fm
i
.-aiiMH^
ISAAC SMITH,
^ BALTIMORE.
1
/./y. -y.
#*^
^i m ^^toio$i(^i ^
PRINCETON, N. J. ^
%>
Presented byV/OYvTZS . &C <7\ V-\d O VOX-A C^TX .
Ly
6"
■ ' vA
Division H.bi61
.564Z
v: I
Sccdon
^-^
•eat
/'/^/^■y^t C y ^^ij^^'^--'^'^'
A N
INQUIRY
INTO THE
NATURE AND CAUSES
OF THE
WEALTH OF NATIONS.
aBaawwwimi iii .'iii.i^Wii»i|iii..iiinfWfiinpr|wiTigm«tmillHJmp
b#
i
A N
I N Q^ U I R Y
INTO THE
NATURE AND CAUSES
OF THE
WEALTH OF NATIONS.
B Y
I •
ADAM SMITH, L. L. D.
AND F. R. S. OF LONDON AND EDINBURGH :
ONE OF THE COMMISSIONERS OF HIS MAJESTY's CUSTOMS
IN SCOTLAND;
AND FORMERLY PROFESSOR OF MORAL PHILOSOPHY IN THE
UNIVERSITY OF GLASGOW.
THE FIFTH EDITION, WITH ADDITIONS.
IN TWO VOLUMES.
V O L. I.
*«:i— WBa— ■^MMWWiliw^liini n<f»»M^MMB— III ■Ill I l■^ll^.■n^^J^M^.■M]■■^»■^^ll|^llMi^
DUBLIN:
J^rittt^n li WiiXiitiVX J^orter,
For G. Burnet, L. White, W. Wilson, P. Byrne,
W. M*Kenzie, J. Moore, and W. Jones.
M.BCC.IiCIH.
ADVERTISEMENT.
THE firft Edition of the following Work was
printed in the end of the year 1775, and in the be-
ginning of the year 1776. Through the greater
part of the Book, therefore, whenever the prefent
ftate of things is mentioned, it is to be underftood
of the flate they were in, either about that time,
or at fome earlier period, during the time I was
employed in writing the Book. To this fifth
Edition, however, I have made feveral additions,
particularly to the chapter upon Drawbacks, and
to that upon Bounties j likewife a new chapter en-
titled. The Condufton of the Mercantile Syjiem ;
and a new article to the chapter upon the expences
of the fovereign. In all thefe additions, the pre-
fent fate of thiiigs means always the flate in which
they were during the year 1783 and the beginning
of the year 1784.
O N T E N T S
TO THE
FIRST VOLUMEo
Introduction and Plan of the Work Page I
BOOK I.
Of the Caufes of Improvement in the
Produftive Powers of Labour, and of
the Order according to which its Pro-
duce is naturally diftributed among
the different Ranks of the People
CHAP I.
Of the Div'ifon of Labour — —
CHAP. II.
ibid.
Of the Principle ivhich gives Occafion to the Divi-
fion of Labour • — • — ^4
CHAP.
yili CONTENTS.
CHAP. III.
^hat the Div'i/io?i of Labour is limited l^ the Extent
of the Market — — Page i8
CHAP. IV.
Of the Origin and life of Money — — 23
CHAP. V.
Of the real and nominal Price of Commodities^ or
of their Price in Labour ^^ and their Price in
Money — — — 30
CHAP. VI.
Of the component Parts of the Price of Commodities 47
CHAP. VII.
Of the natural and market Price of Commodities 55;
CHAP. VIII.
Of the IVages of Labour — — ^^
CHAP. IX.
Of the Profits of Stock - _ "-89
CHAP. X.
Of Wages and Profit in the different Employments of
Labour and Stock — — 100
Part
CONTENTS.
IS
Part lil. Inequalities ar'ifing from the Nature of the
Employments the mf elves — — Page ici
Fart 2d. Liequalities occafioned by the Policy of
Europe — — — 121
CHAP. XL
Of the Rent of Land — — — 147
Part ift. Of the Produce of Land luhlch always af-
fords Refit — — — I ro
Fart 2d. Of the Produce of Land nvhlch fomeiinies
doesy and fometimes does not, afford Rent — 166
Fart 3d. Of the Variations in Proportion hdvjcen
the refpecllve Values of that Sort of Produce luhlch
ahvays affords Renty and of that 'which fometimes
does, and fometimes does ?ioty afford Rent — 180
DlgreffJofi coftcerning the Variations In the Value of
Silver during the Courfe of the four laft Cen-
turies,
Flrft Period — — — -— l%^
Second Period
Flrjl Sort
197
^hird Period — -~- — — 198
Variations In the Proportion between the refpeElivs
Values of Gold and Silver — — 2 1 6
Grounds of the Sufpldon that the Value of Silver fill
continues to decreafe -— — — 2 2 1
Different EffeRs of the Progrefs cf Lnprovement upon
the real Price cf three different Sorts of rude Pro^
2 22
223
Second
X CONTENTS.
Sc\-ond Sort _ — — Page 224
^ bird Sort r- — — — 234
Concliijion of the D'lgrejfion concernwg the Variations
in the Value of Silver — ' — -— 244
Jp.ffccli of the Progref of hiiprovemeut upon the real
Frlce of ManufiSlures • — — — - 250
Conclufton of the Chapter • — -^ — 255
BOO K
CONTENTS. xi
BOOK II.
Of the Naturcj Accumulation, and Employ-
ment of Stock.
Introduction •— — -^ Page 269
G H A P. I.
Of the Divifton of Stoch ■— — — 272
C H A P. II.
Of Mojtey confidered as a particular Branch of the
general Stock of the Society, or of the Expence of
maintainwg the National Capital — — 281
CHAP. IIL
Of the Accumulation of Capital y or of produBive and
unproductive Labour — — — 329
CHAP. IV.
Of Stod lent at Interefl — — — 349
CHAP. V.
Of the different Employment of Capitals — — 35S
BOOK
xii CONTENTS.
BOOK III.
Of the different Progrefs of Opulence In
different Nations.
C H A P. I.
Of the natural Progreff of Opulence — Page 375
CHAP. II.
Of the Djfcouragement of Agriculture in the ancient
State of Europe after the Fall of the Roman Empire 381
CHAP. III.
Of the Rife and Progrefs of Cities and Towns j, after
the Fall of the Roman Empire — — 39^
CHAP. IV.
H01U the Commerce of the Towns contributed to the
Improvement of the Country *— -«- 405
BOOK
CONTENTS. 3tIU
BOOK IV.
Of Syftems of political Oeconomy.
Introduction -^ — Page 419
CHAP. L
0/ the Principle of the commercial, or mercantile
Syjlem — — — ■— 420
CHAP. IL
Of Re/fraints upon the Importation from foreign Cowj"
tries of fiich Goods as can be produced at Home 444
CHAP. IIL
Of the extraordinary Rejlraints upon the Importation of
Goods of almof all Kinds, from thofe Countries luith
nvhich the Balance is fuppofed to be dijadvantageous 465
Part I. Of the XJnreafonablenefs of thofe Reflraints
even upon the Principles of the Commercial SyHem ibid.
Digreffion concerning Banks of Depofit, particularly co7i-
cerning that of Amu.Qrd'a.m — — 472
Part II. Of the XJnreafonablenefs of thofe extraordi^
nary Rejlraints upon other Principles — — 482
CHAP. IV.
Of Draiuhacks — — — ^ 493
A N
1 N Q^ U I R Y
INTO THE
NATURE AND CAUSES
OF THE
WEALTH OF NATIONS,
INTRODUCTION AND PLAN OF THE WORK.
To
H E annual labour of every nation Is the fund which
originally fupplies it with all the neceflaries and convenien-
cies of life which it annually confumes, and which confifh
always either in the immediate produce of that labour, or in
what is purchafed with that produce from other nations.
According therefore, as this produce, or what is pur-
chafed with it, bears a greater or fmaller proportion to the
number of thofe who are to confume it, the nation will be
better or worfe fupplied with all the neceflaries and conveni-
encies for which it has occafion.
But this proportion muft in every nation be regulated by-
two different circumftances ; firft, by the fkill, dexterity,
and judgment with which its labour is generally applied ;
and, fecondly, by the proportion between the number of
thofe who are employed in ufeful labour, and that of thofe
who are not fo employed. Whatever be the foil, climate, or
Vol. I. B extent
2 THE NATURE AKD CAUSES OF
extent of territory of any particular nation, the abundance
or fcantinefs of its annual fupply muft, in that particular
fituatlon, depend upon thofe two circumftances.
'I'he abundance or fcantinefs of this fupply too feems tc--
depend more upon the former of thofe two circumftances
than upon the latter. Among the favage nations of hunters
and filliers, every individual who is able to work, is more or
lefs employed in ufeful labour, and endeavours to provide, as
well as he can, the necelTaries and conveniencies of life, for
himfelfj or fuch of his family or tribe as are either too old,
or too young, or too infirm, to go a hunting and fifhing.
Such nations, however, are fo miferably poor, that, from
mere want, they are frequently reduced, or, at leaft, think
themfelves reduced, to the neceffity fometimes of direftly
deftroying, and fometimes of abandoning their infants, their
old people, and thofe afflicled with lingering difeafes, to
perifli with hunger, or to' be devoured by wild beafts.
Among civilized and thriving nations, on the contrary,
though a great number of people do not labour at all, many
of whom confunie the produce of ten times, frequently of a
hundred times more labour than the greater part of thofe
who workj yet the produce of the whole labour of the
lociety is fo great, that all are often abundantly fupplied, and
a workman, even of thg^ loweft and pooreft order, if he is
frugal and induftrious, may enjoy a greater fhare of the ne-
celTaries and conveniencies of life than it is poiTible for any
favage to acquire.
Ti-TC caufcs of this improvement, in the productive pow-
ers of labour, and the order, according to which its pro-
duce is naturally diftributed among the different ranks and
conditions of men in the fociety, make the fubjeCl of the
FirfliBook of this Inquiry.
Whatever be the adual ftate of the fkill, dexterity, and
j'.idgment with which labour is applied in any nation, the
abundance or fcantinefs of itS aunual fupply mud depend,
during the continuance of that ftate, upon the proportion
between the number of thofe who are annually em.ployed in
ufeful labour, and that of thofe who are not fo employed.
The num.ber of ufeful and produ£live labourers, it will here-
after appear, is every where in proportion to the quantity of
-capital ftock which is employed in fetting them to work, and
to
Tut WEALTH OF NATIONS, 3
to the particular way in which it is fo employed. The
Second Book, therefore, treats of the nature of capital
ftock, of the manner in which it is gradually accumulated,
and of the different quantities of labour which it puts into
motion, according to the different ways in which it is em-
ployed.
Nations tolerably well advanced as to fkill, dexterity,
and judgment, in the application of labour, have followed
very^different plans in the general condu61: or direction of
it ; and thofe plans have not all been equally favourable to
the greatnefs of its produce. The policy of fome nations
has given extraordinary encouragement to the induftry of
the country; that of others to the induftry of towns. Scarce
any nation has dealt equally and impartially with every fort
of induftry. Since the downfall of the Roman empire, the
policy of Europe has been more favourable to arts, manu-*
failures, and commerce, the induftry of towns, than to
agriculture, the induftry of the country. The circumftances
which feem to have introduced and eftablifhed this policy are
explained in the Third Book*
Though thofe different plans were, perhaps, firft in-
troduced by the private interefts and prejudices of particular
orders of men, without any regard to, or forefight of, their
confequences upon the general welfare of the fociety ; yet
they have given occafion to very different theories of political
oeconomy ; of which fome magnify the importance of that
induftry which is carried on in towns, others of that which
is carried on in the country. Thofe theories have had a con-
fiderable influence, not only upon the opinions of men of
learning, but upon the public conduft of princes and fove-
reign ftates. I have endeavoured, in the Fourth Book, to
explain, as fully and diftin^lly as I can, thofe different theo-
ries, and the principal effects which they have produced in
different ages and nations.
To explain in what has confifted the revenue of the great
body of the people, or what has been the nature of thofe
funds, which, in different ages and nations, have fupplied
their annual confumption, is the objeft of thefe Four firft
Books. The Fifth and laft Book treats of the revenue of
the fovereign, or commonwealth. In this Book I have en-
deavoured to fhow ; firft, what are the neceffary expences of
B 2 the
4 THE NATURE AND CAUSES OF
the fovereign, or commonwealth j which of thofe expences
ouMit to be defrayed by the general contribution of the
whole fociety J and which of them, by that of fome particu-
lar part only, or of fome particular members of it : fe-
condlv, what are tlie ditlerent methods in which the whole
fociety m^y be made to contribute towards defraying the ex-
pences incumbent on the whole fociety, and what are the
principal advantages and inconveniencies of each of thofe
methods : and, thirdly and laftly, what are the reafons and
caufes which have induced almoft all modern governments
to mortgage fome part of this revenue, or to contrail debts,
and what have been the efFefts of thofe debts upon the
real wealth, the annual produce of the land, and labour of
the fociety.
B O O ]^
THE WEALTH OF NATIONS..
BOOK I.
Of the Caufes of Improvement in the produ^live
Powers of Labour, and of the Order according
to which its Produce is naturally diflributed
among the ditferent Ranks of the People.
CHAP
Of the D'lvifiGn of Labour*
J- H E greateft improvement in the produiftive powers of
labour, and the greater part of the ilvill, dexterity, and
judgment with which it is any where direfted, or applied,
feem to have been the effefts of the diviiion of labour.
The e^efts of the divifion of labour, in the general bu-
fniefs of fociety, will be more eafily underftood, by confi-
dering in what manner it operates in fome particular manu-
fadlures. It is commonly fuppofed to be earned furtheft in
fome very trifling ones j not perhaps that it really is carried
further in them than in others of more importance : but in
thofe trifling manufaftures which are deftined to fupply the
fmall wants of but a fmall number of people, the whole
number of v/orkmen muft neceffarily be fmall ; and thofe
employed in every different branch of the work can often be
coUecfted into the fame workhoufe, and placed at once un-
der the view of the fpe(5f ator. In thofe great manufactures,
on the contrary, v/hich are deftined to fupply the p^reat
wants of the great body of the people, every different branch
of the work employs fo great a number of workmen, that it
is impcffible to coUeft them all into the fame workhoufe.
We can feldom fee m.ore, at one time, than thofe employed
in one fmgle branch. Though in fuch manufa<^l:ures, .there-
fore,
6 THE NATURE AND CAUSES OF
fore, the work may really be divided into a much greater
number of parts, than in thole of a more trifling nature, the
divifion is not near fo obvious, and has accordingly been
much lefs obferved.
To take an example, therefore, from a very trifling ma-
nufa(flure ; but one in vi^hich the divifion of labour has been
verv often taken notice of, the trade of the pin-maker ; a
workman not educated to this bufinefs (which the divifion of
labour has rendered a diflinft trade), nor acquainted with
the ufe of the machinery employed in it (to the invention of
which the fame divifion of labour has probably given occa-
fion), could fcarce, perhaps, with his utmoft induftry, make
one pin in a day, and certainly could not make twenty. But
in the way in which this bufmefs is now carried on, not only
the whole work is a peculiar trade, but it is divided into a
number of branches, of which the greater part are likewife
peculiar trades. One man draws out the wire, another
ilraights it, a third cuts it, a fourth points it, a fifth grinds
it at the top for receiving the head ; to make the head re-
quires two or three diftinft operations ; to put it on, is a
peculiar bufinefs, to whiten the pins is another ; it is even a
trade by itfelf to put them into the paper •, and the important
bufmefs of making a pin is, in this manner, divided into
about eighteen diilincft operations, which, in fome manu-
fafcories, are all performed by diflinft hands, though in
others the fame man will fometimea perform tw^o or three of
them. I have feen a fmall manufaftory of this kind where
ten men only were employed, and where fome of them con-
fequently perform^ed two or three diflin6t operations. But
though they were very poor, and therefore but indifferently
accommodated with the necefTary machinery, they could,
when they exerted themfelves, make among them about
twelve pounds of pins in a day. There are in a pound up-
wards of four thoufand pins of a middnng fize. Thofe ten
perfons, therefore, could make among them up^^'^rds of
forty-eight thoufand pins in a day. Each perfon, therefore,
making a tenth part of forty-eight thoufand pins, might be
confidered as making four thoufand eight hundred pins a
day. But if they had all wrought Separately and indepen-
dently, and without any of them having been educated to
this peculiar bufmefs, they certainly could not each of them
have made twenty, perhaps not one pin in a day ; that is^
certainly^ not the two hundred and fortieth, perhaps not the
four
THE WEALTH OF NATIONS. 7
four tlioufand eight hundreth part of what they are at pre-
sent capable of performing, in confequence of a proper di-
vifion and combination of their different operations^
In every other art and manufadlure, the efFedls of the
divifion of labour are fmiilar to what they are in this very
trifling one ; though, in many of them, the labour can nei-
ther be fo much fubdivided, nor reduced to fo great a fim-
plicity of operation. The divifion of labour, however, fo
far as it can be introduced, occafions, in every art, a propor-
tionable increafe of the producflive powers of labour. Thsp
reparation of different trades and employments from one
another, feems to have taken place, in confequence of this
advantage. This feparation too is generally carried furtheil
inthofe countries which enjoy the higheil degree of induflry
and improvement 5 what is the work of one man in a rude
ftate of fociety, being generally that of feveral in an improv«
cd one. In every improved fociety, the farmer is generally
nothing but a farmer ; the manufacturer, nothing but a
manufaft urer. The labour too which is neceflary to pro-
duce anv one complete manufacture, is almoft always divide-
;ed among a great number of hands. \ How mtmy different
trades are employed in each branch of the linen and woollen
xnanufa61:ures, from the growers of the flax and the Vv-oolj
to the bleachers and fmoothers of the linen, or to the dyers
and dreffers of the cloth \ The nature of agriculture, indeed,
does not admit of fo many fubdivifions of labour, nor of
fo complete a feparation of one budnefs from another,
as manufaftureSo It is impoffible to feparate fo entire-
ly, the bufmefs of the grazier from that of the corn-
farmer, as the trade of the carpenter is commonly fe-
parated from tliat of the fmith. The fpinner is al-
moft always a diftinft perfon from the weaver ; but the
ploughman, the harrov/er, the fower of the feed, and the
reaper of the corn, are often the fame. T'he occafions for
thofe diflFerent forts of labour returning with the different fea-
fons of the year, it is impoffible that one man fliould be con-
ftantly'employed in any one of them. This impofTibility of
making fo complete and entire a feparation of all the different
branches of labour employed in agriculture, is perhaps the
reafon v/hy the improvement of the productive powers of
labour in this art, does not always keep pace with their im-
provement in manufactures. The moft opulent nations,
indeed;, generally excel ail their neighbours in agriculture as
well
8 THE NATURE AND CAUSES OF
well as in manufaflures •, but they are commonly more diftin-
guiflied by their fuperiority in the latter than in ihe former.
Their lands are in general better cultivated, and having more
labour and expence bellowed upon them, produce more in
proportion to the extent and natural fertility of the ground.
But this fuperiority of produce is fcldom much more than in
proportion to the fuperiority of labour and expence. In agri-
culture, the labour of the rich country is net always much
more produftive, than that of the poor; or, at lead, it is never
fo much more productive, as"it com.monly is in manufaftuves.
The corn of the rich country, therefore, will not always, in
the fame degree of gcodnefs, come cheaper to* market than
that of the poor. The corn of Poland, in the fame degree
of goodnefs, is as cheap as that of France, notwitlidanding
the fupenoi opulence and improvement of the latter coun-
try'. The corn of France is, in the corn provinces, fully as
good, and in mofl years nearly about the fame price with the
corn of England, though, in opulence and improvement,
France is perhaps inferior to England. The corn-lands of
England, however, are better cultivated than thofe of France,
and the corn-lands of France are faid to be much better culti-
vated than thofe of Poland. But though the poor country,
notwithfbanding the inferiority of its cultivation, can, in fome
meafure, rival the rich in the cheap nefs and goodnefs of its
corn, it can pretend to no fuch competition in its manufac-
tares; at leafl if thofe manufactures fuit the foil, climate,
a \d fituation of the rich country. The filks of France are
better and cheaper than thofe of England, becaufe the filk
manufafture, at leaft under the prefent high duties upon the
importation of raw filk, does not fo well fuit the climate of
England as that of France. But the hard-v/are and the coarfe
woollens of England are beyond all comparifon fuperior to
thofe of France, and much cheaper too in the fame degree of
goodnefs. In Poland there are faid to be fcarce any m.anu-
faclures of any kind, a few of thofe coarfer houfehold manu-
fa(fl:ures^excepted, without which no country can well fubfift.
This great increafe of the quantity of work, which, in
confequence of the divifion of labour, the fame number of
people are capable of performing, is owing to three different
circumilances ; firfl, to the increafe of dexterity in every par-
ticular workman ; fecondly, to the faving of the time which
is commonly lofl in pafling from one fpecies of work to ano-
ther -, and laftly, to the invention of a great number of
machines
THE WEALTH OF NATIONS. 9
machines which facilitate and abridge labour, and enable
one man to do the work of many.
First, the improvement of the dexterity of the workman
necefiarily increaies the quantity of the work he can perform j
and the diviiion of labour, by reducing every man's bufmcfs
to fome one hmple operation, and by making this operation
the fole employment of his life, necefiarily increafes very
much the dexterity of the workman, A common fmith,
who, though accuitomed to handle the hammer^ has never
been ufed to make nails, if upon fome particular occaiion he
is obhged to attempt it, will fcarce, I am affured, be able to
make above two or three hundred nails in a day, and thofe
too very bad ones. A fmith who has been accuftomed to
make nails, butwhofe fole or principal bufinefs has notbeeii
that of a nailer, can feldom with his utmofc diligence ma|:e
more than eight hundred or a thoufand naiis in^ a day. I
have feen feveral boys under twenty years of age who had
never exercifed any other trade but that of making nails, and
who when they exerted themfelves, could make, each of
them, upv/ards of two thoufand three hundred nails in a day.
The making of a nail, hov/ever, is by no means one of the
fimpleil operations. The fame perfon blovv'-s the bellows,
ftirs or mends the (ire as there is occafion, heats the iron, and
forges every part of the nail : In forging the head too lie is
obliged to change his tools. The dirKerent operations into
which the making of a pin, or of a metal button is ful>di-
vided, are all of them much more fimple, and the dexterity
of the perfon, of v/hofe life it has been the fole bufinefs to
perform them, is ufually much greater. The rapidity with
which fome of the operations of thofe manufactures are per-
formed exceeds what the human hand could, by thofe who
had never feen them, be fuppofcd capable of acquiring.
Secondly, the advantage which is gained by faving the
time commonly loft in palfing from one fort of work to ano-
ther, is much greater than we ihould at firfi; view be apt to
imagine it. It is impofiible to pafs very quickly from one
kind of work to another, that is carried on in a dilFercnt
place, and v/ith quite different tools. A country v/eaver,
who cultivates a fm.all farm, muft lofe a good deal of time in
pafiTmg from his loom to the field, and from the field to his
loom. When the two trades can be -carried on in the fam.e
y/orkhoufe, the lofs of time is no doubt much lefs. It is even
in
lo THE NATURE AND CAUSES OF
in this cafe, however, very confiderable. A man commonly
faunters a Httle in turning his hand from one fort of employ-
ment to another. When he firft begins the new vork he is
feldom very keen and hearty ; his mind, as they fay, does
not go to it, and for fome time he rather trifles than applies
to good purpofe. The habit of fauntering and of indolent
carelcfs application, which is naturally, or rather neceffarily,
acquired by every country workman who is obliged to change
his work and his tools every half hour, and to apply his hand
jn twenty different ways almofl every day of his life, renders
liim almofl always flothful and lazy, and incapable of any vi-
gorous application, even on the moft prefTmg occafions. In-
dependent, therefore, of his deficiency in point of dexterity,
this caufe alone muft always reduce confiderably the quantity
pf work which he is capable of performing.
Thirdly, and laftly, every body muft be fenfible how
much labour is facilitated and abridged by the application of
proper machineryo It is unnecefTary to give any example. I
ihali only obferve, therefore, that the invention of all thofe
machines by which labour is fo much facilitated and abridged,
feems to have been originally owing to the divifion of labour.
Men are much more likely to difcover eafier and readier me-
thods of attaining any objeft, \yhen the whole attention of
their minds is direfted towards that fingle object, than when
it is diiTipated among a great variety of things. But in confe-
quence of the divifion of labour, the whole of every man's at-
tention comes naturally to be directed towards fome one very
fimple obje£l. It is naturally to be expecff ed, therefore, that
fome one or other of thofe who are employed in each particu-
lar branch of labour fhould foon find out eafier and readier
methods of performing their own particular work, wherever
the nature of it admits of fuch improvement, A great part
of the machines made ufe of in thofe manufactures in which
labour is m.oit fubdivided, were originally the inventions of
common workmen, who being each of them employed in
fome very fimple operation, naturally turned their thoughts
towards finding out eafier and readier methods of performing
it. Whoever has been much accuftomed to vifit fuchmanufac-.
tures, m.uft frequently have been fhewn very pretty machines,
which were the inventions of fuch workmen, in order to fa-
cilitate and quicken their own particular part of the work.
In the firft fire-engines, a boy was conftantly employed to
open and fhut alternately the communication between the
boiler
THE WEALTH OF NATIONS. u
boiler and the cylinder, according as the piflon either afcend-
ed or defcended. One of thofe boys, who loved to play with
his companions, obferved that, by tying a firing from the
handle of the valve which opened this communication to ano-
ther part of the machine, the valve would open and fliut
without his afliftance, and leave him at liberty to divert him-
felf with his play-fellows. One of the greatcft improvements
that has been made upon this machine, fince it was firfl: in-
vented, wa^ in this manner the difcovery of a boy who want-
ed to fave his own labour.
All the improvements in machinery, however, have by
110 means been the inventions of thofe who had occafion to
ufe the machines. Many improvements have been made by
theingenuity of the makers of the machines, when to make
them became the bufmefs of a peculiar trade ; and fome by
that of thofe who are called philofophers or men of {pecula-
tion, v/hofe trade it is not to do any thing, but to obferve
jevery thing ; and who, upon that account, are often capable
of combining together the powers of the moft dillant and dif-
fmiilar obje&s. In the progrefs of fociety, philofophy or
fpeculation becomes, like every other employment, the prin-
cipal or fole trade and occupation of a particular clafs of citi-
zens. Like every other employment too, it is fubdivided into
a great number of different branches, each of which affords
occupation to a peculiar tribe or clafs of philofophers; and
this fubdivifion of employment in philofophy, as well as in
every other bufinefsj improves dexterity, and faves time.
Each individual becomes more expert in his own peculiar
branch, more work is done ^upon the whole, and the quan-
tity of fcience is confiderably increafed by it.
It is the great multiplication of the productions of all the
different arts, in confequence of the divifion of labour, which
occafions, in a well-governed fociety, that univerfal opulence
which extends itfelf to the lowefl ranks of the people. Every
workman has a great quantity of his own work to difpofe of
beyond what he himfelf has occafion for ; and every other
workman being exacff ly in the fame fituation, he is enabled
to exchange a great quantity of his own goods for a great
quantity, or, what comes to the: fame thing, for the price of
a great quantity of theirs. He fupplics them abundantly with
what they have occafion for, and they accommodate him as
amply
i^ THE NATURE AND CAUSES OF
smply with what he has occafion for, and a general plenty dif-
fufes itfcif through all the different ranks of the fociety.
Observe the accommodation of the mod common artifi-
cer or day-labourer in a civilized and thriving country, and
you will pLrreive tha. the number of people of whof:^ induf-
trv a part, though but a fmail part, has been employed in
piocuring himthio accommodation exceeds all computation.
The woollen coat, for exarr.p'cj which covers the day-la-
bourer, as coavfe and rough as it may appear, is the produce
of the joint labour of a great multitude of >vorkmen. The
fhtpherd, thefortcrof the wool, the wool-comber or carder,
ihe dfSc, the fcribbler, the fpinner, the weaver, the fuller,
>the (Ireiler, with many others, muft all join their different
arts in order to complete even this homely production. How
many merchants and carriers, befides, mufh have been em-
ployed in tranfporting the m^aterials from fome of thofe work-
men to others who often live in a very diftant part of the coun-
try ! how much commerce and navigation in particular, how
many fliip-builders, failors, fail-makers, rope-makers, mull
have been employed in order to bring together the different
drugs made ufe of by the dyer, which often come from the
remoteft corners of the world ! What a variety of labour too
is neceffary in order to produce the tools of the meaneft of
thofe workmen ! To fay nothing of fuch complicated ma-
chines as the fhip of the failor, the mill of the fuller, or even
the loom of the weaver, let us confider only what a variety
of labour is rcquifite in order to form that very fimple mia-
chine, tiie Ihears with which the fhepherd clips the wool.
The miner, the builder of the furnace for fmelting the ore,
the feller of the timber, the burner of tlie charcoal to be made
ufe of in the fnielting-houfe, the brick-maker, the brick-
layer, the workmen who attend the furnace, the mill-wright,
the forger, the fmith, miuft all of them join their different
arts in order to produce them. Were we to examine, in the
fame manner, all the dilTerent parts of his drefs and houfe-
hold furniture, the coarfe linen ihirt which he wears next his
ftiin, the Ihoes which cover his feet, the bed which he lies
on, and all the different parts which compofe it, the kitchen-
grate at which he prepares his vi(fl:uals, the coals which
he makes ufe of for that purpofe, dug from the bowels of
the earth,~ and brought to him perhaps by a long fea and a
long land carriage, all the other utenfils of his kitchen, all
the furniture of his table, the knives and forks, the earthen
or
THE WEALTH OF NATIONS. 13
or pewter plates upon which he ferves up and divides his
visuals, the different hands employed in preparing his bread
and his beer, the glafs window which lets in the heat and
the light, and keeps out the wind and the rain, with all the
knowledge and art requifite for preparing that beautiful and
happy invention, without which thefe northern parts of the
world could fcarce have afforded a very comfortable habita-
tion, together with the tools of all the different workmen
employed in producing thofe different conveniencies ; if we
examine, I fay, all thefe things, and confider what a variety
of labour is employed about each of them, we fliall be fenfi-
ble that without the affiilance and co-operation of many
thoufands, the very meaneft perfon in a civilized country
could not be provided, even according to what we very
falfely imagine, the eafy and fimple manner in which he is
commonly accommodated. Compared, indeed, with the
more extravagant luxury of the great, his accommodation
mufl no doubt appear extremely fimpie and eafy ; and yet
it may be true, perhaps, that the accommodation of an Euro-
pean prince does not always fo much exceed that of an in-
duftrious and frugal peafant, as the accommiodation of the
latter exceeds that of many an African king, the abfolute
mafter of the lives and liberties of ten thoufand naked fa-
vagese
CHAP.
14 THE NATURE AND CAUSES OF
CHAP. IL
Of the Principle which gives Occaftoji to the Divifton
of Labour,
-L HIS divlfion of labour, from which fo many advan-
tages are derived, is riot originally the efFe6l of any human
wifdom, vv'hich forefees and intends that general opulence to
which it gives occafion^ It is the neceiTary, though very
flow and gradual confequence of a certain propenlity in hu-
man nature which has in view no fuch extenfive utility ; the
propenfity to truck, barter^ and exchange one thing for
another.
Whether this propenfity be one of thofe original prin-
ciples in human nature, of which no further account can be
given \ or whether, as feems more probable, it be the ne-
ceflary confequence of the faculties of reafon and fpeech, it
belongs not to our prefent fubjedt to enquire. It is common
to all men, and to be found in no other race of animals,
which feem to know neither this nor any other fpecies of
contracts. Two greyhounds, in running down the fame
hare, have fometimes the appearance of acTting in fome fort
of concert. Each turns her towards his companion^ or en-
deavours to intercept her when his companion turns her to-
wards himfeif. This, however, is not the efFed: of any
contra<ft, but of the accidental concurrence of their pafTions
in the fame objeft at that particular time. Nobody ever faw
a dog make a fair and deliberate exchange of one bone for
another with another dog. Nobody ever faw one animal by
its gefturesand natural cries fignify to another, this is mine,
that yours ; I am willing to give this for that. When an ani-
mal wants to obtain fomething either of a man or of another
nnimal, it has no other means of perfuafion but to gain the
favour of thofe whofe fervice it requires. A puppy fawns
upon its dam, and a fpaniel endeavours by a thoufand attrac-
tions to engage the attention of its mailer who is at dinner,
when it wants to be fed by him. Man fometim.es ufes the
fame arts with his brethren, and when he has no other means
of
THE WEALTH OF NATIONS. i^
of engaging them to zS: according to his incHnations, endea-
vours, by every fervile and fawning attention, to obtain their
good will. He has not time, however, to do this upon every
occafion. In civilized fociety he (lands at all times in need
of the co-operation and afliftance of great multitudes, while
his whole life is fcarce fufticient to gain the friendihip of a
few perfons. In almofl every other race of animals, each
individual, when it is grown up to maturity, is entirely in-
dependent, and in its natural flate has occafjon for the aiTift-
ance of no other living creature. But man has almoft con-
ftant occafion for the help of his brethren, and it is in vain
for him to expedl it from their benevolence only. He will
be more likely to prevail if he can interell their felf-iove in
his favour, and (liew them that it is for their own advantage
to do for him what he requires of them. Whoever ofi^ers to
another a bargain of any kind, propofes to do this. Give
me that which I want, and you (hall have this which you
want, is the meaning of every fuch offer -, and it is in this
manner that we obtain from one another the far greater part
*.of thofe good oflices whi<:h we (land in need of. It is not
from the benevolence of the butcher, the brewer, or the ba-
ker, that we expecft our dinner, but from their regard to
their own interefl. We addrefs ourfelves, not to their hu-
manity but to their felf-love, and never talk to them of our
own necefTities but of their advantages. Nobody but a beg-
gar chufes to depend chiefly upon the benevolence of his fel«
low-citizens.' Even a beggar does not depend upon it en--
tirely* The charity of well-difpofed people, indeed, fupplies
him with the whole fund of his fubliflence. But though
this principle ultimately provides him with all the necefTaries
of life which he has occafion for, it neither does nor can pro-
vide him with them as he has occafion for them. The greater
part of his occafional wants are fupplied in the fame manner as
thofe of other people, by treaty, by barter, and by purchafe.
With the money which one man gives him he purchafes food«
The old clothes which another beftows upon him he ex-
changes for other old cloaths which fuit him better, or for
lodging, or for food, or for m.oney. Math v/hich he can buy
cither food, cloaths, or lodging, as he has occafion.
As it is by treaty, by barter, and by purchafe, that we ob-
tain from one another the greater part of thofe mutual good
offices which we ftand in need of, fo it is the fame trucking
difpofition which originally gives occafion to the divifion of
labour^.
j6 the nature and CAUSES OF
liibcur. In a tribe of hunters or fhepherds a particular per-
fon makes bows and arroAvs, for example, with more readi-
iiefs and dexterity than any other. He frequently exchanges
them for cattle or for venifon with his companions ; and he
finds at lail that he can in this manner get more cattle and
venifon, than if he himfelf went to the field to catch them.
From a regard to his own intereft, therefore, the making of
bows and arrows grows to be his chief bufmefs, and he be-
comes a fort of armourer. Anottier excels in making the
frames and covers of their little huts or moveable houfes.
Ke is accuftomed to be of ufe in this way to his neighbours,
who reward him in the fame manner with cattle and with
venifon, till at lail he finds it his intereft to dedicate himfelf
entirely to this employment, and to become a fort of houfe-
cai-penter. In the fame m.anner a third becomes a fmith or
a brazier, a fourth a tanner or dreffer of hides or (kins, the
principal part of the cloathing of favages. And thus the cer-
tainty of being able to exchange all that furplus part of the
produce of his own labour, which is over and above his own
confumption, for fuch parts of the produce of other men's
labour as he may have occafion for, encourages every man to
apply himfelf to a particular occupation, and to cultivate and
brinj^ to perfection whatever talent or genius he may polTefs
for that particular fpecies of bufinefs.
The diitercnce of natural talents in different men is, in
reaiity, m.uchlefs than we are aware of-, and the very diffe-
rent genius which appears to diftinguifli men of different pro-
fcffions, wiien grown up to maturity, is not upon mjany oc-
cafions lb much the caufe, as the cffeCl of the divifion of la
bour. The difference between the moft diffunilar charafters,
between a philofopher and a common ftreet-porter, for ex-
r:mple, feems to arife not fo much from nature, as from ha-
bit, cuftom, and education. When they came into the
world, and for the firft fix or eight years of their exiftence,
they were very m.uch alike, and neither their parents nor
pjiy-fellows could perceive any remarkable difference. About
tlvut age or foon after, they come to be employed in very
^iliFerent occupations. The difference of talents comes then
to be taken notice of, and widens by degrees, till at laft the
■vafuty of the philofopher is willing to acknowledge fcarce any
lefcmblance. But without the difpofition to truck, barter,
s>rd exchange, every man muft have procured to himfelf
f,% crv neceil'arv and conveniencv of life which he wanted.
All
THE WEALTH OF NATIONS. 17
All muft have had the fame duties to perform, and the fame
work to do, and there could have been no fuch difference of
employment as could alone give occafion to any great differ-^
ence of talents.
As it this difpofition which forms that difference of ta-
lents, fo remarkable among men of different profefTions, fo
it is this fame difpofition which renders that difference ufeful.
Many tribes of animals acknowledged to be all of the fame
fpecies, derive from nature a much more remarkable diftinc-
tion of genius, than what, antecedent to cuftom and educa-
tion, appears to take place among men. By nature a philo-
fopher is not in genius and difpofition half fo different from
a ftreet porter, as a maftiff is from a greyhound, or a grey-
hound from a fpaniel, or this lafl from a fliepherd's dog.
Thofe different tribes of animals, however, though all of the
fame fpecies, are of fcarce any ufe to one another. The
ftrength of the maftiff is not, in the leaft, fupported either
by the fvviftncfs of the greyhound, or by the fagacity of the
fpaniel, or by the docility of the fhepherd's dog. The effe(£l:s
of thofe different geniufes and talents, for want of the power
or difpofition to barter and exchange, cannot be brought into
a common ftock, and do not in the leaft contribute to the bet-
ter accommodation and conveniency of the fpecies. Each
animal is ftill obliged to fupport and defend itfelf, feparately
and independently, and derives no fort of advantage from that
variety of talents with which nature has diftinguiflied its fel-
lows. Among men on the contrary, the moft diffmiilar ge-
niufes are of ufe to one another; the different produces of
their refpe6live talents, by the general difpofition to truck,
barter and exchange, being brought, as it were, into a com-
mon ftock, where every man may purchafe whatever part of
the produce of other men's talents he has occafion for.
Vol. L G CHAP.
i8 THE NATURE AND CAUSES OF
CHAP III.
TJ?at the Divifwn of Labour is limited by the Extent of the
Market.
X'VS it is the power ot exchanging that gives occafion to
the divifion of labour, fo the extent of this divifion muft al-
ways be Umited by the extent of that power, or, in other
words, by the extent of the market. When the market is
very fmail, no perfon can have any encouragement to dedi-
cate himfelf entirely to one employment, for v/ant of the
power to exchange ail that furplus part of the produce of his
own labour, wdiich is over and above his own confumption,
for fuch parts of the produce of other men's labour as he has
cccafion for.
There are fome forts of induflry, even of the lov.^eft
kind, which can be carried on no where but in a great town.
A porter, for example, can find employment and fubfifience
in no other place. A village is by much too narrow a fphere
for him *, even an ordinary market town is fcarce large enough
to afford him conftant occupation. In the lone houfes and
very fmall villages which are fcattered about in fo defert a
country as the Highlands of Scotland, every farmer muft be
butcher, baker and brewer for his own family. In fuch fitu-
ations we can fcarce expecft to find even a fmith, a carpenter,
or a mafon, within lefs than twenty miles of another of the
fame trade. The fcattered families that live at eight or ten
miles diftance from the neareft of them, muil learn to per--
form themfelves a great number of little pieces of work, for
which, in more populous countries, they would call in the
RiTiftance of thofe workmen. Country workmen are almoft
every where obliged to apply themfelves to all the different
branches of induftry that have fo much affinity to one another
as to be employed about the fame fort of materials. A
country carpenter deals in every fort of work that is made of
''vood : a country fmith in every fort of work that is made of
^rcn. The former is not only a carpenter, but a joiner, a
. cabinet-
THE WEALTH OF NATIONS. 19
cabinet-maker, and even a carver in wood, as well as a wheel"
Wright, a plough-wrlght, a cart and waggon maker. The
employments of the latter are Hill more various. It is im-
poilible there fliould be fuch a trade as even that of a nailer
in the remote and inland parts of the Highlands of Scotland.
Such a workman at the rate of a thoufand nails a day, and
three hundred working days in the year, will make three
hundred thoufand nails in the year. But in fuch a fituation
it would be impoflible to difpofe of one thoufand, that is, of
one day's work in the year.
As by means of water-carriage a more extenfive market is
opened to every fort of induilry than what land-carriage
alone can afford it, fo it is upon the fea-coaft, and along the
banks of navigable rivers, that induftry of every kind natu-
rally begins to fubdivide and improve itfelf, and it is fre-
quently not till a long time after that thofe improvements ex-
tend themfelves to the inland parts of the country. A broad-
wheeled waggon, attended by two men, and drawn by eight
horfes, in about fix weeks time carries and brings back be-
tween London and Edinburgh near four ton weight of goods.
In about the fame time a fhip navigated by fix or eipht men,
and failing between the ports of London andLeith, lYequently
carries and brings back two hundred ton weight of goods.
Six or eight men, therefore, by the help of water-carrian-e,
can carry and bring back in the fame time the fame quantity
of goods betv/een London and Edinburgh, as fifty broad-
wheeled waggons, attended by ^ hundred men, and drawn
by four hundred horfes. Upon two hundred tons of goods,
therefore, carried by the cheapeft land-carriage from London
to Edinburgh, there mufb be charged the maintenance of a
hundred men for three weeks, and both the m.aintenance,
and, what is nearly equal to the maintenance, the wear and
tear of four hun^lred horfes as well as of fifty great waggons.
Whereas, upon the fame quantity of goods carried by vvater,
there is to be charged only the maintenance of Cix or eight
men, and the wear and tear of a fifip of two hundred tons
burden, together with the value of the fuperior rifk, or the
difference of the infurance between land and water-carriage.
Were there no other communication between thofe two
places, therefore, but by land-carriage, as no goods could be
tranfported from the one to the other, except fuch whole
price was very confiderable in proportion to their weight,
they could carrv on but a fmall part of that commerce which
C I at
20 THE NATURE AND CAUSES OF
at prefent fubfifts between them, and confequently could
give but a fmall part of that encouragement which they at
prefent mutually afford to each other's induftry. There
could be little or no commerce of any kind between the dif-
tant parts of the world. What goods could bear the expence
of land-carriage betw-een London and Calcutta ? Or if there
were any fo precious as to be able to fupport this expence,
with what fafety could they be tranfported through the terri-
tories of fo many barbarous nations ? Thofe two cities,
however, at prefent carry on a very confiderable com-
merce with each other, and by mutually affording a market,
give a good deal of encouragement to each other's in-
duftry.
Since fuch, therefore, are the advantages of water-
carriage, it is natural that the firft improvements of art and
induitry fljould be made where this conveniency opens the
whole world for a market to the produce of every fort of
labour, and that they fl-iould always be much later in ex-
tending themfelves into the inland parts of the country. The
inland parts of the country can for a long time have no other
market for the greater part of their goods, but the country
which lies round about them, and feparates them from the
fea-coaft, and the great navigable rivers. The extent of their
market, therefore, muft for a long time be in proportion to
the riches and populoufnefs of that country, and confequently
their improvement muft always be poflerior to the improve-
ment of that country. In our North American colonies
the plantations have conftantly followed either the fea-
coaft or the banks of the navigable rivers, and have fcarce
any where extended themlelves to any confiderable diftance
from both.
The nations that, according to the beft authenticated hif-^
t.ory, appear to have been firft civilized, were thofe that
dwelt round the coaft of the Mediterranean fea. That fea,
by far the greateft inlet that is known in the world, having
no tides, nor confequently any waves except fuch as are
caufed by the wind only, was, by the fmoothnefs of its fur-
face, as well as by the multitude of its iflands, and the proxi-
mity of its neighbouring fhores, extremely favourable to the
infant navigation of the world *, when, from their ignorance
of the compafs, men were afraid to quit the view of the
coaft, and from, the imperfedion of the art of fhip-building,
to
THE WEALTH OF NATIONS. 21
to abandon themfelves to the boifterous waves of the ocean.
To pafs beyond the pillars of Hercules, that is, to fail out
of the Streights of Gibraltar, was, in the antient world,
long confidered as a mod wonderful and dangerous exploit
of navigation. It was late before even the Phenicians and
Carthaginians, the moft fkilful navigators and fliip-builders of
thofe old times, attempted it, and they were for a long time
the only nations that did attempt it.
Of all the countries on the coaft of the Mediterranean fea,
Egypt feems to have been the flrft in which either agriculture
or manufacSlures were cultivated and improved to any con-
fiderable degree. Upper Egypt extends itfelf no where above
a few miles from the Nile, and in lower Egypt that great
river breaks itfelf into many different canals, which, with
the afliftance of a little art, feem to have afforded a commu-
nication by water-carriage, not only between all the great
towns, but between all the confiderable villages, and even
to many farm-houfes in the country ; nearly in the fame
manner as the Rhine and the Maefe do in Holland at prefent.
The extent and eafmefs of this inland navigation was pro-
bably one of the principal caufes of the early improvement
of Egypt.
The improvements in agriculture and manufactures feem
likewife to have been of very great antiquity in the provinces
of Bengal in the Eaft Indies, and in fome of the eailern pro-
vinces of China ; though the great extent of this antiquity is
not authenticated by any hiftories of w^hofe authority we, in
this part of the world, are well afTiired. In Bengal the
Ganges and feveral other great rivers form a great number of
navigable canals in the fame manner as the Nile does in
Egypt. In the Eaftern provinces of China too, feveral
great rivers form, by their different branches, a multitude
of canals, and by communicating with one another afford an
inland navigation much more extenfive than that either of
the Nile or the Ganges, or perhaps than both of them put
together. It is remarkable that neither the antient Egyp-
tians, nor the Indians, nor the Chinefe, encouraged foreign
commerce, but feem all to have derived their great opulence
from this inland navigation.
All the inland parts of Africa, and all that-^rt of Afia
which lies any confiderable way north of the Euxine and
Cafpian
i2 THE NATURE AND CAUSES OF
Cafpian feas, the antient Scythla, the modern Tartary and
Siberia, feem in all ages of the world to have been in the
fame barbarous and uncivilized ftate in which we find them
at prcfent. The fea of Tartary is the frozen ocean which
admits of no navigation, and though fome of the greatelt
rivers in the world run through that country, they are at too
great a diflance from one another to carry commerce and
communication through the greater part of it. There are
in Africa none of thofe great inlets, fuch as the Baltic and
Adriatic feas in Europe, the Mediterranean and Euxine feas
in both Europe and Afia, and the gulphs of Arabia, Perfia,
India, Bengal, and Siam, in Afia, to carry maritime com-
merce into the interior parts of that great continent: and
the great rivers of Africa are at too great a diftance from
one another to give occafion to any confiderable inland navi-
gation. The commerce bcfides which any nation can carry
on by means of a river which does not break itfelf into any
great number of branches or canals, and which runs into
another territory before it reaches tlie fea, can never be very
confiderable; becaufe it is always in the power of the nati-
ons who polTefs that other territory to obftrucl the commu-
nication between the upper country and the fea. The navi-
gation of the Danube is of very little ufe to the different
ilates of Bavaria, Auftria and Hungary, in comparifon of
what it would be if any of them poiTefled the whole of its
courfe till it falls into the Black Sea.
C II A P.
THE WEALTH OF NATIONS. 23
CHAP. IV.
Of the Origin a?jd life of Aloiiey,
W H E N the divifion of labour has been once thoroughly
eftabhihed, it is but a very Imali part of a man's wants which
the produce of his own labour can fupply. He fuppiies the
far greater part of them by exchanging that furplus part of
the produce of his own labour, which is over and above his
own confumption, for fuch parts of the produce of other
men's labour as he has occafion for. Every man thus lives
by exchanging^ or becomes in fome meafure a merchant,
and the fociety itfelf grows to be what is properly a commer-
cial fociety.
But when the divifion of labour firil began to take place,
this povv'cr of exchanging mufl frequently have been very
much clogged and embarrafled in its operations. One man,
we fliall fuppofe, has more of a certain commodity than he
himifeif has occafion for, v/hile another has lefs. The former
confequently Vv-^ould be glad to difpofe of, and the latter to
purchafe a part of his fuperfluity. But if this latter fliould
chance to have nothing that the former Piands in need of, no
exchange can be made betvv^een them. The butcher has more
meat in his (lion than he himfelf can confume, and the brewer
and the baker would each of them be willing to purchafe a
part of it. But if they have nothing to offer in exchange, ex-
cept the different produftions of their refpedf ive trades, and
the butcher is already provided with all the bread and beer
which he has immediate occafion for, no exchange can, in
this cafe, be made between them. He cannot be their mer-
chant, nor they his cuftomers; and they are all of them thus
mutually lefs ferviceable to one another. In order to avoid
the inconveniency of fuch fituations, every prudent man in
every period of fociety, after the firll eftablifhment of the
divifion of labour, nmft naturally have endeavoured to manage
his affairs in fuch a manner, as to have at all times by him,
befidcs the peculiar produce of his own induflry, a certain
quantity
24 THE NATURE AND CAUSES OF
quantity of fome one commodity or other, fuch as he ima-
gined few people would be likely to refufe in exchange for
the produce of their induflry.
