployed within any society must depend altogether upon the 
increase of the capital which employs it; and the increase of 
that capital again must be exactly equal to the amount of the 
savings from the revenue, either of the particular persons who 
manage and direct the employment of that capital, or of some 
other persons who lend it to them. If merchants, artificers, and 
manufacturers are, as this system seems to suppose, naturally 
more inclined to parsimony and saving than proprietors and 
cultivators, they are, so far, more likely to augment the quantity 
of useful labour employed within their society, and consequently 
to increase its real revenue, the annual produce of its land and 
labour. 

Fifthly and lastly, though the revenue of the inhabitants of 
every country was supposed to consist altogether, as this system 
seems to suppose, in the quantity of subsistence which their 
industry could procure to them; yet, even upon this supposi 
tion, the revenue of a trading and manufacturing country must, 
other things being equal, always be much greater than that of 
one without trade or manufactures. By means of trade and 
manufactures, a greater quantity of subsistence can be annually 
imported into a particular country than what its own lands, in 
the actual state of their cultivation, could afford. The inhabi 
tants of a town, though they frequently possess no lands of 
their own, yet draw to themselves by their industry such a 
quantity of the rude produce of the lands of other people as 
supplies them, not only with the materials of their work, but 
with the fund of their subsistence. What a town always is with 
regard to the country in its neighbourhood, one independent 
state or country may frequently be with regard to other inde 
pendent states or countries. It is thus that Holland draws a 
great part of its subsistence from other countries; live cattle 
from 1 lolstein and Jutland, and corn from almost all the different 
countries of Europe. A small quantity of manufactured pro 
duce purchases a great quantity of rude produce. A trading 
and manufacturing country, therefore, naturally purchases with 
a small part of its manufactured produce a great part of the 
rude produce of other countries; while, on the contrary, a 
country without trade and manufactures is generally obliged to 
purchase, at the expense of a great part of its rude produce, a 
very small part of the manufactured produce of other countries. 
The one exports what can subsist and accommodate but a very 
few, and imports the subsistence and accommodation of a great 



172 The Wealth of Nations 

number. The other exports the accommodation and subsistence 
of a great number, and imports that of a very few only. The 
inhabitants of the one must always enjoy a much greater quan 
tity of subsistence than what their own lands, in the actual 
state of their cultivation, could afford. The inhabitants of the 
other must always enjoy a much smaller quantity. 

This system, however, with all its imperfections is, perhaps, 
the nearest approximation to the truth that has yet been pub 
lished upon the subject of political economy, and is upon that 
account well worth the consideration of every man who wishes 
to examine with attention the principles of that very important 
science. Though in representing the labour which is employed 
upon land as the only productive labour, the notions which it 
inculcates are perhaps too narrow and confined; yet in repre 
senting the wealth of nations as consisting, not in the uncon- 
sumable riches of money, but in the consumable goods annually 
reproduced by the labour of the society, and in representing 
perfect liberty as the only effectual expedient for rendering this 
annual reproduction the greatest possible, its doctrine seems to 
be in every respect as just as it is generous and liberal. Its 
followers are very numerous; and as men are fond of paradoxes, 
and of appearing to understand what surpasses the compre 
hension of ordinary people, the paradox which it maintains, 
concerning the unproductive nature of manufacturing labour, 
has not perhaps contributed a little to increase the number of 
its admirers. They have for some years past made a pretty 
considerable sect, distinguished in the French republic of letters 
by the name of The Economists. Their works have certainly 
been of some service to their country; not only by bringing 
into general discussion many subjects which had never been 
well examined before, but by influencing in some measure 
the public administration in favour of agriculture. It has been 
in consequence of their representations, accordingly, that the 
agriculture of France has been delivered from several of the 
oppressions which it before laboured under. The term during 
which such a lease can be granted, as will be valid against every 
future purchaser or proprietor of the land, has been prolonged 
from nine to twenty-seven years. The ancient provincial re 
straints upon the transportation of corn from one province of 
the kingdom to another have been entirely taken away, and the 
liberty of exporting; it to all foreign countries has been estab 
lished as the common law of the kingdom in all ordinary cases. 
This sect, in their works, which are very numerous, and which 



The Agricultural Systems 173 

treat not only of what is properly called Political Economy, or 
of the nature and causes of the wealth of nations, but of every 
other branch of the system of civil government, all follow im 
plicitly and without any sensible variation, the doctrine of Mr. 
Quesnui. There is upon this account little variety in the greater 
part of their works. The most distinct and best connected 
account of this doctrine is to be found in a little book written 
by Mr. Mercier de la Riviere, some time Intendant of Martinico, 
entitled, The Natural and Essential Order of Political Societies. 
The admiration of this whole sect for their master, who was 
himself a man of the greatest modesty and simplicity, is not 
inferior to that of any of the ancient philosophers for the founders 
of their respective systems. " There have been, since the world 
began," says a very diligent and respectable author, the Marquis 
de Mirabeau, "three great inventions which have principally 
given stability to political societies, independent of many other 
inventions which have enriched and adorned them. The first 
is the invention of writing, which alone gives human nature the 
power of transmitting, without alteration, its laws, its contracts, 
its annals, and its discoveries. The second is the invention of 
money, which binds together all the relations between civilised 
societies. The third is the Economical Table, the result of 
the other two, which completes them both by perfecting their 
object ; the great discovery of our age, but of which our posterity 
will reap the benefit." 

As the political economy of the nations of modern Europe has 
been more favourable to manufactures and foreign trade, the 
industry of the towns, than to agriculture, the industry of the 
country ; so that of other nations has followed a different plan, 
and has been more favourable to agriculture than to manu 
factures and foreign trade. 

The policy of China favours agriculture more than all other 
employments. In China the condition of a labourer is said to 
be as much superior to that of an artificer as in most parts of 
Europe that of an artificer is to that of a labourer. In China, 
the great ambition of every man is to get possession of some 
little bit of land, either in property or in lease; and leases are 
there said to be granted upon very moderate terms, and to 
be sufficiently secured to the lessees. The Chinese have little 
respect for foreign trade. Your beggarly commerce ! was the 
language in which the Mandarins of Pekin used to talk to Mr. 
De Lange, the Russian envoy, concerning it. 1 Except with 

1 See the Journal of Mr. De Lange in Bell s Travels, vol. ii. pp. 758 276 
and 293. 



174 The Wealth of Nations 

Japan, the Chinese cany on, themselves, and in their own 
bottoms, little or no foreign trade; and it is only into one or 
two ports of their kingdom that they even admit the ships of 
foreign nations. Foreign trade therefore is, in China, every 
way confined within a much narrower circle than that to which 
it would naturally extend itself, if more freedom was allowed 
to it, either in their own ships, or in those of foreign nations. 

Manufactures, as in a small bulk they frequently contain a 
great value, and can upon that account be transported at less 
expense from one country to another than most parts of rude 
produce, are, in almost all countries, the principal support of 
foreign trade. In countries, besides, less extensive and less 
favourably circumstanced for inferior commerce than China, 
they generally require the support of foreign trade. Without 
an extensive foreign market they could not well flourish, 
either in countries so moderately extensive as to afford but a 
narrow home market or in countries where the communica 
tion between one province and another was so difficult as to 
render it impossible for the goods of any particular place to 
enjoy the whole of that home market which the country could 
afford. The perfection of manufacturing industry, it must be 
remembered, depends altogether upon the division of labour: 
and the degree to which the division of labour can be intro 
duced into any manufacture is necessarily regulated, it has 
already been shown, by the extent of the market. But the 
great extent of the empire of China, the vast multitude of its 
inhabitants, the variety of climate, and consequently of pro 
ductions in its different provinces, and the easy communication 
by means of water carriage between the greater part of them, 
render the home market of that country of so great extent as 
to be alone sufficient to support very great manufactures, and 
to admit of very considerable subdivisions of labour. The home 
market of China is, perhaps, in extent, not much inferior to the 
market of all the different countries of Europe put together. 
A more extensive foreign trade, however, which to this great 
home market added the foreign market of all the rest of the 
world especially if any considerable part of this trade was 
carried on in Chinese ships could scarce fail to increase very 
much the manufactures of China, and to improve very much 
the productive powers of its manufacturing industry. By a 
more extensive navigation, the Chinese would naturally learn 
the art of using and constructing themselves all the different 
machines made use of in other countries, as well as the other 



The Agricultural Systems 175 

improvements of art and industry which are practised in all the 
different parts of the \vorld. Upon their present plan they have 
little opportunity of improving themselves by the example of 
any other nation except that of the Japanese. 

The policy of ancient Egypt too, and that of the Gentoo 
government of Indostan, seem to have favoured agriculture 
more than all other employments. 

Both in ancient Egypt and Indostan the whole body of the 
people was divided into different castes or tribes, each of which 
was confined, from father to son, to a particular employment or 
class of employments. The son of a priest was necessarily a 
priest; the son of a soldier, a soldier; the son of a labourer, a 
labourer; the son of a weaver, a weaver; the son of a tailor, a 
tailor, etc. In both countries, the caste of the priests held the 
highest rank, and that of the soldiers the next; and in both 
countries, the caste of the farmers and labourers was superior to 
the castes of merchants and manufacturers. 

The government of both countries was particularly attentive 
to the interest of agriculture. The works constructed by the 
ancient sovereigns of Egypt for the proper distribution of the 
waters of the Nile were famous in antiquity; and the ruined 
remains of some of them are still the admiration of travellers. 
Those of the same kind which were constructed by the ancient 
sovereigns of Indostan for the proper distribution of the waters 
of the Ganges as well as of many other rivers, though they have 
been less celebrated, seem to have been equally great. Both 
countries, accordingly, though subject occasionally to dearths, 
have been famous for their great fertility. Though both were 
extremely populous, yet, in years of moderate plenty, they were 
both able to export great quantities of grain to their neighbours. 

The ancient Egyptians had a superstitious aversion to the 
sea; and as the Gentoo religion does not permit its followers to 
light a fire, nor consequently to dress any victuals upon the 
water, it in effect prohibits them from all distant sea voyages. 
Both the Egyptians and Indians must have depended almost 
altogether upon the navigation of other nations for the exporta 
tion of their surplus produce; and this dependency, as it must 
have confined the market, so it must have discouraged the 
increase of this surplus produce. It must have discouraged, too, 
the increase of the manufactured produce more than that of the 
rude produce. Manufactures require a much more extensive 
market than the most important parts of the rude produce of 
the land. A single shoemaker will make more than three hun- 



176 The Wealth of Nations 

dred pairs of shoes in the year; and his own family will not, 
perhaps, wear out six pairs. Unless therefore he has the custom of 
at least fifty such families as his own, he cannot dispose of the 
whole produce of his own labour. The most numerous class of 
artificers will seldom, in a large country, make more than one 
in fifty or one in a hundred of the whole number of families 
contained in it. But in such large countries as France and 
England, the number of people employed in agriculture has by 
some authors been computed at a half, by others at a third, 
and by no author that I know of, at less than a fifth of the 
whole inhabitants of the country. But as the produce of the 
agriculture of both France and England is, the far greater part 
of it, consumed at home, each person employed in it must, 
according to these computations, require little more than the 
custom of one, two, or at most, of four such families as his own 
in order to dispose of the whole produce of his own labour. 
Agriculture, therefore, can support itself under the discourage 
ment of a confined market much better than manufactures. 
In both ancient Egypt and Indostan, indeed, the confinement 
of the foreign market was in some measure compensated by the 
conveniency of many inland navigations, which opened, in the 
most advantageous manner, the whole extent of the home 
market to every part of the produce of every different district 
of those countries. The great extent of Indostan, too, rendered 
the home market of that country very great, and sufficient to 
support a great variety of manufactures. But the small extent 
of ancient Egypt, which was never equal to England, must at 
all times have rendered the home market of that country too 
narrow for supporting any great variety of manufactures. 
Bengal, accordingly, the province of Indostan, \\hich commonly 
exports the greatest quantity of rice, has always been more 
remarkable for the exportation of a great variety of manufac 
tures than for that of its grain. Ancient Egypt, on the con 
trary, though it exported some manufactures, fine linen in 
particular, as well as some other goods, was always most dis 
tinguished for its great exportation of grain. It was long the 
granary of the Roman empire. 

The sovereigns of China, of ancient Egypt, and of the different 
kingdoms into which Indostan has at different times been 
divided, have always derived the whole, or by far the most 
considerable part, of their revenue from some sort of land tax 
or land rent. This land tax or land rent, like the tithe in 
Europe, consisted in a certain proportion, a fifth, it is said, of 



The Agricultural Systems 177 

the produce of the land, which was either delivered in kind, or 
paid in money, according to a certain valuation, and which 
therefore varied from year to year according to all the varia 
tions of the produce. It was natural therefore that the sove 
reigns of those countries should be particularly attentive to the 
interests of agriculture, upon the prosperity or declension of 
which immediately depended the yearly increase or diminution 
of their own revenue. 

The policy of the ancient republics of Greece, and that of 
Rome, though it honoured agriculture more than manufactures 
or foreign trade, yet seems rather to have discouraged the latter 
employments than to have given any direct or intentional en 
couragement to the former. In several of the ancient states of 
Greece, foreign trade was prohibited altogether; and in several 
others the employments of artificers and manufacturers were 
considered as hurtful to the strength and agility of the human 
body, as rendering it incapable of those habits which their mili 
tary and gymnastic exercises endeavoured to form in it, and as 
thereby disqualifying it more or less for undergoing the fatigues 
and encountering the dangers of war. Such occupations were 
considered as fit only for slaves, and the free citizens of the 
state were prohibited from exercising them. Even in those 
states where no such prohibition took place, as in Rome and 
Athens, the great body of the people were in effect excluded 
from all the trades which are now commonly exercised by the 
lower sort of the inhabitants of towns. Such trades were, at 
Athens and Rome, all occupied by the slaves of the rich, who 
exercised them for the benefit of their masters, whose wealth, 
power, and protection made it almost impossible for a poor 
freeman to find a market for his work, when it came into com 
petition with that of the slaves of the rich. Slaves, however, 
are very seldom inventive; and all the most important im 
provements, either in machinery, or in the arrangement and 
distribution of work which facilitate and abridge labour, have 
been the discoveries of freemen. Should a slave propose any 
improvement of this kind, his master would be very apt to 
consider the proposal as the suggestion of laziness, and a desire 
to save his own labour at the master s expense. The poor 
slave, instead of reward, would probably meet with much abuse, 
perhaps with some punishment. In the manufactures carried 
on by slaves, therefore, more labour must generally have been 
employed to execute the same quantity of work than in those 
carried on by freemen. The work of the former must, upon 



178 The Wealth of Nations 

that account, generally have been dearer than that of the latter. 
The Hungarian mines, it is remarked by Mr. Montesquieu, 
though not richer, have always been wrought with less expense, 
and therefore with more profit, than the Turkish mines in their 
neighbourhood. The Turkish mines are wrought by slaves; 
and the arms of those slaves are the only machines which the 
Turks have ever thought of employing. The Hungarian mines 
are wrought by freemen, who employ a great deal of machinery, 
by which they facilitate and abridge their own labour. From 
the very little that is known about the price of manufactures in 
the times of the Greeks and Romans, it would appear that 
those of the finer sort were excessively dear. Silk sold for its 
weight in gold. It was not, indeed, in those times a European 
manufacture; and as it was all brought from the East Indies, 
the distance of the carriage may in some measure account for 
the greatness of the price. The price, however, which a lady, 
it is said, would sometimes pay for a piece of very fine linen, 
seems to have been equally extravagant; and as linen was 
always either a European, or at farthest, an Egyptian manu 
facture, this high price can be accounted for only by the great 
expense of the labour which must have been employed about 
it, and the expense of this labour again could arise from nothing 
but the awkwardness of the machinery which it made use of. 
The price of fine woollens too, though not quite so extravagant, 
seems however to have been much above that of the present 
times. Some cloths, we are told by Pliny, dyed in a particular 
manner, cost a hundred denarii, or three pounds six shillings 
and eightpence the pound weight. 1 Others dyed in another 
manner cost a thousand denarii the pound weight, or thirty- 
three pounds six shillings and eightpence. The Roman pound, 
it must be remembered, contained only twelve of our avoir 
dupois ounces. This high price, indeed, seems to have been 
principally owing to the dye. But had not the cloths them 
selves been much dearer than any which are made in the present 
times, so very expensive a dye would not probably have been 
bestowed upon them. The disproportion would have been too 
great between the value of the accessory and that of the prin 
cipal. The price mentioned by the same 2 author of some 
Triclinaria, a sort of woollen pillows or cushions made use of to 
lean upon as they reclined upon their couches at table, passes 
all credibility; some of them being said to have cost more than 
thirty thousand, others more than three hundred thousand 

1 Tlin. 1. ix. c. 39. Plin. 1. viii. c. 48. 



The Agricultural Systems 179 

pounds. This high price, too, is not said to have arisen from 
the dye. In the dress of the people of fashion of both sexes 
there seems to have been much less variety, it is observed by 
Doctor Arbuthnot, in ancient than in modern times; and the 
very little variety which we find in that of the ancient statues 
confirms his observation. He infers from this that their dress 
must upon the whole have been cheaper than ours; but the 
conclusion does not seem to follow. When the expense of 
fashionable dress is very great, the variety must be very small. 
But when, by the improvements in the productive powers of 
manufacturing art and industry, the expense of any one dress 
comes to be very moderate, the variety will naturally be very 
great. The rich, not being able to distinguish themselves by the 
expense of any one dress, will naturally endeavour to do so by 
the multitude and variety of their dresses. 

The greatest and most important branch of the commerce of 
every nation, it has already been observed, is that which is 
carried on between the inhabitants of the town and those of the 
country. The inhabitants of the town draw from the country 
the rude produce which constitutes both the materials of their 
work and the fund of their subsistence ; and they pay for this 
rude produce by sending back to the country a certain portion 
of it manufactured and prepared for immediate use. The trade 
which is carried on between these two different sets of people 
consists ultimately in a certain quantity of rude produce ex 
changed for a certain quantity of manufactured produce. The 
dearer the latter, therefore, the cheaper the former; and what 
ever tends in any country to raise the price of manufactured 
produce tends to lower that of the rude produce of the land, 
and thereby to discourage agriculture. The smaller the quan 
tity of manufactured produce which any given quantity of rude 
produce, or, what comes to the same thing, which the price of 
any given quantity of rude produce is capable of purchasing, 
the smaller the exchangeable value of that given quantity of 
rude produce, the smaller the encouragement which either the 
landlord has to increase its quantity by improving or the farmer 
by cultivating the land. Whatever, Ix^sicles, tends to diminish 
in any country the number of artificers and manufacturers, 
tends to diminish the home market, the most important of all 
markets for the rude produce of the land, and thereby still 
further to discourage agriculture. 

Those systems, therefore, which, preferring agriculture to all 
other employments, in order to promote it, impose restraints 



180 The Wealth of Nations 

upon manufactures and foreign trade, act contrary to the very 
end which they propose, and indirectly discourage that very 
species of industry which they mean to promote. They are so 
far, perhaps, more inconsistent than even the mercantile system. 
That system, by encouraging manufactures and foreign trade 
more than agriculture, turns a certain portion of the capital of 
the society from supporting a more advantageous, to support a 
less advantageous species of industry. But still it really and in 
the end encourages that species of industry which it means to 
promote. Those agricultural systems, on the contrary, really 
and in the end discourage their own favourite species of industry. 

It is thus that every system which endeavours, either by 
extraordinary encouragements to draw towards a particular 
species of industry a greater share of the capital of the society 
than what would naturally go to it, or, by extraordinary re 
straints, force from a particular species of industry some share 
of the capital which would otherwise be employed in it, is in 
reality subversive of the great purpose which it means to pro 
mote. It retards, instead of accelerating, the progress of the 
society towards real wealth and greatness; and diminishes, 
instead of increasing, the real value of the annual produce of 
its land and labour. 

All systems either of preference or of restraint, therefore, 
being thus completely taken away, the obvious and simple 
system of natural liberty establishes itself of its own accord. 
Every man, as long as he does not violate the laws of justice, 
is left perfectly free to pursue his own interest his own way, and 
to bring both his industry and capital into competition with 
those of any other man, or order of men. The sovereign is 
completely discharged from a duty, in the attempting to per 
form which he must always be exposed to innumerable delu 
sions, and for the proper performance of which no human wisdom 
or knowledge could ever be sufficient; the duty of superintend 
ing the industry of private people, and of directing it towards 
the employments most suitable to the interest of the society. 
According to the system of natural liberty, the sovereign has 
only three duties to attend to ; three duties of great importance, 
indeed, but plain and intelligible to common understandings: 
first, the duty of protecting the society from the violence and 
invasion of other independent societies; secondly, the duty of 
protecting, as far as possible, every member of the society from 
the injustice or oppression of every other member of it, or the 
duty of establishing an exact administration of justice; and, 



The Agricultural Systems 181 

thirdly, the duty of erecting and maintaining certain public 
works and certain public institutions which it can never be for 
the interest of any individual, or small number of individuals, 
to erect and maintain; because the profit could never repay the 
expense to any individual or small number of individuals, though 
it may frequently do much more than repay it to a great society. 
The proper performance of those several duties of the sove 
reign necessarily supposes a certain expense; and this expense 
again necessarily requires a certain revenue to support it. In 
the following book, therefore, I shall endeavour to explain, first, 
what are the necessary expenses of the sovereign or common 
wealth; and which of those expenses ought to be defrayed by 
the general contribution of the whole society; and which of 
them by that of some particular part only, or of some parti 
cular members of the society; secondly, what are the different 
methods in which the whole society may be made to contribute 
towards defraying the expenses incumbent on the whole society, 
and what are the principal advantages and inconveniences of 
each of those methods; and thirdly, what are the reasons and 
causes which have induced almost all modern governments to 
mortgage some part of this revenue, or to contract debts, and 
what have been the effects of those debts upon the real wealth, 
the annual produce of the land and labour of the society. The 
following book, therefore, will naturally be divided into three 
chapters. 



BOOK V 

OF THE REVENUE OF THE SOVEREIGN OR 
COMMONWEALTH 

CHAPTER I 

OF THE EXPENSES OF THE SOVEREIGN OR COMMONWEALTH 
PART I 

Of the Expense of Defence 

THE first duty of the: sovereign, that of protecting the society 
from the violence and invasion of other independent societies, 
can be performed only by means of a military force. But the 
expense both of preparing this military force in time of peace, 
and of employing it in time of war, is very different in the 
different states of society, in the different periods of improvement. 

Among nations of hunters, the lowest and rudest state of 
society, such as we find it among the native tribes of North 
America, every man is a warrior as well as a hunter. When he 
goes to war, either to defend his society, or to revenge the 
injuries which have been done to it by other societies, he main 
tains himself by his own labour in the same manner as when 
he lives at home. His society, for in this state of things there is 
properly neither sovereign nor commonwealth, is at no sort of 
expense, either to prepare him for the field, or to maintain him 
while he is in it. 

Among nations of shepherds, a more advanced state of society, 
such as we find it among the Tartars and Arabs, every man is, 
in the same manner, a warrior. Such nations have commonly 
no fixed habitation, but live either in tents or in a sort of 
covered waggons which are easily transported from place to 
place. The whole tribe or nation changes its situation accord 
ing to the different seasons of the year, as well as according to 
other accidents. When its herds and flocks have consumed the 
forage of one part of the country, it removes to another, and 
from that to a third. In the dry season it comes down to the 
banks of the rivers; in the wet season it retires to the upper 

182 



The Expenses of the Sovereign 183 

country. When such a nation goes to war, the warriors will not 
trust their herds and flocks to the feeble defence of their old 
men, their women and children; and their old men, their women 
and children, will not be left behind without defence and without 
subsistence. The whole nation, besides, being accustomed to 
a wandering life, even in time of peace, easily takes the field 
in time of war. Whether it marches as an army, or moves about 
as a company of herdsmen, the way of life is nearly the same, 
though the object proposed by it be very different. They all 
go to war together, therefore, and every one does as well as he 
can. Among the Tartars, even the women have been frequently 
known to engage in battle. If they conquer, whatever belongs 
to the hostile tribe is the recompense of the victory. But if 
they are vanquished, all is lost, and not only their herds and 
flocks, but their women and children, become the booty of the 
conqueror. Even the greater part of those who survive the 
action are obliged to submit to him for the sake of immediate 
subsistence. The rest are commonly dissipated and dispersed 
in the desert. 

The ordinary life, the ordinary exercises of a Tartar or Arab, 
prepare him sufficiently for war. Running, wrestling, cudgel- 
playing, throwing the javelin, drawing the bow, etc., are the 
common pastimes of those who live in the open air, and are all 
of them the images of war. When a Tartar or Arab actually 
goes to war, he is maintained by his own herds and flocks which 
he carries with him in the same manner as in peace. His chief 
or sovereign, for those nations have all chiefs or sovereigns, is 
at no sort of expense in preparing him for the field; and when 
he is in it the chance of plunder is the only pay which he either 
expects or requires. 

An army of hunters can seldom exceed two or three hundred 
men. The precarious subsistence which the chase affords could 
seldom allow a greater number to keep together for any con 
siderable time. An army of shepherds, on the contrary, may 
sometimes amount to two or three hundred thousand. As long 
as nothing stops their progress, as long as they can go on from 
one district, of which they have consumed the forage, to another 
which is yet entire, there seems to be scarce any limit to the 
number who can march on together. A nation of hunters can 
never be formidable to the civilised nations in their neighbour 
hood. A nation of shepherds may. Nothing can be more con 
temptible than an Indian war in North America. Nothing, on 
the contrary, can be more dreadful than a Tartar invasion has 



184 



The Wealth of Nations 



frequently been in Asia. The judgment of Thucydides, that 
both Europe and Asia could not resist the Scythians united, has 
been verified by the experience of all ages. The inhabitants of 
the extensive but defenceless plains of Scythia or Tartary have 
been frequently united under the dominion of the chief of some 
conquering horde or clan, and the havoc and devastation of 
Asia have always signalised their union. The inhabitants of 
the inhospitable deserts of Arabia, the other great nation of 
shepherds, have never been united but once; under Mahomet 
and his immediate successors. Their union, which was more the 
effect of religious enthusiasm than of conquest, was signalised in 
the same manner. If the hunting nations of America should 
ever become shepherds, their neighbourhood would be much 
more dangerous to the European colonies than it is at present. 

In a yet more advanced state of society, among those nations 
of husbandmen who have little foreign commerce, and no other 
manufactures but those coarse and household ones which almost 
every private family prepares for its own use, every man, in the 
same manner, either is a warrior or easily becomes such. They 
who live by agriculture generally pass the whole day in the open 
air, exposed to all the inclemencies of the seasons. The hardiness 
of their ordinary life prepares them for the fatigues of war, to 
some of which their necessary occupations bear a great analogy. 
The necessary occupation of a ditcher prepares him to work in 
the trenches, and to fortify a camp as well as to enclose a field. 
The ordinary pastimes of such husbandmen are the same as 
those of shepherds, and are in the same manner the images of 
war. But as husbandmen have less leisure than shepherds, 
they are not so frequently employed in those pastimes. They 
are soldiers, but soldiers not quite so much masters of their 
exercise. Such as they are,however,it seldom costs the sovereign 
or commonwealth any expense to prepare them for the field. 

Agriculture, even in its rudest and lowest state, supposes a 
settlement: some sort of fixed habitation which cannot be 
abandoned without great loss. When a nation of mere husband 
men, therefore, goes to war, the whole people cannot take the 
field together. The old men, the women and children, at least, 
must remain at home to take care of the habitation. All the men 
of the military age, however, may take the field, and, in small 
nations of this kind, have frequently done so. In every nation 
the men of the military age are supposed to amount to about a 
fourth or a fifth part of the whole body of the people. If the 
campaign, too, should begin after seed-time, and end before 



The Expenses of the Sovereign 185 

harvest, both the husbandman and his principal labourers can 
be spared from the farm without much loss. He trusts that the 
work which must be done in the meantime can be well enough 
executed by the old men, the women, and the children. He is 
not unwilling, therefore, to serve without pay during a short 
campaign, and it frequently costs the sovereign or common 
wealth as little to maintain him in the field as to prepare him 
for it. The citizens of all the different states of ancient Greece 
seem to have served in this manner till after the second Persian 
war; and the people of Peloponnesus till after the Peloponnesian 
war. The Peloponnesians, Thucydides observes, generally left 
the field in the summer, and returned home to reap the harvest. 
The Roman people under their kings, and during the first ages of 
the republic, served in the same manner. It was not till the 
siege of Veii that they who stayed at home began to contribute 
something towards maintaining those who went to war. In the 
European monarchies, which were founded upon the ruins of 
the Roman empire, both before and for some time after the 
establishment of what is properly called the feudal law, the 
great lords, with all their immediate dependants, used to serve 
the crown at their own expense. In the field, in the same 
manner as at home, they maintained themselves by their own 
revenue, and not by any stipend or pay which they received 
from the king upon that particular occasion. 

In a more advanced state of society, two different causes 
contribute to render it altogether impossible that they who take 
the field should maintain themselves at their own expense. 
Those two causes are, the progress of manufactures, and the 
improvement in the art of war. 

Though a husbandman should be employed in an expedition, 
provided it begins after seed-time and ends before harvest, the 
interruption of his business will not always occasion any con 
siderable diminution of his revenue. Without the intervention 
of his labour, nature does herself the greater part of the work 
which remains to be done. But the moment that an artificer, 
a smith, a carpenter, or a weaver, for example, quits his work 
house, the sole source of his revenue is completely dried up. 
Nature does nothing for him, he does all for himself. When 
he takes the field, therefore, in defence of the public, as he has 
no revenue to maintain himself, he must necessarily be main 
tained by the public. But in a country of which a great part 
of the inhabitants are artificers and manufacturers, a great part 
of the people who go to war must be drawn from those classes, 



186 The Wealth of Nations 

and must therefore be maintained by the public as long as they 
are employed in its service. 

When the art of war, too, has gradually grown up to be a very 
intricate and complicated science, when the event of war ceases 
to be determined, as in the first ages of society, by a single 
irregular skirmish or battle, but when the contest is generally 
spun out through several different campaigns, each of which 
lasts during the greater part of the year, it becomes universally 
necessary that the public should maintain those who serve the 
public in war, at least while they are employed in that service. 
Whatever in time of peace might be the ordinary occupation of 
those who go to war, so very tedious and expensive a service 
would otherwise be by far too heavy a burden upon them. 
After the second Persian war, accordingly, the armies of Athens 
seem to have been generally composed of mercenary troops, 
consisting, indeed, partly of citizens, but partly too of foreigners, 
and all of them equally hired and paid at the expense of the 
state. From the time of the siege of Veii, the armies of 
Rome received pay for their service during the time which they 
remained in the field. Under the feudal governments the 
military service both of the great lords and of their immediate 
dependants was, after a certain period, universally exchanged 
for a payment in money, which was employed to maintain those 
who served in their stead. 

The number of those who can go to war, in proportion to the 
whole number of the people, is necessarily much smaller in a 
civilised than in a rude state of society. In a civilised society, 
as the soldiers are maintained altogether by the labour of those 
who are not soldiers, the number of the former can never exceed 
what the latter can maintain, over and above maintaining, in 
a manner suitable to their respective stations, both themselves 
and the other officers of government and law whom they are 
obliged to maintain. In the little agrarian states of ancient 
Greece, a fourth or a fifth part of the whole body of the people 
considered themselves as soldiers, and would sometimes, it is 
said, take the field. Among the civilised nations of modern 
Europe, it is commonly computed that not more than one- 
hundredth part of the inhabitants of any country can be em 
ployed as soldiers without ruin to the country which pays the 
expense of their service. 

The expense of preparing the army for the field seems not to 
have become considerable in any nation till long after that of 
maintaining it in the field had devolved entirely upon the 



The Expenses of the Sovereign 187 

sovereign or commonwealth. In all the different republics of 
ancient Greece, to learn his military exercises was a necessary 
part of education imposed by the state upon every free citizen. 
In every city there seems to have been a public field, in which, 
under the protection of the public magistrate, the young people 
were taught their different exercises by different masters. In 
this very simple institution consisted the whole expense which 
any Grecian state seems ever to have been at in preparing its 
citizens for war. In ancient Rome the exercises of the Campus 
Martius answered the same purpose with those of the Gym 
nasium in ancient Greece. Under the feudal governments, the 
many public ordinances that the citizens of every district should 
practise archery as well as several other military exercises were 
intended for promoting the same purpose, but do not seem to 
have promoted it so well. Either from want of interest in the 
officers entrusted with the execution of those ordinances, or 
from some other cause, they appear to have been universally 
neglected; and in the progress of all those governments, military 
exercises seem to have gone gradually into disuse among the 
great body of the people. 

In the republics of ancient Greece and Rome, during the whole 
period of their existence, and under the feudal governments for 
a considerable time after their first establishment, the trade of a 
soldier was not a separate, distinct trade, which constituted the 
sole or principal occupation of a particular class of citizens. 
Every subject of the state, whatever might be the ordinary 
trade or occupation by which he gained his livelihood, considered 
himself, upon all ordinary occasions, as fit likewise to exercise 
the trade of a soldier, and upon many extraordinary occasions 
as bound to exercise it. 

The art of war, however, as it is certainly the noblest of all 
arts, so in the progress of improvement it necessarily becomes 
one of the most complicated among them. The state of the 
mechanical, as well as of some other arts, with which it is 
necessarily connected, determines the degree of perfection to 
which it is capable of being carried at any particular time. But 
in order to carry it to this degree of perfection, it is necessary 
that it should become the sole or principal occupation of a 
particular class of citizens, and the division of labour is as 
necessary for the improvement of this, as of every other art. Into 
other arts the division of labour is naturally introduced by the 
prudence of individuals, who find that they promote their private 
interest better by confining themselves to a particular trade 



i 88 The Wealth of Nations 

than by exercising a great number. But it is the wisdom of the 
state only which can render the trade of a soldier a particular 
trade separate and distinct from all others. A private citizen 
who, in time of profound peace, and without any particular 
encouragement from the public, should spend the greater part 
of his time in military exercises, might, no doubt, both improve 
himself very much in them, and amuse himself very well ; but 
he certainly would not promote his own interest. It is the 
wisdom of the state only which can render it for his interest 
to give up the greater part of his time to this pec iliar occupation : 
and states have not always had this wisdom, even when their 
circumstances had become such that the preservation of their 
existence required that they should have it. 

A shepherd has a great deal of leisure; a husbandman, in the 
rude state of husbandry, has some; an artificer or manufacturer 
has none at all. The first may, without any loss, employ a 
great deal of his time in martial exercises; the second may 
employ some part of it; but the last cannot employ a single 
hour in them without some loss, and his attention to his own 
interest naturally leads him to neglect them altogether. These 
improvements in husbandry too, which the progress of arts and 
manufactures necessarily introduces, leave the husbandman as 
little leisure as the artificer. Military exercises come to be as 
much neglected by the inhabitants of the country as by those 
of the town, and the great body of the people becomes altogether 
unwarlike. That wealth, at the same time, which always 
follows the improvements of agriculture and manufactures, and 
which in reality is no more than the accumulated produce of 
those improvements, provokes the invasion of all their neigh 
bours. An industrious, and upon that account a wealthy 
nation, is of all nations the most likely to be attacked; and 
unless the state takes some new measures for the public defence, 
the natural habits of the people render them altogether incapable 
of defending themselves. 

In these circumstances there seem to be but two methods 
by which the state can make any tolerable provision for the 
public defence. 

It may either, first, by means of a very rigorous police, and 
in spite of the whole bent of the interest, genius, and inclinations 
of the people, enforce the practice of military exercises, and 
oblige either all the citizens of the military age, or a certain 
number of them, to join in some measure the trade of a soldier to 
whatever other trade or profession they may happen to carry on. 



The Expenses of the Sovereign 189 

Or, secondly, by maintaining and employing a certain number 
of citizens in the constant practice of military exercises, it may 
render the trade of a soldier a particular trade, separate and 
distinct from all others. 

If the state has recourse to the first of those two expedients, 
its military force is said to consist in a militia; if to the second, 
it is said to consist in a standing army. The practice of military 
exercises is the sole or principal occupation of the soldiers of a 
standing army, and the maintenance or pay which the state 
affords them is the principal and ordinary fund of their sub 
sistence. The practice of military exercises is only the occa 
sional occupation of the soldiers of a militia, and they derive 
the principal and ordinary fund of their subsistence from some 
other occupation. In a militia, the character of the labourer, 
artificer, or tradesman, predominates over that of the soldier; 
in a standing army, that of the soldier predominates over every 
other character: and in this distinction seems to consist the 
essential difference between those two different species of 
military force. 

Militias have been of several different kinds. In some countries 
the citizens destined for defending the state seem to have been 
exercised only, without being, if I may say so, regimented; that 
is, without being divided into separate and distinct bodies of 
troops, each of which performed its exercises under its own 
proper and permanent officers. In the republics of ancient 
Greece and Rome, each citizen, as long as he remained at home, 
seems to have practised his exercises either separately and 
independently, or with such of his equals as he liked best, and 
not to have been attached to any particular body of troops 
till he was actually called upon to take the field. In other 
countries, the militia has not only been exercised, but regimented. 
In England, in Switzerland, and, I believe, in every other 
country of modern Europe where any imperfect military force 
of this kind has been established, every militiaman is, even in 
time of peace, attached to a particular body of troops, which 
performs its exercises under its own proper and permanent 
officers. 

Before the invention of firearms, that army was superior in 
which the soldiers had, each individually, the greatest skill and 
dexterity in the use of their arms. Strength and agility of body 
*ere of the highest consequence, and commonly determined the 
state of battles. But this skill and dexterity in the use of their 
arms could be acquired only, in the same manner as fencing is 



igo The Wealth of Nations 

at present, by practising, not in great bodies, but each man 
separately, in a particular school, under a particular master, 
or with his own particular equals and companions. Since the 
invention of firearms, strength and agility of body, or even 
extraordinary dexterity and skill in the use of arms, though 
they are far from being of no consequence, are, however, of less 
consequence. The nature of the weapon, though it by no means 
puts the awkward upon a level with the skilful, puts him more 
nearly so than he ever was before. All the dexterity and skill, 
it is supposed, which are necessary for using it, can be well 
enough acquired by practising in great bodies. 

Regularity, order, and prompt obedience to command are 
qualities which, in modern armies, are of more importance 
towards determining the fate of battles than the dexterity and 
skill of the soldiers in the use of their arms. But the noise of 
firearms, the smoke, and the invisible death to which every 
man feels himself every moment exposed as soon as he comes 
within cannon-shot, and frequently a long time before the battle 
can be well said to be engaged, must render it very difficult to 
maintain any considerable degree of this regularity, order, and 
prompt obedience, even in the beginning of a modern battle. 
In an ancient battle there was no noise but what arose from the 
human voice; there was no smoke, there was no invisible cause 
of wounds or death. Every man, till some mortal weapon 
actually did approach him, saw clearly that no such weapon was 
near him. In these circumstances, and among troops who had 
some confidence in their own skill and dexterity in the use of 
their arms, it must have been a good deal less difficult to 
preserve some degree of regularity and order, not only in the 
beginning, but through the whole progress of an ancient battle, 
and till one of the two armies was fairly defeated. But the 
habits of regularity, order, and prompt obedience to command 
can be acquired only by troops which are exercised in great 
bodies. 

A militia, however, in whatever manner it may be either 
disciplined or exercised, must always be much inferior to a 
well-disciplined and well-exercised standing army. 

The soldiers who are exercised only once a week, or once a 
month, can never be so expert in the use of their arms as those 
who are exercised every day, or every other day ; and though 
this circumstance may not be of so much consequence in modern 
as it was in ancient times, yet the acknowledged superiority of 
the Prussian troops, owing, it is said, very much to their superior 



The Expenses of the Sovereign 191 

expertness in their exercise, may satisfy us that it is, even at this 
day, of very considerable consequence. 

The soldiers who are bound to obey their officer only once a 
week or once a month, and who are at all other times at liberty 
to manage their own affairs their own way, without being in any 
respect accountable to him, can never be under the same awe 
in his presence, can never have the same disposition to ready 
obedience, with those whose whole life and conduct are every 
day directed by him, and who every day even rise and go to 
bed, or at least retire to their quarters, according to his orders. 
In what is called discipline, or in the habit of ready obedience, 
a militia must always be still more inferior to a standing army 
than it may sometimes be in what is called the manual exercise, 
or in the management and use of its arms. But in modern war 
the habit of ready and instant obedience is of much greater 
consequence than a considerable superiority in the management 
of arms. 

Those militias which, like the Tartar or Arab militia, go to 
war under the same chieftains whom they are accustomed to 
obey in peace are by far the best. In respect for their officers, 
in the habit of ready obedience, they approach nearest to 
standing armies. The highland militia, when it served under 
its own chieftains, had some advantage of the same kind. As 
the highlanders, however, were not wandering, but stationary 
shepherds, as they had all a fixed habitation, and were not, in 
peaceable times, accustomed to follow their chieftain from place 
to place, so in time of war they were less willing to follow him 
to any considerable distance, or to continue for any long time 
in the field. When they had acquired any booty they were 
eager to return home, and his authority was seldom sufficient 
to detain them. In point of obedience they were always much 
inferior to what is reported of the Tartars and Arabs. As the 
Highlanders too, from their stationary life, spend less of their 
time in the open air, they were always less accustomed to military 
exercises, and were less expert in the use of their arms than the 
Tartars and Arabs are said to be. 

A militia of any kind, it must be observed, however, which 
has served for several successive campaigns in the field, becomes 
in every respect a standing army. The soldiers are even- day 
exercised in the use of their arms, and, being constantly under 
the command of their officers, are habituated to the same prompt 
obedience which takes place in standing armies. What they 
were before they took the field is of little importance. They 



192 The Wealth of Nations 

necessarily become in every respect a standing army after they 
have passed a few campaigns in it. Should the war in America 
drag out through another campaign, the American militia may 
become in every respect a match for that standing army of which 
the valour appeared, in the last war, at least not inferior to that 
of the hardiest veterans of France and Spain. 

This distinction being well understood, the history of all ages, 
it will be found, bears testimony to the irresistible superiority 
which a well-regulated standing army has over a militia. 

One of the first standing armies of which we have any distinct 
account, in any well-authenticated history, is that of Philip of 
Macedon. His frequent wars with the Thracians, Illyrians, 
Thessalians, and some of the Greek cities in the neighbourhood 
of Macedon, gradually formed his troops, which in the beginning 
were probably militia, to the exact discipline of a standing army. 
When he was at peace, which he was very seldom, and never for 
any long time together, he was careful not to disband that army. 
It vanquished and subdued, after a long and violent struggle, 
indeed, the gallant and well-exercised militias of the principal 
republics of ancient Greece, and afterwards, with very little 
struggle, the effeminate and ill-exercised militia of the great 
Persian empire. The fall of the Greek republics and of the 
Persian empire was the effect of the irresistible superiority which 
a standing army has over every sort of militia. It is the first 
great revolution in the affairs of mankind of which history has 
preserved any distinct or circumstantial account. 

The fall of Carthage, and the consequent elevation of Rome, 
is the second. All the varieties in the fortune of those two 
famous republics may very well be accounted for from the 
same cause. 

From the end of the first to the beginning of the second 
Carthaginian war the armies of Carthage were continually in 
the field, and employed under three great generals, who suc 
ceeded one another in the command: Amilcar, his son-in-law 
Asdrubal, and his son Annibal; first in chastising their own 
rebellious slaves, afterwards in subduing the revolted nations of 
Africa, and, lastly, in conquering the great kingdom of Spain. 
The army which Annibal led from Spain into Italy must neces 
sarily, in those different wars, have been gradually formed to 
the exact discipline of a standing army. The Romans, in the 
meantime, though they had not been altogether at peace, yet 
they had not, during this period, been engaged in any war of 
very great consequence, and their military discipline, it is 



The Expenses of the Sovereign 193 

generally said, was a good deal relaxed. The Roman armies 
which Annibal encountered at Trebia,Thrasymenus,and Cannae 
were militia opposed to a standing army. This circumstance, 
it is probable, contributed more than any other to determine 
the fate of those battles. 

The standing army which Annibal left behind him in Spain 
had the like superiority over the militia which the Romans sent 
to oppose it, and in a few years, under the command of his 
brother, the younger Asdrubal, expelled them almost entirely 
from that country . 

Annibal was ill supplied from home. The Roman militia, 
being continually in the field, became in the progress of the war 
a well-disciplined and well-exercised standing army, and the 
superiority of Annibal grew every day less and less. Asdrubal 
judged it necessary to lead the whole, or almost the whole ol 
the standing army which he commanded in Spain, to the assist 
ance of his brother in Italy. In this march he is said to have 
been misled by his guides, and in a country which he did not 
know, was surprised and attacked by another standing army, 
in every respect equal or superior to his own, and was entirely 
defeated. 

When Asdrubal had left Spain, the great Scipio found nothing 
to oppose him but a militia inferior to his own. He conquered 
and subdued that militia, and, in the course of the war, his own 
militia necess.irily became a well-disciplined and well-exercised 
standing army. That standing army was afterw irds carried to 
Africa, win-re it found nothing but a militia to oppose it. In 
order to defend Carthage it became necessary to recall the 
standing army of Annibal. The disheartened and frequently 
defeated African militia joined it, and, at the battle of Zama, 
composed the greater part of the troops of Annibal. The event 
of that day determined the fate of the two rival republics. 

From the end of the second Carthaginian war till the fall of 
the Roman republic, the armies of Rome were in every respect 
standing armies. The standing army of Macedon made some 
resistance to their arms. In the height of their grandeur it 
cost them two great wars, and three great battles, to subdue 
that little kingdom, of which the conquest would probably 
have been still more difficult had it not been for the cowardice 
of its last king. The militias of all the civilised nations of the 
annent world, of Greece, of Syria, and of Egypt, made but a 
feeble resistance to the standing armies of Rome. The militias 
of some barbarous nations defended themselves much better. 



194 The Wealth of Nations 

The Scythian or Tartar militia, which Mithridates drew from 
the countries north of the Euxine and Caspian seas, were the 
most formidable enemies whom the Romans had to encounter 
after the second Carthaginian war. The Parthian and German 
militias, too, were always respectable, and upon several occasions 
gained very considerable advantages over the Roman armies. 
In general, however, and when the Roman armies were well 
commanded, they appear to have been very much superior; 
and if the Romans did not pursue the final conquest either of 
Parthia or Germany, it was probably because they judged that 
it was not worth while to add those two barbarous countries to 
an empire which was already too large. The ancient Parthians 
appear to have been a nation of Scythian or Tartar extraction, 
and to have always retained a good deal of the manners of their 
ancestors. The ancient Germans were, like the Scythians or 
Tartars, a nation of wandering shepherds, who went to war 
under the same chiefs whom they were accustomed to follow in 
peace. Their militia was exactly of the same kind with that of 
the Scythians or Tartars, from whom, too, they were probably 
descended. 

Many different causes contributed to relax the discipline of 
the Roman armies. Its extreme severity was, perhaps, one of 
those causes. In the days of their grandeur, when no enemy 
appeared capable of opposing them, their heavy armour was 
laid aside as unnecessarily burdensome, their laborious exercises 
were neglected as unnecessarily toilsome. Under the Roman 
emperors, besides, the standing armies of Rome, those particularly 
which guarded the German and Pannonian frontiers, became 
dangerous to their masters, against whom they used frequently 
to set up their own generals. In order to render them less 
formidable, according to some authors, Dioclesian, according 
to others, Constantine, first withdrew them from the frontier, 
where they had always before been encamped in great bodies, 
generally of two or three legions each, and dispersed them in 
small bodies through the different provincial towns, from whence 
they were scarce ever removed but when it became necessary 
to repel an invasion. Small bodies of soldiers quartered in 
trading and manufacturing towns, and seldom removed from 
those quarters, became themselves tradesmen, artificers, and 
manufacturers. The civil came to predominate over the military 
character, and the standing armies of Rome gradually de 
generated into a corrupt, neglected, and undisciplined militia, 
incapable of resisting the attack of the German and Scythian 



The Expenses of the Sovereign 195 

militias, which soon afterwards invaded the western empire. 
It was only by hiring the militia of some of those nations to 
oppose to that of others that the emperors were for some time 
able to defend themselves. The fall of the western empire is 
the third great revolution in the affairs of mankind of which 
ancient history has preserved any distinct or circumstantial 
account. It was brought about by the irresistible superiority 
which the militia of a barbarous has over that of a civilised 
nation; which the militia of a nation of shepherds has over 
that of a nation of husbandmen, artificers, and manufacturers. 
The victories which have been gained by militias have generally 
been, not over standing armies, but over other militias in 
exercise and discipline inferior to themselves. Such were the 
victories which the Greek militia gained over that of the Persian 
empire; and such too were those which in later times the Swiss 
militia gained over that of the Austrians and Burgundians. 

The military force of the German and Scythian nations who 
established themselves upon the ruins of the western empire 
continued for some time to be of the same kind in their new 
settlements as it had been in their original country. It was a 
militia of shepherds and husbandmen, which, in time of war, 
took the field under the command of the same chieftains whom 
it was accustomed to obey in peace. It was, therefore, tolerably 
well exercised, and tolerably well disciplined. As arts and 
industry advanced, however, the authority of the chieftains 
gradually decayed, and the great body of the people had less 
time to spare for military exercises. Both the discipline and 
the exercise of the feudal militia, therefore, went gradually 
to ruin, and standing armies were gradually introduced to 
supply the place of it. When the expedient of a standing army, 
besides, had once been adopted by one civilised nation, it became 
necessary that all its neighbours should follow the example. 
They soon found that their safety depended upon their doing so, 
and that their own militia was altogether incapable of resisting 
the attack of such an army. 

The soldiers of a standing army, though they may never 
have seen an enemy, yet have frequently appeared to possess all 
the courage of veteran troops, and the very moment that they 
took the field to have been fit to face the hardiest and most 
experienced veterans. In 1756, when the Russian army marched 
into Poland, the valour of the Russian soldiers did not appear 
inferior to that of the Prussians, at that time supposed to be the 
hardiest and most experienced veterans in Europe. The Russian 

*G4 3 



196 The Wealth of Nations 

empire, however, had enjoyed a profound peace for near twenty 
years before, and could at that time have very few soldiers who 
had ever seen an enemy. When the Spanish war broke out in 
1739, England had enjoyed a profound peace for about eight- 
and-twenty years. The valour of her soldiers, however, far 
from being corrupted by that long peace, was never more 
distinguished than in the attempt upon Carthagena, the first 
unfortunate exploit of that unfortunate war. In a long peace 
the generals, perhaps, may sometimes forget their skill; but, 
where a well-regulated standing army has been kept up, the 
soldiers seem never to forget their valour. 

When a civilised nation depends for its defence upon a militia, 
it is at all times exposed to be conquered by any barbarous 
nation which happens to be in its neighbourhood The frequent 
conquests of all the civilised countries in Asia by the Tartars 
sufficiently demonstrates the natural superiority which the 
militia of a barbarous has over that of a civilised nation. A 
well-regulated standing army is superior to every militia. Such 
an army, as it can best be maintained by an opulent and 
civilised nation, so it can alone defend such a nation against the 
invasion of a poor and barbarous neighbour. It is only by 
means of a standing army, therefore, that the civilisation of 
any country can be perpetuated, or even preserved for any 
considerable time. 

As it is only by means of a well-regulated standing army 
that a civilised country can be defended, so it is only by means 
of it that a barbarous country can be suddenly and tolerably 
civilised. A standing army establishes, with an irresistible 
force, the law of the sovereign through the remotest provinces 
of the empire, and maintains some degree of regular government 
in countries which could not otherwise admit of any. Whoever 
examines, with attention, the improvements which Peter the 
Great introduced into the Russian empire, will find that they 
almost all resolve themselves into the establishment of a well- 
regulated standing army. It is the instrument which executes 
and maintains all his other regulations. That degree of order 
and internal peace which that empire has ever since enjoyed 
is altogether owing to the influence of that army. 

Men of republican principles have been jealous of a standing 
army as dangerous to liberty. It certainly is so wherever the 
interest of the general and that of the principal officers are not 
necessarily connected with the support of the constitution of 
the state. The standing army of Caesar destroyed the Roman 



The Expenses of the Sovereign 197 

republic. The standing army of Cromwell turned the Long 
Parliament out of doors. But where the sovereign is himself 
the general, and the principal nobility and gentry of the country 
the chief officers of the army, where the military force is placed 
under the command of those who have the greatest interest in 
the support of the civil authority, because they have them 
selves the greatest share of that authority, a standing army can 
never be dangerous to liberty. On the contrary, it may in some 
cases be favourable to liberty. The security which it gives to 
the sovereign renders unnecessary that troublesome jealousy, 
which, in some modern republics, seems to watch over the 
minutest actions, and to be at all times ready to disturb the 
peace of every citizen. Where the security of the magistrate, 
though supported by the principal people of the country, is 
endangered by every popular discontent; where a small tumult 
is capable of bringing about in a few hours a great revolution, 
the whole authority of government must be employed to 
suppress and punish every murmur and complaint against it. 
To a sovereign, on the contrary, who feels himself supported, 
not only by the natural aristocracy of the country, but by a 
well-regulated standing army, the rudest, the most groundless, 
and the most licentious remonstrances can give little dis 
turbance, lie can safely pardon or neglect them, and his con 
sciousness of his own superiority naturally disposes him to do 
so. That degree of liberty which approaches to licentiousness 
can be tolerated only in countries where the sovereign is secured 
by a well-regulated standing army. It is in such countries only 
that the public safety does not require that the sovereign should 
be trusted with any discretionary power for suppressing even 
the impertinent wantonness of this licentious liberty. 

The first duty of the sovereign, therefore, that of defending 
the society from the violence and injustice of other independent 
societies, grows gradually more and more expensive as the 
society advances in civilisation. The military force of the 
society, which originally cost the sovereign no expense either 
in time of peace or in time of war, must, in the progress of 
improvement, first be maintained by him in time of war, and 
afterwards even in time of peace. 

The great change introduced into the art of war by the 
invention of firearms has enhanced still further both the 
expense of exercising and disciplining any particular number 
of soldiers in time of peace, and that of employing them in time 
of war. Both their arms and their ammunition are become 



198 The Wealth of Nations 

more expensive. A musket is a more expensive machine than 
a javelin or a bow and arrows; a cannon or a mortar than a 
balista or a catapulta. The powder which is spent in a modern 
review is lost irrecoverably, and occasions a very considerable 
expense. The javelins and arrows which were thrown or shot in 
an ancient one could easily be picked up again, and were besides 
of very little value. The cannon and the mortar are not only 
much dearer, but much heavier machines than the balista or 
catapulta, and require a greater expense, not only to prepare 
them for the field, but to carry them to it. As the superiority 
of the modern artillery too over that of the ancients is very 
great, it has become much more difficult, and consequently 
much more expensive, to fortify a town so as to resist even for 
a few weeks the attack of that superior artillery. In modern 
times many different causes contribute to render the defence of 
the society more expensive. The unavoidable effects of the 
natural progress of improvement have, in this respect, been a 
good deal enhanced by a great revolution in the art of war, to 
which a mere accident, the invention of gunpowder, seems to 
have given occasion. 

In modern war the great expense of firearms gives an evident 
advantage to the nation which can best afford that expense, 
and consequently to an opulent and civilised over a poor and 
barbarous nation. In ancient times the opulent and civilised 
found it difficult to defend themselves against the poor and 
barbarous nations. In modern times the poor and barbarous 
find it difficult to defend themselves against the opulent and 
civilised. The invention of firearms, an invention which at 
first sight appears to be so pernicious, is certainly favourable 
both to the permanency and to the extension of civilisation. 



PART II 
Of the Expense of Justice 

The second duty of the sovereign, that of protecting, as far as 
possible, every member of the society from the injustice or 
oppression of every other member of it, or the duty of estab 
lishing an exact administration of justice, requires, too, very 
different degrees of expense in the different periods of society. 

