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 Commonw«alth . .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
*C4«3
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 slowr 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
98
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
103
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,
*E4»J
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
i36
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 number
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 house1. 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,
H4«3
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 even1 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 4«3
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 wrhich
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
325
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-
362
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 ....
3IO,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
oT3«
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
21C
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. io§d. 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
388
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 debt. The canton of
Berne is the single republic in Europe which has amassed any
considerable treasure. The other Swiss republics have not.
The taste for some sort of pageantry, for splendid buildings, at
least, and other public ornaments, frequently prevails as much
in the apparently sober senate-house of a little republic as in
the dissipated court of the greatest king.
The want of parsimony in time of peace imposes the necessity
of contracting debt in time of war. When war comes, there is
no money in the treasury but what is necessary for carrying
on the ordinary expense of the peace establishment. In war
an establishment of three or four times that expense becomes
necessary for the defence of the state, and consequently a
revenue three or four times greater than the peace revenue.
392
The Wealth of Nations
Supposing that the sovereign should have, what he scarce ever
has, the immediate means of augmenting his revenue in pro
portion to the augmentation of his expense, yet still the produce
of the taxes, from which this increase of revenue must be drawn,
will not begin to come into the treasury till perhaps ten or twelve
months after they are imposed. But the moment in which
war begins, or rather the moment in which it appears likely to
begin, the army must be augmented, the fleet must be fitted
out, the garrisoned towns must be put into a posture of defence;
that army, that fleet, those garrisoned towns must be furnished
with arms, ammunition, and provisions. An immediate and
great expense must be incurred in that moment of immediate
danger, which will not wait for the gradual and slow returns
of the new taxes. In this exigency government can have no
other resource but in borrowing.
The same commercial state of society which, by the operation
of moral causes, brings government in this manner into the
necessity of borrowing, produces in the subjects both an ability
and an inclination to lend. If it commonly brings along with
it the necessity of borrowing, it likewise brings along with it the
facility of doing so.
A country abounding with merchants and manufacturers
necessarily abounds with a set of people through whose hands
not only their own capitals, but the capitals of all those who
either lend them money, or trust them with goods, pass as
frequently, or more frequently, than the revenue of a private
man, who, without trade or business, lives upon his income,
passes through his hands. The revenue of such a man can
regularly pass through his hands only once in a year. But the
whole amount of the capital and credit of a merchant, who deals
in a trade of which the returns are very quick, may sometimes
pass through his hands two, three, or four times in a year.
A country abounding with merchants and manufacturers, there
fore, necessarily abounds with a set of people who have it at all
times in their power to advance, if they choose to do so, a very
large sum of money to government. Hence the ability in the
subjects of a commercial state to lend.
Commerce and manufactures can seldom flourish long in any
state which does not enjoy a regular administration of justice,
in which the people do not feel themselves secure in the posses
sion of their property, in which the faith of contracts is not
supported by law, and in which the authority of the state is
not supposed to be regularly employed in enforcing the payment
Public Debts 393
of debts from all those who are able to pay. Commerce and
manufactures, in short, can seldom flourish in any state in
which there is not a certain degree of confidence in the justice
of government. The same confidence which disposes great
merchants and manufacturers, upon ordinary occasions, to
trust their property to the protection of a particular govern
ment, disposes them, upon extraordinary occasions, to trust
that government with the use of their property. By lending
money to government, they do not even for a moment diminish
their ability to carry on their trade and manufactures. On the
contrary, they commonly augment it. The necessities of the
state render government upon most occasions willing to borrow
upon terms extremely advantageous to the lender. The security
which it grants to the original creditor is made transferable to
any other creditor, and, from the universal confidence in the
justice of the state, generally sells in the market for more than
was originally paid for it. The merchant or monicd man makes
money by lending money to government, and instead of diminish
ing, increases his trading capital. He generally considers it as
a favour, therefore, when the administration admits him to
a share in the first subscription for a new loan. Hence the
inclination or willingness in the subjects of a commercial state
to lend.
The government of such a state is very apt to repose itself
upon this ability and willingness of its subjects to lend it their
money on extraordinary occasions. It foresees the facility of
borrowing, and therefore dispenses itself from the duty of
saving.
In a rude state of society there are no great mercantile or
manufacturing capitals. The individuals who hoard whatever
money they can save, and who conceal their hoard, do so from
a distrust of the justice of government, from a fear that if it
was known that they had a hoard, and where that hoard was to
be found, they would quickly be plundered. In such a state of
things few people would be able, and nobody would be willing,
to lend their money to government on extraordinary exigencies.
The sovereign feels that he must provide for such exigencies by
saving, because he foresees the absolute impossibility of borrow
ing. This fore sight increases still further his natural disposition
to save.
The progress of the enormous debts which at present oppress,
and will in the long-run probably ruin, all the great nations of
Europe has been pretty uniform. Nations, like private men,
394 The Wealth of Nations
have generally begun to borrow upon what may be called
personal credit, without assigning or mortgaging any particular
fund for the payment of the debt; and when this resource has
failed them, they have gone on to borrow upon assignments or
mortgages of particular funds.
What is called the unfunded debt of Great Britain is con
tracted in the former of those two ways. It consists partly in
a debt which bears, or is supposed to bear, no interest, and which
resembles the debts that a private man contracts upon account,
and partly in a debt which bears interest, and which resembles
what a private man contracts upon his bill or promissory note.
The debts which are due either for extraordinary services, or
for services either not provided for, or not paid at the time when
they are performed, part of the extraordinaries of the army,
navy, and ordnance, the arrears of subsidies to foreign princes,
those of seamen's wages, etc., usually constitute a debt of the
first kind. Navy and exchequer bills, which are issued some
times in payment of a part of such debts and sometimes for
other purposes, constitute a debt of the second kind — exchequer
bills bearing interest from the day on which they are issued,
and navy bills six months after they are issued. The Bank of
England, either by voluntarily discounting those bills at their
current value, or by agreeing with government for certain con
siderations to circulate exchequer bills, that is, to receive them
at par, paying the interest which happens to be due upon them,
keeps up their value and facilitates their circulation, and thereby
frequently enables government to contract a very large debt of
this kind. In France, where there is no bank, the state bills
(billets d'etat 1) have sometimes sold at sixty and seventy per
cent, discount. During the great recoinage in King William's
time, when the Bank of England thought proper to put a stop
to its usual transactions, exchequer bills and tallies are said to
have sold from twenty-five to sixty per cent, discount; owing
partly, no doubt, to the supposed instability of the new gov
ernment established by the Revolution, but partly, too, to the
want of the support of the Bank of England.
When this resource is exhausted, and it becomes necessary,
in order to raise money, to assign or mortgage some particular
branch of the public revenue for the payment of the debt,
government has upon different occasions done this in two
different ways. Sometimes it has made this assignment or
mortgage for a short period of time only, a year, or a few years,
1 See Examen des Reflexions Politiqufs sur les Finances.
Public Debts 395
for example; and sometimes for perpetuity. In the one case
the fund was supposed sufficient to pay, within the limited time,
both principal and interest of the money borrowed. In the
other it was supposed sufficient to pay the interest only, or a
perpetual annuity equivalent to the inte.?st, government being
at liberty to redeem at any time this annuity upon paying
back the principal sum borrowed. When money was raised
in the one way, it was said to be raised by anticipation; when
in the other, by perpetual funding, or, more shortly, by funding.
In Great Britain the annual land and malt taxes are regularly
anticipated every year, by virtue of a borrowing clause constantly
inserted into the acts which impose them. The Bank of England
generally advances at an interest, which since the Revolution has
varied from eight to three per cent., the sums for which those
taxes are granted, and receives payment as their produce
gradually comes in. If there is a deficiency, which there always
is, it is provided for in the supplies of the ensuing year. The
only considerable branch of the public revenue which yet remains
unmortgaged is thus regularly spent before it comes in. Like
an improvident spendthrift, whose pressing occasions will not
allow him to wait for the regular payment of his revenue,
the state is in the constant practice of borrowing of its own
factors and agents, and of paying interest for the use of its own
money.
In the reign of King William, and during a great part of that
of Queen Anne, before we had become so familiar as we are
now with the practice of perpetual funding, the greater part of
the new taxes were imposed but for a short period of time (for
four, five, six, or seven years only), and a great part of thr
grants of every year consisted in loans upon anticipations of the
produce of those taxes. The produce being frequently insuffi
cient for paying within the limited term the principal and
interest of the money borrowed, deficiencies arose, to make
good which it became necessary to prolong the term.
In 1697, by the 8th of William III. c. 20, the deficiencies of
several taxes were charged upon what was then called the first
general mortgage or fund, consisting of a prolongation to the
first of August 1706 of several different taxes which would
have expired within a shorter term, and of which the produce
was accumulated into one general fund. The deficiencies
charged upon this prolonged term amounted to £5,160,459
145. 9jd.
In 1701, those duties, with some others, were still further
396 The Wealth of Nations
prolonged for the like purposes till the first of August 1710, and
were called the second general mortgage or fund. The defi
ciencies charged upon it amounted to £2,055,999 75. u|d.
In 1707, those duties were still further prolonged, as a fund
for new loans, to the first of August 1712, and were called the
third general mortgage or fund. The sum borrowed upon it
was £983>254 us. 9^d.
In 1708, those duties were all (except the old subsidy of
tonnage and poundage, of which one moiety only was made a
part of this fund, and a duty upon the importation of Scotch
linen, which had been taken off by the articles of union) still
further continued, as a fund for new loans, to the first of August
1714, and were called the fourth general mortgage or fund.
The sum borrowed upon it was £925,176 95. 2^d.
In 1709, those duties were all (except the old subsidy of
tonnage and poundage, which was now left out of this fund
altogether) still further continued for the same purpose to the
first of August 1716, and were called the fifth general mortgage
or fund. The sum borrowed upon it was £922,029 6s.
In 1710, those duties were again prolonged to the first of
August 1720, and were called the sixth general mortgage or
fund. The sum borrowed upon it was £1,296,552 95. nfd.
In 1711, the same duties (which at this time were thus sub
ject to four different anticipations) together with several others
were continued for ever, and made a fund for paying the interest
of the capital of the South Sea Company, which had that year
advanced to government, for paying debts and making good
deficiencies, the sum of £9,177,967 153. 4d.; the greatest loan
which at that time had ever been made.
Before this period, the principal, so far as I have been able
to observe, the only taxes which in order to pay the interest of
a debt had been imposed for perpetuity, were those for paying
the interest of the money which had been advanced to govern
ment by the Bank and East India Company, and of what it was
expected would be advanced, but which was never advanced,
by a projected land bank. The bank fund at this time amounted
to £3,375,027 175. io£d., for which was paid an annuity or
interest of £206,501 135. 5d. The East India fund amounted
to £3,200,000, for which was paid an annuity or interest of
£160,000 — the bank fund being at six per cent., the East India
fund at five per cent, interest.
In 1715, by the first of George I. c. 12, the different taxes
which had been mortgaged for paying the bank annuity,
Public Debts 397
together with several others which by this act were likewise
rendered perpetual, were accumulated into one common fund
called The Aggregate Fund, which was charged not only with
the payments of the bank annuity, but with several other
annuities and burdens of different kinds. This fund was after
wards augmented by the third of George I. c. 8, and by the
fifth of George I. c. 3, and the different duties which were then
added to it were likewise rendered perpetual.
In 1717, by the third of George I. c. 7, several other taxes
were rendered perpetual, and accumulated into another common
fund, called The General Fund, for the payment of certain
annuities, amounting in the whole to £724,849 6s. io.}d.
In consequence of those different acts, the greater part of UK-
taxes which before had been anticipated only for a short term
of years were rendered perpetual as a fund for paying, not the
capital, but the interest only, of the money which had been
borrowed upon them by different successive anticipations.
Had money never been raised but by anticipation, the course
of a few years would have liberated the public revenue without
any other attention of government besides that of not over
loading the fund by charging it with more debt than it could
pay within the limited term, and of not anticipating a second
time before the expiration of the first anticipation. But the
greater part of European governments have been incapable of
those attentions. They have frequently overloaded the fund
even upon the first anticipation, and when this happened not
to be the case, they have generally taken care to overload it
by anticipating a second and a third time before the expiration
of the first anticipation. The fund becoming in this manner
altogether insufficient for paying both principal and interest of
the money borrowed upon it, it became necessary to charge it
with the interest only, or a perpetual annuity equal to the
interest, and such improvident anticipations necessarily gave
birth to the more ruinous practice of perpetual funding. But
though this practice necessarily puts off the liberation of the
public revenue from a fixed period to one so indefinite that it
is not very likely ever to arrive, yet as a greater sum can in
all cases be raised by this new practice than by the old one of
anticipations, the former, when men have once become familiar
with it, has in the great exigencies of the state been universally
preferred to the latter. To relieve the present exigency is
always the object which principally interests those immediately
concerned in the administration of public affairs. The future
The Wealth of Nations
liberation of the public revenue they leave to the care of
posterity.
During the reign of Queen Anne, the market rate of interest
had fallen from six to five per cent., and in the twelfth year of
her reign five per cent, was declared to be the highest rate
which could lawfully be taken for money borrowed upon private
security. Soon after the greater part of the temporary taxes
of Great Britain had been rendered perpetual, and distributed
into the Aggregate, South Sea, and General Funds, the creditors
of the public, like those of private persons, were induced to
accept of five per cent, for the interest of their money, which
occasioned a saving of one per cent, upon the capital of the
greater part of the debts which had been thus funded for per
petuity, or of one-sixth of the greater part of the annuities
which were paid out of the three great funds above mentioned.
This saving left a considerable surplus in the produce of the
different taxes which had been accumulated into those funds
over and above what was necessary for paying the annuities
which were now charged upon them, and laid the foundation of
what has since been called the Sinking Fund. In 1717, it
amounted to £323,434 75. 7|d. In 1727, the interest of the
greater part of the public debts was still further reduced to
four per cent.; and in 1753 and 1757, to three and a half and
three per cent.; which reductions still further augmented the
sinking fund.
A sinking fund, though instituted for the payment of old,
facilitates very much the contracting of new debts. It is a
subsidiary fund always at hand to be mortgaged in aid of any
other doubtful fund upon which money is proposed to be raised
in any exigency of the state. Whether the sinking fund of
Great Britain has been more frequently applied to the one or
to the other of those two purposes will sufficiently appear by
and by.
Besides those two methods of borrowing, by anticipations
and by perpetual funding, there are two other methods which
hold a sort of middle place between them. These are, that of
borrowing upon annuities for terms of years, and that of
borrowing upon annuities for lives.
During the reigns of King William and Queen Anne, large
sums were frequently borrowed upon annuities for terms of
years, which were sometimes longer and sometimes shorter.
In 1693, an act was passed for borrowing one million upon an
annuity of fourteen per cent., or of £140,000 a year for sixteen
Public Debts 399
years. In 1691, an act was passed for borrowing a million upon
annuities for lives, upon terms which in the present times would
appear very advantageous. But the subscription was not filled
up. In the following year the deficiency was made good by
borrowing upon annuities for lives at fourteen per cent., or at
little more than seven years' purchase. In 1695, the persons
who had purchased those annuities were allowed to exchange
them for others of ninety-six years upon paying into the
Exchequer sixty-three pounds in the hundred; that is, the
difference between fourteen per cent, for life, and fourteen per
cent, for ninety-six years, was sold for sixty-three pounds, or
for four and a half years' purchase. Such was the supposed
instability of government that even these terms procured few
purchasers. In the reign of Queen Anne money was upon
different occasions borrowed both upon annuities for lives, and
upon annuities for terms of thirty-two, of eighty-nine, of ninety-
eight, and of ninety-nine years. In 1719, the proprietors of the
annuities for thirty-two years were induced to accept in lieu of
them South Sea stock to the amount of eleven and a half years'
purchase of the annuities, together with an additional quantity
of stock equal to the arrears which happened then to be due
upon them. In 1720, the greater part of the other annuities
for terms of years both long and short were subscribed into the
same fund. The long annuities at that time amounted to
£666,821 8s. 3$d. a year. On the 5th of January 1775, the
remainder of them, or what was not subscribed at that time,
amounted only to £136,453 125. 8d.
During the two wars which began in 1739 and in 1755, little
money was borrowed either upon annuities for terms of years,
or upon those for lives. An annuity for ninety-eight or ninety-
nine years, however, is worth nearly as much money as a per
petuity, and should, therefore, one might think, be a fund for
borrowing nearly as much. But those who, in order to make
family settlements, and to provide for remote futurity, buy
into the public stocks, would not care to purchase into one
of which the value was continually diminishing; and such
people make a very considerable proportion lx>th of the pro
prietors and purchasers of stock. An annuity for a long term
of years, therefore, though its intrinsic value may be very
nearly the same with that of a perpetual annuity, will not find
nearly the same number of purchasers. The subscribers to a
new loan, who mean generally to sell their subscription as soon
as possible, prefer greatly a perpetual annuity redeemable by
400 The Wealth of Nations
parliament to an irredeemable annuity for a long term of years
of only equal amount. The value of the former may be sup
posed always the same, or very nearly the same, and it makes,
therefore, a more convenient transferable stock than the latter.
During the two last-mentioned wars, annuities, either for
terms of years or for lives, were seldom granted but as premiums
to the subscribers to a new loan over and above the redeemable
annuity or interest upon the credit of which the loan was
supposed to be made. They were granted, not as the proper
fund upon which the money was borrowed, but as an additional
encouragement to the lender.
Annuities for lives have occasionally been granted in two
different ways ; either upon separate lives, or upon lots of lives,
which in French are called Tontines, from the name of their
inventor. When annuities are granted upon separate lives, the
death of every individual annuitant disburthens the public
revenue so far as it was affected by his annuity. When annuities
are granted upon tontines, the liberation of the public revenue
does not commence till the death of all the annuitants compre
hended in one lot, which may sometimes consist of twenty or
thirty persons, of whom the survivors succeed to the annuities
of all those who die before them, the last survivor succeeding
to the annuities of the whole lot. Upon the same revenue more
money can always be raised by tontines than by annuities for
separate lives. An annuity, with a right of survivorship, is
really worth more than an equal annuity for a separate life, and
from the confidence which every man naturally has in his own
good fortune, the principle upon which is founded the success
of all lotteries, such an annuity generally sells for something
more than it is worth. In countries where it is usual for govern
ment to raise money by granting annuities, tontines are upon
this account generally preferred to annuities for separate lives.
The expedient which will raise most money is almost always
preferred to that which is likely to bring about in the speediest
manner the liberation of the public revenue.
In France a much greater proportion of the public debts
consists in annuities for lives than in England. According to
a memoir presented by the parliament of Bordeaux to the king
in 1764, the whole public debt of France is estimated at twenty-
four hundred millions of livres, of which the capital for which
annuities for lives had been granted is supposed to amount to
three hundred millions, the eighth part of the whole public debt.
The annuities themselves are computed to amount to thirty
Public Debts 401
millions a year, the fourth part of one hundred and twenty
millions, the supposed interest of that whole debt. These esti
mations, I know very well, are not exact, but having been
presented by so very respectable a body as approximations to
the truth, they may, I apprehend, be considered as such. It is
not the different degrees of anxiety in the two governments of
France and England for the liberation of the public revenue
which occasions this difference in their respective modes of
borrowing. It arises altogether from the different views and
interests of the lenders.