Many different commodities, It is probable, were fuc-
cefTively both thought of and employed for this purpofe. In
the rude ages of fociety, cattle are faid to have been the
common inftrument of commerce; and though they mufh
have been a moft inconvenient one, yet in old times we find
things were frequently valued according to the number of
cattle which had been given In exchange for them. The
armour of DIomedc, fays Homer, coft only nine oxen ; but
that of Glaucus coft an hundred oxen. Salt is faid to be
the common inftrument of commerce and exchanges in
AbyfFmia ; a fpecies of fliells in fome parts of the coaft of
India; dried cod at Newfoundland; tobacco In Virginia;
fugar in fome of our Weft India colonics; hides or drefted
leather in fome other countries; and there is at this day a
village In Scotland where it is not uncommon, I am told, for
a workman to carry nails inftead of money to the baker's
Ihop or the ale-houfe.
In all countries, however, men feem at iaft to have been
determined by irrefiftible reafons to give the preference, for
this employment, to metals above every other commodity.
Metals can not only be kept with as little lofs as any other
comm.odity, fcarce any thing being lefs perlfliable than they
are, but they can likewife, without any lofs, be divided into
any number of parts, as by fufion thofe parts can eafily be
reunited again; a quality wliich no other equally durable
commodities poflefs, and which more than any other quality
renders them fit to be inftruments of commerce and "cir-
culation. Tlie man who wanted to buy fait, for example,
and had nothing but cattle to give in exchange for it, mud
have been obliged to buy fait to the value of a whole ox, or a
whole flieep, at a time. He could feldom buy lefs than this,
becaufe what he was to give for it could feldom be divided
without lofs; and if he had a mind to buy more, he muft,
for the fame reafons, have been obliged to buy double or
triple the quantity, the value, to wit, of two or three oxen,
or of two or three fiieep. If, on the contrary, inftead of
fheep or oxen, he had metals to give in exchange for it, he
could eafily proportion the quantity of the metal to the
precife
THE WEALTH OF NATIONS. 25
preclfe quantity of the commodity which he had immediate
occafion for.
Different metals have been made ufe of by different
nations for this purpofe. Iron was the common inftrument
of commerce among the antient Spartans; copper among the
antient Romans; and gold and lilver among all rich and
commercial nations.
Those metals fecm originally to have been made u'e of for
this purpofe in rude bars, without any ftamp or coinage.
Thus we are told by Pliny*, upon the authority of Timxus,
an . antient hiftorian, that, till the time of Servius Tullius,
the Romans had no coined money, but made ufe of unftamp-
cd bars of copper to purchafe whatever they had occafion for.
Thefe rude bars, therefore, performed at this time the func-
tion of money.
The ufe of metals in this rude ftate was attended with
two very confiderable inconveniencies; firft, with the trouble
of weighing; and, fecondly, with that of aflliying them. In
the precious metals, where a fmall difference in the quantity
makes a great difference in the value, even the buhnefs of
weighing, with proper exaftnefs, requires at leafl very accu-
rate weights and fcales. The weighing of gold in particular
is an operation of fome nicety. In the coarfer metals, in-
deed, v/here a fmall error would be of little confequence, lefs
accuracy, would, no doubt, be neceffary. Yet we lliould find
it exceffively troublefome, if every time a poor man had oc-
cafion either to buy or fell a farthing's worth of goods, he
was obliged to weigh the farthing. The operation of aflaying
is flill more diflicult, ftill more tedious, and, unlefs a part of
tlie metal is fairly melted in the crucible, with proper dif-
folvents, any conclafion that can be drawn from it, is ex-
tremely uncertain. Before the inftitution of coined money,
however, unlefs they went through this tedious and diiHcult
operation, people mull always have been liable to the grofTell
frauds and impofitions, and inffead of a pound weight of
pure filver, or pui'e copper, might receive in exchange for
their goods, an adulterated compofition of the coarfeft and
cheapcft materials, which had, however, in their outward
appearance, been made to refemble thofe metaJs. To pre-
* Plln. HiA. Nat. lib. s^. cap. 3.
vent
26 THE NATURE AND CAUSES OF
vent fuch abufes, to facilitate exchanges, and thereby to en-
courage all forts of induftry and commerce, it has been found
neceflarv, in all countries, that have made any confidcrable
advances towards improvement, to affix a public (lamp upon
certain quantities of fuch particular metals, as were in thofc
countries commonly made ufe of to purchafe goods. Hence
the origin of coined money, and of thofe public offices called
mints; inllitutions exaftly of the fame nature with thofe of
the alnagers and ilampmafters of w^oollen and linen cloth.
AH of them are equally meant to afcertain, by means of a
public (lamp, the quantity and uniform goodnefs of thofe dif-
ferent commodities when brouQ;ht to market.
S
The iirft public flamps of this kind that were affixed to
the current metals, feem in many cafes to have been intended
to afcertain, what it was both moft difficult and moft impor-
tant to afcertain, the goodnefs or fincnefs of the metal, and
to have refembled the flerling mark which is at prefent affixed
to plate and bars of filver, or the Spaniffi mark which is
fometimes affixed to ingots of gold, and which being (Iruck
only upon one fide of the piece, and not covering the wliole
furface, afcertains the finenefs, but not the weight of the
metal. Abraham weighs to Ephron the four hundred ffiekels
of niver which he had agreed to pay for the field of Machpclah.
They are faid however to be the current money of the mer-
chant, and are yet received by weight and not by tale, in the
fame manner as ingots of gold and bars of filver are at pre-
fent. The revenues of the antient Saxon kings of England
are faid to have been paid, not in money but in kind, that is,
in victuals and provifions of all forts. William the Conqueror
introduced the cuftom of paying them in money. This mo-
ney, however, was, for a long time, received at the exche-*
quer, by weight and not by tale.
The inconvenicncy and difficulty of weighing thofe metals
with exartnefs gave occaficn to the infiiitution of coins, of
which the {lamp, covering entirely both fides of the piece
and fumctimes the edges too, v/as fuppofed to afcertain not
only the finenels, but tliC weight of the metal. Such coins,
therefore, were received by tale as at prefent, without the
trouble of weighir.g.
The denominations of thofe coins feem originally to have
expreffed the weight or quantity of metal contained in them.
In
THE WEALTH OF NATIONS. 27
In the time of Servius Tulllus, who firfl coined money nt
Rome, the Roman As or Pondo contained a Roman pound
of good copper. It was divided in the fame manner as our
Troyes pound, into twelve ounces, each of which contained
a real ounce cf good copper. The Englifli pound ilcrling, in
the time of Edward I., contained a pound, Tower weight, of
filver of a known finenefs. The Tower pound feems to have
been fomething more than the Roman pound, and fomething
lefs than the Troyes pound. This laft was not introduced
into the mint of England till the i8th of Henry VIII. The*.
French livre contained in the time of Charlemagne a pound,
Troyes weight, of fdver of a known fmenefs. The fair of
Troyes in Champaign was at that time frequented by all the
nations of Europe, and the weights and meafures of fo famous
a market were generally known and efleemed. The Scots
money pound contained, from the time of Alexander I. to
that of Robert Bruce, a pound of filver of the fame weight
and finenefs with the Englifli pound fterl. Englifli, French,
and Scots pennies too, contained all of them originally a real
penny v/eight of fdver, the twentieth part of an ounce, and
the two-hundreth-and fortieth part of a pound. The fhilling
too feems originally to have been the denomination of a
weight.- When luheat is at twelve J/jili'mgs the quarter, favs
an antient ftatute of Henry III. then ivaftel bread of a far-
thing fb all iveigh eleven fljiUings and four pence. The propor-
tion, however, between the fhilling and either the penny on
the one hand, or the pound on the other, feems not to have
been fo conflant and uniform as that between the penny and
the pound. During the firft race of the kings of France, the
French fou or fhilling appears upon different occaiions to
have contained hve, twelve, twenty, and forty pennies.
Among the antient Saxons a fliilling appears at one time to
have contained only five pennies, and it is not improbable
that it may have been as variable among them as among^ their
neighbours, the antient Franks. From the time of Charle-
magne among the Frencli, and from that of William the
Conqueror among the Englifli, the proportion between the
pound, the fhilling, and the penny, feems to have been uni-
formly tlie fame as at prefent, though the value of each has
been very difTerent. For in every country of the world, I
believe, the avarice and injuflice of princes and fovereign
ftates abufing the confidence of their fubje61s, have by de-
grees diminifhed the real quantity of m.etal, vvhich had been
originally contained in their coin,'?. The Rom-c^n As, in the
latter
2S THE NATURE AND CAUSES OF
latter ages of the Republic, was reduced to the twenty-fourth
part of its original value, and, inftead of weighing a pound,
came to weigh only half an ounce. The Englifh pound and
penny contain at prefent about a third only ; the Scots pound
and penny about a thirty-fixth •, and the French pound and
penny about a fixty-fixth part of their original value. By
means of thofe operations the princes and fovereign dates
w^hich performed them were enabled, in appearance, to pay
their debts and to fulfil their engagements with a fmaller
quantity of filver than would otherwife have been requifite.
It was indeed in appearance only ; for their creditors were
really defrauded of a part of what was due to them. All
other debtors in the (late were allowed the fame privilege, and
might pay with the fame nominal fum of the new and debafed
coin whatever they had borrowed in the old. Such operati-
ons, therefore, have always proved favourable to the debtor,
and ruinous to the creditor, and have fometimes produced a
greater and more univerfal revolution in the fortunes of pri-
vate perfons, than could have been occafioned by a very great
public calamity.
It is in this manner that money has become in all civilized
nations the univerfal inllrument of commerce, by the inter-
vention of which goods of all kinds are bought and fold, or
exchanged for one another*
"What are the rules which men naturally obferve in ex-
changing them either for money or for one another, I fhall
now proceed to examine. Thefe rules determine what may
be called the relative or exchangeable value of goods.
The word value, it is to be obferved, has two different
meanings, and fometimes exprefles the utility of fome parti-
cular obje£l:, and fometimes the power of purchafing other
goods which the poileflion of that objecfl conveys. The one
may be called ** value in ufej" the other, "value in ex-
<' change." The things which have the greateil value in ufe
have frequently little or no value in exchange ; and, on the
contrary, thofe which have the greateft value in exchange
have frequently little or no value in ufe. Nothing is more
ufeful than water: but it will purchafe fcarce any thing;
fcarce any thing can be had in exchange for it. A diamond,
on the contrary, has fcarce any value in ufe ; but a very
greut
THE WEALTH OF NATIONS. 29
great quantity of other goods may frequently be had in ex-
change for it.
In order to inveftigate the principles which regulate the ex-
changeable value of commodities, I fhall endeavour to fhew.
First, what is the real meafure of this exchangeable va-
lue; or, wherein confifts the real price of all commodities.
Secondly, what are the different parts of which this real
price is compofed or made up.
And, laflly, what are the different circumflances which
fometimes raife fome or all of thefe different parts of price
above, and fometimes fink them below their natural or ordi-
nary rate; or, what are the caufes which fometimes hinder
the market price, that is, the actual price of commodities,
from coinciding exaftly with what may be called their na-
tural price.
I SHALL endeavour to explain, as fully and diftinftly as I
can, thofe three fubje^rs in the three following chapters, for
which I muft very earneftly entreat both the patience and at-
tention of the reader: his patience in order to examine a de-
tail which may perhaps in fome places appear unneceffarily
tedious ; and his attention in order to underftand what may
perhaps, after the fulleft explication which I am capable of
giving of it, appear flill in fome degree obfcure. I am al-
ways willing to run fome hazard of being tedious in order to
be fure that I am perfpicuous; and after taking the utmoft
pains that I can to be perfpicuous, fome oblcurity may Hill
appear to remain upon a fubjed in its own nature extremely
^bftraaedc ^
CHAP,
;o THE NATURE AND CAUSES OF
CHAP. V.
Of ihe real and ncmlnal Price cf Commodities^ or of their
Price in Labour^ and their Price in Money,
XLV E R Y man Is rich or poor according to the degree in
which he can afford to enjoy the necellarieSj conveniencies,
and amufements of human hie. But after the divifion of labour
has once thoroughly taken place, it is but a very fmall part of
thefe with whicli a man's own labour can fupply him. The
far greater part of them he niuit derive from the labour of
other people, and he mull be rich or poor according to the
quantity of that labour which he can command, or v/hich he
can afford to purchafe. The value of any commodity, there^
fore, to the pcrfon who poffiffes it, and who means not to
life or coniume it himfelf, but to excliange it for other com-
modities, is equal to the quantity of labour which it enables
him to purchafe or command. Labour, therefore, is the real
meafure cf the exchangeable value of all commodities.
The real price of every thing, what every thing really
cods to tlie man who Vv^ants to acquire it, is the toil and trou-
ble of acquiring it. Yfhat everything is really worth to the
man who has acquired it, and who wants to difpofe of it or
exchange it for fometlilng elfe, is the toil and trouble which
it can fave to himfelf, and which it can impofe upon other
people. V.^hat is bought with money or with goods is pur-
chafed by labour as much as what we acquire by the toil of
our own body. That money or thofe goods indeed fave us
this toil. They contain the value of a certain quantity o£
labour which we exchange for what is fuppofed at the time to
contain the value cf an equal quantity. Labour was the firft
price, the original purchafe-money tliat was paid for all
things. It was not by gold or by filver, but by labour, that all
the wealth of the world was originally purchafed ; and its
value to thofe who pcffefs it and v/ho want to exchange it
for fome new productions, is precifely equal to the quantity
pf labour which it can enable them to purchafe or command
Wealth
THE WEALTH OF NATIONS. 31
Wealth, as Mr. Hobbes fays, is power. But the per-
fon who either acquiresj or iucceeds to a great fortune, does
not necefTarily acquire or fucceed to any poHtical power,
cither civil or rnihtary. His fortune may, perhaps, afford
him the means of acquiring both, but the mere poffeflion of
that fortune does not neceffarily convey to him either. The
power which that poireflion im.mediutely and direftly conveys
to him, is the power of purchafmg; a certain command
over all the labour, or over all the produce of labour which is
then in the market. His fortune is greater or lefs, precifely
in proportion to the extent of this power-, or to the quantity
either of other men's labour, or, what is the fame thing, of
the produce of other men's labour, which it enables him to
purchafe or command. The exchangeable value of every
thing muft always be precifely equal to the extent of thb
power which it conveys to its owner.
But though labour be the real meafure of the exchange-?
able value of all commodities, it is not that by which their
value is commonly eltimated. It is often difficult to afcertain
the proportion between tv/o different quantities of labour.
The time fpent in two different forts of work will not always
alone determine this proportion. The different degrees of
hardfliip endured, and of ingeruiity exercifed, muft likev/iie
be taken into account. There may be more labour in an
hour's hard work than in tv/o hours eafy bufmefs; or in an
hour's application to a trade v/hich it cod ten years labour to
learn than in a month's induilry at an ordinary and obvious
employment. But it is not eafy to find any accurate meafure
either of hardfliip or ingenuity. In exchanging indeed the
different productions of different forts of labour for one
another, fome allowance is commonly made for both. It is
adjufted, hov/ever, not by any accurate meafure, but by the
higgling and bargaining of the market, according to that fort
of rough equality which, though not exaCl, is fufHcient for
carrying on the bufmefs of common life.
EvEP.Y commodity bcfides, is more frequently exchanged
for, and thereby compared with, other commodities than
with labour. It is more natural, therefore, to eftimate its
exchangeable value by the quantity of fome other commodity
than by that of the labour which it can purchafe. The
greater part of people too underftand better what is meant by
71 quantity of a particular commodity, than bv a quantity of
lubour.
32 THE NATURE AND CAUSES OF
Jaboun The one is a plain palpable obje6l; the other an ab-
drzO: notion, which, though it can be made fufficiently in-
telligible, is not altogether fo natural and obvious.
But when barter ceafes, and money has become the com-
mon inilrument of commerce, every particular commodity is
more frequently exchanged for money than for any other
commodity. The Butcher feldom carries his beef or his mut-
ton to the baker, or the brewer, in order to exchange them
for bread or beer, but he carries them to the market, where
he exchanges them for money, and afterwards exchan-
ges that money for bread and for beer. The quantity of
money which he gets for them regulates too the quantity of
bread and beer which he can afterwards purchafe. It is
more natural and obvious to him, therefore, to eftimate their
value by the quantity of money, the commodity for which he
immediately exchanges them, than by that of bread and beer,
the commodities for which he can exchange them only by the
intervention of another commodity j and rather to fay that
his butcher's meat is worth threepence or fourpence a pound
than that it is worth three or four pounds of bread, or three
or four quarts of fmall beer. Hence it comes to pafs, that
the exchangeable value of every commodity is more fre-
quently eftimated by the quantity of money, than by the
quantity either of labour or of any other commodity which
can be had in exchange for it.
Gold and fdver, however, like every other commodity,
vary in their value, are fometimcs cheaper and fometimes
dearer, fometimes of eafier and fometimes of more difficult
purchafe. The quantity of labour Vv^hich any particular quan-
tity of them can purchafe or command, or the quantity of
other goods which it will exchange for, depends always upon
the fertility or barrennefs of the mines which happen to be
known about the time when fuch exchanges are made. The
difccvcry of the abundant mines of America reduced, in the
fixteenth century, the value of gold and filver in Europe to
about a third of what it had been before. As it cofl leis la-
bour to bring thole metals from the mine to the market, fo
when they were brought thither they could purchafe or coin-
mand lefs labour j and this revolution in their value, though
perhaps the greatcft, is by no means the only one of which
hiftory gives feme account. But as a meafure of quantity,
fuch as the natural foot, fathom or handful, which is continual-
THE WEALTH OF NATIONS. 33
ly varying In its own quanti-^y, can never be an accurate mea-
fure of the quantity of other things; fo a commodity vi^hich
is itfelf continually varying in its ov/n \ahae, can never be an
accurate meafure of the value of other commodities. Equal
quantities of labour, at ail times and places, may be faid to
be of equal value to the labourer. In his ordinary fcate of
health, Itrength and fpirits; in the ordinary degree of hl9
(kill and dexterity, he mufl ahvays l^y dovim the fame portion
of his eafe, his liberty, and his happinefs. The price vrhicli
he pays mufl always be the fame, whatever m.ay be tlie quan-
tity of goods which he receives in return for it. Of thefe,
indeed it may fometimes purchafe a greater and fometim.es a
fmaller quantity; but it is their value which varies, not that
of the labour which purch^rifes them. At all'tim-es and places
that is dear which it is dillicuit to come at, or which it cods
much labour to acquire; and that cheap which is to be had
eafily, or v/lth very little labour. Labour alonCj therefore,
never varying in its own value, is alone the ultimate and real
ftandardby which the value of all commodities can at all times
and places be eflimated and compared. It is their real price j
money is their nominal price only.
But though equal quantities of labour are nhvays of
equal value to the labourer, yet to the perfv.n who employs
him they appear fometimes to be of greater and fometimies
of fmaller value. He.purchafes them fometimes with a great-
er and fometimes with a frnaller quantity cf goods, and to him
the price of labour feems to vary like that of all otlier things.
It appears to himi dear in the one caie, and cheap in the other.
In reality, however, it is the goods which are cheap in the
one cafe, and dear in the other.
In this popular fenfe, therefore, labour, like commodities,
may be faid to have a real and a nominal price. Its real price,
may be faid to confift in the quantity of the neceifaries and
conveniencies of life which are given for it; its nom'mal price,
in the quantity of money. The labourer is rich or poor, is
well or ill rewarded, in proportion to the real, not to the no-
minal price of his labour.
The diftinftion between the real and the nominal price
of commodities and labour, is not a matter of mere fpecu-
lation, but may fometimes be of confiderable ufe in prailice.
The fame real price is always of the fame value ; but on ac-
VoL. I. D count
34 THE n'ATURE AND CAUSES OF
count of the variations in the value of gold and filver, the
fame nominal price is fometimes of very different values.
When a landed eilate, therefore, is fold vv^ith a refervation
of a perpetual rent, if it is intended that this rent fhould
always be of the fame value, it is of importance to the fami-
ly in whofe favour it is referv^ed, that it fhould not confift in
a particular fum of money. Its value would in this cafe be lia-
ble to variations of two different kinds; firft, to thofe which
arife from the different quantities of gold and filver which
are contained at different times in coin of the fame denomi-
nation 5 and, fecondly, to thofe v/hich arife from the different
values of equal quantities of gold and nlver at clitTerent
times.
Princes and fovereign dates have frequently fancied that
they had a temporary interefl to dim.inilh the quantity of
pure metal contained in their coins j but they feldom have fan-
cied that they had any to augment it. The quantity of me-
tal contained in the coins, I believe of all nations has, ac-
cordingly, been almoft continually diminifliing, and hardly
'ever augmenting. Such variations therefore tend almofl al-
ways to diminifli the value of a money rent.
The difcovery of the mines of Amxrica diminifhed the
value of gold and filver in Europe. This diminution, it is
commonly fuppnfed, though, I apprehend, without any cer-
tain proof, is (till going on gradually, and is likely to conti-
nue to do fo for a long time. Upon this fuppofition, there-
fore, fuch variations are more likely to diminifh, than to aug-
ment the value of a money rent, even though it (hould be fti-
pnlated to be paid, not in fuch a quantity of coined money
of fuch a denomination (in fo many pounds fterlinp-, for ex-
ample,) but in fo many ounces either of pure filver, or of fil-
ver of a certain ftandard*
The rents which have been referved In corn have preferv-
rA their value much better than thofe which have been re-
ferved in mioncy, even where the denomination of the coin
has not been altered. By the 1 8th of Elizabetlvit was enacfl-
c6, That a third of the rent of all college leafes. fliould be
veferved in corn, to be paid either in kind, or according to,
tlic current prices at the heareft public market. The money
arldng from this corn rent, though originally but a third of
the whole, is in the prefent times, according to Doctor
Blackftone,
THE WEALTH OF NATIONS. 35
Blackftone, commonly near double of what arifes from the
other two-thirds. The old money rents of colleges muft, ac-
cording to this account, have funk ahnoft to a fourth part of
their antient value; or are worth little more than a fgurth
part of the corn which they were formerly worth. But fmce
the reign of Philip and Mary the denojnination of rlie Engliili
coin has undergone- little or no alteration, and the fame num-
ber of pounds, fliillings and pence have contained very
nearly the fiime quantity of pure fdver. This degradation,
therefore, in the value of the money rents of colleges,
has arifen altogether from the degradation in the value of
fdver.
When the degradation inthevalue of fdver Is combined wiih
the diminution of the quantity of it contained in the coin of
the fame denomination, the lofs is frequently ftill greater. In
Scotland, where the denomination of the coin has undenron'^
much greater alterations than it ever did in England, and in
France, where it has undergone ftill greater than it ever did
in Scotland, fome antient rents, originally of conHderabie va-
lue, have in this manner been reduced almofc to nothing.
Ec^JAL quantities of labour will at diftant times be nur-
chafed m.ore nearly with equal quantities of corn, the fubfift-
ence of the labourer, than with equal quantities of gold and
fdver, or perhaps of any other commodity. Equal quantities
of corn, therefore, will, at diftant times, be more nearly of
the fame real value, or enable the pofteflbr to purchafe or com-
mand more nearly the fame quantity of the labour of other
people. They will do this, I fay, more nearly than equal
quantities of almoft any other commodity; for even equal
quantities of corn will not do it exa6fly. The fubfiftence of
the labourer, or the real price of labour, as I fhall endeavour
to ftiew hereafter, is very different upon different occafions ;
more liberal in fociety advancing to opulence than in one
that is ftanding ftill; and in one that is^ftanding ftill than in
one that is going backwards. Every other commodity, how-
ever, will at any particular time purchafe a greater or fmaller
quantity of labour in proportion to the quantity of fubfiftence
which it can purchafe at that time. A rent therefore referv-
ed in corn is liable only to the variations in the quantity of
labour which a certain quantity of corn can purchafe. Bur
a rent referved in any other commodity is liable, not only to
the variations, in the quantity of labour which any particular
D 2 quantity
36 THE NATURE AND CAUSES OF
quantity of corn can purchafe, but to the variations in the
quantity of corn which can be purchafed by any particular
quantity of that commodity.
Though the real value of a corn rent, it is to be obferved
however, varies much iefs from century to century than that
of a money rent, it varies much more from year to year. The
monev price of labour, as I fhail endeavour to fhew hereafter,
does not flucTtuate from year to year with the money price of
corn, but feems to be every where accommodated, not to the
temporary or occafional, but to the average or ordinary price
of that neceflary of life. The average or ordinary price of
corn again is regulated, as I (hall likewife endeavour to fliow
hereafter, by the value of filver, by tlie richnefs or barrennefs
of the mines which fupply the market with that metal, or by
the quantity of labour Vv^hich muft be employed, and confe-
quently of corn which muft be confumed, in order to bring
any particular quantity of filver from the mine to the market.
But the value of filver, though it fometimes varies greatly
from century to century, feldom varies much from year to
year, but frequently continues the fame, or very nearly the
fame, for half a century or a century together. The ordinary
cr average money price of corn, thereibre, may, during fo
long a period, continue the fame or very nearly the fame
too, and along with it the money price of labour, provid-
ed, at leaft, the fociety continues, in other refpecfs, in the.
fame or nearly in the fame conditi n. In the mean time
the temporary and occafional price of corn may frequently
be double, one year, of v/hat it had been the year before,
or flutSluate, for example, from live-and-twenty to fifty
iiiillinc;s the quarter. But when corn is at the latter price,
not only the nominal, but the real value of a corn rent will
be double of what it was when at the former, or will com-
mand double the quantity either of labour or of the greater
part of other commodities •, the money price of labour, and
alonp- with it that of moft other things, continuing the fame
during all thefe fluctuations.
Labour, therefore, it appears evidently, is the only unl-
vcruil, as well as the only accurate meafure of value, or the
onlv ilandard by which we can compare the values of diiTe-
reni commodities at all times and at all places. We cannot
eftiiriate, it is allowed, the real value of different commodi-
ties from century to century by the quantities of filver which
wer«
THE WEALTH OF NATIONS. 37
were given for them. We cannot eftimate it from year to
year by the quantities of corn. By the quantities of labour
we can, with the greateil accuracy, eftimate it both from
century to century and from year to year. From century to
century, corn is a better meafure than filver, becaufe, from
century to century, equal quantities of corn will command
the fame quantity of labour more nearly than equal quajiti-
ties of filver. From year to year, on the contrary, filver is a
better meafure than corn, becaufe equal quantities of it will
more nearly command the fame quantity of labour.
But tho' in eftablifliing perpetual rents, or even in let-
ting very long leafes, it may be of ufe to diftinguiih between
real and nominal price ; it is of none in buying and felling,
the more common and ordinary tranfaclions of human life.
At the fame time and place the real and the nominal
price of all commodities ate exactly in proportion to one
another. The more or lefs money you get for any commo-
dity, in the London market, for example, the more or lefs la-
bour it will at that time and place enable you to purchafe or
command. At the fame time and place, therefore, money is
the exa£l meafure of the real exchangeable value of all com-
modities. It is fo, however, at the fame time and place only.
Though at diftant places, there is no regular proportion
between the real and the money price of commodities, yet
the merchant who carries goods from the one to the other has
nothing to confider but their money price or the difference
between the quantity of filver for which he buys them, and
that for which he is likely to fell them. Half an ounce of
filver at Canton in China may command a greater quantity
both of labour and of the neceflarics and c :>nveniencies of
life, than an ounce at London. A commodity, therefore,
which fells for half an ounce of filver at Canton may there be
really dearer, of more real importance to the man who pof-
feffes it there, than a commodity which fells for an ounce at
London is to the man who pofTefles it at London. If a Lon-
don merchant, however, can buy at Canton for half an ounce
of filver, a commodity which he can afterguards fell at Lon-
don for an ounce, he gains a hundred per cent, by the bar-
gain, juft as much as if an ounce of filver was at London
exa6lly of the fame value as at Canton. It is of no import-
ance to him that half an ounce of fdver at Canton would have
given
^
o
8 THE NATURE AND CAUSES OF
given him the command of more labour and of a greater
quantity of the neceflaries and conveniencies of life than an
ounce can do at London. An ounce at London will always
give him the command of double the quantity of all thefe
which half an ounce could have done there, and this is pre-
cifely what he wants.
As it is the nominal or money price of goods, therefore,
which finally determines the prudence or imprudence of all
purchafes and fales, and thereby regulates almoft the whole
bufmefs of common life in which price is concerned, we can-
not wonder that it fliould have been fo much more attended
to than the real price.
In fuch a work as this, however, it may fometimes be of
life to compare the different real values of a particular com-
modity at different times and places, or the different degrees
of power over the labour of other people which it may, upon
different occafions, have given to thofe who poffeffed it. We
niuft in this cafe compare, not fo much the different quanti-
ties of filver for which it was commonly fold, as the different
quantities of labour which thofe different quantities of filver
could have purchafed. But the current prices of labour at
diftant times and places can fcarce ever be known with any
degree of exaclnefs. Thofe of corn, though they have in
few places been regularly recorded, are in general better
known, and have been more Irequently taken notice of by*
hiftorians and other writers. We muff generally, therefore,
content ourfelves with them, not as being always exa6fly in
the fame proportion as the current prices of labour, but as
being the nearefb approximation which can commonly be
had to that proportion. I Ihall hereafter have occafion to
make feveral comparifons of this kind,
In the progrefs of induftry, commercial nations have
found it convenient to coin feveral different metals into mo-
ney ; gold for larger payments, filver for purchafes of mo-
derate value, and copper or fome other coarfe metal, for
thofe of ffill fmaller confidcration. ^They have always,
however, confidered one of thofe metals as more peculiarly
the meafure of value than any of the other two ; and this
preference feems generally to have been given to the metal
which they happened iirft to make ufe of as the inftrument
pf commerce. Having once begun to ufe it as their ftand-
' ard.
THE WEALTH OF NATIONS. 39
urdy which they muft have done when they Iiacl no other
money, they have generally continued to do fo even when
the neceffity was not the fame.
The Romans are faid to have had nothing but copper
money till within five years before the firlt Punic war*,
when they firit began to coin filver. Copper, therefore,
appears to have continued always the m^eafure of value in
that republic. At Rome all accounts appear to have been
kept, and the value of all cftates to have been ccrmputed ^
either in ^^es or in Sijlertii. The As was always the de-
nomination of a copper coin. The word Seflc'rtius fignifies
two Affl's and a half. Though the Sijiertiusy therefore, was
originally a filver coin, its value was cflimated in copper.
At Rome, one who owed a great deal of monev, wtis faid
to have a great deal of other people's copper.
The northern nations who eftabliflied themfelves upon
the ruins of the Roman empire, feem to have had filver mo-
ney from the firft beginning of their fettlements, and not
to have known either gold, or copper coins for fcveral aG;es
thereafter. There were feveral coins in England in the
time of the Saxons ; but there was little gold -coined till the
time of Edward III. nor any copper till that of James I. of
-Great Britaia. In England, therefore, and for the fame
reafon, I believe, in all other modern nations of Europe,
all accounts are kept, and the value o? all goods and of
all eftates is generally computed in filver : and when we
mean to exprefs the amount of a perfon's fortune, we feldom
mention the number of guineas, but the number of pounds
fterling vv^hich we fuppofe would be given for it.
Originally, in all countries, I believe, a legal tender
of payment could be made only in the coin of that metal,
M^hich was peculiarly confidered as the llandard or m^afure
of value. In England, gold was not oonfidered as a legal
tender for a long time after it was coined into mioney. The
proportion betv/een the values of gold and filver money was
not fixed by any public law or proclamation ; but was left
to be fettled by the market. If a debtor oiTered payment in
gold, the creditor might either reje6l fuch payment altoge-
ther, or accept of it at fuch a valuation of the gold as he and
his debtorcould agree upon. Copper is not at prefent a legal
tender,
Pliuyj lib, xxxiii. c. 3.
/
40 THE NATURE AND CAUSES OF
tender, except in die co-inge of the fmaller filver coins. In
this ilate of things the ciiitin6lion between the metal which
was the (landardj and chat which was not the ftandard, was
fomething more than a nominal diiUnftion.
In procefs of time, and as people became gradually more
familiar with the ufe of the dilTerent metals in coin, and
confequently better acquainted with the proportion between
their refpeftive vnhi.cs, it has tn moil counti-ies, I believe,
lieen found convenient to a [certain this proportion^ and to
declare by a public law that a guinea, for example, of fuch
a wei.^^ht and iinenefs, fhould exchange for one-and-twenty
fh^llin^s, or be a leral tender for a debt of that amount.
In this Hate of things, and during the continuance of any
one regulated proportion cf this kind, the dilliniflion between
the metal which is the ftandard, and that which is not the
ftandard, becomes little more than a nominal diftimflion.
In confequenee of ?ny change, however, in this regulated
proportion, this diftinclion becomes, or at leaft feems to be-
come, fomething m.ore than nominal again. If the regulated
value of a guinea, for example, was either reduced to twenty,
cr raifed to two-and-lwenty {hillings, all accounts being kept
and aimofl all obligaiions for debt being exprelTed in fdver
money, the greater part of payments could in either cafe be
made wi:h the fame quantity of fdver money as before •, but
v/ould require very different quantities of gold money ; a
greater in the one cafe, and a fmaller in the other. Silver
would appear to be more invariable in its value than gold.
Silver would appear to m.eafure the value of gold, and gold
would not appear to meafure the \ aiue of fdver. The value
of gold would feem to depend upon the quantity of fdver
which it would exchan_<^e for ; and the value of filver would
no* feem to depend upon t^ie quantity of gold which it
would exchange for. This diiFerence, however, would be
altogether owing to the cuftom of keeping accounts, and of
.^xprefhng the amount of all great and fmall funis rather in
fdver than in goid money. One of Mr. Drummond's notes
for five-and-twenty or fifty guineas would, after an alterati-
on of this kind, be ftill payable with five-and-twenty or fifty
guineas in the fame manner as before. It would, after fuch
an alteration, be payable wiuh the fame quantity of gold as
before, but with very different quantities of filver. In the
payment of fuch a note, gold would appear to be more in-
variable
THE WEALTH OF NATIONS. 41
variable in its value than filver. Gold would appear to
meafure the value of filver, and filver would not appear to
meafure the value of gold. If the cullom of keeping ac-
counts, and of exprefling promiilbry notes and other obliga-
tions for money in this manner, fhould ever become gene-
ral, gold, and not filver, Vv'-ould be confidered as the metal
which was peculiarly the ftandard or meafure of value.
In reality, during the cpntinuance of any one rtgulated
proportion between the refpeftive values of the diOerent me-
tals in coin, the value of the moll precious metal regulates
the value of the whole coin. Twelve copper pence contain
half a pound averdupois, of copper, of not the belt quality,
which, before it is coined, is feldom worth fevenpence in
filver. But as by the regulation tv/elve fuch pence are or-
dered to exchange for a fhilling, they are in the market con-
fidered as worth a fliilling, and a fhilling can at any tinl? be
had for them. Even before the late roiformation of the gold
coin of Great Britain, the gold, that part of it at lead which
circulated in London and its neighbourhood, was in gene-
ral lefs degraded below its Itandard weight than the greater
part of the filver. One-and-twenty worn and defaced fhil-»
lings, however, were" confidered as equivalent to a guinea,
which perhaps, indeed, was worn and defaced too, but fel-
dom fo much fo. The late regulations have brought the gold
coin as near perhaps to its ftandard weight as it is poifible to
bring the current coin of any nation ; and the order, to re-
ceive no gold at the public offices but by weight, is likely to
preferve it fo as long as that order is enforced. The filver
coin ftill continues in the fame worn and degraded ftate as
before the reformation of the gold coin. In the market5 how-
ever, one-and-twenty fliiliings of this degraded filver coin are
ftill confidered as worth a guinea of this excellent gold coin.
The reformation of the gold coin has evldentlv raifed
the value of the filver coin which can be exchan:j-ed for it.
In the Englifh mint a pound weight of gold is coined in-.
to forty-four*guineas and a half, which, at one-and-twenty
fliiliings the guinea, is equal to forty-fix pounds fourteen
{hillings and fixpence. An ounce of fuch gold coin, there-
fore is worth 3/. 17/. lo^^. in filver. In England no duty
or feignorage is paid upon the coinage, and he who carries.
a pound weight or an ounce weight of ftandard gold bul-
42 THE NATURE AND CAUSES OF
lien to the mint, gets back a pound weight or an ounce
weight of gold in coin, without any deduction. Three
pounds feventeen ihiiUngs and ten pence halfpenny an ounce,
therefore, is faid to be the mint price of gold in England,
or the quantity of gold coin which the mint gives in return
for flandard gold bullion.
Before the reformation oT the gold coin, the price of
ftandard gold bullion in the market had for many years been
upwards of 3/. i8.f. fometimes 3/. 19/. and very frequently
4/. an ounce ; that fum, it is probable, in the worn and de-
graded cold coin, feldom containing miore than an ounce of
(tandard gold. Since the reformation of the gold coin, the
market price of ftandard gold bullion feldom exceeds 3/. 1 7/.
*7(^. an ounce. Before the reformation of the gold coin, the
market price was always more or lefs above the mint price.
Sin^e that reformation, the market price has been conftantly
below the mint price. But that market price is the fame
whether it is paid in gold or in iilver coin. The late refor-
mation of the gold coin, therefore, has raifed not only the
value of the gold coin, but like wife that of the fdver coin in
proportion to gold bullion, and probably too in proportion
to all other comimodities ; though the price of the greater
part of other commodities being influenced by fo many
other caufes, the rife in the value either of gold or fdver coin
in proportion to them, may not be fo diitinCt and fenfible.
In the Englifli mint a pound weight of ftandard filver bul-
lion is coined into fixty-^two (hillings, containing, in the fame
manner, a pound v/eight of ftandard fdver. Five ftiillings
and two-pence an ounce, therefore, is faid to be the mint
price of fdver in England, or the quantity of fdver coin which
the mint gives in return for ftandard fdver bullion. Before
the reformation of the gold coin, the market price of ftand-
ard fdver bullion was, upon different occafions, five ftiillings
and four pence, five ftiillings and five pence, five (hillings
and fix pence," five flnllings and feven pence, and very often
five (hillings and eight pence an ounce. Five (hillings and
(cvai pence, however, feems to have been the moft common
price. Since the reformation of the gold coin, the market
price of ftandard filver bullion has fallen occafionally to five
I'hillings and three pence, five ftiillings and four pence, and
five (hillings and five pence an ounce, which laft price it
has fcarce ever exceeded. Though, the m^arket price of fik
vcv
THE WEALTH OF NATIONS. 43
ver bullion has fallen confiderably fince the reformation of
tlie gold coin. It has not fallen fo low as the mint price.
In the proportion between the different metals in the
Englifh coin, as copper is rated very much above its real
value, io filver is rated fomewhat below it. In the market of
Europe, in the French coin and in the Dutch coin, Tin ounce
of fine gold exchanges for about fourteen ounces of fine fil-
ver. In the Engiifli coin, it exchanges for about fifteen ounces,
that is, for more filver than it is worth, according to the
common eftimation of Europe. But as the price of copper
in bars is not, even in England, raifed by the high price of
copper in Englifii coin, fo the price of filver in bi^llion is
not funk by the low rate of filver in Englifii coin. Silver
in bullion ftill preferves its proper proportion to gold j for
the fiime reafon that copper in bars preferves its proper pro-
portion to filvelr.
Upon the reformation of the filver coin in the rei^n of
William III. the price of filver bullion Hill continued to be
fomewhat above the mint price. Mr. Locke imputed this
high price to the permifiion of exporting filver bullion, and
to the prohibition of exporting filver coin. This permiiTion
of exporting, hefaid, rendered the demand for filver bullion
greater than the demand for filver coin. But the number of
people who want filver coin for the common ufes of buyinsj
and felling at home, is furely much greater than that of thofe
who want filver bullion either for the ufe of exportation or
for any other ufe. There fubfifts at prefent a like permif-
fion of exporting gold bullion, and a like prohibidon of ex-
porting gold coin ; and yet the price of gold bullion has
fallen below the mint price. But in the Englifii coin filver
v/as then, in the fame manner as now, under-rated in pro-
portion to gold J and the gold coin (winch at that time too
was not fuppofed to require any reformation) regulated
then, as well as now, the real value of the whole coin. —
As the reformation of the filver coin ,did not then reduce
the price of filver bullion to the mint price, it is not very
probable that a like reformation will do fo now.
Were the filver coin brought back as near to its fi:andard
weight as the gold, a guinea, it is probable, would, accord-
ing to the prefent proportion, exchange for more filver in
coin than it would purcliafe in bullion. The filver coin
containing its full ftandard weight, there would in this cafe
be
44 THE NATURE AND CAUSES OF
be a profit in melting it down, in order, firft, to fell the
bullion for gold coin, and afterwards to exchange thio gold
coin for filver coin to be melted down rn the fame manner.
.Some alteration in the prefent proportion feems to be the
only metliod of preventing this inconveniency.
The inconveniency perhaps would be lefs if filver was
rated in the coin as much above its proper proportion to
gold as it is at prefent rated below it ; provided it was at
the fame time ena(!:l:ed that filver fhould not be a \e^?.\ ten-
der for more than the change of a guinea ; in the fame
manner as copper is not a legal tender for inore than the
change of a Ihilling. No creditor could in this cafe be
cheated in confequence of the high valuation of filver coin ;.
as no creditor can at prefent be cheated in confequence of
the high valuation of copper. The bankers only ^,/or.ld fuf-
fcr by this regulation. When a run comes upon them they
fometimes endeavour to gain time by paying In fixpences,
and they would be precluded by this regulation from this
difcreditable method of evading imnaediate payment. They
would be obliged in confequence to keep at all times in
their coffers a greater quantity of cafh than at prefent ; and
though this might no doubt be a confiderable inconveniency
to them, it would at the fame time be a confiderable fecu-
rity to their creditors.
Three pounds feventeen {liilllngs and ten pence half-t
penny (the mint price of gold) certainly does not contain,
even iii our prefent excellent gold coin, more than an ounce
of fiandard gold, and it may be thought, therefore, fhould
not purchafs more ftandard Ijullion. But gold in coin is
m.ore convenient than gold in bullion, and tho% jn England,
the coinage is free, yet the gold which is carried in bullion
to the mint, can feldom be returned in coin to the owner till
after a delay of feveral weeks. In the prefent hurry of the
mint, it could not be returned till after a delay of feveral
months. This delay is equivalent to a fmall duty, and ren-
ders g'')ld in coin fomewhat more valuable than an equal
quantity of gold in bullion. If in the Englifh coin filver
was rated according to its proper proportion to gold, the
price of filver bullion would probably fall below the mint
price even without any reformation of the filver coin ; the
» value even of the prefent worn and defaced filver coin being
regulated by the value of the excellent gold coin for which
it can be changed,
A SMA14,
THE WEALTH OF NATIONS. 45
A SMALL feignorage or duty upon the coinage cf both
gold and filver would probably incieafe (lill more the fupe-
riority of thofe metals in coin above nn equal quantity of
either of them in bullion. The' coinage would in tliis cafe
incicafe the value of the metal coined in proportion to the
extent of this fmall duty ; for the fame reafon that the fa-
fhion increafcs the value of plate in proportion to the price
of that fafliion. The fuperiority of coin above bullion would
prevent the melting down of the coin, and would difcou-
rage its exportation. If upon any public exigency it Ihould
become neceflary to export the coin, the greater part of it
would foon return again of its own accord. Abroad it
could fell only for its weight in bullion. At heme it would
buy more than that weight. There would be a profit,
therefore, in bringing it home again. In France a feignor-
age of about eight per cent, is impofed upon the coinage,
and the French coin, when exported, is faid to return home
again of its own accord.
The occafional fluftuations in the market price of gold
and (liver bullion arife from the fame caufes as the like iluc-
tuations in that of other commodities. The frequent lofs
of thofe metals from various accidents by fea and by land,
the continual walte of them in gildiilg and platin^-, in lace
and embroidery, in the wear and tear of coin, and in that
of plate ; require, in all countries which poiTefs no mines
of their own, a continual importation, in order to repair
this lofs and this wafte. The merchant importers, like all
other merchants, we may believe, endeavour, as well as the?
can, to fult their occafional importations to what, they judge,
is likely to be the immediate demand. VV^ith all their at-
tention, however, they fometimes over-do the bufinefs, and
fometimes under-do it. When they import more bullion
than is Vv^anted, rather tlian iAcur the rlllc and trouble of
exporting it again, they are fometijnes willing to fell a part
of it for fomething lefs than the ordinary or average price-
When, on the other hand, tliey import lefs than is wanted,
they get fomething m.ore than this price. But when, under
all thofe occafional fluctuations, the market price either of
gold or filver bullion continues for feveral years together
fteadily and conftantly, either more or lefs above, or more
or lefs below the mint price ; we may be afllired that this-
fteady and conflant, either fuperiority or inferiority of price,
is the effect of fomething in tlie ftate of the coin, which^
at
4<5 THE NATURE AND CAUSES OF
at that time, renders a certain quantity of coin either of
more vahie or of lefs value than the precife quantity of bul-
lion which it ought to contain. The conitancy and fteadi-
nefs of the efFedf, fuppofes a proportionable conflancy and
ftcadinefs in the caufe.
The money of any particular country is, at any particu-
lar time and place,* more or lefs an accurate meafure of
value according as the current coin is more or lefs exadlly
agreeable to its ftandard, or contains more or lefs exactly
the precife quantity of pure gold or pure filver which it
ought to contain. If in England, for example, forty-four
guineas and a half contained exa£l:ly a pound weight of
ftandard gold, or eleven ounces of fine gold and one ounce
of alloy, the gold coin of England would be as accurate a
meafure of the aftual value of goods at any particular time
and place as the nature of the thing v/ould admit. But if,
by rubbing and wearing, forty-four guineas and a half gene-
rally contain lefs than a pound v/eight of ftandard gold ; the
diminution, however, being greater in fome pieces than in
others ; the meafure of value comes to be liable to the fame
fort of uncertainty to which all other weights and meafures
are commonly expofed. As it rarely happens that thefe
arc exa6lly agreeable to their ftandard, the merchant adjufts
the price of his goods, as well as he can, not to v/hat thofe
weights and meafures ought to be, but to what, upon an
siverage, he finds by experience they actually are. In con-
fequence of a like diforder in the coin the price of goods
comes, in the fame manner, to be adjufted, not to the quan-
tity of pure gold or filver which the coin ought to contam,
but to that which, upon an average, it is found by experi-
ence, it ad:ually does contain.
By the money-price of goods, it is to be obferved, I un-
derftand always the quantity of pure gold or fdver for which
they are fold, without any regard to the denomination of
the coin. Six fhillings and eight pence, for example, in
the time of Edward I., I confider as the fame money-price
with a pound fterling in the prefent times -, becaufe it con-
tained, as nearly as we can judge, the fame quantity of pure
fdver.
CHAP,
THE WEALTH OF NATIONS. 47
CHAP. Vf.
Of the ccmpone?it Parts of the Price of Co??2mocIiti'S^
In that early and rude (late of fociety which precedes
both the accumulation of flock and the appropriation of
land, the proportion between the quantities of labour ne-
ceffary for acquiring different objefts feems to be the onlv
circumflance which can afford any rule for exchanging them
for one another. If among a nation of hunters, for exam-
ple, it ufually cofls twice the labour to kill a beaver which
it does to kill a deer, one beaver fhould naturally exchange
for or be worth two deer. It is natural that what is ufually
the produce of two days or two hours labour, fhould be
worth double of what is ufually the produce of one day's
or one hour's labour.
If the one fpecies of labour fhould be more fevere than
the other, fome allowance will naturally be made for this
fuperior hardfliip ; and the produce of one hour's labour in
the one way may frequently exchange for that of two hours
labour in the other.
Or if the one fpecies of labour requires an uncommon
degree of dexterity and ingenuity, the efleem which men
have for fuch talents, will naturally give a value to their
produce, fuperior to what would be due to the time em-
ployed about it. Such talents can feldom be acquired but
in confequence of long application, and the fuperior value
of their produce may frequently be no more than a reafon-
able compenfation for the time and labour which mufl be
fpent in acquiring them. In the advanced flate of fociety,
allowances of this kind, for fuperior hardfiup and fuperior
fkill, are commonly made in the wages of labour ; and
fomething of the fame kind muft probably have taken place
itt its earlieft and rudeft period.
In
4S THE NATURE ANt) CAUSES OF
In this flate of tilings, the whole produce of labour be-
longs to the labourer ; and the quantity of labour common-
ly employed in acquiring or producing any commodity, is
the only circumilance which can regulate the quantity of
labour which it ought commonly to purchafe, command,
or exchange for.
As foon as flock has accumulated in the hands of particu-
lar perfons, fome of them will naturally ernploy it in fetting
to work induftrious people, whom they will fupply with ma-
terials and fubfiilence, in order to make a profit by the fale
of their w^ork, or by what their labour adds to the value of
the materials. In exchanging the complete rnanufafture
eitli.er for money, for labour, or for other goods, over and
above what may be fLiflicient to pay the price of the materials
and the wages of the workmen, fomething muff; be given for
die profits of the undertaker of the work who hazards his
flock in this adventure. The value which the workmen add
to the materials, therefore, refolves itfelf in this cafe into
two partSj of which the one pays their wages, the other the
profits of their employer upon the whole Hock of materials
and wages which he advanced. He could have no intereft
to employ them, unlefs he expected from the fale of their
work fomething more than what was fufhcient to replace
his (lock to him ; and he could have no intereft to employ^
a great ftock rather than a fmall one, unlefs his profits were
to bear fome proportion to the extent of his ftock..