Among nations of hunters, as there is scarce any property, 
or at least none that exceeds the value of two or three days 
labour, so there is seldom any established magistrate or any 



The Expenses of the Sovereign 199 

regular administration of justice. Men who have no property 
can injure one another only in their persons or reputations. 
But when one man kills, wounds, beats, or defames another, 
though he to whom the injury is done suffers, he who does it 
receives no benefit. It is otherwise with the injuries to property. 
The benefit of the person who does the injury is often equal to 
the loss of him who suffers it. Envy, malice, or resentment 
are the only passions which can prompt one man to injure 
another in his person or reputation. But the greater part of 
men are not very frequently under the influence of those passions, 
and the very worst men are so only occasionally. As their 
gratification too, how agreeable soever it may be to certain 
characters, is not attended with any real or permanent advan 
tage, it is in the greater part of men commonly restrained by 
prudential considerations. Men may live together in society 
with some tolerable degree of security, though there is no civil 
magistrate to protect them from the injustice of those passions. 
But avarice and ambition in the rich, in the poor the hatred of 
labour and the love of present ease and enjoyment, are the 
passions which prompt to invade property, passions much more- 
steady in their operation, and much more universal in their 
influence. Wherever there is great property there is great in 
equality. For one very rich man there must be at least five 
hundred poor, and the affluence of the few supposes the indigence 
of the many. The affluence of the rich excites the indignation 
of the poor, who are often both driven by want, and prompted 
by envy, to invade his possessions. It is only under the shelter 
of the civil magistrate that the owner of that valuable property, 
which is acquired by the labour of many years, or perhaps of 
many successive generations, can sleep a single night in security. 
He is at all times surrounded by unknown enemies, whom, though 
he never provoked, he can never appease, and from whose 
injustice he can be protected only by the powerful arm of the 
civil magistrate continually held up to chastise it. The acquisi 
tion of valuable and extensive pro|>crty, therefore, necessarily 
requires the establishment of civil government. Where there 
is no property, or at least none that exceeds the value of two 
or three days labour, civil government is not so necessary. 

Civil government supposes a certain subordination. But as 
the necessity of civil government gradually grows up with the 
acquisition of valuable property, so the principal causes which 
naturally introduce subordination gradually grow up with the 
growth of that valuable property. 



200 The Wealth of Nations 

The causes or circumstances which naturally introduce sub 
ordination, or which naturally, and antecedent to any civil 
institution, give some men some superiority over the greater 
part of their brethren, seem to be four in number. 

The first of those causes or circumstances is the superiority 
of personal qualifications, of strength, beauty, and agility of 
body; of wisdom and virtue, of prudence, justice, fortitude, 
and moderation of mind. The qualifications of the body, unless 
supported by those of the mind, can give little authority in any 
period of society. He is a very strong man, who, by mere 
strength of body, can force two weak ones to obey him. The 
qualifications of the mind can alone give very great authority. 
They are, however, invisible qualities; al vays disputable, and 
generally disputed. No society, whether barbarous or civilised, 
has ever found it convenient to settle the rules of precedency of 
rank and subordination according to those invisible qualities; 
but according to something that is more plain and palpable. 

The second of those causes or circumstances is the superiority 
of age. An old man, provided his age is not so far advanced 
as to give suspicion of dotage, is everywhere more respected than 
a young man of equal rank, fortune, and abilities. Among 
nations of hunters, such as the native tribes of North America, 
age is the sole foundation of rank and precedency. Among 
them, father is the appellation of a superior ; brother, of an equal ; 
and son, of an inferior. In the most opulent and civilised nations, 
age regulates rank among those who are in every other respect 
equal, and among whom, therefore, there is nothing else to 
regulate it. Among brothers and among sisters, the eldest 
always take place; and in the succession of the paternal estate 
everything which cannot be divided, but must go entire to one 
person, such as a title of honour, is in most cases given to the 
eldest. Age is a plain and palpable quality which admits of no 
dispute. 

The third of those causes or circumstances is the superiority 
of fortune. The authority of riches, however, though great in 
every age of society, is perhaps greatest in the rudest age of 
society which admits of any considerable inequality of fortune. 
A Tartar chief, the increase of whose herds and stocks is suffi 
cient to maintain a thousand men, cannot well employ that 
increase in any other way than in maintaining a thousand men. 
The rude state of his society does not afford him any manu 
factured produce, any trinkets or baubles of any kind, for which 
he can exchange that part of his rude produce which is over 



The Expenses of the Sovereign 201 

and above his own consumption. The thousand men whom he 
thus maintains, depending entirely upon him for their subsist 
ence, must both obey his orders in war, and submit to his 
jurisdiction in peace. He is necessarily both their general and 
their judge, and his chieftainship is the necessary effect of the 
superiority of his fortune. In an opulent and civilised society, 
a man may possess a much greater fortune and yet not be able 
to command a dozen of people. Though the produce of his 
estate may be sufficient to maintain, and may perhaps actually 
maintain, more than a thousand people, yet as those people 
pay for everything which they get from him, as he gives scarce 
anything to anybody but in exchange for an equivalent, there 
is scarce anybody who considers himself as entirely dependent 
upon him, and his authority extends only over a few menial 
servants. The authority of fortune, however, is very great 
even in an opulent and civilised society. That it is much greater 
than that either of age or of personal qualities has been the 
constant complaint of every period of society which admitted 
of any considerable inequality of fortune. The first period of 
society, that of hunters, admits of no such inequality. Uni 
versal poverty establishes their universal equality, and the 
superiority either of age or of personal qualities are the feeble 
but the sole foundations of authority and subordination. There 
is therefore little or no authority or subordination in this period 
of society. The second period of society, that of shepherds, 
admits of very great inequalities of fortune, and there is no 
period in which the superiority of fortune gives so great authority 
to those who possess it. There is no period accordingly in 
which authority and subordination are more perfectly estab 
lished. The authority of an Arabian sherif is very great; that 
of a Tartar khan altogether despotical. 

The fourth of those causes or circumstances is the superiority 
of birth. Superiority of birth supposes an ancient superiority 
of fortune in the family of the person who claims it. All 
families are equally ancient; and the ancestors of the prince, 
though they may be better known, cannot well be more numerous 
than those of the beggar. Antiquity of family means every 
where the antiquity either of wealth, or of that greatness which 
is commonly either founded upon wealth, or accompanied with 
it. Upstart greatness is everywhere less respected than ancient 
greatness. The hatred of usurpers, the love of the family of an 
ancient monarch, are, in a great measure, founded upon the 
contempt which men naturally have for the former, and upon 



2O2 The Wealth of Nations 

their veneration for the latter. As a military officer submits 
without reluctance to the authority of a superior by whom he 
has always been commanded, but cannot bear that his inferior 
should be set over his head, so men easily submit to a family 
to whom they and their ancestors have always submitted; but 
are fired with indignation when another family, in whom they 
had never acknowledged any such superiority, assumes a 
dominion over them. 

The distinction of birth, being subsequent to the inequality 
of fortune, can have no place in nations of hunters, among whom 
all men, being equal in fortune, must likewise be very nearly 
equal in birth. The son of a wise and brave man may, indeed, 
even among them, be somewhat more respected than a man of 
equal merit who has the misfortune to be the son of a fool or 
a coward. The difference, however, will not be very great ; and 
there never was, I believe, a great family in the world whose 
illustration was entirely derived from the inheritance of wisdom 
and virtue. 

The distinction of birth not only may, but always does take 
place among nations of shepherds. Such nations are always 
strangers to every sort of luxury, and great wealth can scarce 
ever be dissipated among them by improvident profusion. 
There are no nations accordingly who abound more in families 
revered and honoured on account of their descent from a long 
race of great and illustrious ancestors, because there are no 
nations among whom wealth is likely to continue longer in the 
same families. 

Birth and fortune are evidently the two circumstances which 
principally set one man above another. They are the two great 
sources of personal distinction, and are therefore the principal 
causes which naturally establish authority and subordination 
among men. Among nations of shepherds both those causes 
operate with their full force. The great shepherd or herdsman, 
respected on account of his great wealth, and of the great 
number of those who depend upon him for subsistence, and 
revered on account of the nobleness of his birth, and of the 
immemorial antiquity of his illustrious family, has a natural 
authority over all the inferior shepherds or herdsmen of his 
horde or clan. He can command the united force of a greater 
number of people than any of them. His military power is 
greater than that of any of them. In time of war they are all 
of them naturally disposed to muster themselves under his 
banner, rather than under that of any other person, and his 



The Expenses of the Sovereign 203 

birth and fortune thus naturally procure to him some sort of 
executive power. By commanding, too, the united force of a 
greater number of people than any of them, he is best able to 
rompel any one of them who may have injured another to com 
pensate the wrong. He is the person, therefore, to whom all 
those who are too weak to defend themselves naturally look up 
for protection. It is to him that they naturally complain of the 
injuries which they imagine have been done to them, and his 
interposition in such cases is more easily submitted to, even by 
the person complained of, than that of any other person would 
be. His birth and fortune thus naturally procure him some 
sort of judicial authority. 

It is in the age of shepherds, in the second period of society, 
that the inequality of fortune first begins to take place, and 
introduces among men a degree of authority and subordination 
which could not possibly exist before. It thereby introduces 
some degree of that civil government which is indispensably 
necessary for its own preservation: and it seems to do this 
naturally, and even independent of the consideration of that 
necessity. The consideration of that necessity comes no doubt 
afterwards to contribute very much to maintain and secure that 
authority and subordination. The rich, in particular, are neces 
sarily interested to support that order of things which can alone 
secure them in the possession of their own advantages. Men of 
inferior wealth combine to defend those of superior wealth in 
the possession of their property, in order that men of superior 
wealth may combine to defend them in the possession of theirs. 
All the inferior shepherds and herdsmen feel that the security 
of their own herds and flocks depends upon the security of those 
of the great shepherd or herdsman; that the maintenance of 
their lesser authority depends upon that of his greater authority, 
and that upon their subordination to him depends his power of 
keeping their inferiors in subordination to them. They con 
stitute a sort of little nobility, who feel themselves interested to 
defend the property and to support the authority of their own 
little sovereign, in order that he may be able to defend their 
property and to support their authority. Civil government, so 
far as it is instituted for the security of property, is in reality in 
stituted for the defence of the rich against the poor, or of those 
who have some property against those who have none at all. 

The judicial authority of such a sovereign, however, far from 
beintr a cause of expense, was for a long time a source of revenue 
to him. The persons who applied to him for justice were 



204 The Wealth of Nations 

always willing to pay for it, and a present never failed to 
accompany a petition. After the authority of the sovereign, too, 
was thoroughly established, the person found guilty, over and 
above the satisfaction which he was obliged to make to the 
party, was likewise forced to pay an amercement to the sove 
reign. He had given trouble, he had disturbed, he had broke 
the peace of his lord the king, and for those offences an amerce 
ment was thought due. In the Tartar governments of Asia, in 
the governments of Europe which were founded by the German 
and Scythian nations who overturned the Roman empire, the 
administration of justice was a considerable source of revenue, 
both to the sovereign and to all the lesser chiefs or lords who 
exercised under him any particular jurisdiction, either over 
some particular tribe or clan, or over some particular territory 
or district. Originally both the sovereign and the inferior chiefs 
used to exercise this jurisdiction in their own persons. After 
wards they universally found it convenient to delegate it to 
some substitute, bailiff, or judge. This substitute, however, was 
still obliged to account to his principal or constituent for the 
profits of the jurisdiction. Whoever reads the 1 instructions 
which were given to the judges of the circuit in the time of 
Henry II. will see clearly that those judges were a sort of 
itinerant factors, sent round the country for the purpose of 
levying certain branches of the king s revenue. In those days 
the administration of justice not only afforded a certain revenue 
to the sovereign, but to procure this revenue seems to have been 
one of the principal advantages which he proposed to obtain by 
the administration of justice. 

This scheme of making the administration of justice sub 
servient to the purposes of revenue could scarce fail to be pro 
ductive of several very gross abuses. The person who applied 
for justice with a large present in his hand was likely to get 
something more than justice; while he who applied for it with 
a small one was likely to get something less. Justice, too, might 
frequently be delayed in order that this present might be 
repeated. The amercement, besides, of the person complained 
of, might frequently suggest a very strong reason for finding 
him in the wrong, even when he had not really been so. That 
such abuses were far from being uncommon the ancient history 
of every country in Europe bears witness. 

When the sovereign or chief exercised his judicial authority 
in his own person, how much soever he might abuse it, it must 
1 They are to be found in Tyrrell s History of England. 



The Expenses of the Sovereign 205 

have been scarce possible to get any redress, because there 
could seldom be anybody powerful enough to call him to 
account. When he exercised it by a bailifT, indeed, redress 
might sometimes be had. If it was for his own benefit only 
that the bailifT had been guilty of any act of injustice, the 
sovereign himself might not always be unwilling to punish him, 
or to oblige him to repair the wrong. But if it was for the 
benefit of his sovereign, if it was in order to make court to the 
person who appointed him and who might prefer him, that he 
had committed any act of oppression, redress would upon most 
occasions be as impossible as if the sovereign had committed 
it himself. In all barbarous governments, accordingly, in all 
those ancient governments of Europe in particular which were 
founded upon the ruins of the Roman empire, the administration 
of justice appears for a long time to have been extremely 
corrupt, far from being quite equal and impartial even under the 
best monarchs, and altogether profligate under the worst. 

Among nations of shepherds, where the sovereign or chief is 
only the greatest shepherd or herdsman of the horde or clan, he 
is maintained in the same manner as any of his vassals or 
subjects, by the increase of his own herds or flocks. Among 
those nations of husbandmen who are but just come out of the 
shepherd state, and who are not much advanced beyond that 
state, such as the Greek tribes appear to have been about the 
time of the Trojan war, and our German and Scythian ancestors 
when they first settled upon the ruins of the western empire, 
the sovereign or chief is, in the same manner, only the greatest 
landlord of the country, and is maintained, in the same manner 
as any other landlord, by a revenue derived from his own 
private estate, or from what, in modern Europe, was called the 
demesne of the crown. His subjects, upon ordinary occasions, 
contribute nothing to his support, except when, in order to pro 
tect them from the oppression of some of their fellow-subjects, 
they stand in need of his authority. The presents which they 
make him upon such occasions constitute the whole ordinary 
revenue, the whole of the emoluments which, except perhaps 
upon some very extraordinary emergencies, he derives from 
his dominion over them. When Agamemnon, in Homer, offers 
to Achilles for his friendship the sovereignty of seven Greek 
cities, the sole advantage which he mentions as likely to be 
derived from it was that the people would honour him with 
presents. As long as such presents, as long as the emoluments 
of justice, or what may be called the fees of court, constituted 



2o6 The Wealth of Nations 

in this manner the whole ordinary revenue which the sovereign 
derived from his sovereignty, it could not well be expected, it 
could not even decently be proposed, that he should give them 
up altogether. It might, and it frequently was proposed, that 
he should regulate and ascertain them. But after they had 
been so regulated and ascertained, how to hinder a person who 
was all-powerful from extending them beyond those regulations 
was still very difficult, not to say impossible. During the con 
tinuance of this state of things, therefore, the corruption of 
justice, naturally resulting from the arbitrary and uncertain 
nature of those presents, scarce admitted of any effectual 
remedy. 

But when from different causes, chiefly from the continually 
increasing expense of defending the nation against the invasion 
of other nations, the private estate of the sovereign had become 
altogether insufficient for defraying the expense of the sove 
reignty, and when it had become necessary that the people 
should, for their own security, contribute towards this expense 
by taxes of different kinds, it seems to have been very commonly 
stipulated that no present for the administration of justice 
should, under any pretence, be accepted either by the sovereign, 
or by his bailiffs and substitutes, the judges. Those presents, it 
seems to have been supposed, could more easily be abolished 
altogether than effectually regulated and ascertained. Fixed 
salaries were appointed to the judges, which were supposed to 
compensate to them the loss of whatever might have been their 
share of the ancient emoluments of justice, as the taxes more 
than compensated to the sovereign the loss of his. Justice was 
then said to be administered gratis. 

Justice, however, never was in reality administered gratis in 
any country. Lawyers and attorneys, at least, must always be 
paid by the parties ; and, if they were not, they would perform 
their duty still worse than they actually perform it. The fees 
annually paid to lawyers and attorneys amount, in every court, 
to a much greater sum than the salaries of the judges. The 
circumstance of those salaries being paid by the crown can 
nowhere much diminish the necessary expense of a law-suit. 
But it was not so much to diminish the expense, as to prevent 
the corruption of justice, that the judges were prohibited from 
receiving any present or fee from the parties. 

The office of judge is in itself so very honourable that men 
are willing to accept of it, though accompanied with very small 
emoluments. The inferior office of justice of peace, though 



The Expenses of the Sovereign 207 

attended with a good deal of trouble, and in most cases with 
no emoluments at all, is an object of ambition to the greater 
part of our country gentlemen. The salaries of all the different 
judges, high and low, together with the whole expense of the 
administration and execution of justice, even where it is not 
managed with very good economy, makes, in any civilised 
country, but a very inconsiderable part of the whole expense of 
government. 

The whole expense of justice, too, might easily be defrayed by 
the fees of court; and, without exposing the administration of 
justice to any real hazard of corruption, the public revenue 
might thus be entirely discharged from a certain, though, per 
haps, but a small incumbrance. It is difficult to regulate the 
fees of court effectually where a person so powerful as the 
sovereign is to share in them, and to derive any considerable 
part of his revenue from them. It is very easy where the judge 
is the principal person who can reap any benefit from them. 
The law can very easily oblige the judge to respect the regula 
tion, though it might not always be able to make the sovereign 
respect it. Where the fees of court are precisely regulated and 
ascertained, where they are paid all at once, at a certain period 
of every process, into the hands of a cashier or receiver, to be 
by him distributed in certain known proportions among the 
different judges after the process is decided, and not till it is 
decided, there seems to be no more danger of corruption than 
where such fees are prohibited altogether. Those fees, without 
occasioning any considerable increase in the expense of a law 
suit, might be rendered fully sufficient for defraying the whole 
expense of justice. By not being paid to the judges till the 
process was determined, they might be some incitement to the 
diligence of the court in examining and deciding it. In courts 
which consisted of a considerable number of judges, by propor 
tioning the share of each judge to the number of hours and days 
which he had employed in examining the process, either in the 
court or in a committee by order of the court, those fees might 
give some encouragement to the diligence of each particular 
judge. Public services are never better performed than when 
their reward comes only in consequence of their being performed, 
and is proportioned to the diligence employed in performing 
them. In the different parliaments of France, the fees of court 
(called Epices and vacations) constitute the far greater part of 
the emoluments of the judges. After all deductions are made, 
the net salary paid by the crown to a counsellor or judge in 



208 The Wealth of Nations 

the parliament of Toulouse, in rank and dignity the second 
parliament of the kingdom, amounts only to a hundred and 
fifty livres, about six pounds eleven shillings sterling a year. 
About seven years ago that sum was in the same place the 
ordinary yearly wages of a common footman. The distribution 
of those Epices, too, is according to the diligence of the judges. 
A diligent judge gains a comfortable, though moderate, revenue 
by his office: an idle one gets little more than his salary. 
Those parliaments are perhaps, in many respects, not very con 
venient courts of justice; but they have never been accused, 
they seem never even to have been suspected, of corrup 
tion. 

The fees of court seem originally to have been the principal 
support of the different courts of justice in England. Each 
court endeavoured to draw to itself as much business as it 
could, and was, upon that account, willing to take cognisance 
of many suits which were not originally intended to fall under 
its jurisdiction. The court of king s bench, instituted for the 
trial of criminal causes only, took cognisance of civil suits; the 
plaintiff pretending that the defendant, in not doing him justice, 
had been guilty of some trespass or misdemeanour. The court 
of exchequer, instituted for the levying of the king s revenue, 
and for enforcing the payment of such debts only as were due 
to the king, took cognisance of all other contract debts; the 
plaintiff alleging that he could not pay the king because the 
defendant would not pay him. In consequence of such fictions 
it came, in many cases, to depend altogether upon the parties 
before what court they would choose to have their cause tried; 
and each court endeavoured, by superior dispatch and im 
partiality, to draw to itself as many causes as it could. The 
present admirable constitution of the courts of justice in Eng 
land was, perhaps, originally in a great measure formed by this 
emulation which anciently took place between their respective 
judges; each judge endeavouring to give, in his own court, the 
speediest and most effectual remedy which the law would admit 
for every sort of injustice. Originally the courts of law gave 
damages only for breach of contract. The court of chancery, 
as a court of conscience, first took upon it to enforce the specific 
performance of agreements. When the breach of contract 
consisted in the non-payment of money, the damage sustained 
could be compensated in no other way than by ordering pay 
ment, which was equivalent to a specific performance of the 
agreement. In such cases, therefore, the remedy of the courts 



The Expenses of the Sovereign 209 

of law was sufficient. It was not so in others. When the 
tenant sued his lord for having unjustly outed him of his lease, 
the damages which he recovered were by no means equivalent 
to the possession of the land. Such causes, therefore, for some 
time, went all to the court of chancery, to the no small loss of 
the courts of law. It was to draw back such causes to them 
selves that the courts of law are said to have invented the 
artificial and fictitious writ of ejectment, the most effectual 
remedy for an unjust outer or dispossession of land. 

A stamp-duty upon the law proceedings of each particular 
court, to be levied by that court, and applied towards the 
maintenance of the judges and other officers belonging to it, 
might, in the same manner, afford a revenue sufficient for de 
fraying the expense of the administration of justice, without 
bringing any burden upon the general revenue of the society. 
The judges indeed might, in this case, be under the temptation 
of multiplying unnecessarily the proceedings upon every cause, 
in order to increase, as much as possible, the produce of such a 
stamp-duty. It has been the custom in modern Europe to 
regulate, upon most occasions, the payment of the attorneys and 
clerks of court according to the number of pages which they 
had occasion to write; the court, however, requiring that each 
page should contain so many lines, and each line so many 
words. In order to increase their payment, the attorneys and 
clerks have contrived to multiply words beyond all necessity, to 
the corruption of the aw language of, I believe, every court of 
justice in Europe. A like temptation might perhaps occasion 
a like corruption in the form of law proceedings. 

But whether the administration of justice be so contrived as 
to defray its own expense, or whether the judges be maintained 
by fixed salaries paid to them from some other fund, it does 
not seem necessary that the person or persons entrusted with 
the executive power should be charged with the management of 
that fund, or with the payment of those salaries. That fund 
might arise from the r-ent of landed estates, the management of 
each estate being entrusted to the particular court which was 
to be maintained by it. That fund might arise even from the 
interest of a sum of money, the lending out of which might, in 
the same manner, be entrusted to the court which was to be 
maintained by it. A part, though indeed but a small part, of 
the salary of the judges of the court of session in Scotland 
arises from the interest of a sum of money. The necessary 
instability of such a fund seems, however, to render it an 



2io The Wealth of Nations 

improper one for the maintenance of an institution which ought 
to last for ever. 

The separation of the judicial from the executive power seems 
originally to have arisen from the increasing business of the 
society, in consequence of its increasing improvement. The 
administration of justice became so laborious and so complicated 
a duty as to require the undivided attention of the persons to 
whom it was entrusted. The person entrusted with the execu 
tive power not having leisure to attend to the decision of 
private causes himself, a deputy was appointed to decide them 
in his stead. In the progress of the Roman greatness, the consul 
was too much occupied with the political affairs of the state 
to attend to the administration of justice. A pnetor, therefore, 
was appointed to administer it in his stead. In the progress of 
the European monarchies which were founded upon the ruins 
of the Roman empire, the sovereigns and the great lords came 
universally to consider the administration of justice as an office 
both too laborious and too ignoble for them to execute in their 
own persons. They universally, therefore, discharged them 
selves of it by appointing a deputy, bailiff, or judge. 

When the judicial is united to the executive power, it is scarce 
possible that justice should not frequently be sacrificed to what 
is vulgarly called politics. The persons entrusted with the great 
interests of the state may, even without any corrupt views, 
sometimes imagine it necessary to sacrifice to those interests the 
rights of a private man. But upon the impartial administration 
of justice depends the liberty of every individual, the sense which 
he has of his own security. In order to make every individual 
feel himself perfectly secure in the possession of every right which 
belongs to him, it is not only necessary that the judicial should 
be separated from the executive power, but that it should be 
rendered as much as possible independent of that power. The 
judge should not be liable to be removed from his office accord 
ing to the caprice of that power. The regular payment of his 
salary should not depend upon the good-will or even upon the 
good economy of that power. 

PART III 
Of the Expense of Public Works and Public Institutions 

The third and last duty of the sovereign or commonwealth is 
that of erecting and maintaining those public institutions and 
those public works, which, though they may be in the highest 



The Expenses of the Sovereign 21 i 

degree advantageous to a great society, are, however, of such 
a nature that the profit could never repay the expense to any 
individual or small number of individuals, and which it there 
fore cannot be expected that any individual or small number 
of individuals should erect or maintain. The performance of 
this duty requires, too, very different degrees of expense in the 
different periods of society. 

After the public institutions and public works necessary for 
the defence of the society, and for the administration of justice, 
both of which have already been mentioned, the other works 
and institutions of this kind are chiefly those for facilitating 
the commerce of the society, and those for promoting the 
instruction of the people. The institutions for instruction are 
of two kinds: those for the education of the youth, and those 
for the instruction of people of all ages. The consideration ot 
the manner in which the expense of those different sorts of 
public works and institutions may be most properly defrayed 
will divide this third part of the present chapter into three 
different articles. 

ARTICLE I 

Of the Public Works and Institutions for facilitating 
the Commerce of the Society 

And, first, of those which are necessary for facilitating 
Commerce in general 

That the erection and maintenance of the public works which 
facilitate the commerce of any country, such as good roads, 
bridges, navigable canals, harbours, etc., must require very 
different degrees of expense in the different periods of society 
is evident without any proof. The expense of making and 
maintaining the public roads of any country must evidently 
increase \sith the annual produce of the land and labour of that 
country, or with the quantity and weight of the goods which it 
becomes necessary to fetch and carry upon those roads. The 
strength of a bridge must be suited to the number and weight 
of the carriages which are likely to pass over it. The depth and 
the supply of water for a navigable canal must be proportioned 
to the number and tonnage of the lighters which are likely to 
carry goods upon it; the extent of a harbour to the number of 
the shipping which are likely to tnke shelter in it. 

It does not seem necessary that the expense of those public 



212 The Wealth of Nations 

works should be defrayed from that public revenue, as it is 
commonly called, of which the collection and application is in 
most countries assigned to the executive power. The greater 
part of such public works may easily be so managed as to 
afford a particular revenue sufficient for defraying their own 
expense, without bringing any burden upon the general revenue 
of the society. 

A highway, a bridge, a navigable canal, for example, may in 
most cases be both made and maintained by a small toll upon 
the carriages which make use of them : a harbour, by a moderate 
port-duty upon the tonnage of the shipping which load or un 
load in it. The coinage, another institution for facilitating com 
merce, in many countries, not only defrays its own expense, 
but affords a small revenue or seignorage to the sovereign. The 
post-office, another institution for the same purpose, over and 
above defraying its own expense, affords in almost all countries 
a very considerable revenue to the sovereign. 

When the carriages which pass over a highway or a bridge, 
and the lighters which sail upon a navigable canal, pay toll in 
proportion to their weight or their tonnage, they pay for the 
maintenance of those public works exactly in proportion to the 
wear and tear which they occasion of them. It seems scarce 
possible to invent a more equitable way of maintaining such 
works. This tax or toll too, though it is advanced by the 
carrier, is finally paid by the consumer, to whom it must always 
be charged in the price of the goods. As the expense of carriage, 
however, is very much reduced by means of such public works, 
the goods, notwithstanding the toll, come cheaper to the con 
sumer than they could otherwise have done; their price not 
being so much raised by the toll as it is lowered by the cheapness 
of the carriage. The person who finally pays this tax, therefore, 
gains by the application more than he loses by the payment of 
it. His payment is exactly in proportion to his gain. It is 
in reality no more than a part of that gain which he is obliged 
to give up in order to get the rest. It seems impossible to 
imagine a more equitable method of raising a tax. 

When the toll upon carriages of luxury, upon coaches, post- 
chaises, etc., is made somewhat higher in proportion to their 
weight than upon carriages of necessary use, such as carts, 
waggons, etc., the indolence and vanity of the rich is made to 
contribute in a very easy manner to the relief of the poor, by 
rendering cheaper the transportation of heavy goods to all the 
different parts of the country. 



The Expenses of the Sovereign 2 i ^ 

When high roads, bridges, canals, etc., are in this manner 
made and supported by the commerce which is carried on by 
means of them, they can be made only where that commerce 
requires them, and consequently where it is proper to make 
them. Their expense too, their grandeur and magnificence, 
must be suited to what that commerce can afford to pay. They 
must be made consequently as it is proper to make them. A 
magnificent high road cannot be made through a desert country 
where there is little or no commerce, or merely because it 
happens to lead to the country villa of the intendant of the 
province, or to that of some great lord to whom the intendant 
finds it convenient to make his court. A great bridge cannot be 
thrown over a river at a place where nobody passes, or merely 
to embellish the view from the windows of a neighbouring 
palace: things which sometimes happen in countries where 
works of this kind are carried on by any other revenue than that 
which they themselves are capable of affording. 

In several different parts of Europe the toll or lock-duty upon 
a canal is the property of private persons, whose private interest 
obliges them to keep up the canal. If it is not kept in tolerable 
order, the navigation necessarily ceases altogether, and along 
witii it the whole profit which they can make by the tolls. If 
those tolls were put under the management of commissioners, 
who had themselves no interest in them, they might be less 
attentive to the maintenance of the works which produced 
them. The canal of Lan^uedoc cost the King of France and 
the province upwards of thirteen millions of livres, which (at 
twenty-eight livres the mark of silver, the value of French 
money in the end of the last century) amounted to upwards of 
nine hundred thousand pounds sterling. When that great work 
was finished, the most likely method, it was found, of keeping 
it in constant repair was to make a present of the tolls to Riquet 
the engineer, who planned and conducted the work. Those 
tolls constitute at present a very large estate to the different 
branches of the family of that gentleman, who have, therefore, 
a great interest to keep the work in constant repair. But had 
those tolls been put under the management of commissioners, 
who had no such interest, they might perhaps have been dissi 
pated in ornamental and unnecessary expenses, while the most 
essential parts of the work were allowed to go to ruin. 

The tolls for the maintenance of a high road cannot with any 
safety be made the property of private persons. A high road. 
though entirely neglected, does not become altogether im- 



214 The Wealth of Nations 

passable, though a canal does. The proprietors of the tolls 
upon a high road, therefore, might neglect altogether the repair 
of the road, and yet continue to levy very nearly the same tolls. 
It is proper, therefore, that the tolls for the maintenance of such 
a work should be put under the management of commissioners 
or trustees. 

In Great Britain, the abuses which the trustees have com 
mitted in the management of those tolls have in many cases 
been very justly complained of. At many turnpikes, it has 
been said, the money levied is more than double of what is 
necessary for executing, in the completest manner, the work 
which is often executed in a very slovenly manner, and some 
times not executed at all. The system of repairing the high 
roads by tolls of this kind, it must be observed, is not of very 
long standing. We should not wonder, therefore, if it has not 
yet been brought to that degree of perfection of which it seems 
capable. If mean and improper persons are frequently appointed 
trustees, and if proper courts of inspection and account have 
not yet been established for controlling their conduct, and for 
reducing the tolls to what is barely sufficient for executing the 
work to be done by them, the recency of the institution both 
accounts and apologises for those defects, of which, by the 
wisdom of parliament, the greater part may in due time be 
gradually remedied. 

The money levied at the different turnpikes in Great Britain 
is supposed to exceed so much what is necessary for repairing 
the roads, that the savings, which, with proper economy, might 
be made from it, have been considered, even by some ministers, 
as a very great resource which might at some time or another 
be applied to the exigencies of the state. Government, it has 
been said, by taking the management of the turnpikes into its 
own hands, and by employing the soldiers, who would work for 
a very small addition to their pay, could keep the roads in good 
order at a much less expense than it can be done by trustees, 
who have no other workmen to employ but such as derive their 
whole subsistence from their wages. A great revenue, half a 
million perhaps, 1 it has been pretended, might in this manner 
be gained without laying any new burden upon the people ; 
and the turnpike roads might be made to contribute to the 

1 Since publishing the two first editions of this book. I have got good 
reasons to believe that all the turnpike tolls levied in Great Britain do not 
produce a net revenue that amounts to half a million ; a sum which, under 
the management of Government, would not be sufficient to keep in repair 
five of the principal roads in the kingdom. 



The Expenses of the Sovereign 2 i 5 

general expense of the state, in the same manner as the post- 
office does at present. 

That a considerable revenue might be gained in this manner 
I have no doubt, though probably not near so much as the 
projectors of this plan have supposed. The plan itself, however, 
seems liable to several very important objections. 

First, if the tolls which are levied at the turnpikes should ever 
be considered as one of the resources for supplying the exigencies 
of the state, they would certainly be augmented as those 
exigencies were supposed to require. According to the policy 
of Great Britain, therefore, they would probably be augmented 
very fast. The facility with which a great revenue could be 
drawn from them would probably encourage administration 
to recur very frequently to this resource. Though it may, 
perhaps, be more than doubtful whether half a million could by 
any economy be saved out of the present tolls, it can scarce be 
doubted but that a million might be saved out of them if they 
were doubled; and perhaps two millions if they were tripled. 1 
This great revenue, too, might be levied without the appointment 
of a single new officer to collect and receive it. But the turn 
pike tolls being continually augmented in this manner, instead 
of t.irilitating the inland commerce of the country as at present, 
would soon become a very great incumbrance upon it. The 
expense of transporting all heavy goods from one part of the 
country to another would soon be so much increased, the market 
for all such goods, consequently, would soon be so much nar 
rowed, that their production would be in a great measure 
discouraged, and the most important branches of the domestic 
industry of the country annihilated altogether. 

Secondly, a tax upon carriages in proportion to their weight, 
though a very equal tax when applied to the sole purpose of 
repairing the roads, is a very unequal one when applied to any 
other purpose, or to supply the common exigencies of the state. 
When it is applied to the sole purpose above mentioned, each 
carriage is supposed to pay exactly for the wear and tear which 
that carriage occasions of the roads. But when it is applied 
to any other purpose, each carriage is supposed to pay for more 
than that wear and tear, and contributes to the supply of some 
other exigency of the state. But as the turnpike toll raises the 
price of goods in proportion to their weight, and not to their 
value, it is chiefly paid by the consumers of coarse and bulky, 

1 I have now good reasons to believe that all these conjectural sums are 
by much t<x) large. 



216 The Wealth of Nations 

not by those of precious and light, commodities. Whatever 
exigency of the state therefore this tax might be intended to 
supply, that exigency would be chiefly supplied at the expense 
of the poor, not of the rich; at the expense of those who are 
least able to supply it, not of those who are most able. 

Thirdly, if government should at any time neglect the repara 
tion of the high roads, it would be still more difficult than it is 
at present to compel the proper application of any part of 
the turnpike tolls. A large revenue might thus be levied upon 
the people without any part of it being applied to the only 
purpose to which a revenue levied in this manner ought ever 
to be applied. If the meanness and poverty of the trustees of 
turnpike roads render it sometimes difficult at present to oblige 
them to repair their wrong, their wealth and greatness would 
render it ten times more so in the case which is here supposed. 

In France, the funds destined for the reparation of the high 
roads are under the immediate direction of the executive power. 
Those funds consist partly in a certain number of days labour 
which the country people are in most parts of Europe obliged 
to give to the reparation of the highways, and partly in such a 
portion of the general revenue of the state as the king chooses 
to spare from his other expenses. 

By the ancient law of France, as well as by that of most 
other parts of Europe, the labour of the country people was 
under the direction of a local or provincial magistracy, which 
had no immediate dependency upon the king s council. But 
by the present practice both the labour of the country people, 
and whatever other fund the king may choose to assign for the 
reparation of the high roads in any particular province or 
generality, are entirely under the management of the intendant; 
an officer who is appointed and removed by the king s council, 
who receives his orders from it, and is in constant corre 
spondence with it. In the progress of despotism the authority 
of the executive power gradually absorbs that of every other 
power in the state, and assumes to itself the management of 
every branch of revenue which is destined for any public purpose. 
In France, however, the great post-roads, the roads which make 
the communication between the principal towns of the kingdom, 
are in general kept in good order, and in some provinces are 
even a good deal superior to the greater part of the turnpike 
roads of England. But what we call the cross-roads, that is, 
the far greater part of the roads in the country, are entirely 
neglected, and are in many places absolutely impassable for 



The Expenses of the Sovereign 217 

any heavy carriage. In some places it is even dangerous to 
travel on horseback, and mules are the only conveyance which can 
safely be trusted. The proud minister of an ostentatious court 
may frequently take pleasure in executing a work of splendour 
and magnificence, such as a great highway, which is frequently 
seen by the principal nobility, whose applauses not only flatter 
his vanity, but even contribute to support his interest at court. 
But to execute a great number of little works, in which nothing 
that can be done can make any great appearance, or excite the 
smallest degree of admiration in any traveller, and which, in 
short, have nothing to recommend them but their extreme 
utility, is a business which appears in every respect too mean 
and paltry to merit the attention of so great a magistrate. 
Under such an administration, therefore, such works are almost 
always entirely neglected. 

In China, and in several other governments of Asia, the 
executive power charges itself both with the reparation of the 
high roads and with the maintenance of the navigable canals. 
In the instructions which are given to the governor of each 
province, those objects, it is said, are constantly recommended 
to him, and the judgment which the court forms of his conduct 
is very much regulated by the attention which he appears to 
have paid to this part of his instructions. This branch of public 
police accordingly is said to be very much attended to in all 
those countries, but particularly in China, where the high roads, 
and still more the navigable canals, it is pretended, exceed very 
much everything of the same kind which is known in Europe. 
The accounts of those works, however, which have been trans 
mitted to Europe, have generally been drawn up by weak 
and wondering travellers; frequently by stupid and lying 
missionaries. If they had been examined by more intelligent 
eyes, and if the accounts of them had been reported by more 
faithful witnesses, they would not, perhaps, appear to be so 
wonderful. The account which Hernier gives of some works 
of this kind in Indo,tan falls very much short of what had been 
reported of them by other travellers, more disposed to the 
marvellous than he was. It may too, perhaps, be in those 
countries, as it is in France, where the great roads, the great 
communications which are likely to be the subjects of con 
versation at the court and in the capital, are attended to, and 
all the rest neglected. In China, besides, in Indostan, and in 
several other governments of Asia, the revenue of the sovereign 
arises almost altogether from a land tax or land rent, which 



2 i 8 The Wealth of Nations 

rises or falls with the rise and fall of the annual produce of the 
land. The great interest of the sovereign, therefore, his revenue, 
is in such countries necessarily and immediately connected with 
the cultivation of the land, with the greatness of its produce, 
and with the value of its produce. But in order to render that 
produce both as great and as valuable as possible, it is necessary 
to procure to it as extensive a market as possible, and con 
sequently to establish the freest, the easiest, and the least ex 
pensive communication between all the different parts of the 
country; which can be clone only by means of the best roads 
and the best navigable canals. But the revenue of the sovereign 
does not, in any part of Europe, arise chiefly from a land tax 
or land rent. In all the great kingdoms of Europe, perhaps, the 
greater part of it may ultimately depend upon the produce of 
the land: but that dependency is neither so immediate, nor so 
evident. In Europe, therefore, the sovereign does not feel him 
self so directly called upon to promote the increase, both in 
quantity and value, of the produce of the land, or, by maintain 
ing good roads and canals, to provide the most extensive market 
for that produce. Though it should be true, therefore, what I 
apprehend is not a little doubtful, that in some parts of Asia 
this department of the public police is very properly managed 
by the executive power, there is not the least probability that, 
during the present state of things, it could be tolerably managed 
by that power in any part of Europe. 

Even those public works which are of such a nature that they 
cannot afford any revenue for maintaining themselves, but of 
which the conveniency is nearly confined to some particular 
place or district, are always better maintained by a local or 
provincial revenue, under the management of a local and pro 
vincial administration, than by the general revenue of the state, 
of which the executive power must always have the manage 
ment. Were the streets of London to be lighted and paved at 
the expense of the treasury, is there any probability that they 
would be so well lighted and paved as they are at present, or 
even at so small an expense? The expense, besides, instead of 
being raised by a local tax upon the inhabitants of each particular 
street, parish, or district in London, would, in this case, be 
defrayed out of the general revenue of the state, and would 
consequently be raised by a tax upon all the inhabitants of the 
kingdom, of whom the greater part derive no sort of benefit 
from the lighting and paving of the streets of London. 

The abuses which sometimes creep into the local and pro- 



The Expenses of the Sovereign 219 

vincial administration of a local and provincial revenue, how 
enormous soever they may appear, are in reality, however, 
almost always very trifling in comparison of those which 
commonly take place in the administration and expenditure of 
the revenue of a great empire. They are, besides, much more 
easily corrected. Under the local or provincial administration 
of the justices of the peace in Great Britain, the six days labour 
which the country people are obliged to give to the reparation 
of the highways is not always perhaps very judiciously applied, 
but it is scarce ever exacted with any circumstance of cruelty 
or oppression. In France, under the administration of the 
intendants, the application is not always more judicious, and 
the exaction is frequently the most cruel and oppressive. Such 
Corv6es, as they are called, make one of the principal instru 
ments of tyranny by which those officers chastise any parish or 
communaute which has had the misfortune to fall under their 
displeasure. 

Of the Public Works and Institutions which are necessary for 
facilitating particular Branches of Commerce 

The object of the public works and institutions above mentioned 
is to facilitate commerce in general. But in order to facilitate 
some particular branches of it, particular institutions are neces 
sary, which again require a particular and extraordinary expense. 

Some particular branches of commerce, which are carried on 
with barbarous and uncivilised nations, require extraordinary 
protection. An ordinary store or counting-house could give 
little security to the goods of the merchants who trade to the 
western coast of Africa. To defend them from the barbarous 
natives, it is necessary that the place where they are deposited 
should be, in some measure, fortified. The disorders in the 
government of Indostan have been supposed to render a like 
precaution necessary even among that mild and gentle people; 
and it was under pretence of securing their persons and property 
from violence that both the English and French East India 
Companies were allowed to erect the first forts which they 
possessed in that country. Among other nations, whose vigorous 
government will suffer no strangers to possess any fortified place 
within their territory, it may be necessary to maintain some 
ambassador, minister, or consul, who may both decide, accord 
ing to their own customs, the differences arising among 
his own countrymen, and, in their disputes with the natives, 

H43 



220 The Wealth of Nations 

may, by means of his public character, interfere with more 
authority, and afford them a more powerful protection, 
than they could expect from any private man. The interests 
of commerce have frequently made it necessary to maintain 
ministers in foreign countries where the purposes, either of 
war or alliance, would not have required any. The commerce 
of the Turkey Company first occasioned the establishment of 
an ordinary ambassador at Constantinople. The first English 
embassies to Russia arose altogether from commercial interests. 
The constant interference which those interests necessarily 
occasioned between the subjects of the different states of Europe, 
has probably introduced the custom of keeping, in all neigh 
bouring countries, ambassadors or ministers constantly resident 
even in the time of peace. This custom, unknown to ancient 
times, seems not to be older than the end of the fifteenth or 
beginning of the sixteenth century; that is, than the time when 
commerce first began to extend itself to the greater part of the 
nations of Europe, and when they first began to attend to its 
interests. 

It seems not unreasonable that the extraordinary expense 
which the protection of any particular branch of commerce may 
occasion should be defrayed by a moderate tax upon that 
particular branch ; by a moderate fine, for example, to be paid 
by the traders when they first enter into it, or, what is more 
equal, by a particular duty of so much per cent, upon the goods 
which they either import into, or export out of, the particular 
countries with which it is carried on. The protection of trade 
in general, from pirates and freebooters, is said to have given 
occasion to the first institution of the duties of customs. But, 
if it was thought reasonable to lay a general tax upon trade, 
in order to defray the expense of protecting trade in general, 
it should seem equally reasonable to lay a particular tax upon 
a particular branch of trade, in order to defray the extraordinary 
expense of protecting that branch. 

The protection of trade in general has always been considered 
as essential to the defence of the commonwealth, and, upon 
that account, a necessary part of the duty of the executive 
power. The collection and application of the general duties 
of customs,, therefore, have always been left to that power. But 
the protection of any particular branch of trade is a part of the 
general protection of trade; a part, therefore, of the duty of 
that power; and if nations always acted consistently, the 
particular duties levied for the purposes of such particular 



The Expenses of the Sovereign 221 

protection should always have been left equally to its disposal. 
But in this respect, as well as in many others, nations have 
not always acted consistently; and in the greater part of the 
commercial states of Europe, particular companies of merchants 
have had the address to persuade the legislature to entrust to 
them the performance- of this part of the duty of the sovereign, 
together with all the powers which are necessarily connected 
with it. 

These companies, though they may, perhaps, have been useful 
for the first introduction of some branches of commerce, by 
making, at their own exj>ense, an experiment which the state 
might not think it prudent to make, have in the long run proved, 
universally, either burdensome or useless, and have either mis 
managed or confined the trade. 

When those companies do not trade upon a joint stock, but 
are obliged to admit any person, properly qualified, upon paying 
a certain fine, and agreeing to submit to the regulations of the 
company, each member trading upon his own stock, and at his 
own risk, they are called regulated companies. When they trade 
upon a joint stock, each member sharing in the common profit 
or loss in proportion to his share in this stock, they are called 
joint stock companies. Such companies, whether regulated or 
joint stock, sometimes have, and sometimes have not, exclusive 
privileges. 

Regulated companies resemble, in every respect, the corpora 
tions of trades so common in the cities and towns of all the 
different countries of Europe, and are a sort of enlarged mono 
polies of the same kind. As no inhabitant of a town can exercise 
an incorporated trade without first obtaining his freedom in the 
corporation, so in most cases no subject of the state can lawfully 
carry on any branch of foreign trade, for which a regulated 
company is established, without first becoming a member of 
that company. The monopoly is more or less strict according 
as the terms of admission are more or less difficult; and accord 
ing as the directors of the company have more or less authority, 
or huve it more or less in their power to manage in such a manner 
as to confine the greater part of the trade to themselves and 
their particular friends. In the most ancient regulated com 
panies the privileges of apprenticeship were the same as in other 
corporations, and entitled the person who had served his time 
to a member of the company to Income himself a member, 
either without paying any fine, or upon paying a much smaller 
one than what was exacted of other people. The usual corpora- 



222 The Wealth of Nations 

tion spirit, wherever the law does not restrain it, prevails in all 
regulated companies. When they have been allowed to act 
according to their natural genius, they have always, in order 
to confine the competition to as small a number of persons as 
possible, endeavoured to subject the trade to many burdensome 
regulations. When the law has restrained them from doing 
this, they have become altogether useless and insignificant. 

The regulated companies for foreign commerce which at 
present subsist in Great Britain are the ancient merchant 
adventurers company, now commonly called the Hamburg 
Company, the Russia Company, the Eastland Company, the 
Turkey Company, and the African Company. 

The terms of admission into the Hamburg Company are 
now said to be quite easy, and the directors either have it not 
in their power to subject the trade to any burdensome restraint 
or regulations, or, at least, have not of late exercised that power. 
It has not always been so. About the middle of the last century, 
the fine for admission was fifty, and at one time one hundred 
pounds, and the conduct of the company was said to be extremely 
oppressive. In 1643, in 1645, and in 1661, the clothiers and 
free traders of the \Vest of England complained of them to 
parliament as of monopolists who confined the trade and 
oppressed the manufactures of the country. Though those 
complaints produced no act of parliament, they had probably 
intimidated the company so far as to oblige them to reform 
their conduct. Since that time, at least, there has been no 
complaints against them. By the loth and nth of William III. 
c. 6, the fine for admission into the Russia Company was 
reduced to five pounds; and by the 25th of Charles II. c. 7, 
that for admission into the Eastland Company to forty shillings, 
while, at the same time, Sweden, Denmark, and Norway, all the 
countries on the north side of the Baltic, were exempted from 
their exclusive charter. The conduct of those companies had 
probably given occasion to those two acts of parliament. Before 
that time, Sir Josiah Child had represented both these and the 
Hamburg Company as extremely oppressive, and imputed to 
their bad management the low state of the trade which we 
at that time carried on to the countries comprehended within 
their respective charters. But though such companies may not, 
in the present times, be very oppressive, they are certainly 
altogether useless. To be merely useless, indeed, is perhaps 
the highest eulogy which can ever justly be bestowed upon 
a regulated company; and all the three companies above 



The Expenses of the Sovereign 223 

mentioned seem, in their present state, to deserve this 
eulogy. 

The fine for admission into the Turkey Company was formerly 
twenty-five pounds for all persons under twenty-six years of 
age, and fifty pounds for all persons above that age. Nobody 
but mere merchants could be admitted; a restriction which 
excluded all shopkeepers and retailers. By a bye-law, no British 
manufactures could be exported to Turkey but in the general 
ships of the company; and as those ships sailed always from 
the port of London, this restriction confined the trade to that 
expensive port, and the traders to those who lived in London 
and in its neighbourhood. By another bye-law, no person living 
within twenty miles of Ix>ndon, and not free of the city, could 
l>e admitted a member; another restriction which, joined to 
the foregoing, necessarily excluded all but the freemen of 
London. As the time for the loading and sailing of those 
general ships depended altogether upon the directors, they could 
easily fill them with their own goods and those of their particular 
friends, to the exclusion of others, who, they might pretend, had 
made their proposals too late. In this state of things, therefore, 
this company was in every respect a strict and oppressive 
monopoly. Those abuses gave occasion to the act of the 26th 
of George II. c. 18, reducing the fine for admission to twenty 
pounds for all persons, without any distinction of ages, or any 
restriction, either to mere merchants, or to the freemen of 
London; and granting to all such persons the liberty of export 
ing, from all the ports of Great Britain to any port in Turkey, 
all British goods of which the exportation was not prohibited; 
and of importing from thence all Turkish goods of which the 
importation was not prohibited, upon paying both the general 
duties of customs, and the particular duties assessed for defray 
ing the necessary expenses of the company; and submitting, at 
the same time, to the lawful authority of the British ambassador 
and consuls resident in Turkey, and to the bye-laws of the com 
pany duly enacted. To prevent any oppression by those bye- 
laws, it was by the same act ordained, that if any seven members 
of the company conceived themselves aggrieved by any bye-law 
which should be enacted after the passing of this act, they might 
appeal to the Board of Trade and Plantations (to the authority 
of which a committee of the privy council has now succeeded), 
provided such appeal was brought within twelve months after 
the bye-law was enacted ; and that if any seven meml>ers con 
ceived themselves aggrieved by any bye-law which had been 



224 The Wealth of Nations 

enacted before the passing of this act, they might bring a like 
appeal, provided it was within twelve months after the day on 
which this act was to take place. The experience of one year, 
however, may not always be sufficient to discover to all the 
members of a great company the pernicious tendency of a 
particular bye-law; and if several of them should afterwards 
discover it, neither the Board of Trade, nor the committee of 
council, can afford them any redress. The object, besides, of 
the greater part of the bye-laws of all regulated companies, as 
well as of all other corporations, is not so much to oppress those 
who are already members, as to discourage others from becoming 
so; which may be done, not only by a high fine, but by many 
other contrivances. The constant view of such companies is 
always to raise the rate of their own profit as high as they can; 
to keep the market, both for the goods which they export, and 
for those which they import, as much understocked as they can: 
which can be done only by restraining the competition, or by 
discouraging new adventurers from entering into the trade. A 
fine even of twenty pounds, besides, though it may not perhaps 
be sufficient to discourage any man from entering into the 
Turkey trade with an intention to continue in it, may be 
enough to discourage a speculative merchant from hazarding 
a single adventure in it. In all trades, the regular established 
traders, even though not incorporated, naturally combine to 
raise profits, which are noway so likely to be kept, at all times, 
down to their proper level, as by the occasional competition of 
speculative adventurers. The Turkey trade, though in some 
measure laid open by this act of parliament, is still considered 
by many people as very far from being altogether free. The 
Turkey Company contribute to maintain an ambassador and 
two or three consuls, who, like other public ministers, ought to 
be maintained altogether by the state, and the trade laid open 
to all his Majesty s subjects. The different taxes levied by the 
company, for this and other corporation purposes, might afford 
a revenue much more than sufficient to enable the state to 
maintain such ministers. 

Regulated companies, it was observed by Sir Josiah Child, 
though they had frequently supported public ministers, had 
never maintained any forts or garrisons in the countries to which 
they traded; whereas joint stock companies frequently had. 
And in reality the former seem to be much more unfit for this 
sort of service than the latter. First, the directors of a regulated 
company have no particular interest in the prosperity of the 



The Expenses of the Sovereign 225 

general trade of the company for the sake of which such forts 
and garrisons are maintained. The decay of that general trade 
may even frequently contribute to the advantage of their own 
private trade; as by diminishing the number of their com 
petitors it may enable them both to buy cheaper, and to sell 
dearer. The directors of a joint stock company, on the contrary, 
having only their share in the profits which are made upon the 
common stock committed to their management, have no private 
trade of their own of which the interest can be separated from 
that of the general trade of the company. Their private interest 
is connected with the prosperity of the general trade of the 
company, and with the maintenance of the forts and garrisons 
which are necessary for its defence. They are more likely, 
therefore, to have that continual and careful attention which 
that maintenance necessarily requires. Secondly, the directors 
of a joint stock company have always the management of a 
large capital, the joint stock of the company, a part of which 
they may frequently employ, with propriety, in building, repair 
ing, and maintaining such necessary forts and garrisons. Hut 
the directors of a regulated company, having the management 
of no common capital, have no other fund to employ in tins way 
but the casual revenue arising from the admission fines, and from 
the corporation duties imposed upon the trade of the company. 
Though they had the same interest, therefore, to attend to the 
maintenance of such forts and garrisons, they can seldom have 
the same ability to render that attention effectual. The main 
tenance of a public minister requiring scarce any attention, and 
but a moderate and limited expense, is a business much more 
suitable both to the temper and abilities of a regulated company. 

Long after the time of Sir Josiah Child, however, in 1750, a 
regulatt-d company was established, the present company cf 
merchants trading to Africa, which was expressly charged at 
first with the maintenance of all the British forts and garrisons 
that lit! between Cape Blanc and the Cape of Good Hope, and 
afterwards with that of those only which lie between Cape Rou; 
and the Cape of Good Hope. The act which establishes this 
company (the 2^rd of George? II. c. 31) seems to have had two 
distinct objects in view; fir-t, to restrain effectually the oppres 
sive and monopolising spirit which is natural to the directors 
of a regulated company ; and secondly, to force them, as much 
as possible, to give an attention, which is not natural to them, 
towards the maintenance of forts and garrisons. 

For the first of these purposes the fine for admission is limited 



226 The Wealth of Nations 

to forty shillings. The company is prohibited from trading in 
their corporate capacity, or upon a joint stock; from borrowing 
money upon common seal, or from laying any restraints upon 
the trade which may be carried on freely from all places, and 
by all persons being British subjects, and paying the fine. The 
government is in a committee of nine persons who meet at 
London, but who are chosen annually by the freemen of the 
company at London, Bristol, and Liverpool; three from each 
place. No committee-man can be continued in office for more 
than three years together. Any committee-man might be 
removed by the Board of Trade and Plantations, now by a 
committee of council, after being heard in his own defence. 
The committee are forbid to export negroes from Africa, or to 
import any African goods into Great Britain. But as they are 
charged with the maintenance of forts and garrisons, they may, 
for that purpose, export from Great Britain to Africa goods 
and stores of different kinds. Out of the monies which they 
shall receive from the company, they are allowed a sum not 
exceeding eight hundred pounds for the salaries of their clerks 
and agents at London, Bristol, and Liverpool, the house rent of 
their office at London, and all other expenses of management, 
commission, and agency in England. What remains of this sum, 
after defraying these different expenses, they may divide among 
themselves, as compensation for their trouble, in what manner 
they think proper. By this constitution, it might have been 
expected that the spirit of monopoly would have been effectually 
restrained, and the first of these purposes sufficiently answered. 
It would seem, however, that it had not. Though by the 4th 
of George III. c. 20, the fort of Senegal, with all its dependencies, 
had been vested in the company of merchants trading to Africa, 
yet in the year following (by the 5th of George III. c. 44) 
not only Senegal and its dependencies, but the whole coast 
from the port of Sallee, in south Barbary, to Cape Rouge, was 
exempted from the jurisdiction of that company, was vested in 
the crown, and the trade to it declared free to all his Majesty s 
subjects. The company had been suspected of restraining the 
trade, and of establishing some sort of improper monopoly. It 
is not, however, very easy to conceive how, under the regulations 
of the 23rd George II., they could do so. In the printed debates 
of the House of Commons, not always the most authentic records 
of truth, I observe, however, that they have been accused of 
this. The members of the committee of nine, being all merchants, 
and the governors and factors, in their different forts and settle- 



The Expenses of the Sovereign 227 

ments, being all dependent upon them, it is not unlikely that 
the latter might have given peculiar attention to the consign 
ments and commissions of the former which would establish 
A real monopoly. 