In England, the seat of government being in the greatest
mercantile city in the world, the merchants are generally the
people who advance money to government. By advancing it
they do not mean to diminish, but, on the contrary, to increase
their mercantile capitals, and unless they expected to sell with
some profit their share in the subscription for a new loan, they
never would subscribe. But if by advancing their money they
were to purchase, instead of perpetual annuities, annuities for
lives only, whether their own or those of other people, they
would not always be so likely to sell them with a profit.
Annuities upon their own lives they would always sell with
loss, because no man will give for an annuity upon the life of
another, whose age and state of health are nearly the same with
his own, the same price which he would give for one upon his
own. An annuity upon the life of a third person, indeed, is, no
doubt, of equal value to the buyer and the seller; but its real
value begins to diminish from the moment it is granted, and
continues to do so more and more as long as it subsists. It
can never, therefore, make so convenient a transferable stock as
a perpetual annuity, of which the real value may be supposed
always the same, or very nearly the same.
In France, the seat of government not being in a great mer
cantile city, merchants do not make so great a proportion of
the people who advance money to government. The people
concerned in the finances, the farmers-general, the receivers of
the taxes which are not in farm, the court bankers, etc., make
the greater part of those who advance their money in all public
exigencies. Such people are commonly men of mean birth, but
of great wealth, and frequently of great pride. They are too
proud to marry their equals, and women of quality disdain
to marry them. They frequently resolve, therefore, to live
bachelors, and having neither any families of their own, nor
much regard for those of their relations, whom they are not
402 The Wealth of Nations
always very fond of acknowledging, they desire only to live in
splendour during their own time, and are not unwilling that
their fortune should end with themselves. The number of rich
people, besides, who are either averse to marry, or whose condi
tion of life renders it either improper or inconvenient for them
to do so, is much greater in France than in England. To such
people, who have little or no care for posterity, nothing can be
more convenient than to exchange their capital for a revenue
which is to last just as long, and no longer, than they wish it
to do.
The ordinary expense of the greater part of modern govern
ments in time of peace being equal or nearly equal to their
ordinary revenue, when war comes they are both unwilling and
unable to increase their revenue in proportion to the increase of
their expense. They are unwilling for fear of offending the
people, who, by so great and so sudden an increase of taxes,
would soon be disgusted with the war; and they are unable
from not well knowing what taxes would be sufficient to pro
duce the revenue wanted. The facility of borrowing delivers
them from the embarrassment which this fear and inability
would otherwise occasion. By means of borrowing they are
enabled, with a very moderate increase of taxes, to raise, from
year to year, money sufficient for carrying on the war, and by
the practice of perpetually funding they are enabled, with the
smallest possible increase of taxes, to raise annually the largest
possible sum of money. In great empires the people who live
in the capital, and in the provinces remote from the scene of
action, feel, many of them, scarce any inconveniency from the
war; but enjoy, at their ease, the amusement of reading in the
newspapers the exploits of their own fleets and armies. To
them this amusement compensates the small difference between
the taxes which they pay on account of the war, and those
which they had been accustomed to pay in time of peace. They
are commonly dissatisfied with the return of peace, which puts
an end to their amusement, and to a thousand visionary hopes
of conquest and national glory from a longer continuance of
the war.
The return of peace, indeed, seldom relieves them from the
greater part of the taxes imposed during the war. These are
mortgaged for the interest of the debt contracted in order to
-carry it on. If, over and above paying the interest of this debt,
and defraying the ordinary expense of government, the old
revenue, together with the new taxes, produce some surplus
Public Debts 403
revenue, it may perhaps be converted into a sinking fund for
paying off the debt. But, in the first place, this sinking fund,
even supposing it should be applied to no other purpose, is
generally altogether inadequate for paying, in the course of
any period during which it can reasonably be expected that
peace should continue, the whole debt contracted during the
war; and, in the second place, this fund is almost always applied
to other purposes.
The new taxes were imposed for the sole purpose of paying
the interest of the money borrowed upon them. If they pro
duce more, it is generally something which was neither intended
nor expected, and is therefore seldom very considerable. Sink
ing funds have generally arisen not so much from any surplus
of the taxes which was over and above what was necessary for
paying the interest or annuity originally charged upon them,
as from a subsequent reduction of that interest. That of Holland
in 1655, and that of the ecclesiastical state in 1685, were both
formed in this manner. Hence the usual insufficiency of such
funds.
During the most profound peace various events occur which
require an extraordinary expense, and government finds it
always more convenient to defray this expense by misapplying
the sinking fund than by imposing a new tax. Every new tax
is immediately felt more or less by the people. It occasions
always some murmur, and meets with some opposition. The
more taxes may have been multiplied, the higher they may
have been raised upon every different subject of taxation; the
more loudly the people complain of every new tax, the more
difficult it becomes, too, either to find out new subjects of taxa
tion, or to raise much higher the taxes already imposed upon
the old. A momentary suspension of the payment of debt is
not immediately felt by the people, and occasions neither
murmur nor complaint. To borrow of the sinking fund is
always an obvious and easy expedient for getting out of the
present difficulty. The more the public debts may have been
accumulated, the more necessary it may have become to study
to reduce them, the more dangerous, the more ruinous it may
be to misapply any part of the sinking fund ; the less likely is
the public debt to be reduced to any considerable degree, the
more likely, the more certainly is the sinking fund to be mis
applied towards defraying all the extraordinary expenses which
occur in time of peace. When a nation is already overburdened
with taxes, nothing but the necessities of a new war, nothing
404 The Wealth of Nations
but either the animosity of national vengeance, or the anxiety
for national security, can induce the people to submit, with
tolerable patience, to a new tax. Hence the usual misapplica
tion of the sinking fund.
In Great Britain, from the time that we had first recourse
to the ruinous expedient of perpetual funding, the reduction of
the public debt in time of peace has never borne any pro
portion to its accumulation in time of war. It was in the war
which began in 1688, and was concluded by the Treaty of
Ryswick in 1697, that the foundation of the present enormous
debt of Great Britain was first laid.
On the 3ist of December 1697, the public debts of Great
Britain, funded and unfunded, amounted to £21,515,742 135. 8id.
A great part of those debts had been contracted upon short
anticipations, and some part upon annuities for lives, so that
before the 3ist of December 1701, in less than four years, there
had partly been paid off, and partly reverted to the public,
the sum of £5,121,041 125. o|d.; a greater reduction of the
public debt than has ever since been brought about in so short
a period of time. The remaining debt, therefore, amounted
only to £16,394,701 is. 7^d.
In the war which began in 1702, and which was concluded
by the Treaty of Utrecht, the public debts were still more
accumulated. On the 3ist of December 1714, they amounted
to £53.681,076 55. 6T1i>d. The subscription into the South Sea
fund of the short and long annuities increased the capital of the
public debts, so that on the 3ist of December 1722 it amounted
to £55,282,978 is. 3£d. The reduction of the debt began in
1723, and went on so slowly that, on the 3ist of December 1739,
during seventeen years of profound peace, the whole sum paid
off was no more than £8,328,354 173. n^d., the capital of the
public debt at that time amounting to £46,954,623 35. 4yjd.
The Spanish war, which began in 1739, and the French war
which soon followed it, occasioned a further increase of the
debt, which, on the 3ist of December 1748, after the war had
been concluded by the Treaty of Aix-la-Chapelle, amounted to
£78,293,313 is. io|d. The most profound peace of seventeen
years' continuance had taken no more than £8,328,354 175. i ifod.
from it. A war of less than nine years' continuance added
£31,338,689 i8s. 6£d. to it.1
During the administration of Mr. Pelham, the interest of the
public debt was reduced, or at least measures were taken for
1 See James Postlethvvaite's History of the Public Revenue.
Public Debts 405
reducing it, from four to three per cent. ; the sinking fund was
increased, and some part of the public debt was paid off. In
1755, before the breaking out of the late war, the funded debt
of Great Britain amounted to £72,289,673. On the 5th of
January 1763, at the conclusion of the peace, the funded debt
amounted to £122,603,336 8s. 2^d. The unfunded debt has
been suited at £13,927,589 25. 2d. But the expense occasioned
by the war did not end with the conclusion of the peace, so
that though, on the 5th of January 1764, the funded debt was
increased (partly by a new loan, and partly by funding a part
of the unfunded debt) to £129,586,789 IDS. i^d., there still
remained (according to the very well informed author of the
Considerations on the Trade and Finances of Great Britain} an
unfunded debt which was brought to account in that and the
following year of £9,975,017 125. 2^'d. In 1764, therefore, the
public debt of Great Britain, funded and unfunded together,
amounted, according to this author, to £139,516,807 2s. 4d.
The annuities for lives, too, which had been granted as premiums
to the subscribers to the new loans in 1757, estimated at fourteen
years' purchase, were valued at £472,500; and the annuities for
long terms of years, granted as premiums likewise in 1761 and
1 762, estimated at twenty-seven and a half years' purchase, were
valued at £6,826,875. During a peace of about seven years'
continuance, the prudent and truly patriot administration of
Mr. Pelham was not able to pay off an old debt of six millions.
During a war of nearly the same continuance, a new debt of
more than seventy-five millions was contracted.
On the 5th of January 1775, ^ne funded debt of Great Britain
amounted to £124,996,086 is. 6jd. The unfunded, exclusive
of a large civil list debt, to £4,150,236 35. 1 1 Jd. Both together,
to £129,146,322 55. 6d. According to this account the whole
debt paid off during eleven years' profound peace amounted
only to £10,415,474 i6s. 9^d. Even this small reduction of
debt, however, has not been all made from the savings out of
the ordinary revenue of the state. Several extraneous sums,
altogether independent of that ordinary revenue, have con
tributed towards it. Amongst these we may reckon an additional
shilling in the pound land-tax for three years; the two millions
received from the East India Company as indemnification
for their territorial acquisition s; and the one hundred and ten
thousand pounds received from the bank for the renewal of
their charter. To these must l>e added several other sums
which, as they arose out of the late war, ought perhaps to be
406 The Wealth of Nations
considered as deductions from the expenses of it. The principal
are,
L f. d.
The produce of French prizes . . . 690,449 18 9
Composition for French prisoners . . . 670,000 o o
What has been received from the sale of the
ceded islands ...... 95,500 o o
Total . £1,455,949 18 9
If we add to this sum the balance of the Earl of Chatham's and
Mr. Calcraft's accounts, and other army savings of the same
kind, together with what has been received from the bank, the
East India Company, and the additional shilling in the pound
land-tax, the whole must be a good deal more than five millions.
The debt, therefore, which since the peace has been paid out of
the savings from the ordinary revenue of the state, has not, one
year with another, amounted to half a million a year. The
sinking fund has, no doubt, been considerably augmented since
the peace, by the debt which has been paid off, by the reduction
of the redeemable four per cents, to three per cents., and by
the annuities for lives which have fallen in, and, if peace were
to continue, a million, perhaps, might now be annually spared
out of it towards the discharge of the debt. Another million,
accordingly, was paid in the course of last year; but, at the same
time, a large civil list debt was left unpaid, and we are now
involved in a new war which, in its progress, may prove as
expensive as any of our former wars.1 The new debt which will
probably be contracted before the end of the next campaign
may perhaps be nearly equal to all the old debt which has been
paid off from the savings out of the ordinary revenue of the
state. It would be altogether chimerical, therefore, to expect
that the public debt should ever be completely discharged by
any savings which are likely to be made from that ordinary
revenue as it stands at present.
The public funds of the different indebted nations of Europe,
particularly those of England, have by one author been re
presented as the accumulation of a great capital superadded
to the other capital of the country, by means of which its trade
1 It has proved more expensive than any of our former wars; and has
involved us in an additional debt of more than one hundred millions.
During a profound peace of eleven years, little more than ten millions of
debt was paid; during a war of seven years, more than one hundred
millions was contracted.
Public Debts 407
is extended, its manufactures multiplied, and its lands cultivated
and improved much beyond what they could have been by
means of that other capital only. He does not consider that
the capital which the first creditors of the public advanced to
government was, from the moment in which they advanced it,
a certain portion of the annual produce turned away from
serving in the function of a capital to serve in that of a revenue;
from maintaining productive labourers to maintain unproductive
ones, and to be spent and wasted, generally in the course of the
year, without even the hope of any future reproduction. In
return for the capital which they advanced they obtained,
indeed, an annuity in the public funds in most cases of more
than equal value. This annuity, no doubt, replaced to them
their capital, and enabled them to carry on their trade and
business to the same or perhaps to u greater extent than before;
that is, they were enabled either to borrow of other people a
new capital upon the credit of this annuity, or by selling it to
get from other people a new capital of their own equal or
superior to that which they had advanced to government. This
new capital, however, which they in this manner either bought
or borrowed of other people, must have existed in the country
before, and must have been employed, as all capitals are, in
maintaining productive labour. When it came into the hands
of those who had advanced their money to government, though
it was in some respects a new capital to them, it was not so to
the country, hut was only a capital withdrawn from certain
employments in order to be turned towards others. Though is
replaced to them what they had advanced to government, it
did not replace it to the country. Had they not advanced thit
capital to government, there would have been in the country
two capitals, two portions of the annual produce, instead of
one, employed in maintaining productive labour.
When for defraying the expense of government a revenue is
raised within the year from the produce of free or unmortgaged
taxes, a certain portion of the revenue of private people is only
turned away from maintaining one species of unproductive
labour towards maintaining another. Some part of what they
pay in those taxes might no doubt have been accumulated
into capital, and consequently employed in maintaining produc
tive labour; but the greater part would probably have been
spent and consequently employed in maintaining unproductive
labour. The public expense, however, when defrayed in this
manner, no doubt hinders more or less the further accumuhi-
408 The Wealth of Nations
tion of new capital; but it does not necessarily occasion the
destruction of any actually existing capital.
When the public expense is defrayed by funding, it is defrayed
by the annual destruction of some capital which had before
existed in the country; by the perversion of some portion of
the annual produce which had before been destined for the
maintenance of productive labour towards that of unproductive
labour. As in this case, however, the taxes are lighter than they
would have been had a revenue sufficient for defraying the same
expense been raised within the year, the private revenue of
individuals is necessarily less burdened, and consequently their
ability to save and accumulate some part of that revenue into
capital is a good deal less impaired. If the method of funding
destroys more old capital, it at the same time hinders less the
accumulation or acquisition of new capital than that of defray
ing the public expense by a revenue raised within the year.
Under the system of funding, the frugality and industry of
private people can more easily repair the breaches which the
waste and extravagance of government may occasionally make
in the general capital of the society.
It is only during the continuance of war, however, that the
system of funding has this advantage over the other system.
Were the expense of war to be defrayed always by a revenue
raised within the year, the taxes from which that extraordinary
revenue was drawn would last no longer than the war. The
ability of private people to accumulate, though less during the
war. would have been greater during the peace than under the
system of funding. War would not necessarily have occasioned
the destruction of any old capitals, and peace would have occa
sioned the accumulation of many more new. Wars would in
general be more speedily concluded, and less wantonly under
taken. The people feeling, during the continuance of the war,
the complete burden of it, would soon grow weary of it, and
government, in order to humour them, would not be under the
necessity of carrying it on longer than it was necessary to do
so. The foresight of the heavy and unavoidable burdens of
war would hinder the people from wantonly calling for it when
there was no real or solid interest to fight for. The seasons
during which the ability of private people to accumulate was
somewhat impaired would occur more rarely, and be of shorter
continuance. Those, on the contrary, during which the ability
was in the highest vigour would be of much longer duration
than they can well be under the system of funding.
Public Debts 409
When funding, besides, has made a certain progress, the
multiplication of taxes which it brings along with it sometimes
impairs as much the ability of private people to accumulate even
in time of peace as the other system would in time of war. The
peace revenue of Great Britain amounts at present to more than
ten millions a year. If free and unmortgaged, it might be
sufficient, with proper management and without contracting
a shilling of new debt, to carry on the most vigorous war. The
private revenue of the inhabitants of Great Britain is at present
as much encumbered in time of peace, their ability to accumulate
is as much impaired as it would have been in the time of the
most expensive war had the pernicious system of funding never
been adopted.
In the payment of the interest of the public debt, it has been
said, it is the right hand which pays the left. The money doei
not go out of the country. It is only a part of the revenue of
one set of the inhabitants which is transferred to another, and
the nation is not a farthing the poorer. This apology is founded
altogether in the sophistry of the mercantile system, and after
the long examination which I have already bestowed upon that
system, it may perhaps be unnecessary to say anything further
about it. It supposes, besides, that the whole public debt is
owing to the inhabitants of the country, which happens not to
be true; the Dutch, as well as several other foreign nations,
having a very considerable share in our public funds. But
though the whole debt were owing to the inhabitants of the
country, it would not upon that account be less pernicious.
I^and and capital stock are the two original sources of all
revenue both private and public. Capital stock pays the wages
of productive labour, whether employed in agriculture, manu
factures, or commerce. The management of those two original
sources of revenue belongs to two different sets of people; the
proprietors of land, and the owners or employers of capital
stock.
The proprietor of land is interested for the sake of his own
revenue to keep his estate in as good condition as he can, by
building and repairing his tenants' houses, by making and main
taining the necessary drains and enclosures, and all those other
expensive improvements which it properly belongs to the land
lord to make and maintain. But by different land-taxes the
revenue of the landlord may be so much diminished, and by
different duties upon the necessaries and conveniencies of life
that diminished revenue may be rendered of so little reaJ valur,
410 The Wealth of Nations
that he may find himself altogether unable to make or maintain
those expensive improvements. When the landlord, however,
ceases to do his part, it is altogether impossible that the tenant
should continue to do his. As the distress of the landlord in
creases, the agriculture of the country must necessarily decline.
When, by different taxes upon the necessaries and conveni-
encies of life, the owners and employers of capital stock find
that whatever revenue they derive from it will not, in a parti
cular country, purchase the same quantity of those necessaries
and conveniencies which an equal revenue would in almost any
other, they will be disposed to remove to some other. And
when, in order to raise those taxes, all or the greater part of
merchants and manufacturers, that is, all or the greater part of
the employers of great capitals, come to be continually exposed
to the mortifying and vexatious visits of the tax-gatherers, this
disposition to remove will soon be changed into an actual
removal. The industry of the country will necessarily fall with
the removal of the capital which supported it, and the ruin of
trade and manufactures will follow the declension of agriculture.
To transfer from the owners of those two great sources of
revenue, land and capital stock, from the persons immediately
interested in the good condition of every particular portion of
land, and in the good management of every particular portion
of capital stock, to another set of persons (the creditors of the
public, who have no such particular interest), the greater part
of the revenue arising from either must, in the long-run, occa
sion both the neglect of land, and the waste or removal of
capital stock. A creditor of the public has no doubt a general
interest in the prosperity of the agriculture, manufactures, and
commerce of the country, and consequently in the good condi
tion of its lands, and in the good management of its capital
stock. Should there be any general failure or declension in any
of these things, the produce of the different taxes might no
longer be sufficient to pay him the annuity or interest which is
due to him. But a creditor of the public, considered merely as
such, has no interest in the good condition of any particular
portion of land, or in the good management of any particular
portion of capital stock. As a creditor of the public he has no
knowledge of any such particular portion. He has no inspec
tion of it. He can have no care about it. Its ruin may in
some cases be unknown to him, and cannot directly affect him.