The profits of ftock, it may perhaps be thought, are only
a different name for the wages of a particular fort of labour,,
the labour of infpeftion and direftion. They are, however,
altogether different, are regulated by quite different princi-
ples, and bear no proportion to the quantity, the hardfliip,
or the ingenuity of this fuppofed labour of infpe6t:ion and di-
rection. They are regulated altogether by the value of the
{lock employed, and are greater or fmaller in proportion to
the extent of this ftock. Let us fuppofe, for example, that
in fome particular place, where the common" annual profits
of manufacluring ftock are ten per cent, there are two difte-
rent manufa£lures, in each of which twenty workmen are
employed at the rate of fifteen pounds a year each, or at the
expence of three hundred a year in each manufaftory. Let
us fuppofe too, that the coarfe materials annually wrought up
in the one coil only feven hundred pounds, while the finer
materials
THE WEALTH OF NATIONS. 49
materials, in the other coft feven thoufand. The capital an-
nually employed in the one v/ill in this cafe amount only to
one thoufand pounds ; whereas that employed in the other
will amount to feven thoufand three hundred pounds. At
the rate of ten per cent, therefore, the undertaker of the
one will expefh an yearly profit of about one hundred pounds
only •, while that of the other will cxpeft about (c^cn hun-
dred and thirty pounds. But though their profits are fo very
different, their labour of infpeftion and direction may be
either altogether or very nearly the fame. In many great
works, almofl: the whole labour of this kind is committed
to fome principal clerk. His wages properly exprefs the
value of this labour of infpe6lion and direfticn. Though
in fettling them fome regard is had commonly, not only to
his labour and ikill, but to the truft which is repofed in him,
yet they never bear any regular proportion to the capital of
which he overfees the management ; and the owner of this
capital, though, he is thus difcharged of iilmoit all labour,
ftill expe6ls that his profits fhould bear a proportion to his
capital. In the price of commodities, therefore, the profits
of ftock conftitute a component part altogether different
from the wages of labour, and regulated by different prin-
ciples.
In this ftate of things, the whole produce of labour does
not always belong to the labourer. He mufh in moft cafes
fhare it with the owner of the ftock which employs him.
Neither is the quantity of labour commonly employed in
acquiring or producing any commodity, the only circum-
ftance which can regulate the quantity which it ought com-
monly to purchafe, comm.and, or exchange for. An addi-
tional quantity, it is evident, muft be due for the profits
of the ftock which advanced the w^ages and furniflied the
materials of that labour.
As foon as the land of any country has all become pri-
vate property, the landlords, like all other men, have to reap
where they never fowed, and dem.and a rent even for its
natural produce. The wood of the foreft, the grafs of the
field, and all the natural fruits of the earth, which, when
land was in common, coft the labourer only the trouble of
gathering them, come, even to him, to have an additional
price fixed upon them. He muft then pay for the licence
to gather them ; and muft give up to the landlord a portion
of what his labour either collects or produces. This por-
VoL. I. E t on.
§0 THE NATURE AND CAUSES OF
tion, or, what conies to the fame thing, the price of this
portion, conftitutes the rent of land, and in the price of the
greater part of commodities makes a third component part.
The real value of all the different component parts of
price, it miiil be obferved, is meafured by the quantity of la-
bour which they can, each of them, purchafe or command.
Labour meafures the value not only of that part of price
which refolves itfelf ir>to labour, but of that which refolves-
itfelf into rent, and of that which refolves itfelf into profit.
In every foclety the price of every commodity finally re-
folves itfelf into fome one or other, or all of thofe three
parts *, and in every improved fociety, all the three enter
more or lefs, as component parts, into the price of the far
greater part of commodities.
In the price of corn, for example, one part pays the rent
of the landlord, another pays the wages or maintenance of
the labourers and labouring cattle em.ployed in producing it,
and the third pays the profit of the farmer. Thefe three
parts fcem either immediately or ultimately to make up the
whole price of corn. A fourth part, it may perhaps he
thought, is neceffary for replacing the flock of the farmer,
or for compenfating the wear and tear of his labouring cat-
tle, and other inllruments of hufbandry. But it mud be
confidered that the price of any inilrument of hufbandry,
inch as a labouring horfe, is itfelf made up of the fame three
parts ; the rent of the land upon which he is reared, the
labour of tending and rearing him, and the profits of the
farmer v/ho advances both the rent of this land, and the
wages of his labour. Though the price of the corn, there-
fore, may pay the price as well as the maintenance of the
horfe, the whole price ftill refolves itfelf either immedi-
ately or ultimately into the fame three parts of rent, labour
and profit.
In the price of flour or meal, we mufl add to the price
of the corn, the profits of the miller, and the wages of his
fervants j in the price of bread, the profits of the baker,
and the wages of his fervants ; and in the price of both,
the labour of tranfporting the corn from the houfe of the
f^Armer to that of the miller, and from that of the miller to
tliat
THE WEALTH OF NATIONS. 51
that of the baker, together with the profits of thofe who ad-
vance the wages of that labour.
The price of flax refolves itfelf into the fame three parts
as that of corn. In the price of Hnen we mull add to this
price the wages of the flax-dreffer, of the fpinner, of the
v/eaver, of the bleacher, &c. together with the profits of
their refpe£live employers.
As any particular comm.odity comes to be more manufac-
tured, that part of the price which refolves itfelf into wages
and profit, comes to be greater in pi'oportion to that which
refolves itfelf into rent. In the progrefs of the manufac-
ture, not only the number of profits increafe, but every
fubfequent profit is greater than the foregoing ; becauf-i the
capital from which it is derived mufl always be greater.
The capital which employs the weavers, for example, muft
be greater than that which employs the fpinners j becaufe it
not only replaces that capital with its profits, but pays, be-
fides, the wages of the v/eavers ; and the profits mufl al-
ways bear fome proportion to the capital.
In the mofb improved focieties, however, there are always
a few commodities of which the price refolves itfelf into two
parts only, the wages of labour, and the profits of ftock ;
and a ftill fmaller number in which it confifts altogether in
the wages of labour. In the price of fea-fifh, for example,
one part pays the labour of the fifliermen, and the other the
profits of the capital employed in the fiftiery. Rent very fe!-
dom makes any part of it, though it does fometimes, as I
fliall fhew hereafter. It is otherwife, at leaft through the
greater part of Europe, in river fiflieries. A falmon fifhery
pays a rent, and rent, though it cannot well be called the
rent of land, makes a part of the price of a falmon as well
as wages and profit. In fome parts of Scotland a few poor
people make a trade of gathering, along the fea-fhore, tliofe
little variegated fi.ones commonly known by the name of
Scotch pebbles. The price which is paid to them bv the
ftone-cutter is altogether the v/ages of their labour 5 neither
rent nor profit make any part of it.
But the whole price of any commodity muft fi;i]l finally
refolve itfelf into fome one or other, or all of thofe three
parts; as whatever part of it remains after paying the rent of
E 2 ' the
52 THE NATURE AND CAUSES OF
the land, and the price of^the whole labour employed in
raifing-, manufa^luring, and brmging it to market, mufl nc-
ceflarily be profit to fomebody.
iVs the price or exchangeable value of every particular
^ commodity, taken feparately, refolves itfelf into fome one or
other or all of thole three parts; fo that of all the commo-
dities which compofe the whole annual produce of the labour
cf every country, taken complexly, muft refolve itfelf into
the fame three parts, and be parcelled out among different
inhabitants of the country, either as the M'^ages of their la-
bour, the profits of their flock, or the rent of their land.
The whole of what is annually either coUedf ed or produced
by the labour of every fociety, or what comes to the fame
thing, the whole price of it, is in this manner originally
diftributed among fom^e of its different members. Wages,
profit, and rent, are the three original fources of all revenue
as well as of all exchangeable value. All other revenue is
ultimately derived from ibme One or other of thefe.
"Whoever derives his revenue from a fund which is his
ovvn, mud draw it either from his labour, from his ftock, or
from his land. The revenue derived from labour is called
wages. That derived from ilock, by the perfon who rria-
nages or employs it, is called profit. That derived from it
by the perfon who does not em.ploy it himfelf, but lends it to
another, is called the intereil or the ufe of money. It is the
compenfation v/hich the borrower pays to the lender, for the
profit which he has an opporfunit)'- of making by the ufe of
the monG)'-.. Part of that profit naturally belong;? to the bor-
rovv^er, wHo runs the rrrk and takes the trouble of employing
it ; and part to the lender, who aitords him the opportunity
of making this profit* The intereft of money is always a de-
rivative revenue, which, if it is not paid from the profit
which is made by the ufj c-f the money, mufb be paid from
fome other fcurce ox revenue,unlefs perhaps the borrov/er is
a fiiendthrift, who contrails a fecond debt in order to pay the
intereft of the fivfl. The revenue which proceeds altogether
from Ir.nd^ is called' rent, and belongs to the landlord. The
revenue cf the farmer is derived partly from his labour, and
partly from his ftock. To him, land is only the inftrument
which enables him to earn the wages of this labour, and to
make the profits of this ftock. All taxes, and all the revenue
which is founded upon them,, all falaries, penfions^, and an-
nuities
THE WEALTH OF NATIONS. r^
^ ^
iiultics of every kind, are ultlmjitely derived from fome one
or other of thofe three original fources of revenue, and are
paid either immediately or mediately from the wages of la-
bour, the profits of ftock, or the rent of land.
When thofe three dilxerent forts of revenue belong to dif-
ferent perfons, they are readily diftinguiihed; but when they
belong to the fame they are fometimes confounded with one
another, at leaft in common language.
A GENTLEM.AN who farms a part of his ov/n eflate, after
paying the expence of cultivation, lliould gain both the rent
of the landlord and the profit of the farmer. He is apt to
denominate, hov.xver, his whole gain, profit, and thus con-
founds rent with profit, at leaft in com.mon language. The
greater part of our North American and Well Indian plantr
ers are in this fituatiouc They farm, the greater- part of
them, their own eftates, and accordingly we feldom hear of
the rent of a plantation^ but frequently of its profit.
Common farmers feldom employ any overfeer to direcfl
the general operations of the farm. They generally too work
a good deal with their own hands., as plouglimen, harrov/-
ers, ^c. What remains of the crop alter paying the rent,
therefore, fiiould not only replace to them their Itock em-
ployed in c^altivation, together with its ordinary profits, but
pay them the wages wdiich are due to them, both as labour-
ers and overfeerse Whatever remains, however, after pay-
ing the rent and keeping up the ftock, is called profit. But
wages evidently make a par^ of it. The farmer by faving
thefe wages, muft neceflarily gain them. Wages, therefore,
are in this cafe confounded with profit.
An independent manufa<fi;urer, who has flock enough both
to purchafe materials and to maintain himfelf till he can
carry his work to market, fliould gain both the wages of a
journey mxan who works under a mailer, and the profit which
that mafler makes by the fale of the journeyman's work.
His whole gains, however, are commonly called profit, and '
wages are, in this cafe too, confounded with profit.
A GARDENER who Cultivates his own garden v/ith his
own hands, unites in his own perfon the tlnxe different cha-
raclcrs, of landlord, farmer, and labourer. His produce,
therefore,
54 THE NATURE AND CAUSES O^
tKerefore, fliould pay him the rent of the firfl, the profit of
the fecond, and the wages of the third. The whole, how-
ever, is commonly confidered as the earnings of his labour.
Both rent and profit are in this cafe, confounded with wages.
As in a civilized country there are but few commodities of
which the exchangeable value arifes from labour only, rent
and profit contributing largely to that of the far greater
part of them, fo the annual produce of its labour will always
be fulficient to purchafe or command a much greater quan-
tity of labour than what was employed in raifing, prepar-
ing, and bringing that produce to market. If the fociety
was annually to employ all the labour which it can annually
purchafe, as the quantity of labour would increafe great-
ly every year, fo the produce of every fucceeding year would
be of vaftlv greater value than that of the foregoing. But
there is no country in which the whole annual produce is
employed in maintaining the induftrious. The idle every
w^here confumea great part of it; and according to the dif-
ferent proportions in w^hich it is annually divided between
thofe two different orders of people, its ordinary or average
value mufl either annually increafe or diminifh, or continue
the fame from one year to another=
CHAP.
THE WEALTH OF NATIONS. 55
CHAP. VIL
Of the natural and market Price of Commodities,
X HERE is in every lociety or neighbourhood an ordi-
nary or average rate both of wages and profit in every differ-
ent employment of labour and ftock. This rate is naturally
regulated, as I fliall (l^.ov/ hereafter, partly by the general
circumftances of the fociety, iheir riehes or poverty, their
advancing, ftationary, or declining condition; and partly
by the particular nature of each employment.
There is likewife in every fociety or neighbourliood aw
ordinary or average rate of rent, which is regulated too, as I
{hall {how hereafter, partly by the general circumftances of
the fociety or neighbourhood in which the land is fituated,
and partly by the natural or improved fertility of the
land.
These ordinary or average rates may be called the natu-
ral rates of wages, profit, and rent, at the time and place
in which they commonly prevail.
When the price of any commodity is neither more nor
lefs than what is fufficient to pay the rent of the land, the
wages of the labour, and the profits of the ftock employed
in raifing, preparing, and bringing it to market, according
to their natural rates, the commodity is then fold for what
may be called its natural price.
The commodity is then fold precifely for what it is worth,
or for what it really cofts the perfon who brings it to market ;
for though' in common language what is called the prime coft
of any commodity does not comprehend the profit of the
perfon who is to fell it again, yet if he fells it at a price
which does not allow him the ordinary rate of profit in his
neighbourhood, he is evidently a lofer by the trade; fince by
employing
$6 THE NATURE AND CAUSES OF
employing his flock in fomc other way he might have made
that profit. His profit, befides, is his revenue, the proper
fund of his fubfiflence. As, while he is preparing and bring-
ing the goods to market, he advances to his workmen their
wages, or their fubfifliencej fo he advances to himfelf, in
the fame manner, his own fubfiilcnce, which is generally
luitable to the profit which h^ may reafonably expe6l from
the fde of his goods. Unlefs they yield him this profit,
therefore, they do not repay him. what they may very pro-
perly be faid to have really cofl him.
Though the price, therefore, which leaves him this pro^
fit, is not always the lowed at which a dealer may fc^metimes
f^U his goods, it is the loweft at which he is likely to fell
them for any confiderable time; at leafl where there is per-
feti liberty, or where he may change his trade as often as
he pieafes.
The actual price at which any commodity is commonly
fold is called its market price. It may either be above, or
below, or exactly th^ fame with its natural price.
The market price of every particular commodity is regu-
lated by the proportion between the quantity whie^i is actu-
ally brought to market, and the demand of thofe who are
^wliiing to pay the natural price of the commodity, or the
whole value of the rent, labour, and profit, which muil be
paid in order to bring it thither. Such people may be e;alled
the efFedtual demanders, and their demand the effectual de-
mand ; CmcQ it may be fufhcient to eiTecl^uate the bringing
of the commodity to market. It is different from the abfo-
lute demand. A very poor man may be faid in fome fenfe
to have a demand for a coach and fix; he might like to have
it; but his demand is not an eifevflual demand, as the com-
modity can never be brought to market in order to fatisfy it.
When the quantity of any commodity which is brought
to maijket, falls lliort of the effectual demand, all thofe who
are willing to pay the whole value of the rent, wages, and
profit, which mufl be paid in order to bring it thither, can-
not be fupplied with the quantity which they want. Rather
than want it altogether, fome of them will be willing to give
more. A com.petition will immediately begin among them,
and the market price will rife more or lefs above tlie natural
price,
THE WEALTH OF NATIONS. 57
price, according as either the greatnefs of the deficiency, or
the wealth and wanton luxury of the competitors, happen to
animate more or lefs the eageracfs of the competition^
Among competitors of equal wealth and luxury the fame de-
ficiency will generally occafion a more or lefs eager competi-
tion, according as the acquifition of the commodity happens
to be of more or lefs importance to them. Hence the exorbi-
tant price of the necefiaries of life during the blockade of a
town or in a famine.
When the quantity brought to market exceeds the efFec--
tual demand, it cannot be all fold to thofe who are willing to
pay the whole value of the rent, wages and profit, which
muft be paid in order to bring it thither. Some part muft be
fold to thofe who are willing to pay lefs, and the low price
which they give for it mud reduce the price of the whole.
The market price will fink more or lefs below the natural
price, according as the greatnefs of the excefs increafes more
orlefs the competition of the fellers, or according as it hap-
pens to be more or lefs important to them to get immediately
rid of the commodity. The fame excefs in the importation
of perifhable, will occafion a much greater competition than
in that of durable commodities; in the importation of
oranges, for example, than in that of old iron.
When the quantity brought to market is juft fufficient to
fupply the efFecf ual demand and no more, the market price
naturally comes to be either exa6lly, or as nearly as can be
judged of, the fame with the natural price. The whole
quantity upon hand can be difpofed of for this price, and
cannot be difpofed of for more. The competition of the
different dealers obliges them all to accept of this price, but
does not oblige them to accept of lefs.
The quantity of every commodity brought to market na-
turally fuits itfelf to the efFeclual demand. It Is the intereil
of all thofe who employ their land, labour, or ilock, in bring-
ing any commodity to market, that the quantity never
fhould exceed the effe£l:ual demand; and it is the intereft of
all other people that it never fhould fall fhort of that demand.
If at any time it exceeds the efFeclual demand, fome of
the component parts of its price muft be paid below their
natural rate. If it is rent, the interefl of the landlords will
» immediately
;58 THE NATURE ^N^ CAUSES OF
immediate!-/ prompt them to withdraw a part of their land;
and if it is wages or profit, the intereft of the labourers in
the one cafe, and of their employers in the other, will
prompt them to withdraw a part of their labour or (lock
from this employment. The quantity brought to market will
ioon be no more than fufficient to fupply the effectual de-
mand. AH the different parts of its price will rife to their
natural rate, and the whole price to its natural price.
If, on the contrary, the quantity brought to market fhould
at any time fall fliort of the effecliual demand, fome of the
component parts of its price mufl rife above their natural
rate. If it is rent, the interefl of all other landlords will na-
turally prompt them to prepare more land for the rainng of
this commodity, if it is wages or profit, the intereft of all
other labourers and dealers will fbon prompt them to employ
more labour and ftock in preparing and bringing it to mar-
ket. The quantity brought thither will foon be fufhcient to
fupply the effectual demand. AH the different parts of its
price will foon fink to their natural rate, and the whole price
io its natural price.
The natural price, therefore, is, as it were, the central
price, to which the prices of all commodities are continually
gravitating. Different accidents may fometimes keep them
fufpended a good deal above it, and fometimes force them
down even fomev»^hat below it. But whatever may be the
obitacles which hinder them from fettling in this center of
repofe and continuance, they are conftantly tending toi
wards it.
The whole quantity of induftry annually employed in or-
4er to bring any commodity to market, naturally fuits itfelf
in this manner to the effe<ftual demand. It naturally aims at
brin^ring always that precife quantity thither which may
be fufficient to fupply, and no more than fupply, that de-
mand. ■ ■
But in fome employments the fame quantity of Induftry
will, in different years, produce very different quantities of
commodities; v/hile in others it will produce always the
fame or very nearly the fame. I'he fame number of labour-
ers in huft^andry will, in different years, produce very differ-
ent quantities of corn, wine, oil, hops, &c. But the fame
number
THE WEALTH OF NATIONS. 59
number of fpinners and weavers will every year produce the
fame or very nearly the fame quantity of linen and woollen
cloth. It is only the average produce of the one fpecies of
induftry which can be fuited in any rcfpeft to the effeifbual
demand i and as its actual produce is frequently much great-
er and frequently much lefs than its average produce, the
quantity of the commodities brouglit to market v/iil fome-
times exceed a good deal, and fometimes fall fliort a good
deal of the ciTeclual demands Even though that demand
therefore fliould continue always the fame, their market price
will be liable to great fiudluations, will fometimes fall a good
deal below, and fometimes rife a good deal above their natu-
ral price. In the other fpecies of induftry, the produce of
equal quantities of labour being always the fame, or very
nearly the fame, it can be more exactly fuited to the efK ac-
tual demand. While that demand continues the fame,
therefore, the market price of the commodities is likely to
do fo too, and to be either altogether, or ?^s nearly as can
be judged of, the fame M^th the natural price. That the
price of linen and woollen cloth is liable neither to fuch fre-
quent nor to fuch great variations as the price of corn, every
man's experience will inform him» The price of the one
fpecies of commodities varies only with the variations in the
demand: That of the other varies, not only with the varia-
tions in the demand, but with the much greater and morq
frequent variations in the quantity of what is brought tQ
market in order to fupply that demands
The occafional and temporary Hu(Sluations in the market
price of any commodity fall chiefly upon tliofe parts of its
price which refolve themfelves into wages and profit. That
part which refolves itfelf into rent is lefs afFe^f ed by them.
A rent certain in money is not in the leaft affected by them
either in its rate or in its value. A rent which confifts either
in a certain proportion or in a certain quantity of the rude
produce, is no doubt affedled in its yearly value by all the oc-
cafional and temporary flu£luations in the market price of
that rude produce : but it is feldom affe6f ed by them in its
yearly rate. In fettling the terms of the leafe, the landlord
and farmer endeavour, according to their bell judgment, to
adjuft that rate, not to the temporary and occafional, but to
the average and ordinary price of the produce.
Such
^'o THE NATURE AND CAUSES OF
Such fl urinations afFe£l both the value and the rate either
of wages or of profit, according as the market happens to be
either over-ftocked or under-ftocked with commodities or
with labour; with work done, or with work to be done. —
A public mourning raifes the price of black cloth (with
which the market is almolt always under-flocked upon fuch
occafions), and augments the profits of the merchants who
pofiefs any confiderable quantity of it. It has no efFe^l up.r
on the wages of the weavers. The market is under-ftocked
with commodities, not with labour j with work done, not
with work to be done. It raifes the wages of journeymen
tayiors. The market is here under- flocked with labour.
There is an effeftual demand for more labour, for more
work to be done than can be had. It fmks the price of
coloured filks and cloths, and thereby reduces, the profits of
the merchants who have any confiderable quantity of them
upon hand. It finks too the wages of the workmen employ-
ed in preparing fuch commodities, for which all demand is
flopped for fix months, perhaps for a twelvemonth. The
market is here over-ftocked both with commodities and with
Jaljour,
But though the market price of every particular com-
jnodity is in this mariner continually gravitating, if one may
fay fo, towards the natural price, yet fometimes particular
accidents, fometimes natural caufes, and fometimes parti-
cular regulations of police, may, in many commodities,
keep up the market price, for a long time together, a good
deal above the natural price.
AYhen by an increafe in the efFecflual demand, the market
price of fome particular Gommodity happens to rife a good
deal above the natural" price, thofe who employ their flocks
in fupplying that market are generally careful to conceal this
change- If it was commonly known, their great profit would
tempt fo many new rivals to employ their flocks in the fame
v/av, that, the eftlOual demand being fully fupplied, the
market price v.'ould foon be reduced to the natural price,
and perhaps for fome time even below it. If the market is
at a great dlftance from the refidence of thofe who fupply
it, they may fometiiTses be able to keep the fecret for feveral
years together, and may fo long enjoy their extraordinary
profits vv'ithout any nevv^ rivals. Secrets of this kind, hov/-
ever, it muil be acknowledged^ can feldom be long kept ;
and
THE WEALTH OF NATIONS. 6i
and the extraordinary profit can lafb very little longer than
they are kept.
Secrets in manufa£lures are capable of being longer
kept than fecrets in trade. A dyer who has found the mean.s
of producing a particular colour with materials which coil:
only half the price of thofe commonly made vSc of, may,
with good management, enjoy the advantage of his difcovery
as long as he lives, and even leave it as a legacy to his pof-
terity. His extraordinary gains arife from the high price
which is paid for his private labour. They properly confift
in the high wages of that labour. But as they are repeated
upon every part of his ftock, and as thefr whole amount
bears, upon that account, a regular proportion to it, they
are commonly confidered as extraordinary profits of (lock.
Such enhancements of the market price are evidently
the efPefb of particular, accidents, of which, however, the
operation may fometimes lail for many years together.
Some natural produ£l:ions require fuch a fnigularity of
foil and fituation, that all the land in a great country which
is fit for producing them, may not be fulFicient to fupply
the effecftuai demand. The whole quantity brought to mar-
ket, therefore, m.ay be difpofed of to tliofe who arc willing
to give more than what is fufficient to pay the rent of the
land which produced them, together with the wages of the
labour, and the profits of the ftcck which were employed in
preparing and bringing them to market, according to their
natural rates* Such commodities may continue for whole
centuries together to be fold at this high price j and that
part of it which refolves itfelf into the rent of land is in this
cafe the part which is generally paid above its natural rate.
The rent of the land which affords fuch fingular and elleem-
ed produ61ions, like the rent of fome vineyards in France
of a peculiarly happy foil and fituation, bears no regular
proportion to the rent of otiier equally fertile and equally
Vv-el]-cultivated land in its nei«;hbourhood. The washes of
the labour and the profits of the flock employed in bringing
fuch commodities to market, on the contrary, are feldom
out of their natural proportion to thofe of the other employ-
ments of labour and ftock in their neighbourhood..
Such
62 THE NATURE AND CAUSES OF
Such enhancements of the market price are evidently
the effeft of natural caufes which may hinder the effe£lual
demand from ever being fully fupplied, and which may
continue, therefore, to operate for ever.
A iMONOPOT.Y granted either to an individual or to a trad-
ing company has the fame efFe6t as a fecrct in trade or ma-
nufachires. Tlie monopoliils, by keeping the market con-
flantly under-fbocked, by never fully fupplying the elTeftual
demand, fell their commodities much above the natural
price, and raiie their emoluments, whether they confift in
wages or proiit, greatly above their natural rate.
The pr'ce of monopoly is upon every occafion the higheft
which can be got. The natural price, or the price of free
competition, on the contrary, is the lowed which can be
taken, not upon every occafion, indeed, but for any confider-
able time together. The one is upon every occafion the
higheft which can be fqueezed out of the buyers, or which,
it is fuppofed, th6y will confent to give : The other is the
loweft which the fellers can commonly afford to take, and
at the fame time continue their bufinefs.
The excluiive privileges of corporations, ftatutes of ap-
prenticefliip, and all thofe laws which reitrain, in particular
employments, the competition to a fmaller number than
might otherwife go into them, have the fame tendency,
though in a lefs degree. They are a fort of enlarged mono-
polies, and may frequently, for ages together and in whole
clafTes of employments, keep up the market price of particu-
lar commodities above the natural price, and maintain both
the wages of the labour and the profits of the (lock employ-
ed about them fomewhat above their natural rate.
Such enhancements of the market price m.ay lad as long
as the regulations of police which give occafion to them.
The market price of any particular commodity, though
it may continue Ion? above, can feldom continue lon-i be-
low its natural price. Whatever part of it was paid belo\V
tliC natural rate, the perfons whofe intereft it atfe6led would
imm.ediately feel the lofs, and would immediately withdraw
either fo much land, or fo much labour, or fo much dock,
li'cm being employed about it, that the quantity brought to
market
THE WEALTH OF NATrONS. 63
market would foon be no more than fufficlent to fupply the
efTedlual demand. Its market price, therefore, would foon
rife to the natural price. This at leafl would be the cafsi
where there was perfe£l liberty.
The fame ftatutes of apprenticefliip and other corpora-
tion laws indeed, which, when a manufafture is in profpe-
rity, enable the workman to raife his wages a good deal above
their natural rate, fometimes oblige him, v/hen it decays, "to
let them down a good deal below it. As in the one cafo
they exclude many people from his employment, fo in the
other they exclude him from many employments. The
effecl of fuch regulation, however, is not near fo durable
in finking the workman's wages below, as in raifing theni
above their natural rate. Their operation in the one may
endure for many centuries, but in the other it can laft no
longer than the lives of fome of the workmen who were
bred to the bufinefs in the time of its profperity. When
they are gone, the number of thofe who are afterwards edu-
cated to the trade will naturally fuit itfelf to the efFeftual
demand. The police muft be as violent as that of Indoftan
or antient Egypt (where every man was bound by a princi-
ple of religion to follow the occupation of his father, and
was fuppofed to com.mit the molt horrid facrilege if he
changed it for another) which can in any particular em-
ployment, and for feveral generations together, fink either
the wages of labour or the profits of ftock below their natu-
ral rate.
This is all that I think neceffary to be obferved at prefent
concerning the deviations, whether cccafional or permanent,
of the market price of commodities from the natural price.
The natural price itfelf varies with the natural rate of
each of its component partSj of wages, profit and rent ; and
in every fociety this rate varies according to their circumftan-
ces, according to their riches or poverty, their advancing,
flationary, or declining condition. I fhall, in the four fol-
lowing chapters, endeavour to explain, as fully and diftin^l-
ly as I can, the caufes of thofe different variations.
FftiST, I fliall endeavour to explain what are the circum-
ftances which naturally determine the rate of wages, and in
what manner tliofe circumfhances are afiected bv the riches
or
64 THE NATURE AND CAUSES OF
or poverty, by the advancing, ftationary, or declining ftatc
of the fociety.
Secondly, I fliall endeavour to fliow what are the cir-
cumftances which naturally determine the rate of profit, and
in what manner too thofe circumfhances are affecSled by the
.like variations in the flate of the fociety.
Though pecuniary wages and profit are very different in
the different employments of labour and (lock ; yet a certain
proportion feems commonly to take place between both the
pecuniary wages in all the different employments of labour,
and the pecuniary profits in all the different employments of
ftock. This proportion, it will appear hereafter, depends
partly upon the nature of the different employments, and
partly upon the different laws and policy of the fociety in
which they are carried on. But though in many refpefts
dependent upon the laws and policy, this proportion feems
to be little affe£f ed by the riches or poverty of that fociety, by
its advancing, flationary, or declining condition; but to
rem.ain the fame, or very nearly the fame, in all thofe dif-
ferent flates. I fhall, in the third place, endeavour to ex-
plain all the different circumftances which regulate this pro-
portion.
In the fourth and laft place, I f!iari endeavour to fhow
v/hat are the circumftances which regulate the rent of land,
and which either raife or lower the real price of all the dif-
ferent fubdances which it produces.
CHAP.
THE WEALTH OF NATIONS. 6$
CHAP. viir.
Of the Wages of Labour^
X HE produce of labour conftitutes the natural recom*
pence or wages of labour*.
In that original ftate of things, which precedes both the
appropriation of land and the accumulation of flock, the
whole produce of labour belongs to the labourer. He has
neither landlord nor mafter to (hare with him.
H7\D this {late continued, the wages of labour would
have augmented with all thofe improvements in its produc-
tive powers, to which the divifion of labour gives occafion.
All things would gradually have become cheaper. They
would have been produced by a fmaller quantity of labour ;
and as the commodities produced by equal quantities of la-
bour would naturally in this ftate of things be exchanged
for one another, they would have been purchafed likewife
with the produce of a fmaller quantity.
But though all things would have become cheaper in rea-
lity, in appearance many things might have become dearer
than before, or have been exchanged for a greater quantity
of other goods. Let us fuppofe, for example, that in the
greater part of employments the produdlive powers of labour
had been improved to tenfold, or that a day's labour could
produce ten times the quantity of work which it had done
originally ; but that in a particular employment they had
been improved only to double, or that a day's labour could
produce only twice the quantity of work which it had done
before. In exchanging the produce of a day's labour in the
Vol. L F greater
66 THE NATURE AND CAUSES OF
greater part of employments, for that of a day's labour in
this particular one, ten times the original quantity of work
in them would purchafe only twice the original quantity in
it. Any particular quantity in it, therefore, a pound weight,
for example, would appear to be five times dearer than be-
fore. In reality, however, it would be twice as cheap.
Though it required five times the quantity of other goods
to purchafe it, it would require only half the quantity of
labour either to purchafe or to produce it. The acquifi-
tion, therefore, would be twice as eafy as before.
But this original ftate of things, in which the labourer
enjoyed the whole produce of his own labour, could not laft
beyond the firft introdu£lion of the appropriation of land -
and the accumulation of ftock. It was at an end, therefore,
long before the moft confiderable improvements were mad^
in the productive powers of labour, and it would be to no
purpofe to trace farther what might have been its effects
upon the recompence or wages of labour.
As foon as land becomes private property, the landlord
demands a fhareof almoft all the produce which the labourer
can either raife, or collect from it. His rent makes the
firft deduction from the produce of the labour which is em-
ployed upon land.
It feldom happens that the perfon who tills the ground
has wherewithal to maintain himfelf till he reaps the har-
veft. His maintenance is generally advanced to him from
the ftock of a mafler, the farmer who employs him, and
who would have no intereft to employ him, unlefs he was
to (hare in the produce of his labour, or unlefs his ftock
was to be replaced to him with a profit. This profit makes
a fecond dedu£tion from the produce of the labour w^hich is
employed upon land.
The produce of almoft all other labour is liable to the like
deduction of profit. In all arts and manufactures the greater
part of the workmen ftand in need of a mafter to advance
them the materials of their work, and their wages and main-
tenance till it be compleated. He fhares in the produce of
their labour, or in the value which it adds to the materials
upon
THE WEALTH OF NATIONS. 67
Upon which it is beftowed ; and in this fliare confiils his
profit.
It fometimes happens, indeed, that a fmgle independent
workman has Itock fufficient both to purchafe the materials
of his work, and to maintain himfelf till it be compleatedo
He is both mafter and workman, and enjoys the whole pro-
duce of his own labour, or the whole value which it adds
to the materials upon which it is bellowed. It includes
what are ufually two diilinft revenues, belonging to two
diftInO: peifons, the profits of fcock, and the wages of
labour.
Such cafes, however^ are not very frequent, and in
every part of Europe, twenty workmen ferve under a mafter
for one that is independent •, and the wages of labour arc
every where underftood to be, what they ufually are, when
the labourer is one perfon, and the owner of the flock
wdiich employs him another,
«-
What are the common wages of labour depends everV
where upon the contra£l ufually made between thofe two
parties, whofe interells are by no means the fame. The
workmen deiire to get as much, the mafters to give as little
as pofTible. The former are difpofed to combine in order
to raife, the latter in order to lower the wages of labour.
It is not, however, difficult to forefee which of the two
parties muft, upon all ordinary occaiionsjhavethe advantage
in the difpute, and force the other into a compliance with
their terms. The maflers, being fewer in number, can
combine much more eafdy 5 and the law, befides, authorifes,
or at leafl does not prohibit their combinations, while it pro-
hibits thofe of the workmen. We have no a6l:s of parlia-
ment againft combining to lower the price of work ; but
many againfl combining to raife it. In all fuch difputes the
mafters can hold out much longer. A landlord, a farmer, a
mafter manufacturer, or merchant, though they did not em-
ploy a fmgle workman, could generally live a year or two
upon the flocks which they have already acquired. Many
workmen could not fubfift a week, a few could fubfift a
month, and fcarce any a year without employment. In
the long-run the workman may be as neccllary to his
F 2 mafter
68 THE NATURE AND CAUSES OF
mafter as his mafler is to him •, but the necelTitv is not fo
immediate.
"We rarely hear, it has been faid, of the combinations of
mafters *, though frequently of thofe of workmen. But who-
ever imagines, upon Ihis account, that r?iafters rarely com-
bine, is as ignorant of the world as of the fubjecft. Mafters
are always and every where in a fort of tacit, but conftant
and uniform combination, not to raife the v/ages of labour
above their aflual rate. To violate this combination is every
where a moft unpopular aftion,. and a fort of reproach to a
mafter among his neighbours and equals. We fel do m, in-
deed, hear of this combination, becaufe it is the ufual, and
one may fay, the natural ftate of things which nobody ever
hears of. Mafters too fometimes enter into particular combi-
nations to fm'k the wages of labour even below this rate.
Thefe are always conducted with the utmoft fifence and fe-
crecy, till the moment of execution^ and when the workmen
yield, as they fometimes do, without refiftance, though fe-
verely felt by them, they are never heard of by other people.
Such combinations, however, are frequently refifted by a
contrary defenfive combination of the workmen \ who fome-
times too, without any provocation of this kind, combineof
their own accord to raife the price of their labour. Their
ufual pretences are, fometimes the high price of provifions j
fometimes the great profit which their mafters make by their
work. But whether their combinations be offenfive or de-
fenfive, they are always abundantly heard of. In order to
bring the point to a fpeedy decifion, 'Aey have always re-
courfe to the loudeft clamour, and fometimes to the moft
fliocking violence and outrage. They are defperate, and a£t
with the folly and extravagance of defperate men, who muft
either ftarve, or frighten their mafters into an immediate
compliance with their demands. The mafters upon thefe
occafions arejuft as clamorous upon the other fide, and never
ceafe to call aloud for the afliftance of the civil magiftrate,
and the rigorous execution of thofe laws which have been
enabled with fo much feverity againft the combinations of
fervants, labourers, and journeymen. The workmen, ac-
cordingly, very feldom derive any advantage from the vio-
lence of thofe tumultuous combinations, which, partly from
_the interpofition of the civil magiftrate, partly from the fu-
perior fteadinefs of the mafters, partly from the neceflity
which tlie greater part of workmen are under of fub-
mitting
THE WEALTH OF NATIONS. 69
mitting for the fake of prefent fubfiftence, generally end in
nothing, but the punifliment or ruin of the ring-leaders.
But though in difputes with their workmen, mafters
muft generally have the advantage, there is however a cer-
tain rate below which it feems impoffibie to reduce, for any
confiderable time, the ordinary wages even of the loweit
fpecies of labour^
A Man muft always live by his work, and his wages
muft at leaft be fufficient to mamtain him. They muft even
upon moft occafions be fomevvhat more ; otherwife it
-would be impoflible for him to bring up a family, and the
race of fuch workm-en could not laft beyond the firft gene-
ration. Mr. Cantillon feems, upon this account, to fup-
pofe that the loweft fpecies of common labourers muft every
where earn at leaft double their own maintenance, in order
that one with another they may be enabled to bring up two
children •, the labour of the wife, on account of her necef-*
fary attendance on the children, being fuppofed no more
than fufficient to provide for herfeif. But one-half the
children born, it is computed, die before the age of man-
hood. The pooreft labourers, therefore, according to this
account, muft, one with another, attempt to rear at leaft
four children in order that two may have an equal chance
of living to that age. But the neceffary maintenance of
four children, it is fuppofed, may be nearly equal to that
of one man. The labour of an able-bodied flave, the fame
author adds, iscomputed to be worth double hismaintenance;
and that of the m.eaneft labo'Urer, he thinks, cannot be
worth lefs than that of an able-bodied flave. Thus far at
leaft feems certain, that, in order to bring up a family, the
labour of the hufb.and and wife together muft, even in the
loweft fpecies of common labour, be able to earn fomething
more than what is precifely neceCary for their own
maintenance •, but in what proportion, whether in that
above-mentioned, or in any other, I ibali not take upon me
to determine.
There are certain circumftanccs, however, which
fometimes give the labourers an advantage, and enable
them to raife their wages confiderably above this rate ;
evidently the loweft which is Qonfiftent with common hu-
manity.
When
70 THE NATURE AND CAUSES OF
When in <iny country the dem?ind for thofe who hVe by
wages ; labourers, journeymen, fervants of every kind, is
continually increafing ; when every year furniflies employ-
ment for a greater number than had been employed the year
before, the workmen have no occafion to combine in order
to raife their wages. The fcarcity of hands occafions a com-
petition among mafters, who bid againft one another, in
order to get workmen, and thus voluntarily break through '
the natural combination of mafters not to raife wages.
The demand for thofe who live by wages, it is evident,
cannot increafe but in proportion to the increafe of the funds
which are deftined for the payment of wages. Thefe funds
are of two kinds ; firft, the revenue which is over and above
what is necefTary for the maintenance •, and, fecondly, the
iiock which is over and above what is necelTary for the em-
ployment of their mafters.
When the landlord, annuitant, or monied man, has a
greater revenue than what he judges fufficient to maintain
his own family, he employs either the whole or a part of
the furplus in maintaining one or more menial fervants.
Increafe this furplus, and he will naturally increafe the
number of thofe fervants.
When an independent workman, fuch as a weaver or
fhoe-maker, has got more ftock than what is fufficient to
purchafe the materials of his own work, and to maintain
himfelf till he can difpofe of it, he naturally employs one
or more journeymen with the furplus. In order to make a
profit by their work. Increafe this furplus, and he will
naturally increafe the number of his journeymen.
The demand for thofe who live by wages, therefore, ne-
ceflarily increafeswith the increafe of the revenue and ftock
of every country, and cannot poffibly increafe without it.
The increafe of revenue and ftock is the increafe of nati-
onal wealth. The demand for thofe who live by wages^
therefore, naturally increafes with the increafe of national
wealth, and cannot poffibly increafe without it.
It is not the actual greatnefs of- national wealth, but its
continual increafe, which occafions a rife in the wages of la-
bour. It is not, accordingly, in the richeft countries, hut in
THE WEALTH OF NATIONS. 71
the moft thriving, or in thofe which are growing rich the
fafteft, that the wages of labour are higheft. England is cer-
tainly, in the prefent times, a much richer country than any
part of North America. The wages of labour, however,
are much higher in North America than in any part of Eng-
land. In the province of New York, common labourers
earn * three fliillings and fixpence currency, equal to two
iliillings fterling, a day -, fliip carpenters, ten fliillings and
fixpence currency, with a pint of rum worth fix-pence fler-
Jing, equal in all to fix fl-iillings and fixpence fterling ; houfe
carpenters and bricklayers, eight fliillings currency^, equal
to four fliillings and fixpence fterling ; journeymen taylors,
five fliillings currency, equal to about two fliillings and ten-
pence fterling, Thefe prices are all above the London
price ; and wages are faid to be as high in the other colonies
as in New York. The price of provifions is every where
in North America much lower than in England. A dearth
has never been known there. In the worft feafons, they
have always had a fiifficiency for themfelves, though lefs
for exportation. If the money price of labour, therefore,
be higher than it is any where in the mother country, its
real price, the real command of the neceflaries and conveni-
encies of life which it conveys to the labourer, muft be
Jiigher in a ftill greater proportion.
But thotigh North America is not yet fo rich as England,
it is much more thriving, and advancing with much greater
rapidity to the further acquifition of riches. Tlie moft deci-
five mark of the profperity of any couiitry is the increafe of
the number of lis inhabitants. In Great Britain, and moft
DtherEuropeancountries, ihey arenot fuppofed to double in
lefs than five hundred years. In the Britiih colonies in North
America, It has been found, that they double in twenty or
five-and- twenty years. Nor in the prefent times is this in-
creafe principally owing to the continual importation of new
inhabitants, but to the great multiplication of the fpecies.
Thofe who live to old age, it is faid, frequently fee there
from fifty to a hundred, and fomctimes many more, defcend-
ants from their own body Labour is there fo well rewarded,
that a numerous family of children, inftead of being a bur-
then, is a fource of opulence and profperity to the parents.
The labour of each child, before it can leave their houfe, Is
computed
* This was written in 1773, before the commencement of the diftur-
♦Janccs.
72 THE NATURE AND CAUSES OF
computed to be worth a hundred pounds clear gain to
them. A young widow with four or five young children,
who, among the middling or inferior ranks of people in
Europe, would have fo little chance for a fecond huihand,
is there frequently courted as a fort of fortune. The value
of children is the greateft of all encouragements to marriage,,
"VVe cannot, therefore, wonderthat the people in North Ame-
rica fhould generally marry very young. Notwithftanding
the great increafe occafioned by fuch early marriages, there
is a continual complaint of the fcarcity of hands in North
America. The demand for labourers, the funds deftined
for maintaining them, increafe, it feems, ftill faftcr than
they can find labourers to employ.
Though the wealth of a country fhould be very great,
yet if it has been long ftationary, we mull not exped: to
find the wages of labour very high in it. The funds deftined
for the payment of wages, the revenue and ftock of its in-
habitants, mav be of the greateft extent, but if they have
continued for feveral centuries of the fame, or very nearly
of the fame extent, the number of labourers employed every
year could eafily fupply, and even more than fupply, the
number wanted the following year. There could feldom
be any fcarcity of hands, nor could the mafters be obliged
to bid againft one another in order to get them. The hands,
on the contrary, would, in this cafe, naturally multiply
beyond their employment. There would be a conftant
fcarcity of employment, and the labourers would be obliged
to bid againft one another in order to get it. If in fuch a
country the wages of labour had ever been more than fuf-
ficient to maintain the labourer, and to enable him to bring
up a family, the competition of the labourers and the in-^
tereft of the mafters would foon reduce them to this loweft
rate which is confiftent with common humanity. China
has been long one of the richeft, that is, one of the moft
fertile, beft cultivated, moft induftrious, and moft populous
countries in the world. It feems, however, to have been
long ftationary. Marco Polo, who vifited it more than
five hundred years ago, defcribes its cultivation, induftry,
and populoufnefs, almoft in the fame terms in which they
are defcribed by travellers in the prefent times. It had
perhaps, even long before his time, acquired the full com-
plement of riches which the nature of its laws and inftituti-
ons permits it to acquire. The accounts of all travellers,
inconfiftent
THE WEALTH OF NATIONS. " 73
inconfiftent in many other rerpe(ris, agree in the low wages
of labour, and in the clilHculty which a labourer finds in
bringing up a family in China. If by digging the ground
a whole day he can get what will purchafe a fmail quantity
of rice in the evening, he is contented. The condition
of artificers is, if polTible, flill w^orfe. Inftead of waiting
indolently in their work-houfv^s, for the calls of their cuf-
tomers, as in Europe, they are continually running about
the ftreets with the tools of their refpedlive trades, offering
their fervice, and as it were begging employjnent. The po^
verty of the lower ranks of people in China far furpafles that
of the mod beggarly nations in Europe. In the neighbour-
hood of Canton many hundred, it is commonly faid, manv
thoufand families have no habitation on the land, but live
conftantly in little filhing boats upon the rivers and canals.
The fubfiftence which they find there is fo fcanty, that they
are eager to filli up the naftieil garbage thrown over board
from any European flnp. Any carrion, the carcafe of a dead
dog or cat, for example, though half putrid and (linking,
is as welcome to them as the moll wholefome food to the
people of other countries. Marriage is encouraged in
China, not by the profitablenefs of children, but by the li-
berty of deilroying them. In all great tov/ns feveral are
every night expofed in the ftreet, or drowned like puppies
in the water. The performance of this horrid office is even
faid to be the avowed bufinefs by which feme people earn
their fubfiftence.
China, however, though it may perhaps ftand ftill, does
not feem to go backwards. Its towns are no- where deferted
by their inhabitants. The lands which had once been cul-
tivated are no~where neglected. The fame or very nearly
tliefame annual labour muft therefore continue to be per-
formed, and the funds deftined lor maintaining it muft not,
confequently, be fenfibly dimiiniftied. The loweft clafs of
fibourers, therefore, notwithftanding their fcanty fubfift-.
ence, muft fome way or another make fliift to ccntinue their
race fo far as to keep up their ufual numbers.
But it would be otherwife in a country wl ere the funds
deftined for the maintenance of labour were fenfibly d:2cay-
ing. Every year the demand for fervants and labourers
would, in all the different claiTes of employments,belefs thra
it had been the year before. Many who had been bred in
the fuperior clafies, not being able to find employment in
their
74 THE NATURE AND CAUSES OF
their own bufmefs, would be glad to feek it in the lowed.
TJie lowePt clafs being not only overftocked v/ith it« own
workmen, but with the overflowings of atU other clalTes,
the competition for employment would be fo great in it, as
to reduce the wages oi, labour to the mo:"!: miferable and
iea'TtT' fubfiftence of the labourer. Many v/ould not be able
to find emp'oyment even upon thefe hard terms, but would
either ftarve or be driven to feek a fubfiftence either by beg-
ging, or by the perpetration perhaps of the greateft enormi-
ties. Want, famine, and mortality would immediately
prerail in that clafs, and from thence extend themfelves to
all the fuperior claffes, till the number of inhabitants in the
country was reduced to what could eafily he maintained by
the revenue and ftock which remained in it, and which had
efcaped either the tyranny or calamity which had deftroyed
the reft. This perhaps is nearly the prefent ftate of Bengal,
and of fome other of the Englifli fettlements in the Eaft
Indies. In a fertile country which had before been much
depopulated, where fubfiftence, confequently, fnould not
be very difficult, and where, notwithftanding, three or four
hundred thoufand people die of hunger in one year, we may
be aimred that the funds deftined for the maintenance of
the labouring poor are faft decaying. The difference be-
tween the genius of the Britilh conftitution which prote^s
and governs North America, and that of the mercantile
company which oppreiles and domineers in the Eaft Indies,
cannot perhaps be better illuftrated than by the diiFerent
flate of thofe countries.
. The liberal reward of labour, therefore, as it is the ne-
ceflary effetfb, {o it is the natural fymptom of increafing na-
tional wealth. The fcanty maintenance of the labouring
poor, on the other hand, is the natural fymptom^ that things,
are at a ftand, and their ftarving condition that they are
going faft backwards.
In Great Britain the wages of labour feem, in the prefent
times, to be evidently more than what is precifely neceftiiry
to enable the labourer to bring up a family. In order to fa-
tisfy ourfelves upon this point, it will not be neceflary to en-
ter into any tedious or doubtful calculation of what may be
the loweft fum upon which it is poffible to do this. There
are many plain fymptom s that the wages of labour are no-
where in this country regulated by this loweft rate v/hich is
confiftent with common humanity.
FlRSTj
THE WEALTH OF NATIONS.
/ >
First, in almoft every pavt of Greaf./;in.*:s'I;i taere is a
cliftin(?lion, even in the lovvefl: fpecies of labour, betvveen
Cummer and winter wages. Summer wages are always
higheft. But on account of the extraordinary expence of
fewel, the maintenance of a family is moft expenfive in
winter. Wages, therefore, being higheft when this expence
is loweft, it feems evident that they are not re-rulated by
what is necelTary for this expence •, but by the quantity an4
fuppofed value of the work. A labourer, it may be faid,
■indeed, ought to fave part of his fummer wages in order to
defray his winter expence ; and that through the whoiC
year they do not exteed what is necc^ary io maintain iiis
farnily through the whole year. A flave, however, or one
abfolutely dependent on us for immediate fubfiflence, would
not be treated in this manner. His daily fubfliience would
be proportioned to his daily necefiities.
Secondly, the wages of labour do not in Great Britain
fluftuate with the price ofprovinons. Thefe vary every-
where from year to year, frequently from month to m.onthi.
But in many places the money price of labour remains uni-
formly the fame fometimes for half a century together. If
in thefe places, therefore, the labouring poor can maintain
their families in dear years, they mull be at their eafe in
times of moderate plenty, and in affluence in thofe of ex-
traordinary cheapnefs. The high price of proviilons during
thefe ten years paft has not in many parts of the kingdom
been accompanied with any fenllble rife in the niouey price
of labour. It has, indeed, in fome ; owing probably more
to the increafe of the demand for labour than to that of the
price of provihons.