For the second of these purposes, the maintenance of the 
forts and garrisons, an annual sum has been allotted to them 
by parliament, generally about 13,000. For the proper applica 
tion of this sum, the committee is obliged to account annually 
to the Cursitor Baron of Exchequer; which account is after 
wards to be laid before parliament. But parliament, which 
gives so little attention to the application of millions, is not 
likely to give much to that of 13,000 a year; and the Cursitor 
Baron of Exchequer, from his profession and education, is not 
likely to be profoundly skilled in the proper expense of forts 
and garrisons. The captains of his Majesty s navy, indte 1, or 
any other commissioned officers appointed by the Board of 
Admiralty, may inquire into the condition of the forts and 
garrisons, and report their observations to that board. But 
that board seems to have no direct jurisdiction over the com 
mittee, nor any authority to correct those whose conduct it 
may thus inquire into; and the captains of his Majesty s navy, 
besides, are not supposed to be always deeply learned in the 
science of fortification. Removal from an office which can be 
enjoyed only for the term of three years, and of which the 
lawful emoluments, even during that term, are so very small, 
seems to b<- the utmost punishment to which any committee- 
man is liable for any fault, except direct malversation, or 
embezzlement, either of the public money, or of that of the 
company; and the fear of that punishment can never be a 
motive of sufficient weight to force a continual and careful 
attention to a business to which he has no other interest to 
attend. The committee are accused of having sent out bricks 
and stones from England for the reparation of Cape Coast 
Castle on the coast of (iuinea, a business for which parliament 
had several times granted an extraordinary sum of money. 
These bricks and stones too, which had thus been sent upon 
so long a voyage, were said to have been of so bad a quality 
that it was necessary to rebuild from the foundation the walls 
which had been repaired with them. The forts and garrisons 
which lie north of Cape Rouge are not only maintained at the 
expense of the state, but are under the immediate government 
of the executive power; and why those which lie south of that 
Cape, and which too are, in part at least, maintained at the 
*H 4} 



228 The Wealth of Nations 

expense of the state, should be under a different government, 
it seems not very easy even to imagine a good reason. The 
protection of the Mediterranean trade was the original purpose 
or pretence of the garrisons of Gibraltar and Minorca, and the 
maintenance and government of those garrisons has always 
been, very properly, committed, not to the Turkey Company, 
but to the executive power. In the extent of its dominion con 
sists, in a great measure, the pride and dignity of that power; 
and it is not very likely to fail in attention to what is necessary 
for the defence of that dominion. The garrisons at Gibraltar 
and Minorca, accordingly, have never been neglected; though 
Minorca has been twice taken, and is now probably lost for ever, 
that disaster was never even imputed to any neglect in the 
executive power. I would not, however, be understood to 
insinuate that either of those expensive garrisons was ever, even 
in the smallest degree, necessary for the purpose for which they 
were originally dismembered from the Spanish monarchy. That 
dismemberment, perhaps, never served any other real purpose 
than to alienate from England her natural ally the King of 
Spain, and to unite the two principal branches of the house of 
Bourbon in a much stricter and more permanent alliance than 
the ties of blood could ever have united them. 

Joint stock companies, established either by royal charter 
or by act of parliament, differ in several respects, not only from 
regulated companies, but from private copartneries. 

First, in a private copartnery, no partner, without the consent 
of the company, can transfer his share to another person, or 
introduce a new member into the company. Each member, 
however, may, upon proper warning, withdraw from the co 
partnery, and demand payment from them of his share of the 
common stock. In a joint stock company, on the contrary, no 
member can demand payment of his share from the company; 
but each member can, without their consent, transfer his share 
to another person, and thereby introduce a new member. The 
value of a share in a joint stock is always the price which it will 
bring in the market; and this may be either greater or less, in 
any proportion, than the sum which its owner stands credited 
for in the stock of the company. 

Secondly, in a private copartnery, each partner is bound for 
the debts contracted by the company to the whole extent of his 
fortune. In a joint stock company, on the contrary, each 
partner is bound only to the extent of his share. 

The trade of a joint stock company is always managed by a 



The Expenses of the Sovereign 229 

court of directors. This court, indeed, is frequently subject, 
in many respects, to the control of a general court of proprietors. 
But the greater part of those proprietors seldom pretend to 
understand anything of the business of the company, and when 
the spirit of faction happens not to prevail among them, give 
themselves no trouble about it, but receive contentedly such 
half-vearly or yearly dividend as the directors think proper to 
make to them. This total exemption from trouble and from risk, 
beyond a limited sum, encourages many people to become 
adventurers in joint stock companies, who would, upon no 
account, hazard their fortunes in any private copartnery. Such 
companies, therefore, commonly draw to themselves much 
greater stocks than any private copartnery can boast of. The 
trading stock of the South Sea Company, at one time, amounted 
to upwards of thirty-three millions eight hundred thousand 
pounds. The divided capital of the Bank of England amounts, 
at present, to ten millions seven hundred and eighty thousand 
pounds. The directors of such companies, however, being the 
managers rather of other people s money than of their own, it 
cannot well be expected that they should watch over it with the 
same anxious vigilance with which the partners in a private 
copartnery frequently watch over their own. Like the stewards 
of a rich man, they are apt to consider attention to small matters 
as not for their master s honour, and very easily give themselves 
a dispensation from having it Negligence and profusion, there 
fore, must always prevail, inure or less, in the management 
of the affairs of such a company. It is upon this account that 
joint stock companies for foreign trade have seldom been able 
to maintain the competition against private adventurers. They 
have, accordingly, very seldom succeeded without an exclusive 
privilege, and frequently have not succeeded with one. With 
out an exclusive privilege they have commonly mismanaged the 
trade. With an exclusive privilege they have both mismanaged 
and confined it. 

The Royal African Company, the predecessors of the present 
African Company, had an exclusive privilege by charter; but 
as that charter had not been confirmed by act of parliament, the 
trade, in consequence of the Declaration of Rights, was, soon after 
the revolution, laid open to all his Majesty s subjects. The 
Hudson s Bay Company are, as to their legal rights, in the same 
situation as the Royal African Company. Their exclusive 
charter has not been confirmed by act of parliament. The 
South Sea Company, as long as they continued to be a trading 



230 The Wealth of Nations 

company, had an exclusive privilege confirmed by act of parlia 
ment ; as have likewise the present United Company of Merchants 
trading to the East Indies. 

The Royal African Company soon found that they could not 
maintain the competition against private adventurers, whom, 
notwithstanding the Declaration of Rights, they continued for 
some time to call interlopers, and to persecute as such. In 
1698, however, the private adventurers were subjected to a duty 
of ten per cent, upon almost all the different branches of their 
trade, to be employed by the company in the maintenance of 
their forts and garrisons. But, notwithstanding this heavy 
tax, the company were still unable to maintain the competition. 
Their stock and credit gradually declined. In 1712, their debts 
had become so great that a particular act of parliament was 
thought necessary, both for their security and for that of their 
creditors. It was enacted that the resolution of two-thirds of 
these creditors in number and value should bind the rest, both 
with regard to the time which should be allowed to the company 
for the payment of their debts, and with regard to any other 
agreement which it might be thought proper to make with them 
concerning those debts. In 1730, their affairs were in so great 
disorder that they were altogether incapable of maintaining 
their forts and garrisons, the sole purpose and pretext of their 
institution. From that year, till their final dissolution, the 
parliament judged it necessary to allow the annual sum of ten 
thousand pounds for that purpose. In 1732, after having been 
for many years losers by the trade of carrying negroes to the 
West Indies, they at last resolved to give it up altogether; to 
sell to the private traders to America the negroes which they 
purchased upon the coast; and to employ their servants in a 
trade to the inland parts of Africa for gold dust, elephants teeth, 
dyeing drugs, etc. But their success in this more confined trade 
was not greater than in their former extensive one. Their affairs 
continued to go gradually to decline, till at last, being in every 
respect a bankrupt company, they were dissolved by act of 
parliament, and their forts and garrisons vested in the present 
regulated company of merchants trading to Africa. Before the 
erection of the Royal African Company, there had been three 
other joint stock companies successively established, one after 
another, for the African trade. They were all equally unsuc 
cessful. They all, however, had exclusive charters, which, 
though not confirmed by act of parliament, were in those days 
supposed to convey a real exclusive privilege. 



The Expenses of the Sovereign 231 

The Hudson s Bay Company, before their misfortunes in the 
late war, had been much more fortunate than the Royal African 
Company. Their necessary expense is much smaller. The 
whole number of people whom they maintain in their different 
settlements and habitations, which they have honoured with 
the name of forts, is said not to exceed a hundred and twenty 
persons. This number, however, is sufficient to prepare before 
hand the cargo of furs and other goods necessary for loading 
their ships, which, on account of the ice, can seldom remain 
above six or eight weeks in those seas. This advantage of having 
a cargo ready prepared could not for several years be acquired 
by private adventurers, and without it there seems to be no 
f>ossibility of trading to Hudson s Bay. The moderate capital 
of the company, which, it is said, does not exceed one hundred 
and ten thousand pounds, may besides be sufficient to enable 
them to engross the whole, or almost the whole, trade and 
surplus produce of the miserable, though extensive country, 
comprehended within their charter. No private adventurers, 
accordingly, have ever attempted to trade to that country in 
competition with them. This company, therefore, have always 
enjoyed an exclusive trade in fact, though they may have no 
right to it in law. Over and above all this, the moderate capital 
of this company is said to be divided among a very small number 
of proprietors. But a joint stock company, consisting of a small 
number of proprietors, with a moderate capital, approaches 
very nearly to the nature of a private copartnery, and may be 
capable of nearly the same degree of vigilance and attention. 
It is not to be wondered at, therefore, if, in consequence of these 
different advantages, the Hudson s Bay Company had, before 
the late war, been able to carry on their trade with a consider 
able degree of success. It does not seem probable, however, 
that their profits ever approached to what the late Mr. Dobbs 
imagined them. A much more sober and judicious writer, Mr. 
Anderson, author of The Historical and Chronological Deduction 
of Commerce, very justly observes that, upon examining the 
accounts which Mr. Dobbs himself has given for several years 
together of their exports and imports, and upon making proper 
allowances for their extraordinary risk and expense, it does not 
appear that their profits deserve to be envied, or that they can 
much, if at all, exceed the ordinary profits of trade. 

The South Sea Company never had any forts or garrisons to 
maintain, and therefore were entirely exempted from one great 
expense to which other joint stock companies for foreign trade 



232 The Wealth of Nations 

are subject. But they had an immense capital divided among 
an immense number of proprietors. It was naturally to be 
expected, therefore, that folly, negligence, and profusion should 
prevail in the whole management of their affairs. The knavery 
and extravagance of their stock-jobbing projects are sufficiently 
known, and the explication of them would be foreign to the 
present subject. Their mercantile projects were not much 
better conducted. The first trade which they engaged in was 
that of supplying the Spanish West Indies with negroes, of 
which (in consequence of what was called the Assiento contract 
granted them by the Treaty of Utrecht) they had the exclusive 
privilege. But as it was not expected that much profit could 
be made by this trade, both the Portuguese and French com 
panies, who had enjoyed it upon the same terms before them, 
having been ruined by it, they were allowed, as compensation, 
to send annually a ship of a certain burden to trade directly to 
the Spanish West Indies. Of the ten voyages which this annual 
ship was allowed to make, they are said to have gained con 
siderably by one, that of the Royal Caroline in 1731, and to have 
been losers, more or less, by almost all the rest. Their ill success 
was imputed, by their factors and agents, to the extortion and 
oppression of the Spanish government; but was, perhaps, 
principally owing to the profusion and depredations of those 
very factors and agents, some of whom are said to have acquired 
great fortunes even in one year. In 1734, the company petitioned 
the king that they might be allowed to dispose of the trade and 
tonnage of their annual ship, on account of the little profit which 
they made by it, and to accept of such equivalent as they could 
obtain from the King of Spain. 

In 1724, this company had undertaken the whale-fishery. Of 
this, indeed, they had no monopoly; but as long as they carried 
it on, no other British subjects appear to have engaged in it. 
Of the eight voyages which their ships made to Greenland, they 
were gainers by one, and losers by all the rest. After their 
eighth and last voyage, when they had sold their ships, stores, 
and utensils, they found that their whole loss, upon this branch, 
capital and interest included, amounted to upwards of two 
hundred and thirty-seven thousand pounds. 

In 1722, this company petitioned the parliament to be allowed 
to divide their immense capital of more than thirty-three millions 
eight hundred thousand pounds, the whole of which had been 
lent to government, into two equal parts: The one half, or 
upwards of sixteen millions nine hundred thousand pounds, to 



The Expenses of the Sovereign 233 

be put upon the same footing with other government annuities, 
and not to be subject to the debts contracted, or losses incurred, 
by the directors of the company in the prosecution of their 
mercantile projects; the other half to remain, as before, a 
trading stock, and to be subject to those debts and losses. The 
petition was too reasonable not to be granted. In 1733, they 
again petitioned the parliament that three-fourths of their 
trading stock might be turned into annuity stock, and only one- 
fourth remain as trading stock, or exposed to the hazards arising 
fromthe b id management of their directors. Both their annuity 
and trading stocks had, by this time, been reduced more than 
two millions each by several different payments from govern 
ment; so that this fourth amounted only to 3,662,784 8s. 6d. 
In 1748, all the demands of the company upon the King of 
Spain, in consequence of the Assiento contract, were, by the 
Treaty of Aix-la-Chapelle, given up for what was supposed an 
equivalent. An end was put to their trade with the Spanish 
West Indies, the remainder of their trading stock was turned 
into an annuity stock, and the company ceased in every respect 
to be a trading company. 

It ought to be observed that in the trade which the South Sea 
Company carried on by means of their annual ship, the only 
trade by which it ever was expected that they could make any 
considerable profit, they were not without competitors, either 
in the foreign or in the home market. At Carthagena, Porto 
Hello, and La Vera Cruz, they had to encounter the competition 
of the Spanish merchants, who brought from Cadi/, to those 
markets, European goods of the same kind with the outward 
cargo of their ship; and in England they had to encounter that 
of the English merchants, who imported from Cadiz goods of 
the Spanish West Indies of the same kind with the inward 
cargo. The goods both of the Spanish and English merchants, 
indeed, were, perhaps, subject to higher duties. Hut the loss 
occasioned by the negligence, profusion, and malversation of the 
servants of the company had probably been a tax much heavier 
than all those duties. That a joint stock company should be 
able to carry on successfully any branch of foreign trade, when 
private adventurers can come into any sort of open and fair 
competition with them, seems contrary to all experience. 

The old English East India Company was established in 1600 
by a charter from Queen Eli/.abcth. In the first twelve voyages 
which they fitted out for India, they appear to have traded as a 
regulated company, with separate stocks, though only in the 



234 The Wealth of Nations 

general ships of the company. In 1612, they united into a joint 
stock. Their charter was exclusive, and though not confirmed 
by act of parliament, was in those days supposed to convey a 
real exclusive privilege. For many years, therefore, they were 
not much disturbed by interlopers. Their capital, which never 
exceeded seven hundred and forty-four thousand pounds, and 
of which fifty pounds was a share, was not so exorbitant, nor 
their dealings so extensive, as to afford either a pretext for gross 
negligence and profusion, or a cover to gross malversation. Not 
withstanding some extraordinary losses, occasioned partly by 
the malice of the Dutch East India Company, and partly by 
other accidents, they carried on for many years a successful 
trade. But in process of time, when the principles of liberty 
were better understood, it became every day more and more 
doubtful how far a royal charter, not confirmed by act of parlia 
ment, could convey an exclusive privilege. Upon this question 
the decisions of the courts of justice were not uniform, but varied 
with the authority of government and the humours of the times. 
Interlopers multiplied upon them, and towards the end of the 
reign of Charles II., through the whole of that of James II. and 
during a part of that of William III., reduced them to great 
distress. In 1698, a proposal was made to parliament of 
advancing two millions to government at eight per cent., provided 
the subscribers were erected into a new East India Company 
with exclusive privileges. The old East India Company offered 
seven hundred thousand pounds, nearly the amount of their 
capital, at four per cent, upon the same conditions. But such 
was at that time the state of public credit, that it was more 
convenient for government to borrow two millions at eight 
per cent, than seven hundred thousand pounds at four. The 
proposal of the new subscribers was accepted, and a new East 
India Company established in consequence. The old East India 
Company, however, had a right to continue their trade till 1701. 
They had, at the same time, in the name of their treasurer, 
subscribed, very artfully, three hundred and fifteen thousand 
pounds into the stock of the new. By a negligence in the 
expression of the act of parliament which vested the East India 
trade in the subscribers to this loan of two millions, it did not 
appear evident that they were all obliged to unite into a joint 
stock. A few private traders, whose subscriptions amounted 
only to seven thousand two hundred pounds, insisted upon the 
privilege of trading separately upon their own stocks and at their 
own risk. The old East India Company had a right to a separate 



The Expenses of the Sovereign 235 

trade upon their old stock till 1701 ; and they had likewise, both 
before and after that period, a right, like that of other private 
traders, to a separate trade upon the three hundred and fifteen 
thousand pounds which they had subscribed into the stock of 
the new company. The competition of the two companies with 
the private traders, and with one another, is said to have well- 
nigh ruined both. Upon a subsequent occasion, in 1730, when 
a proposal was made to parliament for putting the trade under 
the management of a regulated company, and thereby laying 
it in some measure open, the East India Company, in opposition 
to this proposal, represented in very strong terms what had 
been, at this time, the miserable effects, as they thought them, 
of this competition. In India, they said, it raised the price of 
goods so high that they were not worth the buying; and in 
England, by overstocking the market, it sunk their price so 
low that no profit could be made by them. That by a more 
plentiful supply, to the great advantage and conveniency of 
the public, it must have reduced, very much, the price of Indian 
goods in the English market, cannot well be doubted; but that 
it should have raised very much their price in the Indian market 
seems not very probable, as all the extraordinary demand which 
that competition could occasion must have been but as a drop 
of water in the immense ocean of Indian commerce. Rie increase 
of demand, besides, though in the beginning it may sometimes 
raise the price of goods, never fails to lower it in the long run. 
It encourages production, and thereby increases the competition 
of the producers, who, in order to undersell one another, have 
recourse to new divisions of labour and new improvements of 
art which might never otherwise have been thought of. The 
miserable effects of which the company complained were the 
cheapness of consumption and the encouragement given to 
production, precisely the two effects which it is the great 
business of political economy to promote. The competition, 
however, of which they gave this doleful account, had not been 
allowed to be of long continuance. In 1702, the two companies 
were, in some measure, united by an indenture tripartite, to 
which the queen was the third party; and in 1708, they were, 
by act of parliament, perfectly consolidated into one company 
by their present name of The United Company of Merchants 
trading to the East Indies. Into this act it was thought worth 
while to insert a clause allowing the separate traders to continue 
their trade till Michaelmas 1711, but at the same time empower 
ing the directors, upon three years notice, to redeem their little 



236 The Wealth of Nations 

capital of seven thousand two hundred pounds, and thereby to 
convert the whole stock of the company into a joint stock. By 
the same act, the capital of the company, in consequence of a 
hew loan to government, was augmented from two millions to 
three millions two hundred thousand pounds. In 1743, the 
company advanced another million to government. But this 
million being raised, not by a call upon the proprietors, but by 
selling annuities and contracting bond-debts, it did not augment 
the stock upon which the proprietors could claim a dividend. 
It augmented, however, their trading stock, it being equally 
liable with the other three millions two hundred thousand pounds 
to the losses sustained, and debts contracted, by the company 
in prosecution of their mercantile projects. From 1708, or at 
least from 1711, this company, being delivered from all com 
petitors, and fully established in the monopoly of the English 
commerce to the East Indies, carried on a successful trade, and 
from their profits made annually a moderate dividend to their 
proprietors. During the French war, which began in 1741, 
the ambition of Mr. Dupleix,the French governor of Pondicherry, 
involved them in the wars of the Carnatic, and in the politics of 
the Indian princes. After many signal successes, and equally 
signal losses, they at last lost Madras, at that time their principal 
settlement in India. It was restored to them by the Treaty of 
Aix-la-Chapelle ; and about this time the spirit of war and 
conquest seems to have taken possession of their servants in 
India, and never since to have left them. During the French 
war, which began in 1755, their arms partook of the general 
good fortune of those of Great Britain. They defended Madras, 
took Pondicherry, recovered Calcutta, and acquired the revenues 
of a rich and extensive territory, amounting, it was then said, 
to upwards of three millions a year. They remained for several 
years in quiet possession of this revenue: but in 1767, adminis 
tration laid claim to their territorial acquisitions, and the revenue 
arising from them, as of right belonging to the crown; and the 
company, in compensation for this claim, agreed to pay to 
government four hundred thousand pounds a year. They had 
before this gradually augmented their dividend from about six 
to ten per cent.; that is, upon their capital of three millions two 
hundred thousand pounds they had increased it by a hundred 
and twenty-eight thousand pounds, or had raised it from one 
hundred and ninety-two thousand to three hundred and twenty 
thousand pounds a year. They were attempting about this 
time to raise it still further, to twelve and a half per cent., which 



The Expenses of the Sovereign 237 

would have made their annual payments to their proprietors 
equal to what they had agreed to pay annually to government, 
or to four hundred thousand pounds a year. But during the 
two years in which their agreement with government was to 
take place, they were restrained from any further increase of 
dividend by two successive acts of parliament, of which the 
object was to enable them to make a speedier progress in the 
payment of their debts, which were at this time estimated at 
upwards of six or seven millions sterling. In 1769, they renewed 
their agreement with government for five years more, and 
stipulated that during the course of that period they should be 
allowed gradually to increase their dividend to twelve and a 
half per cent. ; never increasing it, however, more than one per 
cent, in one year. This increase of dividend, therefore, when it 
had risen to its utmost height, could augment their annual pay 
ments, to their proprietors and government together, but by 
six hundred and eight thousand pounds lx?yond what they had 
been before their late territorial acquisitions. What the gross 
revenue of those territorial acquisitions was supposed to amount 
to has already been mentioned; and by an account brought by 
the Cruttfnden East Indiaman in 1768, the net revenue, clear 
of all deductions and military charges, was stated at two millions 
forty-eight thousand seven hundred and forty-seven pounds. 
They were said at the same time to possess another revenue, 
arising partly from lands, but chielly from the customs established 
at their different settlements, amounting to four hundred and 
thirty-nine thousand pounds. The profits of their trade too, 
according to the evidence of their chairman before the House 
of Commons, amounted at this time to at least four hundred 
thousand pounds a year; according to that of their accountant, 
to at least five hundred thousand; according to the lowest 
account, at least equal to the highest dividend that was to be 
paid to their proprietors. So great a revenue might certainly 
have afforded an augmentation of six hundred and eight thousand 
pounds in their annual payments, and at the same time have 
left a large sinking fund sufficient for the speedy reduction of 
their debts. In 1773, however, their debts, instead of being 
reduced, were augmented by an arrear to the treasury in the 
payment of the four hundred thousand pounds, by another to 
the custom-house for duties unpaid, by a large debt to the bank 
for money borrowed, and by a fourth for bills drawn upon them 
from India, and wantonly accepted, to the amount of upwards 
of twelve hundred thousand pounds. The distress which thes 



238 The Wealth of Nations 

accumulated claims brought upon them, obliged them not only 
to reduce all at once their dividend to six per cent., but to throw 
themselves upon the mercy of government, and to supplicate, 
first, a release from the further payment of the stipulated four 
hundred thousand pounds a year; and, secondly, a loan of 
fourteen hundred thousand, to save them from immediate bank 
ruptcy. The great increase of their fortune had, it seems, only 
served to furnish their servants with a pretext for greater pro 
fusion, and a cover for greater malversation, than in proportion 
even to that increase of fortune. The conduct of their servants 
in India, and the general state of their affairs both in India and 
in Europe, became the subject of a parliamentary inquiry, in 
consequence of which several very important alterations were 
made in the constitution of their government, both at home and 
abroad. In India their principal settlements of Madras, Bombay, 
and Calcutta, which had before been altogether independent of 
one another, were subjected to a governor-general, assisted by 
a council of four assessors, parliament assuming to itself the 
first nomination of this governor and council who were to reside 
at Calcutta; that city having now become, what Madras was 
before, the most important of the English settlements in India. 
The court of the mayor of Calcutta, originally instituted for the 
trial of mercantile causes which arose in the city and neighbour 
hood, had gradually extended its jurisdiction with the extension 
of the empire. It was now reduced and confined to the original 
purpose of its institution. Instead of it a new supreme court of 
judicature was established, consisting of a chief justice and three 
judges to be appointed by the crown. In Europe, the qualifica 
tion necessary to entitle a proprietor to vote at their general 
courts was raised from five hundred pounds, the original price 
of a share in the stock of the company, to a thousand pounds. 
In order to vote upon this qualification too, it was declared 
necessary that he should have possessed it, if acquired by his 
own purchase, and not by inheritance, for at least one year, 
instead of six months, the term requisite before. The court of 
twenty-four directors had before been chosen annually; but it 
was now enacted that each director should, for the future, be 
chosen for four years ; six of them, however, to go out of office 
by rotation every year, and not to be capable of being re-chosen 
at the election of the six new directors for the ensuing year. In 
consequence of these alterations, the courts, both of the pro 
prietors and directors, it was expected, would be likely to act 
with more dignity and steadiness than they had usually done 



The Expenses of the Sovereign 239 

before. But it seems impossible, by any alterations, to render 
those courts, in any respect, fit to govern, or even to share in the 
government of a great empire ; because the greater part of their 
members must always have too little interest in the prosperity 
of that empire to give any serious attention to what may 
promote it. Frequently a man of great, sometimes even a man 
of small fortune, is willing to purchase a thousand pounds share 
in India stock merely for the influence which he expects to 
acquire by a vote in the court of proprietors. It gives him a 
share, though not in the plunder, yet in the appointment of the 
plunderers of India; the court of directors, though they make 
that appointment, being necessarily more or less under the 
influence of the proprietors, who not only elect those directors, 
but sometimes overrule the appointments of their servants in 
India. Provided he can enjoy this influence for a few years, 
and thereby provide for a certain number of his friends, he 
frequently cares little about the dividend, or even about the 
value of the stock upon which his vote is founded. About the 
prosperity of the great empire, in the government of which that 
vote gives him a share, he seldom cares at all. No other sove 
reigns ever were, or, from the nature of things, ever couW be, so 
perfectly indifferent about the happiness or misery of their 
subjects, the improvement or waste of their dominions, the glory 
or disgrace of their administration, as, from irresistible moral 
causes, the greater part of the proprietors of such a mercantile 
company are, and necessarily must be. This indifference, too, 
was more likely to be increased than diminished by some of the 
new regulations which were made in consequence of the parlia 
mentary inquiry. By a resolution of the House of Commons, 
for example, it was declared, that when the fourteen hundred 
thousand pounds lent to the company by government should 
be paid, and their bond-debts be reduced to fifteen hundred 
thousand pounds, they might then, and not till then, divide 
eight per cent, upon their capital; and that whatever remained 
of their revenues and net profits at home should be divkled into 
four parts; three of them to be paid into the exchequer for the 
use of the public, and the fourth to be reserved as a fund either 
tor the further reduction of their bond-debts, or for the dis 
charge of other contingent exigencies which the company might 
labour under. But if the company were bad stewards, and bad 
sovereigns, when the whole of their net revenue ami profits 
belonged to themselves, and were at their own disposal, they 
were surely not likely to be better when three-fourths of them 



240 The Wealth of Nations 

were to belong to other people, and the other fourth, though to 
be laid out for the benefit of the company, yet to be so under 
the inspection and with the approbation of other people. 

It might be more agreeable to the company that their own 
servants and dependants should have either the pleasure of 
wasting or the profit of embezzling whatever surplus might 
remain after paying the proposed dividend of eight per cent, 
than that it should come into the hands of a set of people with 
whom those resolutions could scarce fail to set them, in some 
measure, at variance. The interest of those servants and de 
pendants might so far predominate in the court of proprietors 
as sometimes to dispose it to support the authors of depreda 
tions which had been committed in direct violation of its own 
authority. With the majority of proprietors, the support even 
of the authority of their own court might sometimes be a matter 
of less consequence than the support of those who had set that 
authority at defiance. 

The regulations of 1773, accordingly, did not put an end to 
the disorders of the company s government in India. Notwith 
standing that, during a momentary fit of good conduct, they 
had at one time collected into the treasury of Calcutta more 
than three millions sterling; notwithstanding that they had 
afterwards extended, either their dominion, or their depreda 
tions, over a vast accession of some of the richest and most 
fertile countries in India, all was wasted and destroyed. They 
found themselves altogether unprepared to stop or resist the 
incursion of Hyder Ali; and, in consequence of those disorders, 
the company is now (1784) in greater distress than ever; and, 
in order to prevent immediate bankruptcy, is once more reduced 
to supplicate the assistance of government. Different plans 
have been proposed by the different parties in parliament for 
the better management of its affairs. And all those plans seem 
to agree in supposing, what was indeed always abundantly 
evident, that it is altogether unfit to govern its territorial pos 
sessions. Even the company itself seems to be convinced of its 
own incapacity so far, and seems, upon that account, willing to 
give them up to government. 

With the right of possessing forts and garrisons in distant and 
barbarous countries is necessarily connected the right of making 
peace and war in those countries. The joint stock companies 
which have had the one right have constantly exercised the 
other, and have frequently had it expressly conferred upon 
them. How unjustly, how capriciously, how cruelly they have 



The Expenses of the Sovereign 241 

commonly exercised it, is too well known from recent experi 
ence. 

When a company of merchants undertake, at their own risk 
and expense, to establish a new trade with some remote and 
barbarous nation, it may not be unreasonable to incorporate 
them into a joint stock company, and to grant them, in case of 
their success, a monopoly of the trade for a certain number of 
years. It is the easiest and most natural way in which the 
state can recompense them for hazarding a dangerous and ex 
pensive experiment, of which the public is afterwards to reap 
the benefit. A temporary monopoly of this kind may be vindi 
cated upon the same principles upon which a like monopoly of 
a new machine is granted to its inventor, and that of a new 
book to its author. But upon the expiration of the term, the 
monopoly ou^ht certainly to determine; the forts and garrisons, 
if it was found necessary to establish any, to be taken into the 
hands of government, their value to be paid to the company, 
and the trade to be laid open to all the subjects of the state. 
By a perpetual monopoly, all the other subjects of the state are 
taxed very absurdly in two different ways: first, by the high 
price of goods, which, in the case of a free trade, they could buy 
much cheaper; and, secondly, by their total exclusion from a 
branch of business which it might be both convenient and pro 
fitable for many of them to carry on. It is for the most worth 
less of all purposes, too, that they are taxed in this manner. It 
is merely to enable the company to support the negligence, pro 
fusion, and malversation of their own servants, whose disorderly 
conduct seldom allows the dividend of the company to exceed 
the ordinary rate of profit in trades which are altogether free, 
and very frequently makes it fall even a good deal short of that 
rate. Without a monopoly, however, a joint stock company, 
it would appear from experience, cannot long carry on any 
branch of foreign trade. To buy in one market, in order to sell, 
with profit, in another, when there are many competitors in 
both; to watch over, not only the occasional variations in the 
demand, but the much greater and more frequent variations in 
the competition, or in the supply which that demand is likely 
to get from other people, and to suit with dexterity and judg 
ment both the quantity and quality of each assortment of goods 
to all these circumstances, is a species of warfare of which the 
operations are continually changing, and which can scarce ever 
be conducted successfully without such an unremitting exertion 
of vigilance and attention as cannot long be expected from the 



242 The Wealth of Nations 

directors of a joint stock company. The East India Company, 
upon the redemption of their funds, and the expiration of their 
exclusive privilege, have a right, by act of parliament, to con 
tinue a corporation with a joint stock, and to trade in their 
corporate capacity to the East Indies in common with the rest 
of their fellow-subjects. But in this situation, the superior 
vigilance and attention of private adventurers would, in all 
probability, soon make them weary of the trade. 

An eminent French author, of great knowledge in matters of 
political economy, the Abb6 Morellet, gives a list of fifty-five 
joint stock companies for foreign trade which have been estab 
lished in different parts of Europe since the year 1600, and 
which, according to him, have all failed from mismanagement, 
notwithstanding they had exclusive privileges. He has been 
misinformed with regard to the history of two or three of them, 
which were not joint stock companies and have not failed. 
But, in compensation, there have been several joint stock 
companies which have failed, and which he has omitted. 

The only trades which it seems possible for a joint stock 
company to carry on successfully without an exclusive privilege 
are those of which all the operations are capable of being 
reduced to what is called a Routine, or to such a uniformity of 
method as admits of little or no variation. Of this kind is, 
first, the banking trade; secondly, the trade of insurance from 
fire, and from sea risk and capture in time of war; thirdly, the 
trade of making and maintaining a navigable cut or canal; 
and, fourthly, the similar trade of bringing water for the supply 
of a great city. 

Though the principles of the banking trade may appear some 
what abstruse, the practice is capable of being reduced to strict 
rules. To depart upon any occasion from those rules, in conse 
quence of some flattering speculation of extraordinary gain, is 
almost always extremely dangerous, and frequently fatal, to the 
banking company which attempts it. But the constitution of 
joint stock companies renders them in general more tenacious 
of established rules than any private copartnery. Such com 
panies, therefore, seem extremely well fitted for this trade. The 
principal banking companies in Europe, accordingly, are joint 
stock companies, many of which manage their trade very suc 
cessfully without any exclusive privilege. The Bank of England 
has no other exclusive privilege except that no other banking 
company in England shall consist of more than six persons. 



The Expenses of the Sovereign 243 

The two banks of Edinburgh are joint stock companies without 
any exclusive privilege. 

The value of the risk, either from fire, or from loss by sea, 
or by capture, though it cannot, perhaps, be calculated very 
exactly, admits, however, of such a gross estimation as renders 
it, in some degree, reducible to strict rule and method. The 
trade of insurance, therefore, may be carried on successfully by 
a joint stock company without any exclusive privilege. Neither 
the London Assurance nor the Royal Exchange Assurance 
companies have any such privilege. 

When a navigable cut or canal has been once made, the 
management of it becomes quite simple and easy, and it is 
reducible to strict rule and method. Even the making of it is 
so as it may be contracted for with undertakers at so much a 
mile, and so much a lock. The same thing may be said of a 
canal, an aqueduct, or a great pipe for bringing water to supply 
a great city. Such undertakings, therefore, may be, and accord 
ingly frequently are, very successfully managed by joint stock 
companies without any exclusive privilege. 

To establish a joint stock company, however, for any under 
taking, merely because such a company might be capable of 
managing it successfully ; or to exempt a particular set of dealers 
from some of the general laws which take place with regard to 
all their neighbours, merely because they might be capable of 
thriving if they had such an exemption, would certainly not be 
reasonable. To render such an establishment perfectly reason 
able, with the circumstance of being reducible to strict rule and 
method, two other circumstances ought to concur. First, it 
ought to appear with the clearest evidence that the under 
taking is of greater and more general utility than the greater 
part of common trades; and secondly, that it requires a greater 
capital than can easily be collected into a private copartner\ . 
If a moderate capital were sufficient, the great utility of the 
undertaking would not be a sufficient reason for establishing a 
joint stock company ; because, in this case, the demand for what 
it was to produce would readily and easily be supplied by 
private adventurers. In the four trades above mentioned, both 
those circumstances concur. 

The great and general utility of the banking trade when 
prudently managed has been fully explained in the second book 
of this inquiry. Hut a public bank which is to support public 
credit, and upon particular emergencies to advance to govern 
ment the whole produce of a tax, to the amount, perhaps, of 



244 The Wealth of Nations 

several millions, a year or two before it comes in, requires a 
greater capital than can easily be collected into any private 
copartnery. 

The trade of insurance gives great security to the fortunes 
of private people, and by dividing among a great many that 
loss which would ruin an individual, makes it fall light and easy 
upon the whole society. In order to give this security, how 
ever, it is necessary that the insurers should have a very large 
capital. Before the establishment of the two joint stock com 
panies for insurance in London, a list, it is said, was laid before 
the attorney-general of one hundred and fifty private insurers 
who had failed in the course of a few years. 

That navigable cuts and canals, and the works which are 
sometimes necessary for supplying a great city with water, are 
of great and general utility, while at the same time they 
frequently require a greater expense than suits the fortunes of 
private people, is sufficiently obvious. 

Except the four trades above mentioned, I have not been 
able to recollect any other in which all the three circumstances 
requisite for rendering reasonable the establishment of a joint 
stock company concur. The English copper company of 
London, the lead smelting company, the glass grinding com 
pany, have not even the pretext of any great or singular utility 
in the object which they pursue; nor does the pursuit of that 
object seem to require any expense unsuitable to the fortunes of 
many private men. Whether the trade which those companies 
carry on is reducible to such strict rule and method as to 
render it fit for the management of a joint stock company, or 
whether they have any reason to boast of their extraordinary 
profits, I do not pretend to know. The mine-adventurers com 
pany has been long ago bankrupt. A share in the stock of the 
British Linen Company of Edinburgh sells, at present, very 
much below par, though less so than it did some years ago. 
The joint stock companies which are established for the public- 
spirited purpose of promoting some particular manufacture, 
over and above managing their own affairs ill, to the diminution 
of the general stock of the society, can in other respects scarce 
ever fail to do more harm than good. Notwithstanding the most 
upright intentions, the unavoidable partiality of their directors 
to particular branches of the manufacture of which the under 
takers mislead and impose upon them is a real discouragement 
to the rest, and necessarily breaks, more or less, that natural 
proportion which would otherwise establish itself between 



The Expenses of the Sovereign 245 

judicious industry and profit, and which, to the general industry 
of the country, is of all encouragements the greatest and the 
most effectual. 

ARTICLE II 

Of the Expense of the Institutions for the Education 
of Youth 

The institutions for the education of the youth may, in the 
same manner, furnish a revenue sufficient for defraying their 
own expense. The fee or honorary which the scholar pays to 
the master naturally constitutes a revenue of this kind. 

Even where the reward of the master does not arise altogether 
from this natural revenue, it still is not necessary that it should 
he derived from that general revenue of the society, of which the 
collection and application is, in most countries, assigned to the 
executive power. Through the greater part of Europe, accord 
ingly, the endowment of schools and colleges makes either no 
charge upon that general revenue, or but a very small one. It 
everywhere arises elm-fly from some local or provincial revenue, 
from the rent of some landed estate, or from the interest of some 
sum of money allotted and put under the management of trustees 
for this particular purpose, sometimes by the sovereign himself, 
and sometimes by some private donor. 

Have those public endowments contributed in general to 
promote the end of their institution? Have they contributed 
to encourage the diligence and to improve the abilities of the 
teachers? Have they directed the course of education towards 
objects more useful, both to the individual and to the public, 
than those to which it. would naturally have gone of its own 
accord? It should not serin very difficult to give at least a 
probable answer to earh of those questions. 

In every profession, the exertion of the greater part of those 
who exercise- it is aluays in proportion to the necessity they 
are under of making that exertion. This necessity is greatest 
with those to whom the emoluments of th>-ir profession are the 
ony source from which they expect their fortune, or even their 
ordinary revenue and subsistence. In order to acquire this 
fortune, or even to get this subsistence, they must, in the course 
of a year, execute a certain quantity of work of a known value; 
and, where the competition is free, the rivalship of competitors, 
who are all endeavouring to justle one another out of employ 
ment, obliges every man to endeavour to execute his work with 



246 The Wealth of Nations 

a certain degree of exactness. The greatness of the objects 
which are to be acquired by success in some particular professions 
may, no doubt, sometimes animate the exertion of a few men 
of extraordinary spirit and ambition. Great objects, however, 
are evidently not necessary in order to occasion the greatest 
exertions. Rivalship and emulation render excellency, even 
in mean professions, an object of ambition, and frequently 
occasion the very greatest exertions. Great objects, on the 
contrary, alone and unsupported by the necessity of applica 
tion, have seldom been sufficient to occasion any considerable 
exertion. In England, success in the profession of the law 
leads to some very great objects of ambition; and yet how 
few men, born to easy fortunes, have ever in this country been 
eminent in that profession i 

The endowments of schools and colleges have necessarily 
diminished more or less the necessity of application in the 
teachers. Their subsistence, so far as it arises from their 
salaries, is evidently derived from a fund altogether independent 
of their success and reputation in their particular professions. 

In some universities the salary makes but a part, and fre 
quently but a small part, of the emoluments of the teacher, 
of which the greater part arises from the honoraries or fees of 
his pupils. The necessity of application, though always more 
or less diminished, is not in this case entirely taken away. 
Reputation in his profession is still of some importance to him, 
and he still has some dependency upon the affection, gratitude, 
and favourable report of those who have attended upon his 
instructions; and these favourable sentiments he is likely to 
gain in no way so well as by deserving them, that is, by the 
abilities and diligence with which he discharges every part of 
his duty. 

In other universities the teacher is prohibited from receiving 
any honorary or fee from his pupils, and his salary constitutes 
the whole of the revenue which he derives from his office. His 
interest is, in this case, set as directly in opposition to his duty 
as it is possible to set it. It is the interest of every man to live 
as much at his ease as he can; and if his emoluments are to be 
precisely the same, whether he does or does not perform some 
very laborious duty, it is certainly his interest, at least as interest 
is vulgarly understood, either to neglect it altogether, or, if he 
is subject to some authority which will not suffer him to do this, 
to perform it in as careless and slovenly a manner as that 
authority will permit. If he is naturally active and a lover of 



The Expenses of the Sovereign 247 

labour, it is his interest to employ that activity in any way from 
which he can derive some advantage, rather than in the perform 
ance of his duU , from which he can derive none. 

If the authority to which he is subject resides in the body 
corporate, the college, or university, of which he himself is a 
memlxr, and in which the greater part of the other members 
are, like himself, persons who either are or ought to be teachers, 
they are likely to make a common cause, to be all very indulgent 
to one another, and every man to consent that his neighbour 
may neglect his duty, provided he himself is allowed to neglect 
his own. In the university of Oxford, the greater part of the 
public professors have, for these many years, given up altogether 
even the pretence of teaching. 

If the authority to which he is subject resides, not so much 
in the body corporate of which he is a member, as in some other 
extraneous persons in the bishop of the diocese, for example ; 
in the governor of the province; or, perhaps, in some minister 
of state it is not indeed in this case very likely that he will !* 
suffered to neglect his duty altogether. All that such superiors, 
however, can force him to do, is to attend upon his pupils a 
certain number of hours, that is, to give a certain number of 
lectures in the week or in the year. What those lectures shall 
be must still depend upon the diligence of the teacher; and 
that diligence is likely to be proportioned to the motives which 
he has for exerting it. An extraneous jurisdiction of this kind, 
besides, is liable to be exercised both ignorantly and capriciously. 
In its nature it is arbitrary and discretionary, and the persons 
who exercise it, neither attending upon the lectures of the 
teacher themselves, nor perhaps understanding the sciences 
which it is his business to teach, are seldom capable of exercising 
it with judgment. From the insolence of office, too, they are 
frequently indifferent how they exercise it, and are very apt to 
censure or deprive him of his office wantonly, and without any 
just cause. The person subject to such jurisdiction is necessarily 
degraded by it, and, instead of being one of the most respectable, 
is rendered one of the meanest and most contemptible persons 
in the society. It is by powerful protection only that he can 
effectually guard himself against the bad usage to which he is 
at all times exposed; and this protection he is most likely to 
gain, not by ability or diligence in his profession, but by obse 
quiousness to the will of his superiors, and by being ready, at 
all times, to sacrifice to that will the rights, the interest, and 
the honour of the body corporate of which he is a member. 



248 The Wealth of Nations 

Whoever has attended for any considerable time to the adminis 
tration of a French university must have had occasion to remark 
the effects which naturally result from an arbitrary and ex 
traneous jurisdiction of this kind. 

Whatever forces a certain number of students to any college 
or university, independent of the merit or reputation of the 
teachers, tends more or less to diminish the necessity of that 
merit or reputation. 

The privileges of graduates in arts, in law, physic, and divinity, 
when they can be obtained only by residing a certain number 
of years in certain universities, necessarily force a certain number 
of students to such universities, independent of the merit or 
reputation of the teachers. The privileges of graduates are a 
sort of statutes of apprenticeship, which have contributed to 
the improvement of education, just as the other statutes of 
apprenticeship have to that of arts and manufactures. 

The charitable foundations of scholarships, exhibitions, bur 
saries, etc., necessarily attach a certain number of students 
to certain colleges, independent altogether of the merit of those 
particular colleges. Were the students upon such charitable 
foundations left free to choose what college they liked best, 
such liberty might perhaps contribute to excite some emulation 
among different colleges. A regulation, on the contrary, which 
prohibited even the independent members of every particular 
college from leaving it and going to any other, without leave 
first asked and obtained of that which they meant to abandon, 
would tend ve y much to extinguish that emulation. 

If in each college the tutor or teacher, who was to instruct 
each student in all arts and sciences, should not be voluntarily 
cho en by the student, but appointed by the head of the college; 
and if, in case of neglect, inability, or bad usage, the student 
should not be allowed to change him for another, without leave 
first asked and obtained, such a regulation would not only tend 
very much to extinguish all emulation among the different 
tutors of the same college, but to diminish very much in all 
of them the necessity of diligence and of attention to their 
respective pupils. Such teachers, though very well paid by 
their students, might be as much disposed to neglect them as 
those who are not paid by them at all, or who have no other 
recompense but their salary. 

If the teacher happens to be a man of sense, it must be an 
unpleasant thing to him to be conscious, while he is lecturing 
his students, that he is either speaking or reading nonsense, or 



The Expenses of the Sovereign 249 

what is very little better than nonsense. It must, too, be un 
pleasant to him to observe that the greater part of his students 
desert his lectures, or perhaps attend upon them with plain 
enough marks of neglect, contempt, and derision. If he is 
obliged, therefore, to give a certain number of lectures, these 
motives alone, without any other interest, might dispose him 
to take some pains to give tolerably good ones. Several 
different expedients, however, may be fallen upon which will 
effectually blunt the edge of all those incitements to diligence. 
The teacher, instead of explaining to his pupils himself the 
science in which he proposes to instruct them, may read some 
book upon it; and if this book is written in a foreign and dead 
language, by interpreting it to them into their own; or, what 
would give him still less trouble, by making them interpret it 
to him, and by now and then making an occasional remark 
upon it, he may flatter himself that he is giving a lecture. Thr 
slightest degree of knowledge and application will enable him 
to do this without exposing himself to contempt or derision, or 
saying anything that is really foolish, absurd, or ridiculous. 
The discipline of the college, at the same time, may enable him 
to force all his pupils to the most regular attendance upon this 
sham lecture, and to maintain the most decent and respectful 
behaviour during the whole time of the performance. 

The discipline of colleges and universities is in general con 
trived, not for the benefit of the students, but for the interest, 
or more properly speaking, for the ease of the masters. Its 
object is, in all cases, to maintain the authority of the master, 
and whether he neglects or performs his duty, to oblige the 
students in all cases to behave to him as if he performed it with 
the greatest diligence and ability. It seems to presume pi rfect 
wisdom and virtue in the one order, and the greatest weakness 
and folly in the other. Where the masters, however, really 
perform their duty, there are no examples, I believe, that the 
greater part of the students ever neglect theirs. No discipline 
is ever requisite to force attendance upon lectures which are 
really worth the attending, as is well known wherever any such 
lectures are given. Force and restraint may, no doubt, be in 
some degree requisite in order to oblige children, or very young 
bovs, to attend to those parts of education which it is thought 
necessary for them to acquire during that early period of life; 
but after twelve or thirteen years of age, provided the master 
does his duty, force or restraint can scarce ever be necessary to 
carry on any part of education. Such is the generosity of the 



250 The Wealth of Nations 

greater part of young men, that, so far from being disposed to 
neglect or despise the instructions of their master, provided he 
shows some serious intention of being of use to them, they are 
generally inclined to pardon a great deal of incorrectness in the 
performance of his duty, and sometimes even to conceal from 
the public a good deal of gross negligence. 

Those parts of education, it is to be observed, for the teaching 
of which there are no public institutions, are generally the best 
taught. When a young man goes to a fencing or a dancing 
school, he does not indeed always learn to fence or to dance very 
well; but he seldom fails of learning to fence or to dance. The 
good effects of the riding school are not commonly so evident. 
The expense of a riding school is so great, that in most places 
it is a public institution. The three most essential parts of 
literary education, to read, write, and account, it still continues 
to be more common to acquire in private than in public schools; 
and it very seldom happens that anybody fails of acquiring them 
to the degree in which it is necessary to acquire them. 

In England the public schools are much less corrupted than 
the universities. In the schools the youth are taught, or at 
least may be taught, Greek and Latin ; that is, everything which 
the masters pretend to teach, or which, it is expected, they 
should teach. In the universities the youth neither are taught, 
nor always can find any proper means of being taught, the 
sciences which it is the business of those incorporated bodies 
to teach. The reward of the schoolmaster in most cases depends 
principally, in some cases almost entirely, upon the fees or 
honoraries of his scholars. Schools have no exclusive privileges. 
In order to obtain the honours of graduation, it is not necessary 
that a person should bring a certificate of his having studied a 
certain number of years at a public school. If upon examina 
tion he appears to understand what is taught there, no questions 
are asked about the place where he learnt it. 

The parts of education which are commonly taught in uni 
versities, it may, perhaps, be said are not very well taught. 
But had k not been for those institutions they would not have 
been commonly taught at all, and both the individual and the 
public would have suffered a good deal from the want of those 
important parts of education. 

The present universities of Europe were originally, the greater 
part of them, ecclesiastical corporations, instituted for the 
education of churchmen. They were founded by the authority 
of the pope, and were so entirely under his immediate protection, 



The Expenses of the Sovereign 251 

that their meml>ers, whether masters or students, had all of 
them what was then called the benefit of clergy, that is, were 
exempted from the civil jurisdiction of the countries in which 
their respective universities were situated, and were amenable 
only to the ecclesiastical tribunals. What was taught in the 
greater part of those universities was suitable to the end of 
their institution, either theology, or something that was merely 
preparatory to theology. 

When Christianity was first established by law, a corrupted 
Latin had become the common language of all the western 
parts of Europe. The service of the church accordingly, and 
the translation of the Bible which was read in churches, were 
both in that corrupted Latin; that is, in the common language 
of the country. After the irruption of the barbarous nations 
who overturned the Roman empire, Latin gradually erased to 
be the language of any part of Europe. But the reverence 
of the people naturally preserves the established forms and 
ceremonies of religion long after the circumstances whi -h first 
introduced and rendered them reasonable are no more. Though 
I*atin, therefore, was no longer understood anywhere by the 
great body of the people, the whole service of the church still 
continued to be performed in that language. Two different lan 
guages were thus established in Europe, in the same manner as 
in ancient Egypt; a language of the priests, and a language of 
the people; a sacred and a profane; a learned and an unlearned 
language. But it was necessary that the priests should under 
stand something of that sacred and learned language in which 
they were to officiate; and the study of the Latin language 
therefore made, from the beginning, an essential part of uni 
versity education. 

It was not so with that either of the Greek or of the Hebrew 
language. The infallible decrees of the church had pronounced 
the I^tin translation of the Bible, commonly called the Latin 
Vulgate, to have been equally dictated by divine inspiration, 
and therefore of equal authority with the Greek and Hebrew 
originals. The knowledge of those two languages, therefore, not 
l>eing indispensably requisite to a churchman, the study of them 
did not for a long time make a necessary part of the common 
course of university education. There are some Spanish uni 
versities, I am assured, in which the study of the Grrek lan 
guage has never yet made any part of that course. The first 
reformers found the Greek text of the New Testament, and even 
the Hebrew text of the Old, more favourable to their opinions 
M 3 



252 The Wealth of Nations 

than the Vulgate translation, which, as might naturally be sup 
posed, had been gradually accommodated to support the doc 
trines of the Catholic Church. They set themselves, therefore, 
to expose the many errors of that translation, which the Roman 
Catholic clergy were thus put under the necessity of defending 
or explaining. But this could not well be done without some 
knowledge of the original languages, of which the study was 
therefore gradually introduced into the greater part of uni 
versities, both of those which embraced, and of those which 
rejected, the doctrines of the Reformation. The Greek language 
was connected with every part of that classical learning which, 
though at first principally cultivated by catholics and Italians, 
happened to come into fashion much about the same time that 
the doctrines of the Reformation were set on foot. In the 
greater part of universities, therefore, that language was taught 
previous to the study of philosophy, and as soon as the student 
had made some progress in the Latin. The Hebrew language 
having no connection with classical learning, and, except the 
Holy Scriptures, being the language of not a single book in any 
esteem, the study of it did not commonly commence till after 
that of philosophy, and when the student had entered upon the 
study of theology. 

Originally the first rudiments both of the Greek and Latin 
languages were taught in universities, and in some universities 
they still continue to be so. In others it is expected that the 
student should have previously acquired at least the rudiments 
of one or both of those languages, of which the study continues 
to make everywhere a very considerable part of university 
education. 

The ancient Greek philosophy was divided into three great 
branches; physics, or natural philosophy; ethics, or moral 
philosophy; and logic. This general division seems perfectly 
agreeable to the nature of things. 

The great phenomena of nature the revolutions of the 
heavenly bodies, eclipses, comets; thunder, lightning, and other 
extraordinary meteors; the generation, the life, growth, and 
dissolution of plants and animals are objects which, as they 
necessarily excite the wonder, so they naturally call forth the 
curiosity, of mankind to inquire into their causes. Superstition 
first attempted to satisfy this curiosity, by referring all those 
wonderful appearances to the immediate agency of the gods. 
Philosophy afterwards endeavoured to account for them from 
more familiar causes, or from such as mankind were better 



The Expenses of the Sovereign 253 

acquainted with, than the agency of the gods. As those great 
phenomena are the first objects of human curiosity, so the 
science which pretends to explain them must naturally have 
been the first branch of philosophy that was cultivated. The 
first philosophers, accordingly, of whom history has preserved 
any account, appear to have been natural philosophers. 

In every age and country of the world men must have attended 
to the characters, designs, and actions of one another, and many 
reputable rules and maxims for the conduct of human life must 
have been laid down and approved of by common consent. As 
soon as writing came into fashion, wise men, or those who fancied 
themselves such, would naturally endeavour to increase the 
number of those established and respected maxims, and to 
express their own sense of what was either proper or improper 
conduct, sometimes in the more artificial form of apologues, like 
what are called the fables of /Esop; and sometimes in the more 
simple one of apophthegms, or wise sayings, like the Proverbs 
of Solomon, the verses of Theognis and Phocyllides, and some 
part of the works of Hesiod. They might continue in this 
manner for a long time merely to multiply the number of those 
maxims of prudence and morality, without even attempting to 
arrange them in any very distinct or methodical order, much 
less to connect them together by one or more general principles 
from which they were all deducible, like effects from their 
natural causes. The beauty of a systematical arrangement of 
different observations connected by a few common principles 
was first seen in the rude essays of those ancient times towards 
a system of natural philosophy. Something of the same kind 
was afterwards attempted in morals. The maxims of common 
life were arranged in some methodical order, and connected to 
gether by a few common principles, in the same manner as they 
had attempted to arrange and connect the phenomena of nature. 
The science which pretends to investigate and explain those 
connecting principles is what is properly called moral philosophy. 

Different authors gave different systems both of natural and 
moral philosophy. But the arguments by which they supported 
those different systems, far from being always demonstrations, 
were frequently at best but very slender probabilities, and 
sometimes mere sophisms, which had no other foundation but 
the inaccuracy and ambiguity of common language. Specula 
tive systems have in all ages of the world been adopted for 
reasons too frivolous to have determined the judgment of any 
man of common sense in a matter of the smallest pecuniary 



254 The Wealth of Nations 

interest. Gross sophistry has scarce ever had any influence 
upon the opinions of mankind, except in matters of philosophy 
and speculation; and in these it has frequently had the greatest. 
The patrons of each system of natural and moral philosophy 
naturally endeavoured to expose the weakness of the arguments 
adduced to support the systems which were opposite to their 
own. In examining those arguments, they were necessarily led 
to consider the difference between a probable and a demonstra 
tive argument, between a fallacious and a conclusive one; and 
Logic, or the science of the general principles of good and bad 
reasoning, necessarily arose out of the observations which a 
scrutiny of this kind gave occasion to. Though in its origin 
posterior both to physics and to ethics, it was commonly taught, 
not indeed in all, but in the greater part of the ancient schools 
of philosophy, previously to either of those sciences. The 
student, it seems to have been thought, ought to understand 
well the difference between good and bad reasoning before he 
was led to reason upon subjects of so great importance. 

This ancient division of philosophy into three parts was in 
the greater part of the universities of Europe changed for 
another into five. 