The practice of funding has gradually enfeebled every state
'.vhich has adopted it. The Italian republics seem to have
Public Debts 41 i
begun it. Genoa and Venice, the only two remaining which
can pretend to an independent existence, have both been en
feebled by it. Spain seems to have learned the practice from
the Italian republics, and (its taxes being probably less judicious
than theirs) it has, in proportion to its natural strength, been
still more enfeebled. The debts of Spain are of very old stand
ing. It was deeply in debt before the end of the sixteenth
century, about a hundred years before England owed a shilling.
France, notwithstanding all its natural resources, languishes
under an oppressive load of the same kind. The republic of
the United Provinces is as much enfeebled by its debts as either
Genoa or Venice. Is it likely that in Great Britain alone a
practice which has brought either weakness or desolation into
every other country should prove altogether innocent?
The system of taxation established in those different countries,
it may be said, is inferior to that of England. I believe it is
so. But it ought to be remembered that, when the wisest
government has exhausted all the proper subjects of taxation,
it must, in cases of urgent necessity, have recourse to improper
ones. The wise republic of Holland has upon some occasions
been obliged to have recourse to taxes as inconvenient as the
greater part of those of Spain. Another war begun before any
considerable liberation of the public revenue had been brought
about, and growing in its progress as expensive as the last war,
may, from irresistible necessity, render the British system of
taxation as oppressive as that of Holland, or even as that of
Spain. To the honour of our present system of taxation, indeed,
it has hitherto given so little embarrassment to industry that,
during the course even of the most expensive wars, the frugality
and pood conduct of individuals seem to have been able, by
saving and accumulation, to repair all the breaches which the
waste and extravagance of government had made in the general
capital of the society. At the conclusion of the late war, the
most expensive that Great Britain ever waged, her agriculture-
was as flourishing, her manufacturers as numerous and as fully
employed, and her commerce as extensive as they had ever
l>een before. The capital, therefore, which supported all those
different branches of industry must have been equal to what it
had ever been before. Since the peace, agriculture has been
still further improved, the rents of houses have risen in every
town and village of the country— a proof of the increasing wealth
and revenue of the people; and the annual amount of the
greater part of the old taxes, of the principal branches of the
o 4n
412 The Wealth of Nations
excise and customs in particular, has been continually increas
ing — an equally clear proof of an increasing consumption, and
consequently of an increasing produce which could alone sup
port that consumption. Great Britain seems to support with
ease a burden which, half a century ago, nobody believed her
capable of supporting. Let us not, however, upon this account
rashly conclude that she is capable of supporting any burden,
nor even be too confident that she could support, without great
distress, a burden a little greater than what has already been
laid upon her.
When national debts have once been accumulated to a cer
tain degree, there is scarce, I believe, a single instance of their
having been fairly and completely paid. The liberation of the
public revenue, if it has ever been brought about at all, has
always been brought about by a bankruptcy; sometimes by an
avowed one, but always by a real one, though frequently by a
pretended payment.
The raising of the denomination of the coin has been the
most usual expedient by which a real public bankruptcy has
been disguised under the appearance of a pretended payment.
If a sixpence, for example, should either by act of parliament
or royal proclamation be raised to the denomination of a
shilling, and twenty sixpences to that of a pound sterling, the
person who under the old denomination had borrowed twenty
shillings, or near four ounces of silver, would, under the new,
pay with twenty sixpences, or with something less than two
ounces. A national debt of about a hundred and twenty-eight
millions, nearly the capital of the funded and unfunded debt of
Great Britain, might in this manner be paid with about sixty-
four millions of our present money. It would indeed be a
pretended payment only, and the creditors of the public would
really be defrauded of ten shillings in the pound of what was
due to them. The calamity, too, would extend much further
than to the creditors of the public, and those of every private
person would suffer a proportionable loss ; and this without any
advantage, but in most cases with a great additional loss, to the
creditors of the public. If the creditors of the public, indeed,
were generally much in debt to other people, they might in
some measure compensate their loss by paying their creditors
in the same coin in which the public had paid them. But in
most countries the creditors of the public are, the greater part
of them, wealthy people, who stand more in the relation of
creditors than in that of debtors towards the rest of their fellow-
Public Debts 413
citizens. A pretended payment of this kind, therefore, instead
of alleviating, aggravates in most cases the loss of the creditors
of the public, and without any advantage to the public, extends
the calamity to a great number of other innocent people. It
occasions a general and most pernicious subversion of the for
tunes of private people, enriching in most cases the idle and
profuse debtor at the expense of the industrious and frugal
creditor, and transporting a great part of the national capital
from the hands which were likely to increase and improve it to
those which are likely to dissipate and destroy it. When it
becomes necessary for a state to declare itself bankrupt, in the
same manner as when it becomes necessary for an individual
to do so, a fair, open, and avowed bankruptcy is always the
measure which is both least dishonourable to the debtor and
least hurtful to the creditor. The honour of a state is surely
very'poorly provided for when, in order to cover the disgrace
of a real bankruptcy, it has recourse to a juggling trick of this
kind, so easily seen through, and at the same time so extremely
pernicious.
Almost all states, however, ancient as well as modern, when
reduced to this necessity have, upon some occasions, played
this very juggling trick. The Romans, at the end of the first
Punic war, reduced the As, the coin or denomination by which
they computed the value of all their other coins, from contain
ing twelve ounces of copper to contain only two ounces; that
is, they raised two ounces of copper to a denomination which
had always before expressed the value of twelve ounces. The
republic was, in this manner, enabled to pay the great debts
which it had contracted with the sixth part of what it really
owed. So sudden and so great a bankruptcy, we should in the
present times be apt to imagine, must have occasioned a very
violent popular clamour. It does not appear to have occasioned
any. The law which enacted it was, like all other laws relating
to the coin, introduced and carried through the assembly of the
people by a tribune, and was probably a very popular law. In
Rome, as in all the other ancient republics, the poor people were
constantly in debt to the rich and the great, who, in order to
secure their votes at the annual elections, used to lend them
money at exorbitant interest, which, being never paid, soon
accumulated into a sum too great either for the debtor to pay,
or for anybody else to pay for him. The debtor, for fear of a
very severe execution, was obliged, without any further gratuity,
to vote for the candidate whom the creditor recommended. In
4i 4 The Wealth of Nations
spite of all the laws against bribery and corruption, the bounty
of the candidates, together with the occasional distributions of
corn which were ordered by the senate, were the principal
funds from which, during the latter times of the Roman re
public, the poorer citizens derived their subsistence. To deliver
themselves from this subjection to their creditors, the poorer
citizens were continually calling out either for an entire abolition
of debts, or for what they called New Tables; that is, for a
law which should entitle them to a complete acquittance upon
paying only a certain proportion of their accumulated debts.
The law which reduced the coin of all denominations to a sixth part
of its former value, as it enabled them to pay their debts with
a sixth part of what they really owed, was equivalent to the
most advantageous new tables. In order to satisfy the people,
the rich and the great were, upon several different occasions,
obliged to consent to laws both for abolishing debts, and for
introducing new tables; and they probably were induced to
consent to this law partly for the same reason, and partly that,
by liberating the public revenue, they might restore vigour to
that government of which they themselves had the principal
direction. An operation of this kind would at once reduce a
debt of a hundred and twenty-eight millions to twenty-one
millions three hundred and thirty-three thousand three hundred
and thirty-three pounds six shillings and eightpence. In the
course of the second Punic war the As was still further reduced,
first, from two ounces of copper to one ounce, and afterwards
from one ounce to half an ounce; that is, to the twenty-fourth
part of its original value. By combining the three Roman
operations into one, a debt of a hundred and twenty-eight
millions of our present money might in this manner be reduced
all at once to a debt of five millions three hundred and thirty-
three thousand three hundred and thirty-three pounds six
shillings and eightpence. Even the enormous debt of Great
Britain might in this manner soon be paid.
By means of such expedients the coin of, I believe, all nations
has been gradually reduced more and more below its original
value, and the same nominal sum has been gradually brought
to contain a smaller and a smaller quantity of silver.
Nations have sometimes, for the same purpose, adulterated
the standard of their coin; that is, have mixed a greater quan
tity of alloy in it. If in the pound weight of our silver coin,
for example, instead of eighteen pennyweight, according to the
present standard, there was mixed eight ounces of alloy, a
Public Debts 415
pound sterling, or twenty shillings of such coin, would be worth
little more than six shillings and eightpence of our present
money. The quantity of silver contained in six shillings and
eightpence of our present money would thus be raised very
nearly to the denomination of a pound sterling. The adultera
tion of the standard has exactly the same effect with what the
French call an augmentation, or a direct raising of the de
nomination of the coin.
An augmentation, or a direct raising of the denomination of
the coin, always is, and from its nature must be, an open and
avowed operation. By means of it pieces of a smaller weight
and bulk are called by the same name which had before been
given to pieces of a greater weight and bulk. The adulteration
of the standard, on the contrary, has generally been a concealed
operation. By means of it pieces were issued from the mint of
the same denominations, and, as nearly as could be contrived,
of the same weight, bulk, and appearance with pieces which had
been current before of much greater value. When King John of
France,1 in order to pay his debts, adulterated his coin, all the
officers of his mint were sworn to secrecy. Both operations are
unjust. But a simple augmentation is an injustice of open
violence, whereas an adulteration is an injustice of treacherous
fraud. This latter operation, therefore, as soon as it has been
discovered, and it could never be concealed very long, has always
excited much greater indignation than the former. The coin
after any considerable augmentation has very seldom been
brought back to its former weight; but after the greatest
adulterations it has almost always been brought back to its
former fineness. It has scarce ever happened that the fury and
indignation of the people could otherwise be appeased.
In the end of the reign of Henry VIII. and in the beginning
of that of Edward VI. the English coin was not only raised in
its denomination, but adulterated in its standard. The like
frauds were practised in Scotland during the minority of James
VI. They have occasionally been practised in most other
countries.
That the public revenue of Great Britain can never be com
pletely liberated, or even that any considerable progress can
ever be made towards that liberation, while the surplus of that
revenue, or what is over and above defraying the annual ex
pense of the peace establishment, is so very small, it seems
altogether in vain to expect. That liberation, it is evident, can
1 Set- I)u Cange Glossary, v«ce " Monotn; " the !'.< ncdictine edition.
4i 6 The Wealth of Nations
never be brought about without either some very considerable
augmentation of the public revenue, or some equally considerable
reduction of the public expense.
A more equal land-tax, a more equal tax upon the rent of
houses, and such alterations in the present system of customs
and excise as those which have been mentioned in the fore
going chapter might, perhaps, without increasing the burden
of the greater part of the people, but only distributing the
weight of it more equally upon the whole, produce a considerable
augmentation of revenue. The most sanguine projector, how
ever, could scarce flatter himself that any augmentation of this
kind would be such as could give any reasonable hopes either
of liberating the public revenue altogether, or even of making
such progress towards that liberation in time of peace as either
to prevent or to compensate the further accumulation of the
public debt in the next war.
By extending the British system of taxation to all the
different provinces of the empire inhabited by people of either
British or European extraction, a much greater augmentation
of revenue might be expected. This, however, could scarce,
perhaps, be done, consistently with the principles of the British
constitution, without admitting into the British parliament, or
if you will into the states-general of the British empire, a fair
and equal representation of all those different provinces, that
of each province bearing the same proportion to the produce of
its taxes as the representation of Great Britain might bear to
the produce of the taxes levied upon Great Britain. The private
interest of many powerful individuals, the confirmed prejudices
of great bodies of people seem, indeed, at present, to oppose to so
great a change such obstacles as it may be very difficult, perhaps
altogether impossible, to surmount. Without, however, pre
tending to determine whether such a union be practicable or
impracticable, it may not, perhaps, be improper, in a specula
tive work of this kind, to consider how far the British system of
taxation might be applicable to all the different provinces of the
empire, what revenue might be expected from it if so applied,
and in what manner a general union of this kind might be likely
to affect the happiness and prosperity of the different provinces
comprehended within it. Such a speculation can at worst be
regarded but as a new Utopia, less amusing certainly, but not
more useless and chimerical than the old one.
The land-tax, the stamp-duties, and the different duties of
Public Debts 417
customs and excise constitute the four principal branches of
the British taxes.
Ireland is certainly as able, and our American and West
Indian plantations more able to pay a land-tax than Great
Britain. Where the landlord is subject neither to tythe nor
poor-rate, he must certainly be more able to pay such a tax
than where he is subject to both those other burdens. The
tythe, where there is no modus, and where it is levied in kind,
diminishes more what would otherwise be the rent of the land
lord than a land-tax which really amounted to five shillings in
the pound. Such a tythe will be found in most cases to amount
to more than a fourth part of the real rent of the land, or of
what remains after replacing completely the capital of the
farmer, together with his reasonable profit. If all moduses and
all impropriations were taken away, the complete church tythe
of Great Britain and Ireland could not well be estimated at less
than six or seven millions. If there was no tythe either in Great
Britain or Ireland, the landlords could afford to pay six or seven
millions additional land-tax without being more burdened than
a very great part of them are at present. America pays no
tythe, and could therefore very well afford to pay a land-tax.
The lands in America and the West Indies, indeed, are in general
not tenanted nor leased out to farmers. They could not there
fore be assessed according to any rent-roll. But neither were
the lands of Great Britain, in the 4th of William and Mary,
assessed according to any rent-roll, but according to a very
loose and inaccurate estimation. The lands in America might
be assessed either in the same manner, or according to an
equitable valuation in consequence of an accurate survey like
that which was lately made in the Milanese, and in the dominions
of Austria, Prussia, and Sardinia.
Stamp-duties, it is evident, might be levied without any
variation in all countries where the forms of law process, and
the deeds by which property both real and personal is trans
ferred, are the same or nearly the same.
The extension of the custom-house laws of Great Britain to
Ireland and the plantations, provided it was accompanied, as
in justice it ought to be, with an extension of the freedom of
trade, would be in the highest degree advantageous to both.
All the invidious restraints which at present oppress the trade
of Ireland, the distinction between the enumerated and non-
enumerated commodities of America, would be entirely at an
end. The countries north of ('ape Finisterrc would be as open
41 8 The Wealth of Nations
to every part of the produce of America as those south of that
Cape are to some parts of that produce at present. The trade
between all the different parts of the British empire would, in
consequence of this uniformity in the custom-house laws, be as
free as the coasting trade of Great Britain is at present. The
British empire would thus afford within itself an immense
internal market for every part of the produce of all its different
provinces. So great an extension of market would soon com
pensate both to Ireland and the plantations all that they could
suffer from the increase of the duties of customs.
The excise is the only part of the British system of taxation
which would require to be varied in any respect according as it
was applied to the different provinces of the empire. It might
be applied to Ireland without any variation, the produce and
consumption of that kingdom being exactly of the same nature
with those of Great Britain. In its application to America and
the West Indies, of which the produce and consumption are so
very different from those of Great Britain, some modification
might be necessary in the same manner as in its application to
the cyder and beer counties of England.
A fermented liquor, for example, which is called beer, but
which, as it is made of molasses, bears very little resemblance
to our beer, makes a considerable part of the common drink of
the people in America This liquor, as it can be kept only for
a few days, cannot, like our beer, be prepared and stored up
for sale in great breweries ; but every private family must brew
it for their own use, in the same manner as they cook their
victuals. But to subject every private family to the odious
visits and examination of the tax-gatherers, in the same manner
as we subject the keepers of alehouses and the brewers for
public sale, would be altogether inconsistent with liberty. If
for the sake of equality it was thought necessary to lay a tax
upon this liquor, it might be taxed by taxing the material of
which it is made, either at the place of manufacture, or, if the
circumstances of the trade rendered such an excise improper,
by laying a duty upon its importation into the colony in which
it was to be consumed. Besides the duty of one penny a gallon
imposed by the British parliament upon the importation of
molasses into America, there is a provincial tax of this kind
upon their importation into Massachusetts Bay, in ships be
longing to any other colony, of eightpence the hogshead; and
another upon their importation, from the northern colonies into
South Carolina, of fivepence the gallon. Or if neither of these
Public Debts 419
methods was found convenient, each family might compound
for its consumption of this liquor, either according to the number
of persons of which it consisted, in the same manner as private
families compound for the malt-tax in England ; or according
to the different ages and sexes of those persons, in the same
manner as several different taxes are levied in Holland; or
nearly as Sir Matthew Decker proposes that all taxes upon con
sumable commodities should be levied in England. This mode
of taxation, it has already been observed, when applied to
objects of a speedy consumption is not a very convenient one.
It might be adopted, however, in cases where no better could
be done.
Sugar, rum, and tobacco are commodities which are nowhere
necessaries of life, which are become objects of almost universal
consumption, and which are therefore extremely proper subjects
of taxation. If a union with the colonies were to take place,
those commodities might be taxed either before they go out of
the hands of the manufacturer or grower, or if this mode of
taxation did not suit the circumstances of those persons, they
might be deposited in public warehouses both at the place of
manufacture, and at all the different ports of the empire to
which they might afterwards be transported, to remain there,
under the joint custody of the owner and the revenue officer, till
such time as they should be delivered out either to the consumer,
to the merchant retailer for home consumption, or to the mer
chant exporter, the tax not to be advanced till such delivery.
When delivered out for exportation, to go duty free upon proper
security being given that they should really be exported out of
the empire. These are perhaps the principal commodities with
regard to which a union with the colonies might require some
considerable change in the present system of British taxation.
What might be the amount of the revenue which this system
of taxation extended to all the different provinces of the empire
might produce, it must, no doubt, be altogether impossible to
ascertain with tolerable exactness. By means of this system
there is annually levied in Great Britain, upon less than eight
millions of people, more than ten millions of revenue. Ireland
contains more than two millions of people, and according to the
accounts laid before the congress, the twelve associated pro
vinces of America contain more than three. Those accounts,
however, may have been exaggerated, in order, perhaps, either
to encourage their own people, or to intimidate those of this
country, and we shall suppose, therefore, that our North American
420 The Wealth of Nations
and West Indian colonies taken together contain no more than
three millions : or that the whole British empire, in Europe and
America, contains no more than thirteen millions of inhabi
tants. If upon less than eight millions of inhabitants this
system of taxation raises a revenue of more than ten millions
sterling, it ought upon thirteen millions of inhabitants to raise
a revenue of more than sixteen millions two hundred and fifty
thousand pounds sterling. From this revenue, supposing that
this system could produce it, must be deducted the revenue
usually raised in Ireland and the plantations for defraying the
expense of their respective civil governments. The expense of
the civil and military establishment of Ireland, together with
the interest of the public debt, amounts, at a medium of the
two years which ended March 1775, to something less than seven
hundred and fifty thousand pounds a year. By a very exact
account of the revenue of the principal colonies of America and
the West Indies, it amounted, before the commencement of the
present disturbances, to a hundred and forty-one thousand
eight hundred pounds. In this account, however, the revenue
of Maryland, of North Carolina, and of all our late acquisitions
both upon the continent and in the islands is omitted, which
may perhaps make a difference of thirty or forty thousand
pounds. For the sake of even numbers, therefore, let us sup
pose that the revenue necessary for supporting the civil govern
ment of Ireland and the plantations may amount to a million.
There would remain consequently a revenue of fifteen millions
two hundred and fifty thousand pounds to be applied towards
defraying the general expense of the empire, and towards paying
the public debt. But if from the present revenue of Great
Britain a million could in peaceable times be spared towards
the payment of that debt, six millions two hundred and fifty
thousand pounds could very well be spared from this improved
revenue. This great sinking fund, too, might be augmented
every year by the interest of the debt which had been dis
charged the year before, and might in this manner increase so
very rapidly as to be sufficient in a few years to discharge the
whole debt, and thus to restore completely the at present de
bilitated and languishing vigour of the empire. In the mean
time the people might be relieved from some of the most
burdensome taxes; from those which are imposed either upon
the necessaries of life, or upon the materials of manufacture.