Thirdly, as the price of provifions varies more from
year to year than the wages of labour, fo, on the other handj
the wages of labour vary more from place to place than the
price of provifions. The prices of bread and butcher's meat
are generally the fame or very nearly the fame through the
greater part of the united kingdom. Thefe and moit other
things whichare fold by retail, the way in which the labour-
ing poor buy all things, are generally fully as cheap or cheaper
in great towns than in the remoter parts of the country, for
reafons which I fhall have occafion to explain hereafter. But
the wages of labour in a great town and its neighbourhood
^re frequently a fourth or a fifth part, twenty or five-and-*
twenty
70 THE NATURE AND CAUSES OF
twenty per cent, higher than at a few miles diitance.
Eighteen pence a day may be reckoned the common price of
labour in London and its neighbourhood. At a few miles
diftance it falls to fourteen and fifteen pence. Ten pence
may be reckoned its price in Edinburgh and its neighbour-^
hood. At a few miles diftance it falls to eight pence, the
ufual price of common labour through the greater part of
the low country of Scotland, where it varies a good deal
lefs than in England. Such a difference of prices, which it
feems is not always fufficient to tranfport a man from one
parifli to another, would neceffarily occaficrii fo great a tranf-
portation of the moft bulky commodities, not only from
one parifh to another, but from one end of the kingdom,
almoft from one end of the world to the other, as would
foon reduce them more nearly to a level. After all that
has been faid of the levity and inconftancy of human nature,
it appears evidently from experience that a man is of all
forts of luggage the moft difficult to be tranfported. If
the labouring poor, therefore, can maintain their families
in thofe parts of the kingdom where the price of labour is
loweft, they muft be in affluence where it is higheft.
Fourthly, the variations in the price of labour not only
do not corrcfpond either in place or time with thofe in the
price of provifjons, but they are frequently quite oppofite.
Grain, the food of the common people, is dearer in
Scotland than in England, whence Scotland receives almoft
every year very large fuppiies. But Englifli corn muft be
fold dearer in Scotland, the country to which it is broup^ht,
than in England, the country from which it comes ; and in
proportion to its quality it cannot be fold dearer in Scotland
than the Scotch corn that comes to the fame market in com-
petition M'ith it. The quality of grain depends chiefly up^n
the quantity of Hour or meal which it yields at the mill, and
in this refpeifl Englifh grain is fo much fuperior to the
Scotch, that, though often dearer in appearance, or in pro-
portion to the meafure of its bulk, it is generally cheaper
in reality, or in proportion to its quality, or even to the mea-
fure of its weight. The price of labour, on the contrary, is
dearer in England than in Scotland. If the labouring pDor,
therefore, can maintain their families in one part of the
united kingdom, they muft be in affluence in the o here
Cat neal
TH£ wealth of nations. 77
Oatmeal indecti fupplies the common people in Scotland
with the greatcft and the bed part of their food, which is in
general much inferior to that of their neighbours of the fame
rank in England. This difference, however, in the mode of
their fabfiifence is not the caufe, but the etlect of the diffe-
rence in tlieir wages; though, by a ilrange mifapprehenfion,
I have frequently heard it reprelented as the caufe. It is
not becaufe oneman keepsacoachwhilehis neighbour walks
n-foot, that the one is rich and the other poor •, but becaufe
the one is rich he keeps a coach, and becaufe the other is
poor he walks a~foot.
During the courfe of the laft century, taking one yeat
with another, grain was dearer in both parts of the united
kingdom than during that of the prefent. That is a matter
of fa(Sl which cannot now admit of any reafonabie doubt;
and the proof of it is, if poifible, Itill more decifive
v/ith regard to Scotland thaji with regard to England,
It is in Scotland fupported by the evidence of the public
fiars, annual valuations made upon oath, according to the
afbual ftate of the markets, of all the different forts of grain
in every different county of Scotland. If fuch dire6l proof
couM require any collateral evidence to confirm it, I would
obferve that this has likewife been the cafe in France, and
probably in moft other parts of Europe, With regard to
France there is the cleareft proof. But though it is certain
that in both parts of the united kingdom, grain was fome-*
what dearer in the laft century than in the prefent, it is
equally certain that labour was much cheaper. If the la-
bouring poor, therefore, could bring up tlieir families then,
they muft be much more at their cafe now. In the laft cen-
tury, the mofl ufual day-wages of common labour through
the greater part of Scotland were fixpence in fummer and
fivepence in winter. Three fliillings a week, the fame price
very nearly, ftill continues to be paid in fome parts of the
Highlands and Weftern Iflands. Througli the greater part
oi the low country the moil ufual wages of common labour
are now eight-pence a day ; ten-pence, fometimes a (hilling
aboutEdinburgh,inthe counties which border uponEngland,
probably on account of that neighbourhood, and in a fev/
other places Vvdiere there has lately been a cojifuievabie rife in
the demand for labour, about Giafgow, Carron, Ayr-fliire,
&c. In England the improvements of agriculture, manu-
fa(fl:ure^ and commerce began nuich earlier than in Scotland,
The
7S THE NATURE AND CAUSES O^
The demand for labour, and eonfequently its price, mtffi
necefl'arily have increafed with thofc improvements. In the
lail century, accordingly, as well as in the prefent, the waives
of labour were higher in England than in Scotland. They
have rifen too confiderably fince that time, though, on ac-
count of the greater variety of wages paid there in different
places, it is more difficnlt to afccrtain how much. In 1614,
the pay of a foot foldier was the fame as in the prefent times,
cightpence a day. When it was hril; eftablifhed it would
naturally be regulated by the ufual vrnges of common la-
bourers, the rav.k of people from which foot foldiers are
commonly drawn. Lord Chief Juilice Hales, who wrote in
the time of Charles II. computes the neceilary expence of
a labourer's iamily, confiiling of fix perfons, the father and
mother, two children able to do fomething, and two not
able, at ten Ihillings a week, or twenty-fix pounds a year.
If they cannot earn this by their labour, they mufl make it
up, he fuppofes, either by begging or flealing. Ele appears
to have enquired very carefully into this fubjedf *. In 1688,
Mr. Gregory King, whofe fkill in political arithmetick is fo
much extolled by Do6f or Davenant, computed the ordinary
income of labourers and out-fervants to be fifteen pounds a
year to a family, which he fuppofed to confift, one with
another, of three and a half perfons. His calculation,
therefore, though diiferent in appearance, correfponds very
nearly at bottom with that of judge Hales. Both fuppofe
the weekly expence of fuch families to be about twenty-pence
a head. Both the pecuniary income and expence of fuch
families have increafed confiderably fince that time through
the greater part of the kingdom -, in fome places more, and
in fome lefs -, thougii perhaps fcarce any wliere fo much as
fome exaggerated accounts of the prefent Vv^ages of labour
have lately reprefented them to the public* The price of
labour, it muft be obferved, cannot be afcertained very ac-
curately any where, different prices being often paid at the
fame place and for the fame fort of labour, not only accord-^
ing to the different abilities of the workmen, but according
to the eafinefs or hardnefs of the mafters. A¥here wages ^
are not regulated by law, all that we can pretend to deter-
mine is v/hat are the moit ufual ; and experience feems to
fhow that law can never regulate them properly, though it
has often pretended to do fo.
* See his fchemc for the mainicnance of the Poor, in Burn's Hiflory of
the Poor laws.
The
The wealth of nations. 79
i-
The real recompence of labour, the real quantity of the
necelTaries and conveniencies of life which it can procure to
the labourer, has, 'during the courfe of the prefent century,
increafed perhaps in a ibill greater proportion than its money
price. Not only grain lias become fomewhat cheaper, but
many other things from which the indullrious poor derive an
agreeable and .wliolefome variety of food, have become a
great deal cheaper. Potatoes, for example, do not at pre-
fent, through the greater part of the kingdom, coll half the
price which they ufed to do thirty or forty years ago. The
fame thing may be dud of turnips, carrots, cabbages ; things
which were formerly never raifed but by the fpade, but
which are now commonly raifed by the -plough. All fort of,
garden fluff too has become cheaper. The greater part of
the apples and even of the onions confumed in Great Bri-
tain were in the laft century imported from Flanders. The
great improvements in the coarfer manufactures of both
linen and woollen cloth furnifh the labourers with cheaper
and better cloathing ; and thofe In the manufactures of the
coarfer metals, with cheaper and better Inftruments of
trade, as well as With many agreeable and convenient
pieces of houfliold furniture. Soap, fait, candles, leather,
and fermented liquors have, indeed, become a good deal
dearer ; chiefly from the taxes which have been laid upon
tliern. The quantity of thefe, however, which the labouring
poor are under any neceffity of confumlng, is {o very fmall,
that the increafe in their price does not compenfate the di-
minution in that of fo many other things. The common
complaint that luxury extends itfelf even to the loweit ranks
of the people, and that the labouring poor will not now be
contented with the fame food, cloathing and lodging which
fiitislied them in former times, may convince us that it
is not the money price of labour only, but its real recom,-
pence, which has augmented.
Is this improvement in the clrcumffances of the lower
ranks ot the people to be regarded as an advantage or as an
inconveniency to the fociety ? The anfwer feems at firfl
light abundantly plain. Servants, labourers and workmen
of different kinds, make up the far greater part of every
great political fociety. But what improves thecircumftances
of the greater part can never be regarded as an inconveni-
ency to the whole. No fociety can furely be flouriihiiig and
happy, of which the far greater part of the members are
poor and niiicrc»blc. Jt is but equity, befides, that they who
' feedj
Bo THE NATURE AND CAUSES OF
feed, cloth and lodge the whole body of the people, diould
have fuch a (hare ot the produce of their own labour as to
be themfelves tolerably v/eii fed, cloathed and lodged.
PovEirry, though it no doubt difcourages, does not aU
way? prevent marriage. It feems even to be favourable to
generation. A half-ftarved Highland woman frequently
bears more than twenty children, while a pampered fine
lady is often incapable of beating any, and is generally ex-
hauited by two or three. Barrennefs, fo frequent among
women of faQiion, is very rare among thofe of inferior (la-
tion. Luxury in the fair fex, while it enflames perhaps tlie
paffion for enjoyment, feems always to weaken, and fre-
(juently to deitroy altogether, the powers of generation.
But poverty, though it does not prevent the generation,
is extremely unfavourable to the rearing of children. The
tender plant is produced, but in fo cold a foil and fo fevere a
climate, foon withers and dies. It is not uncommon, I
have been frequently told, in the Highlands of Scotland for
a mother who has born twenty children not to have two
alive. Several officers of great experience have affured me,
that fo far from recruiting their regiment, they have never
been able to fupply it with drums and fifes from all the
foldiers children that were born in it. A greater number of
fine children, however, is feldom. feen any where than about
a barrack of foldiers. Very few of them, it feems, arrive at
the age of thirteen or fourteen. In fome places one half
the children born die before they are four years of age , in
many places before they are feven •, and in almoft all places
before they are nine or ten. This great mortality, however,
will every where be found chiefly among the children of
the common people, who cannot afford to tend them with
the fame care as thofe of better ftation. Though their mar-
riages arc generally more fruitful than thofe of people of
fafhion, a fmaller proportion of their children arrive at ma-
turity. In foundling hofpitals, and among the children
brought up by parifii charities, the mortality is dill greater
than among thofe of the common people.
Every fpecies of animals naturally multiplies in propor-
tion to the means of their fubfifbence, and no fpecies can ever
multiply beyond it. But in civilized fociety it is only among
the inferior ranks of people that the fcantinefs of fubfiftence
can fet limits to the further multiplication gf the human
fpecies •,
THE WEALTH OF NATIONS; 8i
fpecles ; and it can do fo in no other way than by deilroy-
ing a great part of the children which their fruitful mar-
riages produce.
The hberal reward of labour, by enabling them to pro-
vide better for their children, and confequently to bring up
a greater number, naturally tends to widen and extend thofe
limits. It deferves to be remarked too, that it neceflarily
-does this as nearly as poffible in the proportion which the
demand for labour requires; If this demand is continually
increafmg, the reward of labour mud neceflarily encourage
in fuch a manner the marriage and multiplication of la-
bourers, as may enable them to fuppiy that continually in-
creafmg demand by a continually increafmg population. If
the reward ihould at any time be lefs than what was re-
quifite for this purpofe, the deficiency of hands would foon
raife it 5 and if it fliould at any time be more,- their excelhve
multiplication would foon lower it to this neceifary rate.
The market would be fo much under-ltocked with labour
in the one cafe, and fo much over-ftocked in the other, as
would foon force back its price to that proper rate winch the
circumitunces of the fociety required/ It is in this manner
that the demand for men, like that for any other commo-
dity, neceiTarily regulates the produt^iion of men ; quickens
it when it goes on too llow'ly, and Hops it when it advances
too faib At is this demand which regulates and determines
the ftate of propagation in all the different countries of the
world, in North America, in Europe, and in China j
which renders it rapidly progrefTive in the iirft, flow and gra-
dual in the fecond, and altogether llationary in the lad;
The wear and tear of a flave, it has been faid, is at tlie
expence of his mafter ; but that of a free fervant is at his own
expence. The M^ear and tear of the latter, however, is, in
reality, as much at the expence of his mader as that of the
former. The Vv^ages paid to journeymen and fervants of
every kind mud be fuch as may enable them, one withanother^
io continue the race of journeymen and fervants, according-
as the increafmg, diminiihing, or dationary demand of the
fociety may happen to reqtiire. But tliough the wear and
tear of a free fervant be equally at the expence of his mader,
it generally cods him much lefs than that of a flave. The
fund dedined for replacing or repairing, if I may fay fo, th;!:
Vear and tear of the flave, is commonly managed by a ncgli-
Vol. T Q gent
$2 THE NATURE AND CAUSES OF
gent mafter or carelefs overfeer. That deRined for perform-
ing the fame oiTice with regard to the free man, is managed
by the free man himfelf. The diforders which generally
prevail in the osconomy of the rich, naturally introduce
themfehes into the management of the former : The ftri(fl:
frugality and parfmionious attention of the poor as natu-
rally eltablifh themfelves in that of the latter. Under fuch
different management, the fame purpofe mufl require very
different degrees of expense to execute it. It appears, ac-
cordingly,, from the experience of all ages and nations, I be-
lieve, that the work done by freemen comes cheaper in the
end than that performed by ilaves. It is found to do fo even
at Bofton, New York, and Philadelphia,, where the wages
of common labour are fovery hrgh.
The liberal reward of la^Sour, therefore, as it is the effe6i
' of increafmg wealth, fo it is the caufe of increafmg popula-
tion. To complain of it is to lament over the necelTary effect
and caufe of the greateft public profperity.^
It deferves to be remarked, perhaps^ that it is in the
progrefiive (late, while the fociety is advancing to the fur-
ther acquifition, rather than when it has acquired its full
comnlement of riches, that the condition of the labouring
Door, of the great body of the people, feems to be the
happiefl and the mofl: comfortable. It is hard in the fta-
tionary, and miferable in the declining ftate. The pro-
5;reHive flate is in reality the chearful and the hearty Itate
to all the different orders of the fociety. The ftationary is
dull 'y the declining, melancholy.
The liberal reward of labour, as it encourages the propa-
f ation, fo it increafes the induftry of the common people.-
The wages of labour are the encouragement of induftry,..
which, like every other human quality, improves in propor-
tion to the encouragement it receives. A plentiful fubliftence
increafes the bodily ftrength of the labourer, and the com-
fortable hope of bettering his condition, and of ending his
days perhaps in eafe and plenty, animates him to exert that
ftrength to the utmoft. Where wages are high, accordingly,,
we ftiall always find the workmen more a61ive, diligent and
expeditious, than where they are low ; in England, for ex-
ample, than in Scotland ; in the neighbourhood of great
towns, than in remote country places. Some workmen, in-
deed,.
THE WEALTH OF NATIONS. 83
deed, when they can earn In four days what will maintain
them through the week, will be idle the other three. This,
however, is by no means the cafe with the greater part.
Workmen, on the contrary, when they are liberally paid by
the piece, are very apt to over-work themfelves, and to ruin
their health and conftitution in a fcW years. A carpenter in
London, and in fome other places, is not fuppofed to laft In
his utmoft vigour above eight years. Something of the fame
kind happens in many other trades, in which the workmen
are paid by the piece ; as they generally are in manufa(fl:ures,
and even in country labour, wherever wages are higher than
ordinary. Almoft every clafs of artificers is fubjecJ to fome
peculiar Infirmity occafioned by excefTive application to their
peculiar fpecies of work. Ramuzzlnl, an eminent Italian
phyfician, has written a particular book concerning fuch dif-
eafes. We do not reckon our foldiers the moft Induftrlous
fet of people among us. Yet when foldiers have been em-
ployed in fome particular forts of work, and liberally paid by
the piece, their officers have frequently been obliged to (tlpu-
late with the undertaker, that they fliould not be allowed to
earn above a certain fum every day, accordmg to the rate at
which they were paid* 1 ill this ftipulation was made, mu-
tual emulation and the defirc of g'reater gain, frequently
prompted them to over-work themfelves, and to hurt their
health by excefTive labour. ExcefTive application during four
days of the week, Is frequently the real caufe of the idlenefs
of the other three, fo much and fo loudly complained of*
Great labour, either of mind or body, continued for feveral
days together. Is In moft men naturally followed by a great
defire of relaxation, which, if not reftrained by force or by
fome (Irong necelTity, is almoft irrefiftible. It is the call of
nature, which requires to be relieved by fome indulgence,
fometlmes of eafe only, but fometlrnes too of diiTioatlon and
diverflon. If it is not complied with, the confequences are
often dangerous, and fometlmes fatal, and fuch as almoft al-
ways, fooner or later, bring on the peculiar infirmity of the
trade. If mafters would always liflen to the dli^ates of rea-
fon and humanity, they have frequently occafion rather to
moderate, than to animate the application of many of their
workmen. It will be found, I believe, in every fort of trade,
that the man who works fo moderately, as to be able to work
conftantly, not only prefcrves his health the longeft, but, in
the courfe of the year, executes the greatefl quantity of
Work.
G 2 Jn{
^4 THE NATURE AND CAUSES OF
In cheap years, it is pretended, workmen are generally
more idle, and In dear ones more induftnous than ordinary.
A plentiful fubfiilence, therefore, it has been concluded, re-
laxes, and a fcanty one quickens their induftry. That a little
more plenty than ordinary may render fome workmen idle,
cannot well be doubted ; but that it lliould have this efFe(fl:
upon the greater part, or that men in general fhould work
better when they are ill fed than when they are well fed,
when they are diflieartened than witen they are in good fpi-
rits, when they are frequently Tick than when they are gene-
rally in good health, fecms not very probable Years of
dearth, it is to be obferved, are generally among the common
people years of ficknefs and mortality, which cannot fail to-
diminifii ihc produce of their induftry.
In years of plenty, ft^rvants frequently leave the'r mafters,.
and truft their fubfiftence to what they can make by their
own induftry. But the fame cheapnefs of provifions, by in-
crcafmg the fund which is deftined for the maintenance of
fervants, encourages maflers,: farmers efpecially, to employ
a greater number. Farmers upon fuch occafions expe6l
more profit from their conv by maintaiiiing a few more la-
bouring fervants, than by felling it at a low price in the
market. The demand for fervantsincreak.-^, while the num-^
ber of tiiofe who offer to fupply that dema.nd diniiniflies. The
price of labour, therefore, ire<^uently rifes in cheap years.-
In years of fcarcltv, the difliculty and uncertainty of
fubfiftence make all fuch people eager to return to fervice..
But the high price of provifions, by dim.irriftiing the fmids
deftined u r the maintenance of fervantS; difpofes mafters
rather to dimdnifh than to incTcafe the number of thofc
they have. In dear years too,, poor independent workmen
frequently confume the little liiocks with which they had
ufed to fuj'oly them.felves with the materials of their work,
and are obliged to become journeymen for fubfiftence.
More people want employment than can eafily get it ; ma-
ny are willing to take it upon lower terms than ordinary,
anc: the wages of both fervants and journeymxen frequently
fink ill dear vears.
Masters of all forts, therefore, frequently make better
bargains with their fervants in dear than in cheap years, and
£ad them more humble and dependent in the former than
in
THE WEALTH OF NATIONS. 85
in the latter. Thev naturally, therefore, commend the for-
mer as more favourable to indultry. Landlords and farmers,
'befides, two of the largeft claflcs of niafters, have another
reafon for being pleafed with dear years. The rents of the
one and tlie profits of the other depend very much upon the
price of provifions. Nothing can be more abfurd, however,
than to imaGjino that men in general fliould work lefs when
they work for themfeives^ than when they work for other
people. A poor independent workman will generally be
more induRrious than even a journeyman who works by the
piece. The one enjoys the whole prodcice of his own in^
duilry •, the other fliares it with his mafter. The one, in
his feparate independent (late, is lefs liable to the tempta^
tions of bad company, which in large manufa-ftories fo fre-
quentl)^ ruin the morals of the other. The fuperiority of
the independent workman over thofe fervants who arc hired
by the montli or by the year, and whofe wages and main-
tenance are the fame whether they do much or do little,
is .likely to be (till greater. Cheap years tend to increafe
the proportion of independent workmen to journeymen and
fervants of all kinds^ and dear years to diminifh it,
A French author of great knowledge and ingenuity,
iMr. Mcilance, receiver of the tallies in the el ^flion of St.
Etienne, endeavours to fliow that the poor do more work
in cheap than in dear years, by comparing the quantity and
value of the goods made upon thofe different occafions in
three different manufacffures •, one of coarfe woollens carried
on at Elbeuf ; one of linenj and ariotl'-er pf filk, both which
extend through the whole generality of Rouen. It appears
from Ills account, which is copied from the reglfters of the
public oiHces, that the quantity and value or the goods made
in all thofe three manufactures has gen'^rally been greater
in cheap than in dear years ; and that it has always been
greateft in the cheapeft, and lead in the deareft years. All
the three fcem to be ftationary manufaftures, or which,
though their produce may vary fomewhat from, year to year,
^ire upon the whole neither going backwards nor forwards.
The manufacture of linen in Scotland, and that of coarfe
woollens in the welt riding of Yorkfliire^ are growing manu-
factures, of which the produce is generally, though witii
fome variations, increafmg both in quantity and value.
JTpon examining, however, the accounts which have been
publiOicd
S6 THE NATURE AND CAUSES OF
publiflied of their annual produce, I have not been able to
obferve that its variations have had any fenfible connecflioii
with the dearnefs or cheapnefs of the feafons. In 1740, a
year of great fcarcity, both manufactures, indeed, appear
to have declined very confiderably. But in 1756, another
year of great fcarcity, the Scotch manufacture made more
than ordinary advances. The Yorkfliire manufacture, in-
deedj declined, and its produce did not rife to vi-hat it had
been in 1755 till 1766, after the repeal of the Am.erican
Itamp a<fl:. In that and the following year it greatly ex-
ceeded what it had ever been before, and it has continuecl
to advance ever fmce=
The produce of all great manufaclures for diftant fale
muft neceffarily depend, not fo much upon the dearnefs or
cheapnefs of the feafons in the countries where they are car-
ried on, as upon the circumilances which affecl: the demand
in the countries where they are confumed ; upon peace or
war, upon the profperity or declenfion of other rival manu-
failures, and upon the good or bad humour of their principal
cuftomers. A great part of the extraordinary work, befides,
which is probably done in cheap years, never enters the
public regifters of manufa^ures. The men fervants who
leave their mailers become independent labourers. The
women return to their parents, and commonly fpin in or-
der to make cloaths for themfeh'^es and their families. Even
the independent v/orkmen do not always work for public
fale, but are employed by fome of their neighbours in ma-
nufaftures for family ufe, The produce of their labour,
therefore, frequently makes no figure in thofe public regif-
ters of which the records are fometimes publiflied with fo
much parade, and from which our merchants and manufac-
turers would often vainly pretend to announce the profperity
or declenfion of the greatefl empires.
Though the variations in the price of labour, not only
do not always correfpond with thofe in the price of provifi-
ons, but are frequently quite oppofite, we muft not, upon
this account, imagine that the price of provifions has no in-
fluence upon that of labour. The money price of labour is
neceflarily regulated by two circumftances ; the demand for.
labour, and the price of the neceffaries and conveniencies of
life. The demand for labour, according as it happens to be
increafing, ftationary, or declining, or to require an in =
creafing,
THE WEALTH OF NATIONS. 87
creafing, (tatlonary, or declining population, determines
the quantity of the neccfTaries and convcniencies of life
which muft be given to the labourer ; and the money price
of labour is determined by vvhat is requifitc for purchafing
this quantity. Though the money price of labour, therer-
fore, is fomctiraes high where the price of provifions is
low, it would be ftill higher, the demand continuing the
fame, if the price of provifions was high«
It is becaufe the demand for labour increafes in years
of fudden and extraordinary plenty, and diminifhes in
thofe of fudden and extraordinary fcarcity, that the money
price of labour fometimes rifes in the one, and fuiks in the
other.
In a year of fudden and extraordinary plenty, there are
funds in the hands of many of the employers of induftry,
fufficient to maintain and employ a greater number of in^
duftrious people than had been employed the year before j
and this extraordinary number cannot al\yays be had.
Thofe mailers, therefore, who want more workmen, bid
againft one another, in order to get them, which fometime§
iraifes both the real and the money price of their labour*
The contrary of this happens in a year of fudden and ex-e
traordinary fcarcity. The funds dellined for employing in-
duftry are lefs than they had been the year before. A confi-
derable number of people are thrown out of em.ployment,
who bid againft one another, in order to get it, which
fometimes lowers both the real and the money price of
labour. In 1 740, a year of extraordinary fcarcity, many
people were willing to work for bare fubfiftence. In the
Succeeding years of plenty, it was more difficult to get
labourers and fervants.
The fcarcity of a dear year, by diminifliing the demand
for labour, tends to lower its price, as the high price of
provifions tends to raife it. The plenty of a cheap year,
on the contrary, by increafing the demand, tends to raife
the price of labour, as the cheapnefs of provilions tends to
lower it. In the ordinary variations of the price of pro-
vifions, thofe two oppofite caufes feem to counterbalance
one another ; which is probably in part the reafop. whv
the wages of labour are every-where fo much more fteady
and permanent than the price of provifions.
The
/
/
88 THE NATURE AND CAUSES OF
The increafe in the wages of labour neceflarily Increafes
the price of many commodities, by increafmg that part of
it which refolves itfelf into wages, and fo far tends to
diminifh their confumption both at home and abroad. The
fame caufe, however, which raifes the wages of labour,
the increafe of flock, tends to increafe its produclive
powers, and to make a fmaller quantity of labour produce
a greater quantity of work. The owner of the ftock which
employs a great number of labourers, neteflarily endea-
vours, for his own advantage, to make fuch a proper divi-
fion and diflribution of employment, that they may be
eji^.bled to produce the greateft quantity of work pofTible.
For the fame reafon, he endeavours to fupply them with
the usft machinery which either he or they can think of.
AVhat takes place among the labourers in a particular
workhoufe, takes place, for the fame reafen, among thofe
of a greater fociety. The greater their number, the more
they naturally divide themfelves into different claffes and
fubdivifions of employment. More heads are occupied in
inventing the moft proper machinery for executing the
work of each, and it is, therefore, more^ likely to be in-
vented. There are many commodities, therefore, which,
in confequence of thefe improvements, come to be pro-
duced by fo much lefs labour than before, that the increafe
of its price is more than compenfated by the diminutioi^
of its quantity.
CHAP,
THE WEALTH OF NATIONS. S^
CHAP. IX.
Of the Profits of Stock.
J. HE rife and fall In the profits of {loc;^ depend upon
the fame caufes with the rife and fall in the wasres of labour,
the increafing or declining itate of the wealth of the fociety ;
but thofe caufes afFe(ft the one and the other very dif-
ferently.
The increafe of the ftock, which raifes wages, tends to
lower profit. When the (locks of many rich merchants are
turned into the fame trade, their mutual competition natu-
rally tends to lov/er its profit ; and when there is a like in-
creafe of ftock in all the different trades carried on in the
fame fociety, the fame competition muit produce the fame
effecSt in them all,
i
It is not eafy, it has already been obferved, to afcertaiii
:what are the average wages of labour even in a particular
place and at a particular time. We can, even in this caite,
feldom determine more than what are the mod ufual wacres.
But even this can feldom be done with regard to the profits
of ftock. Profit is fo very fluctuating, tliat the perfon who
carries on a particular trade cannot always tell you himfelf
what is the average of his annual profit. It is affe(fted, not
only by every variation of price in the commodities which
he deals in, but by the good or bad fortune both of his rivals
and of his cuftomers, and by a thoufand other accidents to
which goods when carried either by fea or by land, or even
when ftored in a warehoufe, are liable. It varies, therefore,
not only from year to year, but from day to day, and almoit
from hour to hour. To afcertain what is the average profit
of all the different trades carried on in a great kingdom,
muft be much more difficult ; and to judge of what it may
have been formerly, or in remote periods of time, with any
degree of precifion, muft be altogether impoffible.
But
9© THE NATURE AND CAUSES OF
But though it may be Impoflible to determine, with any
degree of precifion, what are or were the average profits of
flock, either in the prefent, or in antient times, ibme no-
tion nmy be fornned of them from the intereft of money
It may be hild down as a maxim, that wherever a great deal
can be made by the ufe of m.oney, a great deal will com-
monly be given for the ufe of it ; and that wherever little
can be made by it, lefs will commonly be given for it. Ac-
cording, therefore, as the ufual market rate of intereft va-
ries in any country, w£ may be aflurecl that the ordinary
profits of Itock muft vary v/ith it, mufl fink as it finks, and
rife as it rifes. The progrefs of intereft, therefore, may
lead us to form fome notion of the progrefs of profit.
By the 37th of Henry VIH. all intereft above ten per
cent, was declared unlav/ful. More, it feems, had feme-
times been taken before that. In the reign of Edward VI.
religious zeal prohibited all interell. This prohibition|
however, like all others of the fame kind, is faid to have
produced no efieel, and probably rather encreafed than di-
minifhcd the evil of ufury. The ftatute of Henry VIII.
was revived by the 13th of Elizabeth, cap. 8. and ten per
cent, continued to be the legal rate of intereft till the 21ft
of James I. when it was reftricted to eight per cent. It was
reduced to fix per cent, foon after the reftoration, and by
the 1 2th of Queen Anne, to five per cent. All thefe dilTe-
rent ftatutory regulations feem to have been made with great
propriety. 'rhcy4eem to have follov/ed and not to have
gone before the market rate of intereft, or the rate at which
people of good credit ufually borrowed. Since the time of
Queen Ai{ne, five per cent, feems to have been rather above
than below the market rate. Before the late war, the go-
vernment borrowed at three per cent. ; and people of good
credit in the capital, and in many other parts of the king-
dom, at three and a half, four, and four and a half per cent.
Since the time of Henry VIII. the wealth and revenue of
the country have been continuallyadvancing,andinthe ccurfe
of their progrefs, their pace feems rather to have been gradu-
ally accelerated than retarded. They feem, not only to have
been going on, but to have been going on fafter and faiter.
The wages of labour have been continually increafing during
the fame period, and in the greater part 0/ the different
branches
THE WEALTH OF NATIONS. 91
branches of trade and manufiKftures the profits of ftock
have been diminidilng.
It generally requires a greater flock to carry on any fort
of trade in a great town than in a country village. The
great flocks employed in every branch of trade, and the
number of rich competitors, generally r^^duce: the rate ot
profit in the former belo\v what it is in the latter. But the
wages of labour are generally higher in a great town than
in a country village. In a thriving town the people who
have great flocks to employ, frequently cannot get the
number of workmen they want, and therefore bid againfl
one another in order to get as many as they can, which
raifes the M^ages of labour, and lowers the profits of flock.
In the remote parts of the country there is frequently not
ftock fufficient to employ all the people, who therefore bid
againfl one another in order to get employment, which
lowers the wages of labour, and raifes the profits of flock.
In Scotland, though the legal rate of interefl is the fame
as in England, the market rate is rather higher. People of
the beft credit there feldom borrow under five per cento
Even private bankers in Edinburgh give four percent, upon
their promifTory notes, of which payment either in the whole
or m part may be demanded at pleafure. Private bankers in
London give no Intereft for the money which is depofited
with them. There are few trades which cannot be carried
on with a fmaller flock in Scotland than in England. The
common rate of profit, therefore, mufl be fomewhat
greater. The wages of labour, it has already been obferved,
are lower in Scotland than in England. The country too is
not only much poorer, but the fteps by which it advances
to a better condition, for it is evidently advancing, feem to
be much flower and more tardy.
The legal rate of Interefl in France has not, during the
courfe of the prefent century, been always regulated by the
market rate*. In 1720 interefl was reduced from the
twentieth to the fifteenth penny, or from five to two per
cent. In 1724 it was ralfed to the thirtieth pennv, or to
2 2 per cent. In 1725 it was again ralfed to the twentieth
penny, or to five per cent* In 1766, during the adminif-
tratlon
• See Denifart. Article Taux des Izitercts, torn, ill. p. i8.
52 THE NATURE AND CAUSES OT
tration of Mr. Laverdy, it was reduced to the twenty-fifth
penny, or to four per cent. The Abbe Terry raifed it
afterwa''ds to tlie old rate of five per cent. The fuppofed
purpofe of many of thofe violent reducT:ions of intereft was
to prepare the way for reducing that ot the public debt5 ; a
purpofe whicii has fometimes been -executed. France is
perhaps in tlie prefent times not fo rich a country as Eng-
land ; and though the legal rate of intcrell has in Franoe
frequently been lower than in England, the market rate ha-^s
generally been higher ; for there, as in other countries,,
they have feveral very iafe and eafy methods of evading the
law. The profits of trade^ I have been aflured by Britifli
merchants v/ho had traded in both countries, are higher in
France than in England ; and it is no doubt upon this ac-
,count that many Britifli fubjecfls chufe r^ithcr to employ
their capitals in a country where ti-ade is in .di%y?^e, than
in one where it is highly refpefted. The wages of hrbour
are lower in' France than in England. When you go from
Scotland to England, the difference which you may remark
between th& drefs and countenan-ee of the common people
in the one country arul in the other, fufhciently indicates the
difference in their condition. The contrail is ftill greater
when 3^0iu return from France. France, though no doubt
a richer country than Scotland, feems not to be going for-
M'ard fo fait. It is a common and even a popular opinion in
the country that it is gomg backwards ; an opinion whichj
i apprehend, is ill founded even with regard to France, but
which nobody can poffibly entertain with regard to Scotland,
who fees the country now and who faw it twenty or thirty
years ago.
The province of Holland, on the other hand, in proportion
to the extent of its territory and the number of its people,
is a richer country than England. The government there
borrow at two per cent, and private people of good credit at
three. The wages of labour are faid to be higher in Hol-
land than in England, and the Dutch, it is well known,
trade upon lower profits than any people in Europe. The
trade of Holland, it has been pretended by fome people, is
decaying, and it may perhaps be true that fome particular
branches of it are fo. But thefe fymptoms feem to indicate
fufficiently that there is no general decay. When profit
diminiflies, merchants are very apt to complain that trade
decays *, though the diminution of profit is the natural effect
of its profperity, or of a greater flock being employed in it
than
THE WEALTH OF NATIONS. 9^
than before. During tlie late war the Dutch gained the
whole carrying trade of France, of which they dill retain a
very large ihare. The great property which they pofTcfs
both in the French and Englidi limds, about forty nullions,
it is faid, in the latter (in which I fufpeti, however, there
is a confidcrable o^aggeration) ; the great Turns which they
lend to private people in countries where the rate of interelt
is higher than in their own, are circumilances which no
doubt demonllrate the redundancy of their itock, or that it
lias increafed beyond what they qan employ with tolerable
profit in the proper bufmefs of their own country : but they
do not demonllrate that, that bufmefs has decreafed. As the
capital of a private man, though acquired by a particular
trade,, may iiacreafe beyond what he can employ in it, and
yet that trade continue to increafe too ; fo may likewife the
capital ot a great nation.
In our North American and Weft Indian colonies, not
only the wages of labour, but the interell of money, an(i
confequently the profits of ftock, are higher than in Eng-
land. In the djiferent colonics both the legal and the mar-
ket rate of intereft run from fix to ei/^ht per cent. High
wages of labour and high profits of ftock, hovvever,, are
things, perhaps, which fcarce ever go together, except in
the peculiar circumftances of new colonies. Anew colony
mult always for fome time be more under-ftocked in pro-
portion to the ex^tcnt of Its territory, and more under-ueo-
pled in proportion to. the extent of its flock, than the greater
part of other countries. They have more land than they have
ilock to cultivate What they have, therefore, is applied
to the cultivation only of what is moft fertile and moll fa-
vourably fituated, the lands near tlie fea fhore, and along
the banks of navigable rivers. Such land too Is frequently
purcliaied at a price belovv" the value even of its natural
produce. StocTi employed in tlie purchafe and improvement
of fuch lands muft yield a very large prof^r, and confe-
quently afford to pay a very large interell. Its rapid accu-
mulation in fo profitable an employment enables the planter
to increafe the number of his hands fafler tlian he can find
them In a new fcttlement. Thofe whom he can fnid, tliere-
fore, are very liberally rewarded. As the colony Increafes,
the profits of ftock gradually diminifli. When the mofl
fertile and bed fituated lands have been all occupied, lefs
profit can be made by the cultivation of M^hat is inferior
both in foil and fituation, and lefs interell can be alTordcd
for
94 THE NATURE AND CAUSES OF
for the ftock which is fo employed In the greater part of
our colonies, accordingly, both the legal and the market rate
of intereft have been confiderably reduced during the courfe
of the prcfent century. As riches, improvement, and popu-
lation have increafed, intereft has declined. The wages of
labour do not fmk with the profits of ftock. The demand
for labour increafes with the increafe of ftock whatever be
its profits ; and after thefe are diminiflied, ftock may not
only continue to increafe, but to mcreafe much fafter than
before. It is with induftrious nations who are advancing
in the acqurfition of riches^ as with induftrious individuals.
A great ftock, though with fmall profi.ts, generally increafes
fafter than a fmall ftock with great profits. Money, fays
the proverb, makes money. When you have got a little, it
is often eafy to gee more. The great difticulty Is to get
that little. The connei:l;ion between the increafe of ftock
and that of induftry, or of the demand for ufeful lalDOur,
has partly been explained already, but will be explained
more fully hereafter in treating of the accumulation of ftock*
The acquliltion of new territoi-y, or of new branches of
trade, m.ay fometimes raife the profits of ftock, and with
them the intereft of money, even in a country which is faft
advancing in the acquifition of riches. The ftock of the
country not being fufficient for the whole accefiion of bufi-^
nefs, wliich fuch acquintions prefent to the different people
am.ong whom it is divided, is applied to thofe particular
branches only which afford the greateft profit. Part of what
had before been employed in other trades, is neceffarily
withdrawn from them, and turned into fome of the new
and more profitable ones. In all thofe old trades, therefore,
the competition comes to be lefs than before. The market
comes to be lefs fully fupplied with many dlflerent forts of
goods. Their price neceffarily rifes more or lefs, and yields-
a greater profit to thofe who deal in them, who can, there-"
fore, afford to borrow at a higher intereft. For fome time
after the conclufion of the late war, not only private people
of the beft credit, but fome of the greateft companies in
London, commonly borrowed at five per cent, who before
that had not been ufed to pay more than four, and four and
a half per cent. The great acceffion both of territory and
trade, by our acquifitions in North America and the Weft
Indies, will fufficiently account for this, without fuppofing
any diminution in the capital ftock of the fociety. So great
an
THE WEALTH OF NATIONS. ^s
an accelTion of new bufinefs to be carried on by the flock,
muil; neceflarily have du-niniflied the quantity employed in a
great number of particular branches, in which the competi-
tion being lefs, the profits mufl have been greater. I fliall
hereafter have occaiion to mention the reafons which difpoie
me to beheve that the capital flock of Great Britain was not
diminilhed even by the enormous expence of the late war.
The diminution of the capital flock of the fociety, or of
the funds deitined for the maintenance of induflry, howe-
ever, as it lowers the wages of labour, fo it raifes the pro-
fits of flock, and confequently the intereil of money. By
the wages of labour being lowered, the owners of what flock
remains in the fociety can bring their goods at lefs expence
to market than before, and lefs llock being employed in fup-
plying the market than before, they can fell them dearer.
Their goods cofl them lefs, and they get more for them.
Their profits, therefore, being augmented at both ends, can
well afford a large interell. The great fortunes {o fuddeniy
and fo eafdy acquired in Bengal and the other Britifh fettle-
ments in tb.e Ead Indies, may fatisfy us that, as the wages
of labour are very low, fo the profits of ilock are very liis^h
in thofe ruined countries. The intered of money is pro-
portionably fo. In Bengal, money is frequently lent to tiie
farmers at forty, fifty, and fixty per cent, and the fucceeding
crop is mortgaged for the payment. As the profits which
can afford fuch an interefl mufl eat up almoR the whole
rent of the landlord, fo fuch enormous ufury mud in its turn
eat up the greater part of thofe profits. Before the fall of
th^ Roman republic, a ufury of the fame kind feems to have
been common in the provinces, under the ruinous adminif-
tration of their proconfuls. The virtuous Brutus lent mo-
ney in Cyprus at eight- and-forty per cent, as we learn froni
the letters of Cicero.
In a country which had acquired that full complement of
riches which the nature of its foil and climate, and its fituation
with refpe£l to other countries allowed it to acquire ; which
could, therefore, advance no further, and which was not
going backwards, both the wages of labour and the profits of
ilock would probably be very low. In a country fully
peopled in proportion to what either its territory could main-
tain or its flock employ, the competition for employment
would
p6 THE NATURE AND CAUSES OF
would neceiTarlly be fo great as to reduce the wages of labou?
to what was barely fufficient to keep up the number of la-^
bourers, and, the country being already fully peopled, that
number coutd never be augmented. In a country fully
flocked in proportion to all the bufmefs it had to tranfa<fiy
as great a quantity of ftock would be employed in every par-
ticular branch as the nature and extent of the trade would
admit. The competition, therefore, M'ould every-where
be as great, and eonfequently the ordinary profit as low as
poflibie^
But perhaps no country has ever yet arrived at this de-
gree of opulence. China feems to have been long flati°
onary, and had probably long ago acquired that full com-
plement of riches which is confiftent with the nature of
its laws and inftitutions. ^ But this complement may be
much inferior to what, with other laws and inftitutions,
the nature ©f its foil, climate, and fituation might admit of.
A country which neglects or defpifes foreign commerce,
and which admits the veflels of foreign nations into one or
two of its ports only, cannot traiifacf the fame quantity of
bufmefs which it might do with different laws and inftitu-
tions. In a country too where» though the rich or the
owners of large capitals enjoy a good deal of fccurity, the
poor or the owners of fmall capitals enjoy fcarce any, but
are liable, under the pretence of juftice, to be pillaged and
plundered at any time by the inferior mandarines, the quan-
tity of ftock employed in all the different branches of bufi-
nefs tranfa£fed within it, can never be equal to what the
nature and extent of that bufmefs might admit. In every
different branch, the opprcftion of the poor muft eftabilih
the monopoly of the rich, who, by engroffmg the whole
trade to themfelves, will be able to make very large profits.
Twelve per cent, accordingly is faid to be the coitimon in-
tereft of money in China, and the ordinary profits of ftock
muft be fufficient to afford this large intereft,
A DEFECT in the law may fometimes raife the rate of In-
tereft confiderably above what the condition of the country.'
as to wealth or poverty, would require, When the law does
n,ot enforce the performance of contradls, it puts all bor-
rowers nearly upon the fame footing Vv'ith bankrupts or peo-
ple of doubtful credit in better regulated countries. The un-
certainty of recovering his money makes thckndcr exa^l the'
fame
THE WEALTH OF NATIONS. 97
lame ufurious intereft which is ufua)ly required from ban!:-
rupts. Among the barbarous nations who over-run the
weftern provinces of the Roman empire, the performance
0/ contraclis was left for m?iny ages to the faith of the con-
tracing parties. The courts of juflice of their kings feidom
intermeddled in it. The high rate of intereft which took
place in thofe antient times may perhaps be partly accounted
for from this caufe.
When the law prohibits intereft altogether, it does not
prevent it. Many people muft borrow, and nobody will
lend without fuch a confideration for the ufe of their money
as is fuitable, not only to what can be made by the ufe of
it, but to the diihculty and danger of evading the law. The
high rate of intereft among all Mahometan nations is ac-
counted for by Mr. Montefquieu, not from their poverty,
but partly from this, and partly from the difficulty of re-
covering the money.
The loweft ordinary rate of profit muft always be fohie-
thing more than what is fufficicnt to compenfate the occa-
fional lofles to which every employment of ftock is expofed.
It is this furplus only which is neat or clear profit. What
is called grofs profit comprehends frequently, nor only this
furplus, but what is retained for compenfating fuch extra-
ordinary loffes. The intereft which the borrower can af-
ford to pay is in proportion to the clear profit only.
The loweft ordinary rate of intereft muft, in the fame
manner, be fomething more than fuflicient to compenfate
the occafional loiTes to which lending, even with tolerable
prudence, is expofed. Were it not more, charity or friend-
Ihip could be the only motives for lending.
In a country which had acquired its full complement of
riches, where in every particular branch of bufmefs there
was the greatell quantity of ftock that could be employed in
it, as the ordinary rate of clear profit would be very fmall,
fo the ufual market rate of intereft which could be aflbrded
out of it, would be fo low as to render it impoilible for any
but the very wealthieft people to live upon tlie intereft of
their money. AH people of fmall or middling fortunes
would be obliged to fuperintcnd themfelves the employment
of their own ftocks. It would be necelTary that almoft
Vol. I. H every
98 THE NATURE AND CAUSES OF
every man fhouid be a man of bufinefs, or engage in fome
fort of trade. The province of Holland feems to be ap-
proaching near to this ftate. It is there unfafliionable not
to be a man of bufinefs. Neceflity makes it ufual for almoft
every inan to be fo, and cuflom every where regulates
fafhion. As it is ridiculous not to drefs, fo is it, in fome
meafure, not to be employed, like other people. As a man
of a civil profefTion feems aukward in a camp or a garrifon,
and is even in fome danger of being defpifed there, fa
does an idle man among men of bufinefs.
The higheft ordinary rate of profit may be fuch as, in
the price of the greater part of commodities, eats up
the whole of what fhouid go to the rent of the land, and
leaves only what is fufficient to pay the labour of preparing
and bringing them to market, according to the lowed rate
at which labour can any-where be paid, the bare fubfiftence
of the labourer. The workman muft always have been fed
in fome way or other while he was about the work ; but
the landlord may not always have been paid. The profits
of the trade which the fervants of the Eaft India Company
carry on in Bengal may not perhaps be very far from this
rate.
The proportion which the ufual market rate of interefl
ought to bear to the ordinary rate of clear profit, necefiarily
varies as profit rifes or falls. Double intereft is in Great
Britain reckoned, what the merchants call, a good, mode-
rate, reafonable profit j terms which I apprehend mean no
more than a common and ufual profit. In a country where
the ordinary rate of clear profit is eight or ten per cent., it
may be reafonable that one half of it fliould go to interefl,
wherever bufinefs is carried on with borrowed money. The
ftock is at the rifk of the borrower, who, as it were, infures
it to the lender ; and four or five per cent, may, in the
greater part of trades, be both a fufficient profit upon the
rifk of this infurance, and a fufficient recompence for
the trouble of employing the ftock. But the proportion be-
tween intereft and clear profit might not be the fame in
countries where the ordinary rate of profit was either a good
deal lower, or a good deal higher. If it were a good deal
lower, one half of it perhaps could not be afforded for in-
tereft ; and more might be afforded if it were a good deal
higher.
In
THE WEALTH OF NATIONS. 99
In countries which are fad advancing to riches, the low
rate of profit may, in the price of many commodities, com-
penfate the high wages of labour, and enable thofe countries
to fell as cheap as their lefs thriving neighbours, among
whom the wages of labour may be lower.
In reality high profits tend much more to raife the price
of work than high wages* If in the linen manufacSlure, for
example, the wages of the different working people ; the
fiax-dreflers, the fpinners, the weavers, &c. Ihould, all of
them, be advanced two pence a day : it would be necefl'ary
to heighten the price of a piece of linen only by a number
of two pences equal to the number of people that had been
employed about it, multiplied by the number of days dur-
ing which they had been fo employed. That part of the
price of the commodity which reiblved itfelf into wages
would, through all the diiFerent ftages of the manufadlure,
rife only in arithmetical proportion to this rife of wages.
But if the profits of all the different employers of thofe
working people (hould be raifed five per cent, that part of
the price of the commodity v/hich refolved itfelf into profit,
would, through all the different flages of the manufafture,
rife in geometrical proportion to this rife of profit. The
employer of the flax-dreffers would in felling his flax require
an additional five per cent, upon the whole value of the
materials and wages which he advanced to his workmen.
The employer of the fpinners would require an additional
five per cent, both upon the advanced price of the flax and
upon the wages of the fpinners. And the employer of the
weavers would require a like five per cent, both upon the
advanced price of the linen yarn and upon the wages of the
weavers. In raifing the price of commodities the rife of
wages operates in the fame manner as fimple intereft does
in the accumulation of debt. The rife of profit operates
like compound intereft. Our merchants and mafter-manu-
fadlurcrs complain much of the bad effects of high wages in
raifing the price, and thereby leffening the fale of their
goods both at home and abroad. They fay nothing con-
cerning the bad elFefts of high "profits. They are filent
with regard to the pernicious effect of their own gains.
They complain only of thofe of other people.
Hz CHAP.
100 THE NATURE AND CAUSES OF
CHAP. X.
Of Wagef and Profits in the different Employments of Labour
^ and ^iock,
X H E whole of the advantages and difadvantages of the;
different employments of labour and flock muft, in the fame
neighbourhood, be either perfecftly equal or continually
tending to equality. If in the fame neighbourhood, there
was any employment evidently either more or lefs advan-^
tageous than the reft, fo many people would crowd into
it in the one cafe, and fo many would defert it in the
other, that its advantages would foon return- to the level of
other employments. This at leafl would be the cafe in a
fociety where things were left to follow their natural courfe,
^vhere there was perfeft liberty, and where every man was
perfectly free both to chufe what occupation he thought
proper, and to change it as often as he thought proper,
Every man^s interefl would prompt him to feek the advan-
tageous, and to fhun the difadvantageous employment.