In the ancient philosophy, whatever was taught concerning 
the nature either of the human mind or of the Deity, made a 
part of the system of physics. Those beings, in whatever their 
essence might be supposed to consist, were parts of the great 
system of the universe, and parts, too, productive of the most 
important effects. Whatever human reason could either con 
clude or conjecture concerning them, made, as it were, two 
chapters, though no doubt two very important ones, of the 
science which pretended to give an account of the origin and 
revolutions of the great system of the universe. But in the 
universities of Europe, where philosophy was taught only as 
subservient to theology, it was natural to dwell longer upon 
these two chapters than upon any other of the science. They 
were gradually more and more extended, and were divided into 
many inferior chapters, till at last the doctrine of spirits, of 
which so little can be known, came to take up as much room 
in the system of philosophy as the doctrine of bodies, of which 
so much can be known. The doctrines concerning those two 
subjects were considered as making two distinct sciences. What 
are called Metaphysics or Pneumatics were set in opposition to 
Physics, and were cultivated not only as the more sublime, but, 
for the purposes of a particular profession, as the more useful 



The Expenses of the Sovereign 255 

science of the two. The proper subject of experiment and 
observation, a subject in which a careful attention is capable 
of making so many useful discoveries, was almost entirely 
neglected. The subject in which, after a few very simple and 
almost obvious truths, the most careful attention can discover 
nothing but obscurity and uncertainty, and can consequently 
produce nothing but subtleties and sophisms, was greatly 
cultivated. 

When those two sciences had thus been set in opposition to 
one another, the comparison between them naturally gave birth 
to a third, to what was called Ontology, or the science which 
treated of the qualities and attributes which were common to 
both the subjects of the other two sciences. But if subtleties 
and sophisms composed the greater part of the Metaphysics or 
Pneumatics of the schools, they composed the whole of this 
cobweb science of Ontology, which was likewise sometimes called 
Metaphysics. 

Wherein consisted the happiness and perfection of a man, 
considered not only as an individual, but as the member of a 
family, of a state, and of the great society of mankind, was the 
object which the ancient moral philosophy proposed to investi 
gate. In that philosophy the duties of human life were treated 
of as subservient to the happiness and perfection of human life. 
But when moral, as well as natural philosophy, came to be 
taught only as subservient to theology, the duties of human life 
were treated of as chiefly subservient to the happiness of a life 
to come. In the ancient philosophy the perfection of virtue 
was represented as necessarily productive, to the person who 
|>ossessed it, of the most perfect happiness in this life. In the 
modern philosophy it was frequently represented as generally, 
or rather as almost always, inconsistent with any degree of 
happiness in this life; and heaven was to be earned only by 
penance and mortification, by the austerities and abasement of 
a monk; not by the liberal, generous, and spirited conduct of a 
man. Casuistry and an ascetic morality made up, in most cases, 
the greater part of the moral philosophy of the schools. By 
far the most important of all the different branches of philo 
sophy became in this manner by far the most corrupted. 

Such, therefore, was the common course of philosophical 
education in the greater part of the universities in Europe. 
Logic was taught first: Ontology came in the second place: 
Pneumatology, comprehending the doctrine concerning the 
nature of the human soul and of the Deity, in the third: in 



256 The Wealth of Nations 

the fourth followed a debased system of moral philosophy which 
was considered as immediately connected with the doctrines of 
Pneumatology, with the immortality of the human soul, and 
with the rewards and punishments which, from the justice of 
the Deity, were to be expected in a life to come: a short and 
superficial system of Physics usually concluded the course. 

The alterations which the universities of Europe thus intro 
duced into the ancient course of philosophy were all meant for 
the education of ecclesiastics, and to render it a more proper 
introduction to the study of theology. But the additional 
quantity of subtlety and sophistry, the casuistry and the 
ascetic morality which those alterations introduced into it, 
certainly did not render it more proper for the education of 
gentlemen or men of the world, or more likely either to improve 
the understanding, or to mend the heart. 

This course of philosophy is what still continues to be taught 
in the greater part of the universities of Europe, with more or 
less diligence, according as the constitution of each particular 
university happens to render diligence more or less necessary to 
the teachers. In some of the richest and best endowed univer 
sities, the tutors content themselves with teaching a few uncon 
nected shreds and parcels of this corrupted course; and even 
these they commonly teach very negligently and superficially. 

The improvements which, in modern times, have been made 
in several different branches of philosophy have not, the greater 
part of them, been made in universities, though some no doubt 
have. The greater part of universities have not even been very 
forward to adopt those improvements after they were made; 
and several of those learned societies have chosen to remain, 
for a long time, the sanctuaries in which exploded systems and 
obsolete prejudices found shelter and protection after they had 
been hunted out of every other corner of the world. In general, 
the richest and best endowed universities have been the slowest 
in adopting those improvements, and the most averse to permit 
any considerable change in the established plan of education. 
Those improvements were more easily introduced into some of 
the poorer universities, in which the teachers, depending upon 
their reputation for the greater part of their subsistence, were 
obliged to pay more attention to the current opinions of the 
world. 

But though the public schools and universities of Europe 
were originally intended only for the education of a particular 
profession, that of churchmen ; and though they were not always 



The Expenses of the Sovereign 257 

very diligent in instructing their pupils even in the sciences 
which were supposed necessary for that profession, yet they 
gradually drew to themselves the education of almost all other 
people, particularly of almost all gentlemen and men of fortune. 
No better method, it seems, could be fallen upon of spending, 
with any advantage, the long interval between infancy and that 
period of life at which men begin to apply in good earnest to 
the real business of the world, the business which is to employ 
them during the remainder of their days. The greater part of 
what is taught in schools and universities, however, does not 
seem to he the most proper preparation for that business. 

In England it becomes every day more and more the custom 
to send young people to travel in foreign countries immediately 
upon their leaving school, and without sending them to any 
university. Our young people, it is said, generally return home 
much improved by their travels. A young man who goes 
abroad at seventeen or eighteen, and returns home at one and 
twenty, returns three or four years older than he was when hr 
went abroad ; and at that age it is very difficult not to improve 
a good deal in three or four years. In the course of his travels 
he generally acquires some knowledge of one or two foreign 
languages; a knowledge, however, which is seldom sufficient to 
enable him either to speak or write them with propriety. In 
other respects he commonly returns home more conceited, more 
unprincipled, more dissipated, and more incapable of any serious 
application either to study or to business than he could well have 
become in so short a time had he lived at home. Uy travelling 
so very young, by spending in the most frivolous dissipation the 
most precious years of his life, at a distance from the inspection 
and control of his parents and relations, every useful habit which 
the earlier parts of his education might have had some tendency 
to form in him, instead of being riveted and confirmed, is 
almost necessarily either weakened or effaced. Nothing but 
the discredit into which the universities are allowing themselves 
to fall could ever have brought into repute so very absurd a 
practice as that of travelling at this early pernd of life. By 
sending his son abroad, a father delivers himscl. at least for 
some time, from so disagreeable an object as that of a son 
unemployed, neglected, and going to ruin before his eyes. 

Such have been the effects of some of the modern institutions 
for education. 

Different plans and different institutions for education seem 
to have taken place in other ages and nations. 



258 The Wealth of Nations 

In the republics of ancient Greece, every free citizen was 
instructed, under the direction of the public magistrate, in 
gymnastic exercises and in music. By gymnastic exercises it 
was intended to harden his body, to sharpen his courage, and 
to prepare him for the fatigues and dangers of war; and as the 
Greek militia was, by all accounts, one of the best that ever 
was in the world, this part of their public education must have 
answered completely the purpose for which it was intended. 
By the other part, music, it was proposed, at least by the 
philosophers and historians who have given us an account of 
those institutions, to humanise the mind, to soften the temper, 
and to dispose it for performing all the social and moral duties 
both of public and private life. 

In ancient Rome the exercises of the Campus Martius answered 
the same purpose as those of the Gymnasium in ancient Greece, 
and they seem to have answered it equally well. But among the 
Romans there was nothing which corresponded to the musical 
education of the Greeks. The morals of the Romans, however, 
both in private and public life, seem to have been not only 
equal, but, upon the whole, a good deal superior to those of the 
Greeks. That they were superior in private life, we have the 
express testimony of Polybius and of Dionysius of Halicarnassus, 
two authors well acquainted with both nations ; and the whole 
tenor of the Greek and Roman history bears witness to the 
superiority of the public morals of the Romans. The good 
temper and moderation of contending factions seems to be the 
most essential circumstance in the public morals of a free people. 
But the factions of the Greeks were almost always violent and 
sanguinary; whereas, till the time of the Gracchi, no blood had 
ever been shed in any Roman faction ; and from the time of the 
Gracchi the Roman republic may be considered as in reality 
dissolved. Notwithstanding, therefore, the very respectable 
authority of Plato, Aristotle, and Polybius, and notwithstanding 
the very ingenious reasons by which Mr. Montesquieu endeavours 
to support that authority, it seems probable that the musical 
education of the Greeks had no great effect in mending their 
morals, since, without any such education, those of the Romans 
were upon the whole superior. The respect of those ancient 
sages for the institutions of their ancestors had probably dis 
posed them to find much political wisdom in what was, perhaps, 
merely an ancient custom, continued without interruption from 
the earliest period of those societies to the times in which they 
had arrived at a considerable degree of refinement. Music and 



The Expenses of the Sovereign 259 

dancing are the great amusements of almost all barbarous 
nations, and the great accomplishments which are supposed 
to fit any man for entertaining his society. It is so at this day 
among the negroes on the coast of Africa. It was so among 
the ancient Celts, among the ancient Scandinavians, and, as 
we may learn from Homer, among the ancient Greeks in the 
times preceding the Trojan war. When the Greek tribes had 
formed themselves into little republics, it was natural that the 
study of those accomplishments should, for a long time, make 
a part of the public and common education of the people. 

The masters who instructed the young people, either in music 
or in military exercises, do not seem to have been paid, or even 
appointed by the state, either in Rome or even in Athens, the 
Greek republic of whose laws and customs we are the best 
informed. The state required that every free citizen should 
fit himself for defending it in war, and should, upon that account, 
learn his military exercises. But it left him to learn them of 
such masters as he could find, and it seems to have advanced 
nothing for this purpose but a public field or place of exercise 
in which he should practise and perform them. 

In the early ages both of the Greek and Roman republics, 
the other parts of education seem to have consisted in learning 
to read, write, and account according to the arithmetic of the 
times. These accomplishments the richer citizens seem fre 
quently to have acquired at home by the assistance of some 
domestic pedagogue, who was generally cither a slave or a 
f reed-man; and the poorer citizens, in the schools of such 
masters as made a trade of teaching for hire. Such parts of 
education, however, were abandoned altogether to the care of 
the parents or guardians of each individual. It does not appear 
that the state ever assumed any inspection or direction of them. 
By a law of Solon, indeed, the children were acquitted from 
maintaining those parents in their old age who had neglected 
to instruct them in some profitable trade or business. 

In the progress of refinement, when philosophy and rhetoric 
came into fashion, the better sort of people used to send their 
children to the schools of philosophers and rhetoricians, in order 
to l>e instructed in these fashionable sciences. But those schools 
were not supported by the public They were for a long time 
barely tolerated by it. The demand for philosophy and rhetoric 
was for a long time so small that the first professed teachers 
of either could not find constant employment in any one city, 
but were obliged to travel about from place to place. In this 

*14 3 



260 The Wealth of Nations 

manner lived Zeno of Elea, Protagoras, Gorgias, Hippias, and 
many others. As the demand increased, the schools both of 
philosophy and rhetoric became stationary; first in Athens, and 
afterwards in several other cities. The state, however, seems 
never to have encouraged them further than by assigning to 
some of them a particular place to teach in, which was some 
times done, too, by private donors. The state seems to have 
assigned the Academy to Plato, the Lyceum to Aristotle, and 
the Portico to Zeno of Citta, the founder of the Stoics. But 
Epicurus bequeathed his gardens to his own school. Till about 
the time of Marcus Antoninus, however, no teacher appears to 
have had any salary from the public, or to have had any other 
emoluments but what arose from the honoraries or fees of his 
scholars. The bounty which that philosophical emperor, as we 
learn from Lucian, bestowed upon one of the teachers of philo 
sophy, probably lasted no longer than his own life. There was 
nothing equivalent to the privileges of graduation, and to have 
attended any of those schools was not necessary, in order to be 
permitted to practise any particular trade or profession. If the 
opinion of their own utility could not draw scholars to them, 
the law neither forced anybody to go to them nor rewarded 
anybody for having gone to them. The teachers had no juris 
diction over their pupils, nor any other authority besides that 
natural authority, which superior virtue and abilities never fail 
to procure from young people towards those who are entrusted 
with any part of their education. 

At Rome, the study of the civil law made a part of the 
education, not of the greater part of the citizens, but of some 
particular families. The young people, however, who wished 
to acquire knowledge in the law, had no public school to go to, 
and had no other method of studying it than by frequenting 
the company of such of their relations and friends as were 
supposed to understand it. It is perhaps worth while to remark, 
that though the laws of the twelve tables were, many of them, 
copied from those of some ancient Greek republics, yet law never 
seems to have grown up to be a science in any republic of 
ancient Greece. In Rome it became a science very early, and 
gave a considerable degree of illustration to those citizens who 
had the reputation of understanding it. In the republics of 
ancient Greece, particularly in Athens, the ordinary courts of 
justice consisted of numerous, and therefore disorderly, bodies 
of people, who frequently decided almost at random, or as 
clamour, faction, and party spirit happened to determine. The 



The Expenses of" the Sovereign 261 

ignominy of an unjust decision, when it was to be divided among 
five hundred, a thousand, or fifteen hundred people (for some 
of their courts were so very numerous), could not fall very heavy 
upon any individual. At Rome, on the contrary, the principal 
courts of justice consisted either of a single judge or of a small 
number of judges, whose characters, especially as they deliberated 
always in public, could not fail to be very much affected by any 
rash or unjust decision. In doubtful cases such courts, from 
their anxiety to avoid blame, would naturally endeavour to 
shelter themselves under the example or precedent of the 
judges who had sat before them, either in the same or in some 
other court. This attention to practice and precedent neces 
sarily formed the Roman law into that regular and orderly 
system in which it has been delivered down to us; and the like 
attention has had the like effects upon the laws of every other 
country where such attention has taken place. The superiority 
of character in the Romans over that of the Greeks, so much 
remarked by Polybius and Dionysius of Halicarnassus, was 
probably more owing to the l>etter constitution of their courts 
of justice than to any of the circumstances to which those 
authors ascribe it. The Romans are said to have been particu 
larly distinguished for their superior respect to an oath. But 
the people who were accustomed to make oath only before some 
diligent and well-informed court of justice would naturally be 
much more attentive to what they swore than they who were 
accustomed to do the same thing before mobbish and disorderly 
assemblies. 

The abilities, both civil and military, of the Greeks and 
Romans will readily be allowed to have been at least equal 
to those of any modern nation. Our prejudice is perhaps rather 
to overrate them. But except in what related to military 
exercises, the state seems to have been at no pains to form those 
great abilities, for I cannot be induced to believe that the 
musical education of the Greeks could be of much consequence 
in forming them. Masters, however, had been found, it seems, 
for instructing the better sort of people among those nations in 
every art and science in which the circumstances of their society 
rendered it necessary or convenient for them to be instructed. 
The demand for such instruction produced what it always pro 
duces the talent for giving it; and the emulation which an 
unrestrained competition never fails to excite, appears to have 
brought that talent to a very high degree of perfection. In the 
attention which the ancient philosophers excited, in the empire 



262 The Wealth of Nations 

which they acquired over the opinions and principles of their 
auditors, in the faculty which they possessed of giving a certain 
tone and character to the conduct and conversation of those 
auditors, they appear to have been much superior to any 
modern teachers. In modern times, the diligence of public 
teachers is more or less corrupted by the circumstances which 
render them more or less independent of their success and 
reputation in their particular professions. Their salaries, too, 
put the private teacher, who would pretend to come into com 
petition with them, in the same state with a merchant who 
attempts to trade without a bounty in competition with those 
who trade with a considerable one. If he sells his goods at 
nearly the same price, he cannot have the same profit, and 
poverty and beggary at least, if not bankruptcy and ruin, will 
infallibly be his lot. If he attempts to sell them much dearer, 
he is likely to have so few customers that his circumstances will 
not be much mended. The privileges of graduation, besides, 
are in many countries necessary, or at least extremely convenient, 
to most men of learned professions, that is, to the far greater 
part of those who have occasion for a learned education. But 
those privileges can be obtained only by attending the lectures 
of the public teachers. The most careful attendance upon the 
ablest instructions of any private teacher cannot always give 
any title to demand them. It is from these different causes 
that the private teacher of any of the sciences which are 
commonly taught in universities is in modern times generally 
considered as in the very lowest order of men of letters. A man 
of real abilities can scarce find out a more humiliating or a more 
unprofitable employment to turn them to. The endowments 
of schools and colleges have, in this manner, not only corrupted 
the diligence of public teachers, but have rendered it almost 
impossible to have any good private ones. 

Were there no public institutions for education, no system, 
no science would be taught for which there was not some 
demand, or which the circumstances of the times did not 
render it either necessary, or convenient, or at least fashionable, 
to learn. A private teacher could never find his account in 
teaching either an exploded and antiquated system of a science 
acknowledged to be useful, or a science universally believed to 
be a mere useless and pedantic heap of sophistry and nonsense. 
Such systems, such sciences, can subsist nowhere, but in those 
incorporated societies for education whose prosperity and revenue 
are in a great measure independent of their reputation and 



The Expenses of the Sovereign 263 

altogether independent of their industry. Were there no public 
institutions for education, a gentleman, after going through 
with application and abilities the most complete course of 
education which the circumstances of the times were supposed 
to afford, could not come into the world completely ignorant of 
everything which is the common subject of conversation among 
gentlemen and men of the world. 

There are no public institutions for the education of women, 
and there is accordingly nothing useless, absurd, or fantastical 
in the common course of their education. They are taught 
what their parents or guardians judge it necessary or useful 
for them to learn, and they are taught nothing else. Every 
part of their education tends evidently to some useful purpose; 
either to improve the natural attractions of their person, or to 
form their mind to reserve, to modesty, to chastity, and to 
economy; to render them both likely to become the mistresses 
of a family, and to behave properly when they have become 
such. In every part of her life a woman feels some conveniency 
or advantage from every part of her education. It seldom 
happens that a man, in any part of his life, derives any con 
veniency or advantage from some of the most laborious and 
troublesome parts of his education. 

Ought the public, therefore, to give no attention, it may be 
asked, to the education of the people? Or if it ought to give 
any, what are the different parts of education which it ought 
to attend to in the different orders of the people? and in what 
manner ought it to attend to them? 

In some cases the state of the society necessarily places the 
greater part of individuals in such situations as naturally form 
in them, without any attention of government, almost all the 
abilities and virtues which that state requires, or perhaps can 
admit of. In other cases the state of the society does not place 
the greater part of individuals in such situations, and some 
attention of government is necessary in order to prevent the 
almost entire corruption and degeneracy of the great body of 
the people. 

In the progress of the division of labour, the employment of 
the far greater part of those who live by labour, that is, of the 
great body of the people, comes to be confined to a few very 
simple operations, frequently to one or two. But the under 
standings of the greater part of men are necessarily formed 
by their ordinary employments. The man whose whole life is 
spent in performing a few simple operations, of which the 



264 The Wealth of Nations 

effects are perhaps always the same, or very nearly the 
same, has no occasion to exert his understanding or to 
exercise his invention in finding out expedients for removing 
difficulties which never occur. He naturally loses, therefore, 
the habit of such exertion, and generally becomes as stupid 
and ignorant as it is possible for a human creature to become. 
The torpor of his mind renders him not only incapable of 
relishing or bearing a part in any rational coversation, but of 
conceiving any generous, noble, or tender sentiment, and con 
sequently of forming any just judgment concerning many even 
of the ordinary duties of private life. Of the great and extensive 
interests of his country he is altogether incapable of judging, 
and unless very particular pains have been taken to render him 
otherwise, he is equally incapable of defending his country in 
war. The uniformity of his stationary life naturally corrupts 
the courage of his mind, and makes him regard with abhorrence 
the irregular, uncertain, and adventurous life of a soldier. It 
corrupts even the activity of his body, and renders him incapable 
of exerting his strength with vigour and perseverance in any 
other employment than that to which he has been bred. His 
dexterity at his own particular trade seems, in this manner, to 
be acquired at the expense of his intellectual, social, and martial 
virtues. But in every improved and civilised society this is the 
state into which the labouring poor, that is, the great body of 
the people, must necessarily fall, unless government takes some 
pains to prevent it. 

It is otherwise in the barbarous societies, as they are commonly 
called, of hunters, of shepherds, and even of husbandmen in 
that rude state of husbandry which precedes the improvement 
of manufactures and the extension of foreign commerce. In 
such societies the varied occupations of every man oblige every 
man to exert his capacity and to invent expedients for removing 
difficulties which are continually occurring. Invention is kept 
alive, and the mind is not suffered to fall into that drowsy 
stupidity which, in a civilised society, seems to benumb the 
understanding of almost all the inferior ranks of people. In 
those barbarous societies, as they are called, every man, it has 
already been observed, is a warrior. Every man, too, is in some 
measure a statesman, and can form a tolerable judgment con 
cerning the interest of the society and the conduct of those who 
govern it. How far their chiefs are good judges in peace, or 
good leaders in war, is obvious to the observation of almost every 
single man among them. In such a society, indeed, no man can 



The Expenses of the Sovereign 265 

well acquire that improved and refined understanding which a 
few men sometimes possess in a more civilised state. Though 
in a rude society there is a good deal of variety in the occupa 
tions of every individual, there is not a great deal in those of 
the whole society. Every man does, or is capable of doing, 
almost even, thing which any other man does, or is capable of 
doing. Every man has a considerable degree of knowledge, 
ingenuity, and invention; but scarce any man has a great 
degree. The degree, however, which is commonly possessed, 
is generally sufficient for conducting the whole simple business 
of the society. In a civilised state, on the contrary, though 
there is little variety in the occupations of the greater part of 
individuals, there is an almost infinite variety in those of the 
whole society. These varied occupations present an almost 
infinite variety of objects to the contemplation of those few, 
who, being attached to no particular occupation themselves, 
have leisure and inclination to examine the occupations of other 
people. The contemplation of so great a variety of objects 
necessarily exercises their minds in endless comparisons and 
combinations, and renders their understandings, in an extra 
ordinary degree, both acute and comprehensive. Unless those 
few, however, happen to be placed in some very particular 
situations, their great abilities, though honourable to themselves, 
may contribute very little to the good government or happiness 
of their society. Notwithstanding the great abilities of those 
few, all the nobler parts of the human character may be, in a 
great measure, obliterated and extinguished in the great body 
of the people. 

The education of the common people requires, perhaps, in a 
civilised and commercial society the attention of the public 
more than that of people of some rank and fortune. People of 
some rank and fortune are generally eighteen or nineteen years 
of age before they enter upon that particular business, pro 
fession, or trade, by which they propose to distinguish them 
selves in the world. They have before that full time to acquire, 
or at least to fit themselves for afterwards acquiring, every 
accomplishment which can recommend them to the public 
esteem, or render them worthy of it. Their parents or guardians 
are generally sufficiently anxious that they should be so accom 
plished, and are, in most cases, willing enough to lay out the 
expense which is necessary for that purpose. If they are not 
always properly educated, it is seldom from the want of expense 
laid out upon their education, but from the improper applica- 



266 The Wealth of Nations 

tion of that expense. It is seldom from the want of masters, 
but from the negligence and incapacity of the masters who are 
to be had, and from the difficulty, or rather from the impossi 
bility, which there is in the present state of things of rinding 
any better. The employments, too, in which people of some 
rank or fortune spend the greater part of their lives are not, 
like those of the common people, simple and uniform. They 
are almost all of them extremely complicated, and such as 
exercise the head more than the hands. The understandings of 
those who are engaged in such employments can seldom grow 
torpid for want of exercise. The employments of people of 
some rank and fortune, besides, are seldom such as harass them 
from morning to night. They generally have a good deal of 
leisure, during which they may perfect themselves in every 
branch either of useful or ornamental knowledge of which they 
may have laid the foundation, or for which they may have 
acquired some taste in the earlier part of life. 

It is otherwise with the common people. They have little 
time to spare for education. Their parents can scarce afford to 
maintain them even in infancy. As soon as they are able to 
work they must apply to some trade by which they can earn 
their subsistence. That trade, too, is generally so simple and 
uniform as to give little exercise to the understanding, while, 
at the same time, their labour is both so constant and so severe, 
that it leaves them little leisure and less inclination to apply to, 
or even to think of, anything else. 

But though the common people cannot, in any civilised 
society, be so well instructed as people of some rank and fortune, 
the most essential parts of education, however, to read, write, 
and account, can be acquired at so early a period of life that 
the greater part even of those who are to be bred to the lowest 
occupations have time to acquire them before they can lx 
employed in those occupations. For a very small expense the 
public can facilitate, can encourage, and can even impose upon 
almost the whole body of the people the necessity of acquiring 
those most essential parts of education. 

The public can facilitate this acquisition by establishing in 
every parish or district a little school, where children may be 
taught for a reward so moderate that even a common labourer 
may afford it; the master being partly, but not wholly, paid by 
the public, because, if he was wholly, or even principally, paid 
by it, he would soon learn to neglect his business. In Scotland 
the establishment of such parish schools has taught almost the 



The Expenses of the Sovereign 267 

whole common people to read, and a very great proportion of 
them to write and account. In England the establishment of 
charity schools has had an effect of the same kind, though not 
so universally, because the establishment is not so universal. 
If in those little schools the books, by which the children are 
taught to read, were a little more instructive than they a mmunly 
are, and if, instead of a little smattering of Latin, Wuich the 
children of the common people are sometimes taught there, and 
which can scarce ever be of any use to them, they were in 
structed in the elementary parts of geometry and mechanics, 
the literary education of this rank of people would perhaps be 
as complete as it can be. There is scarce a common trade 
which does not afford some opportunities of applying to it the 
principles of geometry and mechanics, and which would not 
therefore gradually exercise and improve the common people in 
those principles, the necessary introduction to the most sublime 
as well as to the most useful sciences. 

The public can encourage the acquisition of those most 
essential parts of education by giving small premiums, and 
little badges of distinction, to the children of the common people 
who excel in them. 

The public can impose upon almost the whole body of t ie 
people the necessity of acquiring those most essential parts of 
education, by obliging every man to undergo an examination or 
probation in them before he can obtain the freedom in any 
corporation, or be allowed to set up any trade either in a village 
or town corporate. 

It was in this manner, by facilitating the acquisition of their 
military and gymnastic exercises, by encouraging it, and even 
by imposing upon the whole body of the people the necessity of 
learning those exercises, that the Greek and Roman republics 
maintained the martial spirit of their respective citizens. They 
facilitated the acquisition of those exercises by appointing a 
certain place for learning and practising them, and by granting 
to certain masters the privilege of teaching in that place. Those 
masters do not appear to have had either salaries or exclusive 
privileges of any kind. Their reward consisted altogether in 
what they got from their scholars; and a citizen who had learnt 
his exercises in the public gymnasia had no sort of legal ad 
vantage over one who had learnt them privately, provided 
the latter had learnt them equally well. Those republics en 
couraged the acquisition of those exercises by bestowing little 
premiums and badges of distinction upon those who excelled in 



268 The Wealth of Nations 

them. To have gained a prize in the Olympic, Isthmian, or 
Nemsean games, gave illustration, not only to the person who 
gained it, but to his whole family and kindred. The obligation 
which every citizen was under to serve a certain number of 
years, if called upon, in the armies of the republic, sufficiently 
imposed the necessity of learning those exercises, without which 
he could not be fit for that service. 

That in the progress of improvement the practice of military 
exercises, unless government takes proper pains to support it, 
goes gradually to decay, and, together with it, the martial spirit 
of the great body of the people, the example of modern Europe 
sufficiently demonstrates. But the security of every society 
must always depend, more or less, upon the martial spirit of the 
great body of the people. In the present times, indeed, that 
martial spirit alone, and unsupported by a well-disciplined 
standing army, would not perhaps be sufficient for the defence 
and security of any society. But where every citizen had the 
spirit of a soldier, a smaller standing army would surely be 
requisite. That spirit, besides, would necessarily diminish very 
much the dangers to liberty, whether real or imaginary, which 
are commonly apprehended from a standing army. As it would 
very much facilitate the operations of that army against a 
foreign invader, so it would obstruct them as much if, unfortu 
nately, they should ever be directed against the constitution of 
the state. 

The ancient institutions of Greece and Rome seem to have 
been much more effectual for maintaining the martial spirit of 
the great body of the people than the establishment of what 
are called the militias of modern times. They were much more 
simple. When they were once established they executed them 
selves, and it required little or no attention from government to 
maintain them in the most perfect vigour. Whereas to main 
tain, even in tolerable execution, the complex regulations of 
any modern militia, requires the continual and painful attention 
of government, without which they are constantly falling into 
total neglect and disuse. The influence, besides, of the ancient 
institutions was much more universal. By means of them the 
whole body of the people was completely instructed in the use 
of arms. Whereas it is but a very small part of them who can 
ever be so instructed by the regulations of any modern militia, 
except, perhaps, that of Switzerland. But a coward, a man 
incapable either of defending or of revenging himself, evidently 
wants one of the most essential parts of the character of a man. 



The Expenses of the Sovereign 269 

He is as much mutilated and deformed in his mind as another 
is in his body, who is either deprived of some of its most essen 
tial members, or has lost the use of them. He is evidently the 
more wretched and miserable of the two; because happiness 
and misery, which reside altogether in the mind, must necessarily 
depend more upon the healthful or unhealthful, the mutilated 
or entire state of the mind, than upon that of the body. Even 
though the martial spirit of the people were of no use towards 
the defence of the society, yet to prevent that sort of mental 
mutilation, deformity, and wretchedness, which cowardice neces 
sarily involves in it, from spreading themselves through the 
great body of the people, would still deserve the most serious 
attention of government, in the same manner as it would 
deserve its most serious attention to prevent a leprosy or any 
other loathsome and offensive disease, though neither mortal 
nor dangerous, from spreading itself among them, though 
perhaps no other public good might result from such attention 
besides the prevention of so great a public evil. 

The same thing may be said of the gross ignorance and 
stupidity which, in a civilised society, seem so frequently to 
benumb the understandings of all the inferior ranks of people. 
A man without the proper use of the intellectual faculties of a 
man, is, if possible, more contemptible than even a coward, and 
seems to be mutilated and deformed in a still more essential 
part of the character of human nature. Though the state was 
to derive no advantage from the instruction of the inferior 
ranks of people, it would still deserve its attention that they 
should not be altogether uninstructed. The state, however, 
derives no inconsiderable advantage from their instruction. 
The more they are instructed the less liable they arc to the 
delusions of enthusiasm and superstition, which, among ignorant 
nations, frequently occasion the most dreadful disorders. An 
instructed and intelligent people, besides, are always more decent 
and orderly than an ignorant and stupid one. They feel them 
selves, each individually, more respectable and more likely to 
obtain the respect of their lawful superiors, and they are there 
fore more disposed to respect those superiors. They are more 
disposed to examine, and more capable of seeing through, the 
interested complaints of faction and sedition, and they are, upon 
that account, less apt to be misled into any wanton or unneces 
sary opposition to the measures of government. In free 
countries, where the safety of government depends very much 
upon th; favourable judgment which the people may form of 



270 The Wealth of Nations 

its conduct, it must surely be of the highest importance that 
they should not be disposed to judge rashly or capriciously 
concerning it. 

ARTICLE III 

Of the Expense of the Institutions for the Instruction of 
People of all Ages 

THE institutions for the instruction of people of all ages are 
chiefly those for religious instruction. This is a species 
of instruction of which the object is not so much to render 
the people good citizens in this world, as to prepare them 
for another and a better world in a life to come. The 
teachers of the doctrine which contains this instruction, in 
the same manner as other teachers, may either depend alto 
gether for their subsistence upon the voluntary contributions 
of their hearers, or they may derive it from some other fund to 
which the law of their country may entitle them; such as a 
lauded estate, a tythe or land tax, an established salary or 
stipend. Their exertion, their zeal and industry, are likely to 
be much greater in the former situation than in the latter. In 
this respect the teachers of new religions have always had a 
considerable advantage in attacking those ancient and estab 
lished systems of which the clergy, reposing themselves upon 
their benefices, had neglected to keep up the fervour of faith 
and devotion in the great body of the people, and having given 
themselves up to indolence, were become altogether incapable 
of making any vigorous exertion in defence even of their own 
establishment. The clergy of an established and well-endowed 
religion frequently become men of learning and elegance, who 
possess all the virtues of gentlemen, or which can recommend 
them to the esteem of gentlemen; but they are apt gradually 
to lose the qualities, both good and bad, which gave them 
authority and influence with the inferior ranks of people, and 
which had perhaps been the original causes of the success and 
establishment of their religion. Such a clergy, when attacked 
by a set of popular and bold, though perhaps stupid and ignorant 
enthusiasts, feel themselves as perfectly defenceless as the indo 
lent, effeminate, and full-fed nations of the southern parts of 
Asia when they were invaded by the active, hardy, and hungry 
Tartars of the North. Such a clergy, upon such an emergency, 
have commonly no ^ther resource than to call upon the civil 
magistrate to persecute, destroy, or drive out their adversaries, 



The Expenses of the Sovereign 271 

as disturbers of the public peace. It was thus that the Roman 
Catholic clergy called upon the civil magistrate to persecute 
the Protestants, and the Church of England to persecute the 
Dissenters; and that in general every religious sect, when it has 
once enjoyed for a century or two the security of a legal estab 
lishment, has found itself incapable of making any vigorous 
defence against any new sect which chose to attack its doctrine 
or discipline. Upon such occasions the advantage in point of 
learning and good writing may sometimes be on the side of the 
established church. But the arts of popularity, all the arts of 
gaining proselytes, are constantly on the side of its adversaries. 
In England those arts have been long neglected by the well- 
endowed clergy of the established church, u:id are at present 
chiefly cultivated by the Dissenters and by the Methodists. 
The independent provisions, however, which in many places 
have been made for dissenting teachers by means of voluntary 
subscriptions, of trust rights, and other evasions of the law, 
seem very much to have abated the zeal and activity of those 
teachers. They have many of them become very learned, in 
genious, and respectable men; but they have in general ceased 
to be very popular preachers. The Methodists, without half 
the learning of the Dissenters, are much more in vogue. 

In the Church of Rome, the industry and zeal of the inferior 
clergy are kept more alive by the powerful motive of self- 
interest than perhaps in any established Protestant church. 
The parochial clergy derive, many of them, a very considerable 
part of their subsistence from the voluntary oblations of the 
people; a source of revenue which confession gives them many 
opportunities of improving. The mendicant orders derive their 
whole subsistence from such oblations. It is with them 
as with the hussars and light infantry of some armies; no 
plunder, no pay. The parochial clergy are like those teachers 
whose reward depends partly upon their salary, and partly upon 
the fees or lumoraries which they get from their pupils, and 
these must always depend more or less upon their industry and 
reputation. The mendicant orders are like those teachers whose 
subsistence depends altogether upon their industry. They are 
obliged, therefore, to use every art which can animate the 
devotion of the common people. The establishment of the two 
great mendicant orders of St. Dominic and St. Francis, it is 
observed by Machiavel, revived, in the thirteenth and fourteenth 
centuries, the languishing faith and devotion of the Catholic 
Church. In Roman Catholic countries the spirit of devotion is 



272 The Wealth of Nations 

supported altogether by the monks and by the poorer parochial 
clergy. The great dignitaries of the church, with all the accom 
plishments of gentlemen and men of the world, and sometimes 
with those of men of learning, are careful enough to maintain 
the necessary discipline over their inferiors, but seldom give 
themselves any trouble about the instruction of the people. 

" Most of the arts and professions in a state," says by far the 
most illustrious philosopher and historian of the present age, 
" are of such a nature that, while they promote the interests of 
the society, they are also useful or agreeable to some individuals; 
and in that case, the constant rule of the magistrate, except 
perhaps on the first introduction of any art, is to leave the 
profession to itself, and trust its encouragement to the indivi 
duals who reap the benefit of it. The artisans, finding their 
profits to rise by the favour of their customers, increase as 
much as possible their skill and industry; and as matters are 
not disturbed by any injudicious tampering, the commodity is 
always sure to be at all times nearly proportioned to the demand. 

" But there are also some callings, which, though useful and 
even necessary in a state, bring no advantage or pleasure to 
any individual, and the supreme power is obliged to alter its 
conduct with regard to the retainers of those professions. It 
must give them public encouragement in order to their sub 
sistence, and it must provide against that negligence to which 
they will naturally be subject, either by annexing particular 
honours to the profession, by establishing a long subordination 
of ranks and a strict dependance, or by some other expedient. 
The persons employed in the finances, fleets, and magistracy, 
are instances of this order of men. 

" It may naturally be thought, at first sight, that the eccle 
siastics belong to the first class, and that their encouragement, 
as well as that of lawyers and physicians, may safely be en 
trusted to the liberality of individuals, who are attached to 
their doctrines, and who find benefit or consolation from their 
spiritual ministry and assistance. Their industry and vigilance 
will, no doubt, be whetted by such an additional motive; and 
their skill in the profession, as well as their address in governing 
the minds of the people, must receive daily increase from their 
increasing practice, study, and attention. 

" But if we consider the matter more closely, we shall find 
that this interested diligence of the clergy is what every wise 
legislator will study to prevent; because in every religion except 
the true it is highly pernicious, and it has even a natural 



The Expenses of the Sovereign 273 

tendency to pervert the true, by infusing into it a strong mixture 
of superstition, folly, and delusion. Each ghostly practitioner, 
in order to render himself more precious and sacred in the eyes 
of his retainers, will inspire them with the most violent abhor 
rence of all other sects, and continually endeavour, by some 
novelty, to excite the languid devotion of his audience. No 
regard will be paid to truth, morals, or decency in the doctrines 
inculcated. Every tenet will be adopted that best suits the 
disorderly affections of the human frame. Customers will be 
drawn to each conventicle by new industry and address in 
practising on the passions and credulity of the populace. And 
in the end, the civil magistrate will find that he has dearly paid 
for his pretended frugality, in saving a fixed establishment for 
the priests ; and that in reality the most decent and advantageous 
composition which he can make with the spiritual guides, is to 
bribe their indolence by assigning stated salaries to their pro 
fession, and rendering it superfluous for them to be farther 
active than merely to prevent their flock from straying in 
quest of new pastures. And in this manner ecclesiastical 
establishments, though commonly they arose at first from 
religious views, prove in the end advantageous to the political 
interests of society." 

But whatever may have been the good or bad effects of the 
independent provision of the clergy, it has, perhaps, been very 
seldom bestowed upon them from any view to those effects. 
Times of violent religious controversy have generally been times 
of equally violent political faction. Upon such occasions, each 
political party has either found it, or imagined it, for its interest 
to league itself with some one or other of the contending religious 
sects. But this could be done only by adopting, or at least by 
favouring, the tenets of that particular sect. The sect which 
had the good fortune to be leagued with the conquering party 
necessarily shared in the victory of its ally, by whose favour 
and protection it was soon enabled in some degree to silence 
and subdue all its adversaries. Those adversaries had generally 
leagued themselves with the enemies of the conquering party, 
and were therefore the enemies of that party. The clergy of 
this particular sect having thus become complete masters of the 
field, and their influence and authority with the great body of 
the people being in its highest vigour, they were powerful enough 
to overawe the chiefs and leaders of their own party, and to 
oblige the civil magistrate to respect their opinions and inrlina- 
tions. Their first demand was generally that he should silence 



274 The Wealth of Nations 

and subdue all their adversaries; and their second, that he 
should bestow an independent provision on themselves. As 
they had generally contributed a good deal to the victory, it 
seemed not unreasonable that they should have some share in 
the spoil. They were weary, besides, of humouring the people, 
and of depending upon their caprice for a subsistence. In 
making this demand, therefore, they consulted their own ease 
and comfort, without troubling themselves about the effect 
which it might have in future times upon the influence and 
authority of their order. The civil magistrate, who could 
comply with this demand only by giving them something which 
he would have chosen much rather to take, or to keep to himself, 
was seldom very forward to grant it. Necessity, however, 
always forced him to submit at last, though frequently not till 
after many delays, evasions, and affected excuses. 

But if politics had never called in the aid of religion, had the 
conquering party never adopted the tenets of one sect more 
than those of another when it had gained the victory, it would 
probably have dealt equally and impartially with all the different 
sects, and have allowed every man to choose his own priest and 
his own religion as he thought proper. There would in this 
case, no doubt, have been a great multitude of religious sects. 
Almost every different congregation might probably have made 
a little sect by itself, or have entertained some peculiar tenets 
of its own. Each teacher would no doubt have felt himself 
under the necessity of making the utmost exertion and of using 
every art both to preserve and to increase the number of his 
disciples. But as every other teacher would have felt himself 
under the same necessity, the success of no one teacher, or 
sect of teachers, could have been very great. The interested 
and active zeal of religious teachers can be dangerous and 
troublesome only where there is either but one sect tolerated 
in the society, or where the whole of a large society is divided 
into two or three great sects; the teachers of each acting by 
concert, and under a regular discipline and subordination. But 
that zeal must be altogether innocent where the society is 
divided into two or three hundred, or perhaps into as many 
thousand small sects, of which no one could be considerable 
enough to disturb the public tranquillity. The teachers of each 
sect, seeing themselves surrounded on all sides with more adver 
saries than friends, would be obliged to learn that candour and 
moderation which is so seldom to be found among the teachers 
of those great sects whose tenets, being supported by the civil 



The Expenses of the Sovereign 275 

magistrate, are held in veneration by almost all the inhabitants of 
extensive kingdoms and empires, and who therefore see nothing 
round them but followers, disciples, and humble admirers. The 
teachers of each little sect, finding themselves almost alone, 
would be obliged to respect those of almost every other sect, 
and the concessions which they would mutually find it both 
convenient and agreeable to make to one another, might in 
time probably reduce the doctrine of the greater part of them 
to that pure and rational religion, free from every mixture of 
absurdity, imposture, or fanaticism, such as wise men have in 
all ages of the world wished to see established; but such as 
positive law has perhaps never yet established, and probably 
never will establish, in any country: because, with regard to 
religion, positive law always has been, and probably always 
will be, more or less influenced by popular superstition and 
enthusiasm. This plan of ecclesiastical government, or more 
properly of no ecclesiastical government, was what the sect called 
Independents, a sect no doubt of very wild enthusiasts, proposed 
to establish in England towards the end of the civil war. If 
it had been established, though of a very unphilosophical origin, 
it would probably by this time have been productive of the 
most philosophical good temper and moderation with regard 
to every sort of religious principle. It has been established in 
Pennsylvania, where, though the Quakers happen to be the most 
numerous, the law in reality favours no one sect more than 
another, and it is there said to have been productive of this 
philosophical good temper and moderation. 

But though this equality of treatment should not be pro 
ductive of this good temper and moderation in all, or even in 
the greater part of the religious sects of a particular country, 
yet provided those sects were sufficiently numerous, and each 
of them consequently too small to disturb the public tranquillity, 
the excessive zeal of each for its particular tenets could not well 
be productive of any very hurtful effects, but, on the contrary, 
of several good ones: and if the government was perfectly 
decided both to let them all alone, and to oblige them all to let 
alone one another, there is little danger that they would not 
of their own accord subdivide themselves fast enough so as 
soon to become sufficiently numerous. 

In every civilised society, in every society where the distinction 
of ranks has once been completely established, there have been 
always two different schemes or systems of morality current 
at the same time; of which the one may be called the strict or 



276 The Wealth of Nations 

austere; the other the liberal, or, if you will, the loose system. 
The former is generally admired and revered by the common 
people: the latter is commonly more esteemed and adopted by 
what are called people of fashion. The degree of disapprobation 
with which we ought to mark the vices of levity, the vices which 
are apt to arise from great prosperity, and from the excess of 
gaiety and good humour, seems to constitute the principal 
distinction between those two opposite schemes or systems. In 
the liberal or loose system, luxury, wanton and even disorderly 
mirth, the pursuit of pleasure to some degree of intemperance, 
the breach of chastity, at least in one of the two sexes, etc., 
provided they are not accompanied with gross indecency, and 
do not lead to falsehood or injustice, are generally treated with 
a good deal of indulgence, and are easily either excused or 
pardoned altogether. In the austere system, on the contrary, 
those excesses are regarded with the utmost abhorrence and 
detestation. The vices of levity are always ruinous to the 
common people, and a single week s thoughtlessness and dis 
sipation is often sufficient to undo a poor workman for ever, 
and to drive him through despair upon committing the most 
enormous crimes. The wiser and better sort of the common 
people, therefore, have always the utmost abhorrence and 
detestation of such excesses, which their experience tells them 
are so immediately fatal to people of their condition. The dis 
order and extravagance of several years, on the contrary, will 
not always ruin a man of fashion, and people of that rank are 
very apt to consider the power of indulging in some degree of 
excess as one of the advantages of their fortune, and the liberty 
of doing so without censure or reproach as one of the privileges 
which belong to their station. In people of their own station, 
therefore, they regard such excesses with but a small degree of 
disapprobation, and censure them either very slightly or not 
at all. 

Almost all religious sects have begun among the common 
people, from whom they have generally drawn their earliest as 
well as their most numerous proselytes. The austere system of 
morality has, accordingly, been adopted by those sects almost 
constantly, or with very few exceptions; for there have been 
some. It was the system by which they could best recommend 
themselves to that order of people to whom they first proposed 
their plan of reformation upon what had been before established. 
Many of them, perhaps the greater part of them, have even 
endeavoured to gain credit by refining upon this austere system, 



The Expenses of the Sovereign 277 

and by carrying it to some degree of folly and extravagance; 
and this excessive rigour has frequently recommended them 
more thin anything else to the respect and veneration of the 
common people. 

A man of rank and fortune is by his station the distinguished 
member of a great society, who attend to every part of his 
conduct, and \vho thereby oblige him to attend to every part 
of it himself. His authority and consideration depend very 
much upon the respect which this society bears to him. He 
dare not do anything which would disgrace or discredit him in 
it, and he is obliged to a very strict observation of that species 
of morals, whether liberal or austere, which the general consent 
of this society prescribes to persons of his rank and fortune. A 
man of low condition, on the contrary, is far from being a 
distinguished member of any great society. While he remains 
in a country village his conduct may be attended to, and he 
may be obliged to attend to it himself. In this situation, and 
in this situation only, he may have what is called a character 
to lose. But as soon as he comes into a great city he is sunk in 
ob-curity and darkness. His conduct is observed and attended 
to by nobody, and he is therefore very likely to neglect it him 
self, and to abandon himself to even 1 sort of low profligacy and 
vice. He never emerges so effectually from this obscurity, his 
conduct never excites so much the attention of any respectable 
society, as by his becoming the member of a small religious sect. 
He from that moment acquires a degree of consideration which 
he never had before. All his brother sectaries are, for the credit 
of the sect, interested to observe his conduct, and if he gives 
occasion to any scandal, if he deviates very much from those 
austere morals which they almost always require of one another, 
to punish him by what is always a very severe punishment, even 
where no civil effects attend it, expulsion or excommunication 
from the sect. In little religious sects, accordingly, the morals 
of the common people have been almost always remarkably 
regular and orderly ; generally much more so than in the 
established church. The morals of those little sects, indeed, 
have frequently been rather disagreeably rigorous and unsocial. 

There are two very easy and effectual remedies, however, by 
whose joint operation the state might, without violence, correct 
whatever was unsocial or disagreeably rigorous in the morals 
of all the little sects into which the country was divided. 

The first of those remedies is the study of science and philo 
sophy, which the state might render almost universal among all 



278 The Wealth of Nations 

people of middling or more than middling rank and fortune; 
not by giving salaries to teachers in order to make them negligent 
and idle, but by instituting some sort of probation, even in the 
higher and more difficult sciences, to be undergone by every 
person before he was permitted to exercise any liberal profes 
sion, or before he could be received as a candidate for any 
honourable office of trust or profit. If the state imposed upon 
this order of men the necessity of learning, it would have no 
occasion to give itself any trouble about providing them with 
proper teachers. They would soon find better teachers for 
themselves than any whom the state could provide for them. 
Science is the great antidote to the poison of enthusiasm and 
superstition; and where all the superior ranks of people were 
secured from it, the inferior ranks could not be much exposed 
to it. 

The second of those remedies is the frequency and gaiety of 
public diversions. The state, by encouraging, that is by giving 
entire liberty to all those who for their own interest would 
attempt, without scandal or indecency, to amuse and divert 
the people by painting, poetry, music, dancing; by all sorts of 
dramatic representations and exhibitions, would easily dissipate, 
in the greater part of them, that melancholy and gloomy humour 
which is almost always the nurse of popular superstition and 
enthusiasm. Public diversions have always been the objects 
of dread and hatred to all the fanatical promoters of those 
popular frenzies. The gaiety and good humour which those 
diversions inspire were altogether inconsistent with that temper 
of mind which was fittest for their purpose, or which they could 
best work upon. Dramatic representations, besides, frequently 
exposing their artifices to public ridicule, and sometimes even 
to public execration, were upon that account, more than all 
other diversions, the objects of their peculiar abhorrence. 

In a country where the law favoured the teachers of no one 
religion more than those of another, it would not be necessary 
that any of them should have any particular or immediate 
dependency upon the sovereign or executive power; or that he 
should have anything to do either in appointing or in dis 
missing them from their offices. In such a situation he would 
have no occasion to give himself any concern about them, 
further than to keep the peace among them in the same manner 
as among the rest of his subjects; that is, to hinder them from 
persecuting, abusing, or oppressing one another. But it is 
quite otherwise in countries where there is an established or 



The Expenses of the Sovereign 279 

governing religion. The sovereign can in this case never be 
secure unless he has the means of influencing in a considerable 
degree the greater part of the teachers of that religion. 

The clergy of every established church constitute a great 
incorporation. They can act in concert, and pursue their interest 
upon one plan and with one spirit, as much as if they were under 
the direction of one man; and they are frequently, too, under 
such direction. Their interest as an incorporated body is never 
the same with that of the sovereign, and is sometimes directly 
opposite to it. Their great interest is to maintain their authority 
with the people; and this authority depends upon the supposed 
certainty and importance of the whole doctrine which they 
inculcate, and upon the supposed necessity of adopting every 
part of it with the most implicit faith, in order to avoid eternal 
misery. Should the sovereign have the imprudence to appear 
either to deride or doubt himself of the most trifling part of 
their doctrine, or from humanity attempt to protect those who 
did either the one or the other, the punctilious honour of a clergy 
who have no sort of dependency upon him is immediately 
provoked to proscribe him as a profane person, and to employ 
all the terrors of religion in order to oblige the people to transfer 
their allegiance to some more orthodox and obedient prince. 
Should he oppose any of their pretensions or usurpations, the 
danger is equally great. The princes who have dared in this 
manner to rebel against the church, over and above this crime of 
rebellion have generally been charged, too, with the additional 
crime of heresy, notwithstanding their solemn protestations of 
their faith and humble submission to every tenet which she 
thought proper to prescribe to them. But the authority of 
religion is superior to every other authority. The fears which, it 
suggests conquer all other fears. When the authorised teachers 
of religion propagate through the great body of the people 
doctrines subversive of the authority of the sovereign, it is by 
violence only, or by the force of a standing army, that he ran 
maintain his authority. Even a standing army cannot in this 
case give him any lasting security: because if the soldiers are 
not foreigners, which can seldom be the case, but drawn from 
the great body of the people, which must almost always be the 
case, they are likely to be soon corrupted by those very doctrines. 
The revolutions which the turbulence of the Greek clergy was 
continually occasioning at Constantinople, as long as the eastern 
empire subsisted; the convulsions which, during the course of 
several centuries, the turbulence of the Roman clergy was con 



280 The Wealth of Nations 

tinually occasioning in every part of Europe, sufficiently demon 
strate how precarious and insecure must always he the situation 
of the sovereign who has no proper means of influencing the 
clergy of the established and governing religion of his country. 

Articles of faith, as well as all other spiritual matters, it is 
evident enough, are not within the proper department of a 
temporal sovereign, who, though he may be very well qualified 
for protecting, is seldom supposed to be so for instructing the 
people. With regard to such matters, therefore, his authority 
can seldom be sufficient to counterbalance the united authority 
of the clergy of the established church. The public tranquillity, 
however, and his own security, may frequently depend upon 
the doctrines which they may think proper to propagate con 
cerning such matters. As he can seldom directly oppose their 
decision, therefore, with proper weight and authority, it is 
necessary that he should be able to influence it; and he can 
influence it only by the fears and expectations which he may 
excite in the greater part of the individuals of the order. Those 
fears and expectations may consist in the fear of deprivation or 
other punishment, and in the expectation of further preferment. 

In all Christian churches the benefices of the clergy are a 
sort of freeholds which they enjoy, not during pleasure, but 
during life or good behaviour. If they held them by a more 
precarious tenure, and were liable to be turned out upon every 
slight disobligation either of the sovereign or of his ministers, 
it would perhaps be impossible for them to maintain their 
authority with the people, who would then consider them as 
mercenary dependants upon the court, in the sincerity of whose 
instructions they could no longer have any confid-nce. But 
should the sovereign attempt irregularly, and by violence, to 
deprive any number of clergymen of their freeholds, on account, 
perhaps, of their having propagated, with more than ordinary 
zeal, some factious or seditious doctrine, he would only render, 
by such persecution, both them and their doctrine ten times 
more popular, and therefore ten times more troublesome and 
dangerous, than they had been before. Fear is in almost all 
cases a wretched instrument of government, and ought in par 
ticular never to be employed against any order of men who 
have the smallest pretensions to independency. To attempt 
to terrify them serves only to irritate their bad humour, and to 
confirm them in an opposition which more gentle usage perhaps 
might easily induce them either to soften, or to lay aside alto 
gether. The violence which the French government usually 



The Expenses of the Sovereign 281 

employed in order to oblige all their parliaments, or sovereign 
courts of justice, to enregister any unpopular edict, very seldom 
succeeded. The means commonly employed, however, the im 
prisonment of all the refractory members, one would think were 
forcible enough. The princes of the house of Stewart sometimes 
employed the like means in order to influence some of the 
members of the parliament of England; and they generally 
found them equally intractable. The parliament of England is 
now managed in another manner; and a very small experiment, 
which the Duke of Choiseul made about twelve years ago upon 
the parliament of Paris, demonstrated sufficiently that all the 
parliaments of France might have been managed still more 
easily in the same manner. That experiment was not pursued. 
For though management and persuasion are always the easiest 
and the safest instruments of government, as force and violence 
are the worst and the most dangerous, yet such, it seems, is the 
natural insolence of man that he almost always disdains to use 
the good instrument, except when he cannot or dare not use the 
bad one. The French government could and durst use force, 
and therefore disdained to use management and persuasion. 
But there is no order of men, it appears, I believe, from the 
experience of all ages, upon whom it is so dangerous, or rather 
so perfectly ruinous, to employ force and violence, as upon the 
respected clergy of any established church. The rights, the 
privileges, the personal liberty of every individual ecclesiastic 
who is upon good terms with his own order are, even in the 
most despotic governments, more respected than those of any 
other person of nearly equal rank and fortune. It is so in every 
gradation of despotism, from that of the gentle and mild govern 
ment of Paris to that of the violent and furious government of 
Constantinople. But though this order of men can scarce ever 
be forced, they may be managed as easily as any other; and 
the security of the sovereign, as well as the public tranquillity, 
seems to depend very much upon the means which he has of 
managing them ; and those means seem to consist altogether in 
the preferment which he has to bestow upon them. 

In the ancient constitution of the Christian church, the bishop 
of each diocese was elected by the joint votes of the clergy and 
of the people of the episcopal city. The people did not long 
retain their right of election; and while they did retain it, they 
almost always acted under the influence of the clergy, who in 
such spiritual matters appeared to be their natural guides. The 
clergy, however, soon grew weary of the trouble of managing 



28 2 The Wealth of Nations 

them, and found it easier to elect their own bishops themselves. 
The abbot, in the same manner, was elected by the monks of 
the monastery, at least in the greater part of abbacies. All the 
inferior ecclesiastical benefices comprehended within the diocese 
were collated by the bishop, who bestowed them upon such 
ecclesiastics as he thought proper. All church preferments were 
in this manner in the disposal of the church. The sovereign, 
though he might have some indirect influence in those elections, 
and though it was sometimes usual to ask both his consent to 
elect and his approbation of the election, yet had no direct or 
sufficient means of managing the clergy. The ambition of every 
clergyman naturally led him to pay court not so much to his 
sovereign as to his own order, from which only he could expect 
preferment. 