The labouring poor would thus be enabled to live better, to
work cheaper, and to send their goods cheaper to market. The
Public Debts 421
cheapness of their goods would increase the demand for them,
and consequently for the labour of those who produced them.
This increase in the demand for labour would both increase the
numbers and improve the circumstances of the labouring poor.
Their consumption would increase, and together with it the
revenue arising from all those articles of their consumption
upon which the taxes might be allowed to remain.
The revenue arising from this system of taxation, however,
might not immediately increase in proportion to the number
of people who were subjected to it. Great indulgence would for
some time be due to those provinces of the empire which were
thus subjected to burthens to which they had not before been
accustomed, and even when the same taxes came to be levied
everywhere as exactly as possible, they would not everywhere
produce a revenue proportioned to the numbers of the people.
In a poor country the consumption of the principal commodities
subject to the duties of customs and excise is very small, and
in a thinly inhabited country the opportunities of smuggling
are very great. The consumption of malt liquors among the
inferior ranks of people in Scotland is very small, and the excise
upon malt, beer, and ale produces less there than in England
in proportion to the numbers of the people and the rate of the
duties, which upon malt is different on account of a supposed
difference of quality. In these particular branches of the excise
there is not, I apprehend, much more smuggling in the one
country than in the other. The duties upon the distillery, and
the greater part of the duties of customs, in proportion to the
numbers of people in the respective countries, produce less in
Scotland than in England, not only on account of the smaller
consumption of the taxed commodities, but of the much greater
facility of smuggling. In Ireland the inferior ranks of people
are still poorer than in Scotland, and many parts of the country
are almost as thinly inhabited. In Ireland, therefore, the con
sumption of the taxed commodities might, in proportion to
the number of the people, be still less than in Scotland, and the
facility of smuggling nearly the same. In America and the
West Indies the white people even of the lowest rank are in much
better circumstances than those of the same rank in England,
and their consumption of all the luxuries in which they usually
indulge themselves is probably much greater. The blacks,
indeed, who make the greater part of the inhabitants both of
the southern colonies upon the continent and of the West India
islands, as they are in a state of slavery, are, no doubt, in a worse
422 The Wealth of Nations
condition than the poorest people either in Scotland or Ireland.
We must not, however, upon that account, imagine that they
are worse fed, or that their consumption of articles which might
be subjected to moderate duties is less than that even of the
lower ranks of people in England. In order that they may
work well, it is the interest of their master that they should be
fed well and kept in good heart in the same manner as it is
his interest that his working cattle should be so. The blacks
accordingly have almost everywhere their allowance of rum and
of molasses or spruce beer in the same manner as the white
servants, and this allowance would not probably be withdrawn
though those articles should be subjected to moderate duties.
The consumption of the taxed commodities, therefore, in pro
portion to the number of inhabitants, would probably be as
great in America and the West Indies as in any part of the
British empire. The opportunities of smuggling, indeed, would
be much greater; America, in proportion to the extent of the
country, being much more thinly inhabited than either Scotland
or Ireland. If the revenue, however, which is at present raised
by the different duties upon malt and malt liquors were to
be levied by a single duty upon malt, the opportunity of
smuggling in the most important branch of the excise would be
almost entirely taken away : and if the duties of customs, instead
of being imposed upon almost all the different articles of im
portation, were confined to a few of the most general use and
consumption, and if the levying of those duties were subjected
to the excise laws, the opportunity of smuggling, though not so
entirely taken away, would be very much diminished. In con
sequence of those two, apparently, very simple and easy altera
tions, the duties of customs and excise might probably produce
a revenue as great in proportion to the consumption of the most
thinly inhabited province as they do at present in proportion
to that of the most populous.
The Americans, it has been said, indeed, have no gold or silver
money; the interior commerce of the country being carried on
by a paper currency, and the gold and silver which occasionally
come among them being all sent to Great Britain in return for
the commodities which they receive from us. But without gold
and silver, it is added, there is no possibility of paying taxes.
We already get all the gold and silver which they have. How
is it possible to draw from them what they have not?
The present scarcity of gold and silver money in America is
not the effect of the poverty of that country, or of the inability
Public Debts 423
of the people there to purchase those metals. In a country
where the wages oi labour are so much higher, and the price of
provisions so much lower than in England, the greater part of
the people must surely have wherewithal to purchase a greater
quantity if it were either necessary or convenient for them to
do so. The scarcity of those metals, therefore, must be the
effect of choice, and not of necessity.
It is for transacting either domestic or foreign business that
gold and silver money is either necessary or convenient.
The domestic business of every country, it has been shown in
the second book of this Inquiry, may, at least in peaceable times,
be transacted by means of a paper currency with nearly the
same degree of conveniency as by gold and silver money. It
is convenient for the Americans, who could always employ with
profit in the improvement of their lands a greater stock than
they can easily get, to save as much as possible the expense of
so costly an instrument of commerce as gold and silver, and
rather to employ that part of their surplus produce which would
be necessary for purchasing those metals in purchasing the
instruments of trade, the materials of clothing, several parts of
household furniture, and the ironwork necessary for building
and extending their settlements and plantations; in purchasing,
not dead stock, but active and productive stock. The colony
governments find it for their interest to supply the people with
such a quantity of paper-money as is fully sufficient and generally
more than sufficient for transacting their domestic business.
Some of those governments, that of Pennsylvania particularly,
derive a revenue from lending this paper-money to their subjects
at an interest of so much per cent. Others, like that of Massa
chusetts Bay, advance upon extraordinary emergencies a paper-
money of this kind for defraying the public expense, and after
wards, when it suits the conveniency of the colony, redeem it
at the depreciated value to which it gradually falls. In 1747,*
that colony paid, in this manner, the greater part of its public
debts with the tenth part of the money for which its bills had
been granted. It suits the conveniency of the planters to save
the expense of employing gold and silver money in their domestic
transactions, and it suits the conveniency of the colony govern
ments to supply them with a medium which, though attended
with some very considerable disadvantages, enables them to
save that expense. The redundancy of paper-money neces
sarily banishes gold and silver from the domestic transactions
1 Sec Hutch inson't History of Massachusett's Bay, vol. ii. page 436, ft seq.
424 The Wealth of Nations
of the colonies, for the same reason that it has banished those
metals from the greater part of the domestic transactions in
Scotland; and in both countries it is not the poverty, but the
enterprising and projecting spirit of the people, their desire of
employing all the stock which they can get as active and pro
ductive stock, which has occasioned this redundancy of paper-
money.
In the exterior commerce which the different colonies carry
on with Great Britain, gold and silver are more or less employed
exactly in proportion as they are more or less necessary. Where
those metals are not necessary they seldom appear. Where
they are necessary they are generally found.
In the commerce between Great Britain and the tobacco
colonies the British goods are generally advanced to the colonists
at a pretty long credit, and are afterwards paid for in tobacco,
rated at a certain price. It is more convenient for the colonists
to pay in tobacco than in gold and silver. It would be more
convenient for any merchant to pay for the goods which his
correspondents had sold to him in some other sort of goods
which he might happen to deal in than in money. Such a
merchant would have no occasion to keep any part of his stock
by him unemployed, and in ready money, for answering occa
sional demands. He could have, at all times, a larger quantity
of goods in his shop or warehouse, and he could deal to a greater
extent. But it seldom happens to be convenient for all the
correspondents of a merchant to receive payment for the goods
which they sell to him in goods of some other kind which he
happens to deal in. The British merchants who trade to
Virginia and Maryland happen to be a particular set of corre
spondents, to whom it is more convenient to receive payment
for the goods which they sell to those colonies in tobacco than
in gold and silver. They expect to make a profit by the sale
of the tobacco. They could make none by that of the gold and
silver. Gold and silver, therefore, very seldom appear in the
commerce between Great Britain and the tobacco colonies.
Maryland and Virginia have as little occasion for those metals
in their foreign as in their domestic commerce. They are said,
accordingly, to have less gold and silver money than any other
colonies in America. They are reckoned, however, as thriving,
and consequently as rich, as any of their neighbours.
In the northern colonies, Pennsylvania, New York, New
Jersey, the four governments of New England, etc., the value
of their own produce which they export to Great Britain is not
Public Debts 425
equal to that of the manufactures which they import for their
own use, and for that of some of the other colonies to which
they are the carriers. A balance, therefore, must be paid to
the mother country in gold and silver, and this balance they
generally find.
In the sugar colonies the value of the produce annually exported
to Great Britain is much greater than that of all the goods im
ported from thence. If the sugar and rum annually sent to
the mother country were paid for in those colonies, Great Britain
would be obliged to send out every year a very large balance
in money, and the trade to the West Indies would, by a certain
species of politicians, be considered as extremely disadvan
tageous. But it so happens that many of the principal pro
prietors of the sugar plantations reside in Great Britain. Their
rents are remitted to them in sugar and rum, the produce of
their estates. The sugar and rum which the West India
merchants purchase in those colonies upon their own account
are not equal in value to the goods which they annually sell
there. A balance, therefore, must necessarily be paid to them
in gold and silver, and this balance, too, is generally found.
The difficulty and irregularity of payment from the different
colonies to Great Britain have not been at all in proportion to
the greatness or smallness of the balances which were respectively
due from them. Payments have in general been more regular
from the northern than from the tobacco colonies, though the
former have generally paid a pretty large balance in money,
while the latter have either paid no balance, or a much smaller
one. The difficulty of getting payment from our different sugar
colonies has been greater or less in proportion, not so much to
the extent of the balances respectively due from them, as to
the quantity of uncultivated land which they contained; that
is, to the greater or smaller temptation which the planters have
been under of overtrading, or of undertaking the settlement
and plantation of greater quantities of waste land than suited
the extent of their capitals. The returns from the great island
of Jamaica, where there is still much uncultivated land, have,
upon this account, been in general more irregular and uncertain
than those from the smaller islands of Barbadoes, Antigua, and
St. Christophers, which have for these many years been com
pletely cultivated, and have, upon that account, afforded less
field for the speculations of the planter. The new acquisitions
of Grenada, Tobago, St. Vincents, and Dominica have opened
a new field for speculations of this kind, and the returns from
426
The Wealth of Nations
those islands have of late been as irregular and uncertain as
those from the great island of Jamaica.
It is not, therefore, the poverty of the colonies which occasions,
in the greater part of them, the present scarcity of gold and
silver money. Their great demand for active and productive
stock makes it convenient for them to have as little dead stock
as possible, and disposes them upon that account to content
themselves with a cheaper though less commodious instrument
of commerce than gold and silver. They are thereby enabled
to convert the value of that gold and silver into the instruments
of trade, into the materials of clothing, into household furniture,
and into the ironwork necessary for building and extending
their settlements and plantations. In those branches of business
which cannot be transacted without gold and silver money, it
appears that they can always find the necessary quantity of
those metals; and if they frequently do not find it, their failure
is generally the effect, not of their necessary poverty, but of their
unnecessary and excessive enterprise. It is not because they
are poor that their payments are irregular and uncertain, but
because they are too eager to become excessively rich. Though
all that part of the produce of the colony taxes which was over
and above what was necessary for defraying the expense of their
own civil and military establishments were to be remitted to
Great Britain in gold and silver, the colonies have abundantly
wherewithal to purchase the requisite quantity of those metals.
They would in this case be obliged, indeed, to exchange a part
of their surplus produce, with which they now purchase active
and productive stock, for dead stock. In transacting their
domestic business they would be obliged to employ a costly
instead of a cheap instrument of commerce, and the expense
of purchasing this costly instrument might damp somewhat
the vivacity and ardour of their excessive enterprise in the
improvement of land. It might not, however, be necessary to
remit any part of the American revenue in gold and silver. It
might be remitted in bills drawn upon and accepted by particular
merchants or companies in Great Britain to whorn a part of the
surplus produce of America had been consigned, who would pay
into the treasury the American revenue in money, after having
themselves received the value of it in goods; and the whole
business might frequently be transacted without exporting a
single ounce of gold or silver from America.
It is not contrary to justice that both Ireland and America
should contribute towards the discharge of the public debt of
Public Debts 427
Great Britain. That debt has been contracted in support of
the government established by the Revolution, a government
to which the Protestants of Ireland owe, not only the whole
authority which they at present enjoy in their own country, but
every security which they possess for their liberty, their property,
and their religion ; a government to which several of the colonies
of America owe their present charters, and consequently their
present constitution, and to which all the colonies of America
owe the liberty, security, and property which they have ever
since enjoyed. That public debt has been contracted in the
defence, not of Great Britain alone, but of all the different
provinces of the empire; the immense debt contracted in the
Lite war in particular, and a great part of that contracted in the
war before, were both properly contracted in defence of America.
By a union with Great Britain, Ireland would gain, besides
the freedom of trade, other advantages much more important,
and which would much more than compensate any increase of
taxes that might accompany that union. By the union with
England the middling and inferior ranks of people in Scotland
gained a complete deliverance from the power of an aristocracy
which had always before oppressed them. By a union with
Great Britain the greater part of the people of all ranks in
Ireland would gain an equally complete deliverance from a much
more oppressive aristocracy; an aristocracy not founded, like
that of Scotland, in the natural and respectable distinctions of
birth and fortune, but in the most odious of all distinctions,
those of religious and political prejudices; distinctions which,
more than any other, animate both the insolence of the oppressors
and the hatred and indignation of the oppressed, and which
commonly render the inhabitants of the same country more
hostile to one another than those of different countries ever are.
Without a union with Great Britain the inhabitants of Ireland
are not likely for many ages to consider themselves as one
people.
No oppressive aristocracy has ever prevailed in the colonies.
Even they, however, would, in point of happiness and tran
quillity, gain considerably by a union with Great Britain. It
would, at least, deliver them from those rancorous and virulent
factions which are inseparable from small democracies, and
which have so frequently divided the affections of their people,
and disturbed the tranquillity of their governments, in their
form so nearly democratical. In the case of a total separation
from Great Britain, which, unless prevented by a union of this
M'3
428 The Wealth of Nations
kind, seems very likely to take place, those factions would be
ten times more virulent than ever. Before the commencement
of the present disturbances, the coercive power of the mother
country had always been able to restrain those factions from
breaking out into anything worse than gross brutality and
insult. If that coercive power were entirely taken away, they
would probably soon break out into open violence and blood
shed. In all great countries which are united under one uniform
government, the spirit of party commonly prevails less in the
remote provinces than in the centre of the empire. The dis
tance of those provinces from the capital, from the principal
seat of the great scramble of faction and ambition, makes them
enter less into the views of any of the contending parties, and
renders them more indifferent and impartial spectators of the
conduct of all. The spirit of party prevails less in Scotland
than in England. In the case of a union it would probably
prevail less in Ireland than in Scotland, and the colonies would
probably soon enjoy a degree of concord and unanimity at
present unknown in any part of the British empire. Both Ire
land and the colonies, indeed, would be subjected to heavier
taxes than any which they at present pay. In consequence,
however, of a diligent and faithful application of the public
revenue towards the discharge of the national debt, the greater
part of those taxes might not be of long continuance, and the
public revenue of Great Britain might soon be reduced to what
was necessary for maintaining a moderate peace establishment.
The territorial acquisitions of the East India Company, the
undoubted right of the crown, that is, of the state and people
of Great Britain, might be rendered another source of revenue
more abundant, perhaps, than all those already mentioned.
Those countries are represented as more fertile, more extensive,
and, in proportion to their extent, much richer and more popu
lous than Great Britain. In order to draw a great revenue from
them, it would not probably be necessary to introduce any
new system of taxation into countries which are already suffi
ciently and more than sufficiently taxed. It might, perhaps, be
more proper to lighten than to aggravate the burden of those
unfortunate countries, and to endeavour to draw a revenue
from them, not by imposing new taxes, but by preventing the
embezzlement and misapplication of the greater part of those
which they already pay.
If it should be found impracticable for Great Britain to draw
any considerable augmentation of revenue from any of the
Public Debts 429
resources above mentioned, the only resource which can remain
to her is a diminution of her expense. In the mode of collect
ing and in that of expending the public revenue, though in
both there may be still room for improvement, Great Britain
seems to be at least as economical as any of her neighbours.
The military establishment which she maintains for her own
defence in time of peace is more moderate than that of any
European state which can pretend to rival her either in wealth
or in power. None of those articles, therefore, seem to admit
of any considerable reduction of expense. The expense of the
peace establishment of the colonies was, before the commence
ment of the present disturbances, very considerable, and is an
expense which may, and if no revenue can be drawn from them
ought certainly to be saved altogether. This constant expense
in time of peace, though very great, is insignificant in com
parison with what the defence of the colonies has cost us in
time of war. The last war, which was undertaken altogether
on account of the colonies, cost Great Britain, it has already
been observed, upwards of ninety millions. The Spanish war
of 1739 was principally undertaken on their account, in which,
and in the French war that was the consequence of it, Great
Britain spent upwards of forty millions, a great part of which
ought justly to be charged to the colonies. In those two wars
the colonies cost Great Britain much more than double the sum
which the national debt amounted to before the commencement
of the first of them. Had it not been for those wars that debt
might, and probably would by this time, have been completely
paid; and had it not been for the colonies, the former of those
wars might not, and the latter certainly would not have been
undertaken. It was because the colonies were supposed to be
provinces of the British empire that this expense was laid out
upon them. But countries which contribute neither revenue
nor military force towards the support of the empire cannot be
considered as provinces. They may perhaps be considered as
appendages, as a sort of splendid and showy equipage of the
empire. But if the empire can no longer support the expense
of keeping up this equipage, it ought certainly to lay it down ;
and if it cannot raise its revenue in proportion to its expense,
it ought, at least, to accommodate its expense to its revenue. If
the colonies, notwithstanding their refusal to submit to British
taxes, are still to be considered as provinces of the British
empire, their defence in some future war may cost Great Britain
as great an expense as it ever has done in any former war.
430 The Wealth of Nations
The rulers of Great Britain have, for more than a century past,
amused the people with the imagination that they possessed a
great empire on the west side of the Atlantic. This empire,
however, has hitherto existed in imagination only. It has
hitherto been, not an empire, but the project of an empire; not
a gold mine, but the project of a gold mine; a project which
has cost, which continues to cost, and which, if pursued in the
same way as it has been hitherto, is likely to cost, immense
expense, without being likely to bring any profit; for the effects
of the monopoly of the colony trade, it has been shown, are, to
the great body of the people, mere loss instead of profit. It is
surely now time that our rulers should either realise this golden
dream, in which they have been indulging themselves, perhaps,
as well as the people, or that they should awake from it them
selves, and endeavour to awaken the people. If the project
cannot be completed, it ought to be given up. If any of the
provinces of the British empire cannot be made to contribute
towards the support of the whole empire, it is surely time that
Great Britain should free herself from the expense of defending
those provinces in time of war, and of supporting any part of
their civil or military establishments in time of peace, and en
deavour to accommodate her future views and designs to the
real mediocrity of her circumstances.
APPENDIX
THE two following accounts are subjoined in order to illustrate
and confirm what is said in the Fifth Chapter of the Fourth
Hook, concerning the tonnage bounty to the White-Herring
Fishery. The reader, I believe, may depend upon the accuracy
of both accounts.