Pecunfary wages and profit, indeed, are every- where in
Europe extremely different, according to the different em-
ploymients of labour and flock. But this difference arifes
partly from certain circumftances in the employments them-
felves, which, either really, or at lealt in the imaginations
of men, make up for a fmali pecuniary gain in fome, and
counter-balance a great one in others j and partly from the
policy of Europe,, which no-where leaves tilings at perfect
liberty.
The particular sonfideratlon of thofe circumflances and.
of that policy will- divide this chapter into two parts.
PART L
THE WEALTH OF NATIONS. loi
P A R. T I.
inequalities ar'ifing from the Nature of the Employments
themfelves,
Jl HE five following are the principal circumftances
which, fo far as I have been able to obferve, make up for
a fmall pecuniary gain in fome employments, and counter-
balance a great owt in others : firft, the agreeablenefs or
difagreeablenefs of the employments themfelves ;. fecondly, ■
the eafinefs and cheapnefs, or the difliculty and expcnce
of learning them ; thirdly, the conftancy or inconftancy of
employment in them; fourthly, the fmall orgreat truft which
mull be repofed in thofe who exercife them ; and fifthly,
the probability or improbability ef fuccefs in them.
First, The wages of labour vary with tlie cafe or hard-
:fliip, the cleanlinefs or dirtlnefs, the honourablenefs or diflio-
nourablenefs of the employment. Thus in mod places, take
the year round, a journeyman taylor earns lefs than a jour-
neyman v/eaver. His work is much eafier. A journeyman
weaver earns Ids thii_, a journeyman fraith. His work is
not always eafier, but it is much cleanlier. A journeyman
blackfmith, though an artificer, feldom earns fo much in
twelve hours as a collier, who is only a labourer, docs in
eight. His work is not quite fo dirty, is lefs dan^ero-us,
and is carried on in day-light, and above ground. Honour
makes a great part of the reward of all honour.ible profelfi-
ons. In point of pecuniary gain, all things confidered, they
are generally under-recompenc^e 1, as I ihall endeavour to
fhow by and by. Difgrace has the contrary efFed. The
trade of a butcher is a brutal and an odious bi llnefs • but
it is in mofi: places more profitable than the greater part of
common trades. The molt deteltable of all employments,
that of public executioner, is in proportion to "Cixt quantity
of work done, better paid than any common trade what-
ever.
Hunting
10^ THE NATURE AND CAUSES OF
Hunting and fifiiing, the mofi; important employments
of mankind in the rude ftate of fociety, become in its ad-,
vanced ftate their moft agreeable amufements, and they
purfue for plcafure what they once followed from neceflity.
In the advanced ftate of fociety, therefore, they are all
very poor people who follow as a trade, what other people
purfue as a paftime, Fifhermen have been fo fmce the
time of * Theocritus. A poacher is every-where a very
poor man in Great Britain. In countries where the rigour
of the law fuffers no poachers, the licenfed hunter is not in
a much better condition. The natural tafte for thofe em-
ployments makes more people follow them than can Hve
comfortably by them, and the produce of their labour, in pro-
portion to its quantity, comes always too cheap to market
to afford any thing but the mod fcanty fubiillence to the
labourers.
DisAGREEABLENESS and difgrace affe(ft the profits of flock
in the fame manner as the wages of labour. The keeper
of an inn or tavern, who is never mafler of his own houfe,
and who is expofed to the brutality of every drunkard, exer-
cifes neither a very agreeable nor a very creditable bufinefs.
But there is fcarce any common trade in which a fmall
flock yields fo great a profit.
Secondly, the wages of labour vary with the eafinefs and
cheapnefs, or the difficulty and expence of learning the
bufmefs.
When any expenfive machine is erecfled, the extraordina-
ry work to be performed by it before it is worn out, it muft
be expe6led, will replace the capital laid upon it, with at leafl
the ordinary profits. A man educated at the expence of
much labour and time to any of thofe employmento which
require extraordinary dexterity and fkill, may be compared
to one of thofe expenfive machines. The work which he
learns to perform, it muft be expelled, over and above the
ufual wages of common labour, will replace to him the
whole expence of his education, with at lead the ordinary
profits of an equally valuable capital. It muft do this too
in a reafonable time, regard being had to the very uncertain
duration of human life in the fame manner as to the more
certain duration of the machine.
The difference between the wages of fkilled labour and
thofe of common labour, is founded upon this principle.
* See IdylUum XXI.
The
THE WEALTH OF NATIONS. 103
The policy of Europe confiders the labour of all mecha-
nlcks, artificers, and manufa(Slurers as fKilled labour ; and
that of all country labourers as common labour. It feems
to fuppofe that of the former to be of a more nice and deli-
cate nature than that of the latter. It is fo perhaps in fome
cafes : but in the greater part it is quite otherwife, as I fhall
endeavour to fhew by and by. The laws and cuftoms of
Europe, therefore, in order to qualify any perfon for exer-
cifing the one fpecics of labour, impofe the neceihty of an
apprenticelllip, though with different degrees of rigour in
different places. They leave the other free and open to
every body. During the continuance of the apprentlcefnip,
the whole labour of the apprentice belongs to hi^ mailer.
In the mean time he mud in aiany cafes, be maintained by
Lis parents or relations, and in almoil all cafes mull be
cloathed by them. Some money too is commonly given to
the mafter for teaching him his' trade. They who cannot
give money, give time^ or become bound for more thn.n t\o'
iifual number of years; a confideration which, though it
is not always advai:^t;j.geous to the mailer, on account of the
ufiial idlenefs of apprentices, is always difadvantageous to
the apprentice. In country labour, on the contrary, the
labourer, while he is employed about the eafier, learns the
more difTtcult parts of his bufinefs, and his own labour
maintains him through all the different ilages of his employ-
ment. It is reafonable, therefore, that in Europe the
wages of mechanicks, artificers, and manufaaurers, fliould
be fomewhat higher than thofe of common labourers. They
are fo accordingly, and their fuperior gains make them in
mod places be confidered as a fuperior rank of people.
This fuperiorlty, however, is generally very fmall ; the
daily or weekly earnings of journeymen in thejuore common
forts of manufaaures, fuch as thofe of plain linen and
woollen cloth, computed at an average, are, in mofl places,
very little more than the day wages of common labourers.
Their employment, indeed,, is more fteady and uniform,
and the fuperlority of their earnings, taking the whole year
together, may be fomewhat greater. It feems evidently,
■however, to be no greater than what is fufficient to com-
penfate the fuperior expence of their education.
Education in the ingenious arts and in the liberal pro-
fefhons, is dill more tedious and expenfive. The pecuniary
recompence, therefore, of painters and fculptors, of lawyers
and
104 THE NATURE AND CAUSES OF
and phyficians, ought to be much more liberal ; and it is fo
accordingly.
The profits of ftock feem to be very little affe£led by the
cafinefs or difHculty of learning the trade in which it is em-
ployed. All the different ways in which (lock is commonly
employed in great towns feem, in reality, to be almoft
equally eafy and equally dilhcult to learn. One branch either
of foreign or domeftic trade, cannot well be a much more
intricate bufniefs than another.
Thirdly, the wages of labour in different occupations
vary with the conftancy or inconftancy of employment.
Employment is much more conftant in fome trades
than in others. In the greater part of manufactures, a jour^
nevm.an maybe pretty fure of employment almoft every day
in the year that he is able to work. A mafon or bricklayer,
on the contrary, can work neither in hard froft nor in foul
weather, and his employment at all other times depends
upon the occafional calls of his cuftomers. Ele is liable, in
confequence, to be frequently without any. "What he earnsj
therefore, while he is employed, muft not only maintain him
while he is idle, but make him fome compenfation for thofe
anxious and defponding moments which the thought of fo
precarious a fit nation mufl fometimes occafion. Where the
computed earnings of the greater part of manufa(fl:urers, ac-
cordingly, are nearly upon a level with the day-wages of
common labourers,; thofe of mafons and bricklayers are ge-
nerally from one half more to double thofe wages. Where
common bbourers earn four and five fliillings a week, ma-
fons and bricklayers frequently earn feven and eight ; where
the former earn fix, the latter often earn nine and ten \
and where the former earn nine and ten, as in London,
the latter commonly earn fifteen and eighteen. No fpecies
of {killed labour, hovvcver, feerns m.ore eafy to learn than
that of mafons and bricklayers. Chairmen in London,
during the fummer feafon, are faid fometimes to be em-
ployed as bricklayers. The high wages of thofe workmen,
therefore, are not fo much the recompence of their fkill,
as the compenfation for the inconftancy of their employ-
ment,
A HOUSE carpenter feems to exercife rather a nicer and
more ingenious trade than a mafcn. In mofl places, howe-
ver, for it is not univerfally fo, his day-wages are fomewhat
lower.
THE WEALTH OF NATIONS. 105
lower. His employment, though it depends mu<:h, does
not depend fo entirely upon the occafional calls of his cuf-
tomerti ; and it is not liable to be interrupted by the weather.
When the trades which generally aflbrd conftant employ-
ment, happen in a particular place not to do fo, the wages
of the workmen alM'ays rife a good deal above their ordi-
nary proportion to thofe of common labour. In Londoti
ahnofb all journeymen artificers are liable to be called upon
and difmiiled by their mailers from day to d?y, and from
week to week, in the fame manner as day-labourers in
other places. The loweft order of artlncers, journeymen
taylors, accordingly, earn there half a crown a-day, though
eighteen-pence may be reckoned the wages of common
labour ; but in London they are often many weeks without
employment, particularly during the fummer.
When the Inconftancy of employment is combined with
the hardfhip, difagreeablenefs and dirtinefs of the work, it
fometimes raifes the wages of the mioft common labourer
above thofe of the moil ikilful artificers. A collier workiuir
by the piece is fuppofed, at Newcaille, to earn commonly
about double, and in many parts of Scotland about three
times the wages ot common labour. His high "wages arife
altogether from the hardfliip, difagreeablenefs, and dirtinefs
of his work. His employment may, upon moil occafions,
be as ccnflant as he pleafes. The coal-heavers in London
exercife a trade which in hardfhip, dirtinefs, and difagree-
ablenefs, almofl equals that of colliers ; and from the un-
;Avoidable irregularity in the arrivals of coal-fhips, the em-
ployment of the greater part of them is neceffarily very
inconflant. If colliers, therefore, commonly earn double
and triple the wagess of common labour, it ought not to
feem unreafonable that coal-heavers Ihouid fometimes earn
four and five times thofe wages. In the enquiry made Into
their condition a few years ago, it was found that at the
rate at which they were then paid, they could earn from
fix to ten fiiillings a day. Six flnllings are about four times
the wages of common labour in London, and in everv par-
ticular trade, the lowed common earnings may akvays be
confidered as thofe of the far greater number. How ex-
travagant foever thofe earnings may appear, if they were
more than fufhcient to compenfate all the difagreealle cir-
cumitances
io6 THE NATURE AND CAUSES OF
cumftances of the bufinefs, there would foon be fo great a
number of competitors, as, in a trade which has no ex-
clufive privilege, would quickly reduce them to a lower
rate.
The conftancy or inconftancy of employment cannot
affe6l the ordinary profits of ftock in any particular trade.
Whether the ftock is or is not conllantly employed depends,
not upon the trade, but the trader.
Fourthly, The wages of labour vary according to the
fmall or great truft which mud be repofed in the work-
men.
The wages of goldfmiths and jewellers are every where
fuperior to thofe of many other workmen, not only of
equal, but of much fuperior ingenuity ; on account of the
precious materials with which they are intruded.
We truft our health to the phyfician ; our fortune and
fometimes our life and reputation to the lawyer and attor-
ney.- Such confidence could not fafely be repofed in peo-
ple of a very mean or low condition. Their reward muft
be fuch, therefore, as may give them that rank in the (o-
ciety which fo important a truft requires. The long time
and the great expence which muft be laid out jn their edu-
cation, when combined with this circumftance, neccflarily
enhance ftiil further the price of their labour.
When a perfon employs only his own ftock in trade,
there is no truft ; and the credit which he may get from
other people, depends, not upon the nature of his trade,
but upon their opinion of his fortune, probity, and prur
dence. The different rates of profit, therefore, in the dif-
ferent branches of trade, cannot arifs from the different
degrees of truft repofed in the traders.
Fifthly, the wages of labour in different employments
vary according to the probability or im^probability of fuccefs
in them.
The probability that any particular perfon fhall ever be
qualified for the employment to which he is educated, is very
different in different occupations. In the greater part cf me-
chanic trades, fuccefs is almoft certain J but very uncertain
in
THE WEALTH OF NATIONS. 107
in the liberal profefTions. Put your foil apprentice to a
flioemaker, there is little doubt of his learning to make a
pair of fhoes : But fend him to fludy the law, it is at leait
twenty to one if ever he makes fuch proficiency as will en-
able him to live by the bufinefs. In a perfecily fair lot-
tery, thofe who draw the prizes ought to gain all that is
loft by thofe who draw the blanks. In a profeflion where
twenty fail for one that fuccecds, that one onght to gain
all that fliould have been gained by the unfuccefsful twenty.
The counfellor at law, who, perhaps at near forty years of
age, begins to make fomething by his profefTion, ought to
receive the retribution, not only of his own fo tedious and
expenhve education, but ot that of more than tM'-enty others
who are never "likely to make any thing by it. How ex-
travagant foever the fees of counfellors at law may fome-
times appear, their real retribution is never equal to this.
Compute in any particular place, what is likely to be an-
nually gained, and what is likely to be annually fpent, by
2II the different workmen in any common trade, fuch as
that of flioemakers or weavers, and you will find that the
former fum will generally exceed the latter. But make
the fame computation w^ith regard to all the counfellors and
ftudents of law, in all the different inns of court, -and you
will find that their annual gains bear but a very fmall pro-
portion to their annual expence, even though you rate the
former as high, and the latter as low, as can well be done.
The lottery of the law, therefore, is very far from being
z perfectly fair lottery 5 and that, as well as many other
liberal and honourable profefiions, are, in point of pecu-
niary gain, evidently under-rccompenced.
Those profefTions keep tlieir level, however, witli other
occupations, and, notwithflanding thefe difcouragements,
all the molt generous and liberal Ipirits are eager to crowd
into them. Two different caufes contribute to recommend
them. Firft, the defire of the reputation which attends
upon fuperior excellence in any of them ; and, fecondiv,
the natural confidence which every man has more or lefs,
not only in hia own abilities, but in his own good fortune.
To excel in any profeffion, in which but few arrive at me-
diocrity, is the moft decifive mark of what is called genius or
fuperior talents. The public admiration which attends upon
fuch diftinguiflied abilities, makes always a part of their re-
%yard j a greater or fm aller in propcrticn as it is higher or
lower
!08 THE NATURE AND CAUSES OF
lower in degree. It niakes a confiderable part of that re-
ward in the profeiEon of phyfic ; a ftiil greater perhaps in
that of law j in poetry and philofophy it makes alnioit the
whole.
There are fome very agreeable and beautiful talents of
which the poffeirion commands a certain fort of admiration ;
but of which the excrcife for the fake of gain is confidered,
whether from reafon or prejudice, as a fort of public profti-
tution. The pecuniary recom.pence, therefore, of thofe who
cxercife them in this manner, mull be fufBcient, not only to
pay for the time, labour, and expence of acquiring the ta-
lents, but for the difcredit which attends the employment of
tliem as the means of fubfiftence.. The exorbitant rewards
of players, opera-fmgers, opera-dancers, &c. are founded
upon thofe two principles ; the rarity and beauty of the
talents, and the difcredit of employing them in this "man^
ner. It feems abfurd at hrft fight that we Ihould defpife
their perfons, and yet reward their talents with the moil
profufe liberality. While we do the one, however, we
muft of neceffity do the other. Should the public opinion
or prejudice ever alter with regard to fuch occupations,
their pecuniary reccm^pence would quickly diminifn- More
people would apply to them, and the competition would
quickly reduce the price of their labour. Such talents,
though far from being comm^on, are by no means fo rare as
is imagined. Many people poflefs them in great perfection,
who difdain to make this ufe of them *, and many more are
capable of acquiring them, if any thing could be made ho-
nourably by I hem.
The over-weening conceit which the greater part of
men have of their own abilities, is an antient evil remarked
by the philofophers and moraHfts of all ages. Their abfurd
prefum.ption in their own good fortune, has been lefs taken
notice of. It is, however, if poflible, ftill more univerfal.
There is no man living who, when in tolerable health and
fpirits, has not fome fhare of it. The chance of gain is
by every man more or lefs over-valued, and the chance of
lofs is by moft men under-valued, and by fcarce any man,
who is in tolerable health and fpirits, valued jnore than it is
worth.
That the chance of gain is naturally over-valued, we
may learn from the univerfal fuccefs of lotteries. The
^- orld neither ever faw, nor ever will fee, a perfectly fair
lottery j
THE WEALTH OF NATIONS. 109
lottery ; or one in vs'hich the whole gain compenfated
the whole lofs •, becaufe tlie undertaker could make
nothing by it. In the flate lotteries the tickets are
really not worth the price which is paid by the origi-
nal Tubfcribers, and yet commonly fell in the market for
tv^enty, thirty, and fometimes forty per cent, advance.
The vain hope of gaining fome of the great prizes is the
fole caufe of this demand. The fobereft people fcarce
look upon it as a folly to pay a fmall fum for the chance of
gaining ten or twenty thoufand pounds ; though they know
that even that fmall fum is perhaps twenty or thirty per cent,
more than the chance is worth. In a lottery in which no
prize exceeded twenty pounds, though in other refpetls it
approached much nearer to a perfe6lly fair one than the
common ilate lotteries, there would not be the fame de-
mand for tickets. In order to have a better chance for
fome of the great prizes, fome people purchafe feveral
tickets, and others fmall fhares in a Hill greater number.
There is not, hov/ever, a more certain propoiition in ma-
thematicks, than that the more tickets you adventure upon,
the more likely you are to be a lofer. Adventure upon all
the tickets in the lottery, and you lofe for certain.; and the
greater the number of your tickets, the nearer you ap-
proach to this certainty*
That the chance of lofs is frequently under-valued, and
fcarce ever valued more than it is worth, v/e may learn from
the very moderate profit of infurers.' In order to make in-
furance, either from fire or fea-riik:, a trade at all, the com-
mon premium mufl; be fuflicient to compenfate the common
l-ofles, to pay the expence of management, and to afibrd fuch
a profit as might have been drawn from an equal capital em-
ployed in any common trade. The perfon who pays no more
than this, evidently pays no more than the real value of the
rifk, or the loweft price at which he can reafonahly expcd to
infure it. But though many peopie have made a litde money
by infurance, very few have made a- great fortune 5 and from
this confederation alone, it feems evident enou;>-h, that the
ordinary balance of profit and loh Is not more advantageous,
in this, than in other common trades. by which fo many peo-
ple make fortunes. Moderate, hov/ever,. as the premium of
infurance commonly is, many people defpife the ri;K loo
much to care to pay it. Taking the whole kingdom at an
average, nineteen houfes in twenty, or rather perljaps ninety-
nine In a liUiidred, are not infured from fire. Sea riik is
no THE NATURE AND CAUSES OF
more alarming to the greater part of people, and the propor-
tion of fliips infured to thofc not infared is much greater,^
Many fail, however, at all feafons^ and even in time of vt^ar,
without any infurance. This may fometimes perhaps be
done without any imprudence. When a gr^at company, or
even a great merchant, has twenty or thirty fliips at fea,
they may, as it were, infure one another. The premium
faved upon them all, may more tlian compenfate fuch loffes
as they are likely to meet with in the common courfe of
chances. The negle(ft of infurance upon fliipping, hov/-
ever, in the fame manner as upon houfes, is, in moft
cafes, the effe(fl of no fuch nice calculation, but of mere
thoughtlefs rafhnefs and prefumptuous contempt of the riik.
The contempt of riik and the prefumptuous hope of
fuccefs, are in no period of life more active, than at the
age at v/hich young people chufe their profelTions. How
little the fear of misfortune is then capable of balancing
the hope of good luck, appears {tili more evidently in the
readinefs of the common people to enlift as foldiers, or to
go to fea, than in the eagernefs of thofe of better failiioii
to, enter into what are called the liberal profeiTions.
What a common foldier may lofe is obvious enough.
Without regarding the danger, however, young volunteers
never enlift fo readily as at the beginning of a new war j and
though they have fcarce any chance of preferment, they
figure to themfelves, in their youthful fancies, a thoufand
occafions of acquiring honour and diftinftion which never
occur. Thefe romantic hopes make the whole price of
their blood. Their pay is lefs than that of common la-
bourers, and in aftual fervice their fatigues are much
greater.
The lottery of the fea is not altogether fo difadvantageous
as that of the army. The fon of a creditable labourer or arti-
ficer may frequently go to fea v/ith his father's confent ; but
if he enlifts as a foldier, it is always without it. Other people
fee fome chance of his making fomething by the one trade :
nobody but himfelf fees any of his making any thing by the
other. The great admiral is lefs the objcft of public admira-
tion than the great general, and the higheft fuccefs in the fea
fervice promifes a lefs brilliant fortune and reputation than
ecual fuccefs in the land. The fame difference runs through
all the inferior degrees of preferment in both. By the rules
' of
THE WEALTH OF NATIONS. iii
of precedency a captain in the navy ranks with a colonel in
the army : but he does not rank with him in the common ef-
timation. As the great prizes in the lottery are iels, the
fmaller ones muft be more numerous. Common failors,
therefore, more frequently get fome fortune and prefer-
ment than common foldiers ^ and the hope of thofe prizes
is what principally recommends the trade* Though their
fkill and dexterity are much fuperior to that of almoft any
artificers, and though their whole life is one continual
fcene of hardfliip and danger, yet for all this dexterity and
fkill, for all thofe hardlhips and dangers, while they re-
main in the condition of common failors, they receive
fcarce any other recompence but the pleafure of exercifing
the one and of furmounting the other. Their wages are
not greater than thofe of common labourers at the port
which regulates the rate of feamens wages. As they are
continually going from port to port, the monthly pay of
thofe who fail frorA all the different ports of Great Bri-
tain, is more nearly upon a level than that of any other
workmen in thofe different places ; and the rate of the port
to and from which the greateft number fail, that is the
port of London, regulates that of all the reft. At London
the wages of the greater part of the different claffes of
workmen are about double thofe of the fame claffes at Edin-
burgh. But the failors who fail from the port of London
feldom earn above three or four fhillings a month more than
thofe who fail from the port of Leith, ar.d the difference
is frequently not fo great. In time of peace, and in the
merchant fervice, the London price is from a guinea to
about feven-and-twenty fliillings the calendar month. A
common labourer in London, at the rate of nine or ten
ftiillings a week, may earn in the calendar month from
forty to five-and-forty fhillings. Thq failor, indeed, over
and above his pay, is fuppiied with provifions. The va-
lue, however, may not perhaps always exceed the difference
between his pay and that of the common labourer ; and
though it fometimes fliould, the excefs will not be clear
gain to the failor, becaufe he cannot fliare it with his wife
and family, whom he muft maintain out of his wages at
home.
The dangers and hair-breadth efcapes of a life of adven-
tures, inftead of dilheartening young people, feem frequently
to recommend a trade to them. A tender mother, among
the inferior ranks of people, is often afraid to fend her fon to
fell 00 1
112 thu nature and causes of
fchool at a fea-port town, left the fight of the fliips, and the
converfation and adventures of the failors ihould entiee him
to go to fea. The diftant profpecft of hazards, from which
we can hope to extricate ourfeh'es by courage and addrefs,
13 not difagrceable to us, and does not ralfe the wages of
labour in any employment. It is otherwife with thofe in
which courage and addrefs can be of no avaiL In trades
which are known to be very unwholefome, the wages of
labour are always -remarkablv hiirh. - Unwholefomenefs is
a fpecies of difagreeablenefs, and its effects upon the wages
of labour are to be ranked under that general head.
In all the different employments of ftock, the ordinary
rate of profit varies more or lefs with the certainty or un-
certainty of tlie returns. Thcfe are in general lefs uncer-
tain in the inland than in the foreign trade, and in fome
branches of foreign trade than in others *, in the trade to
North America, for example, than in that to Jamaica.
The ordinary rate of profit always rifes more or lefs with
tlie rilk. It does not, however, feem to rife in proportion
to it, or fo as to compenfate it compleatly. Bankruptcies
are moft frequent in the moft hazardous trades. The moft
hazardous of all trades, that of a fmuggler, though when
the adventure fucceeds it is likewife the moft profitable,
is the infallible road to bankruptcy. The prefumptuous
hope of fuccefs feems to a6l here as upon all other occa-
fions, and to entice fo many adventurers into thofe hazard-
ous trades, that their competition reduces the profit below
what is fufficient to compenfate the rilk. To compenfate
it compleatly, the common returns ought, over and above
the ordinary profits of ftock, not only to make up for all
occafional loffes, but to afford a furplus profit to the adven-
turers of the fame nature with the profit of infurers. But
if the common returns were fufficient for all this, bank-
ruptcies would not be more frequent in th •^e than in other
trades.
Of the five circumftances, therefore, which vary the wa-
ges of labour, two only affe£f the profits of ftock ; the agree-
ablenefs or difagreeablenefs of the bufinefs, and the rilk or fe-
curity with which it is attended. In point of agreeablenefs or
difagreeablenefs, there is little or no difference in the far
greater part of the different employments of ftock j but a great
deal in thofe of labour ; and the ordinary profit of ftock,
though it rifcs with the rifk, does not always feem to rife in
proportion to it. It fliould folic w from all this, that, in the
fame
THE WEALTH OF NATIONS. 113
f;ime fociety or neighbourhood, the average and ordinary rates
of profit in the different employments of ilock fhould be
more nearly upon a level than the pecuniary wages of the
different forts of labour. They are fo accordingly. The
difference between the earnings of a common labourer and
thofe of a well employed lawyer or phyfician, is evidently
much greater, than that, between the ordinary profits iii
any two different branches of trade. The apparent diff^e-
rence, bdides, in the pioftts of diff^erent trades, is generally
a deception ariung from our not always diffinguifhing what
ought to be confidered as wages, from what ought to be
confidered as profit.
Apothecaries profit is become a bye-word, denoting
fomething uncommonly extravagant. This great apparent
profit, however, is frequently no niore than the reafonable
wages of labour. The ikill of an apothecary is a much jiicer
and more delicate matter than that of any artificer whatever 9
and the trull which is repofed in him is of much greater
importance. He is the phyfician of the poor in all cafes,
and of the rich when the diftrefs or danger is not very great.
His reward, therefore, Ought to be fuitable to his fkill and
his trufl, and it arifes generally from the price at which he
fells his drugs. But the whole drugs which the befl em-
ployed apothecary, in a large market town, will fell in a
year, may not perhaps coft him above thirty or forty pounds.
Though he fliould fell them, therefore, for three or four hun-
dred, or at a thoufand per cent, profit, this may frequentlv
be no more th^n the reafonable wages of his labour charged,
in the only way in which he can charge them, upon the
price of his drugs. The greater part of the apparent profit
is real wages difguifed in the garb of profit*
In a fmail fea-port town, a little grocer will make fortv
or fifty per cent, upon a flock of a fingle hundred pounds,
while a confiderable wholefale merchant in the fame place
will fcarce make eight or ten per cent, upon a ftock of ten
thoufand. The trade of the grocer may be necelTary for the
conveniency of the inhabitants, and the narrownefs of the
market may not admit the employment of a larger capital
in the bufinefs. The man, however, mufl not only live by
his trade, but live by it faitably to the qualifications whicli
it requires. Befides pofTelhng a fine capital, he mufl be able
to read, write, and account, and muft be a tolerable judge
too of, perhaps, fifty or fixty different forts of goods, their
prices, qualities, and the markets where they are to be had
Vol. I. I ' cheapeft.
ii4 THE NATURE AND CAUSES of
cheapeft. He mufc have all the knowledge, in fliovt, that'
is neceilarv for a great merchant, which nothing hinders-
him from becoming but the want of a fuihcient capital. ,
Thirty or forty pounds a year cannot be confidered as too
great a recompence for the labour of a perfon fo accom-
plifhed. Deduct this from the feemingly great profits of
his capital, and little more will remain, pei-haps, than the
ordinary profits of (lock. The greater part of the apparent
profit is, in this cafe too, real wages.
The difference between the apparent profit of the retail
and that of the wholefale trade, is much lefs in the canital
than ill fmall towns and country villages. Where ten thou-
fand pounds can be employed in the grocery trade,^ the
wages of the grocer's labour make but a very trifling addition
to the real profits of fo great a ftock. The apparent profits
of the wealthy retailer, therefore,- are there more nearly
upon a level with thofe of the wholefale merchant. It is
upon this account that goods fold by retail are generally as
cheap and frequently much cheaper in the capital, than
in fmall towns and country villages. Grocery goods, for
example, are generally much cheaper •, bread and butcher's
meat frequently as cheap. It coils no more to bring grocery
goods to the great town,- than to the country village •, but
it cofts a great deal more to bring corn and cattle, as the
greater part of them mufl be brought from a much
greater diftance. The prime coil of grocery goods, there-
fore, being the fame in both places, they are cheapell
where the leail profit is charged upon them. The prime
coil of bread and butcher's meat is greater in the great
town than in the country village •, and though the profit
is lefs, therefore, they are not lets cheaper there, but often
ccuaily cheap. In fuch articles as bread and butcher's
meat, the fame caufe, which diminifiies apparent profit,
incrcafes prime coil. The extent of the market, by giving
employment to greater fi:ocks, diminiflies apparent profit y
but by requiring fupplies from a greater diilance, it in-
creafes prime coil. This diminution of the one and increafe
of the other feem, in moll cafes, nearly to counter-balance
one another -, which is probably the reafon that, though
the prices of corn and cattle are commonly very different in-
different parts of the kingdom, thofe of bread and butcher's
meat are generally very nearly the fame through the greater
part of it.
^ ,- 2 Though
THE WEALTH OF NATIONS.
II
Though the profits of flock both in the wholefale and
retail trade, are generally lefs in the capital than in fmal!
towns and country viHages, yet great fortunes are frequently
acquired from fmall beginnings in the former, and fcarce
ever in the latter. In fmall towns and country villages, oil
account of the narrownefs of the market, trade cannot al-
ways be extended as (lock extends. In fuch places, there-
fore,- though the rate of a particular perfon's profits may be
very high, the fum or amount of them can never be very-
great, nor confequently that of his annual accumulationo
In great towns, on the contrary, trade can be extended as
ftock increafes, and the credit of a frugal and thrivincr man
increafes much fafter than his ftock. His trade is ext^ended
in proportion to the amount of both, and the fum or amount
of his profits is in proportion to the extent of his trade, and
his annual accumulation in proportion to the amount of his
profits. It feldom happens, however, that great fortunes
are made even in great tov/ns by any one reo-ular, efta-
blifhed, and well-known branch of bufmefs, buc in confe-
quence of a long Hfe of induftry, frugality, and attention.
Sudden fortunes, indeed, are fometimes made in fuch places
by what is called the trade of fpeculation. The fpeculatlve
merchant exercifes no one regular, eflablifhed, or well-
known branch of bufmefs. He is a corn merchant this
year, and a v/ine merchant the next, and a fugar, tobacco,
or tea merchant the year after; He enters into every trade
when he forefees that it is likely to be more than commonly
profitable, and he quits it when he forefees that its profits
are likely to return to the level of ether trades. His pro-
fits and lolTes,- therefore, can bear no reg-uJar proportion
to thofe of any one eflablifhed and ^ell-known branch of
bufinefs. A bold adventurer may fometimes aco-ulre a con-
fiderable fortune by two or three fuccefsful fpeculations ;
but is jull as likely to lofe one by two or three unfuccefsful
ones. This trade can be carried on no where but in great
towns. It is only in places of the moft extenfive commerce
and correfpondence that the intelligence requifite for it can
be had.
The five circumflances above mentioned, though they oc-'
cafion confiderable inequalities in the wages of labour and
profits of ftock, occafion none in the whole of the advantages
and diladvantages, real or imaginary, of the different em-
ployments of either. The nature of thofe circumftances is
^ 2 fuch,'
iT(5 TH'E NATURE AND CAUSES Of
fuch, thnt they make up for a fmall pecuniary gain in fome,-
and counter-balance a great one in others.
In orcierj howeverj that this equahty may take place in'
the whole of their advantages or difadvantages, three things
are requifite even where thisre is the n^oft perfect freedom.
rirft, the employiTients mud be well known and long efta-
blilhed in the neighbourhood ; fccondly, they mull be in
their ordinary, or v/h at nlay be called their natural ftate ;.-
and, thirdly, they miift be the fole or principal employments
of thofe who occupy them,- '
First, this equahty can take place oniy irt thofe em-
ployments which are well known^ and have been long
eilablifhed in the neighbourhood.
Where all other circumftances a"e equal, wages are
generally higher in new than in old trades. AVhen a pro-
jector attempts to eflabllfli a new manufacture, he mud at'
firft entice his workmen from other employments by higher
wages than they can either earn in their own trades, or than
the nature of his work would otherwife require,- and a con-
fiderable time muft pafs away before he can venture to re-
duce them to the common level. Manufacffures for which
the demand arifes altogether from fafliion and fancy, are
continually changing, and feldcm lait long enough to be
confidered as old eftablifhed manufa£lures. Thofe,. on the
contrary, for which the demand arifes chiefly from ufe or
neceflity, are lefs liable to change, and the fame form or
fabric may confinue in demand for whole centuries toge--
ther. The v/ages of labour, therefore, are likely to be
liisher in manufa6lures of the former, than in thofe of the
latter kind. Birmingham deals chiefly in manufa^lures of
the former kind ; Sheffield in thofe of the latter ; and-
the w^ages of labour in thofe two different places, are faid >
to be fuitable to this difference in the nature of their ma-
nufa<flures.
The eflablifliment of any new manufa6lure, of any nev/
branch of commerce, or of any new pradlice in agriculture,
is always a fpeculation, from which the projector promifes
himfelf extraordinary profits. Thefe profits fometimes are
very great, and fometimes, more frequently, perhaps, they
are quite otherwife ; but in general they bear no regular pro-
portion to thofe of other old trades in the neighbourhood.
THE WEALTH OF NATIONS. 117
If the projecffc fucceeds, they are commonly at firft very
high. When the trade or prafticc becomes thoroughly
eftabliflied and well known, the competition reduces them
to the level of other trades.
Secondly, this equality in the whole of the advantages
and difadvantages of the different employments of labour
and (lock, can take place only in the ordinary, or what may
Jbe called the natural, Hate of thofe employments^
The demand for ahnofl: every dilFerent fpecies of labour,
is fometimes greater and fometimss lefs than ufual. In the
one cafe the advantages of the employment rife above, in
the other they fall below, the common level. The demand
for country labour is greater at hay-time and harveil, than
during the greater part of the year ; and wages rife with
the demand, in time of war, when forty or fifty thcufand
failors are forced from the merchant fervice into that of the
king, the demand for failors to merchant fhips necelTarily
rifes with their fcstrcity, and their v/ages upon fuch occa-
fions commonly rife from a guiinea and feven-and-twenty
ihiliings, to forty fhillings and three pounds a month. In
a decaying manufacSture, on the contrary, many v/orkmen,
rather than quit their old trade, are contented with fnialler
wages than would otherwife be fuitabje to the nature of
their employmeni.
The profits of ftocic vary with the price of the commodi-
ties in which it is employed. As the price of any commo-
dity rifes above the ordinary or average rate, the profits of
at lead fome part of the fiock that is employed in bringing
it to market, rife above their proper level, and as it falls
they fink below it. All commodities are more or lefs liable
to variations of price, but fome arc much .more fo than
others. In all commodities which are produced by human
induftry, the quantity of induftry annually employed is ne-
ceffarily regulated by the annual demand, in fuch a manner
that the average annual produce may, as nearly as pofiible, be
equal to the average annual confumptio;i. In fome emplov-
ments, it has already been obferved, the fame quantity of
induftry will always produce the fame, or very nearly the
fame, quantity of commodities. In the linen or woollen
manufacSf ures, for example, the fame number of hands will
annually work up very nearly the fame quantity of linen
and woollen cloth. The variations in the market price of
fuch
ii8 • THE NATURE AND CAUSES OF
fuch commodities, therefore, can arife only from fome ac-
cidental variation in the demand. A public mourning raifes
the price of black cloth. But as the demand for moil forts
of plain linen and woollen cloth is pretty uniform, fo is
likewife the price. But there are other employments in
which the fame quantity of induftry will not always pro-
duce the fame quantity of commodities. The fam.e quan-
tity of induftry, for exam.ple, will, in different years, pro-
duce very different quantities of corn, wine, hops, fugar,
tobacco, &c. The price of fuch commodities, therefore,
varies not only Vv'ith the variations of demand, but with the
much greater and more frequent variations of quantity, and
is confequently extremely fludluating. But the profit of
fome of the dealers muft neceHarily fiucftuate with the price
of the commodities. The operations of the fpeculative
merchant are principally employed about fuch commodi-
ties. He endeavours to buy them up when he forefees that
their price is likely to rife, and to fell them when it ia
likely to fall. . = .
Thirdly, This equality in the whole of the advantages
and difadvantages of the different employments of labour
and flock, can take place only in fuch as are the fole or
principal employments of thofe who occupy them.
"When a perfon derives his fubfiftence from one employ-
ment, which does not occupy the greater part of his time ;
in the intervals of his leifure he is often M'illing to work at
another for lefs wages than would otherwife fuit the na-
ture of the employment.
There -fiill fubfifts m many parts of Scotland a fet of
people called Cotters or Cottagers, though they were more
frequent fome years ago than they are now. They are a fort
of out-fervants of the landlords and farmers. The ufual re-
ward which they receive from their mafters is a houfe, a
fmall garden for pot-herbs, as much grafs as will feed a cow,
and, perhaps, an acre or two of bad arable land. When
their mafter has occafion for their labour, he gives them,
befides, two pecks of oatmeal a M-eek^ worth about fixteen-
pence llerling. During a great part of the year he has little
or no occafion for their labour, and the cultivation of their
own little pofleffion is not fuiBcient to occupy the time which
is left at their own difpofal. Vv^-hen fuch occupiers were
inore numerous than they are at prefent, they are faid to
have
THE WEALTH OF NATIONS. J19
have been willing to give their fpare time for a very fmail
rccompence to any body, and to Irave wrought for lefs
wages than other labourers. In antient times they fecm
to have been common all over Europe In countries ill
cultivated and worfe inhabited, the greater part of landlords
and farmers could not otlierwife provide themfelves with
the extraordinary number of hands, which country labour
requires at certain feafons. The daily or weekly recom-
pence which fuch labourers occafionally received from their
mafters, was evidently not the whole price of their labour.
Their fmall tenement made a confiderable part of it. This
,daiiy or weekly recompence, however, feems to have been
confidered as the whole of it, by many writers who have
.coUe^fed the prices of labour and provifions in antient
times, and who have taken pleafure in reprefenting both as
wonderfully low.
The produce of fuch labour comes frequently cheaper to
market than would otherwife be fuitable to its nature.
JStockings in many parts of SeO:tland are knit much cheaper
than they can any-where be wrought upon the loom. They
are the work of iervaiits ?.nd labourers, who derive the prin-
cipal part of :their fubfiilence from fome other employment.
More thaiia t'houfand pair of Shetland flockin^s are annually
imported into Leith, of vv^hlch the price Is from five-pence
to feven-pence a pair. At Learwick, the fm.all capital of
the Shetland illands, ten-pence a day, I have been aiTured,
is a common price of common labour. In the fame iilands
they knit worlled ftockings to the value of a guinea a pair
and upwards.
The fpinning of linen yarn is carried on in Scotland
nearly in the fame way as the knitting of ftockings, by
fervants who are chiefly hired for other purpofes. Thcv
earn but a very fcanty fubfiitence, who endeavour to get
their whole livelihood by either of thofe trades. In moil
parts of Scotland (lie is a good fplnncr who can earn twenty-
pence a week.
In opulent countries the market Is generally fo extenfive,
that any one trade is fulhclent to employ the M'holc labour
and ftock of thofe w^ho occupy it. Inftances of people's
living by one employment, and at the fame time deriving
fome little advantage from another, occur chiefly in poor
countries.
120 THE NATURE AND CAUSES OF
countries. The following inftance, however, of fomethliig
of the fame kind is to be lound in the capital of a very rich
one. There is no city in Europe, I believe, in which houfe-
rent is dearer than in Loadon, and yet I know no capital
in which a furniflicd apartment can be hired fo cheap.
Lodging is not only much cheaper in London than in Pa-
ris ; it is much cheaper than in Edinburgh of the fame de-
gree of goodnefs ; and what rnay feem extraordinary, the
dearnefs of houfe-rent is the caufe of the cheapnefs of lodg-
ing. The dearnefs of houfc-rent in London arifes, not
only from thofe caufes which render it dear in all great
capitals, the dearnefs of labour, the dearnefs of all the
materials of building, which mud generally be brought
from a great diltance, and above all, the dearnefs of ground-
rent, every landlord a<fling the part of a monopolift, and
frequently exadiing a higher rent for a fingle acre of bad
land in a town, than can be had for a hundred of the be ft
in the country ; but it arifes in part from the peculiar
manners and culloms of the people, which oblige every
mafter of a family to hire a v/hole houfe from top to bot-
tom. A dwelling-houfe in England means every thing that
is contained under the fame roof. In France, Scotland,
anjl many other parts of Europe, it frequently means no
more than a fnigle Itory. A tradefman in London is
obliged to hire a whole houfe in that part of the tOM^n
where his cuilomers live. His fhop is upon the ground-
floor, and he and his family fieep in the garret ; and he
endeavours to pay a part of his houfe-rent by letting the
two middle ftories to lodgers. He expec'l:s to maintain his
family by his tracle^ and not by his lodgers. Whereas, at
Paris and Edinburgh, the people who let lodgings, have
commonly no other means of fabfiftetice ; and the price of
the lodging mufl pay, not only the rent of the houfe, b\it
the whole expence of the family.
PART
THE WEALTH OF NATIONS. in
PART II.
Jnecptalitles occafioned by the Policy of Europe^
UCH are the inequalities in tlie whole of the advan*
tnges and difaclvantages of the dilierent employments of la-
bour and ftockj which the defe<^l: of any of the three requi-
fites above-mentioned mud occafion, even where there is the
moil perfect liberty- But the policy of Europe, by not
leaving things at perfeft liberty, occafions other inequalir
ties of much greater importance^
It does this chiefly in the three following ways. Firft,
by reil'fo.ininjT the competition in fome employments to a
fmaller number than would otlierwife be difpofed to enter
into them ; ftcondly, by increr.fmg it in others beyond what
it natur;:lly would be j and, thirdly, by obftrudfing the
free circulation of labour and (lock, both from employ-
ment to employment and from place to place?
First, The policy of Europe occafions a v^ry irpportant
inequality in the whole of the advantages and difadvantages
of the different employments of labour and Itock, by re-
llraining the competition in fome employments to a fmaller
number than might otherwife be difpofed to enter into
them.
The exclufive privileges of corporations are the principal
means it makes ufe of for this purpofe.
The exclufive privilege of an incorporated trade necefla-
rily revtrains the competition, in the town where it is efla-
blifhed, to thcie who are free of the trade. To have ferved
an apprcnticefliip in the town, under a mafler properly qua-
lified, is commonly the necefiary requifite for obtaining this
freedom. The bye-laws of the corporation regulate fome-
times the number of apprentices which any mafler is allowed
to have, aad almofl always the number of years which each
apprentice
.1.22 THE NATURE AND CAUSES OF
apprentice is obliged to ferve. The intention of both re--
gulations is to reflrain the competition to a much fmaller
number than might otherwife be difpofed to enter into the
trade. The hmitation of the number of apprentices re-
ftrains it d!re<f.l:ly. A long ten^i of apprenticefhip reftrains
it more indirectly, but as efiedlually, by increafing the ex-
pcnce of educationc
In Sheffield no mader cutler can have more than one ap-
prentice at a time, by a bye-law of the corporation. In
Norfolk and Norwich no mailer weaver can have more than
two apprentices, under pain of forfeiting nve pounds a
month to the king. No mafter hatter can have more than
two apprentices any-Vv^here in England, or in the Englifli
plantations, under pain of forfeiting five pounds a month,
half to the king, and half to him who fnall fue in any court
pf record. Both thefe regulations, though they have been
coniirmed by a public law of the kingdom, are evidently
difrated by the fame corporation fpirit which ena<fLed the
bye-law of Sheffield. The filk weavers in London had
fcarce been incorporated a year when they enafted a bye-
lavr, retraining any mailer from having more than two
apprentices at a time. It required a particular acl of par^
"^liament to refcind this bye-lavv'.
Seven years feem antiently to have been, all over Europe^
the ufual term eftabiidied for the duration of apprenticeffiips
in the greater part of incorporated trades. All fuch incor-
porations were antiently called univerfiiies ; which indeed
is the proper Latin name for any incorporation whatever.
The univernty of fmiths, the univerfity of taylors, Sec. are
cxprefiions which we commonly meet with in the old charters
of antient towns. When thofe particular incorporations
which are now peculiarly called univerfities were firfl eilab-
liffied, the term of years which it was neceflary to ftudy, in
order to obtain the degree of mafter of arts, appears evi-
dently to have been copied from the term of apprenticefhip
in common trades, of which the incorporation^j were much
more antient. As to have wrought icxai years under a
mafter properly qualified, was neceffiiry, in order to intitle
any perfon to become a mafter, and to have hlmfelf appren-
tices in a common trade •, fo to have iludied feven years un-
cler a mafter properly qualified, was neceflary to entitle him
p become a mafter^ teacher, or doctor (words antiently fyno-
'' nimous )
THE WEALTH OF NATIONS. 123
B:imoiis) in the liberal arts, and to have fcholars or appren-
tices (words likewife originally fynonimous) to fiudy under
him.
By the 5th of Elizabeth, commonjy called tlie Statute of
Apprenticelhip, it was enacfied, that no perfon (houid for
the future exercife any trade, craft, or myllery at that timt?
exercifed in England, unlefs he hud previouily fcrvcd to it an
apprenticefliip of [even years at leafl •, and what before had
been the bye-law of many particular corporations, became
in England the general and public law of all trades carried
on in market towns. For though the words of the (latute
are very general, and feem plainly to include the v/hole
kingdom, by interpretation its operation has been limited
to market towns, it having been held that in country vil-
lages a perfon may exercife feveral different trades, though
he has not ferved a feven years apprenticefhip to each,
they being neceffary for the conveniency of the inhsbitants,
and the num.ber of people frequently not being fufficient
to fupply each vvith a particular fett of hands.
By a ftricl interpretation of the words too the operation
of this ftatute has been limited to thofe trades which were
cftabliflied in England before the 5th of Elizabeth, and has
never been extended to fuch as have been introduced fmce
that time. This limitation has given occali.oa to feveral
diftinctions which, confidered as rules of police, appear as
foolifli as can well be imagined. It has been adjudged, fcr
cxample, that a coach-maker can neither himfelf make nor
employ journeymen to make his coach-wheels, but muft
buy them of a mafter wheel-wright ; this latter trade havino-
been exercifed in England before the 5th of Elizabeth.
But a wheel-wright, though he has never ferved an appren-
ticefhip to a coach-maker, may either himfelf make or em-
ploy journeymen to make coaches ; the trade of a coach-
maker .not being within the ftatute, becaufe not exercifed
in England at the time when it was made. The manu-
factures of Manchefter, Birmingham, and Wolverhampton,
are many of them, upon this account, not within the fta-
tute ; not having been exercifed in England before the 5th
of Elizabeth.
In France, the duration of apprenticefliips is difFerent
,1; different towns and in different trades. In Paris, five years
is
124 THE NATURE AND CAUSES OF
is the term required in a great number ; but before any per-
fon can be qualified to exerciie the trade as a mailer, he mull,
in many of them, ferve five years more as a journeyman.
During this latter term he is called the companion of his maf-
ter, and the term itfelf is called his companionfhip.
In Scotland there is no general law which regulates uni-
yerfally the duration of apprenticefhips. Where it is long,
a part of it may generally be' redeemed by paying a fmall
fine. In mod towns too a very fmall fine is fufficient to
purchafe the freedom of any corporation. The weavers of
linen and hempen cloth, the principal manufacftures of the
country, as well as all other artificers fubfervient to them,
wheel-makers, reel-makers, &c. may exercife their trades
in any town corporate without paying any fi.ne. In all
towns corporate all perfons are free to fell burcher's-meat
upon any lawful day of the week. Three years is in Scot^
land a common term of apprenticefhip, even in fome very
nice trades •, and in general I know of no country in Eu?
rope in which corporation laws are fo little opprefliveo
The property which every man has in his own labour, as
It is the original foundation of all other property, fo it is the
mofl faered and inviolable. The patrimony of a poor man
lies in the flrength and dexterity of his hands -, and to hinder
him from employing this ftrength and dexterity in what man-
ner he thinks proptr, without injury to his neighbour, is a
plain violation of this moll faered property. It is a manifeft
encroachment upon the juft liberty both of the workman, and
of thofe who might be difpofed to employ him. As it hin-
ders the one from working at what he thinks proper, fo it
hinders the others from employing whom they think propen
To judge whether lie is fit to' be employed, may furely be
trufted to the difcretion of the employers, whofe intereft it fo
much concerns. The affefted anxiety of the law-giver left
they fi^.ould employ an improper perfon, is evidently as im-.
pertinent as it is oppreffive.