Through the greater part of Europe the pope gradually drew 
to himself first the collation of almost all bishoprics and abbacies, 
or of what were called Consistorial benefices, and afterwards, by 
various machinations and pretences, of the greater part of 
inferior benefices comprehended within each diocese; little 
more being left to the bishop than what was barely necessary 
to give him a decent authority with his own clergy. By this 
arrangement the condition of the sovereign was still worse than 
it had been before. The clergy of all the different countries of 
Europe were thus formed into a sort of spiritual army, dis 
persed in different quarters, indeed, but of which all the move 
ments and operations could now be directed by one head, and 
conducted upon one uniform plan. The clergy of each parti 
cular country might be considered as a particular detachment 
of that army, of which the operations could easily be supported 
and seconded by all the other detachments quartered in the 
different countries round about. Each detachment was not 
only independent of the sovereign of the country in which it 
was quartered, and by which it was maintained, but dependent 
upon a foreign sovereign, who could at any time turn its arms 
against the sovereign of that particular country, and support 
them by the arms of all the other detachments. 

Those arms were the most formidable that can well be 
imagined. In the ancient state of Europe, before the establish 
ment of arts and manufactures, the wealth of the clergy gave 
them the same sort of influence over the common people which 
that of the great barons gave them over their respective vassals, 
tenants, and retainers. In the great landed estates which the 
mistaken piety both of princes and private persons had bestowed 



The Expenses of the Sovereign 283 

upon the church, jurisdictions were established of the same kind 
with those of the great barons, and for the same reason. In 
those great landed estates, the clergy, or their bailiffs, could 
easily keep the peace without the support or assistance either of 
the king or of any other person; and neither the king nor any 
other person could keep the peace there without the support 
and assistance of the clergy. The jurisdictions of the clergy, 
therefore, in their particular baronies or manors, were equally 
independent, and equally exclusive of the authority of the king s 
courts, as those of the great temporal lords. The tenants of 
the clergy were, like those of the great barons, almost all 
tenants at will, entirely dependent upon their immediate lords, 
and therefore liable to be called out at pleasure in order to 
fight in any quarrel in which the clergy might think proper to 
engage them. Over and above the rents of those estates, the 
clergy possessed, in the tythes, a very large portion of the rents 
of all the other estates in every kingdom of Europe. The 
revenues arising from both those species of rents were, the 
greater part of them, paid in kind, in corn, wine, cattle, poultry. 
etc. The quantity exceeded greatly what the clergy could them 
selves consume; and there were neither arts nor manufactures 
for the produce of which they could exchange the surplus. The 
clergy could derive advantage from this immense surplus in no 
other way than by employing it, as the great barons employed 
the like surplus of their revenues, in the most profuse hospitality, 
and in the most extensive charity. Both the hospitality and 
the charity of the ancient clergy, accordingly, are said to have 
been very great. They not only maintained almost the whole 
poor of every kingdom, but many knights and gentlemen had 
frequently no other means of subsistence than by travelling 
about from monastery to monastery, under pretence of devotion, 
but in reality to enjoy the hospitality of the clergy. The re 
tainers of some particular prelates were often as numerous as 
those of the greatest lay-lords; and the retainers of all the 
clergy taken together were, perhaps, more numerous than those 
of all the lay-lords. There was always much more union among 
the clergy than among the lay-lords. The former were under 
a regular discipline and subordination to the papal authority. 
The latter were under no regular discipline or subordination, 
but almost always equally jealous of one another, and of the 
king. Though the tenants and retainers of the clergy, therefore, 
had l>oth together been less numerous than those of the great 
lay-lords, and their tenants were probably much less numerous, 

K4 3 



284 



The Wealth of Nations 



yet their union would have rendered them more formidable. 
The hospitality and charity of the clergy, too, not only gave 
them the command of a great temporal force, but increased 
very much the weight of their spiritual weapons. Those virtues 
procured them the highest respect and veneration among all the 
inferior ranks of people, of whom many were constantly, and 
almost all occasionally, fed by them. Everything belonging or 
related to so popular an order, its possessions, its privileges, its 
doctrines, necessarily appeared sacred in the eyes of the common 
people, and every violation of them, whether real or pretended, 
the highest act of sacrilegious wickedness and profaneness. In 
this state of things, if the sovereign frequently found it difficult 
to resist the confederacy of a few of the great nobility, we 
cannot wonder that he should find it still more so to resist the 
united force of the clergy of his own dominions, supported by 
that of the clergy of all the neighbouring dominions. In such 
circumstances the wonder is, not that he was sometimes obliged 
to yield, but that he ever was able to resist. 

The privileges of the clergy in those ancient times (which to 
us who live in the present times appear the most absurd), their 
total exemption from the secular jurisdiction, for example, or 
what in England was called the benefit of clergy, were the 
natural or rather the necessary consequences of this state of 
things. How dangerous must it have been for the sovereign to 
attempt to punish a clergyman for any crime whatever, if his 
own order were. disposed to protect him, and to represent either 
the proof as insufficient for convicting so holy a man, or the 
punishment as too severe to be inflicted upon one whose person 
had been rendered sacred by religion? The sovereign could, in 
such circumstances, do no better than leave him to be tried by 
the ecclesiastical courts, who, for the honour of their own order, 
were interested to restrain, as much as possible, every member 
of it from committing enormous crimes, or even from giving 
occasion to such gross scandal as might disgust the minds of 
the people. 

In the state in which things were through the greater part of 
Europe during the tenth, eleventh, twelfth, and thirteenth cen 
turies, and for some time both before and after that period, the 
constitution of the Church of Rome may be considered as the 
most formidable combination that ever was formed against the 
authority and security of civil government, as well as against 
the liberty, reason, and happiness of mankind, which can flourish 
only where civil government is able to protect them. In that 



The Expenses of the Sovereign 285 

constitution the grossest delusions of superstition were supported 
in such a manner by the private interests of so great a number 
of people as put them out of all danger from any assault of 
human reason: because though human reason might perhaps 
have been able to unveil, even to the eyes of the common 
people, some of the delusions of superstition, it could never 
have dissolved the ties of private interest. Had this constitu 
tion been attacked by no other enemies but the feeble efforts 
of human reason, it must have endured for ever. But that 
immense and well-built fabric, which all the wisdom and virtue 
of man could never have shaken, much less have overturned, 
was by the natural course of things, first weakened, and after 
wards in part destroyed, and is now likely, in the course of a 
few centuries more, perhaps, to crumble into ruins altogether. 

The gradual improvements of arts, manufactures, and com 
merce, the same causes which destroyed the power of the great 
barons, destroyed in the same manner, through the greater part 
of Europe, the whole temporal power of the clergy. In the 
produce of arts, manufactures, and commerce, the clergy, like 
the great barons, found something for which they could ex 
change their rude produce, and thereby discovered the means 
of spending their whole revenues upon their own persons, with 
out giving any considerable share of them to other people. 
Their charity became gradually less extensive, their hospitality 
less liberal or less profuse. Their retainers became consequently 
less numerous, and by degrees dwindled away altogether. The 
clergy too, like the great barons, wished to get a better rent 
from their landed estates, in order to spend it, in the same 
manner, upon the gratification of their own private vanity and 
folly. But this increase of rent could be got only by granting 
leases to their tenants, who thereby became in a great measure 
independent of them. The ties of interest which bound the 
inferior ranks of people to the clergy were in this manner 
gradually broken and dissolved. They were even broken and 
dissolved sooner than those which bound the same ranks of 
people to the great barons: because the benefices of the church 
being, the greater part of them, much smaller than the estates 
of the great barons, the possessor of each benefice was much 
sooner able to spend the whole of its revenue upon his own 
person. During the greater part of the fourteenth and fifteenth 
centuries the power of the great barons was, through the greater 
part of Europe, in full vigour. But the temporal power of the 
clergy, the absolute command which they had once had over the 



286 The Wealth of Nations 

great body of the people, was very much decayed. The power 
of the church was by that time very nearly reduced through the 
greater part of Europe to what arose from her spiritual authority ; 
and even that spiritual authority was much weakened when it 
ceased to be supported by the charity and hospitality of the 
clergy. The inferior ranks of people no longer looked upon 
that order, as they had done before, as the comforters of their 
distress, and the relievers of their indigence. On the contrary, 
they were provoked and disgusted by the vanity, luxury, and 
expense of the richer clergy, who appeared to spend upon their 
own pleasures what had always before been regarded as the 
patrimony of the poor. 

In this situation of things, the sovereigns in the different 
states of Europe endeavoured to recover the influence which 
they had once had in the disposal of the great benefices of the 
church, by procuring to the deans and chapters of each diocese 
the restoration of their ancient right of electing the bishop, and 
to the monks of each abbacy that of electing the abbot. The 
re-establishing of this ancient order was the object of several 
statutes enacted in England during the course of the fourteenth 
century, particularly of what is called the Statute of Provisors ; 
and of the Pragmatic sanction established in France in the 
fifteenth century. In order to render the election valid, it was 
necessary that the sovereign should both consent to it before 
hand, and afterwards approve of the person elected ; and though 
the election was still supposed to be free, he had, however, all 
the indirect means which his situation necessarily afforded him 
of influencing the clergy in his own dominions. Other regula 
tions of a similar tendency were established in other parts of 
Europe. But the power of the pope in the collation of the 
great benefices of the church seems, before the Reformation, to 
have been nowhere so effectually and so universally restrained 
as in France and England. The Concordat afterwards, in the 
sixteenth century, gave to the kings of France the absolute 
right of presenting to all the great, or what are called the 
consis-torial, benefices of the Gallican Church. 

Since the establishment of the Pragmatic sanction and of the 
Concordat, the clergy of France have in general shown less 
respect to the decrees of the papal court than the clergy of any 
other Catholic country. In all the disputes which their sovereign 
has had with the pope, they have almost constantly taken 
party with the former. This independency of the clergy of 
France upon the court of Rome seems to be principally founded 



The Expenses of the Sovereign 287 

ujxjn the Pragmatic sanction and the Concordat. In the earlier 
{>eriods of the monarchy, the clergy of France appear to have 
l>een as much devoted to the pope as those of any other country. 
When Robert the second prince of the Capetian race was most 
unjustly excommunicated by the court of Rome, his own 
servants, it is said, threw the victuals which came from his 
table to the dogs, and refused to taste anything themselves 
which had been polluted by the contact of a person in his 
situation. They were taught to do so, it may very safely be 
presumed, by the clergy of his own dominions. 

The claim of collating to the great benefices of the church, 
a claim in defence of which the court of Rome had frequently 
shaken, and sometimes overturned the thrones of some of the 
greatest sovereigns in Christendom, was in this manner either 
restrained or modified, or given up altogether, in many different 
parts of Europe, even before the time of the Reformation. As 
the clergy had now less influence over the people, so the state 
had more iniluence over the clergy. The clergy, therefore, had 
both less power and less inclination to disturb the state. 

The authority of the Church of Rome was in this state ot 
declension when the disputes which gave birth to the Reforma 
tion began in Germany, and soon spread themselves through 
every part of Europe. The new doctrines were everywhere 
received with a high degree of popular favour. They were pro 
pagated with all that enthusiastic zeal which commonly animate^ 
the spirit of party when it attacks established authority. The 
teachers of those doctrines, though perhaps in other respects 
not more learned than many of the divines who defended 
the established church, seem in general to have been better 
acquainted with ecclesiastical history, and with the origin and 
progress of that system of opinions upon which the authority 
of the church was established, and they had thereby some 
advantage in almost every dispute. The austerity of their 
manners gave them authority with the common people, who 
contrasted the strict regularity of their conduct with the dis 
orderly lives of the greater part of their own clergy. They 
possessed, too, in a much higher degree than their adversaries 
all the arts of popularity and of gaining proselytes, arts which 
the lofty and dignified sons of the church had long neglected 
as being to them in a great measure useless. The reason of the 
new doctrines recommended them to some, their novelty to 
many; the hatred and contempt of the established clergy to a 
still greater number; but the zealous, passionate, and fanatical, 



288 The Wealth of Nations 

the h frequently coarse and rustic, eloquence with which they 
were almost everywhere inculcated,, recommended them to by 
far the greatest number. 

The success of the new doctrines was almost everywhere so 
great that the princes who at that time happened to be on bad 
terms with the court of Rome were by means of them easily 
enabled, in their own dominions, to overturn the church, which, 
having lost the respect and veneration of the inferior ranks of 
people, could make scarce any resistance. The court of Rome 
had disobliged some of the smaller princes in the northern parts 
of Germany, whom it had probably considered as too insignificant 
to be worth the managing. They universally, therefore, estab 
lished the Reformation in their own dominions. The tyranny 
of Christiern II. and of Troll Archbishop of Upsal, enabled 
Gustavus Vasa to expel them both from Sweden. The pope 
favoured the tyrant and the archbishop, and Gustavus Vasa 
found no difficulty in establishing the Reformation in Sweden. 
Christiern II. was afterwards deposed from the throne of 
Denmark, where his conduct had rendered him as odious as in 
Sweden. The pope, however, was still disposed to favour him, 
and Frederick of Holstein, who had mounted the throne in his 
stead, revenged himself by following the example of Gustavus 
Vasa. The magistrates of Berne and Zurich, who had no 
particular quarrel with the pope, established with great ease 
the Reformation in their respective cantons, where just before 
some of the clergy had, by an imposture somewhat grosser than 
ordinary, rendered the whole order both odious and contemptible. 

In this critical situation of its affairs, the papal court was 
at sufficient pains to cultivate the friendship of the powerful 
sovereigns of France and Spain, of whom the latter was at that 
time Emperor of Germany. With their assistance it was enabled, 
though not without great difficulty and much bloodshed, either 
to suppress altogether or to obstruct very much the progress 
of the Reformation in their dominions. It was well enough 
inclined, too, to be complaisant to the King of England. But 
from the circumstances of the times, it could not be so without 
giving offence to a still greater sovereign, Charles V., King of 
Spain and Emperor of Germany. Henry VIII. accordingly, 
though he did not embrace himself the greater part of the 
doctrines of the Reformation, was yet enabled, by their general 
prevalence, to suppress all the monasteries, and to abolish the 
authority of the Church of Rome in his dominions. That he 
should go so far, though he went no further, gave some satis- 



The Expenses of the Sovereign 289 

faction to the patrons of the Reformation, who having got 
possession of the government in the reign of his son and successor, 
completed without any difficulty the work which Henry VIII. 
had begun. 

In some countries, as in Scotland, where the government was 
weak, unpopular, and not very firmly established, the Reforma 
tion was strong enough to overturn, not only the church, but 
the state likewise for attempting to support the church. 

Among the followers of the Reformation dispersed in all the 
different countries of Europe, there was no general tribunal 
which, like that of the court of Rome, or an oecumenical council, 
could settle all disputes among them, and with irresistible 
authority prescribe to all of them the precise limits of orthodoxy. 
When the followers of the Reformation in one country, therefore, 
happened to differ from their brethren in another, as they had 
no common judge to appeal to, the dispute could never be 
decided; and many such disputes arose among them. Those 
concerning the government of the church, and the right of 
conferring ecclesiastical benefices, were perhaps the most interest 
ing to the peace and welfare of civil society. They gave birth 
accordingly to the two principal parties of sects among the 
followers of the Reformation, the Lutheran and Calvinistic sects, 
the only sects among them of which the doctrine and discipline 
have ever yet been established by law in any part of Europe. 

The followers of Luther, together with what is called the 
Church of England, preserved more or less of the episcopal 
government, established subordination among the clergy, gave 
the sovereign the disposal of all the bishoprics and other con- 
sistorial benefices within his dominions, and thereby rendered 
him the real head of the church; and without depriving the 
bishop of the right of collating to the smaller benefices within 
his diocese, they, even to those benefices, not only admitted, 
but favoured the right of presentation both in the sovereign and 
in all other lay-patrons. This system of church government 
was from the beginning favourable to peace and good order, 
and to submission to the civil sovereign. It has never, accord 
ingly, been the occasion of any tumult or civil commotion in any 
country in which it has once been established. The Church of 
England in particular has always valued herself, with great 
reason, upon the unexceptionable loyalty of her principles. 
Under such a government the clergy naturally endeavour to 
recommend themselves to the sovereign, to the court, and to 
the nobility and gentry of the country, by whose influence they 



290 The Wealth of Nations 

chiefly expect to obtain preferment. They pay court to those 
patrons sometimes, no doubt, by the vilest flattery and assenta 
tion, but frequently, too, by cultivating all those arts which best 
deserve, and which are therefore most likely to gain them the 
esteem of people of rank and fortune; by their knowledge in all 
the different branches of useful and ornamental learning, by 
the decent liberality of their manners, by the social good humour 
of their conversation, and by their avowed contempt of those 
absurd and hypocritical austerities which fanatics inculcate and 
pretend to practise, in order to draw upon themselves the 
veneration, and upon the greater part of men of rank and 
fortune, who avow that they do not practise them, the abhor 
rence of the common people. Such a clergy, however, while 
they pay their court in this manner to the higher ranks of life, 
are very apt to neglect altogether the means of maintaining 
their influence and authority with the lower. They are listened 
to, esteemed, and respected by their superiors; but before their 
inferiors they are frequently incapable of defending, effectually 
and to the conviction of such hearers, their own sober and 
moderate doctrines against the most ignorant enthusiast who 
chooses to attack them. 

The followers of Zuinglius, or more properly those of Calvin, 
on the contrary, bestowed upon the people of each parish, when 
ever the church became vacant, the right of electing their own 
pastor, and established at the same time the most perfect 
equality among the clergy. The former part of this institution, 
as long as it remained in vigour, seems to have been productive 
of nothing but disorder and confusion, and to have tended 
equally to corrupt the morals both of the clergy and of the 
people. The latter part seems never Xo have had any effects 
but what were perfectly agreeable. 

As long as the people of each parish preserved the right of 
electing their own pastors, they acted almost always under the 
influence of the clergy, and generally of the most factious and 
fanatical of the order. The clergy, in order to preserve their 
influence in those popular elections, became, or affected to 
become, many of them, fanatics themselves, encouraged fanati 
cism among the people, and gave the preference almost always 
to the most fanatical candidate. So small a matter as the 
appointment of a parish priest occasioned almost always a 
violent contest, not only in one parish, but in all the neighbour 
ing parishes, who seldom failed to take part in the quarrel. 
When the parish happened to be si uated in a great city, it 



The Expenses of the Sovereign 291 

divided all the inhabitants into two parties ; and when that city 
happened either to constitute itself a little republic, or to be 
the head and capital of a little republic, as is the case with many 
of the considerable cities in Switzerland and Holland, every 
paltry dispute of this kind, over and above exasperating the 
animosity of all their other factions, threatened to leave behind 
it both a new schism in the church, and a new faction in the 
state. In those small republics, therefore, the magistrate very 
soon found it necessary, for the sake of preserving the public 
peace, to assume to himself the right of presenting to all vacant 
benefices. In Scotland, the most extensive country in which 
this Presbyterian form of church government has ever been 
established, the rights of patronage were in effect abolished by 
the act which established Presbytery in the beginning of the 
reign of William III. That act at least put it in the power of 
certain classes of people in each parish to purchase, for a very 
small price, the right of electing their own pastor. The con 
stitution which this act established was allowed to subsist for 
about two-and-twenty years, but was abolished by the loth of 
Queen Anne, ch. 12, on account of the confusions and disorders 
which this more popular mode of election had almost every 
where occasioned. In so extensive a country as Scotland, 
however, a tumult in a remote parish was not so likely to give 
disturbance to government as in a smaller state. The loth of 
Queen Anne restored the rights of patronage. But though in 
Scotland the law gives the benefice without any exception to 
the person presented by the patron, yet the church requires 
sometimes (for she has not in this respect been very uniform in 
her decisions) a certain concurrence of the people before she 
will confer upon the presentee what is called the cure of souls, 
or the ecclesiastical jurisdiction in the parish. She sometimes 
at least, from an affected concern for the peace of the parish, 
delays the settlement till this concurrence can be procured. 
The private tampering of some of the neighbouring clergy, 
sometimes to procure, but more frequently to prevent, this 
concurrence, and the popular arts which they cultivate in order 
to enable them upon such occasions to tamper more effectually, 
are perhaps the causes which principally keep up whatever 
remains of the old fanatical spirit, either in the clergy or in the 
people of Scotland. 

The equality which the Presbyterian form of church govern 
ment establishes among the clergy, consists, first, in the equality 
of authority or ecclesiastical jurisdiction; and, secondly, in the 

*K 43 



292 The Wealth of Nations 

equality of benefice. In all Presbyterian churches the equality 
of authority is perfect : that of benefice is not so. The difference, 
however, between one benefice and another is seldom so con 
siderable as commonly to tempt the possessor even of the small 
one to pay court to his patron by the vile arts of flattery and 
assentation in order to get a better. In all the Presbyterian 
churches, where the rights of patronage are thoroughly estab 
lished, it is by nobler and better arts that the established clergy 
in general endeavour to gain the favour of their superiors; by 
their learning, by the irreproachable regularity of their life, and 
by the faithful and diligent discharge of their duty. Their 
patrons even frequently complain of the independency of their 
spirit, which they are apt to construe into ingratitude for past 
favours, but which at worst, perhaps, is seldom any more than 
that indifference which naturally arises from the consciousness 
that no further favours of the kind are ever to be expected. 
There is scarce perhaps to be found anywhere in Europe a more 
learned, decent, independent, and respectable set of men than 
the greater part of the Presbyterian clergy of Holland, Geneva, 
Switzerland, and Scotland. 

Where the church benefices are all nearly equal, none of them 
can be very great, and this mediocrity of benefice, though it may 
no doubt be carried too far, has, however, some very agreeable 
effects. Nothing but the most exemplary morals can give 
dignity to a man of small fortune. The vices of levity and vanity 
necessarily render him ridiculous, and are, besides, almost as 
ruinous to him as they are to the common people. In his own 
conduct, therefore, he is obliged to follow that system of morals 
which the common people respect the most. He gains their 
esteem and affection by that plan of life which his own interest 
and situation would lead him to follow. The common people 
look upon him with that kindness with which we naturally 
regard one who approaches somewhat to our own condition, but 
who, we think, ought to be in a higher. Their kindness naturally 
provokes his kindness. He becomes careful to instruct them, 
and attentive to assist and relieve them. He does not even 
despise the prejudices of people who are disposed to be so 
favourable to him, and never treats them with those con 
temptuous and arrogant airs which we so often meet with in 
the proud dignitaries of opulent and well-endowed churches. 
The Presbyterian clergy, accordingly, have more influence over 
the minds of the common people than perhaps the clergy of 
any other established church. It is accordingly in Presbyterian 



The Expenses of the Sovereign 293 

countries only that we ever find the common people converted, 
without persecution, completely, and almost to a man, to the 
established church. 

In countries where church benefices are the greater part of 
them very moderate, a chair in a university is generally a better 
establishment than a church benefice. The universities have, 
in this case, the picking and choosing of their members from all 
the churchmen of the country, who, in every country, constitute 
by far the most numerous class of men of letters. Where church 
benefices, on the contrary, are many of them very considerable, 
the church naturally draws from the universities the greater 
part of their eminent men of letters, who generally find some 
patron who does himself honour by procuring them church 
preferment. In the former situation we are likely to find the 
universities filled with the most eminent men of letters that are 
to be found in the country. In the latter we are likely to find 
few eminent men among them, and those few among the youngest 
members of the society, who are likely, too, to be drained away 
from it before they can have acquired experience and know 
ledge enough to be of much use to it. It is observed by Mr. 
de Voltaire, that Father Porree, a Jesuit of no great eminence 
in the republic of letters, was the only professor they had ever 
had in France whose works were worth the reading. In a 
country which has produced so many eminent men of letters, 
it must appear somewhat singular that scarce one of them 
should have been a professor in a university. The famous 
Gassendi was, in the beginning of his life, a professor in the 
University of Aix. Upon the first dawning of his genius, it was 
represented to him that by going into the church he could easily 
find a much more quiet and comfortable subsistence, as well as 
a better situation for pursuing his studies; and he immediately 
followed the advice. The observation of Mr. de Voltaire may 
be applied, I believe, not only to France, but to all other Roman 
Catholic countries. We very rarely find, in any of them, an 
eminent man of letters who is a professor in a university, except, 
perhaps, in the professions of law and physic; professions from 
which the church is not so likely to draw them. After the 
Church of Rome, that of England is by far the richest and best 
endowed church in Christendom. In England, accordingly, 
the church is continually draining the universities of all their 
best and ablest members; and an old college tutor, who is 
known and distinguished in Europe as an eminent man of letters, 
is as rarely to be found there as in any Roman Catholic country. 



294 The Wealth of Nations 

In Geneva, on the contrary, in the Protestant cantons of Switzer 
land, in the Protestant countries of Germany, in Holland, in 
Scotland, in Sweden, and Denmark, the most eminent men of 
letters whom those countries have produced, have, not all 
indeed, but the far greater part of them, been professors in 
universities. In those countries the universities are continually 
draining the church of all its most eminent men of letters. 

It may, perhaps, be worth while to remark that, if we except 
the poets, a few orators, and a few historians, the far greater 
part of the other eminent men of letters, both of Greece and 
Rome, appear to have been either public or private teachers; 
generally either of philosophy or of rhetoric. This remark will 
be found to hold true from the days of Lysias and Isocrates, 
of Plato and Aristotle, down to those of Plutarch and Epictetus, 
of Suetonius and Quintilian. To impose upon any man the 
necessity of teaching, year after year, any particular branch of 
science, seems, in reality, to be the most effectual method for 
rendering him completely master of it himself. By being obliged 
to go every year over the same ground, if he is good for anything, 
he necessarily becomes, in a few years, well acquainted with 
every part of it: and if upon any particular point he should 
form too hasty an opinion one year, when he comes in the course 
of his lectures to reconsider the same subject the year there 
after, he is very likely to correct it. As to be a teacher of 
science is certainly the natural employment of a mere man of 
letters, so is it likewise, perhaps, the education which is most 
likely to render him a man of solid learning and knowledge. 
The mediocrity of church benefices naturally tends to draw the 
greater part of men of letters, in the country where it takes 
place, to the employment in which they can be the most useful 
to the public, and, at the same time, to give them the best 
education, perhaps, they are capable of receiving. It tends to 
render their learning both as solid as possible, and as useful as 
possible. 

The revenue of every established church, such parts of it 
excepted as may arise from particular lands or manors, is a 
branch, it ought to be observed, of the general revenue of the 
state which is thus diverted to a purpose very different from 
the defence of the state. The tythe, for example, is a real land- 
tax, which puts it out of the power of the proprietors of land to 
contribute so largely towards the defence of the state as they 
otherwise might be able to do. The rent of land, however, 
is, according to some, the sole fund, and, according to others, 



The Expenses of the Sovereign 295 

the principal fund, from which, in all great monarchies, the 
exigencies of the state must be ultimately supplied. The more 
of this fund that is given to the church, the less, it is evident, 
can be spared to the state. It may be laid down as a certain 
maxim that, all other things being supposed equal, the richer 
the church, the poorer must necessarily be, either the sovereign 
on the one hand, or the people on the other; and, in all cases, 
the less able must the state be to defend itself. In several 
Protestant countries, particularly in all the Protestant cantons 
of Switzerland, the revenue which anciently belonged to the 
Roman Catholic Church, the tythes and church lands, has been 
found a fund sufficient, not only to afford competent salaries 
to the established clergy, but to defray, with little or no addition, 
all the other expenses of the state. The magistrates of the 
powerful canton of Berne, in particular, have accumulated out 
of the savings from this fund a very large sum, supposed tw 
amount to several millions, part of which is deposited in a public 
treasure, and part is placed at interest in what are called the 
public funds of the different indebted nations of Europe; chiefly 
in those of France and Great Britain. What may be the amount 
of the whole expense which the church, either of Berne, or of 
any other Protestant canton, costs the state, I do not pretend 
to know. By a very exact account it appears that, in 1755, 
the whole revenue of the clergy of the Church of Scotland, 
including their glebe or church lands, and the rent of their 
manses or dwelling-houses, estimated according to a reasonable 
valuation, amounted only to 68,514 is. S^d. This very 
moderate revenue affords a decent subsistence to nine hundred 
and forty-four ministers. The whole expense of the church, 
including what is occasionally laid out for the building and 
reparation of churches, and of the manses of ministers, cannot 
well be supposed to exceed eighty or eighty-five thousand pounds 
a year. The most opulent church in Christendom does not 
maintain hater the uniformity of faith, the fervour of devotion, 
the spirit of order, regularity, and austere morals in the great 
body of the people, than this very poorly endowed Church of 
Scotland. All the good effects, both civil and religious, which 
an established church can be supposed to produce, are produced 
by it as completely as by any other. The greater part of the 
Protestant churches of Switzerland, which in general are not 
better endowed than the Church of Scotland, produce those effects 
in a still higher degree. In the greater part of the Protestant 
cantons there is not a single person to be found who does not 



296 The Wealth of Nations 

profess himself to be of the established church. If he professes 
himself to be of any other, indeed, the law obliges him to leave 
the canton. But so severe, or rather indeed so oppressive a 
law, could never have been executed in such free countries 
had not the diligence of the clergy beforehand converted to 
the established church the whole body of the people, with the 
exception of, perhaps, a few individuals only. In some parts 
of Switzerland, accordingly, where, from the accidental union 
of a Protestant and Roman Catholic country, the conversion has 
not been so complete, both religions are not only tolerated but 
established by law. 

The proper performance of every service seems to require 
that its pay or recompense should be, as exactly as possible, 
proportioned to the nature of the service. If any service is 
very much underpaid, it is very apt to suffer by the meanness 
and incapacity of the greater part of those who are employed 
in it. If it is very much overpaid, it is apt to suffer, perhaps, 
still more by their negligence and idleness. A man of a large 
revenue, whatever may be his profession, thinks he ought to 
live like other men of large revenues, and to spend a great part 
of his time in festivity, in vanity, and in dissipation. But in 
a clergyman this train of life not only consumes the time which 
ought to be employed in the duties of his function, but in the 
eyes of the common people destroys almost entirely that sanctity 
of character which can alone enable him to perform those duties 
with proper weight and authority. 

PART IV 
Of the Expense of supporting the Dignity of the Sovereign 

Over and above the expenses necessary for enabling the sove 
reign to perform his several duties, a certain expense is requisite 
for the support of his dignity. This expense varies both with 
the different periods of improvement, and with the different 
forms of government. 

In an opulent and improved society, where all the different 
orders of people are growing every day more expensive in their 
houses, in their furniture, in their tables, in their dress, and in 
their equipage, it cannot well be expected that the sovereign 
should alone hold out against the fashion. He naturally, there 
fore, or rather necessarily, becomes more expensive in all those 
different articles too. His dignity even seems to require that 
he should become so. 



The Expenses of the Sovereign 297 

As in point of dignity a monarch is more raised above his 
subjects than the chief magistrate of any republic is ever 
supposed to be above his fellow-citizens, so a greater expense 
is necessary for supporting that higher dignity. We naturally 
expect more splendour in the court of a king than in the 
mansion-house of a doge or burgomaster 

CONCLUSION 

The expense of defending the society, and that of supporting 
the dignity of the chief magistrate, are both laid out for the 
general benefit of the whole society. It is reasonable, there 
fore, that they should be defrayed by the general contribution 
of the whole society, all the different members contributing, as 
nearly as possible, in proportion to their respective abilities. 

The expense of the administration of justice, too, may, no 
doubt, be considered as laid out for the benefit of the whole 
society. There is no impropriety, therefore, in its being defrayed 
by the general contribution of the whole society. The persons, 
however, who give occasion to this expense are those who, by 
their injustice in one way or another, make it necessary to seek 
redress or protection from the courts of justice. The persons 
again most immediately benefited by this expense are those 
whom the courts of justice either restore to their rights or 
maintain in their rights. The expense of the administration of 
justice, therefore, may very properly be defrayed by the parti 
cular contribution of one or other, or both, of those two different 
sets of persons, according as different occasions may require, 
that is, by the fees of court. It cannot be necessary to have 
recourse to the general contribution of the whole society, except 
for the conviction of those criminals who have not themselves 
any estate or fund sufficient for paying those fees. 

Those local or provincial expenses of which the benefit is 
local or provincial (what is laid out, for example, upon the police 
of a particular town or district) ought to be defrayed by a local 
or provincial revenue, and ought to be no burden upon the 
general revenue of the society. It is unjust that the whole 
society should contribute towards an expense of which the 
benefit is confined to a part of the society. 

The expense of maintaining good roads and communications 
is, no doubt, beneficial to the whole society, and may, therefore, 
without any injustice, be defrayed by the general contribution 
of the whole society. This expense, however, is most imme- 



298 



The Wealth of Nations 



diately and directly beneficial to those who travel or carry goods 
from one place to another, and to those who consume such 
goods. The turnpike tolls in England, and the duties called 
peages in other countries, lay it altogether upon those two 
different sets of people, and thereby discharge the general 
revenue of the society from a very considerable burden. 

The expense of the institutions for education and religious 
instruction is likewise, no doubt, beneficial to the whole society, 
and may, therefore, without injustice, be defrayed by the 
general contribution of the whole society. This expense, how 
ever, might perhaps with equal propriety, and even with some 
advantage, be defrayed altogether by those who receive the 
immediate benefit of such education and instruction, or by the 
voluntary contribution of those who think they have occasion 
for either the one or the other. 

When the institutions or public works which are beneficial to 
the whole society either cannot be maintained altogether, or 
are not maintained altogether by the contribution of such 
particular members of the society as are most immediately 
benefited by them, the deficiency must in most cases be made 
up by the general contribution of the whole society. The 
general revenue of the society, over and above defraying the 
expense of defending the society, and of supporting the dignity 
of the chief magistrate, must make up for the deficiency of many 
particular branches of revenue. The sources of this general or 
public revenue I shall endeavour to explain in the following 
chapter. 



CHAPTER II 

OF THE SOURCES OF THE GENERAL OR PUBLIC REVENUE 
OF THE SOCIETY 

THE revenue which must defray, not only the expense of 
defending the society and of supporting the dignity of the 
chief magistrate, but all the other necessary expenses of govern 
ment for which the constitution of the state has not provided 
any particular revenue, may be drawn either, first, from some 
fund which peculiarly belongs to the sovereign or common 
wealth, and which is independent of the revenue of the people; 
or, secondly, from the revenue of the people. 



The Sources of Revenue 299 



PART I 

Of thf Funds or Sources of Revenue which may peculiarly belong 
to the Sovereign or Commonwealth 

The funds or sources of revenue which may peculiarly belong 
to the sovereign or commonwealth must consist either in stock 
or in land. 

The sovereign, like any other owner of stock, may derive a 
revenue from it, either by employing it himself, or by lending 
it. His revenue is in the one case profit, in the other interest. 

The revenue of a Tartar or Arabian chief consists in profit. 
It arises principally from the milk and increase of his own herds 
and flocks, of which he himself superintends the management, 
and is the principal shepherd or herdsman of his own horde or 
tribe. It is, however, in this earliest and rudest state of civil 
government only that profit has ever made the principal part 
of the public revenue of a monarchical state. 

Small republics have sometimes derived a considerable revenue 
from the profit of mercantile projects. The republic of Ham 
burg is said to do so from the profits of a public wine cellar 
and apothecary s shop. 1 The state cannot be very great of 
which the sovereign has leisure to carry on the trade of a wine 
merchant or apothecary. The profit of a public bank has been 
a source of revenue to more considerable states. It has been 
so not only to Hamburg, but to Venice and Amsterdam. A 
revenue of this kind has even by some people been thought not 
below the attention of so great an empire as that of Great 
Britain. Reckoning the ordinary dividend of the Bank of Eng 
land at five and a half per cent, and its capital at ten millions 
seven hundred and eighty thousand pounds, the net annual 
profit, after paying the expense of management, must amount, 
it is said, to five hundred and ninety-two thousand nine hundred 
pounds. Government, it is pretended, could borrow this capital 
at three per cent, interest, and by taking the management of 

1 See Mrmoires concernant les Droits et Impositions en Europe, tome i. 
page 73. This work was O tnpiled by the order of the court for the use of 
a commission employed f>r s< me vears past in considering the proper 
means for reforming the finances of France. The account of the French 
taxes, which takes up three volumes in quarto, may be regarded as per 
fectly authentic. That of those of other European nations was compiled 
from such informations as the French ministers at the different courts 
could procure. It is much shorter, and probably not quite so exact as 
that of the French taxes. 



300 The Wealth of Nations 

the bank into its own hands, might make a clear profit of two 
hundred and sixty-nine thousand five hundred pounds a year. 
The orderly, vigilant, and parsimonious administration of such 
aristocracies as those of Venice and Amsterdam is extremely 
proper, it appears from experience, for the management of a 
mercantile project of this kind. But whether such a govern 
ment as that of England which, whatever may be its virtues, 
has never been famous for good economy; which, in time of 
peace, has generally conducted itself with the slothful and 
negligent profusion that is perhaps natural to monarchies ; and 
in time of war has constantly acted with all the thoughtless 
extravagance that democracies are apt to fall into could be 
safely trusted with the management of such a project, must at 
least be a good deal more doubtful. 

The post office is properly a mercantile project. The govern 
ment advances the expense of establishing the different offices, 
and of buying or hiring the necessary horses or carriages, and 
is repaid with a large profit by the duties upon what is carried. 
It is perhaps the only mercantile project which has been suc 
cessfully managed by, I believe, every sort of government. The 
capital to be advanced is not very considerable. There is no 
mystery in the business. The returns are not only certain, 
but immediate. 

Princes, however, have frequently engaged in many other 
mercantile projects, and have been willing, like private persons, 
to mend their fortunes by becoming adventurers in the common 
branches of trade. They have scarce ever succeeded. The 
profusion with which the affairs of princes are always managed 
renders it almost impossible that they should. The agents of 
a prince regard the wealth of their master as inexhaustible; are 
careless at what price they buy ; are careless at what price they 
sell; are careless at what expense they transport his goods from 
one place to another. Those agents frequently live with the 
profusion of princes, and sometimes too, in spite of that pro 
fusion, and by a proper method of making up their accounts, 
acquire the fortunes of princes. It was thus, as we are told by 
Machiavel, that the agents of Lorenzo of Medicis, not a prince 
of mean abilities, carried on his trade. The republic of Florence 
was several times obliged to pay the debt into which their 
extravagance had involved him. He found it convenient, ac 
cordingly, to give up the business of merchant, the business to 
which his family had originally owed their fortune, and in the 
latter part of his life to employ both what remained of that 



The Sources of Revenue 301 

fortune, and the revenue of the state of which he had the 
disposal, in projects and expenses more suitable to his station. 

No two characters seem more inconsistent than those of 
trader and sovereign. If the trading spirit of the English East 
India Company renders them very bad sovereigns, the spirit of 
sovereignty seems to have rendered them equally bad traders. 
While they were traders only they managed their trade success 
fully, and were able to pay from their profits a moderate dividend 
to the proprietors of their stock. Since they became sovereigns, 
with a revenue which, it is said, was originally more than three 
millions sterling, they have been obliged to beg the extraordinary- 
assistance of government in order to avoid immediate bank 
ruptcy. In their former situation, their servants in India con 
sidered themselves as the clerks of merchants: in their present 
situation, those servants consider themselves as the ministers 
of sovereigns. 

A state may sometimes derive some part of its public revenue 
from the interest of money, as well as from the profits of stock. 
If it has amassed a treasure, it may lend a part of that treasure 
either to foreign states, or to its own subjects. 

The canton of Berne derives a considerable revenue by lend 
ing a part of its treasure to foreign states; that is, by placing 
it in the public funds of the different indebted nations of Europe, 
chiefly in those of France and England. The security of this 
revenue must depend, first, upon the security of the funds in 
which it is placed, or upon the good faith of the government 
which has the management of them; and, secondly, upon the 
certainty or probability of the continuance of peace with the 
debtor nation. In the case of a war, the very first act of 
hostility, on the part of the debtor nation, might be the for 
feiture of the funds of its creditor. This policy of lending 
money to foreign states is, so far as I know, peculiar to the 
canton of Berne. 

The city of Hamburg l has established a sort of public 
pawnshop, which lends money to the subjects of the state upon 
pledges at six per cent, interest. This pawnshop or Lombard, 
as it is called, affords a revenue, it is pretended, to the state 
of a hundred and fifty thousand crowns, which, at four and 
sixpence the crown, amounts to 33,750 sterling. 

The government of Pennsylvania, without amassing any 
treasure, invented a method of lending, not money indeed, but 

1 Sec M (moires concernant Its Droits et Impositions en Europe, tome i. 
P. 73- 



302 The Wealth of Nations 

what is equivalent to money, to its subjects. By advancing to 
private people at interest, and upon land security to double the 
value, paper bills of credit to be redeemed fifteen years after 
their date, and in the meantime made transferable from hand 
to hand like bank notes, and declared by act of assembly to be 
a legal tender in all payments from one inhabitant of the pro 
vince to another, it raised a moderate revenue, which went a 
considerable way towards defraying an annual expense of about 
4500, the whole ordinary expense of that frugal and orderly 
government. The success of an expedient of this kind must 
have depended upon three different circumstances ; first, upon 
the demand for some other instrument of commerce besides 
gold and silver money ; or upon the demand for such a quantity 
of consumable stock as could not be had without sending 
abroad the greater part of their gold and silver money in order 
to purchase it; secondly, upon the good credit of the govern 
ment which made use of this expedient; and, thirdly, upon the 
moderation with which it was used, the whole value of the 
paper bills of credit never exceeding that of the gold and silver 
money which would have been necessary for carrying on their 
circulation had there been no paper bills of credit. The same 
expedient was upon different occasions adopted by several other 
American colonies: but, from want of this moderation, it pro 
duced, in the greater part of them, much more disorder than 
conveniency. 

The unstable and perishable nature of stock and credit, how 
ever, render them unfit to be trusted to as the principal funds 
of that sure, steady, and permanent revenue which can alone 
give security and dignity to government. The government of 
no great nation that was advanced beyond the shepherd state 
seems ever to have derived the greater part of its public revenue 
from such sources. 

I^ind is a fund of a more stable and permanent nature; and 
the rent of public lands, accordingly, has been the principal 
source of the public revenue of many a great nation that was 
much advanced beyond the shepherd state. From the produce 
or rent of the public lands, the ancient republics of Greece and 
Italy derived, for a long time, the greater part of that revenue 
which defrayed the necessary expenses of the commonwealth. 
The rent of the crown lands constituted for a long time the 
greater part of the revenue of the ancient sovereigns of Europe. 

War and the preparation for war are the two circumstances 
which in modern times occasion the greater part of the neces- 



The Sources of Revenue 303 

sary expense of all great states. But in the ancient republics 
of Greece and Italy every citizen was a soldier, who both served 
and prepared himself for service at his own expense. Neither 
of those two circumstances, therefore, could occasion any very 
considerable expense to the state. The rent of a very moderate 
landed estate might be fully sufficient for defraying all the other 
necessary expenses of government. 

In the ancient monarchies of Europe, the manners and 
customs of the times sufficiently prepared the great body of the 
people for war; and when they took the field, they were, by 
the condition of their feudal tenures, to be maintained either 
at their own expense, or at that of their immediate lords, with 
out bringing any new charge upon the sovereign. The other 
expenses of government were, the greater part of them, very 
moderate. The administration of justice, it has been shown, 
instead of being a cause of expense, was a source of revenue. 
The labour of the country people, for three days before and for 
three days after harvest, was thought a fund sufficient for 
making and maintaining all the bridges, highways, and other 
public works which the commerce of the country was supposed 
to require. In those days the principal expense of the sove 
reign seems to have consisted in the maintenance of his own 
family and household. The officers of his household, accord 
ingly, were then the great officers of state. The lord treasurer 
received his rents. The lord steward and lord chamberlain 
looked after the expense of his family. The care of his stables 
was committed to the lord constable and the lord marshal. 
His houses were all built in the form of castles, and seem to 
have been the principal fortresses which he possessed. The 
keepers of those houses or castles might be considered as a sort 
of military governors. They seem to have been the only mili 
tary officers whom it was necessary to maintain in time of 
peace. In these circumstances the rent of a great landed estate 
might, upon ordinary occasions, very well defray all the necessary 
expenses of government. 

In the present state of the greater part of the civilised 
monarchies of Europe, the rent of all the lands in the country, 
managed as they probably would be if they all l>elonged to one 
proprietor, would scarce perhaps amount to the ordinary revenue 
which they levy upon the people even in peaceable times. The 
ordinary revenue of Great Britain, for example, including not 
only what is necessary for defraying the current expense of the 
year, but for paying the interest of the public debts, and for 



304 The Wealth of Nations 

sinking a part of the capital of those debts, amounts to upwards 
of ten millions a year. But the land-tax, at four shillings in 
the pound, falls short of two millions a year. This land-tax, as 
it is called, however, is supposed to be one-fifth, not only of 
the rent of all the land, but of that of all the houses, and of 
the interest of all the capital stock of Great Britain, that part 
of it only excepted which is either lent to the public, or em 
ployed as farming stock in the cultivation of land. A very 
considerable part of the produce of this tax arises from the 
rent of houses, and the interest of capital stock. The land-tax 
of the city of London, for example, at four shillings in the 
pound, amounts to 123,399 6s. yd. That of the city of West 
minster, to 63,092 is. 5d. That of the palaces of Whitehall 
and St. James s, to 30,754 6s. 3d. A certain proportion of the 
land-tax is in the same manner assessed upon all the other 
cities and towns corporate in the kingdom, and arises almost 
altogether, either from the rent of houses, or from what is 
supposed to be the interest of trading and capital stock. Ac 
cording to the estimation, therefore, by which Great Britain is 
rated to the land-tax, the whole mass of revenue arising from 
the rent of all the lands, from that of all the houses, and from 
the interest of all the capital stock, that part of it only excepted 
which is either lent to the public, or employed in the cultiva 
tion of land, does not exceed ten millions sterling a year, the 
ordinary revenue which government levies upon the people even 
in peaceable times. The estimation by which Great Britain is 
rated to the land-tax is, no doubt, taking the whole kingdom 
at an average, very much below the real value; though in 
several particular counties and districts it is said to be nearly 
equal to that value. The rent of the lands alone, exclusive of 
that of houses, and of the interest of stock, has by many people 
been estimated at twenty millions, an estimation made in a 
great measure at random, and which, I apprehend, is as likely 
to be above as below the truth. But if the lands of Great 
Britain, in the present state of their cultivation, do not afford a 
rent of more than twenty millions a year, they could not well 
afford the half, most probably not the fourth part of that rent, 
if they all belonged to a single proprietor, and were put under 
the negligent, expensive, and oppressive management of his 
factors and agents. The crown lands of Great Britain do not 
at present afford the fourth part of the rent which could prob 
ably be drawn from them if they were the property of private 



The Sources of Revenue 305 

persons. If the crown lands were more extensive, it is probable 
they would be still worse managed. 

The revenue which the great body of the people derives from 
land is in proportion, not to the rent, but to the produce of the 
land. The whole annual produce of the land of every country, 
if we except what is reserved for seed, is either annually con 
sumed by the great body of the people, or exchanged for some 
thing else that is consumed by them. Whatever keeps down 
the produce of the land below what it would otherwise rise to 
keeps down the revenue of the great body of the people still 
more than it does that of the proprietors of land. The rent of 
land, that portion of the produce which belongs to the pro 
prietors, is scarce anywhere in Great Britain supposed to be 
more than a third part of the whole produce. If the land 
which in one state of cultivation affords a rent of ten millions 
sterling a year would in another afford a rent of twenty millions, 
the rent being, in both cases, supposed a third part of the 
produce, the revenue of the proprietors would be less than it 
otherwise might be by ten millions a year only; but the revenue 
of the great body of the people would be less than it otherwise 
might be by thirty millions a year, deducting only what would 
be necessary for seed. The population of the country would 
be less by the number of people which thirty millions a year, 
deducting always the seed, could maintain according to the 
particular mode of living and expense which might take place 
in the different ranks of men among whom the remainder was 
distributed. 

Though there is not at present, in Europe, any civilised state 
of any kind which derives the greater part of its public revenue 
from the rent of lands which are the property of the state, yet 
in all the great monarchies of Europe there are still many large 
tracts of land which belong to the crown. They are generally 
forest; and sometimes forest where, after travelling several 
miles, you will scarce find a single tree; a mere waste and loss 
of country in respect both of produce and population. In every 
great monarchy of Europe the sale of the crown lands would 
produce a very large sum of money, which, if applied to the 
payment of the public debts, would deliver from mortgage a 
much greater revenue than any which those lands have ever 
afforded to the crown. In countries where lands, improved and 
cultivated very highly, and yielding at the time of sale as great 
a rent as can easily be got from them, commonly sell at thirty 
years purchase, the unimproved, uncultivated, and low-rented 



306 The Wealth of Nations 

crown lands might well be expected to sell at forty, fifty, or 
sixty years purchase. The crown might immediately enjoy the 
revenue which this great price would redeem from mortgage. 
In the course of a few years it would probably enjoy another 
revenue. When the crown lands had become private property, 
they would, in the course of a few years, become well improved 
and well cultivated. The increase of their produce would 
increase the population of the country by augmenting the 
revenue and consumption of the people. But the revenue which 
the crown derives from the duties of customs and excise would 
necessarily increase with the revenue and consumption of the 
people. 

The revenue which, in any civilised monarchy, the crown 
derives from the crown lands, though it appears to cost nothing 
to individuals, in reality costs more to the society than perhaps 
any other equal revenue which the crown enjoys. It would, in 
all cases, be for the interest of the society to replace this revenue 
to the crown by some other equal revenue, and to divide the 
lands among the people, which could not well be done better, 
perhaps, than by exposing them to public sale. 

Lands for the purposes of pleasure and magnificence parks, 
gardens, public walks, etc., possessions which are everywhere 
considered as causes of expense, not as sources of revenue seem 
to be the only lands which, in a great and civilised monarchy, 
ought to belong to the crown. 

Public stock and public lands, therefore, the two sources of 
revenue which may peculiarly belong to the sovereign or 
commonwealth, being both improper and insufficient funds for 
defraying the necessary expense of any great and civilised state , 
it remains that this expense must, the greater part of it, be 
defrayed by taxes of one kind or another; the people contri 
buting a part of their own private revenue in order to make up 
a public revenue to the sovereign or commonwealth. 



PART II 
Of Taxes 

The private revenue of individuals, it has been shown in the 
first book of this Inquiry, arises ultimately from three different 
sources; Rent, Profit, and Wages. Every tax must finally be 
paid from some one or other of those three different sorts of 
revenue, or from all of them indifferently. I shall endeavour to 



The Sources of Revenue 307 

give the best account I can, first, of those taxes which, it is 
intended, should fall upon rent ; secondly, of those which, it 
is intended, should fall upon profit ; thirdly, of those which, it is 
intended, should fall upon wages; and, fourthly, of those which, 
it is intended, should fall indifferently upon all those three 
different sources of private revenue. The particular considera 
tion of each of these four different sorts of taxes will divide the 
second part of the present chapter into four articles, three of 
which will require several other subdivisions. Many of those 
taxes, it will appear from the following review, are not finally 
paid from the fund, or source of revenue, upon which it was 
intended they should fall. 

Before I enter upon the examination of particular taxes, it 
is necessary to premise the four following maxims with regard 
to taxes in general. 

I. The subjects of every state ought to contribute towards 
the support of the government, as nearly as possible, in pro 
portion to their respective abilities; that is, in proportion to the 
revenue which they respectively enjoy under the protection of 
the state. The expense of government to the individuals of a 
great nation is like the expense of management to the joint 
tenants of a great estate, who are all obliged to contribute in 
proportion to their respective interests in the estate. In the 
observation or neglect of this maxim consists what is called 
the equality or inequality of taxation. Every tax, it must be 
observed once for all, which falls finally upon one only of the 
three sorts of revenue above mentioned, is necessarily unequal 
in so far as it does not affect the other two. In the following 
examination of different taxes I shall seldom take much further 
notice of this sort of inequality, but shall, in most cases, confine 
my observations to that inequality which is occasioned by a 
particular tax falling unequally even upon that particular sort 
of private revenue which is affected by it. 

II. The tax which each individual is bound to pay ought to 
be certain, and not arbitrary. The time of payment, the manner 
of payment, the quantity to be paid, ought all to be clear and 
plain to the contributor, and to every other person. Where it 
is otherwise, every person subject to the tax is put more or less 
in the power of the tax-gatherer, who can either aggravate the 
tax upon any obnoxious contributor, or extort, by the terror of 
such aggravation, some present or perquisite to himself. The 
uncertainty of taxation encourages the insolence and favour 
the corruption of an order of men who are naturally unpopular, 



308 The Wealth of Nations 

even where they are neither insolent nor corrupt. The cer 
tainty of what each individual ought to pay is, in taxation, a 
matter of so great importance that a very considerable degree 
of inequality, it appears, I believe, from the experience of all 
nations, is not near so great an evil as a very small degree of 
uncertainty. 

III. Every tax ought to be levied at the time, or in the 
manner, in which it is most likely to be convenient for the 
contributor to pay it. A tax upon the rent of land or of houses, 
payable at the same term at which such rents are usually paid, 
is levied at the time when it is most likely to be convenient 
for the contributor to pay; or, when he is most likely to have 
wherewithal to pay. Taxes upon such consumable goods as are 
articles of luxury are all finally paid by the consumer, and 
generally in a manner that is very convenient for him. He 
pays them by little and little, as he has occasion to buy the 
goods. As he is at liberty, too, either to buy, or not to buy, 
as he pleases, it must be his own fault if he ever suffers any 
considerable inconveniency from such taxes. 

IV. Every tax ought to be so contrived as both to take out 
and to keep out of the pockets of the people as little as possible 
over and above what it brings into the public treasury of the 
state. A tax may either take out or keep out of the pockets 
of the people a great deal more than it brings into the public 
treasury, in the four following ways. First, the levying of it 
may require a great number of officers, whose salaries may eat 
up the greater part of the produce of the tax, and whose per 
quisites may impose another additional tax upon the people. 
Secondly, it may obstruct the industry of the people, and dis 
courage them from applying to certain branches of business 
which might give maintenance and employment to great multi 
tudes. While it obliges the people to pay, it may thus diminish, 
or perhaps destroy, some of the funds which might enable them 
more easily to do so. Thirdly, by the forfeitures and other 
penalties which those unfortunate individuals incur who attempt 
unsuccessfully to evade the tax, it may frequently ruin them, 
and thereby put an end to the benefit which the community 
might have received from the employment of their capitals. 
An injudicious tax offers a great temptation to smuggling. But 
the penalties of smuggling must rise in proportion to the temp 
tation. The law, contrary to all the ordinary principles of 
justice, first creates the temptation, and then punishes those 
who yield to it; and it commonly enhances the punishment, too, 



The Sources of Revenue 309 

in proportion to the very circumstance which ought certainly 
to alleviate it, the temptation to commit the crime. 1 Fourthly, 
by subjecting the people to the frequent visits and the odious 
examination of the tax-gatherers, it may expose them to much 
unnecessary trouble, vexation, and oppression; and though 
vexation is not, strictly speaking, expense, it is certainly equiva 
lent to the expense at which every man would be willing to 
redeem himself from it. It is in some one or other of these four 
different ways that taxes are frequently so much more burden 
some to the people than they are beneficial to the sovereign. 

The evident justice and utility of the foregoing maxims have 
recommended them more or less to the attention of all nations. 
All nations have endeavoured, to the best of their judgment, to 
render their taxes as equal as they could contrive; as certain, 
as convenient to the contributor, both in the time and in the 
mode of payment, and, in proportion to the revenue which they 
brought to the prince, as little burdensome to the people. The 
following short review of some of the principal taxes which have 
taken place in different ages and countries will show that the 
endeavours of all nations have not in this respect been equally 
successful. 

ARTICLE I 
Taxes upon Rent. Taxes upon the Rent of Land 

A tax upon the rent of land may either be imposed according 
to a certain canon, every district being valued at a certain rent, 
which valuation is not afterwards to be altered, or it may be 
imposed in such a manner as to vary with every variation in 
the real rent of the land, and to rise or fall with the improve 
ment or declension of its cultivation. 

A land-tax which, like that of Great Britain, is assessed upon 
each district according to a certain invariable canon, though it 
should be equal at the time of its first establishment, necessarily 
becomes unequal in process of time, according to the unequal 
degrees of improvement or neglect in the cultivation of the 
different parts of the country. In England, the valuation 
according to which the different counties and parishes were 
assessed to the land-tax by the 4th of William and Mary was 
very unequal even at its first establishment. This tax, there 
fore, so far offends against the first of the four maxims above 
mentioned. It is perfectly agreeable to the other three. It is 

1 See Sketches of the History of Man, page 474, et seq. 



310 The Wealth of Nations 

perfectly certain. The time of payment for the tax, being the 
same as that for the rent, is as convenient as it can be to the 
contributor. Though the landlord is in all cases the real con 
tributor, the tax is commonly advanced by the tenant, to whom 
the landlord is obliged to allow it in the payment of the rent. 
This tax is levied by a much smaller number of officers than 
any other which affords nearly the same revenue. As the tax 
upon each district does not rise with the rise of the rent, the 
sovereign does not share in the profits of the landlord s improve 
ments. Those improvements sometimes contribute, indeed, to 
the discharge of the other landlords of the district. But the 
aggravation of the tax which this may sometimes occasion upon 
a particular estate is always so very small that it never can 
discourage those improvements, nor keep down the produce of 
the land below what it would otherwise rise to. As it has no 
tendency to diminish the quantity, it can have none to raise 
the price of that produce. It does not obstruct the industry 
of the people. It subjects the landlord to no other incon- 
veniency besides the unavoidable one of paying the tax. 