AN Accot NT OF BUSSES FITTED OUT IN SCOTLAND FOR ELEVEN
YEARS, WITH THE NUMBER OF EMPTY BARRELS CARRIED OUT.
AND THE NUMBER OF BARRELS OF HERRINGS CAUGHT; ALSO
THE BOUNTY AT A MEDIUM ON EACH BARREL OF SKASTEEKS,
AND ON EACH BARREL WHEN FULLY PACKED
Year*.
1771
1772
1773
'774
'775
1776
1777
1778
1779
1780
Total
Number
Empty Mar- liarrels H > • t
">aiH nn
'I'.
n-ls carried of Herrings \S X
out. caught.
i
29
5948
2832
2085
0 0
1 68
41316
22237
II055
7 6
190
42333
42055
12510
8 6
248
593°3 ' 56365
16952
2 6
275
69144 52879
15 o
294
76329
51863
21290
7 6
240
62679
43313
17592
2 6
220
56390
40958
16316
2 6
206
55194
29367
15287
0 0
181
48315
19885
13445
12 6
135
33992
16593 9613
12 6
1
2186
550943
378347 155463 if o
431
432 The Wealth of Nations
Seasteeks . . 378,347 Bounty at a medium for each
barrel of seasteeks £08 2$
But a barrel of seasteeks
being only reckoned two-thirds
of a barrel fully packed, one-
third is deducted, which brings
the bounty to £o 12 3^
deducted < , 12
Barrels full packed 252, 231$
And if the herrings are exported, there is,
besides, a premium of . . . . . 028
So that the bounty paid by Government in
money for each barrel is . . . . fo 14 nf
But if to this the duty of the salt usually
taken credit for as expended in curing each
barrel, which at a medium is of foreign, one
bushel and one-fourth of a bushel, at IDS. a
bushel, be added, viz. . . . . . o 12 6
The bounty on each barrel would amount to £i 75!
If the herrings are cured with British salt, it will stand
thus, viz.
Bounty as before . . . . £o 14 nj
But if to this bounty the duty on two
bushels of Scots salt at is. 6d. per bushel,
supposed to be the quantity at a medium used
in curing each barrel is added, to wit . . 030
The bounty on each barrel will amount to £o 17 u|
And,
When buss herrings are entered for home consumption in
Appendix 433
Scotland, and pay the shilling a barrel of duty, the bountv
stands thus, to wit as before . . . £o 12 3}
From which the is. a barrel is to be
deducted o i o
o ii 3
But to that there is to be added again the
duty of the foreign salt used in curing a barrel
of herrings, viz. . . . . . . 0126
So that the premium allowed for each barrel
of herrings entered for home consumption is . £i 39?
If the herrings are cured with British salt, it will stand as
follows, viz.
Bounty on each barrel brought in by the
busses as above . . . . . £o 12 3!
From which deduct the is. a barrel paid at
the time they are entered for home con
sumption . . . . . . .010
£°
But if to the bounty the duty on two
bushels of Scots salt at is. 6d. per bushel,
supposed to be the quantity at a medium
used in curing each barrel, is added, to wit . 0
The premium for each barrel entered for
home consumption will be . . . . £o 14 3$
Though the loss of duties upon herrings exported cannot,
perhaps, properly be considered as bounty; that upon herrings
entered for home consumption certainly may.
434
The Wealth of Nations
AN ACCOUNT OF THE QUANTITY OF FOREIGN SALT IMPORTED INTO
SCOTLAND, AND OF SCOTS SALT DELIVERED DUTY FREE FROM
THE WORKS THERE FOR THE FISHERY, FROM THE 5TH OF APRIL
1771 TO THE 5TH OF APRIL 1782, WITH A MEDIUM OF BOTH FOR
ONE YEAR.
PERIOD.
From the 5th of April 1771
to the 5th of April 1782 .
Medium for one Year
Foreign Salt
Imported.
Scots Salt de
livered from the
Works.
Bushels.
BusheK
:
936,974
168,226
85,179 A
i5,293iY
It is to be observed that the Bushel of Foreign Salt weighs
84 lb., that of British Salt 56 Ib. only.
INDEX
Act for the Encouragement of
Trade ii. 3, 4
Act of Navigation, i. 407, 408; ii. 92
Africa, its inland navigation, L 19;
inhabitants of, 130
African Company, ii. 225-228
Agio, of the bank of Amsterdam, i.
293, 421; of bank of Hamburg,
422
Agriculture, not so susceptible of
division of labour as manufac
tures, i. 6; cipital spent on the
most advantageous to societv,
324-325, 327; cause of the growth
of wealth in our American colon
ies, 327-328; discouragement of
in Ancient Europe, 341 fT ;
foreign commerce dependent on,
361-362; profit to from manufac
tures and commerce, 366-370;
favoured bv the law of England,
372; wealth derived from more
durable than that which arises
from commerce, 373-374 ; ancient
policy of Europe concerning, ii.
28-29; agricultural system of the
French philosophers, 158-166; as
affected by free trade or by duties,
164-167 ; not favoured by the poli
tical economy of modern Europe,
173; favoured by that of China,
'73-174 ', -ind of Egypt and Indo-
stan, 1 75-177 ; not encouraged by
imposing restraints upon manu
factures and foreign trade, 179-
180; effect on, of the taille 335-
338 ; dependent on capital of land
lord, 409-410; trade and manu
facture dependent on, 410
Alcavala, the, of Spain, ii. 381
Ale, price of dependent on that of
Barley, i. 167-168 (see Mnlt tax)
America, wages, interest and profits
of stock in, i. 82; discovery of
silver mines in, effect on price of
silver, 175, 183, 184; its market
for the produce of its own mines,
185-186; paper currency in, 287,
288, 291; agriculture and trade
in, 327-328; rapid progress in
North American colonies com
pared to that of Europe, 370;
price of land in, 371 ; discovery of,
in what way it enriched Europe,
393; English colonies of( cause of
their rapid progress, ii. 69—73 ;
discovery of, effects of this great
event, 121, 122; poll tax in, 338-
339; scarcity of gold and silver
in, 422; contribution to public-
debt of Great Britain, 426-427
Amsterdam, Bank of, L 293; 422 ft;
ii. -99
Annuities, money borrowed upon.
by government, ii. 398-400; sal-
of, 401
Apothecaries, their profitsf i. 100
Apples and vegetables, increasing;
cheapness of, in i8th century,
1.69
Apprentices, number of limited bv
law, i. ioH; quite unknown to the
ancients, 1 1 1 ; never been thought
necessary for husbandry, 114;
free circulation of labour ob
structed by, 122-123
Apprenticeships, duration of as
fixed by statute, i. 108-109; in
France and Scotland, 109-110;
long, no security against fraud,
no; and no encouragement to
industry, iio-in; and unneces
sary, in
Aristotle, his tutorship of Alex
ander munificently rewarded,
i. 122
Army, comparative expense of, in
uncivilized and civilized socie
ties, ii. 182-185; causes rendering
war expensive, 185-188, 197-198;
methods of providing for public
defence, 188-189; first standing
army of which record is extant,
192 ; armies of Carthage, 192-193 ;
of Rome, 192-193; relaxation of
discipline in Roman army, 194 ;
military forces of the Germans
and Scythians, 195; superiority
of a standing army over a militi.i,
195, 196; jealousy of, among re
publicans, 196 197
Artificers, prohibited from leaving
the country, ii. 153, 154; un
productiveness of their labour
4.35
436
The Wealth of Nations
as considered by the French
philosophers, 160-163; exposi
tion of the errors of this state
ment, 168-172; to diminish the
number of, depresses the home
market, 179
Assize of bread and ale, the, i.
163, 167
Bank of England, its issue of paper
money and great annual coinage,
i. 267-269; greatest bank of cir
culation in Europe, 283; history
of, 283-285; the coinage, ii. 51-
54; net annual profit of, 299; and
the unfunded debt, 394; interest
on advances made by, 395
Bankruptcy, public, how generally
disguised, ii. 412
Banks and banking (see also under
Money), how the business carried
on, i. 257-260; cash accounts
granted by banking companies
in Scotland, 263; chief expenses
of banks, 266; effect of issuing
too large a quantity of paper
money, 267-269; bills of ex
change, 269 ; advances of money,
269-273; the practice of drawing
and redrawing, 274-278; failure
occasioned by too great liberality
in the granting of credit, 279-282 ;
its operations turn dead stock
into productive stock, 285-286;
optional clause inserted in notes
issued by Scottish banks, 290-
291; agio, a premium, 293; free
competition in, is advantageous
to the public, 294; banks of
deposit, 422 ff; and joint-stock
companies, ii. 242, 243
Bengal, early agriculture and manu
factures in, i. 18; cause of rapid
fortunes acquired in, 84; tythe
levied in, ii. 319; Modus estab
lished in, 321
Bills of exchange, i. 263, 265, 269;
drawing and re-drawing, 274-278
Bohemia, tax on wages in, ii. 348
Bounties, see Trade
Bread, Assize of, established by
Act of George I. 129-130; rela
tive value of, compared with
butchers' meat, 134, 135, 137;
wheaten and oaten, compared
146; price of as regulated in old
Scotch law book, 168; taxes on,
ii. 357
Burghers, privileges and exemp
tions of, i. 353, 354 ; supported by
the King against the lords, 355
Candles, tax on, ii. 355
Capital, two ways of employing it, i.
243, 244; circulating, and fixed,
244, 245, 246-248; how circu
lating capital is replenished,
248; works requiring capital of
both kinds, 249; the intention of
fixed capital, 252; expense of
maintaining fixed capital, 252,
253; circulating capital of a so
ciety differs from that of an indi
vidual, 253; fixed capital and
money, their similar effect on the
revenue of society, 253-257; pro
portion between, and revenue,
regulates proportion between in
dustry and idleness, 301 ; cause of
increase and diminution in, 301—
303; when lent at interest, is
equivalent to the assignment of
a portion of the annual produce,
315; how competition between
capitals arises, 316; result of
competition, 316; proportion
between value of, and that of
interest, 317; proportion be
tween capital and profit as
affected by increase in quantity
of silver, or of commodities, 317-
319; different ways of employing,
32 1 ; of retailer and wholesale mer
chant, 323, 324, 325 ; of the master
manufacturer, 324, 325, 326 ; capi
tal used in agriculture the most
advantageous to society, 324,
325, 327; that employed in ex
portation the least effective, 327;
comparative advantage of its
employment in home, foreign,
or carrying trade, 328-333; in
every growing society, capital is
first directed to agriculture,
afterwards to manufactures and
foreign commerce, 336—340; this
order reversed in modern states
of Europe, 340; that of Great
Britain, whence drawn, ii. 96, 97;
the most advantageous employ
ment of, 97 ; effect of the monopo
ly of colonial trade on that of
Great Britain, 98-102; capital
advanced to government a loss
to productive labour, 407; fur
ther accumulation of prevented
by defraying public expense from
the produce of taxes, 407,408;
Index
437
destruction of by meeting public
expense by funding, 408; in
dustry of a country falls with
removal of, 410
Cash accounts, granted by Scotch
banks, i. 263
Cattle, circumstances regulating
price of, i. 201-205, 215
Charities, educational, lead to over
stocking ot the Church, i. 118-120
China, inland navigation of, i. 18,
19; low wages in, 63, 64; effect of
its neglect of foreign commerce
85; high interest in, 85; rank and
wages of country labourers in,
115; price of subsistence in as
compared to Europe, 173; price
of labour in, 173; value of pre
cious metals in, 187-189; agri
culture and trade in, ii. 173, 174;
high roads and canals in, under
the direction of the executive
power, 217; revenue of the sove
reign in, derived from a land-
tax, 217, 218; tythe levied in,
319
Church, see Clergy
Clergy, the, of the different sects, ii.
270 ff: persecution and prosely
tising of, 270, 271; independent
provision of, 273; of an establish
ed church, their power in old days,
279, 280; benefices of, 280; an
cient constitution of the Church,
281, 282; former independence
and wealth of, 282-284; ancient
privileges of, 284; decline of the
temporal power of the Church,
285-287; benefices, privileges of
disposing of. before and after the
Reformation, 286 ff ; effect of the
respective values of benefices on
university teaching, 293, 294;
revenue of established churches,
294 295 ; survey and assessment
of Church lands in Prussia and
elsewhere, 316, 317
Cloth, price of, in Henry VII 's reign,
i 225, 226; its price compared
with that of wheat, 226; later
reduction in price, 226, 227
Clothing, when and how remunera
tive, t. 147, 148; only slight re
duction in price of, as result of
improved machinery, 225
Coal-mine, on what its power of
affording rent depends, i. 150,
151; on what its value depends,
153; production of not brought
into competition with that of dis
tant ones, 153
Coals, price of, how regulated, i.
JS2. 153', t°e share of rent in it,
153; not affected in one place by
their price in others, 153; export
duty on, ii. 153; tax on, 356
Cochin China, relative price of
sugar, corn and rice in, i. 142,
143
Colbert, his commercial and agri
cultural system, i. 411; ii. 157,
158
Colonies, Greek and Roman, ii. 54-
56, 64, 65 ; Spanish, 57-60, 65, 66 ;
Portuguese, 66, 67; Swedish and
Danish, 68; Dutch 68, 69;
French, 69; causes of prosperity
in new colonies, 69; English
colonies of North America, their
political institutions favourable
to progress, 70-73; mistaken
colonial policy of Spain, Portugal,
France, and other countries in
the way of taxes and monopolies,
72-74; liberal policy of Great
Britain, 74 ff; liberty of the
English colonists to manage
their own affairs, 82 ; superiority
of the English policy over that of
other nations, 83; advantages to
Europe generally arising from the
colonisation of America, 87-89;
particular advantages derived
from, by each colonising country,
89, 90; in what way they have
been a cause of weakness to the
mother countries, 90; exclusive
trade with, 90-92; effect of this
monopoly, 93-^7 ; its effect on
the capital of Great Britain, 98-
102, 107-110; on the taxing and
government of, 113-118; of their
representation in Parliament,
120, 121 ; on the derangement of
the natural distribution of stock
by trade monopoly with, 124-129;
British system of taxation extend
ed to, considerations as to possi
bility of, 416-421 ; paper money in,
423; conditions of their com
merce with Great Britain, 424;
payments of, to latter, 425; ad
vantage to, of union with Great
Britain, 427, 428
Commerce, see Manufactures and
Trade
Commercial system, principle of,
375 fl; six principal means by
438
The Wealth of Nations
which it proposes to increase the
quantity of gold and silver,
396 ff; contrived rather for the
benefit of the producers than for
that of the consumers, ii. 156 (see
foregoing chapters)
Companies, regulated, ii. 221, 222,
224, 225; joint-stock, 225, 228,
229, 242-245 (See also under
separate companies, East India,
African, etc.)
Competition, restrained by the
privileges of incorporated trade,
i. 107; reduction of price, profit,
and wages by free competition,
112; competition of the poor,
takes away the reward of the rich,
118; competition in the church,
118, 119; in trade, 322, 323
Concordat, the, ii. 286
Consumption, that of the inferior
ranks greater than that of those
above them, ii. 368
"orn, relative price of in rich and
poor countries, i. 6, 7; rents
reserved in, 30; not liable to so
many variations as rents reserved
in any other commodity, 31 ; how
its ordinary price is regulated, 31 ;
corn land and pasture, their
relative values, 134-136; its price
in ancient Rome, 136; rent and
profit of, regulates rent and
profit of pasture, 136, 137; rent
and profit of, compared with
those of vineyard, 141, 142; its
price compared with that of
sugar, 142, 143; rent of corn land
regulates nearly without excep
tion that of other cultivated
lands in Europe, 144; fertility of
Great Britain, 145 ; price of other
goods in proportion to, an indi
cation of the wealth or poverty
of a nation, 221; fluctuations in
price not due to rise and fall in
the price of silver, 222 ; bounty
on the exportation of, ii. 7, 8";
injurious effects of, 8-10, 14-16;
corn trade and corn laws, 23 ff;
the inland dealer, 24-35; mer
chant importer, 35-37; mer
chant exporter, 37-39; mer
chant carrier, 39, 40; at what
price duties and bounties are
taken off, 41, 42; at what price
exportation prohibited, 42
Cornwall, tin mines in, rent, and
tax on, i. 154, 155; encourage
ment given to discovery and
working of, 155, 156
Corporations, exclusive privileges
of, their effect on competition, i.
107; why they have been estab
lished, 112; ancient regulations
concerning, 112; town traders
more easy to co-operate than
country labourers, 114; not
necessary for the better govern
ment of trade, 117; free circula
tion of labour obstructed by
corporation laws, 122, 123, 124
Cotters, the, of Scotland, i. 105
Country, conditions of trade be
tween, and town, i. 113; wages
of country labour, in China, 115,
in Great Britain, 116
Curate, his pay compared with that
of an artisan, i. 119, 120
Dairy, rise in price of produce of, i.
208, 209
Davenant, Dr, his objections to
alteration of excise duties, ii. 373
Debt, unfunded, of Great Britain, ii.
394; loans upon anticipation of
taxes, and prolongation of, for
payment of, 395, 396; misapplica
tion of Sinking Fund for its
reduction, 403 ; amount of funded
and unfunded, in Great Britain,
404-406; pretended payment of
public debt, expedient resorted
to for, 412, 413; just that Ireland
and America should contribute
to discharge of, 426, 427; con
sideration of further means of
augmenting revenue or lessening
expenses, 429, 430
Decker, Sir Matthew, his scheme of
taxation, ii. 358, 419
Denmark, colonies of, in the New
World, ii. 68; its colonial policy,
73; transit duties levied in, 376
Drawbacks, see Trade
Dutch, their settlements in the
West, ii. 68, 69.
East India Companies. English and
Dutch, their system of govern
ment, ii. 131-137; 233-242
East Indies, condition of, under the
East India Company, i. 64, 65 ;
value of precious metals in, 187;
European trade with, 394, 395
Education, institutions for, ii. 245 ff ;
endowments, salaries and fees,
246, 247; jurisdiction of, 247,
Index
439
248: privileges to graduates, 248;
charitable foundations, 248; ap
pointment of teachers, 248; disci
pline of, 240, 250; public schools
and universities of England, 250;
universities of Etirope, 250, 251;
curriculum at, 252-256; effect of
travelling on the young, 257;
education in Greece and Rome, I
258-261; of the position of !
teachers, 262. 263; education of ,
women as compared to that of !
men, 263; education of the |
people, 263-266; parish schools, |
266, 267; practice of military
exercises, 267, 268; advantage to I
the state of educating the people,
269, 270; how to meet expenses
of, 298
Egvpt, agriculture in. ii. 175-177
Employments, inequalities of wages
and profit arising from the nature
of, i. 88; general equality of the
advantages and disadvantages of
different, 102-105; how affected
by the policy of Europe, 107
England, increase of wealth in, i.