The inflitution of long apprenticQfliips can give no fecu»
rity that infutficievit workmanfhip Oiall not frequently be ex-
poied to public fale. When this is done it is generally the
elFefl: of fraud, and not of inability ; and the longeft apprcn-
tkernip can give no fccurity againft fraud. Quite different
regulations
THE WEALTH OF NATIONS. i^i
fegulations are nccelTary to prevent this abufe. The (ledlng
mark upon plate, and the flamps upon Unen and woollen
cloth, give the purchafer much greater fecurity than any lla-
tute of apprenticeihip. He generally looks at thefe, but
nevej: thinks it worth while to enquire whether the workman
had ferved a feven years apprenticefhip.
The inflitution of long apprentlcefliips has no tendency
to form young people to indullry, A journeyman who works
by the piece is likely to be induilriousy becaufe he derives a
benefit from every exertion of his induftry. An apprentice
is likely to be idle, 'and almoft always is fo, becaufe he has
no immediate interefl to be otherwife. In the inferior em«
ployments, the fweets of labour confift altogether in the
recompence of labour. They who are foonefl in a condi-
tion to enjoy the fweets of it, are likely foonefl: to conceive
a relifli for it, and to acquire the early habit of induftry.
A young man naturally conceives an averfion to labour^
when for a long time he receives no bene St from it. The
boys who are put out apprentices from public charities are
generally bound for more th?ln the ufual number of years,
and they generally turn out very idle and worthlefs.
Apprenticeships were altogether unknown to the an-*
tients. The reciprocal duties of mailer and apprentice make
a conhderable article in every modern code. The Roman
h\v is perfectly filent with regard to them. I know no Greek
or Latin word (I might venture, I believe, to aflert there
is none) which exprefles the idea we now annex to the word
Apprentice, a fervant bound to work at a particular trade
for the benefit of a mailer, during a term of years, upon
condition that the mafter (hall teach him that trade*
Long apprenticefliips are altogether unnecefTary. The
artSy whi<:h are much fuperior to common trades, fuch as
^-hofe of making clocks and watches, contain no fuch myftery
as to require a long courfe of inftru6lion. The (irft invention
of fuch beautiful machines, indeed, and even that of fome of
the inftruments employed in making them, muft, no doubt,
have been the work of deep thought and long time, and may
juftly be confidered as among the happieft efforts of human
ingenuity. But when both have been fairly invented and are
well underftood, to explain to any young man, in the com-
pleateft manner, how to apply the inftruments and how to
conftrudt
126 THE NATURE AND CAUSES OF
conllruifl the machines, cannot well require more than the
JeiTons of a few weeks : perhaps thofe of a few day§ might,
be fuiHcient. In the common mechanic trades, thofe of
<i few days might certainly be fulhcient. The dexterity of
hand, indeed, even in common trades, cannot be acquired
without much practice and experience. But a young man
would pra6life with ^nuch more diligence and attention, it
from the beginning lie v/rought as a journeyman, being paid
in proportion to the little work which he could execute, and.
paying in his turn for the materials which he might fome-
times fpoil through awkwardnefs and inexperience. His
education would generally in this way t)e more effectual,
and always lefs tedious and expenfive. The mailer, indeed,
would be a lofer. He would lofe all the wages of the ap-
prentice, which he now faves, for feven years together.
In the end, perhaps, the apprentice himfeif would be a
lofer. In a trade fo eafdy learnt he would have more com-
petitors, and his wages, when he came to be a compleat
workman, would be much lefs than at prefent. The fame
increafe of competition would reduce the profits of the
mifters as well as the wages of the worknren. The trades,
the crafts, the myfteries, would all be lofers. But the pub-
lic would be a gainer, the work of ail artificers coming
in this way much cheaper to market.
It is to prevent this redu6lion of price, and confequently
of wages and profit, by reftraining that free competition
which would moft certainly occafion it, that ail corporations,
and the greater part ot corporation laws, have been eftab-
lilhed. In order to ereft a corporation, no other authority
in antlent times was requifite in many parts of Europe, but
tliat of the town corporate in which it was eiiablifiied. In
Engb.nd, indeed, a charter from the king was likewife ne-
-cefiarv. But this prerogative of tlie crown feenvs to have
been referved rather for extorting money from the fubjecf,
than for the defence of the common liberty againfi: fuch op-
preilive monopolies. Upon paying a fine to the king, the
charter feems generally to have been readily granted ; and
wdien any particular clafs of artificers or traders thought pro-
per to a(fl as a corporation without a charter, fuch adulterine
guilds, as they were called, were not always disfrancliifed
UDon that account, but obliged to Hue annually to the king
for nermiflion to exercife their ufurped privileges *. The
iiv- mediate infpeifion of all corporations, and of the bye-.
lawa
* See Madox Firma Burgi, p. 26, &iz\
THt WEALTH OI^ NATIONS. 127
laws which they might think proper to enacl for their owti
government, belonged to the town corporate in which they
were eftabhfhed •, and whatever difciphne was exercifed over
them, proceeded commonly, not from the king, but from
that greater incorporation of which thofe fubordinate one?
were only parts or members.
The governrftent of towns corporate was altogether in the
hands of traders and artificers ; and it was the manifeft in-
tereft of every particular clafs of them, to prevent the mar-
ket from being over-ftocked, as they commonly exprefs it,
with their own particular fpecies of induftry ; which is in
reality to keep it always under-flocked. Each clafs wasr
eager to eftablifli regulations proper for this purpofe, and,
provided it was allowed to do fo, Vv'as willing to confent that
every other clafs fiiould do the fame. In confequence of fuch
regulations, indeed, each clafs was obliged to buy the goocb
they had occafion for from every other within the town,
fomewhat dearer than they otherwife might have done. But
in recom pence, they were enabled to fell their own juft as
much dearer ; fo that fo far it was as broad as long, as they
fay ; and in the dealings of the different clafles within the
town With one another, none of them were lofers by thefe
regulations. But in their dealings with the country they
were all great gainers ; and in thefe latter dealings coniifts
the whole trade which fupports and enriches every tov/n.
Every town draws its whole fubfiftenccj and all the ma-
terials of its induftry, from the countrv. It pavs for thefe
chiefly in two ways : firfty by fending back to the country
a part of thofe materials wrought up and manufaftured ; in
which cafe their price is augmented by the waives of the
workmen, and the profits of their maiters or immediate em-
ployers : fecondly, by fending, to it a part both of the rude
and manufactured produi:e, either of other countries, or of
diftant parts of the fame country, impoytcd into the town j
in which cafe too the original price of thofe goods is aug-
mented by the vv^ages of the carriers or failors, and by the
profits of the merchants who employ themJ/ hi what is
gained upon the firft. of thofe two branches of commerce,
confifts the advantage which the town makes by its maiiufac-
tures •, in what is gained upon the fecond, the advantage of
its inland and foreign trade. The wages of the workmen,
^nd the profits of their different employers, make up the
whole
i28 THE NATURE AND CAUSES OF"
whole of what is gained upon both. Whatever regulationsy
therefore, tend to iiicreafe thofe wages ;ind profits beyond
what they otherwife would be, tend to- enable the town tc
purchafe, with a fmaller quantity of its labour, the produce
of a greater quantity of the labour of the country. They
give the traders and artificers in the town an advantage over
the landlords, farmers, and labourers in the country, and
breii^ down that natural equality which ^'ould otherwife
take place in the commerce which is carried on between
them. The whole annual produce of the labour of the
focicty is annually divided between thofe two different fets
of people. By means of thofe regulations a greater fliare
of it is given to the inhabitants of the town than would
otherwife fall to them j and a lefs to thofe of the country.-
The price which the town really pays for the provifions
atid materials annually imported into it, is the quantity of
manufa6lures and other goods annually expofted from it.
The dearer the latter are fold, the cheaper the former are
bought. The induflry of the' tovv^i becomes more, and
that of the country lefs, advantageous.
That the induftry which is carried on in towns is, every-
where in Europe, more advantageous than that which is
carried on in the country, without entering into any very
nice computations, we may fatisfy ourfelves by one very
/Imple and obvious obfervation. In every country of Eu-
rope we find, at leafl, a hundred people who have acquired
great fortunes from fmail beginnings by trade and manufac-
tures, the induftry which properly belongs to townS;, for
one who has done f6 by that which properly belongs to the
cauntrv, the raifmg of rude prodiice by die improvement and
cultivation of land. Induflry, therefore, mufi: be better re-
warded, the wages of labour and the profits of fiock muft
evidently be greater in the one fituation than in the other.
But flock and labour naturally feek the moft advantageous
employment. They naturally, therefore, refort as much as
they can to the town, and dcfert the country.-
The inhabitants of a town, being collecT.ed into one plac?,
can eafily combine together. The mofi infignificant trades
carried on in towns have accordingly, in fome place or other,
been incorporated ; and even where they have never been in-
corporated, yet the corporation fpirit, the jealoufy of ftran-
oers.
THE WEALTH OF NATIONS. 129
gers, the averfion to take apprentices, or to communicate
the fecret of their trade, generally prevail in them, and often
teach them, by voluntary allbciations and agreements, to
prevent that free competition which they cannot prohibit
by bye-laws. The trades which employ but a fmall num-
ber of hands, run moll eafily into fuch combinations*
Half a dozen wool-combers, perhaps, are necelfary to keep
a thoufand fpinners and weavers at work. By combining
not to take apprentices they can not only engrofs the em-
ployment, but reduce the whole manufacTture into a fort
of llavery to themfelves, and raife the price of their labour
much above what is due to the nature of their work.
The inhabitants of the country, difperfcd in diftant
places, cannot eafily combine together. They h:^ve not
only never been incorporated, but the corporation f^irit ne-
ver has prevailed among tliem. No apprenticefliip lias ever
been thought neceilary to qualify for huibaiidry, the great
trade of the country. After what are called the fine arts,'
^and the liberal prcfeflions, however, there is perhaps no trade
which requires fo great a variety of knowledge and experi-"
encc. The innumerable volumes which have been written
upon it in all languages, may fatisfy us, that among the
wifefb and moft learned nations, it has nevrr been i^egarded
as a matter very eafdy underftood. And from all thofe
volumes we (hall in vain attempt to coiled! that knowledge?
of its various and complicated operations, which is com-
monly poiTefTed even bv the common farmer ; how con-
temptuoufly foever the very contemptible authors of fome of
them may fometimes afFeCf to fpeak of him. There is fcarce
any common mechanic trade, on the contrary, of ^^'hich all
the operations may n ?t be as compleatly and diftindily ex^
plained in a pamp'ilef of a very few pages, as it is pollible
for words iiluftrated by fii?:ures to explain them. In the
hlitory of the arts, now publilLing by the French academy
of fciences, fcveral of them are actually explained in this
manner. The dire<ff ion of operations, befides, which muft
be varied with every change of the weather, as well as with
many ether accid mts, r'^qulres much mor^ judgment and
difcre.ion, than that of thofe which are alwajs the fame
or very nearly the fame*
Not only the art of the farmer, the general Jire'Slion of
the operations of huibandry, but many inferior branches of
Vol. L ■ , ' K country
130 THE NATURE AND CAUSES OF
country labour require much more {kill and experience than
the greater part of mechanic trades. The man who works
upon brafs and iron, works with inftruments and upon ma-
terials of which the temper is always the fame, or very nearly
the fame. But the man who ploughs the ground with a team
of horfes or oxen, works with inftruments of which the
health, ftrength, and temper are very dilTerent upon diffe-
rent occafions. The condition of the materials which he
works upon too is as variable as that of the inftrument which
he works with, and both require to be managed with much
judgment and difcretion. The common ploughman, though
generally regarded as the pattern of ftupidity and ignorance,
is feldom defe(flive in this judgment and difcretion. He is
lefs accuftomed, indeed, to focial intercourfe than the me-
chanic who lives in a town. His voice and language arc
more uncouth and more difficult to be underftood by thofe
who are not ufed to them. His underftanding, however,
being '.^ccuflomed to confider a greater variety of objects, is
generally much fuperior to that of the other, whofe whole
attention from morning till night is commonly occupied in
performing one or two very fimple operations. How much
the lower ranks of people in the country are really fuperior
to thofe of the town, is well knov/n to every man whom
cither bufmefs or curiofity has led to converfe much with
both. In China and Indoftan accordingly both the rank
nnd the wages of country labourers are faid to be fuperior
to thofe of the greater part of artificers and manufacturers.
They would probably be fo every where, if corporation
laws and the corporation fpirit did not prevent it.
The fuperlority which the Induftry of the towns has every
where in Europe over that of the country, is not altogether
owing to corporations and corporation laws. It is fupported
by many other regulations. The high duties upon foreign
manufadturcs and upon all goods imported by alien mer-
chants, all tend to the fame purpofe. Corporation laws en-
able the inhabitants of towns to raife their prices, without
fearing to be under-fold by the free competition of their own
countrymen. Thofe other regulations fecure them equally
agalnft that of foreigners. The enhancement of price occa-
fioncd by both is every where finally paid by the landlords,
farmers, and labourers of the country, who have feldom op-
pofed the eftabliflnnent of . fuch monopolies. They have
commonly neitlier liiciination nor fitnefs to enter into com-
binations ;
THE WEALTH OF NATIONS. 131
binatlons ; and the clamour and fophiilry of ni'erchants and
manufa6lurers eafily perfuade them that the private intereil
of a part, and of a fubordhiate part of the fociety, is the
general intereft of the whole.
In Great Britain the fuperiority of the induftry of the
towns over that of the country, feems to have been greater
formerly than in the prefent times. The wages of country
labour approach nearer to thofe of manufa(5luring labour,
and the profits of flock employed in agriculture to thofe of
trading and manufacfturing flock, than they are laid to have
done in the lafl century, or in the beginning of the prefcnt.
This change may be regarded as the necefTary, though very
late confequence of the extraordinary encouragement given
to the induflry of the towns. The Hock accumulated in
them comes in time to be fo great, that it can no longer be
employed with the antient profit in that fpecies of induftry
which is peculiar to them. That induflry has its limits like
every other ; and the increafe of ftock, by increafmg the
competition, neceflarily reduces the profit. The lowering of
profit in the town forces out ftock to the country, where, by
creating a new demand for country labour, it necefTarily
raifes its wages. It then fpreads itfelf, if I may fay fo, over
the face of the land, and by being employed in agriculture
is in part reflored to the country, at the expence of v/hich,
in a great meafure, it had originally been accumulated in
the town. That every where in Europe the greatefl im-
provements of the country have been owing to fuch over-
flowings of the ftock originally accumulated in the towns, I
fliall endeavour to fhow hereafter ; and at the fame time to
demonflrate, that though fome countries have by this courfe
attained to a confiderable degree of opulence, it is in itfelf
neceflarily flow, uncertain, liable to be diflurbed and inter-
rupted by innumerable accidents, and in every refpecl con-
trary to the order of nature and of reafoli. The interefts,
prejudices, laws and cufloms which have given occafion to
it, I fhall endeavour to explain as fully and diftindtly as I
can in the third and fourth books of this enquiry.
People of the fame trade feldom meet together, even for
merriment and diverfion, but the converfation ends in a con-
fpiracy againft the public, or in fome contrivance to raife
prices. It is impoflible indeed to prevent fuch meetings, by
any law v/hich either could be executed, or would be con-
K 2 fiftenf
T32 THE NATURE AND CAUSES OF
fiflent wltli liberty and juftice. But though the law cannot
hinder people of the fame trade from fometimes afTembUng
together, it ought to do nothing to faciHtate fuch aflem-
bHes J much lefs to render them neceiTary.
A REGULATION whlch obHges all thofe of the fame trade
in a particular town to enter their names and places of
abode in a public regifler, facilitates fuch alTembiie?. It
connecls individuals who might never other wife be known
to one another, and gives every man of the trade a direc-
tion where to find every other man of it.
A REGULATION which enables thofe of the fame trade to
tax themfelves in order to provide for their poor, their fick,
their widows and orphans, by giving them a common in-
tereft to manage, renders fuch aflemblies necelTary.
An incorporation not only renders them neceflary, but
makes the ac^ of the majority binding upon the whole. In
a free trade an efFcclual combination cannot be eflabliilied
but by the unanimous confent of every fnigle trader, and it
c;mnot laft Ioniser than every fingle trader continues of the
fame mind. The majority of a corporation can ena£l a
bye-law with proper penalties, which will limit the com-
petition more effectually and' more durably than any volun-
tary combination whatever.
The pretence that corporations are necelTary for the better
government of the trade, is without any foundation. The
real and etTeclual difcipline which is exercifed over a work-
man, is not that of his corporation, but that of his cuftomers.
It is the fear of lofing their employment which reftrains his
frauds and corre<fls his negligence. An exclufive corporation
neceffarily weakens the force of this difcipline. A particular
let of workmen mull then be employed, let them behave
well or iil. It is upon this account that in many large in-
corporated towns no tolerable workmen are to be found,
even in fome of tlie moft neceffary trades. If you would
]-ave your work tolerably executed, it mull be done in the
fiibuvbs, where the workn*»en having no exclufive privilege,
liave nothing but their character to' depend upon, and you
niufl then fmujigle it into the town as well as you can.
It
THE WEALTH OF NATIONS. 133
It is in this manner that the policy of Europe, by re-
ftraining the competition in fome employments to a fmal-
ler number tiran would otherwife be dilpofed to enter into
them, occafions a very important inequality in the whole
of tlie advantages and difad^'antages of the difFcrent em-
ployments of labour and Hock.
Secondly, The policy of Europe, by increafmg the com-
petition in fome employments beyond what it naturally would
be, occafions anorher inequality of an oppofite kind in the
whole of the advantages and difadvantages ot the different
employments of labour and Hock.
It has been confidered as of fo much importance that a
proper number of young people Ihould be educated for cer-
tain profeflions, that, fometimes the public, and fometimes
the piety of private founders have eilabiithed many penfions,
fcholarfhips, exhibitions, burfaries, &c. for this purpofe,
which draw many more people into thofe trades than could
otherwife pretend to follow them. In all chrillian countries,
I believe, the education of the greater part of churchmen is
paid for in this manner. Very few of them are educated
altogether at their own expence. The long, tedious and ex-
penhve education, therefore, of thofe who are, will not ai-
w^ays procure them a fuitable reward, the church being
crowded with people who, in order to get employment, are
willing to accept of a much iVnaller recompence than what
fuch an educjition would otherwife have entitled them to;
and in this manner the competition of the poor takes away
the reward of the rich. It would be indecent, no doubt,
to compare either a curate or a chaplain with a journeyman in
any common trade. The pay of a curate or chaplain, how-
ever, may very properly be confidered as of the fame nature
with the wages of a journeyman. They are, all three, paiiL
for tiieir work according to the contra6l which they may hap-
pen to make with their refpecflive fuperiors. Till after the
middle of the fourteenth century, five marks, containing
about as much filver as ten pounds of our present money,
was in England the ufual pay of a curate or ilipendiary parifli
priell, as we find it regulated by the decrees of feveral dilFe-
rent national counciis. At tlie fame period four-pence a day,
contairiing tlie fame, quantity of iilver as a fliiliing of ourpre-
fent money, was declared to be the pay of a madcr mafon,
and three-^ence a day, equal to nine-pence of our prefcnt
money, that of a journeyman mafon. * The wages of both
thefc
* Sec the Statute of labourers, aj Ed. III.
((
134 THE NATURIE AND CAUSES OF "
thefc labourers, therefore, fuppofing them to have been
conflantly emplc^yed, were much fuperior to thofe of the
curate. The wages of the mafter mafon, fuppofing him
to have been without employment one-third of the year,
would have fully equalled them. By the I2th of Queen
Anne, c. 12, it is declared, " That whereas for want of
^' fufficient maintenance and encouragement to curates,
" the cures have in feveral places been meanly fupplied,
** the bifliop is, therefore, empowered to appoint by writ-
*' ing under his hand and feal, a fufficient certain ftipend
or allowance, not exceeding fifty and not lefs than twenty
pounds a year." Forty pounds a year is reckoned at
prefent very good pay for a curate, and notwithflanding
this a6l of Parliament, there are many curacies under
twenty pounds a year. There are journeymen flroe-makers
in London who earn forty pounds a year, and there is
fcarce an induftrious workman of anv kind in that metro-
polls who does not earn more tkan twenty. This lafl fum
indeed does not exceed what is frequently earned by com-
mon labourers in many country parifhes. Whenever the
law has attempted to regulate the wages of workmen, it has
always been rather to lower them than to raife them. But
the law has upon many occafions attempted to raife the
wages of curates, and for the dignity of the church, to
oblige the re(R:ors of parifnes to give them more than the
wretched maintenance which they themfelves might be
v/illmg to accept of. And in both cafes the law feems to
have been equally inefFe(ftual, and has never either been
able to raife the vv^ages of curates or to fink thofe of la-
bourers to the degree that was intended ; becaufe it has
never been able to hinder either the one from being willing
to accept of lefs than the legal allowance, on account of
the indis^ence of their fituation and the multitude of their
competitors j or the other from receiving more, on account
of the contrary competition of thofe who expelled to de-
rive either profit or pleafure from employing them.
The great benefices and other ecclefiaftical dignities fup-
port the honour of the church, notwithltanding the mean
circumilances of fome of its inferior members. The refpecft
paid to the profeffion too makes fome compenfation even to
them for the meannefs of their pecuniary recompence. In
England,
THE WEALTH OF NATIONS. 135
England, and in all Roman Catholic countries, tne lottery
of the church is in reality much more advantageous than
is neceffary. The example of the churches of Scotland,
of Geneva, and of fcvcral other protcftant churches, may
fatisfy us that m (o creditable a profelhon, ui which edu-
cation is fo eafily procured, the hopes of much more mo-
derate benefices will drav/ a fulHcient number of learned,
decent, and refpe6lable men into holy orders.
In profeffions in which there are no benefices, fuch as
law and phyfic, if an equal proportion of people were edu-
cated at the public expence, the competition would foon
be fo great, as to fink very much their pecuniary reward.
It might then not be worth any man's while to educate his
fon to either of thofe profeflions at his own expence. They
would be entirely abandoned to fuch as had been educated
by thofe public charities, whofe numbers and neceffities
would oblige them in general to content themfelves with a
very miferable recompence, to the entire degradation of
the now refpe£table profeflions of law and phvfic.
That unprofperous race of men commonly called men
of letters, are pretty much in the fituatlon which lawyers
and phyficians probably would be in upon the foregoing
fuppofition. In every part of Europe the greater part of
them have been educated for the church, but have been
hindered by different reafons from entering into holy or-
ders. They have generally, therefore, been educated at
the public expence, and their numbers are every where fo
great, as commonly to reduce the price of their labour to
SI very paultry recompence.
Before the invention of the art of printing, the only em-
ployment by which a man of letters could make any thing by
his talents, was that of a public or private teacher, or by-
communicating to other people the curious and ufeful know-
ledge which he had acquired himfelf : And this is (till furely
a more honourable, a more ufeful, and in general even a
more profitable employment than that of writing for
a bookiclier, to which the art of printing has given occa-
fion. The time and fludy, the genius, knowledge, and
application rcquifite to qualify an eminent teacher of the
fciences, arc at leall equal to what is nccefRiry for the
greateft pradlitioners in law and phyfic. But the ufual
reward of the eminent teacher bears no proportion to that
Gt
136 THE NATURE AND CAUSES OF
of the lawyer or phyfician ; becaufe the trade of the one
is ctowed with indigent people who have been brought up
to it at the public expence •, whereas thofe of the other two
are incumbered with very few who have not been educated
at their own. The ufual recompence, however, of pub-
lic and private teachers, fmall as it may appear, would un-
doubtedly be lefs than it is, if the competition of thofe yet
more indigent men of letters who write for bread was not
taken out of the market. Before the invention of the art
of printing, a fcholar and a beggar feem to have been terms
very nearly fynonimous. The different governors of the
univerfitics before that time, appear to have often granted
licences to their fcholars to beg.
In antient times, before any charities of this kind had been
eftabliflied for the edacation of indigent people to the learned
profeiTions, the rewards of eminent teachers appear to have
been much more confideruble If^crates, in what is called
his difcourfe againft the fophiils, reproaches the teachers of
his own times wich iiiconuftency. " They make the mod
magnificent promifes to their fcholars, fays he, and under-
take to teach them to be wife, to be happy, and to be juft,
and in return for fo important a fervice, they ftipulate the
paultry reward of four or five mime. They who teach wif-
dom, continues he, ought certainly to be wife themfelves ;
but if any man was to fell fuch a bargain for fuch a price,
he wouLl be convicted -of the mod evident folly." He cer-
tainly does not mean here to exaggerate the reward, and we
may be afTured that it was not lefs tlian he reprefents it.
Four minre were equal to thirteen pounds fix (liillings and
eight-pence: five minse to fixteen pounds thirteen fliillings
and four-p::ncc. Something not lefs than' the largeil of
t^of.' tvvo fuwis, therefore, mult at that time have been
ufuallv paid to the mcft eminent teachers at Athens. Ifo-
crateshimfc^lf demanded ten minre, or thirty-three pounds fix
rhiUmnjS and e'iglit-pence, from each fcholar. When he
taugbt at Atheiis, he is faid to have had an hundred fcho-
lars. I underitnnd this to be the number whom he taaght
at one tim", or who attended what we would call one courfe
^f ieclures, a number which will not appear extraordinary
from fo great a ':^:ty to fo lamous a teaclier, who taught too
what was at that time the moil fafhionabij of all fciences,
ihetorick. Ho muit have made, therciore, by each courfe
of ledlures, a thoufand min^x, or 3,3331. ds. 8ei, A thou-
fand
THE WEALTH OF NATIONS. 137
fanci minx, accordingly, is faid by Plutarch in another
place, to have been his Didav.T:ron, or iifual price of teach-
ing. Many other eminent teachers in thofe times appear
to have acquired great fortunes. Gorgias made a prefent
to the temple of Delphi of his own (latue in folid gold.
We muft not, I prefume, fuppofe that it was as large as the
life, tlis way of living, as well as that of Hippias and
Protagoras, two other eminent teachers of thofe times, is
reprefented by Plato as fplendid even to oftentation. Plato
himfelf is faid to have lived with a good deal of magnifi-
cence. Ariftotle, after having been tutor to Alexander and
moll munificentlv rewarded, as it is univerfaliy agreed, both
by him imd his father Philip, thought it worth while, not-
withftanding, to return to Athens, in order to refume the
teaching of his fchool. Teachers of the fciences were proba-
bly in thofe times lefo common than they came to be in an age
or two afterwards, when the competition had probably fome-
what reduced both the price of their labour ancl the admira^
tion for their perfons. The moft eminent of Lhem, however,
appear always to have enjoyed a degree of conlidc^ration much
fuperior to any of the like profelFion in the prefent times.
The Atiienians f?nt Carneades the academic, _an<i Diogenes
the ftoic, upon a folemn cmbaiTy to Rone ., and though
their city had then declined from its foniif^r grandeur, it was
ftill an independent and coniiderable republic. Garneades
too was a Babylonian by birth, and as there ntvcr was a peo-»
pie more jealous of admitting foreign-.::rs to public ofhces
than the Athenians, their confideration for him muft have
been very great.
This inequality is upon the whole, perhaps, rather ad-
vantageous than hurtful to the public. It may fomewhat
degrade the profeffion of a public teacher ; but the chcap-
nefs of literary education is furely an advantage wMch greatly
overbalances this trifling inconveniency. The public too
might derive ftill greater benefit from it, if the conftitutio-i
of thofe fchools and colleges, in which education is carrie<l
on, was more reafonuble than it is at prefent through the
greater part of Europe.
Thit ELY, The policy of Europe, by obftruflinf^ the free
circulation of labour and fto«ck both from employment to em-
ployment, r.nd from pb(jn to place, occafions in fonie cafes
a very inconvenient inequality in the whole of the ad-
vantages
138 THE NATURE AND CAUSES OF
vantages and difadvantages of their different employ-
ments.
The ftatute of apprenticcfliip obflrufls the free circula-
tion of labour from one employment to another, even in
the fame place. The exclufive privileges of corporations
obflru6l it from one place to another, even in the fame em-
ployment.
It frequently happens that while high wages are given to
the workmen in one manufacture, thofe in another are
obliged to content themfelves with bare fubfiftence. The
one is in an advancing Itate, and has, therefore, a continual
demand for new hands : The other is in a declining ftate,
and the fuper-abundance of hands is continually increafmg.
Thofe two manufactures may fometimes be in the fame
town, and fometimes in the fame neighbourhood, without
being able to lend the lead affiftance to one another. The
flatute of apprenticefnip may oppofe it in the one cafe, and
both that and an exclufive corporation in the other. In ma-
ny different manufactures, however, the operations are fo
much alike, that the workmen could eafily change trades
with one another, if thofe abfurd laws did not hinder them.
The arts of weaving plain linen and plain filk, for example,
are almofl entirely tlie fame. That of weaving plain wool-
len is fomewhat different ; but the difference is fo infignifi-
cant, that either a linen or a filk weaver might become a to-
lerable workman in a very few days. If any of thofe three
capital manufactures, therefore, were decaying, the work-
men might find a refource in one of the other two which
was in a more profperous condition ; and their wages would
neither rife too high in the thriving, nor (ink too low in the
decaying manufacture. The linen manufacture indeed is,
in England, by a particular ftatute, open to every body ;
but as it is not much cultivated through the greater part of
the country, it can afford no general refource to the work-
men of other decaying manufactures, who, where ever the
ftatute of apprenticeihip takes place, have no other choice
but either to come upon the parifli, or to work as common
labourers, for which, by their habits, they are much Vv'orfe
qualified than for any fort of manufatfture that bears any_
refemblance to their own. They generally, therefore,
caufe to come upon the parifh.
Whatever
THE WEALTH OF NATIONS. 139
Whatever obflru<n:s the fvee circulation of labour from
one employment to another, obllrudls that of (lock likewifc ;
the quantity of ftock which can be employed in any branch
of bufmers depending very much upon that of the labour
vi^hich can be employed in it. Corporation laws, however,
give lefs obftruclion to the free circulation of ftock fron\
one place to another than to that of labour. It is every-
where much eafier for a wealthy merchant to obtain the
privilege of trading in a town corporate, than for a poor
artificer to obtain that of working in it.
The obftru^lion which corporation laws give to the free
circulation of labour is common, I believe, to every part of
Europe. That which is given to it by the poor lav/s is, fo
far as I know, peculiar to England. It confiiis in the diffi-
culty vvhich a poor man finds in obtaining a fettlement, or
even in being allowed to exercife his induftry in any pariili
but that to which he belongs. It is the labour of artificers
and m.anufa6turers only of which the free circulation is ob-
fl:ru6led by corporation laws. The difficulty of obtaining
fettlements obftrucfts even that of common labour. It may
be worth while to give fome account of the rife, progrefs,
and prefcnt (late of this diforder, the greateit perhaps of
any in the police of England.
When by the dedrucbion of mrnnfteries the poor had
been deprived of the charity of thofe religious houfcs, after
fome other ineffectual attempts for their relief, it -was en-
acfled by the 43 of Elizabeth, c. 2. that every pariih ihould
be bound to provide for its own poor ; and that overfeers
of the poor fhould be annually appointed, who, with the
church-wardens, fliould raife by a pariin rate, competent
fums for this purpofe.
By this ftatute the neceflity of providing for their own
poor was indifpenfably impofed upon every parifli. Who
were to be confidered as the poor of each parilli, became,
therefore, a queftion of fome importance. This queftion,
after fome variation, was at laft determined by the 13th and
14th of Charles II. when it was enacled, that forty days un-
dilfuvbed refidence fhould gain any perfon a fettlement in
any parifh ; but that within that time it fhould be lawful
ior two juOaces of the peace, upon complaint made by the
churcli-wardens or overfeers of the poor, to remove any
new inhabitant to the pariih v/herc he was hft legally fet-
tled -,
I40 THE NATURE AND CAUSES OF
tied ; unlefs he either rented a tenement of ten pounds a
year, or could give fuch fecurity for the difcharge of the
pariOi where he was then Hving, as thofe juitices (liould
judge fuiricient.
Some frauds, it is faid, were committed in confequence
of this llatute •, parifli officers fometimes bribing their own
poor to go clandeftinely to another parifh, and by keeping
themfch'es concealed for forty days to gain a fettlement
there, to the difcharge of that to which they properly be-
longed. It was enacled, therefore, by the ift of James II.
that the forty days undiilurbed refidence of any perfon ne-
cefTary to gain a fettlement, fhould be accounted only from
the time of his delivering notice in writing, of the place of
his abode and the number of his family, to one of the
churchwardens or overfeers of the parifh where he came to
dwell.
But pariOi officers, it feems, were not always more ho-
nefl with regard to their own, than they had been with re-
gard to other pariflies, and fometimes connived at fuch in-
trufions, receiving the notice, and taking no proper fleps
in confequence of it. As every perfon in a parifh, there-
fore, was fuppofed to have an intereft to prevent as much
as poffiblc their being burdened by fuch intruders, it was
further enabled by the 3d of William IIJ. that the forty
days refidence fhould be accounted only from the publica-
tion of fuch notice in writing on Sunday in th^ hurch,
immediately after divine fervice.
" After all, fays Dotflor Burn, this kind of fettlement,
*' by continuing forty days after publication of notice in
" writing, is very feldom obtained ; and the defign of the
" aiPcs is not fo much for gaining of fettlements, as for the
<* avoiding them, by perfons coming into a parifh clandcf-
** tinely : for the giving of notice is only putting a force
^^ upon the parifh to remove. But if a perfon's fituation
^* is fuch, that it is doubtful whether he is acftually re-
^^ moveable or not, he fnall by giving of notice compel the
^' parifli either to allow him a fettlement uncontefled, by
^'* fuifering him to continue forty days j or, by removing
^^ him, to try the right."
This flatute, therefore, rendered it alraoft imprafticable
for a poor man to gain a new fettlement in the old way, by
forty
THE WEALTH OF NATIONS. 141
forty days inhabitancy. But that it might not appear to pre-
clude altogether the common people of one parifli t-rom
ever eftabliiliing thcmfelves with fecurity in another, it
appointed four other ways by which a fettlemcnt might be
gained without any notice delivered or publiflied. The
firft was, by being taxed to parifli rates and paying them ;
the fecond, by being elecfted into an annual pariih office
and ferving in it a year -, the third, by ferving an appren-
ticeiliip in the pariih j the fourth, by being hired into fer-
vice there for a year, and continuing in the fame fcrvice
during the whole of it.
Nobody can gain a fettlement by either of the two firft
ways, but by the public deed of the whole parifn, who are
too well aware of the confequences to adopt any new-comer
who has nothing but his labour to fupport him, either by
taxing him to pariih rates, or by ele£ling liim into a pa-
rifh office.
No married man can well gain any fettlement in either of
the two laft ways. An apprentice is fcarce ever married ;
and it is exprefsly enabled, that no married fervant Ihali
gain any fettlement by being hired for a year. The prin-
cipal effeft of introducing fettlement by (ervice, has been to
put out in a great meafure the old faffiion of hiring for a
year, which before had been fo cuftomary in England, that
even at this day, if no particular term is agreed upon, the
law intends that every fervant is hired for a year. But
mafters are not always wilHng to give their fervants a fettle-
ment by hiring them in this manner j and fervants are not
always willing to be fo hired, becaufe as every laft fettle-
ment difcharges all the foregoing, they mi;2,ht thereby lofe
their original fettlement in the places of their nativity, tlie
habitation of their parents and relations.
No independent workman, it is evident, whether labourer
or artificer, is likely to gain any new fertlement either by ap-
prenticefliip or by fervice. . When fuch a perfon, therefore,
carried iiis induftry to a new parifli, he was liable to be re-
moved, how healthy and induftrious focver, at the caprice of
any churchwarden or overfeer, unlefs he either rented a tene-
ment of ten pounds a year, a thing impoffible for one who
has nothing but his labour to live by ; or could give fuch fe-
curity for the difcharge of the parifti as two juitices of the
peace fnould judge fufficient. What fecurity they ftiall re-
q^uirCj
142 THE NATURE AND CAUSES OF
quire, indeed, is left altogether to their difcretioii *, but they
cannot well require lefs than thirty pounds, it having been
enabled, that the purchafe even of a freehold eltate of lefs
than thirty pounds value, fliall not gain any perfon a fertle-
mcnt, as not being fulhcient for tlie difcbarge of the parilh.
But this is a fecurity which fcarce any man who lives by la-
bour can give j and much greater fecurity is frequently de-
manded.
In order to reflore in fome meafure that free circulation
of labour which thofe diOerent (latutes had almol'l entirely
taken away, the invention of certificates was fallen upon.
By the 8th and 9th of William III. it was ena6Ied, that if
any perfon fhould bring a certificate from tlie parifh where
he was lafl legally fettled, fubfcribed by the churchwardens
and overfeers of the poor, and allowed by two jullices of
the peace, that every other pariih fliould be obliged to re-
ceive him 'y that he fhould not be removeable merely upon
account of his being likely to become chargeable, but only
upon his becoming acStually chargeable, and that then the
parifh which granted the certificate fliould be obliged to
pay the expence both of his maintenance and of his re-
moval. And in order to give the mod perfe£l fecurity to
the parifh where fuch certificated man fliould come 10 re-
fide, it was further enabled by the fame flatute, that he
iliould gain no fettlement there by any means whatever,
except either, by renting a tenement of ten pounds a year,
or by ferving upon his own account in an annual parifii
ofBce for one whole year •, and confequently neither by no-
tice, nor by fervice, nor by apprenticefiiip, nor by paying
parifh rates. By the 12th of Queen Anne too, itat. i.
c. 18. it was further enabled, that neither the fervants nor
apprentices of fuch certificated man fliould gain any fettle-
ment in the parifh \vhere he refided under fuch certificate.
How far this invention lias reflored that free circulation
of labour which the preceding ftatutes had almoffc entirely
taken away, we may learn from the following very judi-
cious obfcrvation of Doctor Burn. " It is obvious, fays
^' he, that there are divers good reafons for requiring cer-
" tificates with perfons coming to fettle in any place ;
" namely, that pei-fons rending under them can gain no
*' fettlement, neither by apprenticefhip, nor by fervice,
** nor by giving notice, nor by paying parifh rates ; that
" they can fettle neither apprentices nor fervants ; that if
« they
THE WEALTH OF NATIONS. 143
»* they become chargeable, it is certainly known whither
« to remove them, and the parifh Ihall be paid for the re-
" moval, and for their maintenance in the mean time ;
<« and that if they fall fick, and cannot be removed, ths
" parifli which gave the certificate mult maintain them :
** none of all which can be without a certificate. Which
** reafons will hold proportionably for parilhes not granting
" certificates in ordinary cafes ; for it is far more than an
*' equal chance, but that they will have the certificated
<* perfons again, and.inaworfe condition." The moral
of this cbfervation feems to be, that certificates ought al-
ways to be required by the parilh wliere any poor man
comes to refide, and that they ought very feldom to be
granted by that which he propofes to leave. " There is
<* fomewhat of hardfliip in this matter of certificates/'
fays the fame very intelligent author in his Hiftory of the
Poor Laws, " by putting it in tlie power of a parilh
*' officer, to imprifon a man as it were for life ; however
" inconvenient it may be for him to continue at that place
'' where he has had the misfortune to acquire what is
** called a fettlement, or whatever advantage he may pro-
" pofe to himfelf by living elfewhere."
Though a certificate carries along with it no teftimonial
of good behaviour, and certifies nothing but that the perfon
belongs to the parifli to M^hich he really does belong, It is al-
together difcretionary in the parlfh ollicers either to grant
or to refufe it. A mandamus was once moved for, fays
Do61:or Burn, to compel the churchwardens and overfeers
to fign a certificate ; but the court of King's Bench re-
jecSled the motion as a very ftrange attempt.
The very unequal price of labour which we frequently
find in England In places at no great diftance from one ano-
ther, is probably owing to the obftruftion which the law
of fettlements gives to a poor man Vvho would carry his in-
duftry from one parifh to another without a certificate. A
fingle man, indeed, who is healthy and induflrious, may
fometimes refide by fufferance witliout one ; but a man
with a wnfe and family who fliould attempt to do fo, would
in mofi: parilhes be fure of being removed, and if the fingle
man fliould afterwards marry, he would generally be re-
moved llkewife. The fcarclty of hands In one parlfij,
therefore, cannot always be relieved by their fuper-abund-
ance in another, as it is conflantly in Scotland, and, I
believe.
144 THE NATURE AND CAUSES OF
believe, in all other countries where thefe is no difficulty
of fcttlemenc. In fuch countries, though wages may fome-*
times I lie a linle in the neighbourhood of a great town,
or wherever cife there is an extraordinary demand for la-
bour, and fiiik gradually as the diflance from fuch places
increafes, till they fall back to the common rate of tha
coantry ; yet we never meet with thofe fudden and unac-
ccAiutable ditTerences in the wages of neighbouring places
which we fometimes find in England, where it is often
more diihcult for a poor man to pafs the artinrial boundary
oi a parifli, than an arm of the fea or a ridge of higii
mountains, natural boundaries which fometimes feparatc
very diiiin6lly ditTerent rates of wages in other countries.
To remove a man who has committed no mifdemeanour
from the parifli where he cliufes to refide, is an evident vio-
lation of natural liberty and judice. £hc common people
of England, however, fo jealous of their liberty, but like
the common people of mofl other countries never rightly
underftanding wherein it confifts, have now for more than
a century together fullered themfidves to be cxpofed to this
opprelhon without a remedy. Though men of reflecflion
too have fometimes complained of the law of fettlementsas
a public grievance ; yet it has never been the objecfl of any
general popular clamour, fuch as that againft general war-
rants, an abufive praftice undoubtedly, but fuch a one as
was not likely to occafion any general opprefiion. There is
fcarce a poor man in England of forty years of age, I will
venture to fay, who has not in fome part of his life felt him-
felf mofb cruelly opprefled by this ill- contrived law of fettle*
nients.
I SHALL conclude this long chapter with obferving, that
though antiently it was ufual to rate wages, firft: by general
laws exteu'Jing over the whole kingdom, and afterwards by
particular orders of the juftices of peace in every particular
county, both thefe praflices have now gone entirely into
difufe. " By the experience of above four hundred years,"
f.iys Do(flor Ourn, " it feems time to lay afide all endea-
** vours to bring under dnti regulations, what in its ov/n
*« nature feems incapable of minute limitation : for if all
" perfons in the fame kind of vv'ork were to receive equal
" v/ages, there would be no emulation, and no room left
*f fcr iiiduilry or ingenuity."
Particular
THE WEALTH OF NATIONS. ^45
Particular a£ls of parliament, however, ftill attempt
fometimes to regulate wages in particular trades and in parti-
cular places. Thus the 8th of George III. prohibits, uuder
heavy penalties, all mailer taylors in London, and five miles
round it, from giving, and their workmen from accepting,
more than two (hillings and feven-pencc halfpenny a day,
except in the cafe of a general rriourning. Whenever thd
legiOature attempts to regulate the differences between maf-
ters and their workmen, its counfellors are always the maf-
ters. When the regulation, therefore, is in favour of the
workmen, it is always juH and equitable ; but it is fome-
times otherwife when in favour of the mafters. Thus the
law which obliges the mafters in feveral different trades to
pay their workmen in money, and not in goods, is quite
jull and equitable. It impofes no real liardOiip upon the
rnafters. It only obliges them to pay that value in money,
which they pretended to pay, but did not always really
pay, in goods. This law is in favour of the workmen ;
but the 8th of George III. is in favour of the mafters.
When mafters combine together in order to reduce the
v/2ges of their workmen, they commonly enter into a pri-
vate bond or agreement, not to give more than a certain
wage under a certain penalty. Were the workmen to
enter into a contrary corribination of the fame kind, not to
accept of a certain wage under a certain penalty, the law
vrould punifh them very feverely ; and if it dealt imtpar-
titiily, it would treat the mafters in the fame manner. But
the 8th of George III. enforces by law that very regula-
tion v/hich mafters fometimes attempt to eftablifti by fuch
combinations. The complaint of the workmen, that it
puts the ableft and moft induftrious upon the fame footing
with an ordinary workman, feems perfedly well foundedo
In antient times too it was ufual to attempt to regulate the
proGts of merchants and other dealers, by rating the price
both of provifions and other goods. The aflize of bread
is, fo far as I know, the only remnant of this ancient ufagc.
Where there is an exclufive corporation, it may perhaps
be proper to regulate the price of the hrft neceffiry of life.
But where there is none, the competition will regulate it,
much better than any affize. The method of fixing the '
aft!ze of bread eftabliftied by the 31ft of George II. could
not be put in pradlice in Scotland, on account of a defeat
in the law ; its execution depending upon the office of clerfc
Vol. L L of
146 THE NATURE AND GAIjSES OF'
of the market, which does not exlft there. This defe<f^
was not remedied till the 3d of George III. .The want of
an afllze occafioned no fenfible inconveniency, and the
eftabiifliment of one, in the few places where it has yet
taken place, has produced no feniible advantage. In the
greater part of the towns of Scotland, however, there is an
fncorporation of bakers who claim exclufive privileges,
though they are not very ftricflly guarded.
The proportion between the different rates both of wages
and profit in the different employments of labour and ftock^
feems not to be much affefted, as has already been obferved,
by the riches or poverty, the advancing, ftationary, or de-
clining ftate of the fociety. Such revolutions m the public
welfare, though they affeft the general rates both of wages
and profit, mud in the end affed them equally m all difie-
rent employments. The proportion between them, there-
fore, muft remain the fame, and cannot well be altered,
at leafl for any confiderable time, by any fuch revolutions.
e n A ?.
THE WEALTH OF NATIONSc 147
C H A P. XL
Of the Rent of Land.
ENT, confidered as the price paid for the ufe of land,
is naturally the higheil which the tenant can aiTord to pay in
the actual circumllances of the land. In adjufling the terms
of the leafe, the landlord endeavours to leave him no greater
ihare of the produce than what is fufficient to keep up the
{lock from which he furnlfhes the feed, pays the labour, and
purchafes and maintains the cattle and other inftruments of
hulhandry, together with the ordinary profits of farming
flock in the neighbourhood. This is evidently the fmalleft
fliare with which the tenant can content himfelf without be-
ing a lofer, and the landlord feldom means to leave him any
more. Whatever part of the produce, or, what is the fame
thing, whatever part of its price, is over and above this fhare,
he naturally endeavours to referve to himfelf as the rent of
his land, which is evidently the higheft the tenant can afford
to pay in the aftual circumllances of the land. Sometimes,
indeed, the liberality, more frequently the ignorance, of thc
iandlord, makes him accept of fomewhat lefs than this por-
tion ; and fometimes too, though more rarely, the ignorance
of the tenant makes him undertake to pay fomewhat more,
or to content himfelf with fomewhat lefs than tlie ordinary
profits of farming flock in the neighbourhood. This por-
tion, however, may itill be confidered as the natural rent
of land, or the rent for which it is naturally meant that land
fhould for the mofl part be let.
The rent of land, it may be thou^^ht, is frequently no
more than a rcafcnable profit or intercfl for the flock laid out
by the landlord upon its improvement. This, no doubt,
may be partiy the cafe upon feme occafions ; for it can
fcarce ever be more than partly the cafe. The landlord de-
mands a rent even for unimproved land, and the fuppofed
intereft or profit upon the expence of improvement is gene-
rally an addition to this original rent. Thofe improvements,
befides^ are not always m.ade by the flock of the landlord,
L 2 but
148 THE NATURE AND CAUSiS OF
but fometimes by that of the tenant. When the leafe corned
to be rene^^ed, however, the landlord commonly demands
the fame augmentation of rent, as if they had been all made
by his own.
He fometimes demands rent for what is altogether in-
capable of human improvemxent. Kelp is a fpecies of fea-
weed, which, v/hen burnt, yields an alkaline fait, ufeful
for making glafs, foap, and for feveral other purpofes. It
grows in feveral parts of Great Britain, particularly in
Scotland, upon fuch rocks only as lie within the high water
mark, which are twice every day covered with the fea, and
of which the produce, therefore, was never augmented by
human induilry. The landlord, however, whofe eftate is
bounded by a kelp Ihore of this kind, demands a rent for it
as much as for his corn-fields.
The fea in the neighbourhood of the iflands of Shetland is
more than commonly abundant in filh, which make a great
part of the fubfiftence of their inhabitants. But in order to
profit by the produce of the water, they muft have a habita-
tion upon the neighbouring land. The rent of the landlord
is in proportion, not to what the farmer can make by the
land, but to what he can make both by the land and by the
water. It is partly paid in fea-iilh j and one of the very
few inltances in which rent makes a part of the price oi
that commodity, is to be found in that country.
The rent of land, therefore, confidered as the price
paid for the vSt of the land, is naturally a monopoly price.
It is not at all proportioned to what the landlord may have
laid out upon the improvement of the land, or to what he
can afford to take j but to what the farmer can afford to
give.
Such parts onhf of the produce of land can commonly
be brought to market of which the ordinary price is fulH-
cient to replace the flock which mufl be employed in bring-^
ing them tliither, together with its ordinary profits. If
the ordinary price is more than this, the furplus part of it
will naturally go to the rent of the land. If it is not more,
though the commodity may be brought to market, it can
afford no rent to the landlord. Whether the price is, or
is ruot more, depends upon the demand.
* Theri
THE WEALTH OF NATIONS. 149
There are fome parts of the produce of land for which
the demand muft always be fuch as to afford a greater price
than what is fuflicient to bring them to market ; and there
are others for which it either may, or may not, be fuch as
to afford this greater price. The former muft always af-
ford a rent to the landlord. The latter fometimes may,
and fometimes may not, according to different circum--
ftances.
Rent, It Is to be obferved, therefore, enters Into the
compofition of the price of commodities in a different way
from wages and profit. High or low wages and profit,
are the caufes of high or low price ; high or low rent is the
effe6^ of it. It Is becaufe high or lovy wages and profit
mufb be paid, in order to bring a particular commodity to
market, that Its price is high or low. But It Is becaufe Its
price is high or low -, a great deal more, or very little more,
or no more, than what is fufficlent to pay thofe wages and
profit, that it affords as high rent, or a low rent, or no
rent at all.
The particular confideratlon, firft, of thofe parts of the
produce of land which always afford fome rent j fecondly,
of thofe which fometimes may and fometimes may not af-
ford rent ; and, thirdly, of the variations which, in the
different periods of improvement, naturally take place, m
the relative value of thofe two different forts of rude pro-
duce, when compared both with one another and with
manufactured commodities^ will divide this chapter into
^hree parts.