The advantage, however, which the landlord has derived from 
the invariable constancy of the valuation by which all the 
lands of Great Britain are rated to the land-tax, has been 
principally owing to some circumstances altogether extraneous 
to the nature of the tax. 

It has been owing in part to the great prosperity of almost 
every part of the country, the rents of almost all the estates of 
Great Britain having, since the time when this valuation was 
first established, been continually rising, and scarce any of them 
having fallen. The landlords, therefore, have almost all gained 
the difference between the tax which they would have paid 
according to the present rent of their estates, and that w r hich 
they actually pay according to the ancient valuation. Had the 
state of the country been different, had rents been gradually 
falling in consequence of the declension of cultivation, the land 
lords would almost all have lost this difference. In the state of 
things which has happened to take place since the revolution, 
the constancy of the valuation has been advantageous to the 
landlord and hurtful to the sovereign. In a different state of 
things it might have been advantageous to the sovereign and 
hurtful to the landlord. 

As the tax is made payable in money, so the valuation of the 
land is expressed in money. Since the establishment of this 
valuation the value of silver has been pretty uniform, and there 



The Sources of Revenue 3 i i 

has been no alteration in the standard of the coin either as to 
weight or fineness. Had silver risen considerably in its value, 
as it seems to have done in the course of the two centuries 
which preceded the discover) of the mines of America, the con 
stancy of the valuation might have proved very oppressive to 
the landlord. Had silver fallen considerably in its value, as it 
certainly did for about a century at least after the discovery of 
those mines, the same constancy of valuation would have reduced 
very much this branch of the revenue of the sovereign. Had 
any considerable alteration been made in the standard of the 
money, either by sinking the same quantity of silver to a lower 
denomination, or by raising it to a higher; had an ounce of 
silver, for example, instead of being coined into five shillings 
and twopence, been coined either into pieces which bore so low 
a denomination as two shillings and sevenpence, or into pieces 
which bore so high a one as ten shillings and fourpence, it would 
in the one case have hurt the revenue of the proprietor, in the 
other that of the sovereign. 

In circumstances, therefore, somewhat different from those 
which have actually taken place, this constancy of valuation 
might have been a very great inconveniency, either to the con 
tributors, or to the commonwealth. In the course of ages such 
circumstances, however, must, at some time or other, happen. 
But though empires, like all the other works of men, have all 
hitherto proved mortal, yet every empire aims at immortality. 
Every constitution, therefore, which it is meant should be as 
permanent as the empire itself, ought to be convenient, not in 
certain circumstances only, but in all circumstances; or ought 
to be suited, not to those circumstances which are transitory, 
occasional, or accidental, but to those which are necessary and 
therefore always the same. 

A tax upon the rent of land which varies with even variation 
of the rent, or which rises and falls according to the improve 
ment or neglect of cultivation, is recommended by that sect of 
men of letters in France who call themselves the economists as 
the most equitable of all taxes. All taxes, they pretend, fall 
ultimately upon the rent of land, and ought therefore to be 
imposed equally upon the fund which must finally pay them. 
That all taxes ought to fall as equally as possible upon the fund 
which must finally pay them is certainly true. But without 
entering into the disagreeable discussion of the metaphysical 
arguments by which they support their very ingenious theory, 
it will sufficiently appear, from the following review, what are 



3 i 2 The Wealth of Nations 

the taxes which fall finally upon the rent of the land, and what 
are those which fall finally upon some other fund. 

In the Venetian territory all the arable lands which are given 
in lease to farmers are taxed at a tenth of the rent. 1 The 
leases are recorded in a public register which is kept by the 
officers of revenue in each province or district. When the pro 
prietor cultivates his own lands, they are valued according to 
an equitable estimation, and he is allowed a deduction of one- 
fifth of the tax, so that for such lands he pays only eight 
instead of ten per cent, of the supposed rent. 

A land-tax of this kind is certainly more equal than the land- 
tax of England. It might not, perhaps, be altogether so certain, 
and the assessment of the tax might frequently occasion a good 
deal more trouble to the landlord. It might, too, be a good deal 
more expensive in the levying. 

Such a system of administration, however, might perhaps 
be contrived as would, in a great measure, both prevent this 
uncertainty and moderate this expense. 

The landlord and tenant, for example, might jointly be 
obliged to record their lease in a public register. Proper penal 
ties might be enacted against concealing or misrepresenting any 
of the conditions ; and if part of those penalties were to be paid 
to either of the two parties who informed against and convicted 
the other of such concealment or misrepresentation, it would 
effectually deter them from combining together in order to 
defraud the public revenue. All the conditions of the lease 
might be sufficiently known from such a record. 

Some landlords, instead of raising the rent, take a fine for the 
renewal of the lease. This practice is in most cases the expedient 
of a spendthrift, who for a sum of ready money sells a future 
revenue of much greater value. It is in most cases, therefore, 
hurtful to the landlord. It is frequently hurtful to the tenant, 
and it is always hurtful to the community. It frequently takes 
from the tenant so great a part of his capital, and thereby 
diminishes so much his ability to cultivate the land, that he finds 
it more difficult to pay a small rent than it would otherwise 
have been to pay a great one. Whatever diminishes his ability 
to cultivate, necessarily keeps down, below what it would other 
wise have been, the most important part of the revenue of the 
community. By rendering the tax upon such fines a good deal 
heavier than upon the ordinary rent, this hurtful practice might 
be discouraged, to the no small advantage of all the different 

1 Memoir es concernant Ics Droits, pp. 240, 241. 



The Sources of Revenue 3 i 3 

parties concerned, of the landlord, of the tenant, of the sovereign, 
and of the whole community. 

Some leases prescribe to the tenant a certain mode of cultiva 
tion and a certain succession of crops during the whole con 
tinuance of the lease. This condition, which is generally the 
effect of the landlord s conceit of his own superior knowledge 
(a conceit in most cases very ill founded), ought always to be 
considered as an additional rent; as a rent in service instead 
of a rent in money. In order to discourage the practice, which 
is generally a foolish one, this species of rent might be valued 
rather high, and consequently taxed somewhat higher than 
common money rents. 

Some landlords, instead of a rent in money, require a rent in 
kind, in corn, cattle, poultry, wine, oil, etc. ; others, again, require 
a rent in service. Such rents are always more hurtful to the 
tenant than beneficial to the landlord. They either take more 
or keep more out of the pocket of the former than they put into 
that of the latter. In every country where they take place 
the tenants are poor and beggarly, pretty much according to 
the degree in which they take place. By valuing, in the same 
manner, such rents rather high, and consequently taxing them 
somewhat higher than common money rents, a practice which 
is hurtful to the whole community might perhaps be sufficiently 
discouraged. 

When the landlord chose to occupy himself a part of his own 
lands, the rent might be valued according to an equitable 
arbitration of the farmers and landlords in the neighbourhood, 
and a moderate abatement of the tax might be granted to him, 
in the same manner as in the Venetian territory, provided the 
rent of the lands which he occupied did not exceed a certain sum. 
It is of importance that the landlord should be encouraged to 
cultivate a part of his own land. His capital is generally greater 
than that of the tenant, and with less skill he can frequently 
raise a greater produce. The landlord can afford to try ex 
periments, and is generally disposed to do so. His unsuccessful 
experiments occasion only a moderate loss to himself. His 
successful ones contribute to the improvement and better 
cultivation of the whole country. It might be of importance, 
however, that the abatement of the tax should encourage him 
to cultivate to a certain extent only. If the landlords should, 
the greater part of them, be tempted to farm the whole of their 
own lands, the country (instead of sober and industrious tenants, 
who are bound by their own interest to cultivate as well as 



314 The Wealth of Nations 

their capital and skill will allow them) would be filled with idle 
and profligate bailiffs, whose abusive management would soon 
degrade the cultivation and reduce the annual produce of the 
land, to the diminution, not only of the revenue of their masters, 
but of the most important part of that of the whole society. 

Such a system of administration might, perhaps, free a tax 
of this kind from any degree of uncertainty which could occa 
sion either oppression or inconveniency to the contributor; and 
might at the same time serve to introduce into the common 
management of land such a plan or policy as might contribute 
a good deal to the general improvement and good cultivation 
of the country. 

The expense of levying a land-tax which varied with every 
variation of the rent would no doubt be somewhat greater than 
that of levying one which was always rated according to a fixed 
valuation. Some additional expense would necessarily be in 
curred both by the different register offices which it would be 
proper to establish in the different districts of the country, and 
by the different valuations which might occasionally be made 
of the lands which the proprietor chose to occupy himself. The 
expense of all this, however, might be very mode- ate, and much 
below what is incurred in the levying of many other taxes 
which afford a very inconsiderable revenue in comparison of 
what might easily be drawn from a tax of this kind. 

The discouragement which a variable land-tax of this kind 
might give to the improvement of land seems to be the most 
important objection which can be made to it. The landlord 
would certainly be less disposed to improve when the sovereign, 
who contributed nothing to the expense, was to share in the 
profit of the improvement. Even this objection might perhaps 
be obviated by allowing the landlord, before he began his im 
provement, to ascertain, in conjunction with the officers of 
revenue, the actual value of his lands according to the equitable 
arbitration of a certain number of landlords and farmers in the 
neighbourhood, equally chosen by both parties, and by rating 
him according to this valuation for such a number of years as 
might be fully sufficient for his complete indemnification. To 
draw the attention of the sovereign towards the improvement of 
the land, from a regard to the increase of his own revenue, is 
one of the principal advantages proposed by this species of land- 
tax. The term, therefore, allowed for the indemnification of the 
landlord ought not to be a great deal longer than what was 
necessary for that purpose, lest the remoteness of the interest 



The Sources of Revenue 3 i 5 

should discourage too much this attention. It had better, how 
ever, be somewhat too long than in any respect too short. No 
incitement to the attention of the sovereign can ever counter 
balance the smallest discouragement to that of the landlord. 
The attention of the sovereign can be at best but a very general 
and vague consideration of what is likely to contribute to the 
better cultivation of the greater part of his dominions. Tin- 
attention of the landlord is a particular and minute considera 
tion of what is likely to be the most advantageous application 
of every inch of ground upon his estate. The principal attention 
of the sovereign ought to be to encourage, by every means in 
his power, the attention both of the landlord and of the farmer, 
by allowing both to pursue their own interest in their own way 
and according to their own judgment; by giving to both the 
most poriect security that they shall enjoy the full recompense 
of their own industry; and by procuring to both the most 
extensive market for every part of their produce, in consequence 
of establishing the easiest and safest communications both by 
land and by water through every part of his own dominions as 
well as the most unbounded freedom of exportation to the 
dominions of all other princes. 

If by such a system of administration a tax of this kind could 
be so managed as to give, not only no discouragement, but, on 
the contrary, some encouragement to the improvement of land, 
it does not appear likely to occasion any other inconveniency 
to the landlord, except always the unavoidable one of being 
obliged to pay the tax. 

In all the variations of the state of the society, in the im 
provement and in the declension of agriculture; in all the 
variations in the value of silver, and in all those in the standard 
of the coin, a tax of this kind would, of its own accord and 
without any attention of government, readily suit itself to the 
actual situation of things, and would be equally just and equit 
able in all those different changes. It would, therefore, be 
much more proper to be established as a perpetual and un 
alterable regulation, or as what is called a fundamental law of 
the commonwealth, than any tax which was always to l>e levied 
according to a certain valuation. 

Some states, instead of the simple and obvious expedient of 
a register of leases, have had recourse to the laborious and 
expensive one of an actual survey and valuation of all the lands 
in the country. They have suspected, probably, that the lessor 
and lessee, in order to defraud the public revenue, might combine 



316 



The Wealth of Nations 



to conceal the real terms of the lease. Doomsday-book seems 
to have been the result of a very accurate survey of this kind. 

In the ancient dominions of the King of Prussia, the land-tax 
is assessed according to an actual survey and valuation, which 
is reviewed and altered from time to time. 1 According to that 
valuation, the lay proprietors pay from twenty to twenty-five 
per cent, of their revenue. Ecclesiastics from forty to forty-five 
per cent. The survey and valuation of Silesia was made by order 
of the present king; it is said with great accuracy. According 
to that valuation, the lands belonging to the Bishop of Breslaw 
are taxed at twenty-five per cent, of their rent. The other 
revenues of the ecclesiastics of both religions, at fifty per cent. 
The commanderies of the Teutonic order, and of that of Malta, 
at forty per cent. Lands held by a noble tenure, at thirty-eight 
and one-third per cent. Lands held by a base tenure, at thirty- 
five and one-third per cent. 

The survey and valuation of Bohemia is said to have been the 
work of more than a hundred years. It was not perfected till 
after the peace of 1748, by the orders of the present empress 
queen. 2 The survey of the duchy of Milan, which was begun 
in the time of Charles VI., was not perfected till after 1760. 
It is esteemed one of the most accurate that has ever been made. 
The survey of Savoy and Piedmont was executed under the orders 
of the late King of Sardinia. 3 

In the dominions of the King of Prussia the revenue of the 
church is taxed much higher than that of lay proprietors. The 
revenue of the church is, the greater part of it, a burden upon 
the rent of land. It seldom happens that any part of it is 
applied towards the improvement of land, or is so employed as 
to contribute in any respect towards increasing the revenue of 
the great body of the people. His Prussian Majesty had probably, 
upon that account, thought it reasonable that it should con 
tribute a good deal more towards relieving the exigencies of 
the state. In some countries the lands of the church are 
exempted from all taxes. In others they are taxed more 
lightly than other lands. In the duchy of Milan, the lands 
which the church possessed before 1575 are rated to the tax at 
a third only of their value. 

In Silesia, lands held by a noble tenure are taxed three per 
cent, higher than those held by a base tenure. The honours 

1 Memoires concernant les Droits, etc., tome i. pp. 114, 115, 116. etc. 

Ibid. pp. 83, 84. 

* Ibid. p. 280, etc., also p. 287, etc., to 316. 



The Sources of Revenue 317 

and privileges of different kinds annexed to the former, his 
Prussian Majesty had probably imagined, would sufficiently 
compensate to the proprietor a small aggravation of the tax; 
while at the same time the humiliating inferiority of the latter 
would be in some measure alleviated by being taxed some 
what more lightly. In other countries, the system of taxa 
tion, instead of alleviating, aggravates this inequality. In the 
dominions of the King of Sardinia, and in those provinces of 
France which are subject to what is called the real or predial 
taille, the tax falls altogether upon the lands held by a base 
tenure. Those held by a noble one are exempted. 

A land-tax assessed according to a general survey and valua 
tion, how equal soever it may be at first, must, in the course of 
a very moderate period of time, become unequal. To prevent 
its becoming so would require the continual and painful attention 
of government to all the variations in the state and produce 
of every different farm in the country. The governments of 
Prussia, of Bohemia, of Sardinia, and of the duchy of Milan 
actually exert an attention of this kind; an attention so un 
suitable to the nature of government that it is not likely to be 
of long continuance, and which, if it is continued, will probably 
in the long-run occasion much more trouble and vexation than 
it can possibly bring relief to the contributors. 

In 1666, the generality of Montauban was assessed to the 
real or predial tai le according, it is said, to a very exact survey 
and valuation. 1 By 1727, this assessment had become altogether 
unequal. In order to remedy this inconveniency, government 
has found no better expedient than to impose upon the whole 
generality an additional tax of a hundred and twenty thousand 
livres. This additional tax is rated upon all the different districts 
subject to the taille according to the old assessment. But it is 
levied only upon those which in the actual state of things are 
by that assessment undertaxed, and it is applied to the relief 
of those which by the same assessment are overtaxed. Two 
districts, for example, one of which ought in the actual state of 
things to be taxed at nine hundred, the other at eleven hundred 
livres, are by the old assessment both taxed at a thousand livres. 
Both these districts are by the additional tax rated at eleven 
hundred livres each. But this additional tax is levied only 
upon the district undercharged, and it is applied altogether to 
the relief of that overcharged, which consequently pays only 
nine hundred livres. The government neither gains nor loses 
* M (moire* concerniinl Us Drotis, etc., tome ii. p. 139, etc. 



318 The Wealth of Nations 

by the additional tax, which is applied altogether to remedy 
the inequalities arising from the old assessment. The applica 
tion is pretty much regulated according to the discretion of the 
intendant of the generality, and must, therefore, be in a great 
measure arbitrary. 

Taxes which are proportioned, not to the Rent, but to the 
Produce of Land 

Taxes upon the produce of land are in reality taxes upon the 
rent; and though they may be originally advanced by the 
farmer, are finally paid by the landlord. When a certain portion 
of the produce is to be paid away for a tax, the farmer computes, 
as well as he can, what the value of this portion is, one year with 
another, likely to amount to, and he makes a proportionable 
abatement in the rvnt which he agrees to pay to the landlord. 
There is no farmer who does not compute beforehand what the 
church tythe, which is a land-tax of this kind, is, one year with 
another, likely to amount to. 

The tythe. and every o\her land-tax of this kind, under the 
appearance of perfect equality, are very unequal taxes ; a certain 
portion of the produce beiiag, in different situations, equivalent 
to a very- different portion of the rent. In some very rich lands 
the produce is so great that the one half of it is fully sufficient 
to replace to the farmer his capital employed in cultivation, 
together with the ordinary profits of farming stock in the 
neighbourhood. The other half, or, what comes to the same 
thing, the value of the other half, he could afford to pay as rent 
to the landlord, if there was no tythe. But if a tenth of the 
produce is taken from him in the way of tythe, he must require 
an abatement of the fifth part of his rent, otherwise he cannot 
get back his capital with the ordinary profit. In this case the 
rent of the landlord, instead of amounting to a half or five- 
tenths of the whole produce, will amount only to four-tenths of 
it. In poorer lands, on the contrary, the produce is sometimes 
so small, and the expense of cultivation so great, that it requires 
four-fifths of the whole produce to replace to the farmer his 
capital with the ordinary profit. In this case, though there was 
no tythe, the rent of the landlord could amount to no more than 
one-fifth or two-tenths of the whole produce. But if the farmer 
pays one-tenth of the produce in the way of tythe, he must 
require an equal abatement of the rent of the landlord, which 
will thus be reduced to one-tenth only of the whole produce. 



The Sources of Revenue 319 

Upon the rent of rich lands, the tythe may sometimes be a tax 
of no more than one-fifth part, or four shillings in the pound ; 
whereas upon that of poorer lands, it may sometimes be a tax 
of one-half, or of ten shillings in the pound. 

The tythe, as it is frequently a very unequal tax upon the 
rent, so it is always a great discouragement both to the im 
provements of the landlord and to the cultivation of the farmer. 
The one cannot venture to make the most important, which 
are generally the most expensive improvements, nor the other 
to raise the most valuable, which are generally too the most 
expensive crops, when the church, which lays out no part of 
the expense, is to share so very largely in the profit. The 
cultivation of madder was for a long time confined by the tythe 
to the United Provinces, which, being Presbyterian countries, 
and upon that account exempted from this destructive tax, 
enjoyed a sort of monopoly of that useful dyeing drug against 
the rest of Europe. The late attempts to introduce the culture 
of this plant into England have Ix^en made only in consequence 
of the statute which enacted that five shillings an acre should 
be received in lieu of all manner of tythe upon madder. 

As through the greater part of Europe the church, so in many 
different countries of Asia the state, is principally supported 
by a land-tax, proportioned, not to the rent, but to the produce 
of the land. In China, the principal revenue of the sovereign 
consists in a tenth part of the produce of all the lands of 
the empire. This tenth part, however, is estimated so very 
moderately that, in many provinces, it is said not to exceed 
a thirtieth part of the ordinary produce. The land-tax or land- 
rent which used to be paid to the Mahometan government of 
Bengal, before that country fell into the hands of the English 
East India Company, is said to have amounted to about a fifth 
part of the produce. The land-tax of ancient Egypt is said 
likewise to have amounted to a fifth part. 

In Asia, this sort of land-tax is said to interest the sovereign 
in the improvement and cultivation of land. The sovereigns of 
China, those of Bengal while under the Mahometan government, 
and those of ancient Egypt, are said accordingly to have been 
extremely attentive to the making and maintaining of good 
roads and navigable canals, in order to increase, as much as 
possible, both the quantity and value of every part of the 
produce of the land, by procuring to every part of it the most 
extensive market which their own dominions could afford. The 
tythe of the church is divided into such small portions that no 



320 The Wealth of Nations 

one of its proprietors can have any interest of this kind. The 
parson of a parish could never find his account in making a road 
or canal to a distant part of the country, in order to extend the 
market for the produce of his own particular parish. Such taxes, 
when destined for the maintenance of the state, have some 
advantages which may serve in some measure to balance their 
inconveniency. When destined for the maintenance of the 
church, they are attended with nothing but inconveniency. 

Taxes upon the produce of land may be levied either in kind, 
or, according to a certain valuation, in money. 

The parson of a parish, or a gentleman of small fortune who 
lives upon his estate, may sometimes, perhaps, find some 
advantage in receiving, the one his tythe, and the other his 
rent, in kind. The quantity to be collected, and the district 
within which it is to be collected, are so small that they both 
can oversee, with their own eyes, the collection and disposal of 
every part of what is due to them. A gentleman of great 
fortune, who lived in the capital, would be in danger of suffer 
ing much by the neglect, and more by the fraud of his factors 
and agents, if the rents of an estate in a distant province were 
to be paid to him in this manner. The loss of the sovereign 
from the abuse and depredation of his tax-gatherers would 
necessarily be much greater. The servants of the most careless 
private person are, perhaps, more under the eye of their master 
than those of the most careful prince; and a public revenue 
which was paid in kind would suffer so much from the mis 
management of the collectors that a very small part of what 
was levied upon the people would ever arrive at the treasury 
of the prince. Some part of the public revenue of China, how 
ever, is said to be paid in this manner. The mandarins and 
other tax-gatherers will, no doubt, find their advantage in con 
tinuing the practice of a payment which is so much more liable 
to abuse than any payment in money. 

A tax upon the produce of land which is levied in money may 
be levied either according to a valuation which varies with all 
the variations of the market price, or according to a fixed 
valuation, a, bushel of wheat, for example, being always valued 
at one and the same money price, whatever may be the state 
of the market. The produce of a tax levied in the former way 
will vary only according to the variations in the real produce 
of the land, according to the improvement or neglect of cultiva 
tion. The produce of a tax levied in the latter way will vary, 
not only according to the variations in the produce of the land, 



The Sources of Revenue 321 

but according to both those in the value of the precious metals 
and those in the quantity of those metals which is at different 
times contained in coin of the same denomination. The produce 
of the former will always bear the same proportion to the value 
of the real produce of the land. The produce of the latter may, 
at different times, bear very different proportions to that value. 
When, instead either of a certain portion of the produce of 
land, or of the price of a certain portion, a certain sum of money 
is to be paid in full compensation for all tax or tythe, the tax 
becomes, in this case, exactly of the same nature with the land- 
tax of England. It neither rises nor falls with the rent of the 
land. It neither encourages nor discourages improvement. 
The tythe in the greater part of those parishes which pay what 
is called a Modus in lieu of all other tythe is a tax of this kind. 
During the Mahometan government of Bengal, instead of the 
payment in kind of a fifth part of the produce, a modus, and, 
it is said, a very moderate one, was established in the greater 
part of the districts or zemindaries of the country. Some of 
the servants of the East India Company, under pretence of 
restoring the public revenue to its proper value, have, in some 
provinces, exchanged this modus for a payment in kind. Under 
their management this change is likely both to discourage 
cultivation, and to give new opportunities for abuse in the 
collection of the public revenue which has fallen very much 
below what it was said to have been when it first fell under the 
management of the company. The servants of the company 
may, perhaps, have profited by this change, but at the expense, 
it is probable, both of their masters and of the country. 

Taxes upon the Rent of Houses 

The rent of a house may be distinguished into two parts, of 
which the one may very properly be called the Building-rent; 
the other is commonly called the Ground-rent. 

The building-rent is the interest or profit of the capital 
expended in building the house. In order to put the trade of 
a builder upon a level with other trades, it is necessary that this 
rent should be sufficient, first, to pay him the same interest 
which he would have got for his capital if he had lent it upon 
good security; and, secondly, to keep the house in constant 
repair, or, what comes to the same thing, to replace, within a 
certain term of years, the capital which had been employed in 
building it. The building-rent, or the ordinary profit of build- 



322 The Wealth of Nations 

ing, is, therefore, everywhere regulated by the ordinary interest 
of money. Where the market rate of interest is four per cent, 
the rent of a house which, over and above paying the ground- 
rent, affords six or six and a half per cent, upon the whole 
expense of building, may perhaps afford a sufficient profit to 
the builder. Where the market rate of interest is five per cent., 
it may perhaps require seven or seven and a half per cent. If, 
in proportion to the interest of money, the trade of the builder 
affords at any time a much greater profit than this, it will soon 
draw so much capital from other trades as will reduce the 
profit to its proper level. If it affords at any time much less 
than this, other trades will soon draw so much capital from it 
as will again raise that profit. 

Whatever part of the whole rent of a house is over and above 
what is sufficient for affording this reasonable profit naturally 
goes to the ground-rent; and where the owner of the ground 
and the owner of the building are two different persons, is, in 
most cases, completely paid to the former. This surplus rent 
is the price which the inhabitant of the house pays for some 
real or supposed advantage of the situation. In country houses 
at a distance from any great town, where there is plenty of 
ground to choose upon, the ground-rent is scarce anything, or 
no more than what the ground which the house stands upon would 
pay if employed in agriculture. In country villas in the neigh 
bourhood of some great town, it is sometimes a good deal higher, 
and the peculiar conveniency or beauty of situation is there 
frequently very well paid for. Ground-rents are generally 
highest in the capital, and in those particular parts of it where 
there happens to be the greatest demand for nouses, whatever 
be the reason of that demand, whether for trade and business, 
for pleasure and society, or for mere vanity and fashion. 

A tax upon house-rent, payable by the tenant and pro 
portioned to the whole rent of each house, could not, for any 
considerable time at least, affect the building-rent. If the 
builder did not get his reasonable profit, he would be obliged 
to quit the trade; which, by raising the demand for building, 
would in a short time bring back his profit to its proper level 
with that of other trades. Neither would such a tax fall 
altogether upon the ground-rent; but it would divide itself in 
such a manner as to fall partly upon the inhabitant of the 
house, and partly upon the owner of the ground. 

Let us suppose, for example, that a particular person judges 
that he can afford for house-rent an expense of sixty pounds a 



The Sources of Revenue 323 

year; and let us suppose, too, that a tax of four shillings in the 
pound, or of one-fifth, payable by the inhabitant, is laid upon 
house-rent. A house of sixty pounds rent will in this case cost 
him seventy-two pounds a year, which is twelve pounds more 
than he thinks he can afford. He will, therefore, content him 
self with a worse house, or a house of fifty pounds rent, which, 
with the additional ten pounds that he must pay for the tax, 
will make up the sum of sixty pounds a year, the expense which 
he judges he can afford; and in order to pay the tax he will 
give up a part of the additional conveniency which he might 
have had from a house of ten pounds a year more rent. He 
will give up, I say, a part of this additional conveniency; for 
he will seldom be obliged to give up the whole, but will, in 
consequence of the tax, get a better house for fifty pounds a 
year than he could have got if there had been no tax. For as 
a tax of this kind, by taking away this particular competitor, 
must diminish the competition for houses of sixty pounds rent, 
so it must likewise diminish it for those of fifty pounds rent, 
and in the same manner for those of all other rents, except the 
lowest rent, for which it would for some time increase the com 
petition. But the- rents of every class of houses for which the 
competition was diminished would necessarily be more or less 
reduced. As no part of this reduction, however, could, for any 
considerable time at least, affect the building-rent, the whole 
of it must in the long-run necessarily fall upon the ground-rent. 
The final payment of this tax, therefore, would fall partly upon 
the inhabitant of the house, who, in order to pay his share, 
would be obliged to give up a part of his conveniency, and 
partly upon the owner of the ground, who, in order to pay his 
share, would be obliged to give up a part of his revenue. In 
what proportion this final payment would be divided between 
them it is not perhaps very easy to ascertain. The division 
\\ould probably be very different in different circumstances, 
and a tax of this kind might, according to those different cir 
cumstances, affect very unequally both the inhabitant of the 
house and the owner of the ground. 

The inequality with which a tax of this kind might fall upon 
the owners of different ground-rents would arise altogether 
from the accidental inequality of this division. But the in 
equality with which it might fall upon the inhabitants of different 
houses would arise not only from this, but from another cause. 
The proportion of the expense of house-rent to the whole ex 
pense of living is different in the different degrees of fortune. 



324 The Wealth of Nations 

It is perhaps highest in the highest degree, and it diminishes 
gradually through the inferior degrees, so as in general to be 
lowest in the lowest degree. The necessaries of life occasion the 
great expense of the poor. They find it difficult to get food, 
and the greater part of their little revenue is spent in getting it. 
The luxuries and vanities of life occasion the principal expense 
of the rich, and a magnificent house embellishes and sets off to 
the best advantage all the other luxuries and vanities which 
they possess. A tax upon house-rents, therefore, would in 
general fall heaviest upon the rich ; and in this sort of inequality 
there would not, perhaps, be anything very unreasonable. It 
is not very unreasonable that the rich should contribute to the 
public expense, not only in proportion to their revenue, but 
something more than in that proportion. 

The rent of houses, though it in some respects resembles the 
rent of land, is in one respect essentially different from it. The 
rent of land is paid for the use of a productive subject. The 
land which pays it produces it. The rent of houses is paid for 
the use of an unproductive subject. Neither the house nor the 
ground which it stands upon produce anything. The person 
who pays the rent, therefore, must draw it from some other 
source of revenue distinct from and independent of this sub 
ject. A tax upon the rent of houses, so far as it falls upon 
the inhabitants, must be drawn from the same source as the 
rent itself, and must be paid from their revenue, whether 
derived from the wages of labour, the profits of stock, or the 
rent of land. So far as it falls upon the inhabitants, it is one 
of those taxes which fall, not upon one only, but indifferently 
upon all the three different sources of revenue, and is in every 
respect of the same nature as a tax upon any other sort of 
consumable commodities. In general there is not, perhaps, any 
one article of expense or consumption by which the liberality or 
narrowness of a man s whole expense can be better judged of 
than by his house-rent. A proportional tax upon this particular 
article of expense might, perhaps, produce a more considerable 
revenue than any which has hitherto been drawn from it in any 
part of Europe. If the tax indeed was very high, the greater 
part of people would endeavour to evade it, as much as they 
could, by contenting themselves with smaller houses, and by 
turning the greater part of their expense into some other channel. 

The rent of houses might easily be ascertained with sufficient 
accuracy by a policy of the same kind with that which would 
be necessary for ascertaining the ordinary rent of land. Houses 



The Sources of Revenue 



3 2 5 



not inhabited ought to pay no tax. A tax upon them would 
fall altogether upon the proprietor, who would thus be taxed 
for a subject which afforded him neither conveniency nor 
revenue. Houses inhabited by the proprietor ought to be rated, 
not according to the expense which they might have cost in 
building, but according to the rent which an equitable arbitra 
tion might judge them likely to bring if leased to a tenant. If 
rated according to the expense which they may have cost in 
building, a tax of three or four shillings in the pound, joined 
with other taxes, would ruin almost all the rich and great 
families of this, and, I believe, of every other civilised country. 
Whoever will examine, with attention, the different town and 
country houses of some of the richest and greatest families in 
this country will find that, at the rate of only six and a half 
or seven per cent, upon the original expense of building, their 
house-rent is nearly equal to the whole net rent of their estates. 
It is the accumulated expense of several successive generations, 
laid out upon objects of great beauty and magnificence, indeed ; 
but, in proportion to what they cost, of very small exchangeable 
value. 1 

Ground-rents are a still more proper subject of taxation than 
the rent of houses. A tax upon ground-rents would not raise 
the rents of houses. It would fall altogether upon the owner 
of the ground-rent, who acts always as a monopolist, and exacts 
the greatest rent which can be got for the use of his ground. 
More or less can be got for it according as the competitors happen 
to be richer or poorer, or can afford to gratify their fancy for a 
particular spot of ground at a greater or smaller expense. In 
every country the greatest number of rich competitors is in the 
capital, and it is there accordingly that the highest ground-rents 
are always to be found. As the wealth of those competitors 
would in no respect Ixi increased by a tax upon ground-rents, 
they would not probably be disposed to pay more for the use 
of the ground. Whether the tax was to be advanced by the 
inhabitant, or by the owner of the ground, would be of little 
importance. The more the inhabitant was obliged to pay for 
the tax, the less he would incline to pay for the ground; so 
that the final payment of the tax would fall altogether upon 
the owner of the ground-rent. The ground-rents of uninhabited 
houses ought to pay no tax. 

Both ground-rents and the ordinary rent of land are a species 

1 Since the first publication of this book, a tax nearly upon the above- 
mentioned principles has been imposed. 



326 The Wealth of Nations 

of revenue which the owner, in many cases, enjoys without any 
care or attention of his own. Though a part of this revenue 
should be taken from him in order to defray the expenses of the 
state, no discouragement will thereby be given to any sort of 
industry. The annual produce of the land and labour of the 
society, the real wealth and revenue of the great body of the 
people, might be the same after such a tax as before. Ground- 
rents and the ordinary rent of land are, therefore, perhaps, the 
species of revenue which can best bear to have a peculiar tax- 
imposed upon them. 

Ground-rents seem, in this respect, a more proper subject of 
peculiar taxation than even the ordinary rent of land. The 
ordinary rent of land is, in many cases, owing partly at least to 
the attention and good management of the landlord. A very 
heavy tax might discourage too much this attention and good 
management. Ground-rents, so far as they exceed the ordinary 
rent of land, are altogether owing to the good government of 
the sovereign, which, by protecting the industry either of the 
whole people, or of the inhabitants of some particular place, 
enables them to pay so much more than its real value for the 
ground which they build their houses upon; or to make to its 
owner so much more than compensation for the loss which he 
might sustain by this use of it. Nothing can be more reason 
able than that a fund which owes its existence to the good 
government of the state should be taxed peculiarly, or should 
contribute something more than the greater part of other funds, 
towards the support of that government. 

Though, in many different countries of Europe, taxes have 
been imposed upon the rent of houses, I do not know of any in 
which ground-rents have been considered as a separate subject 
of taxation. The contrivers of taxes have, probably, found 
some difficulty in ascertaining what part of the rent ought to 
be considered as ground-rent, and what part ought to be con 
sidered as building-rent. It should not, however, seem very 
difficult to distinguish those two parts of the rent from one 
another. 

In Great Britain the rent of houses is supposed to be taxed 
in the same proportion as the rent of land by what is called 
the annual land-tax. The valuation, according to which each 
different parish and district is assessed to this tax, is always the 
same. It was originally extremely unequal, and it still con 
tinues to be so. Through the greater part of the kingdom this 
tax falls still more lightly upon the rent of houses than upon 



The Sources of Revenue 327 

that of land. In some few districts only, which were originally 
rated high, and in which the rents of houses have fallen con 
siderably, the land-tax of three or four shillings in the pound 
is said to amount to an equal proportion of the real rent of 
houses. Untcnanted houses, though by law subject to the tax, 
are, in most districts, exempted from it by the favour of the 
assessors; and this exemption sometimes occasions some little 
variation in the rate of particular houses, though that of the 
district is always the same. Improvements of rent, by new 
buildings, repairs, etc., go to the discharge of the district, which 
occasions still further variations in the rate of particular houses. 

In the province of Holland l every house is taxed at two and 
a half per cent, of its value, without any regard either to the 
rent which it actually pays, or to the circumstance of its being 
tenanted or untenanted. There seems to be a hardship in 
obliging the proprietor to pay a tax for an untenanted house, 
from which he can derive no revenue, especially so very heavy 
a tax. In Holland, where the market rate of interest does not 
exceed three per cent., two and a half per cent, upon the whole 
value of the house must, in most cases, amount to more than a 
third of the building-rent, perhaps of the whole rent. The 
valuation, indeed, according to which the houses are rated, 
though very unequal, is said to be always below the real value. 
When a house is rebuilt, improved, or enlarged, there is a new 
valuation, and the tax is rated accordingly. 

The contrivers of the several taxes which in England have, 
at different times, been imposed upon houses, seem to have 
imagined that there was some great difficulty in ascertaining, 
with tolerable exactness, what was the real rent of every house. 
They have regulated their taxes, therefore, according to some 
more obvious circumstance, such as they had probably imagined 
would, in most cases, bear some proportion to the rent. 

The first tax of this kind was hearth-money, or a tax of two 
shillings upon every hearth. In order to ascertain how many 
hearths were in the house, it was necessary that the tax-gatherer 
should enter every room in it. This odious visit rendered the 
tax odious. Soon after the revolution, therefore, it was abolished 
as a badge of slavery. 

The next tax of this kind was a tax of two shillings upon 

every dwelling-house inhabited. A house with ten windows to 

pay four shillings more. A house with twenty windows and 

upwards to pay eight shillings. This tax was afterwards so far 

1 Memoires cone tr mini les Droits, etc., p. 233. 



328 The Wealth of Nations 

altered that houses with twenty windows, and with less than 
thirty, were ordered to pay ten shillings, and those with thirty 
windows and upwards to pay twenty shillings. The number of 
windows can, in most cases, be counted from the outside, and, 
in all cases, without entering every room in the house. The 
visit of the tax-gatherer, therefore, was less offensive in this 
tax than in the hearth-money. 

This tax was afterwards repealed, and in the room of it was 
established the window-tax, which has undergone, too, several 
alterations and augmentations. The window- tax, as it stands 
at present (January 1775), over and above the duty of three 
shillings upon every house in England, and of one shilling upon 
every house in Scotland, lays a duty upon every window, which, 
in England, augments gradually from twopence, the lowest rate, 
upon houses with not more than seven windows, to two shillings, 
the highest rate, upon houses with twenty-five windows and 
upwards. 

The principal objection to all such taxes is their inequality, an 
inequality of the worst kind, as they must frequently fall much 
heavier upon the poor than upon the rich. A house of ten 
pounds rent in a country town may sometimes have more 
windows than a house of five hundred pounds rent in London; 
and though the inhabitant of the former is likely to be a much 
poorer man than that of the latter, yet so far as his contribu 
tion is regulated by the window-tax, he must contribute more 
to the support of the state. Such taxes are, therefore, directly 
contrary to the first of the four maxims above mentioned. 
They do not seem to offend much against any of the other three. 

The natural tendency of the window-tax, and of all other 
taxes upon houses, is to lower rents. The more a man pays for 
the tax, the less, it is evident, he can afford to pay for the rent. 
Since the imposition of the window-tax, however, the rents of 
houses have upon the whole risen, more or less, in almost every 
town and village of Great Britain with which I am acquainted. 
Such has been almost everywhere the increase of the demand 
for houses, that it has raised the rents more than the window- 
tax could sink them; one of the many proofs of the great 
prosperity of the country, and of the increasing revenue of its 
inhabitants. Had it not been for the tax, rents would probably 
have risen still higher. 



The Sources of Revenue 329 

ARTICLE II 
Taxes upon Profit, or upon the Revenue arising from Stock 

The revenue or profit arising from stock naturally divides itself 
into two parts ; that which pays the interest, and which belongs 
to the owner of the stock, and that surplus part which is over 
and above what is necessary for paying the interest. 

This latter part of profit is evidently a subject not taxable 
directly. It is the compensation, and in most cases it is no 
more than a very moderate compensation, for the risk and 
trouble of employing the stock. The employer must have this 
compensation, otherwise he cannot, consistently with his own 
interest, continue the employment. If he was taxed directly, 
therefore, in proportion to the whole profit, he would be obliged 
either to raise the rate of his profit, or to charge the tax upon 
the interest of money; that is, to pay less interest. If he raised 
the rate of his profit in proportion to the tax, the whole tax, 
though it might be advanced by him, would be finally paid by 
one or other of two different sets of people, according to the 
different ways in which he might employ the stock of which he 
had the management. If he employed it as a farming stock in 
the cultivation of land, he could raise the rate of his profit only 
by retaining a greater portion, or, what comes to the same 
thing, the price of a greater portion of the produce of the land ; 
and as this could be done only by a reduction of rent, the final 
payment of the tax would fall upon the landlord. If he em 
ployed it as a mercantile or manufacturing stock, he could raise 
the rate of his profit only by raising the price of his goods; in 
which case the final payment of the tax would fall altogether 
upon the consumers of those goods. If he did not raise the 
rate of his profit, he would be obliged to charge the whole tax 
upon that part of it which was allotted for the interest of 
money. He could afford less interest for whatever stock he 
borrowed, and the whole weight of the tax would in this case 
fall ultimately upon the interest of money. So far as he could 
not relieve himself from the tax in the one way, he would be 
obliged to relieve himself in the other. 

The interest of money seems at first sight a subject equally 
capable of being taxed directly as the rent of land. Like the 
rent of land, it is a net produce which remains after com 
pletely compensating the whole risk and trouble of employing 
the stock. As a tax upon the rent of land cannot raise rents; 



330 The Wealth of Nations 

because the net produce which remains after replacing the 
stock of the farmer, together with his reasonable profit, cannot 
be greater after the tax than before it, so, for the same reason, 
a tax upon the interest of money could not raise the rate of 
interest; the quantity of stock or money in the country, like 
the quantity of land, being supposed to remain the same after 
the tax as before it. The ordinary rate of profit, it has been 
shown in the first book, is everywhere regulated by the quan 
tity of stock to be employed in proportion to the quantity of 
the employment, or of the business which must be done by it. 
But the quantity of the employment, or of the business to be 
done by stock, could neither be increased nor diminished by 
any tax upon the interest of money. If the quantity of the 
stock to be employed, therefore, was neither increased nor 
diminished by it, the ordinary rate of profit would necessarily 
remain the same. But the portion of this profit necessary for 
compensating the risk and trouble of the employer would like 
wise remain the same, that risk and trouble being in no respect 
altered. The residue, therefore, that portion which belongs to 
the owner of the stock, and which pays the interest of money, 
would necessarily remain the same too. At first sight, there 
fore, the interest of money seems to be a subject as fit to be 
taxed directly as the rent of land. 

There are, however, two different circumstances which render 
the interest of money a much less proper subject of direct 
taxation than the rent of land. 

First, the quantity and value of the land which any man 
possesses can never be a secret, and can always be ascertained 
with great exactness. But the whole amount of the capital 
stock which he possesses is almost always a secret, and can 
scarce ever be ascertained with tolerable exactness. It is liable, 
besides, to almost continual variations. A year seldom passes 
away, frequently not a month, sometimes scarce a single day, 
in which it does not rise or fall more or less. An inquisition 
into every man s private circumstances, and an inquisition 
which, in order to accommodate the tax to them, watched over 
all the fluctuations of his fortune, would be a source of such 
continual and endless vexation as no people could support. 

Secondly, land is a subject which cannot be removed; whereas 
stock easily may. The proprietor of land is necessarily a citizen 
of the particular country in which his estate lies. The pro 
prietor of stock is properly a citizen of the world, and is not 
necessarily attached to any particular country. He would be 



The Sources of Revenue 331 

apt to abandon the country in which he was exposed to a 
vexatious inquisition, in order to be assessed to a burdensome 
tax, and would remove his stock to some other country where 
he could either carry on his business, or enjoy his fortune more 
at his ease. By removing his stock he would put an end to 
all the industry which it had maintained in the country which 
he left. Stock cultivates land; stock employs labour. A tax 
which tended to drive away stock from any particular country 
would so far tend to dry up every source of revenue both to 
the sovereign and to the society. Not only the profits of stock, 
but the rent of land and the wages of lal)our would necessarily 
be more or less diminished by its removal. 

The nations, accordingly, who have attempted to tax the 
revenue arising from stock, instead of any severe inquisition of 
this kind, have been obliged to content themselves with some 
very loose, and, therefore, more or less arbitrary estimation. 
The extreme inequality and uncertainty of a tax assessed in 
this manner can be compensated only by its extreme modera 
tion, in consequence of which every man finds himself rated so 
very much below his real revenue that he gives himself little 
disturbance though his neighbour should be rated somewhat 
lower. 

By what is called the land-tax in England, it was intended 
that stock should be taxed in the same proportion as land. 
When the tax upon land was at four shillings in the pound, or 
at one-fifth of the supposed rent, it was intended that stock 
should be taxed at one-fifth of the supposed interest. When the 
present annual land-tax was first imposed, the legal rate of 
interest was six per cent. Every hundred pounds stock, accord 
ingly, was supposed to be taxed at twenty-four shillings, the 
fifth part of six pounds. Since the legal rate of interest has been 
reduced to five per cent, every hundred pounds stock is supposed 
to be taxed at twenty shillings only. The sum to be raised by 
what is called the land-tax was divided between the country 
and the principal towns. The greater part of it was laid upon 
the country; and of what was laid upon the towns, the greater 
part was assessed upon the houses. What remained to be 
assessed upon the stock or trade of the towns (for the stock 
upon the land was not meant to be taxed) was very much l>elo\v 
the real value of that stock or trade. Whatever inequalities, 
therefore, there might be in the original assessment gave little 
disturbance. Every parish and district still continues to be 
rated for its land, its houses, and its stock, according to the 



332 The Wealth of Nations 

original assessment; and the almost universal prosperity of the 
country, which in most places has raised very much trie value 
of all these, has rendered those inequalities of still less im 
portance now. The rate, too, upon each district continuing 
always the same, the uncertainty of this tax, so far as it might 
be assessed upon the stock of any individual, has been very 
much diminished, as well as rendered of much less consequence. 
If the greater part of the lands of England are not rated to the 
land-tax at half their actual value, the greater part of the stock 
of England is, perhaps, scarce rated at the fiftieth part of its 
actual value. In some towns the whole land-tax is assessed 
upon houses, as in Westminster, where stock and trade are 
free. It is otherwise in London. 

In all countries a severe inquisition into the circumstances of 
private persons has been carefully avoided. 

At Hamburg l every inhabitant is obliged to pay to the state 
one-fourth per cent, of all that he possesses ; and as the wealth 
of the people of Hamburg consists principally in stock, this 
tax may be considered as a tax upon stock. Every man assesses 
himself, and, in the presence of the magistrate, puts annually 
into the public coffer a certain sum of money which he declares 
upon oath to be one-fourth per cent, of all that he possesses, 
but without declaring what it amounts to, or being liable to any 
examination upon that subject. This tax is generally supposed 
to be paid with great fidelity. In a small republic, where the 
people have entire confidence in their magistrates, are convinced 
of the necessity of the tax for the support of the state, and 
believe that it will be faithfully applied to that purpose, such 
conscientious and voluntary payment may sometimes be 
expected. It is not peculiar to the people of Hamburg. 

The canton of Underwald in Switzerland is frequently ravaged 
by storms and inundations, and is thereby exposed to extra 
ordinary expenses. Upon such occasions the people assemble, 
and every one is said to declare with the greatest frankness what 
he is worth in order to be taxed accordingly. At Zurich the 
law orders that, in cases of necessity, every one should be taxed 
in proportion to his revenue the amount of which he is obliged 
to declare upon oath. They have no suspicion, it is said, that 
any of their fellow-citizens will deceive them. At Basil the 
principal revenue of the state arises from a small custom upon 
goods exported. All the citizens make oath that they will pay 
every three months all the taxes imposed by the law. All 

1 Memoires concernani les Drotis, tome i. p. 74. 



The Sources of Revenue 333 

merchants and even all innkeepers are trusted with keeping 
themselves the account of the goods which they sell either 
within or without the territory. At the end of every three 
months they send this account to the treasurer with the amount 
of the tax computed at the bottom of it. It is not suspected 
that the revenue suffers by this confidence. 1 

To oblige every citizen to declare publicly upon oath the 
amount of his fortune must not, it seems, in those Swiss cantons 
be reckoned a hardship. At Hamburg it would be reckoned 
the greatest. Merchants engaged in the hazardous projects of 
trade all tremble at the thoughts of being obliged at all times 
to expose the real state of their circumstances. The ruin of their 
credit and the miscarriage of their projects, they foresee, would 
too often be the consequence. A sober and parsimonious 
people, who are strangers to all such projects, do not feel that 
they have occasion for any such concealment. 

In Holland, soon after the exaltation of the late Prince of 
Orange to the stadtholdership, a tax of two per cent., or the 
fiftieth penny, as it was called, was imposed upon the whole 
substance of every citizen. Every citizen assessed himself and 
paid his tax in the same manner as at Hamburg; and it was 
in general supposed to have been paid with great fidelity. The 
people had at that time the greatest affection for their new 
government, which they had just established by a general in 
surrection. The tax was to be paid but once, in order to relieve 
the state in a particular exigency. It was, indeed, too heavy 
to be permanent. In a country where the market rate of 
interest seldom exceeds three per cent., a tax of two per cent, 
amounts to thirteen shillings and fourpence in the pound upon 
the highest net revenue which is commonly drawn from stock. 
It is a tax which very few people could pay without encroaching 
more or less upon their capitals. In a particular exigency the 
people may. from great public zeal, make a great effort, and 
give up even a part of their capital in order to relieve the state. 
But it is impossible that they should continue to do so for any 
considerable time; and if they did, the tax would soon ruin 
them so completely as to render them altogether incapable of 
supporting the state. 

The tax upon stock imposed by the Land-tax Bill in England, 
though it is proportioned to the capital, is not intended to 
diminish or take away any part of that capital. It is meant 
only to be a tax upon the interest of money proportioned to 

1 Mtmoirrs concfrnant les Droits, tome i. pp. 163, 166, 171. 



334 The Wealth of Nations 

that upon the rent of land, so that when the latter is at four 
shillings in the pound, the former may be at four shillings in the 
pound too. The tax at Hamburg and the still more moderate 
taxes of Underwald and Zurich are meant, in the same manner, 
to be taxes, not upon the capital, but upon the interest or net 
revenue of stock. That of Holland was meant to be a tax upon 
the capital. 

Taxes upon the. Profit of particular Employments 

In some countries extraordinary taxes are imposed upon the 
profits of stock, sometimes when employed in particular 
branches of trade, and sometimes when employed in agriculture. 

Of the former kind are in England the tax upon hawkers and 
pedlars, that upon hackney coaches and chairs, and that which 
the keepers of ale-houses pay for a licence to retail ale and 
spirituous liquors. During the late war, another tax of the 
same kind was proposed upon shops. The war having been 
undertaken, it was said, in defence of the trade of the country, 
the merchants, who were to profit by it, ought to contribute 
towards the support of it. 

A tax, however, upon the profits of stock employed in any 
particular branch of trade can never fall finally upon the dealers 
(who must in all ordinary cases have their reasonable profit, 
and where the competition is free can seldom have more than 
that profit), but always upon the consumers, who must be obliged 
to pay in the price of the goods the tax which the dealer ad 
vances; and generally with some overcharge. 

A tax of this kind when it is proportioned to the trade of the 
dealer is finally paid by the consumer, and occasions no oppres 
sion to the dealer. When it is not so proportioned, but is the 
same upon all dealers, though in this case, too, it is finally paid 
by the consumer, yet it favours the great, and occasions some 
oppression to the small dealer. The tax of five shillings a week 
upon every hackney coach, and that of ten shillings a year upon 
every hackney chair, so far as it is advanced by the different 
keepers of such coaches and chairs, is exactly enough pro 
portioned to the extent of their respective dealings. It neither 
favours the great, nor oppresses the smaller dealer. The tax 
of twenty shillings a year for a licence to sell ale ; of forty shillings 
for a licence to sell spirituous liquors; and of forty shillings more 
for a licence to sell wine, being the same upon all retailers, must 
necessarily give some advantage to the great, and occasion some 



The Sources of Revenue 335 

oppression to the small dealers. The former must find it more 
easy to get back the tax in the price of their goods than the 
latter. The moderation of the tax, however, renders this in 
equality of less importance, and it may to many people appear 
not improper to give some discouragement to the multiplication 
of little ale-houses. The tax upon shops, it was intended, should 
be the same upon all shops. It could not well have been other 
wise. It would have been impossible to proportion with tolerable 
exactness the tax upon a shop to the extent of the trade carried 
on in it without such an inquisition as would have been 
altogether insupportable in a free country. If the tax had been 
considerable, it would have oppressed the small, and forced 
almost the whole retail trade into the hands of the groat dealers. 
The competition of the former being taken away, the latter 
would have enjoyed a monopoly of the trade, and like all other 
monopolists would soon have combined to raise their profits 
much beyond what was necessary for the payment of the tax. 
The final payment, instead of falling upon the shopkeeper, 
would have fallen upon the consumer, with a considerable over 
charge to the profit of the shopkeeper. For these reasons the 
project of a tax upon shops was laid aside, and in the room of 
it was substituted the subsidy, 1759. 

What in France is called the personal taille is, perhaps, the 
most important tax upon the profits of stock employed in 
agriculture that is levied in any part of Furope. 

In the disorderly state of Furope during the prevalence of the 
feudal government, the sovereign was obliged to content himself 
with taxing those who were too weak to refuse to pay taxes. 
The great lords, though willing to assist him upon particular 
emergencies, refused to subject themselves to any constant tax, 
and he was not strong enough to force them. The occupiers of 
land all over Europe were, the greater part of them, originally 
bondmen. Through the greater part of Furope they were 
gradually emancipated. Some of them acquired the property 
of landed estates which they held by some base or ignoble 
tenure, sometimes under the king, and sometimes under some 
other great lord, like the ancient copy-holders of Fngland. 
Others, without acquiring the property, obtained leases for 
terms of years of the lands which they occupied under their 
lord, and thus became less dependent upon him. The great 
lords seem to have beheld the degree of prosperity and in 
dependency whu h this inferior order of men had thus come to 
enjoy with a malignant and contemptuous indignation, and 



336 The Wealth of Nations 

willingly consented that the sovereign should tax them. In 
some countries this tax was confined to the lands which were 
held in property by an ignoble tenure; and, in this case, the 
taille was said to be real. The land-tax established by the late 
King of Sardinia, and the taille in the provinces of Languedoc, 
Provence, Dauphine, and Brittany, in the generality of Mon- 
tauban, and in the elections of Agen and Condom, as well as in 
some other districts of France, are taxes upon lands held in 
property by an ignoble tenure. In other countries the tax was 
laid upon the supposed profits of all those who held in farm or 
lease lands belonging to other people, whatever might be the 
tenure by which the proprietor held them; and in this case 
the taille was said to be personal. In the greater part of those 
provinces of France which are called the Countries of Elections 
the taille is of this kind. The real taille, as it is imposed only 
upon a part of the lands of the country, is necessarily an un 
equal, but it is not always an arbitrary tax, though it is so 
upon some occasions. The personal taille, as it is intended to 
be proportioned to the profits of a certain class of people which 
can only be guessed at, is necessarily both arbitrary and unequal. 
In France the personal taille at present (1775) annually 
imposed upon the twenty generalities called the Countries of 
Elections amounts to 40,107,239 livres, 16 sous. 1 The pro 
portion in which this sum is assessed upon those different 
provinces varies from year to year according to the reports 
which are made to the king s council concerning the goodness 
or badness of the crops, as well as other circumstances which 
may either increase or diminish their respective abilities to pay. 
Each generality is divided into a certain number of elections, 
and the proportion in which the sum imposed upon the whole 
generality is divided among those different elections varies like 
wise from year to year according to the reports made to the 
council concerning their respective abilities. It seems im 
possible that the council, with the best intentions, can ever 
proportion with tolerable exactness either of those two assess 
ments to the real abilities of the province or district upon which 
they are respectively laid. Ignorance and misinformation must 
always, more or less, mislead the most upright council. The 
proportion which each parish ought to support of what is 
assessed upon the whole election, and that which each individual 
ought to support of what is assessed upon his particular parish, 
are both in the same manner varied, from year to year, accord- 
1 Memoircs concernant les Droits, etc., tome ii. p. 17. 



The Sources of Revenue 337 

ing as circumstances are supposed to require. These circum 
stances are judged of, in the one case, by the officers of the 
election, in the other by those of the parish, and both the one 
and the other are, more or less, under the direction and influence 
of the intendant. Not only ignorance and misinformation, but 
friendship, party animosity, and private resentment are said 
frequently to mislead such assessors. No man subject to such 
a tax, it is evident, can ever be certain, before he is assessed, 
of what he is to pay. He cannot even be certain after he is 
assessed. If any person has been taxed who ought to have been 
exempted, or if any person has been taxed beyond his pro 
portion, though both must pay in the meantime, yet if they 
complain, and make good their complaints, the whole parish is 
reimposed next year in order to reimburse them. If any of the 
contributors become bankrupt or insolvent, the collector is 
obliged to advance his tax, and the whole parish is reimposed 
next year in order to reimburse the collector. If the collector 
himself should become bankrupt, the parish which elects him 
must answer for his conduct to the receiver-general of the 
election. But, as it might be troublesome for the receiver to 
prosecute the whole parish, he takes at his choice five or six 
of the richest contributors and obliges them to make good what 
had been lost by the insolvency of the collector. The parish 
is afterwards reimposed in order to reimburse those five or six. 
Such reimpositions are always over and above the taille of the 
particular year in which they are laid on. 