307-309; parsimony not a chara :-
teristic virtue of its inhabitants,
^09; well fitted by nature for
foreign commerce, 371; law of,
favours agriculture directlv and
indirectly, 372; monopoly in for
bread and meat, 372; hostility
between, and France, in respect
<>f high duties on imp >rted goods,
lii; on the question of its free
trade with France, 417; advan
tages of trade with France, 438,
439; Church of, ii. 289-291;
house tax in, 327; land tax in,
331; stamp duties in, 345; poll-
taxes in, 349-351 (see Great
Britain)
Entail, see Primogeniture
Europe, policy of, its effect on th»-
employment of labour and stock,
i 107-118; 118-122; price of
subsistence, and of labour in, as
compared with China, 173, 174;
its market for the produce of the
silver mines of America. 184;
value of precious metals in, as
compared to China and India,
189; rat>* of interest in, 316, 317;
slow progress of, in comparison
with the rapid advances of our
North American Colonies, 370;
difference of the price of land in
the two countries, 370, 371 ; how
enriched by the discovery of
America, 393; its commerce
with the East Indies, 394, 395;
ancient policy of with regard to
the com trade, ii 28; advantages
arising to, from the colonization
of America, 87-89
Excise and customs duties ii. 359
ff (see Taxes)
Expense, some modes of, contribute
more than others to public
wealth, i. 310-312; advantage of,
laid out in durable commodities,
311, 312
Exportation, prohibitions against,
ii. 142 ff; excise and customs
d<iti«-s, 359 ff (sec Trade and
Taxes)
Farmers, see Yeomanry
Feudal Law, i. 365, 366; as regarded
transference and alienation of
property, ii. 341, 342
Firearms, invention of, favourable
to the permanence and extension
of civilisation, ii. 198
Fish, how price of, may rise, i. 216,
217; efficacy of human industry
in multiplying this produce is
uncertain, 217
Fishermen, produce of their labour,
i. 90
Food, relative values of bread and
butcher's meat, i. 134, 135, 137.
high price in i8th century, 137;
rent of land cultivating food
stuffs regulates that of other
lands, 144; only produce which
always affords rent to the land
lord, 147; the original source of
rent, 149, 150; fertility of a land
in producing, adds to the value
of many other lands, 159;
abundance of, the cause of the
demand for precious metals anil
stones, 159; constitutes the
principal part of the riches of the
world, 159; animal and vege
table, how affected by improve
ment and cultivation of land.
223; rise in price of one species
of, compensated for by fall in the
other, 223
France, rate of interest in, 1. 80, 81 ;
wages in, 81 ; term of apprentice
ship in, 109; market rate of inter
est in, 320; farmers (Metayers
in, 346; the TailU collected if:,
440
The Wealth of Nations
350; magistrates and town coun
cils first established in the towns,
356; law of, less favourable to
agriculture than that of England,
372 ; high duties on foreign
imports imposed by Colbert, 411 ;
on the question of its free trade
with England, 416-418; ad
vantages of trade with England,
438, 439; its colonies in the West,
ii. 69; colonial policy of, 72, 73;
absolute government established I
in its colonies, 83; Colbert's j
agricultural system, 157, 158; |
executive power charged with :
the maintenance of the high roads I
and canals in, 216, 219; the |
Tattle in, 335, 336, 337, 338; the
Vingtitme in 339; stamp duties
and duties upon registration in,
343, 345; secret registers in, 345;
capitation taxes in, 350; Peages
in, 375; revenue laws in, 382;
farming of taxes in, 385, 386;
whence its chief revenue derived,
386; requisite reformation of
finances in, 386, 387; system of
taxation in, inferior to that of
Great Britain, 387; sale of State
bills in, 394; public debt in, 400,
401 ; by whom money advanced
in, 401, 402; adulteration of coin
in King John's time, 415
Frugality, a public benefactor, i.
301-304; the principle which
prompts to, 305; expense laid
out in durable commodities
favourable to, 311, 312
Fund, the general, of Great Britain,
ii. 397
Funding, system of, ii. 408, 409;
enfeebling to the State, 410, 411
Genoa, reason of the dearness of
corn in, i. 174
Gold and silver, vary in value, i.
28; not an accurate measure of
the value of other commodities,
28; value of, diminished by dis
covery of the mines in America,
30; price of corn regulated by
value of silver, 31; when used
for coinage, 34; gold originally
not a legal tender in England, 35 ;
respective value of, 35, 36;
market price of, 36-41, 154; rent
and tax on silver mines in Peru,
154, 155; and of gold mines, 156;
lowest price at which precious
metals can be sold, 156, 157; and
highest, 157; cause of demand
for, 159; value of silver in pro
portion to that of corn, 162 ff; its
value not to be judged by low
price of commodities, 170 ;
real value of, depends chiefly on
the quantity of corn they can
purchase, 170, 171, 172; causes
that conduce to increase their
quantity, 172, 173; increase in
quantity has not diminished
their value, 175; discovery of
mines in America, 175; value of
silver in proportion to that of
corn (second period), 1570-
1640, 175, 176; (third period)
1637-1700, 176 ff; debasement
of silver coin, 177, 178; com
parative value of, in Europe,
and the East, 187-189; con
tinual consumption of, 189, 190;
annual importation of into
Spain, IQO, 191; proportion
between the respective values of
gold and silver, 192-195 ; effect
of tax on, 195, 196; their con
sumption and importation, 197;
value of silver in old Rome, 199,
200; in Edward Ill's time, 212;
in 1425, 213; high or low value of
no proof of the wealth or poverty
of a country, 219, 220 (see Money)
Gorgias, his way of living, i. 121,
122
Government, civil, origin and
growth of, ii. 199 ff
Grain, price of, in England and
Scotland, i. 67 ; in France, 68
Great Britain, capital stock of, i.
84; cornlands in, 144, 145; her
liberal colonial policy, ii. 74 ff;
her monopoly of colonial trade,
90-97; effect upon her capital of,
98-105, 107-110; her colonies in
Africa and the East, 130, 131;
house tax in, 326; stamp duties
m, 342 '> principal taxes on the
necessaries of life in, 355; on
consumable commodities in, 381;
interior commerce of country
left free by the system of taxa
tion in, 382 ; its system of taxa
tion superior to that of France,
387; taxes on necessaries incon
siderable in, 388; taxes in, which
bear hardest on manufactures
in, 388; unfunded debt of, 394 ff;
the general fund of, 397; Sinking
Index
441
Fund of, 398; by whom money
advanced in, 401 ; amount of
public debts of, 404-406 , flourish
ing condition of after late war,
411,412; impossibility of libera
ting the public revenue of, 415
416; how far might the system of
taxation in be applicable To all
provincesof the Empire, 416-421 ;
medium of commerce between
the Colonies and, 424, 425; just
that Ireland and America should
contribute to the country's
revenue, 426, 427; advantage to
Colonies of union with, 427, 428;
consideration of further means
for augmenting revenue or lessen
ing expenses, 429, 430
Greece, trad<> not encouraged by, ii.
177; enormous price of certain
goods in, 178, 179; education in,
258-261, 267, 26s; men of
letters in, generally teachers,
294
Ground rents, see House
Hamburg, tax on stock in, ii. 332
Hamburg Company, ii. 222
Herring fishery, bounty granted to,
iii. 18-22
Hides, extensive market for, how
price affected by, i. 210, 211;
price of in 1425, 213; real and
nominal price of, 213, 214; price
of in iHth century, 214; efficacy
of human industry in multiply
ing this produce is uncertain, 216
Hoes, rise in price of, i. 207
Holland, proportionately richer
than England, i. 81; rate of
interest in, Ri; wages and profit
in, HI ; redundancy of its stock,
82; unfashionable not to be a
man of business in, 86; why corn
is dear in, 174; carrying trade in,
418; Dutch colonies, ii. 68, 69;
its colonial policy not favour
able to development, 73; >ts
colonies in Africa and the East,
131; house tax in, 137; excep
tional tax on capital levied in,
133, 334", tax on servants in, 339;
tax upon succession in, 341;
stamp-duties and duties on
registration in, 342, 343; tax on
bread in. 357; heavy taxes on
necessaries of life in, 387-389,
411
Hose, cloth, price of in Ldward IV's
time, i. 227; knitted stockings
not known till later, 227
Hospitality, extravagance of, before
the extension of commerce, i. 363,
364
House, dearness of rent in London, i.
107; building rent, ii. 321, 322;
ground rent, 322; tax on house
rent, 322, 323; falls heaviest on
the rich, 324 ; difference between
house rent and rent of land, 324;
how houses should be rated, 324,
325; ground rents more proper
subject for taxation than house
rents, 325; regulation of ground
rent, 325; ground rent a species
of revenue, 3.26; more proper
subject of taxation than rent of
land, 326; rent of taxed in same
proportion as rent of land, in
Great Britain, 326, 327; tax on
houses in Holland, 327; hearth
tax, 327; rated according to
number of windows, 3.27, 328;
window tax, 328; effect of on
rent, 328
Hudson Bay Company, ii. 229, 231
Hunters, produce of their labour,
i. 90
Husbandry, no apprenticeship
thought necessary for, i. 114;
superior intelligence of those en
gaged in, 115; Democritus and
Columella on, 139, 140
Idleness, natural cause of, i. 37
Importation, goods exempted from
duties, ii. 138, ff; excise and cus
toms duties, 359, ff (see Trade
and Taxes)
Indostan, agriculture in, ii. 175-
J77
Industry, plenty quickens, dearth
diminishes, i. 74; its connection
with increase of stock, 83; not
encouraged by long apprentice
ships, no, in ; computation of
the quantity of, which the cir
culating capital of a society can
employ, 260, 261; why we arc
more industrious than our fore
fathers, 299; cause of. in certain
cities, 299, 300; proportion be
tween, and idleness, regulated by
the proportion between capital
and revenue, 301
Innkeeper, his profitable trade, i.
oo
Insurance, calculation of premium,
442
The Wealth of Nations
i. 96; trade of, and joint-stock I
companies, ii. 243
Interest, profits of stock vary with
market rate of, i. 79; legal rate
of, in Henry VIII's time, 79;
abolished under Edward VI, 79;
ten per cent the legal rate till
James I's time, 79; restricted to
eight per cent, and later reduc
tions, 79; legal rate and market
rate in Scotland, 80; in France, '
80, 81; in Holland, 81; in North
America and West Indian Colo
nies, 82; effect of acquisition of
new territory, or new branch of
industry on, 83, 84; high rate in
China, 85; high rate in ancient
times accounted for, 85 ; high rate
among the Mahometan nations,
85, 86; as affected by the riches
of a country, 86; proportion be
tween interest and clear profit,
87; moneyed, landed and traded
interest, 314; moneyed interest
increases as the portion of annual
produce destined to replace
capital increases, 315; interest
diminishes as amount of stock to
be lent increases, 316 ; lowering of
rate of, not clue to the discovery
of the Spanish West Indies, 316;
rate of interest in Europe before
and since, 316, 317; value of,
proportion between and that of
capital, 317; legal rate of, 319,
320; market rate in France and
England, 320; tax upon cannot
raise the rate of, ii. 330; reasons
why a less proper subject of
direct taxation than the rent of
land, 330, 331; when affected by
taxes on profits of stock, 339;
market rate in Queen Anne's
reign, 398
Ireland, its ability to pay land tax,
ii. 417; its contribution towards
discharge of public debt, 426,
427; advantage to, of union with
Great Britain, 427
Isocrates, fees paid to, by his scho
lars, i. 121
Italy, rise of the cities in, i. 358;
foreign commerce in, 373; tax on
bread in, ii. 357; transit duties
levied by, 376; tax on value of
contracts in Naples, 3^1 ; revenue
laws in, 383, 384; fanning of
taxes in, 386; system of funding
in, 411
Justice, administration of, necessi
tated by increase in property, ii.
199; at one time a source of
revenue, 203, 204; consequent
abuse in, 204, 205; acceptance
of presents in return for, 205,
206; fixed salaries for, 206; de
fray ins; the expenses of by fees
of court, 207, 208; by a stamp
duty, 209; by fund raised on
landed estates, or by loan of
money, 209; separation of the
judicial from the executive power,
210; necessary for the impartial
administration of justice, 210;
how to meet expenses of, 297
Kelp, its uses. i. 131
Kitchen gardens, rent and profit of,
i. 139, 140
Labour, division of, occasions a
proportionable increase of the
productive powers of labour, i.
6— 10; the cause of universal opu
lence, and accommodation, 10,
ii ; the consequence of a certain
propensity in human nature, 12;
co-operation a necessity to man,
12, 13; due to natural tendency in
man to barter, 13, 14; difference of
talents effected by, 14; dissimi
larity of genius useful to man,
15; limited by the extent of the
market, 15; the real measure of
the exchangeable value of com
modities, 27, 29, 32; difficult to
ascertain proportion between dif
ferent quantities of, 27; never
varies in value, 29 ; in what sense
it has a real and nominal price,
29; its money price does not
fluctuate with money price of
corn, 31; when and when not its
produce belongs to the labourer,
42, 43, 44; measures the value
of rent and profits, 44; whole
produce of, originally enjoyed by
the labourer, 57; price of, 'dearer
in England than in Scotland, 67;
that of freemen cheaper than that
of slaves, 72; liberal reward of,
encourages the increase of popu
lation, 72, 73; money price of,
regulated by two circumstances,
76; demand for, how affected by
plenty and scarcity, 76, 77;
increase of its productive powers
by increase of stock, 77, 87; in-
Index
443
crease of its price compensated
for by the diminution of its quan
tity, 78; high profits tend to
raise price of, 87, 88 ; cheaper, in
cases where the work paid is not
the sole employment of labourer,
105, 106; property of every man
in his own labour, no; free cir
culation of, obstructed by corpo
rations and apprenticeship, 122;
and by the Poor Laws, 123-127;
unequal price of, in different
places, owing to this, 127; part
of labour in price of metals. 154;
tin- real measure of the value of
silver and all other commodities,
170; money price of, depends
chiefly on average money price
of corn, 171; labour is the ulti
mate price paid for everything,
i?i; price of, in China, 173;
money price of, risen in Great
Britain, 183; improvement in
productive powers of, lower price
of mariufacturc-s, and raise real
rent of land, 229; the interests
of the labourer strictly connected
with the interest of society, 230;
productive and unproductive
labour, 294-296; the part of stock
employed for one or the other,
296-298; proportion between pro
ductive and unproductive, in rich
and poor countries, 298, 299;
productive labour alone increases
value of the annual produce of
the land, 306, 307; taxes on
necessities of 1 fe, how far they
raise the price of 409, 410;
money price of. regulated by that
of com, ii. ii ; productive and
unproductive, according to the
system of French philosophers,
158-166; exposition of the errors
of this statement, 168-172; taxes
on the wages of, 346-349; pro
ductive, how hindered by certain
methods of defraying public
expense, 407, 408
Land, natural rent of, i. 130, 131;
extra rent on, demanded for im
provements, and for other advan
tage, 131 ; the pr.cc for use of, a
monopoly price, 131; how pro
portioned, 131: high or low rent
depends on high or low price of
commodities, 132; increase of
produce and diminution of labour
profit the landlord, 133; rent
varies with the fertility of land
and with its situation, 133, 134;
relative values of pasture and corn
lands, 134-136; rent and profits
of productions requiring more
expense and care, 138-141; rela
tive rent and profit of vineyard
and corn and pasture, 141, 142;
the cultivation of sugar and
tobacco, 142-144; rent of land
producing foodstuffs regulates
that of other cultivated ';iiid,
144; rice fields, 145; potato fields,
145, 146; food, the only produce
which always affords sure rent to
the landlord, 147; produce not
invariably affording rent, 147;
when clothing and lodging arc
remunerative, 147-149; food Un
original source of rent, 150; rent
from coal mines, 150, 151; Irom
timber, 151, i«j2; rent has little
part in the price of metals, 154;
rent of tin and lead mines in
Great Britain, 154, i.ss; of silver
mines in Peru, 154, 155; and of
gold mines, 156; of preciou^
stones, 158; rent of a mine of
either is in proportion to its rela
tive fertility, 158; rent of estates
above ground to their absolute
fertility, 158, 159; increase of fer
tility of a land in producing foot!
increases the value of many other
lands. 159; respective values of
produce producing rent, or other
wise, 160, 161; consideration of
its three sorts of produce, 198 fl;
necessity of rise in the price of its
produce, 209; constitutes chief
wealth of every country, 223:
improvement and cultivation ol,
how they affect animal and vege
table food, 223; real rent of,
raised by improvement in the
circumstances of society, 228; in
some cases directly, in others
indirectly, 229 ; rent of, one of the
three parts into which the price
of the annual produce divides
itself, 230; interest of proprietors
inseparably connected with the
general interest of society, 2V>;
gross rent and net rent? 251;
rent increases in proportion to
the extent, but diminishes in
proportion to the produce of the
land, 298; value of annual pro
duce increased by productive
f44
The Wealth of Nations
labour alone, 306, 307; market
rate of, dependent on market
rate of interest, 320 ; law of primo
geniture and entail, 342, 343;
extensive property unfavourable
to improvement, ' 344 ; common
rent for, in Scotland at one time
364; power of the old allodial
lords, 365, 366; change in the
Kjrsonal expenditure of the
tter brought about by in
creased commerce, 366—369; ori
gin 01 long leases, 368; profit to
the country derived from com
merce and manufactures, 369,
370; advantage of small holdings,
370; law concerning, in Rome,
ii. 55; improvement of, discour
aged by monopoly, 108; agricul
tural system of the French
philosophers, 158-166; revenue of
the Emperor of China derived
from a land-tax; 217; rent of, as
a source of maintenance of the
State, 302-305; land-tax, amount
of revenue arising from in Great
Britain, 304 ; Crown lands, re
venue arising from, 304, 305,
306; tax on the rent of, 309 ff (see
Taxes) ; fine for renewal of lease,
312; conditions attendant on
certain leases, 313; rent in kind,
313; the landlord should be en
couraged to cultivate a part, but
a part only, of his land, 313, 314;
survey and valuation of, in Prus
sia, Bohemia, Milan, Savoy and
Piedmont, 316; tithe levied on
the produce of, 318-321 ; differ
ence in rent of, to house rent,
324; ground rent a more proper
subject of taxation than rent of
land, 326; annual land-tax in
Great Britain, valuation of, 326,
327; tax on rent of, cannot raise
rents, 329; reasons why a more
proper subject of taxation than
interest, 330, 331; land tax, its
dealing with stock, 331, 332 ; land
tax Bill, a tax on interest not on
capital, 333, 334; one of the two
original sources of revenue, 409,
410.
Land- carriage and water-carriage,
advantages of the latter, i. 16,
i7
Land tax Bill. ii. 333
T.ead mines in Scotland, rent of, i.
154
Leather, tax on, ii. 355; ancient
customs duties on, 360
Liquors, fermented and spirituous,
productive tax on, ii. 368, 369;
when exempt from excise duties,
369; amount of revenue drawn
from, 370 (see Malt-tax)
Lodgings, wi v cheaper in London
than in Paris and Edinburgh, i.