PART
150 THE NATURE AND CAUSES OF
PART L
Of the T reduce of Land which always affords Rent.
f\ S men, like all other animals, naturally multiply In pro-
portion to the means of their lubfiftence, food is always,
more or lefs, in demand. It can always purchafe or com-
mand a greater or fmaller quantity of labour, and fome-
body can always be found who is Milling to do fomething,
in order to obtain It. The quantity of labour, indeed,
which it can purchafe, is not always etjual to what it could
maintain, if managed in the mod oeconomical manner, on
account of the high M^ages which are fometimes given to
labour. But it can always purchafe fuch a quantity of la-
bour as it can maintain, according to the rate at which that
fort ot labour is cominionly maintained in the neighbour-
hood.
But land, in almoft any fituationi produces a greater
quantity of food than what is lufficient to maintain all the
labour neceffary for bringing it to m.arket, in the moft libe--
ral way in which that labour is ever maintained. The
furplus too is always more than fufhcient to replace the
Hock which employed that labour, together with its pro»
fits. Something, therefore, always remains for a rent to
the landlord.
The moft defart moors in Norway and Scotland produce
fome fort of pafture for cattle, of which the milk and the
increafe are always more than fufhcient, not only to maintain
all the labour neceflary for tending them, and to pay the
ordinary profit to the farmer or owner of the herd or flock ;
but to afford fome fmall rent to the landlord. The rent
increafes in proportion to the goodnefs of the paflure. The
fame extent of ground not only maintains a greater num-
ber of cattle, but as they are brought within a fmaller
compafs, lefs labour becomes requifite to tend them> and
to colleft their produce. The landlord gains both ways -,
by the increafe of the produce, and by the diminution of
the labour which muft be maintained out of it.
The
THE WEALTH OF NATIONS,. 151
The rent of land not only varies with its fertility, what-
ever be its produce, but with its fituation, whatever be its
fertility. Land in the neighbourhood of a town, gives a
greater rent than land equally fertile in a dKtant part of
the country. Though it may coft no more labour- to cul-
tivate the one than the other, it mufl always coft more to
bring the produce of the diilant land to market. A greater
quantity of labour, therefore, mull be maintained out of
it ; and the furplus, from which are drawn both tlie prolit
of the farmer and the rent of the landlord, mult be dimi-
niflied. But in remote parts of the country the rate of
profit, as has already been (liown, is generally higher than
in the neighbourhood of a large town. A fmaller propor-
ftion of this dimiiiiihed furplus, therefore, muii belong to
:tlie landlordo
■ "Good roads, canals, and navigable rivers, by diminifliing
?the expence of carriage, put the remote parts of the coun-
try more nearly upon a level with thofe in the neighbour-
hood of the -town. They are upon that account the greatefl
of all improvements. They encourage the cultivation of
the remote, v/hich muft always be the mod extenfive cir-
cle of the country. They are advantageous to the town,
•by breaking down the monopoly of the country in its
neighbourhood. They are advantageous even to that part
of the country. Though they introduce fome rival ccm-
modities into the old market, they open many uew markets
to its produce. Monopoly, behdes, is a great enemy to
good management, which can never be unlverfally eila-
tlilhed but in confequence of that free and univerfal com-
petition which forces every body to have recourfe to it for
the fake of felf-defence. It is not more than fifty years
ago that fome of the ecunties in the neighbourhood of Lon-
don, petitioned the parliament againft the extention of the
turnpike roads into the remoter counties. Thofe remoter
counties, they pretended, from the cheapnefs of labour,'
would be able to fell their grafs and corn cheaper in the
London market than themfejves, and would thereby reduce
their rents, and ruin their cultivation. T'heir rents, how-
ever, have rife.n, and their cultivation has been improved,
fince that time.
A CORN field of moderate fertility produces a much greater
quantity of food for man, than the beft pafture of equal
e;i:tent. Though its ciUtivation requires much more la-
bo-ur
152 THE NATURE AND CAUSES OF
bour, yet the furplus which remains after replacing the
feed and maintaining all that labourj is likewife much
greater. If a pound of butcher's-meat, therefore, was ne-
ver fuppofed to be worth more than a pound of bread, this
greater furplus would every-M'here be of greater value, and
conifitute a greater fund both for the proht of the f^u'm.er
and the rent of the landlord. It feems to have done fo
univerfally in the rude beginnings of agriculture.
But the relative values of thofe -two different ipecies of
food, bread and butcher's-meatj are very different in th6
different periods of agriculture^ In its rude beginnings,
the unimproved v.-ilds, wdiich then occupy the far greater
part of the country, are all abaridoiied to cattle. There
is more butcher's-meat than bread, and bread, therefore,
is the food for which there is the greateil: competition, and
which confequently brings the greateO: price. At Buenos
Ayres, we are told by Ulloa, four reals, one-and-twenty
pence halfpenny fteriing, was, forty or fifty years ago,
the ordinary price of an ox, chofen from a herd of tv/o or
three hundred. He fays nothing of the price of bread,
"probably becaufe he found nothing remarkable about ito
An ox there, he fays, cofts little more than the labour of
catchinir him. But corn can no-where be raifed without a
great deal of labour, and in a country which lies upon the
river Plate, at that time the dire6l road from Europe to
the filver mines of Potofi, the money price of labour could
irot be very cheap. It is othervv-ife when cultivation is ex-
tended over the greater part of the country. There is then
more bread than butcher's meat. The competition changes
its dire£l:ion, and the price of butcher's-meat becomes
greater tlian the price of bread.
By the extenfion befides of cultivation, the unimproved
wilds become infufficient to fupply the demand for butcher's-
meat. A great part of the cultivated lands mud be employed
in rearing and fattening cattle, of which the price, therefore,
muft be fufficient to pay, not only the labour ncceffary for
tendins; them, but the rent which the landlord and the profit
which the farmer could have drawn from fuch land employed
in tillage. The cattle bred upon the nroft uncultivated moors,
when brought to tlie fame market, are, in proportion to their
v/ein-ht or goodnefs, fold at the fame price as thofe which are
reared upon the moft improved land. The proprietors of
thofe moors profit by it, and raife the rent of their land in
proportion to the price of their cattle. It is not more than a
'' " - century
THE WEALTH OF NATIONS. 193
century ago that in many parts of the highlands of Scotland,
biitcher's-meat was as cheap or cheaper than even bread made
of oatmeal. The union opened the market oi England to the
highland cattle. Their ordinary price is at prefent about three
times greater than at the beginning of the century, and the
rents of many highland ellates have been tripled and quadru-
pled in the fame time. In aimoft every part of Great Bri-
tain a pound of the bell butcher's- meat is, in the prefent
times, generally worth more than two pounds of the bell
white bread ; and in plentiful years it is fometimes worth
three or four poundso
It is thus that in the progrefs of improvement the rent
and profit of unimproved pafture come to be regulated iii
fome meafure by the rent and profit of what is improved,
and thefe again by the rent and proht of corn. Corn is an
annual crop. Butcher's-meat, a crpp which requires four
or five years to grow. As an acre of land, therefore, will pro-
duce a much fmaller quantity of the one fpecies of food than
of the other, the inferiority of the quantity muil be com-
pcnfated by the fuperiority of the price. If it was more than
compenfated, more corn land would be turned into pafture ;
and if it was not compenfated, part of what was in pafture
would be brought back into corno
This equality, however, between the rent and profit of
grafs and thofe of corn ; of the land of which the imme-
diate produce is food for cattle, and of that of which the im-
diate produce is food for men; muft be undcrftood to
take place only through the greater part of the improved
lands of a great country. In fome particular local fituations
it is quite otherwife, and the rent and profit of grafs are
much fuperior to wdiat can be made by corn.
Thus in the neighbourhood of a great town, the demand
for milk and for forage to horfes, frequently contribute, to-
gether with the high price of butcher's-meat, to raife the va-
lue of grafs above what may be called its natural proportion
to that of corn. This local advantage, it is evident, cannot
be communicated to the lands at a diftance.
Particular circumftances have fometimes rendered
fome countries fo populous, that the whole territory, like the
lands in the neighbourhood of a great town, has not beem
(ufEcient to produce both the grafs and the corn neceifary for
154 THE NATURE AND CAUSES OF
the fubfiflence of their inhabitants. Their lands, therefore^
have been principally employed in the produ(R:ion of grafs,
the more bulky commodity, and which cannot be fo eafily
brouglit from a great diftance •, and corn, the food of the
great body of the people, has been chiefly imported from
foreign countries. Holland is at prefent in this Tituation,
and a confiderable par.t of anlient lialy^ fecms to have been
fo during the profperity of the Romans. To feed well, old
Cato faid, as we are told by Cicero, was the firft and moft
profitable thing in the management of a private eflate ; to.
feed tolerably well, the fecond ; and to feed ill, the third.
To plough, he ranked only in the fourth place of profit and
advantage. Tillage, indeed, in that part of antient Italy
which lay in the neighbourliood of Rome, muft have been
very much difcouraged by the diftributions of corn which
were frequently made to the people, either gratuitoufly, or at
a very low price. This corn was brought from the conquer-
ed provinces, of which feveral, inftead of taxes, were ob-
liged to furnifn a tenth part of their produce at a ftated price,
about hx^pence a peck, to the republic. The low price at
which this corn was diftributed to the people, mud necefTa-
nly have funk the price of what could be brought to the
Roman market from Latium, or the antient territory of
Rome, and mufl liave difcouraged its cultivation in that
country.
In an open country too, of which the principal produce is
corn, a \vell-cnclofed piece of grafs will frequently rent
higher than any corn field in its neighbourhood. It is con-
vehient for the maintenance of the cattle employed in the
cultivation of the corn, and its high rent is, in this cafe, not
fo prcperl)& paid from the value of its own produce, as from
that of the corn lands which are cultivated by means of it.
A It i^ likely ji;o fall, if ever the neighbouring lands are com-
^pleatly inclofed. The prefent high rent of inclofed land in
Scotland feems owing to the fcarcity of enclofure, and will
probably laft no lounger than that fcarcity. The advantage
^f enclofure is greater for pafhure than for corn. It faves the
labour of guarding jthe cattle, which feed better too when
they are not liable to be difturbed by their keeper or his
i)g. '
But where there is no local advantage of this kind, the
rent and profit of corii. or whatever elfc is the common
vegetable
THE WEALTH OF NATIONS. 15^
vegetable food of the people, muft naturally regulate, upon
the land which is fit for producing it, the rent and profit of
paftux"e.
The ufe of the artificial grades, of turnips, carrots, cab-
bages, and the other expedients which have been fallen upon
to make an equal quantity of land feed a greater number of
cattle than when in natural grafs, (hould fomewhat reduce, it
might be expected, the fuperiority which, in an improved
country, the price of butcher's-meat naturally has over that
of bread. It feems accordingly to have done fo; and there
is fome reafon for believing that, at' lealt in tlic London
market, the price of butcher's-meat in proportion to the price
of bread, is a good deal lower in the prefent times than it was
in the beginning of the laft century.
In the Appendix to the Life of Prince Henry, Do^lor
Birch has given us an account of the prices of butcher's-
meat as commonly paid by that prince. It is there faid,
that the four quarters of an ox weighing fix hundred pounds
ufually coft him nine pounds ten fhiliings, or thereabouts ;
that is, thirty-fhillings and eight pence per hundred
pounds weight. Prince Henry died on the 6th of Novem-
ber, 1612., in the nineteenth year of his age.
In March, 1764, there was a parliamentary enquiry Into
the caufes of the high price of provifions at that time. It
was then, among other proof to the fame purpofe, given in
evidence by a Virginia merchant, that in March, 1763, he
had victualled his Ihips for twenty-four or twenty-five lliil-
lings the hundred weight of beef, which he conGdered as the
ordinary price ; Vvdiereas, in the ddar year, lie had paid
twcnty-feven fhiliings for the fame weight and fort. This
high price in 1764, is, however, four fhiliings and eight
pence cheaper than the ordinary price paid by Prince Henry ;
and it is the belt beef only, it muft be obfeived, which is fit
to be falted for thofe diftant voyages.
The price paid by Prince Henry arjiounts to 3|f/. per
pound weight of the whole carcafe, coarfe and choice
pieces taken together ; aiid at that rate the choice pieces
could not have been fold by retail for lefs than 4^. or ^d^
the pound.
In
iS6 THE NATURE AND CAUSES OF
In the parliamentary enquiry in 1 764^ the witnelles ftated
the price of the choice pieces of the beft beef to be to the
confumer 4^. and 4'^. tlie pound 5 and the coarfe pieces ii>
general to be from feven farthings to 2 5^/. and 2id, ; and this,
they faid, was in general one half-penny dearer than the fame
fort of pieces Iiad ufually been fold in the month of March.
But evjen this high price is ilill a good deal cheaper than
what wc can fuppofe the ordinary retail price to have been
in the time of Prince Henry.
During the twelve firfl years of the lafl century, the
average price of the beft wheat at the Windfor market was
i/. 18/. 3-</. the quarter of nine Winchefter bufhels.
But in the twelve years preceding 1764, including that
year, the average price of the fame meafure pf the beft wheat
at the fame market was 2/. is. ^_d.
In the tv/elve iirft years of the laft century, therefore,
wheat appears to have been a good deal cheaper, and but-
cher's-meat a good deal dearer than in the twelve years pre-^
ceding 1764, including that year.
In all great countries the greater part of the cultivated
lands are employed in producing either food for men or food
for cattle. The rent and profit of thefe regulate the rent
and profit of all other cultivated land. If any particular
produce afforded lefs, the land would foon be turned into
corn or pafture ; and if any afforded more, fome part
of the lands in corn or pafture would foon he turned to that
produce.
Those produ^ions, indeed, which require either a greater
original expence of improvement, or a greater annual ex-
pence of cultivation, in order to fit the land for them,
appear commonly to aflbrd, the one a greater rent, the
ether a greater profit, than corn or pafture. This fuperio-
rity, however, will feldom be found to amount to more
than a reafonable'lntereft or compenfation for this fuperior
expence.
In a hop garden, a fruit garden, a kitclien garden, both the
rent of the landlord, and the profit of the farmer, are gene-
rally greater than in a corn or grafs field. But to bring the
' ■ ground
THE WEALTH OF NATIONS. i^^
ground into tins condition requires more expence. Hence a
greater rent becomes due to the landlord. It requires too a
more attentive and llcilful management. Hence a greater
profit becomes due to the farmer. The crop too, atleaft in
the hop and fruit garden, is more precarious. Its price,
therefore, befides compenfating all occafional lofies, mult
afford fomething like the profit of infurance. The circum-
ftances of gardeners, generally m^ean, and always moderate,
may fatisfy us that their great ingenuity is not commonly
over-recompenfed. Their delightful art is praftifed by fo.
many rich people for amufenrent, that little advantage is to be
made by thofe who praftife it for profit ; becaufe the perfons
who fliould naturally be their beil cultomers, fupply them-
felves with all their moil precious produ(fl:ions.
The advantage which the landlord derives from^ fuch im-
provements feems at no time to ha"ve been greater than what
was fufficient to compenfate the original expence of making
them. In the antlent hiifbandry, after the vineyard, a well-
Watered kitchen garden feems to have been the part of the
farm which was fuppofed to yield the molt valuable produce.
But Democritus who wrote upon hufbandry about two
thoufiiiid years ago, and who was regarded by the antients as
one of the fathers of the art, thought they did not act wifelv
who enclofed a kitchen garden. The profit, he faid, would
not compenfate the expence of a ftone wall; and bricks (he
meant, I fuppofe, bricks baked in the fun) mouldered with
the rain, and the winter florni, and required continual re-
pairs. Columella, who reports this judgment of Democritus,
does not controvert it, but propofes a very frugal method of
enciofing with a hedge of brambks and briars, M^hich, he
fays, he had found by experience to be both a lading and an
impenetrable tence ; but which, it feems, was not commonly
known in the tinr.e of I>emocritus. Palladius adopts the
opinion of Columella, which had before been recommended
by Yarro. In the judgment of thofe antient Improvers, the
produce of a kitchen garden had, it feems, been little more
than fuJlicient' to pay the extraordinary culture and the ex-
pence of watering ; for in countries fo near the fun, it was
thought proper,- in thofe times as in the prefent, to have
tiie commanil of a ftream of v/ater, which could be con-
duifted to every bed in the garden. Through the greater
part of Europe, a kitchen garden is not at prefent fuppofed
t'o rlrfcrve a better Inclofure tlian that recommended by Co-
hunell?..
153 THE NATURE AND CAUSES OF
Iiimella. In Great Britain, and fome other northern coim^
tries, the finer fruits cannot be brought to perfe61:ion but by
the afTiftance of a wall. Their price, therefore, in fuch
countries muft be fuflicient to pay the expence of building
and maintainuig what they cannot be had without. The
fruit-wall frequently furrounds the kitchen garden, which
thus enjoys the benefit of an enciofure which its own pro-
duce could feldom pay for.
That the vineyard, when properly planted and brought
to perfedlion, was the moft valuable part of the farm, feems
to have been an undoubted maxim in the antient agriculture,
as it is in the modern through all the wine countries. But
whether it was advantageous to plant a new vineyard, was a
matter of difpute among the antient Italian hufbandmen, as
we learn from Columella. He decides, like a true lover of
all curious cultivation, in favour of the vineyard, and en-
deavours to fhow, by a comparifon of the profit and expence^
that it was a moft advantageous improvement. Such com-
parifons, however, between the profit and expence of new
projects, are commonly very fallacious ; and in nothing
more fo than in agriculture. Had the gain actually made by
fuch plantations been commonly as great as he imagined it
might have been, there could have been no difpute about it.
The fame point is frequently at this day a matter of contro-
verfy in the wine countries. Their v.^iters on agriculture,
indeed, the lovers and promoters of high cultivation, feem
generally difpofed to decide v/ith Columella in favour of the
vineyard. In France the anxiety of the proprietors of the
old vineyards to prevent the planting of any new ones,
feems to favour their opinion, and to indicate a confcioul-
nefs in thofe who muft have -the experience, that this f[:)ecies
of cultivation is at prefent in that country more profitable
than any other. It feems at the fame time, however, to indi-
cate another opinion, that this fuperior profit can laft no lon-
ger than the laws which at prefent reftrain the free cultivation:
of the vine. In 1 73 1, they obtained an order of council, pro-
hibiting both the planting of new vineyard.'^, and the renewal
of thofe old ones, of which the cultivation had been inter-
rupted for two years ; without a particular permifiion from
the king, to be granted only in confequence of an information
from the intendant of the province, certifying that he had ex-'
amined the land and that it was incapable of any other culture.
The pretence of this order was the fcarcity of corn and pafture,-
and'
THE WEALTH O? NATIONS. r^.*)
andthefuperabundanceofwlne. But had this fuperabundance
been real, it would, without any order of council, have ef-
fedlually prevented the plantation of new vineyards, by reduc-
ing the profits of this fpecies of cultivation below their natu-
ral px'oportion to thofe of corn and pafture. With regard to
the fuppofed fcarcity of corn occafioned by the multiplication
of vineyards, corn is no wherein France more carefully culti-
vated than in the wine provinces, where the land is fit for
producing it -, as in Burgundy, Guienne, and the Upper
Languedoc. The numerous hands employed in the one Ipe-
cies of cultivation neceffarily encourage the other, by afFord-
ing a ready market for its produce. To diminiih the num-
ber of thofe who are capable of paying for it, is furely a moft
unpromifing expedient for encouraging the cultivation of
corn. It is like the policy which would promote agricul-
ture by difcouraging manufactures.
The rent and profit of thofe produ6fion&, therefore, which
require either a greater original expence of improvement in
order to fit the land for them, or a greater annual expence of
cultivation, though often much Superior to thofe of corn and
pafture, yet when they do no more than compenfate fucli
extraordinary expence, are in reality regulated by the rent
and profit of thofe common crops.
It fometim.es happens, indeed, that the quantity of land
which can be fitted for fome particular produce, is too fmall
to fupply the effeiftual demand. The whole produce can be
difpofed of to thofe who are willing to give fomewhat more
than what is fufficient to pay the whole rent, wages and pro-
fit neceflary for raifing and bringing it to market, according
to their natural rates, or according to the rates at which they
are paid in the greater part of other cultivated land. The
furplus part of the p/ice which remains after defraying the
whole expence of improvement and cultivation may com-
monly, in this cafe, and in this cafe only, bear no regular
proportion to the like furplus in corn or pafture, but may
exceed it in almoft any degree \ and the greater part of this
excefs naturally goes to the rent of the landlord.
The ufual and natural proportion, for example, between
che rent and profit of wine and thofe of corn and pafture,
muft be underftood to take place only with regard to thofe
vineyards which produce nothing but good common w^ine,
fuch
^oo THE NATURE AND CAUSES OF
fuch as can be, ralfed almoft any where, upon any ligKtf
gravelly, or fandy foil, and which has nothing to recommend
it but its OiTength and wholefomencfs. It is with fuch vine-*
yards only that the common land of the country can be
brought into competition t for with thofe of a peculiar qua-
lity it is evident that it cannot-
The vine is more affefted by the difference of foils than
any other fruit tree. From fome it <}erives a flavour which
no culture or management can' equal, it is fuppofed, upon
any other. This flavour, real or imaginary, is fometimes pe-
culiar to the produce of a few vineyards ^ fon-ietimes it ex-
tends through the greater part of a fmall diftricft, and fome-
times through a confiderable part of a large province. The
whole quantity of fuch wines that is brought to market falls
fhort of the effeftual demand, or the demand of thofe who
would be willing to pay the whole rent, profit and wages ne=
ceflary for preparing and bringing them thither, according to
the ordinary rate, or according to the rate at which they are
paid in common vineyards. The^whoie quantity, therefore,
can be difpofedof to thofe who are willirrg. to pay more, which
sieceffarily raifes the price above that of common wine. The
difference is greater or lefs, according as the fafhionablenefs
and fcarcity of the wine render the competition of the buy-
ers more or Jefs eager. Whatever it be, the greater part
of it goes to the rent of the landlord. For though fuch
vineyards are in r^neral more carefullv cultivated than moft
others, the high price of the wine feems to be, not fo mucii
the effeci:, as the caufe, of thrs careful cultivation. In fo va-
I'aable a produce the lofs occafioned by negligence is fo
great as to force even the mofl carelefs to attention. A
fmall part of this high price, therefore,' is fufhcient to pay^
the wages of the extraordinary labour beftowed upon their
cultivation, and the profits of the extraordinary ftock which'
^uts that labour into motion.
The fugar colonies pofTefTed by the European nations in the
Well Indies, may be compared to thofe precious vineyards.
Their whole produce falls fliort of the effe£lual demand of
Europe, and can be difpofed of to thofe who are willing to
frive more than what is fufhcient to pay tlie whole rent, pro-
fitand wages neceflary for preparing and bringing it tontarket,
according to the rate at which they are commonly paid by
any other produce. In Cochin-china the lineft white fugar
commonlv
THE WEALTH OF NATIONS. i<^i
commonly fells for three piaflres the quintal, about thirteen
fliillings and fixpence of our money, as we are told by * Mr.
Poivre, a very careful obferver of the agriculture of that coun-
try. What is there called the quintal weighs from a hundred
and fifty to two hundred Paris pounds, or a hundred and fe-
venty-five Paris pounds at a medium, which reduces the price
of the hundred v/eight Engliihi to about eight fhillings ilerl-
ing, not a fourth part of what is commonly paid for the brown
or mufl^avado fugars imported from our colonies, and not a
fjxth part of what is paid for the fined white fugar. The
greater part of the cultivated lands in Cochin-china are em-
ployed in producing corn and rice, the food of the great body
of the people. The refpe£live prices of corn, rice, and fugar,
are there probably in the natural proportion, or in that which
naturally takes place in the difierent crops of the greater part
of cultivated land, and v/hich recompences the landlord and
farmer, as nearly as can be computed, according to what is
ufually the original expence of improvement and the annual
expence of cultivation. But in our fugar colonics the price
of fugar bears no fuch proportion to that of the produce of a
rice or corn field either in Europe or in America. It is com-
monly faid, that a fugar planter expecfts that the rum and
the moiaifes fhoald defray the whole expence of his cultiva-
tion, and that his fugar (hould be all clear profit. If this be
true, for I pretend not to affirm it, it is as if a corn farmer
expecled to defray the expence of his cultivation with the
chaff and tlie ilraw, and that the grain fhould be all clear pro-
fit. We fee frequently focieties of merchants in London and
other trading towns, purchafe wafte lands in our fugar colo-
nies, which they expert to improve and cultivate with profit
by means of fad^ors and_agents,j notwithftanding the great
diftance and the uncertain returns, from the defe(5five admini-
ilratlon of juftice in thofe countries. Nobody will attempt
to improve and cultivate in the fame manner the molt fertile
lands of Scotland, Ireland, or the corn province? of North
America ; though from the more exaO adminiilration of juf-
tice in thefe countries^ more regular returns might be ex-
pected.
In Virginia and Maryland the cultivation of tobacco is
preferred, as more profitable, to that of corn. Tobacco
might be cultivated with advantage through the greater part
Vol. L M of
* Voyages d'un Philofophc.
i52 THE NATURE AND CAUSES OF
of Europe j but in almoil every part of Europe it has become
a principal fubje(ft of tiixation, and to collecl: a tax from every
diiTerent farm in the country where this plant might happen
to be cultivated, w'ould be more difficult, ithas been fuppofed,
tlian to levy one upon its importation at the cuftom-houfe.
The cultivation of tobacco has upon this account been moft
abfurdlv prohibited through the greater part of Europe, which
necefiarily gives a fort of monopoly to the countries where it
is allowed ;. and as Virginia and Maryland produce the great-
eft quantity of it, they fliare largely, though with fome com-
petitors, in tlie advantage of this monopoly. The cultivation
of tobacco, however, feems not to be fo advantageous as that
of fusjar. I have never even heard of any tobacco plantation
that was improved and cultivated by the capital of merchants
who refided in Great Britain,^ and our tobacco colonies fend
us home nofuch wealthy planters as we lee frequently arrive
from our fugar iilands, 'Ehough- from the preference givea
in thofe colonies to the cultivation of tobacco above that of
corn, it v/ould appear that the eitecftual demand of Europe
for tobacco is not completely fupplied, it probably is more
nearly fo than that for fugar i And though the prefent price
of tobacco is probably more than fuflicient to pay the whole
rent, wages and proEt neceilary for preparing ajid bringing,
it to market, according to the rate at which they are com-
monly paid in corn land •, it mufl not be fo much more as
the prefent price of fugar. Our tobacco^ planters^, according^
ly, have fhewn the fame fear of the fuper-ahundance of to-
bacco,, which the proprietors of the bid vineyards in France
have of the fuper-abundance of wine. By acl: of aflembly
they have reftrained its cultivation to fix thoufand plants,
fuppofed to yield a thoufand weight of tobacco, for every
negro between fixteen and fixty years of age. Such a ne-
gro, over and above this quantity of tobacco, can manage,
they reckon,, four acres of Indian corn. To prevent the
market from being overftocked too,, they have fometimes,
in plentiful years,, we are told by Dr. Douglas, (I fufpect
he has been ill informed) * burnt a certain quantity of to-
bacco for every negro, in the fame manner as the Dutch
arc faid to do of fpices. If fuch violent methods are ne-
ceffary to keep up the prefent price of tobacco, the fupe-
rior advantage of its culture over that of corn, if it ftill has
any, will not probably be of long continuance.
It
* Douglas-'s Summary, vol. il. p. 372, 373'- ,
2
THE WEALTH OF NATIONS. 163
It Is in this manner that the rent of the cultivated land,
of which the produce is human food, regulates the rent of
the greater part of other cultivated land. No particular pro-
duce can long afFordlefs; becaufe the land would immediately
be turned to another ufe: And if any particular produce com-
monly affords more, it is becaufe the quaiitity of land which
can be fitted for It Is too fmali to fupply the elFedual demand.
In Europe corn is the principal produce of land which
ferves immediately for human food. Except in particular
fituations, therefore, the rent of corn land regulates in Europe
that of all other cultivated land. Britain need envy neither
the vineyards of France nor the olive plantations of Italy.
Except in particular fituations, the value of thefc is regulated
by that of corn. In which the fertility of Britain is not mucli
inferior to that of either of thofe two countries.
If In any country the common and favourite vegetable
food of the people fhould be drawn from a plant of which
the moft common land, with the fame or nearly the fame cul-
ture, produced a much greater quantity than the moft fertile
does of corn, the rent of the landlord, or the furplus quantity
of food which would remain to him, after paying the labour
and replacing the ftock of the farmer, together with its ordi-
nary profits, would necefl-irlly be much greater. Whatever
was the rate at which labour was commonly maintained in
that country, this great furplus could always maintain a
greater quantity of it, and confequently enable the landlord to
purchafe or command a greater quantity of it. The real value of
his rent, his real power and authority, his command of the necef-
farles and conveniencies of life with which the labour of other
people could fupply him, woulc necefiarily be much greater. .
A RICE field produces a much greater quantity of food
than the moft fertile corn field. Two crops In the year from
thirty to fixty buftiels each, are fald to be the ordinary produce
of an acre. Though its cultivation, therefore, requires more
labour, a much greater furplus remains after maintaining all
that labour. In thofe rice countries, therefore, where rice
is the common and favourite vegetable food of the people,
and where the cultivators are chiefly maintained with it, a
greater ftiare of this greater furplus ftiould belong to the land-
lord than In corn countries. In Carolina, where the planters,
as ni other Britifli colonics, arc generally both farmers and
M 'Z landlords,
i64 THE NATURE AND CAUSES OF
landlords, and where rent confequently is confounded witfe
profit, the cultivation of rice is found to be more profitable
than that of corn, though their fields produce only one crop
in the year,, and though, from the prevalence of the cuiloms
of Europe, rice is not there the common and favourite ve-
getable food of the people.
A GOOD rice field is a bof^ at all feafons, and at one feafoii
a bog covered w^ith water. It is unfit either for corn,
or pafture, or vineyard, or, indeed, for any other vege-
table produce that is very uf'efuj to men : And the huQis,
v/hich are fit for thofe purpofcs, are not fit for rice. Even
in the rice countries, therefore, the rent of rice lands can-
not regulate the rent of the other cultivated land which caa;
never be turned to that produce.
The food produced by a field of potatoes is not inferior in
quantity to that produced by a field of rice, and much fupe-
rior to what is produced by a field of wheat. Twelve thou-
fand weight of potatoes from an acre of land is not a
greater produce than two thoufand weight of wheat. The
food or folid nourifhment, indeed, which can be drawn from
each of thofe two plants, is not altogether in proportion to
their weight, on account of the watery nature of potatoes*
Allowing, however, half the v/eight of this root to goto
water, a very large allowance, fuch an acre of potatoes will
ftill produce fix thoufand weight of folid nourifhment, three
times the quantity produced by the acre of wheat. An acre
of potatoes is cultivated with lefs espence than an acre of
wheat j the fallow, which generally precedes the lowing of
wheat, more than compenfaring the hoeing and other ex-
traordinary culture which is always given to potatoes. Should
this root ever become in any part of Europe, like rice in
fome rice countries, the common and favourite vegetable
food of tlie people, io as to occupy the fame proportion of
the lands in tillage which wheat and other forts of grain
for human food do at prefent, the fame quantity of cuki-
vat-ed land would maintain a much greater number of peo-
ple, and the labourers being generally fed with potatoes, a
great furplus would remain after replacing all the ftock and
maintaining all the labour employed in cultivation. A
greater (hare of this furplus too would belong to the land-
lord. Population would increafe, and rent& would rife
much beyond what they are at prefent.
The
THE WEALTH OE NATIONS. 165
The land which is fit for potatoes, is fit for ahnoil ever}''
Hother ufeful vegetable. If they occupied the fame proportion
of cultivated land which corn does at prefent, they would
regulate, in the fame manner^ the rent of the greater part
of other cultivated land.
In fome parts of Lancashire it is pretended, I have been
told, that bread of oatmeal is a heartier food for labouring
people than wheaten bread, and I have frequently heard the
lame docftrine held in Scotland. I am, however, fomewhat
doubtful of the truth of it. The common people in Scot-
land, who are fed with oatmeal, are in general neither fc?
ilrong, nor fo handfome as the fame rank of people in Eng-
land, who are fed wiih wheaten bread. They neither
work fo well, nor look fo well ; and as there is not the
fame difference between the people of fafliion in the two
countries, experience would feem to fliovv, that the food
•of the common people in Scotland is not fo fuitable to the
human conftitution as that of their neighbours of the fame
Tank in England^ But it feems to be otherwife with pota-
toes. The chairmen, porters, and coal-heavers in Lon-
don, and thofe unfortunaie women v/ho live by proftitii-
'tion, the flrongeft men and the moft beautiful women per-
haps in the Britiih dominions, are faid to be, the greater
part of them^ from the loweft rank of people in Ireland,
•who are generally fed v/ith this root. No food can afford
a more decifive proof of its nourifhing quality, or of its be-
ing peculiary fuitable to the health of the human conili-
iution.
It is diffi<:ult to preferve potatoes through the year, and
impofTible to ftore them, like corn, for two or three years
together. The fear of not being able to fell them before
they rot, difcourages their cultivation, and is, perhaps, the
chief obftacle to their ever becoming in any great country,
like bread, the principal vegetable food of all the different
yanks of the pe^^ple.
PART
i66 THE NATURE AND CAUSES OF
PART IL
Of the Produce of Land luhich fometima does^ and fometimes
dees noty afford Rent.
Xl,UMAN^food feems to be the only produce of land
y/hich always and necefTarily affords fome rent to the land-
lora. Oiiher forts of produce fometimes may and fometimes
may not, according to different circumilances.
After food, cloathing and lodging are llie two great
wants of mankind.
Land in its original rude ftate can afford the materials of
cloathing and lodging to a much greater number of people
than it can feed. In its improved (late It can fometimes feed
a greater number of people than it can fupply with thofe
materials', at lead in the way in which they require them,
and are willing to pay for them. In the one ftate, therefore,
there is always a fuper-abundance of thofe materials, which
are frequently, upon that account, of little or no value. In
the other there is often a fcarcity, which necefTarily augments
their value. In the one ftate a great part of them is throv/n
away as ufelefs, and the price of what is ufed is confidered as
equal only to the labour and expence of fitting it for ufe, and
can, -therefore, afford no rent to the landlord. In the other
they are all made ufe of, and there is frequently a demand
for more than can be had. Somebody is always willing to
give more for every part of them than what is fufficient to pay
the expence of bringing them to market. Their price, there-
fore, can always afford fome rent to the landlord.
The fkins of the larger animals were the original materials
of cloathing. Among nations of hunters and fhepherds,
therefore, whofe food confifts chiefly in the flefh of thofe ani-
mals, every man, by providing himfelf with food, provides
himfelf with the materials of more cloathing than he can
wear. If there was no foreign commerce, the greater part
of
THE WEALTH OT KATIONS. 167
of them would be thrown away as things of no value. This
was probably the cafe among the hunting nations of North
America, before their country was difcoveredby the Euro-
peans, with whom they now exchange their furplus peltry,
for blankets, fire-arms, and brandy, which gives it fome
value. In the prefent commercial itatt of the known worlds
the mofl: barbarous nations, I believe, amoftg wdiom land
propertv is ellablifhed, have fome foreign coip.merce of this
kind, and find among their wealthier neighbours fach a de*-
mand for all the materials of cloathing, which their land pro*
<kices, and which can neither be wrought up nor coiifume<?^,
at home, as raifes their price above what it colts to fend them
to thofe wealthier neighbours. It affords, therefore, fome
rent to the landlord. When the greater part of the highland
cattle were confumed on their own hills, the exportation of
their hides made the moll confiderable article of the com-
merce of that country, and what they were exchanged for
afforded fome addition to the rent of the liighland cllates.
The wool of England, which in old times could neither be
confumed nor wrought up at home, found a market in the
then wealthier and more induftrious country of Flanders,
and its price afforded fomethingto the rent of the land which
produced it. In countxies not better cultivated than Eng-
land w^as then, or than the Irlghlands of Scotland are now,
and which had no foreign commerce, the materials of cloatli-
ing w^ould evidently be 10 fuper-abundant, that a great part of
them would be thrown axvay as ufclefs, and no part could
afford any rent to the landlord.
The materials of lodging cannot always be transported to
10 great a diflance as thofe of cloathing, and do not fo readily
l3ecome an obje£l of foreign commerce. When they are
fuper-abundant in the country which produces fhem, It fre-
quently happens, even in the prefent commercial ftate of tlie
world, that they are of no value to the landlord. A good
flone quarry in the neighbourhood of London v/ouid afford a
confiderable rent. In many parts of vScotland and Wales it
affords none. Barren timber for building is of great value in
a populous and well-cultivated country, and the land which
produces it, affords a confiderable rent. But in many parts
of Nortli Americathe landlord would be much obliged to any
body who would carry away the greater part of his large
trees. In fome parts of the highlands of Scotland the bark
*s the only part of the wood which, for want of roads and
water-
i<58 THE NATURE AND CAUSES OF
water-carria'jre, can be fent to market. The timber is left to
rot upon the ground. When the materials of lodging are fo
Tuper-abundant, the part made ufc of is worth only the la-
bour and expencc of fitting It for that ufe. It affords no rent
to the landlord, who generally grants the ufe Qi it to whoever
takes the trouble of afking it. The demand of wealthier na-
tions, however, fometimes enables him to get a rent for it.
The paving of the ftreets of London has enabled the owners
of fome barren rocks on the coafl of Scotland to draw a
rent from what never afforded any before. The woods
of Norway and of the coafts of X^v^^ Baltlck, find a market
in many parts of Great Britain which they could not find
at home, and thereby afford fome rent to their pro-
prietors.
CoUNTE-TEs are populous, not in proportion to the num-
ber of people whom their produce can cloath and lodge, but
in proportion to that of thofe whom it can feed. When
food is provided, it is eafy to find the neceffary cloathing and
lodging. But though thefe are at hand, it may often be diffi-
cult to fmd food. In fome parts of the Britifli, domini-
ons what is called A Houfe, may be built by one day's labour
of one man. The fimplcfl fpecies of cloathing, the flcins of
anim.als, requires fomewhat more labour to drefs and prepare
them for ufe. They diO not, however, require a great deal.
Among fava^^e and barbarous nations, a hundredth or little
more than a hundreth part of the labour of the whole year^
will be fufficient to provide them wiih fuch cloathing and
lodging as fatisfy the greater part of the peoplca All the
other ninety-nine parts are frequently no more than enough
to provide thein with food.
But when by the Improvement and cultivation of land the
labour of one family can provide food for two, the labour of
half the foclety becomes fuflicient to provide food for the
whole. The other half, therefore, or at leaft the greater part
of them, can be employed in providing other things, or in
fatisfying the other wants and fancies of mankind. Cloathing
and lodging, hpufhold furniture, and what is called Equi-
page, are the principal objefts of the greater part of thofe
wants and fancies. The rich man confumes wo more food
than his poor neighbour. In quality it miay be very different,
and to fele£l and prepare it may require more labour and art ;
but in quantity it is very nearly tlie fame. But compare the
fpacious
THE WEALTH OF NATIONS. 169
fpacious palace and great wardrobe of the one, with the
hovel and the few rags of the other, and you will be fenfible
that the dhTercnce between tlieir clcathing, lodging and
houdiold furniture, is almofl as great in quantity as it is in
quality. The defire of food is limited in every man by the
narrow capacity of the human llomach; but thedcfire of the
convenie:icics and ornaments of building, drefs, equipr'.n;e,
and houlliold furniture, fccms to have no limit or certain
boundary. Thofe, therefore, wlio have the comm.ind of
more food than they themfelves can confume, are always
w^illing to excliant^c the furplus, or, what is the fame thing,
the price of it, for gratifications of this other kind. What
is over and above fatisfying the limited defire, is given for
the amufcment of thofe dehres which cannot be fatisfted, but
feem to be altogether endlefs. The poor, in order to obtain
food, exert themfelves to gratify thofe fancies of the rich, and
to obtain It more certainly, they vie with one another in the
cheapnefs and perfection of their work. The number of
workmen increafes with the increaung quantity of food, or
with the growing improvement and cultivation of the lands ;
and as the nature of their bulTnefs admits of the utmoft fub-
divinons of labour, the quantity of materials which they can
w^ork up, increafes in a much greater proportion than their
numbers. Hence arifes a demand for every fort of material
which human invention can employ, either ufefully or
ornamentally, in building, drefs, equipage, or houihold
furniture ; for the fofills and minerals contained in the
bowels of the earth, the precious metals, and the precious
flones.
Food is in this manner, not only the original fource of
rent, but every other part of the produce of land wdiich af-
terwards aifords rent, derives that part of its value from the
improvement of the powers of labour in producing food by
means of the improvement and cultivation of land.
Those other parts of the produce of land, however, which
afterwards afford rent, do not afford it always. Even In imr
proved and cultivated countries, the demand for them is not
always fuch as to afford a greater price than what is fufficient
to pay the labour, and replace, together with its ordinary
profits, the flock which mull be employed In bringing them
to market. Whether it is or is not fuch, depends upon dif-
ferent circumflanccs.
Wheti-iur
I70 THE NATURE AND CAUSES OF
Whether a coal-mine, for example, can afford any
rent depends partly upon its fertility, and partly upon its
fituation.
A MINE of any kind may be faid to be either fertile or
barren, according as the quantity of mineral which can be
brought from it by a certain quantity of labour, is greater or
lefs than what can be brought by an equal quantity from the
greater part of other mines of the fame kind.
Some coal-mines advantageoufly fituated, cannot be
wrought on account of their barrennefs. The produce
does not pay the expence. They can afford neither profit
iior rent.
There are fom.e of which tlie produce is barely fulTicient
to pay the labour, and replace, together with its ordinary
profits, the ilock employed in >vorking them. They aflbrd
iom.e profit to the undertaker of the work, but no rent to the
landlord. They can be wrought advantageoufly by nobody
but the landlord, who being himfelf undertaker of the work,
gets the ordinary profit of the capital which he employs in
jt. Many coal-mines in Scotland are wrought in this man-
ner, and can be wrought in no other. The landlord v/ili
allow nobody elfe to work them without paying fome rent,
and nobody can afford to pay any.
Other coal-mines in the fame country fufEciently fertile,
cannot be wrought on account of their fituation. A quan-
tity of mineral fuilicient to defray the expence of working,
could be brought from the mine by the ordinary, or even lefs
than the ordinary quantity of labour ; But m an inland
country, thinly inhabited, and without either good roads or
water-carriage, this quantity could not be fold.
Coals are a lefs agreeable fewel than wood : they are faid
to be lefs wholefome. The expence of coals, therefore, at
the place where they are confumed, mull generally be fome-
what lefs than that of wood.
The price of wood again varies with the ftate of agricul-
ture, nearly in the fame manner, and exatily for the fame
xeafon, as the price of cattle. In its rude beginnings the
•crrcater nart of every country is covered with wood, which is
the a
THE WEALTH OF NATIONS. 171
tlicn a mere incumbrance of no value to the landlord, wlio
would gladly give it to any body for the cutting. As agri-
culture advances, the woods are partly cleared by the pro-
grefs of tillage, and partly go to decay in confequcnce oi
the increafed number of cattle. Thcfe, though they do not
increafe in the lame proportion as corn, v.hich is altogether
the acquifition of human induflry, yet multiply under the
care and protection of men j who (lore up in the feafon of
plenty what may maintain them in that of fcarcity, who
through the whole year furnifli them with a greater quan-,
tity of food than uncultivated nature provides for them, and
w4io by dellroying and extirpating their enemies, fecurc
them in the free enjoyment of all that flie providesi Nume-
rous herds of cattle, when allowed to wander through the
woods, though they do not deftroy the old tr^es, hinder any
young ones from coming up, fo that in tlie courie of a cen-
tury or two the whole forell goes to ruin. The fcarcity of
wood then raifes its price. It affords a good rent, and the
landlord fometimes finds that he can fcarce employ his bell:
lands more advantageoufly than in growing barren timber,
of which the greatnefs of the profit often compenfates the
iatenefs of the returns. This feems in the prelent times to
be nearly the Itate of things in fever al parts of Great
Britain, where the profit of planting is found to be equal to
that of either corn or pafture. The advantage which tlie
landlord derives from planting, can no-v»'here exceed, at leaft
for any confiderable time, the rent which thefe could af-
ford hirn ; and in an inland country which is highly culti-
vated, it will frequently not fall much fliort of this rent.
Upon the fea-coafl of a well-improved country, indeed, if
coals can conveniently be had for fewel, it may fometimes
be cheaper to bring barren timber for building from lefs cul-
tivated foreign countries, than to raife it at home. In the
new town of Edinburgh, built within thefe few years, there
is not, perhaps, a fmgle flick of Scotch tin-^er.
Whatever may be the price of wood, if that of coals is
fuch that the expence of a coal-fire is nearly equal to that of a
wood one, we may be afTured, that at that place, and in
thefe circumflances, the price of coals is as high as it can be.
It feems to be fo in fome of the inland parts of England,
particularly in Oxfordfliire, where it is ufual, even in the
firei' of the common people, to mix coals and wood together,
and
172 THE NATURE AND CAUSES OF
and where the clIfFerence in the expence of thofe two forts of
fewel cannot, therefore, be very great.
Coals, in the coal countries, are every-where much be-
low this highefl price. If they were not, they could not bear
the expence of a diflant carriage, either by land or by water.
A fmall quantity only could be fold, and the coal maflers and
coal proprietors find it more for their interell to fell a great
qit-antity at a price fomewhat above the loweft, than a fmall
quantity at the highefl. The mod fertile coal-mine too, re-
gulates the price of coals at all the other mines in its neigh-
bourhood. Both the proprietor and the undertaker of the
work find, the one that he can get a greater rent, the other
that he can get a greater profit, by fomewhat underfelling all
their neighbours. Their neighbours are foon obliged to fell
at the fame price, though they cannot fo well afford it,
and though it always diminiflies, and fometimes takes away
altogether both their rent and their profit. Some works are
abandoned altogether ; others can afford no rent, and can be
wrought only by the proprietor.
The loweft price at which coals can be fold for any confi-
derable time, is like that of all other commodities, the price
which is barely fufhcient to replace, together with its ordinary
profits, the flock which mud be employed in bringing them
to market. At a coal-mine for which the landlord can get no
rent, but which he mufl either work himfelf, or let it alone
altogether, the price of coals muft generally be nearly about
this price.
Rent, even where coals afford one, has generally a fmaller
lliare in their price than in that of moft other parts of the
rude produce of land. The rent of an eflate above ground,
commonly amounts to what is fuppofed to be a third of the
grofs produce ; and it is generally a rent certain and inde-
pendent of the occafional variations in the crop. In coal-
mines a fifth of the grofs produce is a very great rent; a tenth
the common rent, and it is feldom a rent certain, but de-?
pends upon the occafional variations in the produce. Thefe
are fo great, that in a country where thirty years purchafe is
confidered as a moderate price for the property of a landed
eftate, ten years purchafe is regarded as a good price for that
r»f a coal-mine.
The
THE WEALTH OF NATIONS, 173
The value of a coal-mine to the proprietor frequently de-
pends as much upon its fituation as upon its fertility. That
of a metallic mine depends more upon its fertility, and Icls
upon its fituation. The coarie, and (till more the precious
metals, when feparated from the ore, are io valuable that
they can generally bear the expcnce of a very long land, and
of the moft diftant fea carriage. Their mark*^t is not con-
fined to the countries in the neighbourhood of the mine, but
extends to the wht)le world. The copper of Japan makes an
article of commerce iji Europe v the iron of Spain in that of
Chili and Peru. The filver of Peru finds its way, not only
to Europe, but from Europe to China.
The price of coals in Weftmorland or Shropfhire, can
have little effe^l on their price at Newcaflle •, and their price
in the Lionnois can have none at all. The produ(5f ions of
fuch diftant coal-mines can never be brought into competi-
tion with one another. But the produdfions of the moffc
diftant metallic mines frequently may, and in fa£l; commonly
are. The price, therefore, of the coarfe, and ftill more that
of the precious metals, at the moft fertile mines in the world,
muft neceflarily more or iefs afFecfb their p-rice at every other
in it. The price of copper in Japan muft have fome influ-
ence upon its price at the copper mines in Europe. The price
of filver in Peru, or the quantity either of labour or of other
goods which it will purchafe there, muft have fome influence
on its price, not only at the filver mines of Europe, but at
thofe of China. After the dilcovery of the mines of Peru,
the filver mines of Europe were, the greater part of them,
abandoned. The value of filver v*^as fo much reduced that
their produce could no longer pay the expence of working
them, or replace, with a profit, the food, cloaths, lodging
and other necefiaries v/hich were confumed in that opera-
tion. This was the cafe too M^ith the mines of Cuba and
St. Domingo, and even with the antient mines af Peru, after
the difcovery of thofe of Potofi.
The price of every m.etal at every mine, therefore, being
regulated in fome meafure by its price at the moft fertile mine
in the world that is acftually wrought, it can at the greater
part of mines do very little more than pay the expence of
'working, and can feldom aiTord a very high rent to the land-
lord. Rent, accordingly, feems at the greater part of mines
to have but a frnall lliarc in the price of the coarfe, and a ftill
fmaller
T74 THE NATURE AND CAUSES OF
fmaller in that of the precious metals. Labour and profit
make up the greater p^rt of both.
A SIXTH part of the grofs produce may be reckoned tlie
average rent of tlie tin mines of Cornwall, the mod fertile
that are known in the world, as we are told by the Reverend
Mr Borlace, vice-warden of the ftannaries. Some, he fays,
afford more, and fome do not afford fo much. A fixth part
of the grofs produce is the rent too of feveral very fertile
lead mines in Scotland.