When a tax is imposed upon the profits of stock in a parti 
cular branch of trade, the traders are all careful to bring no 
more goods to market than what they can sell at a price suffi 
cient to reimburse them for advancing the tax. Some of them 
withdraw a part of their stocks from the trade, and the market 
is more sparingly supplied than before. The price of the goods 
rises, and the final payment of the tax falls upon the consumer. 
But when a tax is imposed upon the profits of stock employed 
in agriculture, it is not the interest of the farmers to withdraw 
any part of their stock from that employment. Each farmer 
occupies a certain quantity of land, for which he pays rent. 
For the proper cultivation of this land a certain quantity of 
stock is necessary, and by withdrawing any part of this neces 
sary quantity, the farmer is not likely to be more able to pay 
either the rent or the tax. In order to pay the tax, it can 
never be his interest to diminish the quantity of his produce, 
nor consequently to supply the market more sparingly than 



The Wealth of Nations 

before. The tax, therefore, will never enable him to raise the 
price of his produce so as to reimburse himself by throwing the 
final payment upon the consumer. The farmer, however, must 
have his reasonable profit as well as every other dealer, other 
wise he must give up the trade. After the imposition of a tax 
of this kind, he can get this reasonable profit only by paying 
less rent to the landlord. The more he is obliged to pay in the 
way of tax the less he can afford to pay in the way of rent. 
A tax of this kind imposed during the currency of a lease may, 
no doubt, distress or ruin the farmer. Upon the renewal of the 
lease it must always fall upon the landlord. 

In the countries where the personal taille takes place, the 
farmer is commonly assessed in proportion to the stock which 
he appears to employ in cultivation. He is, upon this account, 
frequently afraid to have a good team of horses or oxen, but 
endeavours to cultivate with the meanest and most wretched 
instruments of husbandry that he can. Such is his distrust in 
the justice of his assessors that he counterfeits poverty, and 
wishes to appear scarce able to pay anything for fear of being 
obliged to pay too much. By this miserable policy he does not, 
perhaps, always consult his own interest in the most effectual 
manner, and he probably loses more by the diminution of his 
produce than he saves by that of his tax. Though, in conse 
quence of this wretched cultivation, the market is, no doubt, 
somewhat worse supplied, yet the small rise of price which this 
may occasion, as it is not likely even to indemnify the farmer 
for the diminution of his produce, it is still less likely to enable 
him to pay more rent to the landlord. The public, the farmer, 
the landlord, all suffer more or less by this degraded cultivation. 
That the personal taille tends, in many different ways, to dis 
courage cultivation, and consequently to dry up the principal 
source of the wealth of every great country, I have already had 
occasion to observe in the third book of this Inquiry. 

Whut are called poll-taxes in the southern provinces of North 
America, and in the West Indian Islands annual taxes of so 
much a head upon every negro, are properly taxes upon the 
profits of a certain species of stock employed in agriculture. 
As the planters are, the greater part of them, both farmers and 
landlords, the final payment of the tax falls upon them in their 
quality of landlords without any retribution. 

Taxes of so much a head upon the bondmen employed in 
cultivation seem anciently to have been common all over 
Europe. There subsists at present a tax of this kind in the 



The Sources of Revenue 339 

empire of Russia. It is probably upon this account that poll- 
taxes of all kinds have often been represented as badges of 
slavery. Every tax, however, is to the person who pays it a 
badge, not of slavery, but of liberty. It denotes that he is 
subject to government, indeed, but that, as he has some pro 
perty, he cannot himself be the property of a master. A poll- 
tax upon slaves is altogether different from a poll-tax upon 
freemen. The latter is paid by the persons upon whom it is 
imposed; the former by a different set of persons. The latter 
is either altogether arbitrary or altogether unequal, and in most 
cases is both the one and the other; the former, though in some 
respects unequal, different slaves being of different values, is in 
no respect arbitrary. Every master who knows the number of 
his own slaves knows exactly what he has to pay. Those 
different taxes, however, being called by the same name, have 
been considered as of the same nature. 

The taxes which in Holland are imposed upon men- and maid 
servants are taxes, not upon stock, but upon expense, and so 
far resemble the taxes upon consumable commodities. The tax 
of a guinea a head for every man-servant which has lately been 
imposed in Great Britain is of the same kind. It falls heaviest 
upon the middling rank. A man of two hundred a year may 
keep a single man-servant. A man of ten thousand a year will 
not keep fifty. It does not affect the poor. 

Taxes upon the profits of stock in particular employments 
can never affect the interest of money. Nobody will lend his 
money for less interest to those who exercise the taxed than 
to those who exercise the untaxed employments. Taxes upon 
the revenue arising from stock in all employments where the 
government attempts to levy them with any degree of exact 
ness, will, in many cases, fall upon the interest of money. The 
Vingtieme, or twentieth penny, in France is a tax of the same 
kind with what is called the land-tax in England, and is assessed, 
in the same manner, upon the revenue arising from land, houses, 
and stock. So far as it affects stock it is assessed, though not 
with great rigour, yet with much more exactness than that part 
of the land-tax of England which is imposed upon the same 
fund. It, in many cases, falls altogether upon the interest of 
money. Money is frequently sunk in France upon what are 
called Contracts for the constitution of a rent; that is, per 
petual annuities redeemable at any time by the debtor upon 
repayment of the sum originally advanced, but of which this 
redemption is not exigible by the creditor except in particular 



340 The Wealth of Nations 

cases. The Vingtieme seems not to have raised the rate of 
those annuities, though it is exactly levied upon them all. 

APPENDIX TO ARTICLES I. AND II. 
Taxes upon the Capital Value of Land, Houses, and Stock 

While property remains in the possession of the same person, 
whatever permanent taxes may have been imposed upon it, 
they have never been intended to diminish or take away any 
part of its capital value, but only some part of the revenue 
arising from it. But when property changes hands, when it is 
transmitted either from the dead to the living, or from the 
living to the living, such taxes have frequently been imposed 
upon it as necessarily take away some part of its capital value. 

The transference of all sorts of property from the dead to the 
living, and that of immovable property, of lands and houses, 
from the living to the living, are transactions which are in their 
nature either public and notorious, or such as cannot be long 
concealed. Such transactions, therefore, may be taxed directly. 
The transference of stock, or movable property, from the living 
to the living, by the lending of money, is frequently a secret 
transaction, and may always be made so. It cannot easily, 
therefore, be taxed directly. It has been taxed indirectly in 
two different ways; first, by requiring that the deed containing 
the obligation to repay should be written upon paper or parch 
ment which had paid a certain stamp-duty, otherwise not to be 
valid; secondly, by requiring, under the like penalty of in 
validity, that it should be recorded either in a public or secret 
register, and by imposing certain duties upon such registration. 
Stamp-duties and duties of registration have frequently been 
imposed likewise upon the deeds transferring property of all 
kinds from the dead to the living, and upon those transferring 
immovable property from the living to the living, transactions 
which might easily have been taxed directly. 

The Vicesima Hereditatum, the twentieth penny of inheri 
tances imposed by Augustus upon the ancient Romans, was a 
tax upon the transference of property from the dead to the 
living. Dion Cassius, 1 the author who writes concerning it the 
least indistinctly, says that it was imposed upon all successions, 
legacies, and donations in case of death, except upon those to 
the nearest relations and to the poor. 

1 Lib. 55. See also Burman, De Vcctigalibus Pop. Rom. cap. xi. and 
Bouchaud, De I impdi du vingtieme sur les successions. 



The Sources of Revenue 341 

Of the same kind is the Dutch tax upon successions. 1 Colla 
teral successions are taxed, according to the degree of relation, 
from five to thirty per cent, upon the whole value of the suc 
cession. Testamentary donations, or legacies to collaterals, are 
subject to the like duties. Those from husband to wife, or 
from wife to husband, to the fiftieth penny. The Luctuosa 
Hereditas, the mournful succession of ascendants to descendants, 
to the twentieth penny only. Direct successions, or those of 
descendants to ascendants, pay no tax. The death of a father, 
to such of his children as live in the same house with him, is 
seldom attended with any increase, and frequently with a con 
siderable diminution of revenue, by the loss of his industry, 
of his office, or of some life-rent estate of which he may have 
been in possession. That tax would be cruel and oppressive 
which aggravated their loss by taking from them any part of 
his succession. It may, however, sometimes be otherwise with 
those children who, in the language of the Roman law, are said 
to be emancipated; in that of the Scotch law, to be foris- 
familiated; that is, who have received their portion, have got 
families of their own, and are supported by funds separate and 
independent of those of their father. Whatever part of his 
succession might come to such children would be a real addi 
tion to their fortune, and might therefore, perhaps, without 
more inconvenicncy than what attends all duties of this kind, 
be liable to some tax. 

The casualties of the feudal law were taxes upon the trans 
ference of land, both from the dead to the living, and from the 
living to the living. In ancient times they constituted in every 
part of Europe one of the principal branches of the revenue of 
the crown. 

The heir of every immediate vassal of the crown paid a 
certain duty, generally a year s rent, upon receiving the investi 
ture of the estate. If the heir was a minor, the whole rents of 
the estate during the continuance of the minority devolved to 
the superior without any other charge besides the maintenance 
of the minor, and the payment of the widow s dower when 
there happened to be a dowager upon the land. When the 
minor came to be of age, another tax, called Relief, was still 
due to the superior, which generally amounted likewise to a 
year s rent. A long minority, which in the present times so 
frequently disburdens a great estate of all its incumbrances and 
restores the family to their ancient splendour, could in those 

1 Memoirts concernant les Drotts, etc., tome i. p. 225. 



342 The Wealth of Nations 

times have no such effect. The waste, and not the disincum- 
brance of the estate, was the common effect of a long minority. 

By the feudal law the vassal could not alienate without the 
consent of his superior, who generally extorted a fine or com 
position for granting it. This fine, which was at first arbitrary, 
came in many countries to be regulated at a certain portion of 
the price of the land. In some countries where the greater part 
of the other feudal customs have gone into disuse, this tax upon 
he alienation of land still continues to make a very considerable 
branch of the revenue of the sovereign. In the canton of Berne 
it is so high as a sixth part of the price of all noble fiefs, and 
a tenth part of that of all ignoble ones. 1 In the canton of 
Lucerne the tax upon the sale of lands is not universal, and 
takes place only in certain districts. But if any person sells his 
land in order to remove out of the territory, he pays ten per 
cent, upon the whole price of the sale. 2 Taxes of the same 
kind upon the sale either of all lands, or of lands held by certain 
tenures, take place in many other countries, and make a more 
or less considerable branch of the revenue of the sovereign. 

Such transactions may be taxed indirectly by means either 
of stamp-duties, or of duties upon registration, and those duties 
either may or may not be proportioned to the value of the 
subject which is transferred. 

In Great Britain the stamp-duties are higher or lower, not 
so much according to the value of the property transferred (an 
eighteenpenny or half-crown stamp being sufficient upon a bond 
for the largest sum of money) as according to the nature of the 
deed. The highest do not exceed six pounds upon every sheet 
of paper or skin of parchment, and these high duties fall chiefly 
upon grants from the crown, and upon certain law proceedings, 
without any regard to the value of the subject. There are in 
Great Britain no duties on the registration of deeds or writings, 
except the fees of the officers who keep the register, and these 
are seldom more than a reasonable recompense for their labour. 
The crown derives no revenue from them. 

In Holland 2 there are both stamp-duties and duties upon 
registration, which in some cases are, and in some are 
not, proportioned to the value of the property transferred. All 
testaments must be written upon stamped paper of which the 
price is proportioned to the property disposed of, so that there 
are stamps which cost from threepence, or three stivers a sheet, 
to three hundred florins, equal to about twenty-seven pounds 

1 Memoirts concernant les Draits, etc., tome i. p. 154. * Ibid. p. 157. 



The Sources of Revenue 343 

ten shillings of our money. If the stamp is of an inferior price 
to what the testator ought to have made use of, his succession 
is confiscated. This is over and above all their other taxes on 
succession. Except bills of exchange, and some other mer 
cantile bills, all other deeds, bonds, and contracts are subject 
to a stamp-duty. This duty, however, does not rise in propor 
tion to the value of the subject. All sales of land and of houses, 
and all mortgages upon either, must be registered, and, upon 
registration, pay a duty to the state of two and a half per cent, 
upon the amount of the price or of the mortgage. This duty is 
extended to the sale of all ships and vessels of more than two 
tons burthen, whether decked or undecked. These, it seems, 
are considered as a sort of houses upon the water. The sale of 
movables, when it is ordered by a court of justice, is subject 
to the like duty of two and a half per cent. 

In France there are both stamp-duties and duties upon regis 
tration. The former are considered as a branch of the aides or 
excise, and in the provinces where those duties take place are 
levied by the excise officers. The latter are considered as a 
branch of the domain of the crown, and are levied by a different 
set of officers. 

Those modes of taxation, by stamp-duties and by duties upon 
registration, are of very modern invention. In the course of 
little more than a century, however, stamp-duties have, in 
Europe, become almost universal, and duties upon registration 
extremely common. There is no art which one government 
sooner learns of another than that of draining money from the 
pockets of the people. 

Taxes upon the transference of property from the dead to 
the living fall finally as well as immediately upon the person 
to whom the property is transferred. Taxes upon the sale of 
land fall altogether upon the seller. The seller is almost always 
under the necessity of selling, and must, therefore, take such .1 
price as he can get. The buyer is scarce ever under the neces 
sity of buying, and will, therefore, only give such a price as he 
likes. He considers what the land will cost him in tax and 
price together. The more he is obliged to pay in the way of 
tax, the less he will be disposed to give in the way of pricr. 
Such taxes, therefore, fall almost always upon a necessitous 
person, and must, therefore, be frequently very cruel and op 
pressive-. Taxes upon the sale of new-built houses, where the 
building is sold without the ground, fall gem-rally upon the 
buyer, because the builder must generally have his profit 



344 The Wealth of Nations 

otherwise he must give up the trade. If he advances the tax, 
therefore, the buyer must generally repay it to him. Taxes 
upon the sale of old houses, for the same reason as those upon 
the sale of land, fall generally upon the seller, whom in most 
cases either conveniency or necessity obliges to sell. The 
number of new-built houses that are annually brought to 
market is more or less regulated by the demand. Unless the 
demand is such as to afford the builder his profit, after paying 
all expenses, he will build no more houses. The number of old 
houses which happen at any time to come to market is regu 
lated by accidents of which the greater part have no relation to 
the demand. Two or three great bankruptcies in a mercantile 
town will bring many houses to sale which must be sold for 
what can be got for them. Taxes upon the sale of ground-rents 
fall altogether upon the seller, for the same reason as those 
upon the sale of land. Stamp-duties, and duties upon the 
registration of bonds and contracts for borrowed money, fall 
altogether upon the borrower, and, in fact, are always paid by 
him. Duties of the same kind upon law proceedings fall upon 
the suitors. They reduce to both the capital value of the 
subject in dispute. The more it costs to acquire any property, 
the less must be the net value of it when acquired. 

All taxes upon the transference of property of every kind, so 
far as they diminish the capital value of that property, tend to 
diminish the funds destined for the maintenance of productive 
labour. They are all more or less unthrifty taxes that increase 
the revenue of the sovereign, which seldom maintains any but 
unproductive labourers, at the expense of the capital of the 
people, which maintains none but productive. 

Such taxes, even when they are proportioned to the value 
of the property transferred, are still unequal, the frequency of 
transference not being always equal in property of equal value. 
When they are not proportioned to this value, which is the 
case with the greater part of the stamp-duties and duties of 
registration, they are still more so. They are in no respect 
arbitrary, but are or may be in all cases perfectly clear and 
certain. Though they sometimes fall upon the person who is 
not very able to pay, the time of payment is in most cases 
sufficiently convenient for him. When the payment becomes 
due, he must in most cases have the money to pay. They are 
levied at very little expense, and in general subject the con 
tributors to no other inconveniency besides always the un 
avoidable one of paying the tax. 



The Sources of Revenue 345 

In France the stamp-duties are not much complained of. 
Those of registration, which they call the Controle, are. They 
give occasion, it is pretended, to much extortion in the officers 
of the farmers-general who collect the tax, which is in a great 
measure arbitrary and uncertain. In the greater part of the 
libels which have been written against the present system of 
finances in France the abuses of the Controle make a principal 
article. Uncertainty, however, does not seem to be necessarily 
inherent in the nature of such taxes. If the popular complaints 
are well founded, the abuse must arise, not so much from the 
nature of the tax as from the want of precision and distinct 
ness in the words of the edicts or laws which impose it. 

The registration of mortgages, and in general of all rights upon 
immovable property, as it gives great security both to creditors 
and purchasers, is extremely advantageous to the public. That 
of the greater part of deeds of other kinds is frequently in 
convenient and even dangerous to individuals, without any 
advantage to the public. All registers which, it is acknow 
ledged, ought to be kept secret, ought certainly never to exist. 
The credit of individuals ought certainly never to depend upon 
so very slender a security as the probity and religion of the 
inferior officers of revenue. But where the fees of registration 
have been made a source of revenue to the sovereign, register 
offices have commonly been multiplied without end, both for 
the deeds which ought to be registered, and for those which 
ought not. In France there are several different sorts of secret 
registers. This abuse, though not perhaps a necessary, it must 
be acknowledged, is a very natural effect of such tuxes. 

Such stamp-duties as those in England upon cards and dice, 
upon newspapers and periodical pamphlets, etc., are properly 
taxes upon consumption; the final payment falls upon the 
persons who use or consume such commodities. Such stamp- 
duties as those upon licences to retail ale, wine, and spirituous 
liquors, though intended, perhaps, to fall upon the profits of 
the retailers, are likewise finally paid by the consumers of those 
liquors. Such taxes, though called by the same name, and 
levied by the same officers and in the same manner with the 
stamp-duties above mentioned upon the transference of property, 
are, however, of a quite different nature, and fall upon quite 
different funds. 



346 The Wealth of Nations 

ARTICLE III 
Taxes upon the Wages of Labour 

The wages of the inferior classes of workmen, I have endeavoured 
to show in the first book, are everywhere necessarily regulated 
by two different circumstances; the demand for labour, and the 
ordinary or average price of provisions. The demand for labour, 
according as it happens to be either increasing, stationary, or 
declining, or to require an increasing, stationary, or declining 
population, regulates the subsistence of the labourer, and 
determines in what degree it shall be, either liberal, moderate, 
or scanty. The ordinary or average price of provisions deter 
mines the quantity of money which must be paid to the work 
man in order to enable him, one year with another, to purchase 
this liberal, moderate, or scanty subsistence. While the demand 
for labour and the price of provisions, therefore, remain the same, 
a direct tax upon the wages of labour can have no other effect 
than to raise them somewhat higher than the tax. Let us 
suppose, for example, that in a particular place the demand for 
labour and the price of provisions were such as to render ten 
shillings a week the ordinary wages of labour, and that a tax 
of one-fifth, or four shillings in the pound, was imposed upon 
wages. If the demand for labour and the price of provisions 
remained the same, it would still be necessary that the labourer 
should in that place earn such a subsistence as could be bought 
only for ten shillings a week, or that after paying the tax he 
should have ten shillings a week free wages. But in order to 
leave him such free wages after paying such a tax, the price of 
labour must in that place soon rise, not to twelve shillings a 
week only, but to twelve and sixpence; that is, in order to 
enable him to pay a tax of one-fifth, his wages must necessarily 
soon rise, not one-fifth part only, but one-fourth. Whatever 
was the proportion of the tax, the wages of labour must in all 
cases rise, not only in that proportion, but in a higher pro 
portion. If the tax, for example, was one-tenth, the wages of 
labour must necessarily soon rise, not one-tenth part only, but 
one-eighth. 

A direct tax upon the wages of labour, therefore, though the 
labourer might perhaps pay it out of his hand, could not properly 
be said to be even advanced by him; at least if the demand 
for labour and the average price of provisions remained the same 
after the tax as before it. In all such cases, not only the tax 



The Sources of Revenue 347 

but something more than the tax would in reality be advanced 
by the person who immediately employed him. The final pay 
ment would in different cases fall upon different persons. The 
rise which such a tax might occasion in the wages of manu 
facturing labour would be advanced by the master manu 
facturer, who would both be entitled and obliged to charge it, 
with a profit, upon the price of his goods. The final payment 
of this rise of wages, therefore, together with the additional 
profit of the master manufacturer, would fall upon the consumer. 
The rise which such a tax might occasion in the wages of country 
labour would be advanced by the farmer, who, in order to 
maintain the same number of labourers as before, would be 
obliged to employ a greater capital. In order to get back this 
greater capital, together with the ordinary profits of stock, it 
would be necessary that he should retain a larger portion, or 
what comes to the same thing, the price of a larger portion, of 
the produce of the land, and consequently that he should pay 
less rent to the landlord. The final payment of this rise of wages, 
therefore, would in this case fall upon the landlord, together 
with the additional profit of the farmer who had advanced it. 
In all cases a direct tax upon the wages of labour must, in the 
long-run, occasion both a greater reduction in the rent of land, 
and a greater rise in the price of manufactured goods, than 
would have followed from the proper assessment of a sum equal 
to the produce of the tax partly upon the rent of land, and 
partly upon consumable commodities. 

If direct taxes upon the wages of labour have not always 
occasioned a proportionable rise in those wages, it is because 
they have generally occasioned a considerable fall in the demand 
for labour. The declension of industry, the decrease of employ 
ment for the poor, the diminution of the annual produce of the 
land and labour of the country, have generally been the effects 
of such taxes. In consequence of them, however, the price of 
labour must always be higher than it otherwise would have been 
in the actual state of the demand : and this enhancement of price, 
together with the profit of those who advance it, must always 
be finally paid by the landlords and consumers. 

A tax upon the wages of country labour does not raise the 
price of the rude produce of land in proportion to the tax, for 
the same reason that a tax upon the farmer s profit does not 
raise that price in that proportion. 

Absurd and destructive as such taxes are, however, they take 
place in many countries. In France that part of the taille which 



348 The Wealth of Nations 

is charged upon the industry of workmen and day-labourers in 
country villages is properly a tax of this kind. Their wages 
are computed according to the common rate of the district in 
which they reside, and that they may be as little liable as 
possible to any overcharge, their yearly gains are estimated at 
no more than two hundred working days in the year. 1 The tax 
of each individual is varied from year to year according to 
different circumstances, of which the collector or the com 
missary whom the intendant appoints to assist him are the 
judges. In Bohemia, in consequence of the alteration in the 
system of finances which was begun in 1748. a very heavy tax 
is imposed upon the industry of artificers. They are divided 
into four classes. The highest class pay a hundred florins a 
year which, at two-and-twenty pence halfpenny a florin, 
amounts to g ys. 6d. The second class are taxed at seventy; 
the third at fifty; and the fourth, comprehending artificers in 
villages, and the lowest class of those in towns, at twenty-five 
florins. 2 

The recompense of ingenious artists and of men of liberal 
professions, I have endeavoured to show in the first book, neces 
sarily keeps a certain proportion to the emoluments of inferior 
trades. A tax upon this recompense, therefore, could have no 
other effect than to raise it somewhat higher than in proportion 
to the tax. If it did not rise in this manner, the ingenious arts 
and the liberal professions, being no longer upon a level with 
other trades, would be so much deserted that they would soon 
return to that level. 

The emoluments of offices are not, like those of trades and 
professions, regulated by the free competition of the market, 
and do not, therefore, always bear a just proportion to what 
the nature of the employment requires. They are, perhaps, in 
most countries, higher than it requires; the persons who have 
the administration of government being generally disposed to 
reward both themselves and their immediate dependants rather 
more than enough. The emoluments of offices, therefore, can 
in most cases very well bear to be taxed. The persons, besides, 
who enjoy public offices, especially the more lucrative, are in 
all countries the objects of general envy, and a tax upon their 
emoluments, even though it should be somewhat higher than 
upon any other sort of revenue, is always a very popular tax. 
In England, for example, when by the land-tax every other sort 

1 Memoires concernant les Droits, etc., tmn. ii. p. 108. 
1 Ibid. torn. iii. p. 87. 



The Sources of Revenue 349 

of revenue was supposed to be assessed at four shillings in the 
pound, it was very popular to lay a real tax of five shillings 
and sixpence in the pound upon the salaries of offices which 
exceeded a hundred pounds a year, the pensions of the younger 
branches of the royal family, the pay of the officers of the army 
and navy, and a few others less obnoxious to envy excepted. 
There are in England no other direct taxes upon the wages of 
labour. 

ARTICLE IV 

Taxes which, it is intended, should jail indifferently upon every 
different Species of Revenue 

The taxes which, it is intended, should fall indifferently upon 
every different species of revenue, are capitation taxes, and 
taxes upon consumable commodities. These must be paid in 
differently from whatever revenue the contributors may possess ; 
from the rent of their land, from the profits of their stock, or 
from the wages of their labour. 

Capitation Taxes 

Capitation taxes, if it is attempted to proportion them to the 
fortune or revenue of each contributor, become altogether arbi 
trary. The state of a man s fortune varies from day to day, 
and without an inquisition more intolerable than any tax, and 
renewed at least once every year, can only be guessed at. His 
assessment, therefore, must in most cases depend upon the good 
or bad humour of his assessors, and must, therefore, be alto 
gether arbitrary and uncertain. 

Capitation taxes, if they are proportioned not to the supposed 
fortune, but to the rank of each contributor, become altogether 
unequal, the degrees of fortune being frequently unequal in 
the same degree of rank. 

Such taxes, therefore, if it is attempted to render them equal, 
become altogether arbitrary and uncertain, and if it is at 
tempted to render them certain and not arbitrary, become 
altogether unequal. Let the tax be light or heavy, uncertainty 
is always a great grievance. In a light tax a considerable degree 
of inequality may be supported; in a heavy one it is altogether 
intolerable. 

In the different poll-taxes which took place in England during 
the reign of William III. the contributors were, the greater part 



350 The Wealth of Nations 

of them, assessed according to the degree of their rank; as 
dukes, marquisses, earls, viscounts, barons, esquires, gentlemen, 
the eldest and youngest sons of peers, etc. All shopkeepers and 
tradesmen worth more than three hundred pounds, that is, the 
better sort of them, were subject to the same assessment, how 
great soever might be the difference in their fortunes. Their 
rank was more considered than their fortune. Several of those 
who in the first poll-tax were rated according to their supposed 
fortune were afterwards rated according to their rank. Ser 
jeants, attorneys, and proctors at law, who in the first poll-tax 
were assessed at three shillings in the pound of their supposed 
income, were afterwards assessed as gentlemen. In the assess 
ment of a tax which was not very heavy, a considerable degree 
of inequality had been found less insupportable than any degree 
of uncertainty. 

In the capitation which has been levied in France without 
any interruption since the beginning of the present century, the 
highest orders of people are rated according to their rank by an 
invariable tariff; the lower orders of people, according to what 
is supposed to be their fortune, by an assessment which varies 
from year to year. The officers of the king s court, the judges 
and other officers in the superior courts of justice, the officers 
of the troops, etc., are assessed in the first manner. The inferior 
ranks of people in the provinces are assessed in the second. In 
France the great easily submit to a considerable degree of in 
equality in a tax which, so far as it affects them, is not a very 
heavy one, but could not brook the arbitrary assessment of an 
intendant. The inferior ranks of people must, in that country, 
suffer patiently the usage which their superiors think proper to 
give them. 

In England the different poll-taxes never produced the sum 
which had been expected from them, or which, it was supposed, 
they might have produced, had they been exactly levied. In 
France the capitation always produces the sum expected from 
it. The mild government of England, when it assessed the 
different ranks of people to the poll-tax, contented itself with 
what that assessment happened to produce, and required no 
compensation for the loss which the state might sustain either 
by those who could not pay, or by those who would not pay 
(for there were many such), and who, by the indulgent execution 
of the law, were not forced to pay. The more severe government 
of France assesses upon each generality a certain sum, which 
the intendant must find as he can. If any province complains 



The Sources of Revenue 35 i 

of being assessed too high, it may, in the assessment of next 
year, obtain an abatement proportioned to the overcharge of 
the year before. But it must pay in the meantime. The in- 
tendant, in order to be sure of finding the sum assessed upon 
his generality, was empowered to assess it in a larger sum that 
the failure or inability of some of the contributors might be 
compensated by the overcharge of the rest, and till 1765 the 
fixation of this surplus assessment was left altogether to his 
discretion. In that year, indeed, the council assumed this power 
to itself. In the capitation of the provinces, it is observed by 
the perfectly well-informed author of the Memoirs upon the 
impositions in France, the proportion which falls upon the 
nobility, and upon those whose privileges exempt them from 
the taille, is the least considerable. The largest falls upon those 
subject to the taille, who are assessed to the capitation at so 
much a pound of what they pay to that other tax. 

Capitation taxes, so far as they are levied upon the lower 
ranks of people, are direct taxes upon the wages of labour, and 
are attended with all the inconveniences of such taxes. 

Capitation taxes are levied at little expense, and, where they 
are rigorously exacted, afford a very sure revenue to the state. 
It is upon this account that in countries where the ease, com 
fort, and security of the inferior ranks of people are little 
attended to, capitation taxes are very common. It is in general, 
however, but a small part of the public revenue which, in a 
great empire, has ever been drawn from such taxes, and the 
greatest sum which they have ever afforded might always have 
been found in some other way much more convenient to the 
people. 

Taxes upon Consumable Commodities 

The impossibility of taxing the people, in proportion to their 
revenue, by any capitation, seems to have given occasion to the 
invention of taxes upon consumable commodities. The state, 
not knowing how to tax, directly and proportionably, the 
revenue of its subjects, endeavours to tax it indirectly by taxing 
their expense, which, it is supposed, will in most cases be nearly 
in proportion to their revenue. Their expense is taxed by 
taxing the consumable commodities upon which it is laid out. 

Consumable commodities are either necessaries or luxuries. 

By necessaries I understand not only the commodities which 
are indispensably necessary for the support of life, but what 



352 The Wealth of Nations 

ever the custom of the country renders it indecent for creditable 
people, even of the lowest order, to be without. A linen shirt, 
for example, is, strictly speaking, not a necessary of life. The 
Greeks and Romans lived, I suppose, very comfortably though 
they had no linen. But in the present times, through the 
greater part of Europe, a creditable day-labourer would be 
ashamed to appear in public without a linen shirt, the want of 
which would be supposed to denote that disgraceful degree of 
poverty which, it is presumed, nobody can well fall into with 
out extreme bad conduct. Custom, in the same manner, has 
rendered leather shoes a necessary of life in England. The 
poorest creditable person of either sex would be ashamed to 
appear in public without them. In Scotland, custom has 
rendered them a necessary of life to the lowest order of men; 
but not to the same order of women, who may, without any 
discredit, walk about barefooted. In France they are neces 
saries neither to men nor to women, the lowest rank of both 
sexes appearing there publicly, without any discredit, some 
times in wooden shoes, and sometimes barefooted. Under 
necessaries, therefore, I comprehend not only those things which 
nature, but those things which the established rules of decency 
have rendered necessary to the lowest rank of people. All other 
things I call luxuries, without meaning by this appellation 
to throw the smallest degree of reproach upon the temperate 
use of them. Beer and ale, for example, in Great Britain, and 
wine, even in the wine countries, I call luxuries. A man of any 
rank may, without any reproach, abstain totally from tasting 
such liquors. Nature does not render them necessary for the 
support of life, and custom nowhere renders it indecent to live 
without them. 

As the wages of labour are everywhere regulated, partly by 
the demand for it, and partly by the average price of the neces 
sary articles of subsistence, whatever raises this average price 
must necessarily raise those wages so that the labourer may 
still be able to purchase that quantity of those necessary articles 
which the state of the demand for labour, whether increasing, 
stationary, or declining, requires that he should have. 1 A tax 
upon those articles necessarily raises their price somewhat higher 
than the amount of the tax, because the dealer, who advances the 
tax, must generally get it back with a profit. Such a tax must, 
therefore, occasion a rise in the wages of labour proportionable 
to this rise of price. 

*Sce booki. cha; . 8. 



The Sources of Revenue 353 

It is thus that a tax upon the necessaries of life operates 
exactly in the same manner as a direct tax upon the wages of 
labour. The labourer, though he may pay it out of his hand, 
cannot, for any considerable time at least, be properly said even 
to advance it. It must always in the long-run be advanced to 
him by his immediate employer in the advanced rate of his 
wages. His employer, if he is a manufacturer, will charge upon 
the price of his goods this rise of wages, together with a profit; 
so that the final payment of the tax, together with this over 
charge, will fall upon the consumer. If his employer is a farmer, 
the final payment, together with a like overcharge, will fall 
upon the rent of the landlord. 

It is otherwise with taxes upon what I call luxuries, even 
upon those of the poor. The rise in the price of the taxed 
commodities will not necessarily occasion any rise in the wages 
of labour. A tax upon tobacco, for example, though a luxury 
of the poor as well as of the rich, will not raise wages. Though 
it is taxed in England at three times, and in France at fifteen 
times its original price, those high duties seem to have no effect 
upon the wages of labour. The same thing may be said of the 
taxes upon tea and sugar, which in England and Holland have 
become luxuries of the lowest ranks of people, and of those upon 
chocolate, which in Spain is said to have become so. The 
different taxes which in Great Britain have in the course of the 
present century been imposed upon spirituous liquors are not 
supposed to have had any effect upon the wages of labour. The 
rise in the price of porter, occasioned by an additional tax of 
three shillings upon the barrel of strong beer, has not raised the 
wages of common labour in London. These were about eighteen 
pence and twenty pence a day before the tax, and they are not 
more now. 

The high price of such commodities does not necessarily 
diminish the ability of the inferior ranks of people to bring up 
families. Upon the sober and industrious poor, taxes upon 
such commodities act as sumptuary laws, and dispose them 
either to moderate, or to refrain altogether from the use of 
superfluities which they can no longer easily afford. Their 
ability to bring up families, in consequence of this forced 
frugality, instead of being diminished, is frequently, perhaps, 
increased by the tax. It is the sober and industrious poor 
who generally bring up the most numerous families, and who 
principally supply the demand for useful labour. All the poor, 
indeed, are not sober and industrious, and the dissolute and 



354 The Wealth of Nations 

disorderly might continue to indulge themselves in the use of 
such commodities after this rise of price in the same manner 
as before without regarding the distress which this indulgence 
might bring upon their families. Such disorderly persons, how 
ever, seldom rear up numerous families,, their children generally 
perishing from neglect, mismanagement, and the scantiness or 
unwholesomeness of their food. If by the strength of their 
constitution they survive the hardships to which the bad 
conduct of their parents exposes them, yet the example of 
that bad conduct commonly corrupts their morals, so that, 
instead of being useful to society by their industry, they become 
public nuisances by their vices and disorders. Though the 
advanced price of the luxuries of the poor, therefore, might 
increase somewhat the distress of such disorderly families, and 
thereby diminish somewhat their ability to bring up children, 
it would not probably diminish much the useful population of 
the country. 

Any rise in the average price of necessaries, unless it is com 
pensated by a proportionable rise in the wages of labour, must 
necessarily diminish more or less the ability of the poor to bring 
up numerous families, and consequently to supply the demand 
for useful labour, whatever may be the state of that demand, 
whether increasing, stationary, or declining, or such as requires 
an increasing, stationary, or declining population. 

Taxes upon luxuries have no tendency to raise the price of 
any other commodities except that of the commodities taxed. 
Taxes upon necessaries, by raising the wages of labour, neces 
sarily tend to raise the price of all manufactures, and con 
sequently to diminish the extent of their sale and consumption. 
Taxes upon luxuries are finally paid by the consumers of the 
commodities taxed without any retribution. They fall in 
differently upon every species of revenue, the wages of labour, 
the profits of stock, and the rent of land. Taxes upon neces 
saries, so far as they affect the labouring poor, are finally paid, 
partly by landlords in the diminished rent of their lands, and 
partly by rich consumers, whether landlords or others, in the 
advanced price of manufactured goods, and always with a 
considerable overcharge. The advanced price of such manu 
factures as are real necessaries of life, and are destined for the 
consumption of the poor, of coarse woollens, for example, must 
be compensated to the poor by a further advancement of their 
wages. The middling and superior ranks of people, if they 
understood their own interest, ought always to oppose all taxes 



The Sources of Revenue 355 

upon the necessaries of life, as well as all direct taxes upon the 
wages of labour. The final payment of both the one and the 
other falls altogether upon themselves, and always with a con 
siderable overcharge. They fall heaviest upon the landlords, 
who always pay in a double capacity; in that of landlords by 
the reduction of their rent, and in that of rich consumers by 
the increase of their expense. The observation of Sir Matthew 
Decker, that certain taxes are, in the price of certain goods, 
sometimes repeated and accumulated four or five times, is 
perfectly just with regard to taxes upon the necessaries of life. 
In the price of leather, for example, you must pay not only 
for the tax upon the leather of your own shoes, but for a part 
of that upon those of the shoemaker and the tanner. You 
must pay, too, for the tax upon the salt, upon the soap, and upon 
the candles which those workmen consume while employed in 
your service, and for the tax upon the leather which the salt- 
maker, the soap-maker, and the candle-maker consume while 
employed in their service. 

In Great Britain, the principal taxes upon the necessaries 
of life are those upon the four commodities just now mentioned, 
salt, leather, soap, and candles. 

Salt is a very ancient and a very universal subject of taxa 
tion. It was taxed among the Romans, and it is so at present 
in, I believe, every part of Europe. The quantity annually 
consumed by any individual is so small, and may be purchased 
so gradually, that nobody, it seems to have been thought, could 
feel very sensibly even a pretty heavy tax upon it. It is in 
England taxed at three shillings and fourpence a bushel about 
three times the original price of the commodity. In some other 
countries the tax is still higher. Leather is a real necessary of 
life. The use of linen renders soap such. In countries where 
the winter nights are long, candles are a necessary instrument 
of trade. Leather and soap are in Great Britain taxed at three 
halfpence a pound, candles at a penny; taxes which, upon the 
original price of leather, may amount to about eight or ten per 
cent.; upon that of soap to about twenty or five-and-twenty 
per cent.; and upon that of candles to about fourteen or fifteen 
per cent.; taxes which, though lighter than that upon salt, are 
still very heavy. As all those four commodities are real neces 
saries of life, such heavy taxes upon them must increase some 
what the expense of the sol>er and industrious poor, and must 
consequently raise more or less the wages of their labour. 

In a country where the winters are so cold as in Great Britain, 



356 The Wealth of Nations 

fuel is, during that season, in the strictest sense of the word, 
a necessary of life, not only for the purpose of dressing victuals, 
but for the comfortable subsistence of many different sorts of 
workmen who work within doors; and coals are the cheapest 
of all fuel. The price of fuel has so important an influence 
upon that of labour that all over Great Britain manufactures 
have confined themselves principally to the coal countries, other 
parts of the country, on account of the high price of this neces 
sary article, not being able to work so cheap. In some manu 
factures, besides, coal is a necessary instrument of trade, as in 
those of glass, iron, and all other metals. If a bounty could in 
any case be reasonable, it might perhaps be so upon the trans 
portation of coals from those parts of the country in which they 
abound to those in which they are wanted. But the legis 
lature, instead of a bounty, has imposed a tax of three shillings 
and threepence a ton upon coal carried coastways, which upon 
most sorts of coal is more than sixty per cent, of the original 
price at the coal-pit. Coals carried either by land or by inland 
navigation pay no duty. Where they are naturally cheap, they 
are consumed duty free: where they are naturally dear, they 
are loaded with a heavy duty. 

Such taxes, though they raise the price of subsistence, and 
consequently the wages of labour, yet they afford a considerable 
revenue to government which it might not be easy to find in 
any other way. There may, therefore, be good reasons for 
continuing them. The bounty upon the exportation of corn, 
so far as it tends in the actual state of tillage to raise the price 
of that necessary article, produces all the like bad effects, and 
instead of affording any revenue, frequently occasions a very 
great expense to government. The high duties upon the im 
portation of foreign corn, which in years of moderate plenty 
amount to a prohibition, and the absolute prohibition of the 
importation either of live cattle or of salt provisions, which 
takes place in the ordinary state of the law, and which, on 
account of the scarcity, is at present suspended for a limited 
time with regard to Ireland and the British plantations, have 
all the bad effects of taxes upon the necessaries of life, and 
produce no revenue to government. Nothing seems necessary 
for the repeal of such regulations but to convince the public of 
the futility of that system in consequence of which they have 
been established. 

Taxes upon the necessaries of life are much higher in manv 
other countries than in Great Britain. Duties upon flour and 



The Sources of Revenue 357 

meal when ground at the mill, and upon bread when baked at 
the oven, take place in many countries. In Holland the money 
price of the bread consumed in towns is supposed to be doubled 
by means of such taxes. In lieu of a part of them, the people 
who live in the country pay every year so much a head accord 
ing to the sort of bread they are supposed to consume. Those 
who consume wheaten bread pay three guilders fifteen stivers 
about six shillings and ninepence halfpenny. These, and some 
other taxes of the same kind, by raising the price of labour, are 
said to have ruined the greater part of the manufactures of 
Holland. 1 Similar taxes, though not quite so heavy, take place 
in the Milanese, in the states of Genoa, in the duchy of Modena, 
in the duchies of Parma, Placentia, and Guastalla, and in the 
ecclesiastical state. A French 2 author of some note has pro 
posed to reform the finances of his country by substituting in the 
room of the greater part of other taxes this most ruinous of all 
taxes. There is nothing so absurd, says Cicero, which has not 
sometimes been asserted by some philosophers. 

Taxes upon butchers meat are still more common than those 
upon bread. It may indeed be doubted whether butchers meat 
is anywhere a necessary of life. Grain and other vegetables, 
with the help of milk, cheese, and butter, or oil where butter 
is not to be had, it is known from experience, can, without any 
butchers meat, afford the most plentiful, the most wholesome, 
the most nourishing, and the most invigorating diet. Decency 
nowhere requires that any man should eat butchers meat, as it 
in most places requires that he should wear a linen shirt or a 
pair of leather shoes. 

Consumable commodities, whether necessaries or luxuries, 
may be taxed in two different ways. The consumer may either 
pay an annual sum on account of his using or consuming goods 
of a certain kind, or the goods may be taxed while they remain 
in the hands of the dealer, and before they are delivered to the 
consumer. The consumable goods which last a considerable 
time before they are consumed altogether are most properly 
taxed in the one way; those of which the consumption is 
cither immediate or more speedy, in the other. The coach-tax 
and plate-tax are examples of the former method of imposing: 
the greater part of the other duties of excise and customs, of 
the latter. 

A coach may, with good management, last ten or twelve 

1 Memoir conternant le* Droits, etc., pp 210. 211. 
1 Le Reformatcur. 



358 The Wealth of Nations 

years. It might be taxed, once for all, before it comes out of 
the hands of the coachmaker. But it is certainly more con 
venient for the buyer to pay four pounds a year for the privilege 
of keeping a coach than to pay all at once forty or forty-eight 
pounds additional price to the coachmaker, or a sum equivalent 
to what the tax is likely to cost him during the time he uses 
the same coach. A service of plate, in the same manner, may 
last more than a century. It is certainly easier for the con 
sumer to pay five shillings a year for every hundred ounces of 
plate, near one per cent, of the value, than to redeem this long 
annuity at five-and-twenty or thirty years purchase, which 
would enhance the price at least five-and-twenty or thirty per 
cent. The different taxes which affect houses are certainly more 
conveniently paid by moderate annual payments than by a 
heavy tax of equal value upon the first building or sale of the 
house. 

It was the well-known proposal of Sir Matthew Decker that 
all commodities, even those of which the consumption is either 
immediate or very speedy, should be taxed in this manner, the 
dealer advancing nothing, but the consumer paying a certain 
annual sum for the licence to consume certain goods. The 
object of his scheme was to promote all the different branches 
of foreign trade, particularly the carrying trade, by taking away 
all duties upon importation and exportation, and thereby 
enabling the merchant to employ his whole capital and credit 
in the purchase of goods and the freight of ships, no part of 
either being diverted towards the advancing of taxes. The 
project, however, of taxing, in this manner, goods of immediate 
or speedy consumption seems liable to the four following very 
important objections. First, the tax would be more unequal, 
or not so well proportioned to the expense and consumption of 
the different contributors as in the way in which it is commonly 
imposed. The taxes upon ale, wine, and spirituous liquors, 
which are advanced by the dealers, are finally paid by the 
different consumers exactly in proportion to their respective 
consumption. But if the tax were to be paid by purchasing a 
licence to drink those liquors, the sober would, in proportion to 
his consumption, be taxed much more heavily than the drunken 
consumer. A family which exercised great hospitality would 
be taxed much more lightly than one who entertained fewer 
guests. Secondly, this mode of taxation, by paying for an 
annual, half-yearly, or quarterly licence to consume certain 
goods, would diminish very much one of the principal con- 



The Sources of Revenue 359 

veniences of taxes upon goods of speedy consumption the 
piecemeal payment. In the price of threepence halfpenny, 
which is at present paid for a pot of porter, the different taxes 
upon malt, hops, and beer, together with the extraordinary 
profit which the brewer charges for having advanced them, may 
perhaps amount to about three halfpence. If a workman can 
conveniently spare those three halfpence, he buys a pot of 
porter. If he cannot, he contents himself with a pint, and, as 
a penny saved is a penny got, he thus gains a farthing by his 
temperance. He pays the tax piecemeal as he can afford to 
pay it, and when he can afford to pay it, and every act of 
payment is perfectly voluntary, and what he can avoid if he 
chooses to do so. Thirdly, such taxes would operate less as 
sumptuary laws. When the licence was once purchased, whether 
the purchaser drank much or drank little, his tax would be the 
same. Fourthly, if a workman were to pay all at once, by 
yearly, half-yearly, or quarterly payments, a tax equal to what 
he at present pays, with little or no inconveniency, upon all the 
different pots and pints of porter which he drinks in any such 
period of time, the sum might frequently distress him very 
much. This mode of taxation, therefore, it seems evident, 
could never, without the most grievous oppression, produce a 
revenue nearly equal to what is derived from the present mode 
without any oppression. In several countries, however, com 
modities of an immediate or very speedy consumption are taxed 
in this manner. In Holland people pay so much a head for a 
licence to drink tea I have already mentioned a tax upon 
bread, which, so far as it is consumed in farm-houses and 
country villages, is there levied in the same manner. 

The duties of excise are imposed chiefly upon goods of home 
produce destined for home consumption. They are imposed 
only upon a few sorts of goods of the most general use. There 
can never be any doubt either concerning the goods which are 
subject to those duties, or concerning the particular duty which 
each species of goods is subject to. They fall almost altogether 
upon what I call luxuries, excepting always the four duties 
above mentioned, upon salt, soap, leather, candles, and, perhaps, 
that upon green glass. 

The duties of customs are much more ancient than those of 
excise. They seem to have been called customs as denoting 
customary payments which had been in use from time imme 
morial. They appear to have been originally considered as 
taxes upon the profits of merchants. During the barbarous 



360 



The Wealth of Nations 



times of feudal anarchy, merchants, like all the other inhabi 
tants of burghs, were considered as little better th^.n emanci 
pated bondmen, whose persons were despised, and whose gains 
were envied. The great nobility, who had consented that the 
king should tallage the profits of their own tenants, were not 
unwilling that he should tallage likewise those of an order of 
men whom it was much less their interest to protect. In those 
ignorant times it was not understood that the profits of mer 
chants are a subject not taxable directly, or that the final 
payment of all such taxes must fall, with a considerable over 
charge, upon the consumers. 

The gains of alien merchants were looked upon more un 
favourably than those of English merchants. It was natural, 
therefore, that those of the former should be taxed more heavily 
than those of the latter. This distinction between the duties 
upon aliens and those upon English merchants, which was begun 
from ignorance, has been continued from the spirit of monopoly, 
or in order to give our own merchants an advantage both in 
the home and in th* foreign market. 

With this distinction, the ancient duties of customs were 
imposed equally upon all sorts of goods, necessaries as well as 
luxuries, goods exported as well as goods imported. Why should 
the dealers in one sort of goods, it seems to have been thought, 
be more favoured than those in another? or why should the 
merchant exporter be more favoured than the merchant importer ? 

The ancient customs were divided into three branches. The 
first, and perhaps the most ancient of all those duties, was that 
upon wool and leather. It seems to have been chiefly or alto 
gether an exportation duty. When the woollen manufacture 
came to be established in England, lest the king should lose any 
part of his customs upon wool by the exportation of woollen 
cloths, a like duty was imposed upon them. The other two 
branches were, first, a duty upon wine, which, being imposed 
at so much a ton, was called a tonnage; and, secondly, a duty 
upon all other goods, which, being imposed at so much a pound 
of their supposed value, was called a poundage. In the forty- 
seventh year of Edward III. a duty of sixpence in the pound 
was imposed upon all goods exported and imported, except 
wools, wool-fells, leather, and wines, which were subject to 
particular duties. In the fourteenth of Richard II. this duty 
was raised to one shilling in the pound, but three years after 
wards it was again reduced to sixpence. It was raised to eight- 
pence in the second year of Henry IV., and in the fourth year 



The Sources of Revenue 361 

of the same prince to one shilling. From this time to the ninth 
year of William III. this duty continued at one shilling in the 
pound. The duties of tonnage and poundage were generally 
granted to the king by one and the same act of parliament, and 
were called the Subsidy of Tonnage and Poundage. The sub 
sidy of poundage having continued for so long a time at one 
shilling in the pound, or at five per cent., a subsidy came, in 
the language of the customs, to denote a general duty of this 
kind of five per cent. This subsidy, which is now called the 
Old Subsidy, still continues to be levied according to the book 
of rates established in the twelfth of Charles II. The method 
of ascertaining, by a book of rates, the value of goods subject 
to this duty is said to be older than the time of James I. The 
new subsidy imposed by the ninth and tenth of William III. 
was an additional five per cent, upon the greater part of goods. 
The one-third and the two-third subsidy made up between them 
another five per cent, of which they were proportionable parts. 
The subsidy of 1747 made a fourth five per cent, upon the 
greater part of goods; and that of 1759 a fifth upon some 
particular sorts of goods. Besides those five subsidies, a great 
variety of other duties have occasionally been imposed upon 
particular sorts of goods, in order sometimes to relieve the 
exigencies of the state, and sometimes to regulate the trade of 
the country according to the principles of the mercantile system. 
That system has come gradually more and more into fashion. 
The old subsidy was imposed indifferently upon exportation as 
well as importation. The four subsequent subsidies, as well as 
the other duties which have since been occasionally imposed 
upon particular sorts of goods have, with a few exceptions, been 
laid altogether upon importation. The greater part of the 
ancient duties which had been imposed upon the exportation of 
the goods of home produce and manufacture have either been 
lightened or taken away altogether. In most cases they have 
been taken away. Bounties have even been given upon the 
exportation of some of them. Drawbacks too, sometimes of the 
whole, and, in most cases, of a part of the duties which are 
paid upon the importation of foreign goods, have been granted 
upon their exportation. Only half the duties imposed by the 
old subsidy upon importation are drawn back upon exportation: 
but the whole of those imposed by the latter subsidies and 
other imposts are, upon the greater part of goods, drawn back 
in the same manner. This growing favour of exportation, and 
discouragement of importation, have suffered only a few exccp- 



3 62 



The Wealth of Nations 



tions, which chiefly concern the materials of some manufac 
tures. These our merchants and manufacturers are willing 
should come as cheap as possible to themselves, and as dear 
as possible to their rivals and competitors in other countries. 
Foreign materials are, upon this account, sometimes allowed to 
be imported duty free; Spanish wool, for example, flax, and 
raw linen yarn. The exportation of the materials of home pro 
duce, and of those which are the particular produce of our 
colonies, has sometimes been prohibited, and sometimes sub 
jected to higher duties. The exportation of English wool has 
been prohibited. That of beaver skins, of beaver wool, and of 
gum Senega has been subjected to higher duties; Great Britain, 
by the conquest of Canada and Senegal, having got almost the 
monopoly of those commodities. 

That the mercantile system has not been very favourable to 
the revenue of the great body of the people, to the annual 
produce of the land and labour of the country, I have en 
deavoured to show in the fourth book of this Inquiry. It seems 
not to have been more favourable to the revenue of the sove 
reign, so far at least as that revenue depends upon the duties 
of customs. 

In consequence of that system, the importation of several 
sorts of goods has been prohibited altogether This prohibition 
has in some cases entirely prevented, and in others has very 
much diminished the importation of those commodities by 
reducing the importers to the necessity of smuggling. It has 
entirely prevented the importation of foreign woollens, and it 
has very much diminished that of foreign silks and velvets. In 
both cases it has entirely annihilated the revenue of customs 
which might have been levied upon such importation. 

The high duties which have been imposed upon the importa 
tion of many different sorts of foreign goods, in order to dis 
courage their consumption in Great Britain, have in many cases 
served only to encourage smuggling, and in all cases have 
reduced the revenue of the customs below what more moderate 
duties would have afforded. The saying of Dr. Swift, that in 
the arithmetic of the customs two and two, instead of making 
four, make sometimes only one, holds perfectly true with regard 
to such heavy duties which never could have been imposed 
had not the mercantile system taught us, in many cases, to 
employ taxation as an instrument, not of revenue, but of 
monopoly. 

The bounties which are sometimes given upon the exporta- 



The Sources of Revenue 363 

tion of home produce and manufactures, and the drawbacks 
which are paid upon the re-exportation of the greater part of 
foreign goods, have given occasion to many frauds, and to a 
species of smuggling more destructive of the public revenue 
than any other. In order to obtain the bounty or drawback, 
the goods, it is well known, are sometimes shipped and sent to 
sea, but soon afterwards clandestinely relanded in some other 
part of the country. The defalcation of the revenue of customs 
occasioned by bounties and drawbacks, of which a great part 
are obtained fraudulently, is very great. The gross produce of 
the customs in the year which ended on the 5th of January 1755 
amounted to 5,068,000. The bounties which were paid out of 
this revenue, though in that year there was no bounty upon 
corn, amounted to 167,800. The drawbacks which were paid 
upon debentures and certificates, to 2,156,800. Bounties and 
drawbacks together amounted to 2,324,600. In consequence 
of these deductions the revenue of the customs amounted only 
to 2,743,400: from which, deducting 287,900 for the expense 
of management in salaries and other incidents, the net revenue 
of the customs for that year comes out to be 2,455,500. The 
expense of management amounts in this manner to between five 
and six per cent, upon the gross revenue of the customs, and to 
something more than ten per cent, upon what remains of that 
revenue after deducting what is paid away in bounties and 
drawbacks. 

Heavy duties being imposed upon almost all goods imported, 
our merchant importers smuggle as much and make entry of 
as little as they can. Our merchant exporters, on the contrary, 
make entry of more than they export; sometimes out of vanity, 
and to pass for great dealers in goods which pay no duty, and 
sometimes to gain a bounty or a drawback. Our exports, in 
consequence of these different frauds, appear upon the custom 
house books greatly to overbalance our imports, to the un 
speakable comfort of those politicians who measure the national 
prosperity by what they call the balance of trade. 

All goods imported, unless particularly exempted, and such 
exemptions are not very numerous, are liable to some duties of 
customs. If any goods are imported not mentioned in the book 
of rates, they are taxed at 45. g.^d. for every twenty shillings 
value, according to the oath of the importer, that is, nearly at 
five subsidies, or five poundage duties. The book of rates is 
extremely comprehensive, and enumerates a great variety of 
articles, many of them little used, and therefore not well known. 



364 The Wealth of Nations 

It is upon this account frequently uncertain under what article 
a particular sort of goods ought to be classed, and consequently 
what duty they ought to pay. Mistakes with regard to this 
sometimes ruin the custom-house officer, and frequently occasion 
much trouble, expense, and vexation to the importer. In point 
of perspicuity, precision, and distinctness, therefore, the duties 
of customs are much inferior to those of excise. 

In order that the greater part of the members of any society 
should contribute to the public revenue in proportion to their 
respective expense, it does not seem necessary that every single 
article of that expense should be taxed. The revenue which 
is levied by the duties of excise is supposed to fall as equally 
upon the contributors as that which is levied by the duties of 
customs, and the duties of excise are imposed upon a few 
articles only of the most general use and consumption. It has 
been the opinion of many people that, by proper management, 
the duties of customs might likewise, without any loss to the 
public revenue, and with great advantage to foreign trade, be 
confined to a few articles only. 