106, 107
London, dearness of house rent in,
i. 106; and cheapness of lodgings,
1 06
Lotteries, i. 96
Machinery, improvements in, i. 225,
227
Malt-tax, ii. 370-375
Manufactures, of various kinds,
growing improvement and cheap
ness of, in i8th century, i. 69, 70;
linen and woollen in Scotland and
Yorkshire, 75,76; produce of, by
what affected, 76; capital em
ployed in, 325, 326; manufac
tures for distant sale, how intro
duced into different countries,
359-361 ; wealth arising from less
durable than that derived from
agriculture, 373, 374; derive
the greatest advantage from the
monopoly of home markets, 403;
competition among, advantage
ous to the people, 437; certain
goods prohibited to be imported
for home consumption, ii. 2, 3;
price of home industries regulated
by that of corn, 10; premiums
given to manufacturers, 23;
ancient policy of Europe con
cerning, 29; their labour un
productive according to the sys
tem of the French philosophers,
160-163; exposition of the errors
of this system, 168-172; to di
minish the number of, diminishes
the home market and discourages
agriculture, 179; progress in,
increases the expense of war,
185, 1 86; price of raised by
tax on wages, 347; taxes
bearing heaviest on, 388 (see
undT Trade for Drawbacks and
Bounties)
Marriage, not prevented by poverty,
i. 70
Masters, able to combine more
easily than workmen, i. 59
Meat, its price in proportion to
Index
445
bread, i. 134, 135, 137; price of,
in early i7th century and during
i8th century, 137, 138; later
prices, 138; not so good a
measure of the money price of
labour, as corn, 171, 172; cause
of the lowering of price of, 206;
taxes on, ii. 357
Mediterranean Sea, nations dwel
ling round, the first to be civi
lised, i. 1 8
Messance, quoted as to the poor
working m<*^ln cheap years than
dear years, i. 75
Metals, as used in commerce in
ancient times, i. 21; difficulty of
weighing and assaying, 22, 23;
as used for coinage, 34, 35 ; gold
and copper as It-gal tenders,
35 (see Gold and Silver); metallic
mines, in what their value con
sists, 153; price of a metal at one
mine affects that at every other,
154; lowest and highest price of
precious metals (see Gold and
Silver); quantity of, brought to
market, ifjz; price of, varies less
than that of other land produce,
192 ; efficacy of human industry in
multiplying quantity of, is un
certain, 217; and the two circum
stances on which their quantity
depends 217; and consequent
rise and fall in price, 218; fer
tility or barrenness of mines have
no connexion with the state of
industry in a country, 218 219;
effect of improvement in dimin
ishing price of manufactures in
which metals are employed, 225
Metayers, species of farmers known
in France as, i. 346
Militias, in the old towns, i. 356;
several kinds of, ii. 189; infe
riority of, to standing armies,
190, 191, 195, 196; in times of
war the militia becomes practi
cally a standing army, 191, 192;
of various countries and tribes, in
opposition to the standing armies
of Rome, 193, 194; victories of,
195; of Germans and Scyth
ians, 195
Mines (see coals and metals), Hun-
garian and Turkish, how worked,
. I7-S
Mississippi scheme, I. 283
Modus, tax known as, ii. 321
Money, cattle, salt, and other
commodities used for, 1. 20, 21;
different metals used for, by
different nations, 21; no coined
money among the Romans before
Servius Tullius, 21; origin of
coined money, 22; use of, intro
duced by William the Con
queror, 23; Roman As or Pondo,
23; English pound in Ed
ward I's time, 23; the Troyes
pound, 23; French livre of Char
lemagne's time, 23; the Scots
pound, 23; original weight of
shillings and pennies, 23; pro
portion between pound shilling
and penny, 23, 24; the exact
measure of the exchangeable
value of commodities at the
same time and place, 32, 33 ; value
of at Rome estimated in coppers,
34; silver coins in England, 34;
when gold and copper first used
for coinage in England, 34 ;
money-price of goods, 41 (sec
Interest); part only of the circu
lating capital, 253; no part of the
revenue of society or individual,
256; the substitution of paper
for gold and silver, 257 ff; gold
and silver employed in the pur
chasing of foreign goods, 259,
260; proportion which the cir
culating money of a country
bears to whole value of annual
produce. 261; benefit to trade_in
Scotland by introduction of
paper money, 261-263; paper
money cannot exceed in value
the gold and silver it represents,
265; effect of issuing too large a
quantity of paper money, 267-
269, 279-282; disadvantages of
paper money in time of war,
286; the circulation of, 286-289;
paper currency in North America,
287, 288, 291-293; and in York-
•hire, 287, 291; quantity of gold
and silver taken from the cur
rency is always equal to the
quantity of paper mom y added
to it, 289; error of statement that
increase of paper money aug
ments money price of com
moditirs, 289, 290; bank-money
and premium, or agio, 293; paper
currency does not affect value
of gold and silver, 293; .11
what the value of these depend-.,
293; the quantity of. which can
446
The Wealth of Nations
be annually employed in a
country, how determined, 303,
304; increases as value of annual
produce increases, 304, (see
Stock) ; distinction between, and
other moveable goods, 376;
exportation of gold and silver in
trade, 377-380, 381, 382; price of
gold and silver less fluctuating
than that of other commodities,
382; more easily replaced than
other commodities, 382, 383;
cause of the complaints of
scarcity of money, 383; only a
small part of the national
capital, 384; quantity in every
country, how regulated, 385,
386; the gold and silver stored up
in a country may be distin
guished into three parts, 386, 387 ;
the circulating money, 387;
plate of private families, 387;
money laid up in the treasury of
princesf 3?7; foreign wars not
maintained by any of these funds,
387-390; the greater need for
collecting treasure in old days,
391, 392; course of exchange,
418 ff; how the value of the
current coin of a country must
be judged, 420; expense of
coinage, how defrayed in France
and England, 420, 421; foreign
hills of exchange, how paid,
d2i; of deposits, 422 ff; value
• >f silver degraded by bounties,
it. 10; degradation in value of
silver, when of consequence and
when not, n, 12; effect of the
taxing and prohibiting of the
exportation of gold and silver by
Spain and Portugal, 12-14; im~
portation into England of gold
from Portugal, 45-47; for what
purpose gold and silver are im
ported, 47, 48 ; respective value
of coined and uncoined gold and
silver in Great Britain, 48, 49;
coinage and the seignorage, 49-
54; duty on coinage, 51; and
the Bank of England, 51-55;
raising the denomination of coin,
an expedient for concealing
public bankruptcy, 412 ; adultera
tion and augmentation of coin,
415 ; paper money in the colonies,
423; employment of gold and
silver in the Colonies, 424-426
Monopoly, effect of, i. 54, 55; an
enemy to good management,
134; of home markets, 401 ff;
colonial policy of, ii. 73, 74, 93-
97; effect of, 'on British capital,
98-105, 107-110; its derange
ment of the natural distribution
of stock, 124-129
Navigable rivers, importance of, i.
1 8, 19
Pasture land, and corn land, their
relative values, i. 134-136; rent
and profit of pasture regulated
by rent and profit of corn, 136,
137; rent and profit of, as com
pared with those of vineyard,
141, 142
Peages, duties of passage, ii. 375
Pennsylvania, paper currency in,
i. 291, 292; no right of primo
geniture in, ii. 70
Peru, gold and silver mines in, rent
and tax on, i. 154-156, 183, 184;
encouragement given to discovery
and working of, 155, 156
Piece-work, remarks upon, i. 73,
74
Pin-making, i. 5
Plato, his way of living, i. 122
Poll-taxes, i. 353; ii. 338, 339, 349,
450
Poor laws in England, hardship of,
i. 123, 124; statute of Queen
Elizabeth 124; of Charles II,
122; of James II, 124; of Wil
liam III, 125, 126; of Queen
Anne, 126, 127
Population, rate of increase of, in
Great Britain and other European
nations, i. 62; in Biitish Colonies
in North America, 62; regulated
by the demand for men, 71, 72;
increased by the liberal reward
of labour, 72 ; in what populous-
ness consists, 149
Portugal, foreign commerce in, i.
372» 373'. effect of prohibiting
the exportation of its gold and
silver, ii. 12-14; treaty of com
merce with England, 44 ; impor
tation of gold into England from,
45-47; discoveries of the Portu
guese, 57; colonization of Brazil,
66, 67; its naval power, 67; its
mistaken colonial policy, 72, 73,
74 ; absolute government estab
lished in its colonies, 83; effect
of the monopoly of colonial trade
Index
447
on, 106; its colonies in Africa and
the East, 131
Post-other, the, a mercantile pro
ject, ii. 300
Potatoes, the increased cheapness
of, i. 69; their cultivation com
pared with that of rice and
wheat, 145, 146; their nutritive
qualities, 147; reason why their
cultivation is discouraged, 147
Poultry, rise in price of, i. 205, 206,
207
Pragmatic Sanction, the, ii. 286
Precious stones, their price nearly
entirely mpde up of wages and
profit, i. 158; their abundance
would add little to the wealth
of the world, 158; cause of de
mand for, 159
Premiums, see Manufactures
Price, real and nominal, i 26; of
labour, 29; real and nominal, in
proportion to one another, 32 ;
money price of goods, 32, 33, 41 ;
its component parts, 42-45;
market price, how regulated, 49,
50; prices of all commodities
continually gravitate to the
natural price, 51; fluctuation of,
dependent on variations in de
mand, and variations in the
quantity brought to market, 52;
fluctuations fall chiefly on wages
and profit, 52; enhancement of
market price, causes of, 53, 54;
highest and lowest natural price,
54; market price seldom con
tinuously below the natural price, j
55; price rises with increase of |
wages, 77; price of commodities
affects the profits of stock, 104;
reduced by competition, 112;
how regulated by the trade be
tween town and country, 131;
of provisions and other goods
rated in ancient times, 120; rent
affected by high or low of com
modities, 132 ; of coals, how regu
lated, 152, 153; of mt-taJs, how
affected, 153, 154; lowest and
highest of precious metals, 156,
157; not determined by that of
any other commodity, 157; of
precious stones, 158; of wheat
in former times 161 ff ; conversion
price and market price 166; of
the three sorts of produce, 198
ff; price of gold and silver no
proof of the nation's wealth or
poverty, 219, 220; of that of
certain commodities in propor
tion to corn, a more decisive one,
220, 221 ; rise in, of commodities,
the pecuniary reward of public
servants should be regulated
according to the cause of, 223;
artificial rise in, occasioned by
taxes, more distressing to the poor
than a natural rise, 224; diminu
tion of price in manufactures
owing to improvements, 224 ;
manufactures in which metal^
are employed, 225; clothing
manufacture, 225; hose, 227;
woollen, 227, 228; rise in the
price of one species of food com
pensated for by fall in another.
223; price of annual product-
divides itself into three parts,
230; erroneously stated that
increase of paper money aug
ments price of commodities, 289,
290; price of labour and other
commodities, how affected by a
tax on the necessaries of life,
409, 410; bounty on exportation
of corn tends to raise the price of,
ii. 8; money price of corn regu
lates that of other home indus
tries and of labour, 10, n; rise
of, in commodities a discourage
ment to industry, ii 12; of
regulating the price. o< corn in
times of scarcity, 24; engrossing
and forestalling of corn, popular
prejudices concerning, 33, 34;
of manufactured goods, raised by
tax on wages, 347; of necessaries,
wages regulated by, 352; of
luxuries, wages unaffected by,
353; monopoly, effect of tax on,
374; taxes besides customs and
excise affecting price of goods,
375
Primogeniture, law of, i. 342;
entails the natural consequences
of, 342; their absurdity in the
present state of Kurope, 343;
obstruction caused bv entail to
the granting of l<>Mg leases, 348;
no right of in Pennsylvania, ii.
70
Prodigality, a public enemy, i. 301.
304; the principle which prompts
to, 305
Produce, respective values of, ac
cording to power of affording
rent, i. 160-161 ; three classes of,
448
The Wealth of Nations
how affected by the progress of
improvement, 198 ft; rise in
price of, necessary to secure com
plete improvement and cultiva
tion of the country, 209; whole
price of annual, divides itself
into three parts, 230; part em
ployed for productive, part for
unproductive, labour, 296-298;
proportion between the parts so
employed in rich and poor coun-
iries, 298, 299; value of annual
produce increased by productive
labour alone, 306, 307; annual
produce of land and labour in
England greater than formerly,
307, 309; capital lent at interest
equivalent to an assignment of a
portion of the annual produce,
315; as the share destined for
replacing capital increases, the
monied interest increases, 315;
revenue of all the inhabitants of
a country in proportion to the
value of the annual produce, 327;
balance of annual produce and
consumption, 440, 441 ; the classi
fication of producers according
to the system of the French
philosophers, ii. 158-166; value
of annual produce diminished by
restraints on trade, 180; revenue
of the country depends on pro
duce of the land, 305; tax on:
tythe, 318-321
Professions, the, competition in,
i. 118-120
Professional actors and singers,
principles on which their rewards
are founded, i. 95
Profits, regulated by different
principles to wages, i. 43; their
value measured indirectly by
labour, 44 ; one of the component
parts of price, 43, 44; often con
founded with wages, 47; contri
bute largely to the value of com
modities, 48; affected by fluctua
tions in the market, 52; never
sink below their natural rate for
a great length of time, 55;
affected by price of provisions,
75 ; increase of stock tends to
lower, 78; hourly fluctuations of,
79; profits of stock vary with
market rate of interest, 79; have
been diminishing since Henry
VIII's time, 80; low, in Holland,
8 1 ; higher in North America and
West Indian Colonies than in
England, 82 ; wages do not sink
with, 83; effect of acquisition of
new territory, or new branch of
trade on, 83; raised by diminu
tion of stock, 84; as affected by
the wealth and population of a
country, 84, 85; net, and gross,
86 ; as affected by the wealth of a
country, 86, 130; proportion
between interest and clear profit,
87; affected by disagreeableness
of employment, 90; not affected
by the same causes as wages, 91,
93, 94J varY with certainty
or uncertainty of returns, 99;
affected by agreeableness or
disagreeableness of the business,
and the risk or security with
which it is attended, 99 ; more on
a level than wages in the different
trades, 100; apparent profit only
real wages, 101; respective pro
fits of retail and wholesale trade,
101, 102; vary with price of
commodities for which stock is
used, 104; reduced by competi
tion, 112; lowering of in town
raises country wages, 116; share
of, in the price of metals, 154;
one of the three parts into which
the price of annual produce
divides itself, 230; rate of, does
not rise and fall with the pros
perity and declension of society,
231; falls with competition of
capitals, 316; proportion be
tween capital and profit as affect
ed by increased quantity of
silver, or of commodities, 317-
319; how affected by monopoly,
ii. 109; not directly taxable, 329;
taxes on the, of particular em
ployments, 334, 335 ; the faille,
most important tax on profits of
stock, 335; effect on trade and
agriculture of tax on, 337, 338;
interest affected by tax on, 339
Property, extensive, unfavourable
to improvement, i. 344
Provisions, price of, lower in North
America than in England, i. 62;
price of in Great Britain, 66, 67;
price of, affects price of labour,
74, 76; and rents and profits, 75
Public works and institutions, for
facilitating commerce, ii. 211;
expenses of, need not be defrayed
by the public revenue, 212;
Index
449
exaction of tolls, 212-214; reve
nue to be derived from, 214, 215;
abuses likely to arise from tolls
becoming a source of revenue,
215, 216; high roads in France
under the direction of the
executive power, 216, 219; and
in China, 217; always better
maintained by a local or pro
vincial revenue, 218, 219; and
joint-stock companies, 243; how
to meet expenses of, 297-299
(see also under Education)
Ramuzzini, his treatise on Dis
eases of Artificers, i. 73
Reformation, The, ii. 287 ff; Luther
and the Church of England, 289-
291 ; Calvin, 290; Church of Scot
land, 291, 292; Protestant
Churches of Switzerland, 295,
296
Registration, duties on, ii. 342, 343;
on whom they fall, 344; registra
tion on immovable property,
345
Rel
, different sects of ii. 270,
271; its connection with politics,
273, 274; toll-ration induced by
the multiplying of sects, 274,
275; morals of the poor and the
rich, 275-277; regularity of moral
in the smaller sects, 277; State
remedies for sectarian extrava
gances, 277, 278; the sovereign
and an established church, 278-
280
Rent, what constitutes it, i. 44; its
value indirectly measured by
labour, 44; one of the component
parts of price, 44 ; often con
founded with wages, 47; contri
butes largely to the value of com
modities, 48; less affected than
wages and profits by fluctuations
in the market, 52; aftected by
price of provisions, 75 (see Land
and House and Taxes)
Revenue, the three original sources
of, i. 46; increase of, increases the
demand for workers, 61; gross
and net, 251 ; how justly to com
pute gross and net, 254; in what
it consists, 254-256; unproduc
tive labour maintained by, 297;
proportion between, and capital,
regulates proportion between in
dustry and idleness, 301 ; that of
all the inhabitants of a country j
is in proportion to the value of its
annual produce, 327; annual
revenue of a society is equal to
the exchangeable value of the
whole annual produce of its in
dustry, 400; of the customs,
injured by taxes restraining im
portation 416; of China and
Egypt, ii. 176, 177; of the
Emperor of China, 217, 218; of
the sovereigns of F.urope, 218;
public, in what the funds of con
sist, 299-301; of the Canton of
Berne, 301 ; of Hamburg, 299,
301; of Pennsylvania, 301, 302;
land as a source of, for the main
tenance of the State, 302-305 ;
ordinary, of Great Britain 303,
304; revenue from Crown lands,
305, 306; sources of private
revenue, 306 ; part of, arising from
stock, not directly taxable, 329;
drawn from duties of customs,
364; frequently diminished by
high taxation, 364; remedies
against diminution of, and smug
gling, 365 ; from spirituous liquors,
369; from malt tax, 370, 371;
taxes on luxuries take out of the
pocket of the people in propor
tion to what they bring into the
public treasury, 377-381 ; laws
of in France, 382, 383; in parts
of Italy, 383 384; revenues of
France and Great Britain com
pared, 387; public, mortgaged,
394, 395; mortgage on taxes,
395-397; burden on, arising from
these methods, 397; money
borrowed upon annuities, 398-
400; misapplication of Sinking
Fund, 403; raised from produce
of free or unmortgaged taxes
hinders further accumulation of
capital, 407, 408; two original
sources of, 409, 410; liberation of
public, always brought about by
a bankruptcy, 412; impossibility
of liberating public, of Great
Britain, 415, 416; possible means
of augmentation of, 416; contri
bution of colonies to, 416, 427;
of acquisition of East India Com
pany to, 428; consideration of
further means for augmenting,
429, 430
Rice, its price compared with that
of sugar, i. 142, 143; surplus of
profit obtained from its cultiva-
45°
The Wealth of Nations
tion. 145 ; reason why rent of rice-
fields cannot regulate that of
other land, 145; abundance of
food in countries where grown,
187
Rome, money first coined in, i. 21,
23; Roman As or Pondo, 23, 24;
copper the measure of value in,
34; usury in, 84; law concerning
land in, ii. 55; education in, 258-
261, 267, 268; men of letters in,
generally teachers, 294; the Vi-
cesima Hereditatum in, 340;
bankruptcy and degradation of
coinage in, 415; laws for abolish
ing debts in, 414
Royal African Company, ii. 229, 230
Rum, trade in, ii. 76
Sailors, pay of, i. 98
Salt, tax on, ii. 355
Scotland, wages in, i. 68, 80, 98 ;
rate of interest in, 80; the Cotters
of, 105 ; stocking knitting in, 106;
and spinning, 106; term of ap
prenticeship in, 109, no; no diffi
culty of settlement in, 128; non-
assize of bread in, 129, 130;
cheapness of butchers' meat in
at one time, 135; high rent of
enclosed lands in, 137; the oaten
bread eaten in, 146; timber in,
148, 149; coal mines in, how
worked, 151; rent of lead mines
in, i .54; conversion price and
market price of commodities in,
166; price of corn in, 173; and
of labour, 173, 174 ; dairy work in,
208; fall of the price of wool in,
216; effects of the erection of new
banking companies in, 261, 262;
cash accounts granted by the
banks in, 263; advantage of to
Scotch merchants, 264, 265;
effect on the Scotch banks of
issuing too large a quantity of
paper money, 267-269; their
cautious advance of money, 270-
272; mistaken efforts of bank in,
to relieve existing distress, 279-
282; paper currency in, 287, 288;
optional clause inserted into the
notes of the banking companies
in, 290; steel-bow tenants in,
347; Yeomanry in, 348, 349; rent
of land in at one time, 364 ; parish
schools in, ii. 266, 267; church of,
291, 292; revenue of, 295
Settlement, difficulty in obtaining
by the poor man, and poor laws
concerning, i. 123-128
Silver, see Gold and Silver
Sinking Fund, The, ii. 398; mis
application of, 403
Slavery, in ancient Europe and in
the West Indian Colonies, i. 344;
in later times in Europe, 345
Slaves, work done by, not so cheap
as that performed by freemen, i.
72, 345, 346; their work in the
sugar colonies, 84, 346; their con
dition better under an arbitrary
than a free government, 84, 85 ;
set free by Quakers, 345 ; Bill for
their emancipation, 347
Smuggling, ii. 362, 364, 363, 379
Soap, tax on, ii. 355
Society, the four causes which give
rise to the superiority of some
men over others, ii. 200, 203; the
beginning of inequality, 203;
two codes of morals in, 275-277
Soldier, pay of in 1614, i. 68; ordin
ary pay of, 97
South Sea Company, ii. 231-233,
396, 398, 399
Sovereign, expenses of (see Army,
Justice, Public Works, etc.) ; and
the church, ii. 278 ff.
Spain, its annual importation of
precious metals, i. 190, 191;
foreign commerce in, 372 ; effect
of the tax imposed by, on gold
and silver, ii. 12-14; its colonies,
59—62, 65, 66; its mistaken
colonial policy, 72, 74; absolute
government established in its
colonies, 83; effect of the mo
nopoly of colonial trade on, 106;
the Alcavala of, 381; public
debts, 411
Stamp-duties, ii. 342, 343; on whom
they fall, 344 ; on cards, dice, and
newspapers, 345 ; on licences,
345
Statute of Labourers, The, i. 162
Statute of Provisors, ii. 286
Steel-bow tenants, i. 347
Stock, increase in, increases pro
ductive power of labour, i. 77,
78; increase of, raises wages and
lowers profits, 78 (see Profits) ;
more required for trading in town
than in country, 80; less required
in Scotland than in England, 80;
great stock with small profits
increases faster than small stock
with great profits, 83; connec-
Index
45
tion of its increase with industry,
83; effect of acquisition of new
territory or new branch of trade
on, 83, 84; diminution of, lowers
wages and raises profits, 84; its
free circulation less affected by
corporation laws, than that of
labour, 123; accumulation of
necessary previous to the divi
sion of labour, 241, 242; dis
tinguished into two parts, 243;
three portions into which divided,
245; that required for immediate
consumption, yielding no revenue,
245, 246; fixed capital, consisting
of four articles, 246, 247; and
circulating capital, composed of
four parts, 247, 248; stock em
ployed for present enjoyment or
future profit, 249; conversion of
dead into active, 285, 286; part
used for maintaining productive,
part unproductive, labour, 296-
298; proportion between parts
so employed in rich and poor
countries, 298, 290; quantity lent
at interest — how regulated, 314 ;
as quantity of, to be lent at
interest increases, the interrst
diminishes, 316; profit of, di
minishes with competition of j
capitals, 316; derangement of
the natural distribution of, by
monopoly, ii. 124-129; revenue
arising from, divides itself into
two parts, 329; part of the profit
not directly taxable, 329; injury
to rent and labour by taxation of,
330, 331; land tax, how it deals
with, 331, 332; tax upon revenue
of, in Hamburg, 332, 334; tattle,
tax on profits of, 335, 336; diffe
rent effects of tax on profits of,
in trade and agriculture, 337, 338;
wh«-n interest affected by tax on
profits of, 339
Succession, natural law of, i. 341;
succeeded by law of primo
geniture, 342
Sugar, high price sold at in West
Indies compared to that given
in Cochin China, i. 142, 143; more
profitable than tobacco, 143,
144; monopoly of England in,
and " drawbacks " allowed on,
ii. 2; bounty on, 12, 23; early
restrictions on its exportation
removed, 76; sugar colonies of
England and France, 83-83
Sumptuary laws, I. 227
Swedes, their colonisation of New
Jersey, ii. 68
Switzerland, taxation in, ii. 332,
334
Talents, natural, less difference in,
than we are aware or i. 14
Tallage, as levied in England at <1
France, i. 349, 350 (see Taille)
Taille, i. 349, 350; most important
tax on the profits of stock, ii
335, 336; amount of, as levied
in France, 336; effect of, on agri
culture, 337, 338, 347
Taxes, railage, i. 349, 350; passage,
pontage, lastage and stallage,
352, 353 (see also under Trade
and Colonies); maxims with
regard to, in general, ii. 307-309;
on the rent of land, assessment of,
in England, 309; constancy of its
valuation, 310, 311; variation of,
with variation of rent, com
mended by some economists,
311, 312; land tax in Venetian
territory, 312 ; system of adminis
tration for the prevention of un
certainty, and moderating of ex
pense, ^ 12-3 14; objection t->
a variable land-tax, 314; how
to obviate the difficulty, 314,
315; land-tax, how assessed
in Pru^ia, 316 ; in Silesia,
316, 317; in Sardinia, 317;
assessment according to general
valuation is bound to become
unequal, 317; how this is
remedied in the generality
of Montauban, 317, 318; tythe,
tax levied on the produce of
land. 318, 319; in China and
Bengal, 319; levied in money
or in kind, 320; valuation of,
320, 321; modus paid in lieu
of tythe, 321; on house rent
and ground rent, 321-326; valua
tion of, in great Britain 327;
house tax in Holland 327; hearth
tax, why odious to the people,
327; house tax regulated accord
ing to number of windows, 327,
328; the window tax, 328; objec
tion to taxes of this kind, 328;
effect of window tax on rents,
328; revenue arising from stock,
part not directly taxable, 329;
why interest not so pr<'p<T a
subject for, as land rent, 330, 331 ;
452
The Wealth of Nations
tax on stock in Hamburg, 332 ; on
revenue and exports in Switzer
land, 332, 333, 334; exceptional
tax on capital levied in Holland,
333, 334J on the profits of par
ticular employments, 334, 335;
the taille in France, 335, 336; ef
fect on trade and agriculture of
the taxing of profits, 337, 338;
poll-taxes, 338, 339, 349, 350;
on servants, in Holland, 339; the
Vingtilme in France, 339; tax
on transference of property, 340-
342 ; stamp duties, and duties on
registration, 342, 343; on whom
the various taxes fall, 343, 344;
registration on immovable pro
perty, 345; taxes on wages, 346—
349; capitation, 349~35i; on
necessaries and luxuries, 351-355 ;
on whom these taxes fall heaviest,
354, 355, 367-369; principal
taxes in Great Britain on the
necessaries of life, 355, 356; in
Holland, 357; in Italy, 357; on
consumable commodities, 357;
coach and plate tax, 357, 358 ; Sir
MatthewDecker's scheme of taxa
tion, 358, 359 ; excise and customs
duties, 359; antiquity of customs
duties, 359, 360; three branches
of, 360; regulations concerning
import and export duties in
author's time, 361-364; revenue
diminished rather than increased
by high taxation, 364; lowering
of, a remedy for diminution of
revenue, and for smuggling, 365 ;
suggestion for improvements in
excise laws, 365, 366; Sir Robert
Walpole's scheme concerning,
367; excise on spirituous liquors
the most productive, 368, 369;
on what class and on what com
modities taxes should justly fall,
369; excise on spirituous liquors,
368, 369; malt tax, 370-375;
effect of a tax on a monopoly
price, 374; others besides customs
and excise, affecting the price of
goods, 375; transit duties, 376;
in what way taxes on luxuries
take out of the pocket of the
people, 377-381; the Alcavala of
Spain, 381 ; on value of contracts
in Naples, 381, 382 ; system of, in
Great Britain, leaves its interior
commerce free, 382 ; of the
farming of, 384-386; the French
and British system of, compared,
387; those which bear hardest on
manufactures, 388; loans upon
anticipation of, 395 ; prolongation
of, 305, 396; rendered per
petual to form the General Fund,
397; in time of war, 402, 403;
possibility of regulating, so as to
augment the public revenue, 416;
consideration as to how far the
the British system of taxation
might be applicable to all the
different provinces of the empire,
416-421
Teachers, poorly rewarded, i. 120,
121 ; their stipends in olden
times in Greece, 121, 122
Timber, rent from, i. 148, 149, 151,
152
Tin mines in Cornwall, tax on, and
rent, i. 154, 155; encouragement
given to discovery and working
of, 155, 156
Tobacco, cultivation of, prohibited
in Europe, i. 143; not so pn fit
able as sugar, 143, 144; methods
adopted to keep up the price, 144 ;
purchase and exportation of,
33°, 333, 334; England's mo
nopoly of, and " drawbacks "
allowed on. ii. 2
Tolls, see Public Works
Tonnage and Poundage, ii. 360, 361
Town, inland and foreign trade of,
i. 113; industry carried on in,
more advantageous than that
carried on in the country,ii3,ii4,
116
Towns allowed to farm their own
revenues, i. 353, 354; privileges
granted to, 355 ; magistrates and
town council first instituted in
France, 356; free, of Ger
many, 356; of Italy and Switzer
land, 356; militia of, in former
times, 356; not entirely inde
pendent in England, and France,
357; their increased wealth a
benefit to their country, 362, 363 ;
commerce and manufacture of,
the cause of improvement and
cultivation of the country, 366-
370
Trade between town and country,
112, 113; regulation of price de
pendent on, 113; corporations
not necessary for its better govern
ment, 117; capital employed in
wholesale and retail, 325; com-
Index
453
parative advantage of capital
employed in home, foreign, or
carrying, 329-333; carrying, the
eftect not the cause of tiational
wraith, 334; the limits of
home trade 334-335 ; recipro
cal benefit or, between town and
country, 336-339; foreign com
merce dependent on agriculture,
361, 362; the extravagant hospi
tality before the extension of
commerce, 363, 364; change from
the feudal system wrought by com
merce, 366, 367; effect of foreign
commerce on the expenditure of
large proprietors, 366-369; mu
tual benefits of foreign trade, 392 ;
restraints on importation, bow
far beneficial to the general in
dustry of the society, 397 ff; the
monopoly of home markets given
to the produce of domestic in
dustry is either a hurtful or use-
lessregulation, 401-403; monopoly
of home markets more beneficial
to merchants than gra/iers and
farmers, 40^-406; cases in which
r'-straint on importation bene
ficial, 406 ; Act of Navigation, 407,
408; if a tax laid on a domestic
industry, an equal tax should be
laid on" the like foreign product,
408, 409; taxes on the necessar
ies of life, how far they raise the
price of labour, and other com
modities, 409, 410; considera
tion of Colbert's policy, 411;
mutual oppression of each other's
industry by France and England,
411; how far it is proper to restore
a free trade that has been inter
rupted, 412-414; opposition to
free trade, 414, 4r5; taxes im
posed to prevent or diminish im
portation injurious to the revenue
of the customs, 416; on the
question of free trade between
France and England, 416-418;
the two criterions generally ap
pealed to, in order to determine
which of two countries exports
to the greatest value, 418; the
course of exchange, 4 r 8-422; on
the balance of trade, 431 ff;
wealth of a neighbouring nation
advantageous to, 437; " draw
backs " encouragements to ex
portation, ii i, 2; not allowed on
certain goods, 2, 3; amount of
allowed upon wines, 3, 4; pro
fits of to the carrying trade, and
to the customs, 5; only justi
fied under certain conditions,
5, 6; bounties, not advantageous
to the trade of a country, 7;
bounty on the exportation of
corn, 7-10, 14-16, 40-42 ; tends
to raise the money price of,
8; taxes imposed on the people
by bounties, 9, 10; further
considerations on the bounty on
corn, 14-16; general objections
to bounties on exportation,
16, 17; bounties upon production
more encouraging to industry,
17, 18; bounties granted to her
ring and whale fisheries, 18-22;
and to other commodities, 22,
23; colonial, 73 ff; effect of
monopoly of, 93-97; exemption
from duties on certain imported
commodities, 138; grant of
successive bounties, 140-142;
prohibitions on exportation of
wool, 142-146; on exportation
of other commodities, 149-153;
on coals, 153: burden on honv-
consumer entailed by thes"
restraints, 155, 156; Colbert'^
system, r57, 158; advantage-
of free trade, 164-166; reverse
of the opposite system, 166,
167; trade in China, Egypt, In-
dostan, and Greece, 173-179;
imposition of restraints on, dis
couraging to agriculture, 179,
180; and a drawback to the
wealth of society, 180; effect on
of taxation of profits of stock,
337, 338; excise and customs
duties, 359 ff ; exportation and
importation, regulations con
cerning, in the author's time,
361-364
Treaties of commerce, advantages
and disadvantages of, ii. 43, 44;
between England and Portugal.
44
Tumbrel and Pillory, Statute of, i
K>7
Turkey Company, The, ii. 223, 224
Universities, see Education
Usury, in Bengal and Home, i. 84
Value, of a commodity, labour the
real measure of, i. 26, 27, 29;
money price of goods, 32, 33, 41
454
The Wealth of Nations
does not as a rule depend only on
labour in civilized countries, 48;
of mines, dependent on their
relative fertility, 158; of estates
above ground on their absolute
fertility, 158, 159; respective
values of produce affording rent
regularly and irregularly, 160.
161 ; proportion of that of capital
to that of interest, 317
"Value in use," and "Value in ex
change," i. 25
Venetians, their commerce in spices,
"\56, 57
Venice, bank of, ii. 299; land Uix
in Venetian territory, 312
Venison, price of, i. 205
Vicesima Hereditatum, ii. 340
Villanage, tenure of, i. 346, 347
Vineyard, profit of, i. 140, 141; as
compared with rent and profit of
corn and pasture. 141, 142
Virginia and Maryland, cultivation
of tobacco in, i. 143, 144
Wages.regulated by different princi
ples to profits, i. 43; often con
founded with profits, 47 ; and with
rent, 47; affected by fluctuations
in the market, 52; never sink
below their natural rate for a
great length of time, 55; ordinary-
rate of, on what it depends, 50;
highest in those countries which
are growing rich the fastest, 62;
higher in North America than in
England, 62 ; not high in a coun
try where wealth is stationary,63 ;
rate of, in Great Britain, 65, 66;
usual day wage in Scotland, in the
I7th century, 68; its rise in parts
since, 68 ; reason of the rise of, in
cheap years, 74; increase in, in
creases price of commodities, 77;
increase of stock tends to raise,
78; have been continually rising
since Henry VIII's time, 8p;
generally higher in town than in
the country, 80; lower in Scot
land than England, 80; and in
France than England, 81; in
Holland, 81; in North America
and West Indian Colonies, 82 ; do
not sink with profits of stock, 83;
lowered with diminution of stock,
84; as affected by the wealth and
population of a country, 84, 85,
130; less affected by high profits
than the price of work, 87, 88;
causes of their variation in differ
ent trades, 89; of skilled labour
and common labour, 90, 91 ; vary
with constancy or inconstancy o'f
employment, 92, 93; according to
the trust reposed in the workmen,
93 ; according to the probability
or improbability of success, 94;
in new and old trades, 103; wages
low for labour that is not the sole
employment of labour< r, 105;
106 ; reduced by competition,! 12 ;
increased in the country by
lowering of profit in the town, 116;
ancient method of rating, 12'^:
Act passed for regulation of, 129:
one of the three parts into which
the price of the annual produce
divides itself, 230; raised by the
competition of capitals, 316; how
affected by monopoly, ii. 109;
taxes on, effect of on rent and
price of manufactured goods,
347; tax on, in France, 347,
348; in Bohemia, 348; regulated
by the price of necessities, 352;
unaffected by tax on luxuries,
353
Walpole, Sir Robert, his excise
scheme, ii. 367
War, how its cost is defrayed, i.
387-390 (see Army)
Wealth, consists in power of pur
chase, i. 27; its continual in
crease occasions a rise in wages,
62 ; increase or decline of, its
effect on profits and wages, 78;
advance of, since Henry VIII's
time, 79, 80; precious metals and
stones add little to, 158; general
ideas concerning national, 219;
value of gold and silver no proof
of wealth or poverty of a nation,
219, 220; price of goods in pro
portion to corn, an indication of,
221; land constitutes the chief
wealth of every country, 223; in
crease in wealth of society tends
to raise real rent of land, 229;
increase of, in England, 307-309 ;
some modes of expense more
favourable than others to its in
crease, 310-312; capital used
in agriculture most advantageous
to, 324, 325; that which arises
from agriculture more durable
than that arising from commerce,
373, 374; popular notion that
wealth consists in money, 375-
Index
455
395 ; restraints on trade a draw- I
back to, ii. 180
West Indies, wages, interest and
profits of stock in, i. 83; price of
sugar in, 142, 143; first discovery
of by Columbus, ii. 57, 58 ; animal
and vegetable food in, 58, 59;
gold and silver in, 59, 60; poll-
tax in, 338, 339
Whale fishery, bounty granted to,
ii. 18-22; in New England, 75,
76
Wheat, average price in 1350, i- 161 ;
from beginning of iGth century
to 1570, 162-164; in 1512, 164;
in 1463, 164; in 1554 and 155s.
164, 165; mistakes in estimating
the prices of com in ancient times, I
166-169; Bishop Fleet wood and j
Dupre de St Maur on, 168, 169;
a more accurate measure of value
than other commodities, 171;
value of gold and silver dependent
on quantity of which they can
buy, 171, 172; dear in towns, and
in certain countries, 1 74 ; its value
in proportion to that of silver
(second period), 1570-1640, 175, |
176 (third period) 1637-1700, j
176 ff; effects of civil war
on price, 176, 177; bounty upon j
the exportation of, 177-182; i
price of in old Rome, 199; con- j
tract price in England, before
the years of scarcity, 200; price
in Henry VII's and Edward IVs
time, 225, 226; tables showing
prices of, from 1202 to 1750,
232-240
Wholesale and retail trade, respec
tive profits of, L 101, 102
Wines, imposts on, and " draw-
backs," allowed upon, ii. 3, 4; im
portation of, into the colonies 4
Wool, extensive market for, how
price affected by, i. 210, 211 ; fall
in price of, in England, 212; its
causes, 212, 213; prohibition of
exportation of, 215; fall of price
in Scotland, owing to the Union,
216; efficacy of human industry
in multiplying this produce is
uncertain, 216; severe penalties
against exportation of, ii. 143-146 ;
effect of these regulations on
quantity and quality, 146-148;
ancient customs duties on,
360; exportation of prohibited,
362
Woollen manufacture, changes in
price of coarse and fine since
ancient times, i. 227, 228
Workmen, comparison of their
work in cheap, and dear years, i.
74, 75; their respective wages in
London and Edinburgh, 98; ex
clusive privileges of, in any trade
tend to inferiority of work, 117,
; [8
Yeomanry, their tenure in Europe,
i- 347. 34^1 status in England,
348; action of ejectment on be
half of, 348; law securing long
leases to, 348; shorter leases
granted to in l;rancc,349 ; services
they were bound to perform,
349; subjected to public taxes,
349, 35°; general discourage
ments to, 350, 351; benefit less
from the monopoly of home
markets than merchants, 403
Yorkshire, paper currency in, i.
367, .zoi
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