The foreign articles of the most general use and consumption 
in Great Britain seem at present to consist chiefly in foreign 
wines and brandies; in some of the productions of America and 
the West Indies sugar, rum, tobacco, cocoanuts, etc.; and in 
some of those of the East Indies tea, coffee, china-ware, spiceries 
of all kinds, several sorts of piece-goods, etc. These different 
articles afford, perhaps, at present, the greater part of the 
revenue which is drawn from the duties of customs. The taxes 
which at present subsist upon foreign manufactures, if you 
except those upon the few contained in the foregoing enumera 
tion, have the greater part of them been imposed for the purpose, 
not of revenue, but of monopoly, or to give our own merchants 
an advantage in the home market. By removing all pro 
hibitions, and by subjecting all foreign manufactures to such 
moderate taxes as it was found from experience afforded upon 
each article the greatest revenue to the public, our own work 
men might still have a considerable advantage in the home 
market, and many articles, some of which at present afford no 
revenue to government, and others a very inconsiderable one, 
might afford a very great one. 

High taxes, sometimes by diminishing the consumption of 
the taxed commodities, and sometimes by encouraging smuggling, 
frequently afford a smaller revenue to government than what 
might be drawn from more moderate taxes. 



The Sources of Revenue 365 

When the diminution of revenue is the effect of the diminu 
tion of consumption there can be but one remedy, and that is 
the lowering of the tax. 

When the diminution of the revenue is the effect of the 
encouragement given to smuggling, it may perhaps be remedied 
in two ways; either by diminishing the temptation to smuggle, 
or by increasing the difficulty of smuggling. The temptation 
to smuggle can be diminished only by the lowering of the tax, 
and the difficulty of smuggling can be increased only by estab 
lishing that system of administration which is most proper for 
preventing it. 

The excise laws, it appears, I believe, from experience, 
obstruct and embarrass the operations of the smuggler much 
more effectually than those of the customs. By introducing 
into the customs a system of administration as similar to that 
of the excise as the nature of the different duties will admit, 
the difficulty of smuggling might be very much increased. This 
alteration, it has been supposed by many people, might very 
easily be brought about. 

The importer of commodities liable to any duties of customs, 
it has been said, might at his option be allowed either to carry 
them to his own private warehouse, or to lodge them in a ware 
house provided either at his own expense or at that of the 
public, but under the key of the custom-house officer, and never 
to be opened but in his presence. If the merchant carried them 
to his own private warehouse, the duties to be immediately paid, 
and never afterwards to be drawn back, and that warehouse 
to be at all times subject to the visit and examination of the 
custom-house officer, in order to ascertain how far the quantity 
contained in it corresponded with that for which the duty had 
been paid. If he carried them to the public warehouse, no duty 
to be paid till they were taken out for home consumption. It 
taken out for exportation, to l)e duty free, proper security being 
always given that they should be so exported. The dealers in 
those particular commodities, either by wholesale or retail, to 
be at all times subject to the visit and examination of the 
custom-house officer, and to be obliged to justify by proper 
certificates the payment of the duty upon the whole quantity 
contained in their shops or warehouses. What are allied the 
excise-duties upon rum imported are at present levied in this 
manner, and the same system of administration might perhaps 
be extended to all duties upon goods imported, provided always 
that those duties were, like the duties of excise, confined to a 



366 



The Wealth of Nations 



few sorts of goods of the most general use and consumption. 
If they were extended to almost all sorts of goods, as at present, 
public warehouses of sufficient extent could not easily be 
provided, and goods of a very delicate nature, or of which the 
preservation required much care and attention, could not safely 
be trusted by the merchant in any warehouse but his own. 

If by such a system of administration smuggling, to any con 
siderable extent, could be prevented even under pretty high 
duties, and if every duty was occasionally either heightened 
or lowered according as it was most likely, either the one way 
or the other, to afford the greatest revenue to the state, taxa 
tion being always employed as an instrument of revenue and 
never of monopoly, it seems not improbable that a revenue 
at least equal to the present net revenue of the customs might 
be drawn from duties upon the importation of only a few sorts 
of goods of the most general use and consumption, and that the 
duties of customs might thus be brought to the same degree 
of simplicity, certainty, and precision as those of excise. What 
the revenue at present loses by drawbacks upon the re-exporta 
tion of foreign goods which are afterwards relanded and con 
sumed at home would under this system be saved altogether. 
If to this saving, which would alone be very considerable, were 
added the abolition of all bounties upon the exportation of 
home produce in all cases in which those bounties were not 
in reality drawbacks of some duties of excise which had before 
been advanced, it cannot well be doubted but that the net 
revenue of customs might, after an alteration of this kind, be 
fully equal to what it had ever been before. 

If by such a change of system the public revenue suffered no 
loss, the trade and manufactures of the country would certainly 
gain a very considerable advantage. The trade in the com 
modities not taxed, by far the greatest number, would be 
perfectly free, and might be carried on to and from all parts 
of the world with every possible advantage. Among those 
commodities would be comprehended all the necessaries of life 
and all the materials of manufacture. So far as the free im 
portation of the necessaries of life reduced their average money 
price in the home market it would reduce the money price of 
labour, but without reducing in any respect its real recompense. 
The value of money is in proportion to the quantity of the 
necessaries of life which it will purchase. That of the necessaries 
of life is altogether independent of the quantity of money which 
can be had for them. The reduction in the money price of 



The Sources of Revenue 367 

labour would necessarily be attended with a proportionable 
one in that of all home manufactures, which would thereby gain 
some advantage in all foreign markets. The price of some 
manufactures would be reduced in a still greater proportion by 
the free importation of the raw materials. If raw silk could 
be imported from China and Indostan duty free, the silk manu 
facturers in England could greatly undersell those of both 
France and Italy. There would be no occasion to prohibit the 
importation of foreign silks and velvets. The cheapness of their 
goods would secure to our own workmen not only the posses 
sion of the home, but a very great command of the foreign 
market. Even the trade in the commodities taxed would be 
carried on with much more advantage than at present. If those 
commodities were delivered out of the public warehouse for 
foreign exportation, being in this case exempted from all taxes, 
the trade in them would be perfectly free. The carrying trade 
in all sorts of goods would under this system enjoy every possible 
advantage. If those commodities were delivered out for home 
consumption, the importer not being obliged to advance the 
tax till he had an opportunity of selling his goods, either to some 
dealer, or to some consumer, he could always afford to sell them 
cheaper than if he had been obliged to advance it at the moment 
of importation. Under the same taxes, the foreign trade of 
consumption even in the taxed commodities might in this 
manner be carried on with much more advantage than it can 
at present. 

It was the object of the famous excise scheme of Sir Robert 
Walpole to establish, with regard to wine and tobacco, a system 
not very unlike that which is here proposed. But though the 
bill which was then brought into parliament comprehended 
those two commodities, only it was generally supposed to be 
meant as an introduction to a more extensive scheme of the 
same kind, faction, combined with the interest of smuggling 
merchants, raised so violent, though so unjust, a clamour against 
that bill, that the minister thought proper to drop it, and from 
a dread of exciting a clamour of the same kind, none of his 
successors have dared to resume the project. 

The duties upon foreign luxuries imported for home con 
sumption, though they sometimes fall upon the poor, fall 
principally upon people of middling or more than middling 
fortune. Such are, for example, the duties upon foreign wines, 
upon coffee, chocolate, tea, sugar, etc. 

The duties upon the cheaper luxuries of home produce 



368 The Wealth of Nations 

destined for home consumption fall pretty equally upon people 
of all ranks in proportion to their respective expense. The poor 
pay the duties upon malt, hops, beer, and ale, upon their own 
consumption: the rich, upon both their own consumption and 
that of their servants. 

The whole consumption of the inferior ranks of people, or of 
those below the middling rank, it must be observed, is in every 
country much greater, not only in quantity, but in value, than 
that of the middling and of those above the middling rank. 
The whole expense of the inferior is much greater than that of 
the superior ranks. In the first place, almost the whole capital 
of every country is annually distributed among the inferior 
ranks of people as the wages of productive labour. Secondly, 
a great part of the revenue arising from both the rent of land 
and the profits of stock is annually distributed among the same 
rank in the wages and maintenance of menial servants, and other 
unproductive labourers. Thirdly, some part of the profits of 
stock belongs to the same rank as a revenue arising from the 
employment of their small capitals. The amount of the profits 
annually made by small shopkeepers, tradesmen, and retailers 
of all kinds is everywhere very considerable, and makes a very 
considerable portion of the annual produce. Fourthly, and 
lastly, some part even of the rent of land belongs to the same 
rank, a considerable part to those who are somewhat below 
the middling rank, and a small part even to the lowest rank, 
common labourers sometimes possessing in property an acre or 
two of land. Though the expense of those inferior ranks of 
people, therefore, taking them individually, is very small, yet 
the whole mass of it, taking them collectively, amounts always 
to by much the largest portion of the whole expense of the 
society; what remains of the annual produce of the land and 
labour of the country for the consumption of the superior ranks 
being always much less, not only in quantity, but in value. The 
taxes upon expense, therefore, which fall chiefly upon that 
of the superior ranks of people, upon the smaller portion of the 
annual produce, are likely to be much less productive than 
either those which fall indifferently upon the expense of all 
ranks, or even those which fall chiefly upon that of the inferior 
ranks; than either those which fall indifferently upon the whole 
annual produce, or those which fall chiefly upon the larger 
portion of it. The excise upon the materials and manufacture 
of home-made fermented and spirituous liquors is accordingly, 
of all the different taxes upon expense, by far the most pro- 



The Sources ot Revenue 369 

ductive; and this branch of the excise falls very much, perhaps 
principally, upon the expense of the common people. In tin 
y-ear which ended on the 5th of July 1775, the gross produce of 
this branch of the excise amounted to 3,341,837 95. gd. 

It must always be remembered, however, that it is the 
luxurious and not the necessary expense of the inferior ranks 
of people that ought ever to be taxed. The final payment of 
any tax upon their necessary expense would fall altogether 
upon the superior ranks of people; upon the smaller portion of 
the annual produce, and not upon the greater. Such a tax 
must in all cases either raise the wages of labour, or lessen the 
demand for it. It could not raise the wages of labour without 
throwing the final payment of the tax upon the superior ranks 
of people. It could not lessen the demand for labour without 
lessening the annual produce of the land and labour of the 
country, the fund from which all taxes must be finally paid. 
Whatever might be the state to which a tax of this kind reduced 
the demand for labour, it must always raise wages higher than 
they otherwise would be in that state, and the final payment 
of this enhancement of wages must in all cases fall upon the 
superior ranks of people. 

P ernicnted liquors brewed, and spirituous liquors distilled, 
not for sale, but for private use, are not in Great Britain liable 
to any duties of excise. This exemption, of which the object 
is to save private families from the odious visit and examination 
of the tax-gatherer, occasions the burden of those duties to fall 
frequently much lighter upon the rich than upon the poor. It 
is not, indeed, very common to distil for private use, though it 
is done sometimes. But in the country many middling and 
almost all rich and great families brew their own beer. Their 
strong beer, therefore, costs them eight shillings a barrel less 
than it costs the common brewer, who must have his profit 
upon the tax as well as upon all the other expense which he 
advances. Such families, therefore, must drink their beer at 
least nine or ten shillings a barrel cheaper than any liquor of 
the same q-iality can be drunk by the common people, to whom 
it is everywhere more convenient to buy their beer, by little 
and little, from the brewery or the alehouse. Malt, in the same 
manner, that is made for the use of a private family is not 
liable to the visit or examination of the tax-gatherer; but in 
this case the- f imily must compound at seven shillings and six 
pence a head for the tax. Seven shillings and sixpence are 



370 The Wealth of Nations 

equal to the excise upon ten bushels of malt a quantity fully 
equal to what all the different members of any sober family, 
men, women, and children, are at an average likely to consume. 
But in rich and great families, where country hospitality is 
much practised, the malt liquors consumed by the members of 
the family make but a small part of the consumption of the 
house. Either on account of this composition, however, or for 
other reasons, it is not near so common to malt as to brew for 
private use. It is difficult to imagine any equitable reason why 
those who either brew or distil for private use should not be 
subject to a composition of the same kind. 

A greater revenue than what is at present drawn from all 
the heavy taxes upon malt, beer, and ale might be raised, it 
has frequently been said, by a much lighter tax upon malt, the 
opportunities of defrauding the revenue being much greater in 
a brewery than in a malt-house, and those who brew for private 
use being exempted from all duties or composition for duties, 
which is not the case with those who malt for private use. 

In the porter brewery of London a quarter of malt is 
commonly brewed into more than two barrels and a half, some 
times into three barrels of porter. The different taxes upon 
malt amount to six shillings a quarter, those upon strong beer 
and ale to eight shillings a barrel. In the porter brewery, there 
fore, the different taxes upon malt, beer, and ale amount to 
between twenty-six and thirty shillings upon the produce of a 
quarter of malt. In the country brewery for common country 
sale a quarter of malt is seldom brewed into less than two 
barrels of strong and one barrel of small beer, frequently into 
two barrels and a half of strong beer. The different taxes upon 
small beer amount to one shilling and fourpence a barrel. In 
the country brewery, therefore, the different taxes upon malt, 
beer, and ale seldom amount to less than twenty-three shillings 
and fourpence, frequently to twenty-six shillings, upon the 
produce of a quarter of malt. Taking the whole kingdom at an 
average, therefore, the whole amount of the duties upon malt, 
beer, and ale cannot be estimated at less than twenty-four or 
twenty-five shillings upon the produce of a quarter of malt. 
But by taking off all the different duties upon beer and ale, and 
by tripling the malt-tax, or by raising it from six to eighteen 
shillings upon the quarter of malt, a greater revenue, it is said, 
might be raised by this single tax than what is at present 
drawn from all those heavier taxes. 



1 ne bources or Kevenue 371 




i 


s. 


d. 


In 1772, the old malt-tax produced . 


722,023 


ii 


ii 


The additional .... 


356,776 


7 


9l 


In 1773, the old tax produced . 


561,627 


3 


7l 


The additional .... 


278,650 


15 




In 1774, the old tax produced . 


624,614 


17 


5i 


The additional .... 


3 IO ,745 


2 




In 1775, the old tax produced . 


657,357 


O 


8* 


The additional .... 


323,785 


12 


6} 




4)3,835,58o 


12 


l 


Average of these four years 


958,895 


3 


o T 3 


In 1772, the country excise produced 


1,243,128 


5 


3 


The London brewery 


408,260 


7 


22 


In 1773, the country excise 


1,245,808 


3 


3 


The London brewery 


405,406 






In 1774, the country excise 


1,246,373 


M 


5* 


The London brewery 


320,601 


18 


oi 


In 1775, the country excise 


1,214,583 


6 




The London brewery 


463,670 


7 


! 




4)6,547,832 


19 


*\ 


Average of these four years 


1,636,958 


4 


9i 


To which adding the average malt-tax, or 


958,895 


3 




The whole amount of those different taxes 








comes out to be . 


2,595,853 


7 


9ti 


But by tripling the malt-tax, or by raising 








it from six to eighteen shillings upon the 








quarter of malt, that single tax would 








produce ...... 


2,876,6*5 


9 


nr 


A sum which exceeds the foregoing by 


280,832 


i 


2 1C 



Under the old malt-tax, indeed, is comprehended a tax of 
four shillings upon the hogshead of cyder, and another of ten 
shillings upon the barrel of mum. In 1774, the tax upon cydtr 
produced only 3083 6s. 8d. It probably fell somewhat short 
of its usual amount, all the different taxes upon cyder having, 
that year, produced less than ordinary. The tax upon mum, 



372 The Wealth of Nations 

though much heavier, is still less productive, on account of the 
smaller consumption of that liquor. But to balance whatever 
may be the ordinary amount of those two taxes, there is com 
prehended under what is called the country excise, first, the old 
excise of six shillings and eightpence upon the hogshead of 
cyder; secondly, a like tax of six shillings and eightpence upon 
the hogshead of verjuice; thirdly, another of eight shillings and 
ninepence upon the hogshead of vinegar; and, lastly, a fourth 
tax of elevenpence upon the gallon of mead or metheglin: the 
produce of those different taxes will probably much more than 
counterbalance that of the duties imposed by what is called 
the annual malt tax upon cyder and mum. 

Malt is consumed not only in the brewery of beer and ale, but 
in the manufacture of low wines and spirits. If the malt tax 
were to be raised to eighteen shillings upon the quarter, it might 
be necessary to make some abatement in the different excises 
which are imposed upon those particular sorts of low wines and 
spirits of which malt makes any part of the materials. In what 
are called malt spirits it makes commonly but a third part of 
the materials, the other two-thirds being either raw barley, or 
one-third barley and one-third wheat. In the distillery of malt 
spirits, both the opportunity and the temptation to smuggle 
are much greater than either in a brewery or in a malt-house; 
the opportunity on account of the smaller bulk and greater 
value of the commodity, and the temptation on account of 
the superior height of the duties, which amount to 35. lofd. 1 
upon the gallon of spirits. By increasing the duties upon malt, 
and reducing those upon the distillery, both the opportunities 
and the temptation to smuggle would be diminished, which 
might occasion a still further augmentation of revenue. 

It has for some time past been the policy of Great Britain to 
discourage the consumption of spirituous liquors, on account of 
their supposed tendency to ruin the health and to corrupt the 
morals of the common people. According to this policy, the 
abatement of the taxes upon the distillery ought not to be so 
great as to reduce, in any respect, the price of those liquors. 
Spirituous liquors might remain as dear as ever, while at the 
same time the wholesome and invigorating liquors of beer and 
ale might be considerably reduced in their price. The people 

1 Though the duties directly imposed upon proof spirits amount only to 
2s. 6d. per gallon, these add ed to the duties upon the low wines, from 
which they are distilled, amount to 35. iod. Both low wines and proof 
spirits are, to prevent frauds, now rated according to what they gauge in 
the wash. 



The Sources of Revenue 373 

might thus be in part relieved from one of the burdens of which 
they at present complain the most, while at the same time the 
revenue might be considerably augmented. 

The objections of Dr. Davenant to this alteration in the 
present system of excise duties seem to be without foundation. 
Those objections are, that the tax, instead of dividing itself as 
at present pretty equally upon the profit of the maltster, upon 
that of the brewer, and upon that of the retailer, would, so far 
as it affected profit, fall altogether upon that of the maltster; 
that the maltster could not so easily get back the amount of 
the tax in the advanced price of his malt as the brewer and 
retailer in the advanced price of their liquor; .-I that so heavy 
a tax upon malt might reduce the rent and profit of barley land. 

No tax can ever reduce, for any considerable time, the rate 
of profit in any particular trade which must always keep its 
level with other trades in the neighbourhood. The present 
duties upon malt, beer, and ale do not a(Tect the profits of the 
dealers in those commodities, who all get back the tax with an 
additional profit in the enhanced price of their goods. A tax, 
indeed, may render the goods upon which it is imposed so dear 
as to diminish the consumption of them. But the consumption 
of malt is in malt liquors, and a tax of eighteen shillings upon 
the quarter of malt could not well render those liquors dearer 
than the different taxes, amounting to twenty-four or twenty- 
five shillings, do at present. Those liquors, on the contrary, 
would probably become cheaper, and the consumption of them 
would be more likely to increase than to diminish. 

It is not very easy to understand why it should be more 
difficult for the maltster to get back eighteen shillings in the 
advanced price of his malt than it is at present for the brewer 
to get back twenty-four or twenty-five, sometimes thirty, shillings 
in that of his liquor. The maltster, indeed, instead of a tax of 
six shillings, would be obliged to advance one of eighteen shillings 
upon every quarter of malt. But the brewer is at present 
obliged to advance a tax of twenty-four or twenty-five, some 
times thirty, shillings upon every quarter of malt which he 
brews. It could not be more inconvenient for the maltster to 
advance a lighter tax than it is at present for the brewer to 
advance a heavier one. The maltster doth not always keep in 
his granaries a stock of malt which it will require a longer time 
to dispose of than the stock of beer and ale which the brewer 
frequently keeps in his cellars. The former, therefore, may 
frequently get the returns of his money as soon as the latter. 



374 The Wealth of Nations 

But whatever inconveniency might arise to the maltster from 
being obliged to advance a heavier tax, it could easily be 
remedied by granting him a few months longer credit than is 
at present commonly given to the brewer. 

Nothing could reduce the rent and profit of barley land which 
did not reduce the demand for barley. But a change of system 
which reduced the duties upon a quarter of malt brewed into 
beer and ale from twenty-four and twenty-five shillings to 
eighteen shillings would be more likely to increase than diminish 
that demand. The rent and profit of barley land, besides, must 
always be nearly equal to those of other equally fertile and 
equally well-cultivated land. If they were less, some part of 
the barley land would soon be turned to some other purpose; 
and if they were greater, more land would soon be turned to 
the raising of barley. When the ordinary price of any parti 
cular produce of land is at what may be called a monopoly 
price, a tax upon it necessarily reduces the rent and profit of 
the land which grows it. A tax upon the produce of those 
precious vineyards of which the wine falls so much short of the 
effectual demand that its price is always above the natural 
proportion to that of the produce of other equally fertile and 
equally well-cultivated land would necessarily reduce the rent 
and profit of those vineyards. The price of the wines being 
already the highest that could be got for the quantity commonly 
sent to market, it could not be raised higher without diminish 
ing that quantity, and the quantity could not be diminished 
without still greater loss, because the lands could not be turned 
to any other equally valuable produce. The whole weight of 
the tax, therefore, would fall upon the rent and profit properly 
upon the rent of the vineyard. When it has been proposed to 
lay any new tax upon sugar, our sugar planters have frequently 
complained that the whole weight of such taxes fell, not upon 
the consumer, but upon the producer, they never having been 
able to raise the price of their sugar after the tax higher than 
it was before. The price had, it seems, before the tax been a 
monopoly price, and the argument adduced to show that sugar 
was an improper subject of taxation demonstrated, perhaps, 
that it was a proper one, the gains of monopolists, whenever 
they can be come at, being certainly of all subjects the most 
proper. But the ordinary price of barley has never been a 
monopoly price, and the rent and profit of barley land have 
never been above their natural proportion to those of other 
equally fertile and equally well-cultivated land. The different 



The Sources of Revenue 375 

taxes which have been imposed upon malt, beer, and ale have 
never lowered the price of barley, have never reduced the rent 
and profit of barley land. The price of malt to the brewer has 
constantly risen in proportion to the taxes imposed upon it, 
and those taxes, together with the different duties upon beer 
and ale, have constantly either raised the price, or what comes 
to the same thing, reduced the quality of those commodities 
to the consumer. The final payment of those taxes has fallen 
constantly upon the consumer, and not upon the producer. 

The only people likely to suffer by the change of system here 
proposed are those who brew for their own private use. But 
the exemption which this superior rank of people at present 
enjoy from very heavy taxes which are paid by the poor 
labourer and artificer is surely most unjust and unequal, and 
ought to be taken away, even though this change was never to 
take place. It has probably been the interest of this superior 
order of people, however, which has hitherto prevented a change 
of system that could not well fail both to increase the revenue 
and to relieve the people. 

Besides such duties as those of customs and excise above 
mentioned, there are several others which affect the price of 
goods more unequally and more indirectly. Of this kind are 
the duties which in French are called Peages, which in old Saxon 
times were called Duties of Passage, and which seem to have 
been originally established for the same purpose as our turnpike 
tolls, or the tolls upon our canals and navigable rivers, for the 
maintenance of the road or of the navigation. Those duties, 
when applied to such purposes, are most properly imposed 
according to the bulk or weight of the goods. As they were 
originally local and provincial duties, applicable to local and 
provincial purposes, the administration of them was in most 
cases entrusted to the particular town, parish, or lordship in 
which they were levied, such communities being in some way 
or other supposed to be accountable for the application. The 
sovereign, who is altogether unaccountable, has in many 
countries assumed to himself the administration of those duties, 
and though he has in most cases enhanced very much the duty, 
he has in many entirely neglected the application. If the turn 
pike tolls of Great Britain should ever become one of the re 
sources of government, we may learn, by the example of many 
other nations, what would probably be the consequence. Such 
tolls are no doubt finally paid by the consumer; but the con 
sumer is not taxed in proportion to his expense when he pays, 



376 The Wealth of Nations 

not according to the value, but according to the balk or weight 
of what he consumes. When such duties are imposed, not 
according to the bulk or weight, but according to the supposed 
value of the goods, they become properly a sort of inland 
customs or excises which obstruct very much the most im 
portant of all branches of commerce, the interior commerce of 
the country. 

In some small states duties similar to those passage duties 
are imposed upon goods carried across the territory, either by 
land or by water, from one foreign country to another. These 
are in some countries called transit-duties. Some of the little 
Italian states which are situated upon the Po and the rivers 
which run into it derive some revenue from duties of this kind 
which are paid altogether by foreigners, and which, perhaps, are 
the only duties that one state can impose upon the subjects of 
another without obstructing in any respect the industry or 
commerce of its own. The most important transit-duty in the 
world is that levied by the King of Denmark upon all merchant 
ships which pass through the Sound. 

Such taxes upon luxuries as the greater part of the duties of 
customs and excise, though they all fall indifferently upon every 
different species of revenue, and are paid finally, or without any 
retribution, by whoever consumes the commodities upon which 
they are imposed, yet they do not always fall equally or pro- 
portionably upon the revenue of every individual. As every 
man s humour regulates the degree of his consumption, every 
man contributes rather according to his humour than in pro 
portion to his revenue; the profuse contribute more, the parsi 
monious less, than their proper proportion. During the minority 
of a man of great fortune he contributes commonly very little, 
by his consumption, towards the support of that state from 
whose protection he derives a great revenue. Those who live 
in another country contribute nothing, by their consumption, 
towards the support of the government of that country in 
which is situated the source of their revenue. If in this latter 
country there should be no land-tax, nor any considerable duty 
upon the transference either of movable or of immovable pro 
perty, as is the case in Ireland, such absentees may derive a 
great revenue from the protection of a government to the 
support of which they do not contribute a single shilling. This 
inequality is likely to be greatest in a country of which the 
government is in some respects subordinate and dependent upon 
that of some other. The people who possess the most extensive 



The Sources of Revenue 377 

property in the dependent will in this case generally choose to 
live in the governing country. Ireland is precisely in this 
situation, and we cannot, therefore, wonder that the proposal of 
a tax upon absentees should be so very popular in that country. 
It might, perhaps, be a little difiicult to ascertain either what 
sort or what degree of absence would subject a man to be taxed 
as an absentee, or at what precise time the tax should either 
begin or end. If you except, however, this very peculiar situa 
tion, any inequality in the contribution of individuals which 
can arise from such taxes is much more than compensated by 
the very circumstance which occasions that inequality the 
circumstance that every man s contribution is altogether volun 
tary, it being altogether in his power either to consume or not 
to consume the commodity taxed. Where such taxes, therefore, 
are properly assessed, and upon proper commodities, they are 
paid with less grumbling than any other. When they art- 
advanced by the merchant or manufacturer, the consumer, who 
finally pays them, soon comes to confound them with the price 
of the commodities, and almost forgets that he pays any tax. 

Such taxes are or may be perfectly certain, or may be assessed 
so as to leave no doubt concerning either what ought to be paid, 
or when it ought to be paid ; concerning either the quantity or 
the time of payment. Whatever uncertainty there may some 
times l>e, either in the duties of customs in Great Britain, or in 
other duties of the same kind in other countries, it cannot arise 
from the nature of those duties, but from the inaccurate or 
unskilful manner in which the law that imposes them is 
expressed. 

Taxes upon luxuries generally are, and always may be, paid 
piecemeal, or in proportion as the contributors have occasion 
to purchase the goods upon which they are imposed. In the 
time and mode of payment they are, or may be, of all taxes the 
most convenient. Upon the whole, such taxes, therefore, are, 
perhaps, as agreeable to the three first of the four general 
maxims concerning taxation as any other. They offend in 
every respect against the fourth. 

Such taxes, in proportion to what they bring into the public 
treasury of the state, always take out or keep out of the pockets 
of the people more than almost any other taxes. They seem 
to do this in all the four different ways in which it is possible 
to do it. 

First, the levying of such taxes, even when imposed in the 
most judicious manner, requires a great number of custom 



The Wealth of Nations 

house and excise officers, whose salaries and perquisites are a 
real tax upon the people, which brings nothing into the treasury 
of the state. This expense, however, it must be acknowledged, 
is more moderate in Great Britain than in most other countries. 
In the year which ended on the 5th of July 1775, the gross 
produce of the different duties, under the management of the 
commissioners of excise in England, amounted to 5,507,308 
1 8s. 8|d., which was levied at an expense of little more than five 
and a half per cent. From this gross produce, however, there 
must be deducted what was paid away in bounties and draw 
backs upon the exportation of excisable goods, which will reduce 
the net produce below five millions. 1 The levying of the salt 
duty, an excise duty, but under a different management, is much 
more expensive. The net revenue of the customs does not 
amount to two millions and a half, which is levied at an expense 
of more than ten per cent, in the salaries of officers, and other 
incidents. But the perquisites of custom-house officers are every 
where much greater than their salaries; at some ports more 
than double or triple those salaries. If the salaries of officers, 
and other incidents, therefore, amount to more than ten per 
cent, upon the net revenue of the customs, the whole expense 
of levying that revenue may amount, in salaries and perquisites 
together, to more than twenty or thirty per cent. The officers 
of excise receive few or no perquisites, and the administration 
of that branch of the revenue, being of more recent establish 
ment, is in general less corrupted than that of the customs, into 
which length of time has introduced and authorised many 
abuses. By charging upon malt the whole revenue which is at 
present levied by the different duties upon malt and malt liquors, 
a saving, it is supposed, of more than fifty thousand pounds 
might be made in the annual expense of the excise. By con 
fining the duties of customs to a few sorts of goods, and by 
levying those duties according to the excise laws, a much greater 
saving might probably be made in the annual expense of the 
customs. 

Secondly, such taxes necessarily occasion some obstruction 
or discouragement to certain branches of industry. As they 
always raise the price of the commodity taxed, they so far dis 
courage its consumption, and consequently its production. If 
it is a commodity of home growth or manufacture, less labour 
comes to be employed in raising and producing it. If it is a 

1 The net produce of that year, after deducting all expenses and allow 
ances, amounted to 4,975,652 195. 6d. 



The Sources of Revenue 379 

foreign commodity of which the tax increases in this manner 
the price, the commodities of the same kind which are made at 
home may thereby, indeed, gain some advantage in the home 
market, and a greater quantity of domestic industry may thereby 
be turned toward preparing them. But though this rise of 
price in a foreign commodity may encourage domestic industry 
in one particular branch, it necessarily discourages that industry 
in almost every other. The dearer the Birmingham manu 
facturer buys his foreign wine, the cheaper he necessarily sells 
that part of his hardware with which, or, what comes to the same 
thing, with the price of which he buys it. That part of his 
hardware, therefore, becomes of less value to him, and he has 
less encouragement to work at it. The dearer the consumers 
in one country pay for the surplus produce of another, the 
cheaper they necessarily sell that part of their own surplus 
produce with which, or, what comes to the same thing, with 
the price of which they buy it. That part of their own surplus 
produce becomes of less value to them, and they have less 
encouragement to increase its quantity. All taxes upon con 
sumable commodities, therefore, tend to reduce the quantity of 
productive labour below what it otherwise would be, either in 
preparing the commodities taxed, if they are home commodities, 
or in preparing those with which they are purchased, if they 
are foreign commodities. Such taxes, too, always alter, more 
or less, the natural direction of national industry, and turn 
it into a channel always different from, and generally leas 
advantageous than that in which it would have run of its own 
accord. 

Thirdly, the hope of evading such taxes by smuggling gives 
frequent occasion to forfeitures and other penalties which 
entirely ruin the smuggler; a person who, though no doubt 
highly blamable for violating the laws of his country, is fre 
quently incapable of violating those of natural justice, and 
would have been, in every respect, an excellent citizen had not 
the laws of his country made that a crime which nature never 
meant to be so. In those corrupted governments where there 
is at least a general suspicion of much unnecessary expense, and 
great misapplication of the public revenue, the laws which guard 
it are little respected. Not many people are scrupulous about 
smuggling when, without perjury, they can find any easy and 
safe opportunity of doing so. To pretend to have any scruple 
about buying smuggled goods, though a manifest encourage 
ment to the violation of the revenue laws, and to the perjury 

N 4 3 



380 The Wealth ot Nations 

which almost always attends it, would in most countries be 
regarded as one of those pedantic pieces of hypocrisy which, 
instead of gaining credit with anybody, serve only to expose the 
person who affects to practise them to the suspicion of being a 
greater knave than most of his neighbours. By this indulgence 
of the public, the smuggler is often encouraged to continue a 
trade which he is thus taught to consider as in some measure 
innocent, and when the severity of the revenue laws is ready 
to fall upon him, he is frequently disposed to defend with 
violence what he has been accustomed to regard as his just 
property. From being at first, perhaps, rather imprudent than 
criminal, he at last too often becomes one of the hardiest and 
most determined violators of the laws of society. By the ruin 
of the smuggler, his capital, which had before been employed 
in maintaining productive labour, is absorbed either in the 
revenue of the state or in that of the revenue officer, and is 
employed in maintaining unproductive, to the diminution of 
the general capital of the society and of the useful industry 
which it might otherwise have maintained. 

Fourthly, such taxes, by subjecting at least the dealers in 
the taxed commodities to the frequent visits and odious examina 
tion of the tax-gatherers, expose them sometimes, no doubt, 
to some degree of oppression, and always to much trouble and 
vexation; and though vexation, as has already been said, is 
not, strictly speaking, expense, it is certainly equivalent to the 
expense at which every man would be willing to redeem himself 
from it. The laws of excise, though more effectual for the 
purpose for which they were instituted, are, in this respect, 
more vexatious than those of the customs. When a merchant 
has imported goods subject to certain duties of customs, when 
he has paid those duties, and lodged the goods in his warehouse, 
he is not in most cases liable to any further trouble or vexa 
tion from the custom-house officer. It is otherwise with goods 
subject to duties of excise. The dealers have no respite from 
the continual visits and examination of the excise officers. The 
duties of excise are, upon this account, more unpopular than 
those of the customs ; and so are the officers who levy them. 
Those officers, it is pretended, though in general, perhaps, they 
do their duty fully as well as those of the customs, yet, as 
that duty obliges them to be frequently very troublesome to 
some of their neighbours, commonly contract a certain hard 
ness of character which the others frequently have not. This 
observation, however, may very probably be the mere suggestion 



The Sources of Revenue 38 i 

of fraudulent dealers whose smuggling is either prevented or 
detected by their diligence. 

The inconveniencies, however, which are, perhaps, in some 
iegree inseparable from taxes upon consumable commodities, 
fall as light upon the people of Great Britain as upon those of 
any other country of which the government is nearly as expensive. 
Our state is not perfect, and might be mended, but it is as good 
or better than that of most of our neighbours. 

In consequence of the notion that duties upon consumable 
goods were taxes upon the profits of merchants, those duties 
have, in some countries, been repeated upon every successive 
sale of the goods. If the profits of the merchant importer or 
merchant manufacturer were taxed, equality seemed to require 
that those of all the middle buyers who intervened between 
either of them and the consumer should likewise be taxed. 
The famous alcavala of Spain seems to have been established 
upon this principle. It was at first a tax of ten per cent., after 
wards of fourteen per cent., and is at present of only six per 
cent, upon the sale of every sort of property, whether movable 
or immovable, and it is repeated every time the property is 
sold. 1 The levying of this tax requires a multitude of revenue 
officers sufficient to guard the transportation of goods, not only 
from one province to another, but from one shop to another. 
It subjects not only the dealers in some sorts of goods, but 
those in all sorts, every farmer, every manufacturer, every 
merchant and shopkeeper, to the continual visits and examina 
tion of the tax-gatherers. Through the greater part of a country 
in which a tax of this kind is established nothing can be pro 
duced for distant sale. The produce of every part of the country 
must be proportioned to the consumption of the neighbourhood. 
It is to the alcavala, accordingly, that Ustarit/ imputes the 
ruin of the manufactures of Spain. He might have imputed to 
it likewise the declension of agriculture, it being imposed not 
only upon manufactures, but upon the rude produce of the 
land. 

In the kingdom of Naples there is a similar tax of three per 
cent, upon the value of all contracts, and consequently upon 
that of all contracts of sale. It is both lighter than the Spanish 
tax, and the greater part of towns and parishes are allowed 
to pay a composition in lieu of it. They levy this composition 
in what manner they please, generally in a way that gives 
no interruption to the interior commerce of the place. The 

1 Memnires concernant Us Dmtls. etc., torn. i. p. 455. 



382 The Wealth of Nations 

Neapolitan tax, therefore, is not near so ruinous as the Spanish 
one. 

The uniform system of taxation which, with a few exceptions 
of no great consequence, takes place in all the different parts 
of the united kingdom of Great Britain, leaves the interior 
commerce of the country, the inland and coasting trade, almost 
entirely free. The inland trade is almost perfectly free, and 
the greater part of goods may be carried from one end of the 
kingdom to the other without requiring any permit or let-pass, 
without being subject to question, visit, or examination from 
the revenue officers. There are a few exceptions, but they are 
such as can give no interruption to any important branch of 
the inland commerce of the country. Goods carried coastwise, 
indeed, require certificates or coast-cockets. If you except coals, 
however, the rest are almost all duty-free. This freedom of 
interior commerce, the effect of the uniformity of the system of 
taxation, is perhaps one of the principal causes of the prosperity 
of Great Britain, every great country being necessarily the best 
and most extensive market for the greater part of the pro 
ductions of its own industry. If the same freedom, in con 
sequence of the same uniformity, could be extended to Ireland 
and the plantations, both the grandeur of the state and the 
prosperity of every part of the empire would probably be still 
greater than at present. 

In France, the different revenue laws which take place in the 
different provinces require a multitude of revenue officers to 
surround not only the frontiers of the kingdom, but those of 
almost each particular province, in order either to prevent the 
importation of certain goods, or to subject it to the payment 
of certain duties, to the no small interruption of the interior 
commerce of the country. Some provinces are allowed to com 
pound for the gabelle or salt-tax. Others are exempted from it 
altogether. Some provinces are exempted from the exclusive 
sale of tobacco, which the farmers-general enjoy through the 
greater part of the kingdom. The aides, which correspond to 
the excise in England, are very different in different provinces. 
Some provinces are exempted from them, and pay a composition 
or equivalent. In those in which they take place and are in 
farm there are many local duties which do not extend beyond a 
particular town or district. The traites, which correspond to 
our customs, divide the kingdom into three great parts; first, 
the provinces subject to the tariff of 1664, which are called the 
provinces of the five great farms, and under which are com- 



The Sources of Revenue 383 

prehended Picardy, Normandy, and the greater part of the 
interior provinces of the kingdom; secondly, the provinces 
subject to the tariff of 1667, which are called the provinces 
reckoned foreign, and under which are comprehended the greater 
part of the frontier provinces; and, thirdly, those provinces 
which are said to be treated as foreign, or which, because they 
are allowed a free commerce with foreign countries, are in their 
commerce with the other provinces of France subjected to the 
same duties as other foreign countries. These are Alsace, the 
three bishoprics of Metz, Toul, and Verdun, and the three 
cities of Dunkirk, Bayonne, and Marseilles. Both in the pro 
vinces of the five great farms (called so on account of an ancient 
division of the duties of customs into five great branches, each 
of which was originally the subject of a particular farm, though 
they are now all united into one), and in those which are said to 
be reckoned foreign, there are many local duties which do not 
extend beyond a particular town or district. There are some 
such even in the provinces which are said to be treated as foreign, 
particularly in the city of Marseilles. It is unnecessary to 
observe how much both the restraints upon the interior com 
merce of the country and the number of the revenue officers 
must be multiplied in order to guard the frontiers of those 
different provinces and districts which are subject to such 
different systems of taxation. 

Over and above the general restraints arising from this 
complicated system of revenue laws, the commerce of wine, 
after corn perhaps the most important production of France, 
is in the greater part of the provinces subject to particular 
restraints, arising from the favour which has been shown to 
the vineyards of particular provinces and districts, above those 
of others. The provinces most famous for their wines, it will 
l>e found, I believe, are those in which the trade in that article 
is subject to the fewest restraints of this kind. The extensive 
market which such provinces enjoy, encourages good manage 
ment both in the cultivation of their vineyards, and in the 
subsequent preparation of their wines. 

Such various and complicated revenue laws are not peculiar 
to France. The little duchy of Milan is divided into six pro 
vinces, in each of which there is a different system of taxation 
with regard to several different sorts of consumable goods. The 
still smaller territories of the Duke of Parma are divided into 
three or four, each of which has, in the same manner, a system 
of its own. Under such absurd management, nothing but the 



384 The Wealth of Nations 

great fertility of the soil and happiness of the climate could 
preserve such countries from soon relapsing into the lowest 
state of poverty and barbarism. 

Taxes upon consumable commodities may either be levied by 
an administration of which the officers are appointed by govern 
ment and are immediately accountable to government, of which 
the revenue must in this case vary from year to year according 
to the occasional variations in the produce of the tax, or they 
may be let in farm for a rent certain, the farmer being allowed 
to appoint his own officers, who, though obliged to levy the tax 
in the manner directed by the law, are under his immediate 
inspection, and are immediately accountable to him. The best 
and most frugal way of levying a tax can never be by farm. 
Over and above what is necessary for paying the stipulated rent, 
the salaries of the officers, and the whole expense of administra 
tion, the farmer must always draw from the produce of the tax 
a certain profit proportioned at least to the advance which he 
makes, to the risk which he runs, to the trouble which he is at, 
and to the knowledge and skill which it requires to manage so 
very complicated a concern. Government, by establishing an 
administration under their own immediate inspection of the 
same kind with that which the farmer establishes, might at 
least save this profit, which is almost always exorbitant. To 
farm any considerable branch of the public revenue requires 
either a great capital or a great credit; circumstances which 
would alone restrain the competition for such an undertaking 
to a very small number of people. Of the few who have this 
capital or credit, a still smaller number have the necessary 
knowledge or experience; another circumstance which restrains 
the competition still further. The very few, who are in con 
dition to become competitors, find it more for their interest to 
combine together; to become copartners instead of competitors, 
and when the farm is set up to auction, to offer no rent but 
what is much below the real value. In countries where the 
public revenues are in farm, the farmers are generally the most 
opulent people. Their wealth would alone excite the public 
indignation, and the vanity which almost always accompanies 
such upstart fortunes, the foolish ostentation with which they 
commonly display that wealth, excites that indignation still 
more. 

The farmers of the public revenue never find the laws too 
severe which punish any attempt to evade the payment of a 
tax. They have no bowels for the contributors, who are not 



The Sources of Revenue 385 

their subjects, and whose universal bankruptcy, if it should 
happen the day after their farm is expired, would not much 
affect their interest. In the greatest exigencies of the state, 
when the anxiety of the sovereign for the exact pavment of his 
revenue is necessarily the greatest, they seldom fail to complain 
that without laws more rigorous than those which actually take 
place, it will be impossible for them to pay even the usual rent. 
In those moments of public distress their demands cannot be 
disputed. The revenue laws, therefore, become gradually more 
and more severe. The most sanguinary are always to be found 
in countries where the greater part of the public revenue is in 
farm; the mildest, in countries where it is levied under the 
immediate inspection of the sovereign. Even a bad sovereign 
feels more compassion for his people than can ever be expected 
from the farmers of his revenue. He knows that the permanent 
grandeur of his family depends upon the prosperity of his 
people, and he will never knowingly ruin that prosperity for the 
sake of any momentary interest of his own. It is otherwise 
with the farmers of his revenue, whose grandeur may frequently 
be the effect of the ruin, and not of the prosperity of his people. 

A tax is sometimes not only farmed for a certain rent, but 
the farmer has, besides, the monopoly of the commodity taxed. 
In France, the duties upon tobacco and salt are levied in this 
manner. In such cases the farmer, instead of one, levies two 
exorbitant profits upon the people; the profit of the farmer, 
and the still more exorbitant one of the monopolist. Tobacco 
being a luxury, every man is allowed to buy or not to buy as 
he chooses. But salt being a necessary, every man is obliged 
to buy of the farmer a certain quantity of it; because, if he did 
not buy this quantity of the farmer, he would, it is p.vsumed, 
buy it of some smuggler. The taxes upon both commodities 
are exorbitant. The temptation to smuggle consequently is 
to many people irresistible, while at the same time the rigour 
of the law, and the vigilance of the farmer s officers, render the 
yielding to that temptation almost certainly ruinous. The 
smuggling of salt and tobacco sends every year several hundred 
people to the galleys, besides a very considerable number whom 
it sends to the gibbet. Those taxes levied in this manner yield 
a very considerable revenue to government. In 1767, the farm 
of tobacco was let for twenty-two millions five hundred and 
forty-one thousand two hundred and seventy-eight livres a 
year. That of salt, for thirty-six millions four hundred and 
ninety-two thousand four hundred and four livres. The farm 



386 The Wealth of Nations 

in both cases was to commence in 1768, and to last for six 
years. Those who consider the blood of the people as nothing 
in comparison with the revenue of the prince, may perhaps 
approve of this method of levying taxes. Similar taxes and 
monopolies of salt and tobacco have been established in many 
other countries; particularly in the Austrian and Prussian 
dominions, and in the greater part of the states of Italy. 

In France, the greater part of the actual revenue of the crown 
is derived from eight different sources ; the taille, the capitation, 
the two vingtie"mes, the gabelles, the aides, the traites, the 
domaine, and the farm of tobacco. The five last are, in the 
greater part of the provinces, under farm. The three first are 
everywhere levied by an administration under the immediate 
inspection and direction of government, and it is universally 
acknowledged that, in proportion to what they take out of the 
pockets of the people, they bring more into the treasury of the 
prince than the other five, of which the administration is much 
more wasteful and expensive. 

The finances of France seem, in their present state, to admit 
of three very obvious reformations. First, by abolishing the 
taille and the capitation, and by increasing the number of 
vingtie"mes, so as to produce an additional revenue equal to 
the amount of those other taxes, the revenue of the crown 
might be preserved; the expense of collection might be much 
diminished; the vexation of the inferior ranks of people, which 
the taille and capitation occasion, might be entirely prevented ; 
and the superior ranks might not be more burdened than the 
greater part of them are at present. The vingtieme, I have 
already observed, is a tax very nearly of the same kind with 
what is called the land-tax of England. The burden of the taille, 
it is acknowledged, falls finally upon the proprietors of land; 
and as the greater part of the capitation is assessed upon those 
who are subject to the taille at so much a pound of that other 
tax, the final payment of the greater part of it must likewise fall 
upon the same order of people. Though the number of the ving- 
tie"mes, therefore, was increased so as to produce an additional 
revenue equal to the amount of both those taxes, the superior 
ranks of people might not be more burdened than they are at 
present. Many individuals no doubt would, on account of the 
great inequalities with which the taille is commonly assessed 
upon the estates and tenants of different individuals. The 
interest and opposition of such favoured subjects are the 
obstacles most likely to prevent this or any other reformation 



The Sources of Revenue 387 

of the same kind. Secondly, by rendering the gabelle, the aides, 
the traites, the taxes upon tobacco, all the different customs 
and excises, uniform in all the different parts of the kingdom, 
those taxes might be levied at much less expense, and the 
interior commerce of the kingdom might be rendered as free as 
that of England. Thirdly, and lastly, by subjecting all those 
taxes to an administration under the immediate inspection and 
direction of government, the exorbitant profits of the farmers- 
general might be added to the revenue of the state. The 
opposition arising from the private interest of individuals is 
likely to be as effectual for preventing the two last as the first- 
mentioned scheme of reformation. 

The French system of taxation seems, in every respect, 
inferior to the British. In Great Britain ten millions sterling 
are annually levied upon less than eight millions of people 
without its t>eing possible to say that any particular order is 
oppressed. From the collections of the Abbd Expilly, and the 
observations of the author of the Essay upon the legislation 
and commerce of corn, it appears probable that France, includ 
ing the provinces of Lorraine and Bar, contains about twenty- 
three or twenty-four millions of people three times the number 
perhaps contained in Great Britain. The soil and climate of 
France are better than those of Great Britain. The country has 
been much longer in a state of improvement and cultivation, 
and is, upon that account, better stocked with all those things 
which it requires a long time to raise up and accumulate, such 
as great towns, and convenient and well-built houses, both in 
town and country. With these advantages it might be expected 
tlxat in France a revenue of thirty millions might be levied for 
the support of the state with as little inconveniency as a revenue 
of ten millions is in Great Britain. In 1765 and 1766, the whole 
revenue paid into the treasury of France, according to the best, 
though, I acknowledge, very imperfect, accounts which I could 
get of it, usually run between 308 and 325 millions of livres; 
that is, it did not amount to fifteen millions sterling; not the 
half of what might have been expected had the people con 
tributed in the same proportion to their numbers as the people 
of Great Britain. The people of France, however, it is generally 
acknowledged, are much more oppressed by taxes than the 
people of Great Britain. France, however, is certainly the great 
empire in Europe which, after that of Great Britain, enjoys the 
mildest and most indulgent government. 

In Holland the heavy taxes upon the necessaries of life have 



3 88 



The Wealth of Nations 



ruined,, it is said, their principal manufactures, and are likely 
to discourage gradually even their fisheries and their trade in 
shipbuilding. The taxes upon the necessaries of life are in 
considerable in Great Britain, and no manufacture has hitherto 
been ruined by them. The British taxes which bear hardest 
on manufactures are some duties upon the importation of raw 
materials, particularly upon that of raw silk. The revenue of 
the states-general and of the different cities, however, is said to 
amount to more than five millions two hundred and fifty 
thousand pounds sterling; and as the inhabitants of the United 
Provinces cannot well be supposed to amount to more than a 
third part of those of Great Britain, they must, in proportion 
to their number, be much more heavily taxed. 

After all the proper subjects of taxation have been exhausted, 
if the exigencies of the state still continue to require new taxes, 
they must be imposed upon improper ones. The taxes upon 
the necessaries of life, therefore, may be no impeachment of 
the wisdom of that republic which, in order to acquire and to 
maintain its independency, has, in spite of its great frugality, 
been involved in such expensive wars as have obliged it to 
contract great debts. The singular countries of Holland and 
Zealand, besides, require a considerable expense even to pre 
serve their existence, or to prevent their being swallowed up by 
the sea, which must have contributed to increase considerably 
the load of taxes in those two provinces. The republican form 
of government seems to be the principal support of the present 
grandeur of Holland. The owners of great capitals, the great 
mercantile families, have generally either some direct share or 
some indirect influence in the administration of that govern 
ment. For the sake of the respect and authority which they 
derive from this situation, they are willing to live in a country 
where their capital, if they employ it themselves, will bring 
them less profit, and if they lend it to another, less interest; 
and where the very moderate revenue which they can draw 
from it will purchase less of the necessaries and conveniences of 
life than in any other part of Europe. The residence of such 
wealthy people necessarily keeps alive, in spite of all disadvan 
tages, a certain degree of industry in the country. Any public 
calamity which should destroy the republican form of govern 
ment, which should throw the whole administration into the 
hands of nobles and of soldiers, which should annihilate alto 
gether the importance of those wealthy merchants, would soon 
render it disagreeable to them to live in a country where they 



Public Debts 389 

were no longer likely to be much respected. They would remove 
both their residence and their capital to some other country, and 
the industry and commerce of Holland would soon follow the 
capitals which supported them. 



CHAPTER III 

OF PUBLIC DEBTS 

IN that rude state of society which precedes the extension of 
commerce and the improvement of manufactures, when those 
expensive luxuries which commerce and manufactures can alone 
introduce are altogether unknown, the person who possesses a 
large revenue, I have endeavoured to show in the third book of 
this Inquiry, can spend or enjoy that revenue in no other way 
than by maintaining nearly as many people as it can maintain. 
A large revenue may at all times be said to consist in the com 
mand of a large quantity of the necessaries of life. In that 
rude state of things it is commonly paid in a large quantity of 
those necessaries, in the materials of plain food and coarse 
clothing, in corn and cattle, in wool and raw hides. When 
neither commerce nor manufactures furnish anything for which 
the OWIH.T can exchange the greater part of those materials 
which are over and above his own consumption, he can do 
nothing with the surplus but feed and clothe nearly as many 
people as it will feed and clothe. A hospitality in which there 
is no luxury, and a liberality in which there is no ostentation, 
occasion, in this situation of things, the principal expenses of 
the rich and the great. But these, I have likewise endeavoured 
to show in the same book, are expenses by which people are 
not very apt to ruin themselves. There is not, perh.ips, any 
selfish pleasure so frivolous of which the pursuit has not 
sometimes ruined even sensible men. A passion for cock-fighting 
has ruined many. But the instances, I believe, are not very 
numerous of people who have been ruined by a hospitality or 
lilx;rality of this kind, though the hospitality of luxury and the 
liberality of ostentation have ruined many. Among our feudal 
ancestors, the long time during which estates used to continue 
in the same family sufficiently demonstrates the general dis 
position of people to live within their income. Though the 
rustic hospitality constantly exercised by the great land holders 
may not, to us in the present times, seem consistent with that 



390 The Wealth of Nations 

order which we are apt to consider as inseparably connected 
with good economy, yet we must certainly allow them to have 
been at least so far frugal as not commonly to have spent their 
whole income. A part of their wool and raw hides they had 
generally an opportunity of selling for money. Some part of 
this money, perhaps, they spent in purchasing the few objects 
of vanity and luxury with which the circumstances of the times 
could furnish them; but some part of it they seem commonly 
to have hoarded. They could not well, indeed, do anything else 
but hoard whatever money they saved. To trade was disgrace 
ful to a gentleman, and to lend money at interest, which at that 
time was considered as usury and prohibited by law, would have 
been still more so. In those times of violence and disorder, 
besides, it was convenient to have a hoard of money at hand, 
that in case they should be driven from their own home they 
might have something of known value to carry with them to 
some place of safety. The same violence which made it con 
venient to hoard made it equally convenient to conceal the 
hoard. The frequency of treasure-trove, or of treasure found 
of which no owner was known, sufficiently demonstrates the 
frequency in those times both of hoarding and of concealing the 
hoard. Treasure- trove was then considered as an important 
branch of the revenue of the sovereign. All the treasure-trove 
of the kingdom would scarce perhaps in the present times make 
an important branch of the revenue of a private gentleman of 
a good estate. 

The same disposition to save and to hoard prevailed in the 
sovereign as well as in the subjects. Among nations to whom 
commerce and manufactures are little known, the sovereign, it 
has already been observed in the fourth book, is in a situation 
which naturally disposes him to the parsimony requisite for 
accumulation. In that situation the expense even of a sove 
reign cannot be directed by that vanity which delights in the 
gaudy finery of a court. The ignorance of the times affords 
but few of the trinkets in which that finery consists. Standing 
armies are not then necessary, so that the expense even of a 
sovereign, like that of any other great lord, can be employed in 
scarce anything but bounty to his tenants and hospitality to 
his retainers. But bounty and hospitality very seldom lead 
to extravagance; though vanity almost always does. All the 
ancient sovereigns of Europe accordingly, it has already been 
observed, had treasures. Every Tartar chief in the present 
times is said to have one* 



Public Debts 391 

In a commercial country abounding with every sort of expen 
sive luxury, the sovereign, in the same manner as almost all the 
great proprietors in his dominions, naturally spends a great 
part of his revenue in purchasing those luxuries. His own and 
the neighbouring countries supply him abundantly with all the 
costly trinkets which compose the splendid but insignificant 
pageantry of a court. For the sake of an inferior pageantry of 
the same kind, his nobles dismiss their retainers, make their 
tenants independent, and become gradually themselves as in 
significant as the greater part of the wealthy burghers in his 
dominions. The same frivolous passions which influence their 
conduct influence his. How can it be supposed that he should 
be the only rich man in his dominions who is insensible to 
pleasures of this kind? If he does not, what he is very likely 
to do, spend upon those pleasures so great a part of his revenue 
as to debilitate very much the defensive power of the state, it 
cannot well be expected that he should not spend upon them 
all that part of it which is over and above what is necessary 
for supporting that defensive power. His ordinary expense 
becomes equal to his ordinary revenue, and it is well if it does 
not frequently exceed it. The amassing of treasure can no 
longer be expected, and when extraordinary exigencies require 
extraordinary expenses, he must necessarily call upon his sub 
jects for an extraordinary aid. The present and the late king 
of Prussia are the only great princes of Europe who, since the 
death of Henry IV. of France in 1610, are supposed to have 
amassed any considerable treasure. The parsimony which leads 
to accumulation has become almost as rare in republican as in 
monarchical governments. The Italian republics, the United 
Provinces of the Netherlands, are all in d