In the filver mines of Peru, we are told by Frezier and
Ulloa, the proprietor frequently exacts no other acknowledg-
ment from the undertaker of the mine, but that he will grind
the ore at his mill, paying him the ordinary multure or price
of grinding. Till 1736, indeed, the tax of the king of Spain
arnounted to one-fifth of the flandard fdver, which till then
might be confidered as the real rent of the greater part of the
filver mines of Peru, the richeft which have been known in
the world. If there had been no tax, this fifth would natu-
rally have belonged to the landlord, and many mine^ might
have been wrouglit which could not then be wrought, becaufe
they could not afford this tax. The tax of the duke of Corn-^
wall upon tin is fuppofed to amount to more than five per
cent, or one-twentieth part of the value ; and whatever may
be his proportion, it M-ould naturally too belong to the pro-
prietor of the mine, if tin was duty free. But if you add
one-twentieth to one-fixth, you will find that the whole- ave-
rare rent of the tin mines of Cornwall, was to the whole
average rent of the filver mines of Peru, as thirteen to twelve.
But the filver mines of Peru are not now able to pay even
this low rent, and the tax upon fiiver was, in 1736, reduced
from one-fifth to one-tenth. Even this tax upon filver too
gives more temptation to fmuggling than the tax of one-twen-
tieth upon tin •, and fmuggling muft be much eafier in the
nrecious than in tlie bulky commodity. The tax of the king
of Spain, accordingly, is faid to be very ill paid, and that of
the Duke of Cornwall very well. Rent, therefore, it is pro-
bable, makes a greater part of the price of tin at the m.oll
fertile tin mines, than it does of filver at the moll fertile fil-
ver mines in the world. After replacing the (lock employed
in working thofe different mines, together with its ordinary
profits, the refidue which remains to the proprietor, is greater
it feems in the coarfe, than in the precious metal.
Nlither
THE WEALTH OF NATIONS. 175
Neither are tlie profits of the undertakers of filver mines
commonly very great in Peru. The fame moft refpeclable
and well informed authors acquaint us, that when any perfon
undertakes to work a new mine in Peru, he is univerfallv
looked upon as a man deftined to bankruptcy and ruin, and
is upon that account {hunned and avoided by every body.
Ivlining, it feems, is confidcred there in the fame light as
here, as a lottery, in which the prizes do not compenfatc
the blanks, though the greatnefs of fome tempts many ad-
venturers to throw away their fortunes in fuch unprofper-
ous proje6ls.
As the fovereign, however, derives a confiderable part of
his revenue from the produce of filver mines, the law in Peru
gives every poflible encouragement to the dlfcovery and work-
ing of new ones. Whoever difcovers a new mine, is entitled
to meafure off two hundred and forty-fix feet in length, ac-
cording to what he fuppofes to be the direction of the vein,
and half as much in breadth. He becomes proprietor of this
portion of the mine, and can work it without paying any
acknowledgment to the landlord. The intereft of the duke
of Cornwall has given occafion to a regulation nearly of the
fame kind in that antient dutchy. In wafle and uninclofed
lands any perfon who difcovei^ a tin mine, may mark out
its limits to a certain extent, which is called bounding a
mine. The bounder becomes the real proprietor of the
mine, and may either work it himfelf, or give it in leafe
to another, without the confent of the owner of the land,
to whom, however, a very fmall acknowledgment mull be
paid upon working it. In both regulations the facred rights
of private property are facrificed to the fuppofed interefts
of public revenue.
The fame encouragement is given in Peru to the difcovery
and working of hew gold mines ; and in gold the king's tax
amounts only to a twentieth part of the flandard metal. It
was once a fifth, and afterwards a tenth, as in filver ; but it
was found that the work could not bear even the loweft of
thefe two taxes. If it is rare, however, fay the fame au-
thors, Frezier and Ulloa, to find a perfon who has made his
fortune by a filver, it is ftili much rarer to find one who has
done fo by a gold mine. This twentieth part feems to be the
v/hole rent which is paid by the greater part of the gold mines
in Chili and Peru. Gold too is much more liable to be fmug-
gled
175 THE NATURE AND CAUSES OF
gled than even filver; not only on account of the fuperior va-^
hie of the metal in proportion, to its bulk, but on account
of the peculiar way in which nature produces it^ Silver is
very feidom found virgin, but, like moll other nietals, is
genv'.rally mineralized with fome other body, from which
it is impofTible to feparate it in fuch quantities as will pay
for the expence, but by a very laborious and tedious opera-
tion, which cannot well be carried on but in workhoufes
erefted for the purpofe, and therefore cxpofed to the in-
fpedblon of the king^s officers. Gold, on the contrary,
is almoft always found virgin. It is fometimes found in
pieces of fomc bulk ; and even when mixed in fmall and
almoft infenfibie particles with fand, earth, and other ex-
traneous bodies, it can be feparated from them by a very
fhort and iimple operation, which can be carried on in any
private houfe by any body who is pofleiTed of a fmall quan-
tity of mercury. If the king's tax, therefoi-e, is but ill
paid upon filver, it is likely to be much worfe paid upon
gold ; and rent muft make a much fmaller part of the price
of p^old, than even of that of filver.
The loweft price at which the precious metals can bs
fold, or the fiiialleil quantity of other goods lor Vv'liich they
can be exchanged during any confiderable time, is regu-
lated by the fame principles which nx the loweil ordinary
price of all other goods. The Hock which muft commonly
be employed, the food, deaths and lodging which mud
commonly be confumed in bringing them from the mine
to the market, determine it. It muft at leaft be fufficient
to replace ihat flock, with the ordinary profits.
Their higheft price, however, fecms not to be necefla-
rily determined bv any thinsr but the a£fual fcarcitv or
plenty of thofe metals themfelves. It is not determined by
that of any other commodity, in the fame manner as the
price of coals is by that of wood, beyond which no fcarcity
can ever raife it. Increafe the fcarcity of gold to a certain
degree, and the fmalieft bit of it may become more preci-
ous than a diamond, and exchange for a greater quantity
of other goods.
The demand for thofe metals arifes partly from their uti-
lity, and partly from their beauty. If you except iron, they
are more ufeful than perhaps any other metal. As they are
lefs liable to ruft and impurity, they can more cafily be kept
clean ;
THE WEALTH OF NATIONS. 177
clean ; and the utenfils either of the table or the kitchen arc
often upon that account more agree.ible when made of them.
A fdver boiler is nwre cleanly than a lead, copper, or tin-
one ; and the fame quality would render a gold boiler flili
better than a fdver one. Their principal merit, however,
arifes from their beauty, which renders them peculiarly fit
for the ornaments of drefs and furniture. No paint or dye
can give fo fplendid a colour as gilding. The merit of their
beauty is greatly enhanced by their" fcarcity. With the
greater part of rich people, the chief enjoyment of riches con-
fifts in the parade of riches, which in their eyes is never fo
complete as when they appearjo poiTefs thofe decifive marks
of opulence which no body can poilefs but themfelvcs. In
their eyes the merit of an objed which is in any degree ei-
ther ufeful or beautiful, is greatly enhanced by its fcarcity, or
by the great labour which it requires to colled: any confider-
able quantity of it, a labour which nobody can afford to pay
but themfelves. Such objects they are willing to purchafe at
a higher price than things much more beautiful and ufeful,
but rnore common. Thefe qualities of utility, beauty, and
fcarcity, are the original foundation of the high price of thofc
metals, or of the great quantity of other goods for which they
can every where be exchanged. This value was antecedent
to and independent of their being employed as coin, and was
the quality which fitted them for that employment. That
employment, however, by occafioning :i new demand, and
by diminifhing the quantity which could be employed in any
other way, may have afterwards contributed to keep up or in-
creafe their value.
The demand for the precious flones arifes altogether from
their beauty. They are of no ufe, but as ornaments ; and
the merit of their beauty is greatly enhanced by their fcarcity,
or by the difficulty and expence of getting them from the
mine. Wages and profit accordingly make up, upon moft
occafions, almoft the whole of their high price. Rent comes
in but for a very fmall {hare j frequently for no fhare j and
the moft fertile mines only afford any confiderable rent.
When Tavernier, a jeweller, vifited the diamond mines of
Golconda and Vifiapour, he was informed that the fovereigu
of the country, for whofe benefit they were wrought, had
ordered all of them to be fhut up, except thofe which yield-
ed.the largeft and fineft ftones. The others, it feems, were
to the proprietor not worth the working.
Vol. I. • N As
178 THE NATURE AND CAUSES OF
As the price both of the precious metals and of the pre-
cious Hones is regulated all over the world by their price at
the moil fertile mine in it, the rent which a mine of either
czn afford to its proprietor is in proportion, not to its abfo-
lute, but to what may be called its relative fertility, or to its
•fuper^rity over other mines of the fame kind. It new mines
\yere difcovered as much fuperior to thofe of Potofi as they
were -fuperior to thofe of Europe, the value of filver might
be fo much degraded as to render even the mines of Potofi
not worth the working. Before the difcovery of the Spanifti
Weft Indies, the moft fertile mines in Europe may have af-
forded as great a rent to their proprietor as the richeft mines
m Peru do at prefent. Though the quantity of filver was
much lefs, it might have exchanged for an equal quantity of
other goods, and the proprietor's Ihare might have enabled
him to purchafe or command an equal quantity either of la-
bour or of commodities. The value both of the produce and
of the rent, the real revenue which they afforded both to
the public and to the proprietor, might have been the
fame.
The moft abundant mines either of the precious metals
or of the precious ftones could add little to the wealth ot the
worM. A produce of which the value is principally de-
rived from its fcarcity, is neceffarily degraded by its abund-
ance. A fervice of plate, and the other frivolous ornaments
of drefs and furniture, could be purchafed for a fmaller
quantity of labour, or for a fmaller quantity of commodi-
ties ; and in this would confift the fole advantage which the
world could derive from that abundance.
It is otherwife in eftates above ground. The value both
of their produce and of their rent is in proportion to their ab-
folute, and not to their relative fertility. The land which
produces a certain quantity of food, cloaths, and lodging,
can always feed, cloath, and lodge a certain num.ber of peo-
ple •, and whatever may be the proportion of the landlord, it
will' always give him a proportionable command of the labour
of thofe peopld:, and of the commodities with which that la-
bour can fupply him. The value of the moft barren lands is
not diminiflied by the neighbourhood of the moft fertile. On
the contrary, it is generally increafed by it. The great num-
ber of people maintained by the fertile lands afford a market
to many parts of the produce of the barren, which they could
never
THE WEALTH OF NATIONS. 179
never have found among thofe whom their own produce
could maintain.
Whatever increafes the fertility of land in producing
food, increafes not only the value of the lands upon which
the improvement is beflowed, but contributes likewife fo in-
creafe that of many other lands, by creating a nev/ demand
for their produce. That abundance of food, of which, in
confequence of the improvement of land, many people have
the difpofal beyond what they therafelves can confame, is the
great caufe of the demand both for the precious metals and
the precious (tones, as well as for every other convenien-
cy and ornament of drefs, lodging, houfhold furniture,
and equipage. Food not only conftitules the principal
part of the riches of the world, but it is the abundance of
food which gives the principal part of their value to many
other forts of riches. The poor inhabitants of Cuba and
St. Domingo, when they were firft difcovered by the Spa-
niards, ufed to wear little bits of gold as ornaments in their
hair and other parts of their drefs. They feemed to value
them as we would do any little pebbles of fomewhat
more than ordinary beauty, and to conGder them as juffc
worth the picking up, but not worth the refufing to any
body who alked them. They gave them to their new guefts
at the firft requeft, without feeming to think that they had
made them any very valuable prefent. They were aftonifhed
to obferve the rage of the Spaniards to obtain them ; and had
no notion that there could any where be a country in which
many people had the difpofal of fo great a fuperfluity of
food, fo fcanty always among themfelves, that for a very
fma.'l quantity of thofe glittering baubles they would will-
, ingly give as much as might maintain a whole family for
many years. Could they have been made to underftand
this, the paffion of the Spaniards would net have furprifed
them.
N 2 PART
1^0 THE NATURE AND CAUSES OF
PART III.
Of the Vayiatlons in Proportion bdween the refpeftive Values
cf that Sort of Produce ivhich always affords Rent^ and of
that ivhich fometimes does and fometimes does not afford
Rent.
1 HE increafing abundance of food, in confequence of in-
creafing improvement aiid cultivation, muft neceflarily in-
creafe the demand for every part of the produce of land
\vhich is not food, and which can be applied either to ufe or
to ornament. In the whole progrefs of improvement, it
might therefore be expeOed, there fnould be only one varia-
tion in the comparative values of thofe two different forts of
produce. /Ihe value of that fort which fometimes does and
fometimes' does not afford rent, ftiould conftantly rife in pro-
portion to that which always affords fome rent. As art and
induflry advance, the materials of cloathing and lodging, the
ufeful fofBls and minerals of the earth, the precious metals
and the precious Hones iliould gradually come to be more and
more in demand, fliould gradually exchange for a greater and
a crreater quantity of food, or in other words, fliould gradu-
alfy become dearer and dearer. This accordingly has been
the cafe with mod of thefe things upon moft occafions, and
would have been the cafe with all of them upon all occa-
fions, if particular accidents had not upon fome occafions
increafed the fupply of fome of them in a ftill greater pro-
portion than the demand.
The va^uc of a free ft one quarry, for example, will necef-
farily increafe with the increafing improvement and popula-
tion of the country round about it j efpecially if it fliould be
the only one in the neighbourhood. But the value of a fil-
ver m.ine, even though there fliould not be another within a
thoufand m/iles of it, will not neceffarily increafe with the
improvement of the country in which it is fituated. The
market for the produce of a free-flione quarry can feldom ex-
tend more than a few miles round about it, and the demand
muft
THE WEALTH OF NATIONS. i8i
muft generally be in proportion to the improvement and
population of that fmall difhricSt. But the market for the pro-
duce of a filver mine may extend over the whole known
world. Unlefs the world in general, therefore, be advan-
cing in improvement and population, the demand for filver
might not be at all increafed by the improvement even of a
large country in the neighbourhood of the mine. Even though
the world in general "were improving, yet, if, in the courfe
of its improvement new mines fhould be difcovered, much
more fertile than any which had been known before, though
the demand for filver would neceflarily increafe, yet the
fupply might increafe in fo much a greater proportion, that
the real price of that metal might gradually fall j that is,
any given quantity, a pound weight of it, for example,
might gradually purchafe or command a fmaller and a
fmaller quantity of labour, or exchange for a fmaller and a
fmaller quantity of corn, the principal part of the fubfift-
ence of the labourer.
The great market for filver is the commercial and civiliz-
ed part of the world.
If by the general progrefs of improvement the demand
of this market fhould increafe, while at the fame time the fup-
ply did not increafe in the fame proportion, the value of lilver
would gradually rife in proportion to that of corn. Any
given quantity of filver would exchange for a greater' and
a greater quantity of corn ; or, in other words, the average
money price of corn would gradually become cheaper and
cheaper.
If, on the contrary, the fupply by fome accident fliould in-
creafe for many years together in a greater proportion than
the demand, that metal would gradually become cheaper
and cheaper ; or, in other words, the average money price of
corn would, in fpite of all improvements, gradually become
dearer and dearer.
But if, on the other hand, the fupply of the metal fliould
increafe nearly in the fame proportion as the demand, it
would continue to purchafe or exchange for nearly the fame
quantity of corn, i^nd the average money price of corn
would, in fpite of all improvements, continue very nearly
the fame.
These
i82 THE NATURE AND CAUSiS OF
These three feem to exhaufl all the poffible combina-
tions of events which can happen in the progrefs of improve-
ment ', and during the courfe of the four centuries preceding
the prefent, if we may judge by what has happened both in
France and Great Britain, each of thofe three different com-
binations feem to have taken place in the European market,
and nearly in the fame order too in which I have here fet
them down.
Jjtgre^^ton concsrmng the Varlatktis in the Value of Silver dut'"
ing the Courfe of the four I of Centuries.
First Period.
i N T350J and for fome time before, the average price of
the quarter of wheat in England feems not have been efti-
maied lower than four ounces of filver, Tover-weight, equal
to about tv/enty fliillings of cur prefent money. From^ this
price it feems to have fallen graduidly to two ounces of filver,
equal to about ten fhillings of cur prefent money, the price
at vhich we find it ePtimated in the beginning of the f.x-
teenrb. century and at which it feems to have continued to b.e
eflimated till about 1570.
In 1-^50, being the 25th of Edward III, was enacted what
is''called, The (latute of labourers. In the preamble it com-
plains much of the infolence of fervants, who endeavoured to
raife their wages upon their mailers. It therefore ordains,
that all fervr^rrs and labourers fnould for the future be con-
tented with the fame wages and liveries (liveries in thofe
times fignified, rot only deaths, but provifions) which they
had been accuftomed to receive in the 2olh year of the king,
and the four preceding years ; that upon this account their
livery wheat fhould no where be edimated higher than ten-
pence a buffiel, and that it fliould always be in the option of
the m.after to deliver them either the wheat or the money.
Ten-pence a bufhel, therefore, had in the 25th of Edward
III. been reckoned a very moderate price of wheat, fince it
required a particular (tatute to oblige fervants to accept of it
in
THE WEALTH OF NATIONS. 183
in exchange for their ufual Hvery of provifions ; and It had
been reckoned a reafonable price ten years before that, or in
the 1 6th year of the king, the term to which the ftatute re-
fers. But in the i6th year of Edward III. ten-pence con-
tained about half an ounce of filver. Tower-weight, and was
nearly equal to half a crown of our prefent money. Four
ounces of filver, Tower-weight, therefore, equal to fix fhil-
lings and eight-pence of the money of thofe times, and to
near twenty-flilllings of that of the prefent, muft have been
reckoned a moderate price for the quarter of eight bufliels.
This flatute is furely a better evidence of what was reckon-
ed in thofe times a moderate price of grain, than the prices.
of fome particular years which have generally been recorded
by hiftorians and other writers on account of their extraor-
dinary dearnefs or cheapnefs, and from which, therefore, it
is difficult to form any judgment concerning what may have
been the ordinary price. There are, befides, other reafons
for believing that in the beginning of the fourteenth century,
and for fome time before, the common price of wheat was not
lefs than four ounces of filver the quarter, and that of other
grain in proportion.
In 1309, Ralph de Born, prior of St. Auguftine's, Canter-
bury, gave a feaft upon this in{lallation-day,of which William
Thorn has preferved, not only the bill of fare, but the prices
of many particulars. In that feaft were confumed, ift, fifty-
three quarters of wheat, which coft nineteen pounds, or fe-
ven fhilllngs and two-pence a quarter, equal to about one-
and-twenty fliilllngs and fix-pence of our prefent money :
2dly, Fifty-eight quarters of malt, Mdiich coft feventeen
pounds ten Ihillings, or fix ihillings a quarter, equal to about
eighteen ftiillings of our prefent money : 3dly, Twenty cuar-
ters of oats, which coft four pounds, or four ihillings a quar-
ter, equal to about twelve fiiillings of our prefent money.
The prices of malt and oats feem here to be higher than
their ordinary proportion to the price of wheat.
These prices are not recorded on account of their extra-
ordniary dearnefs or cheapnefs, but are mentioned acciden-
tally as the prices actually paid for large quantities of grain
confumed at a feaft which was famous for its magnificence.
In
i84 THE NATURE AND CAUSES OF
In 1262, being the 5 1 ft of Henry III. was revived an an-
tient ftatute called, T^he Jffize of Bread and Ale, which, the
king fays in the preamble, had been made in the times of his
progenitors fometime kings of England. It is probably,
therefore, as old at lead as the time of his grandfather Henry
II. and may have been as old as the conqucft. It regulates
/ the price of bread according as the prices of wheat may hap-
pen to be, from one {lulling to twenty Ihillings the quarter of
the money of thofe times. But (latutes of this kind are ge-
nerally prefumed to provide with equal care for all deviations
from the middle price, for thofe below it as well as for thofe
above it. Ten fhillings, therefore, containing fix ounces of
filver, Tower-weight, and equal to about thirty fliillings of
our prefent money, mud, upon this fuppofition, have been
reckoned the middle price of the quarter of wheat v/hen this
ftatute was firft enafted, and muft have continued to be fo
in the 51ft of Henry III. We cannot therefore be very
wrong in fuppofing that the middle price was not lefs than
one-third of the highefl price at which this ftatute regulates
the price of bread, or than fix fhillings and eight-pence of the
' money of thofe times, containing four ounces of filver,
Tower-'weight.
From thefe different facfhs, therefore, we feem to have
fome reafon to conclude, that about the middle of the four-
teenth century, and for a confiderable time before, the ave-
rage or ordinary price of the quarter of wheat was not fup-
pofed to be lefs than four ounces of filver. Tower-weight.
From about the middle of the fourteenth to the begin-
ning of the fixteenth century, what was reckoned the reason-
able and moderate, that is the ordinary or average price of
wheat, feems to have funk gradually to about one-half of this
price ; fo as at laft to have fallen to about two ounces of
filver. Tower- weight, equal to about ten fliillings of our pre-
fent m.oney. It continued to be eflimated at this price till
about 1570.
In the houfhold book of Henrv, the fifth earl of Northum-
bcrland, drawn up in 15 12, there are two different eft ima-
tions of wheat. In one of them it is computed at fix ftiillings
and eight-pence the quarter, in the other at five (hillings and
eight- pence only. In 15 12, fix fiiillings and eight-pence
contained
\
THE WEALTH OF NATIONS. 185
contained only two ounces of filver Tower-wei^rht, and
were equal to about ten fliillings of our prefent money.
From the 25111 of Edward III. to the beginnhig of the
reign of Elizabeth., during the fp?ice of more than two hun-
dred years, fix fhillings and eight-pence, it appears from
feveral different (latutes, had continued to be confidered as
what is called the moderate and reafonablr, that is the or-
dinary or average price of wheat. The quantity of fi^ver,
however, contained in that nominal fum was, during the
courfe of this period, continually diminifiiing, in ' confe-
quence of feme alterations which were made in the coin.
But the increafe of the value of filver had, it feems, fo far
compenfated the diminution of tlie quantity of it contained
in the fame nominal fum, that the legillature did not think
it worth while to attend to this circumftance.
Thus in 1436', it was ena'^ed, that wheat might be ex-
ported without a licence when the price was fo low as vix
Ihiiilings and eight-pence : And in 1463 it was ena<fted, that
no wheat fhould be imported if the price was not above fix
fliillings and eight-pence the quarter. The legifiature had
imagined, that when the price was fo low, there could be
no inconveniency in exportation, but that when it rcfe
higher, it became prudent to allow of im.portation. Six
ihillings and eight-pence, therefore, containing about the
fame quantity of filver as thirteen fhillings and four-pence
of our prefent money (one third part lefs than the fame
nominal fum contained in the time of Edward III.\ had
in th©fe times been confidered as what i^ called the mode-
rate and reafonable price of wheat.
In 1554, by the ift and 2d of Philip and Mary; and in
1558, by the ift of Elizabeth, the exportation of wheat was
in the fame manner prohibited, whenever the price of the
quarter fliould exceed fix fliillings and eight-pence, which did
not then contain two penny worth more filver than the fame
nominal fum does at prefent. But it had foon been found that
to reftrain the exportation of wheat till the price was fo very
low, was, in reahty, to prohibit it altogether. In 1562,
therefore, by the 5th of Elizabeth, the exportation of Mdieat
was allowed from certain ports whenever the price of the
quarter (liould not exceed ten fliillings, containing nearly the
fame quantity of filver as thelike nominal fum docs at prefent.
This
186 THE NATURE AND CAUSES OF
Tiiis price had at this time, therefore, been confidcred as
what is called the moderate and reafonable price of wheat.
It agrees nearly with the eilimatiou of the Northumberland
book in 15 12,
That in France the average price of grain was, in the
fame manner, much lower in the end of the fifteenth and
begin^viiig of the fixteenth century, than in -the two
centuries preceding, has been obferv'ed both by Mr. Du-
pre de St. Maur, and by the elegant author of the elTay on
the pohce of grain. Its price, during the fame period,
liad probably funk in the fame manner, through the greater
part of Europe*
This rife in the value of filver in proportion to that of
corn, may either have been owing altogether to the increafe
of the demand for that metal, in confequence of increafing
improvement and cultivation, the fupply in the mean time
continuing the fame as before : Or, the demand continuing
the fame as before, it may have, been owing altogether to
the gradual diminution cf the fupply, the greater part of
the mines which were then known in the world, being
much exhaulted, and confequently the expence of working
them much increafed : Or it may have been owing partly
to the one and partly to the other of thofe two circum-
ftances. In the end of the fifteenth and beginning of the
fixteenth centuries, the greater part of Europe was ap-
proaching towards a more fettled form of govern-
ment than it had enjoyed for feveral ages before. The
increafe of fecurity would naturally increafe indultry and
improvement \ and the demand for the precious metals, as
well as for every other luxury and ornament, would natu-
rally increafe with the increafe of riches. A greater an-
nual produce would require a greater quantity of coin to
circulate it , and a greater number of rich people would
require a greater quantity of plate and other ornaments of
filver. It is natural to fuppofe too, that the greater part
of the mines wliich then fuppiied the European market
with filver, might be a good deal exhaufled, and have be-
come mere cxpenfive in the working. They had been
wrought many of them from the time of the Romans.
It has been the opinion, however, of the greater part of
thofe who have written upon the prices of commoditie* in
antient times, that^ from the Conqueft, pohaps from the
invafion
THE WEALTH OF NATIONS. 187
invafion of Julius Cxfar till the difcovery of the mines of
America, the value of filver was continually diminlfhing.
This opinion they fcem to have been led into, partly by the
obfervations which they had occafion to make upon the
prices both of corn and of fome other parts of the rude
produce of land ; and partly by the popular notion, that as
the quan ity of filver naturally increafes in every country
with the increafe of wealth, lb its value diminiflies as its
quantity increafes.
In their obfervations upon the prices of corn, three diffe-
rent circumllances feem frequently to have milled them.
First, In antient tlm.es almoft all rents were paid in
kind ; in a certain quantity of corn, cattle, poultry, &c.
It fometimcs happened, however^ that the landlord would
itipulate, that he fhould be at liberty to demand ot the
tenant, either the annual payment in kind, or a certain
fum of money Infltad of it. The price at which the pay-
ment in kind was in this manner exchanged for a certain
fum of money, is in Scotland called the converfion price.
As the option is always in the landlord to take either the
fubftance or the price, it is neceffary for the fafety of the
tenant, that the converfion price iliould rather be below
than above the average market price. In many places, ac-
cordingly, it Is not much above one-half of this price.
Through the greater part of Scotland this cuitom ftill con-
tinues with regard to poultry, and in fome places v, ith re-
gard to cattle. It might probably have continued to ta'ce
place too with regard to corn, had not the iniiitution of
the public fiars put an end to it. Thefe are annual \aiaa-
tions, according to the judgment of an allize, of the average
price of all the different forts of grain, and of all the different
qualities of each, according to the acflual market price in every
different county. This inititution rendered it fuliiciently fafe
for the tenant, and much more convenient for the landlcrd,
to convert, as they call it, the corn rent, ratlier at what
fhould happen to be the price of the fiars of each year, than
at any certain fixed price. But the writers who have colleO-
ed the prices of corn in antient times, feem frequently to
have miftaken what is called in Scotland the converfion price
for the adf ual market price. Fleetwood acknowledges, upon
one occaficn, tliat he had made this miftake. As he wrote
his book, however, for a particu-lar purpofe, he does not
think proper to make this acknowledgment till after
tranfcribing .
iS8 THE NATURE AND CAUSES OF
tranfcribing this converfion price fifteen times. The price
is eight {lullini;s the quarter of wheat. This fum in 1423,
the year at which he begins M^ith it, contained the fame
quantity of fiker as fixteen fliillings of our prefent money.
But in 1562, the year at which he ends with it, it con-
tained no more than the fame nominal fum does at prefent.
"Secondly, They have been milled by the flovenly man-
ner in which fome ai,tient fhatutes of affize had been fome-
times tranfcribed by lazy copiers ; and fometimes perhaps
a61:ually compofed by the legiflature.
The antient (tatutes of aflize feem to have begun always
with determining what ought to be the price of bread and ale
when the price of wheat and barley were at the loweii, and
to have proceeded gradually to determine what it ought to
bcj according as the prices of thofe two forts of grain
iliould gradually rife above this lowell price. But the
tranfcribers of thofe itatutes feem frequently to have thought
it fufFicient, to copy the regulation as far as the three or
four nrft and lowell prices -, faving in this manner their
, own labour, and judging, I fuppofe, that this was enough
to fliew what proportion ought to be obferved in all higher
prices.
Thus in the affize of bread and ale, of the 51ft of
Henry III. the price of bread was regulated according to
tlie different prices of wheat, from one fliilling to. twenty
fliillings the quarter, of the money of thofe times. But
in the manufcripts from which all the different editions of
the itatutes, preceding that of Mr. Ruifhead, were printed,
the copiers had never tranfcribed this regulation beyond the
price of twelve {liillings. Several writers, therefore, be-
ing milled by this faulty tranfcription, very naturally con-
cluded that the middle price, or fix fnillings the quarter,
equal to about eigiiteen fliillings of our prefent money,
was the ordinary or average price of wheat at that time.
In the ftatute of Tumbrel and Pillory, ena£):ed nearly
about the fameiime, the price of ale is regulated according
to every fixpence rife in the price of barley, from two
ftiilHngs to four fliillings the quarter. That four fliillings,
however, v> as not confldered as the highefl price to which
4)arley might frequently rife in thofe times, and that thefe
prices were only given as an example of the proportion
which
THE WEALTH OF NATIONS. 1^9
which ought to be obferved in all other prices, whether
higher or lower, we may infer from the lalt words of the
ftatute ; " et fic deinceps crefcetur vel diminuetur per
<* fex denarios." The expreflion is very flovenly, but the
meaning is plain enough ; ** That the price of ale is in
" this manner to be incrcafed or diminilhed according to
*^ every fixpence rife or fall in the price of barley." In
the compofition of this ilatute the legiflature itfelf feems to
have been as negligent as the copiers were in the tranfcrip-
tion of the other. .
In an antient manufcript of the Regiam. Majeftatem, an
old Scotch law book, there is a ftatute of allize, in which the
price of bread is regulated according to all the different prices
of wheat, from ten-pence to three fliillings the Scotch boll,
equal to about half an Englifh quarter. Three (hillings
Scotch, at the time when this afiize is fuppofed to have
been enacfled, were equal to about nine lliiiiings (lerling of
our prefent money. Mr. Ruddiman feems * to conclude
from this, that three fliillings was the higheft price to
which wheat ever rofe in thofe times, and that ten-pence,
a fliilling, or ;,t moft two fnillings, were the ordinary
prices. Upon confulting the manufcript, however, it ap-
pears evidently, that all thefe prices are only fet down as
examples of the proportion which ought to be obferved be-
tween the refped:ive prices of vvheat and bread. The laft
words of the ftatute are, ** rellqua judicabis fecundum
" pr?efcripta habendo refpeclum ad pretium bladi.'*
*' You fhall judge of the remaining cafes according to what
" is above written having a refpe£l to the price of corn."
Thirdly, They feem to have been milled too by the very
low price at which wheat was fometimes fold in very an-
tient times ; and to have imagined, that as its ioweft price
was then much lower than in later times, its ordinary price
muft likewife have been much lower. They might have
found, however, that in thofe antient times, its higheft
price was fully as much above as its lov/eit price was below
any thing that had ever been known in latter tirpes. Thiis
in 1270, Fleetwood gives us two prices of the quarter of
wheat. The one is four pounds hxteen iliillings of the
money of thofe times, equal to fourteen pounds eight shil-
lings of that of the prefent ; the other is fix pounds eiglit
(hillings, equal to nineteen pounds four (hillings of our pre-
fent money. No price can be found in the end of the fif-
teenth,
* .S<je his preface to Anderfon's Diploniatu Scotise.
ipo THE NATURE AND CAUSES .OF
teenth, or beginning of the fixteenth century, which ap-
proaches to the extravagance of thefe. The price of corn,
though at all times liable to variation, varies moil in thofe
turbulent and dlforderly focietieSj in which the interruption
of all commerce and communication hinders the plenty of
one part of the country from relieving the fcar>;ity of ano-
ther. In the diforderly ftate of England under the Planta-
j^enets, who governed it from about the middle of the
twelfth, till towards the end of the fifteenth century, one
diftricl mi^^ht be in plenty, while another at no great dif-
tance, by having its crop dedroyed either by fom? accident
of the feafonsj or by the incurfion of fome neighbourhig
baron, might be fuffering all the horrors of a famine ; and
yet if t'.e lands of fcm.; hoilile lord were interpofed be-
tween them, the one might not be able to give the leaft
aifiilance to tlie other. Under the vigorous adminiftra-
tion of the Tudors, who governed England during the
lattei part of the fifteenth, and through the whole of the
fixteenth century, no baron was powerful enough to dare
to difturb the public fecurity.
The reader will find at the end of this chapter all the
prices of wheat which have been collefted by Fleetv/ood
from 1202 to 1 597 J both inclufive, reduced to the money
of the prifent times, and digefted according to the order
of tim.e, into feven divifions of twelve years each. At the
end of each divifion too, he will find the average price of
the twelve years of which it confifls. In that long period
of time, Fleetwood has been able to colle£l the prices of
no more than eighty years, fo that four years are wanting
to make cut the lait twelve years. I have added, there-
fore, from the accounts of Eton College, the prices of
1598, 1599, 1600, and 1601. It is the only addition
which I have made. The reader v/ill fee that from the
beginning of the thirteenth, till after the middle of the
fixteenth century, the average price of each twelve years
grows gradually lov/er and lower •, and that towards the
end of the iixteenth century it begins to rife again. The
pricec> indeed, which Fleetwood has been able to colle£l:,
feem to have been thofe chiefly which were remarkable for
extraordinary dearnefs or cheapnefs j and I do not pretend
that any very certain conclufion can be drawn from them.
So far, however, as they prove any thing at all, they confirm
the account which i have been endeavouring to give. Fleet-
wood himfelf, however, feems, with moft other writers, to
have
THE WEALTH OF NATIONS. ipt
have believed, that during all this. period the value of fiiver,
in confequence of its increafing abundanc :, was continually
diminilhing. The prices of corn which he himfclf has col-
ledled, certainly do not agree with this opinion. They agree
perfectly with that of Mr. Dupre de St. Maur, and with
that which I have been endeavouring to explain. Bifhop
Fleetv/ood and Mr Dupve de St. Mnur are the two authors
who feem to have colleclcd^ M'ith the greateft diligence
and fidelity, the price;? of tilings in antient times. It is
fomewhat curious that, though their opinions are fo very
difterent, their fads, fo far as they relate to the price of
corn at leaft, fliould coincide fo very exactly.
It is not, however, fo much from the low price of corn,
as from that of fome other parts of the rude produce of
land, that the moft judicious writers have inferred the
great value of filver in thofe very antient times. Corn, it
has been faid, being a fort of manufadure, was, in thofe
rude ages, much dearer in proportion than the greater part
of other commodities; it is meant, I fuppofe, than the
greater part of unmanufadurcd commodities*, fuch as cat-
tle, poultry, game of all kinds, Sec. That in thofe times
of poverty and barbarifm thefe were proponionably much
cheaper than corn, is undoubtedly true. But this cheap-
nefs was not the efted of the high value of filver, but of
the low value of thofe commodities. It was not becaufe
filver v/ould in fuch times purchafe or rcpref'jnt a greater
quantity of labour, but becaufe fuch commodities would
purchafe or repreferit'a^ much fmaller quantity than in times
of more opulence and improvement. Silver muft certainly
be cheaper in Spanifn America than in Europe ; in the
country where it is produged, than in the country to Vv'hicli
it is brought, at the expence of a long carriage both by
land and by fea, of a freight and an inlurance. One-and-
twenty pence halfpenny (lerling, however, we are told by
Ulioa, v/as, not many years ago, at Buenos Ayres, the
price of an ox cbofen from a herd of three or four hundred.
Sixteen {hillings fterling, we are told by Mr. Byron, was
the price of a good horfe in the capital of Chili. In a
country naturally fertile, but of which the far greater part is
ahcgether uncukivated, cattle, poultry, game of all kinds,
&c. as they can be acquired with a very fmall quantitv of
labour, fo they will purchafe or command but a very fniall
quantity. The low money price for which they may be fold,
is no proof that the real value of filver is there very hi-ni, but
that the real value of thofe commioditics is vcrv low.
L/\BOUR.
192 THE NATURE AND CAUSES OF
Labour, it mud always be remembered, and not any
particular commodity or fett of commodities, is the real
mcafure of the value both of filver and of ail other com-
modities.
But in countries almoft wafte, or but thinly Inhabited,
cattle, poultry, game of all kinds, &c. as they are the fponta-
neous productions of nature, fo (lie frequently produces them
in much greater quantities than the confumption of the inha-
bitants requires. In fuch a ftate of things the fupply commonly
exceeds the demand. In different ftates of fociety, in different
ftages of improvement, therefore, fuch commodities will re-
prefent, or be equivalent to, very different quantities of labour.
In every ftate of fociety, In every flage of improvement,
corn is the produftion of human induftry. But the arerage
produce of every fort of induftry is always fuited, more or
lefs exaftly, to the average confumption ; the average fup-
ply to the average demand. In every different ft age of im-
provement, befides, the raifing of equal quantities of corn in
the fame foil and climate, will, at an average, require nearly
equal quantities of labour ; or what comes to the fame thing,
the price of nearly equal quantities ; the continual increafe
of tlie productive powers of labour in an improving ftate of
cultivation, being more or lefs counter-balanced by the conti-
,nually increafing price of cattle, the principal inftruments of
agriculture. Upon all thefe accounts,. therefore, we may reft
ailured, that equal quantities of corn will, in every ftate of
fociety, in every ftage of improvement, more nearly repre-
fent, or be equivalent to, equal quantities of labour, than
equal quantities of any other pare of the rude produce of
land. Corn, accordingly, it has already been obferved, is,
in all the different ftages of M^ealth and improvement, a
more accurate meafure of value than any other commodity
or fett of commodities. In all thofe different ftages, there-
fore, we can judge better of the real value of filver, by
comparing it wnth corn, than by comparing it with any
other cornn-iodlty, or fett of commodities.
CojiN, befides, or whatever elfe Is the common and favour-
rite vecretable food of the people, conftltutes, in every civiliz-
ed .couutry, the principaj part of the fubfiftence of the la-
bourer, in confequence of the extenfion of agriculture, the
land
THE WEALTH OF NATIONS. 193
land of every country produces a much greater quantity of
vegetable than of animal food, and the labourer every where
lives chiefly upon the wholefome food that is cheapeft and
moft abundant. Butcher's-meat, except in the mod thriving
countries, or where labour is moit highly rewarded, makes
but an infignificant part of his fubfiitence ; poultry makes a
IVill fmdler part of it, and game no part of it. In FraiKe,
and even in Scotland, where labour is fomewhat better re-
warded than in France, the labouring poor feldom eat butch-
crVmeat, except upon holidays, and other extriiordinary oc-
cafions. The money price of labour, therefore, depends much
more upon the average money price of corn, the fubfiftence
of the labourer, than upon that of butcher's-meat, or of any-
other part of the rude produce of land. The real value of
gold and filver, therefore, the real quantity of labour which
they can purchafe or command, depends much more upon
the quantity of corn which they can purchafe or command,
than upon that of butcher's-meat, or any other part of the
rude produce of land.
Such flight obfervations, however, upon the prices either
of corn or of other commodities, would not probably Lave
mifled fo many intelligent authors, had they not been influ-
enced, at the fame time, by the popular notion, that as the
quantity of filver naturally increafes in every country v/ith the
increafe of wealth, fo its value diminiilies as its quantity in-
creafes. This notion, hov/ever, feems to be altogether
groundlefs.
The quantity of the precious metals may increafe in any
country from two difl^erent caufes : either, firfl:, from the in-
creafed abundance of the mines v/hich fupply it ; or, fecond-
ly, from the increafed wealth of the people, from the increaf-
cd produce of their annual labour. The firll of thefe caufes
is no doubt neceflarily connected with the diminution of the
value of the precious metals •, but the fecond is not.
'^HEN more abundant mines are difcovered, a greater
quantity of the precious metals is brought to market, and the
quantity of the neceflaries and conveniencies of life for which
they mufl be exchanged being the fame as before, equal quan-
tities of the metals muft be exchanged for fmaller quantities
of commodities. So far, therefore, as the increafe of the
quantity of the precious metals in any country arifes from the
Vol. I. O iacreafed
194 THE NATURE AND CAUSES OF
increafed abundance of the mines, it is necsilarily con»
nedled with fome diminution of their value.
When, on the contrary, the wealth of any country in-
creafes, when the annual produce of its labour becomes gra-
dually greater and greater, a greater quantity of coin becomes
neceiTary in order to circulate a greater quantity of commo-
dities; and the people, as they can afford it, as they have more
commodities to gire for it, will naturally purchale a greater
and a greater quantity of plate. The quantity of their coin
^?v'ill increafe from necelFity ; the quantity of their plate from
vanity and oflentation, or from the fame reafon that the
quantity of fine (latues, pi£l:ures, and of every other luxury
and curiofity, is likely to increafe among them. But as fta-
tuaries and painters are not likely to be worfe rewarded in
times of wealth and profperity, than in times of poverty
and depreflion, fo gold and filver are not likely to be worfe
paid for.
The price of gold and fdver, when the accidental difcove-
rv of more abundant mines does not keep it down, as it natu-
rallv rifes with the wealth of every country, fo whatever be
the (late of the m.ines, it is at all times naturally higher in a
rich than in a poor country. Gold and filver, like ail other
commodities, naturally feek the market where the beft price is
given for them, and the beft price is commonly given for
every thine in the country v/hich can beil afford it. La-
bour, it muft be remiCmibered, is the ultimate price which is
paid for everv thing, and in countries where labour is equally
veil rewarded, the m.oney price of labour will be in propor-
tion to that of the fubfiitence of the labourer. But gold and
iilver will naturally exchange for a greater quantity of fubfift-
cnce in a rirh than in a poor countrv, in a country which
abounds with fubfiftence, than in one which is but indiife-
rently fuunli'^d with it. If the tv;o countries are at a great ciif-
tance, the difference may be very great ; beeaufe though the
metals natur^illy fly from the worfe to the better market, yet
it may be difRcult to tranfport them in fuch quantities as to
brino their price nearly to a level in both. If the countries
are near, the d'^er-^nce will be frnaller, and may fometimes
be fcarce r>ercepti^Jf ; beeaufe in this cafe the tranfportatiou
v-ill be eafy. China i^ a much richer country than any part
(f Europe, and the difference between the price of fubfill-
ence in China and in Europe is very great. Rice in Chma
h much cheaper than wheat is any where in Europe. Eng-
land
THE WEALTH OF NATIONS. 195
]and is a much richer country than Scotland j but the dif-
ference between the money-price of corn in thofe two coun-
tries is much fmaller, and is but juit perceptible. In pro-
"portion to the quantity or meafure, Scotch corn generally
appears to be a good deal cheaper than Englilh ; but in pro-
portion to its quality, it is certainly fomewhat dearer. Scot-
land receives almoil every year very large fupplies from Eng-
land, and every commodity mult commonly be fomewhat
dearer in the country to which it is brought than in that
from which it comes. Englifh corn, therefore, muft be
dearer in Scotland than in England, and yet in proportion
to its quality, or to the quantity and goodnefs of the flour
or meal which can be made from it, it cannot commonly be
fold higher there than the Scotch corn which comes to mar-
ket in competition with it.
The difference between the money price of labour in
China and in Europe, is ftill greater than that between the
money price of fubfiflence • becaufe the real recompence
of labour is higher in Europe, than in China, the greater
part of Europe being in an improving Itate, while China
feems to be (landing flill. The money price of labour is
lower in Scotland than in England, becaufe the real recom-
pence of labour is much lower ; Scotland, though advancing
to greater wealth, advances much more flowly than Eng-
land. The frequency of emigration from Scotland, and the
rarity of it from England, fufficiently prove that the demand
for labour is very diiferent in the two countries. The pro-
portion between the real recompence of labour in different
countrie-s, it muft be remembered, is naturally regulated,
not by their aclual wealth or poverty, but by their advan-
cing, ftationary, or declining condition.
Gold and filver, as they are naturally of the greatefl
value among the richeft, fo they are naturally of the leaft
value among the pooreft nations. Among favages, the pooreft
of all nations, they are of fcarce any value.
In great towns corn is always dearer than in remote p^rts
of the country. This, however, is the effe<ft, not of the real
cheapnefs of li'ver, but of the real dearnefs of corn. It does
not coft lefs labour to bring fdver to the great town than to
the remote parts of the country ; but it cofts a great deal
more to bring corn.
O2 In
i<^6 THE NATURE AND CAUSES OF
In fome very rich and commercial countries, fuch as Hol-
land and the territory of Genoa, corn is dear for the fame rea-
fon that \X( is dear in great towns. They do not produce
enough to maintain their inhabitants. They are rich in the
induftry and fkill of their artificers and manufa(!^\irers j in
every fort of msichinery which can* facilitate and abridge la-
bour j in {hipping, and in all the other inilruments and
means of carriage and commerce *, but they are p<3or in corn,
which, as it muft be brought to them from diftant countries,
muft, by an addition to its price, pay for the carriage from
thofe countries^ It does not coft left labour to bring filver
to Amfterdam than to Dantzick *, but it cofts a great deal
more to bring corn. The real coft of filver muft be nearly
the fame in=bx)th places •, bu.t that of corn muft be very diffe-
rent^ Dimlnifh- the real opulen-ce either of Holland or of
the territory of Genoa, while the number of their inhabitants
remains the fame : diminifti their power of fupplying them-
felves from diftant countries y and the price of corn, inftead
of finking with that diminution in the quantity of their filverj^
which muft neceflarily accompany this declenficn either as
its caufe or as. its- efret^, will rife to ths price of a famine.
When we are in want of neceffa-ries we muft part with all
fuperfluities;!^ of which the value, as it rifes in thnes of opa-
knce and profperity, fo it finks in times of poverty and dif^
trefs. It is. otherwife with neeefiaries. Their real price, the
quantity of labour which they can purchafe or command,
rifes in times of poverty and drftrei^s, and finks in times of
opulence and profperity, which are alw^ays times of great
abundance •, for they could not otherwife be times of opu-
lence and profperity. Corn is i? neceffary, filver is- only 2
fuperfluity-
Whatever, therefore, may have been the increafc in the
quantity of the precious metals, which, during the period
between the middle of the fourteenth and that of the frx-
teenth century, arofe from the increafe of wealth and im-
provement, it could have no tendency to diminifti their va-.
lue either in Great Britain, or in any other part of Europe.
If thofe who have collected the prices of things- in ancient
times, therefore, had, during this period, no reafon to infer
the diminution of the value of filver, from any obfervations
which they had made upon the prices either of corn or of
other commodities, they had ftill lefs reafon to infer it from.
3.ny fuppofed increafe of wealth and improvement.
S E c o N x>~
THE WEALTH 0:P NATIQNS. 19^
SECOND P E R I O IX
jl5 U T how various foever may havx^ -been the opinions oT
the learned concerning the progrefs of the value of filver
during this firft period, they are unanimous concerning it
during the fecond*
From about 1570 to about 1640, during a period of about
feventy years, the variation in the pr^oportioii between the
value of filver and that of corn, held a quite oppofite courfe.
Silver funk in its real value, or would exchange for a fmaller
<]uantity of labour than before ; and corn rofe in its iiowiinal
price, and inftead of being commonly fold for about two
ounces of lilver the q^iarter, or about ten {hillings of our
prefent money, came to be fold for fix and eight ounces of
jfilver the quarter, or ahout thirty and forty fhillings of our
prefent imoney*
The difcovery of the abundant mines of America, feenis
to have been the folecaufe of this diminution in the value of
filver in proportion to that of cora. It is accounted for ac-
cordingly in the fame manner by every body ; and there
never has been any difpute either aboiit the fadl, or about
the caufe of it. The greater part of Europe was, during
this period, advancing in induftry and improvement, and the
demand for filver mull confequently have been increafmgo
But the increafe of the fupply had, it feems, fo far exceed-
ed that of the demand, that the value of that metal funk
confiderably. The difcovery of the mines of Atnerica, it is
to be obferved, does not (ecm to have Iiad any \^vy fenfibie
effe£l upon the prices of things in England till after 1570 j
though even the mines of Potofi had been difcovered more
than twenty years before.
From 1595 to 1620, both inclufive, the average price of
the quarter of nine bufhels of the bed wheat at Windfor
market, appears from the accounts of Eton College, to have
'been 2/. ir. 6d. ^.^ From which fum, negle^ling the frac-
. Jion, and deducting a ninth, or 4/. yd, ^, the price of the
ijuarter
193 THE NATURE AND CAUSES OF
quarter of eight bufhels comes out to have been lA i6s. lo^. >•
And from this fum, negleftiiig likewiie the fra6Uon, and de~
du6ling a ninth, or 4^. id, ly for the difference between the
price of the beft wheat and that of the middle wheat, the
price of the middle wheat comes out to have been about
lA I2s. Sd. ly or about dx ounces and one-third of an ounce
of iflver.
From 1621 to i6;^6j both incluGve, the average pr'ce of
the fame m^eafure of the bell: wheat at the fame market, ap-
pears from the fame accounts, to have been 2A i oj-. •, from
which making the like deductions as in the foregoing cafe,
the average price of the quarter of eight builicls of middle
wheat comes out to have been lA 19/. 6d. or about (gvcv.
ounces and two-thirds of an ounce of hlverr
T H I Pv D P E R I O D.
.0 ET WEEN 1630 and 1640, or about 1636, the cf'
fe£l: of the difcovery of the mines of America in reducing
the value of fdver, appears to have been compleated, and the
value of that metal feems never to have funk lower in propor-
tion to that of corn than it was about that time. It feems
to have rifen fomewhat in the courfe of the prefent cen-
tury, and it had probably begun to do fo even fome time
before the end of the laft. '
From 1^37 to 1700, both inclufive, being the fixty-four
laft year^ of the laft century, the average price of the quarter
of nine bufhels of the bed wheat at Windfor market, ap-
pears, from the fame accounts, to have been 2A i u. od. 4 j
•which is only is. od.^ dearer than it had been during the
fixteen years before. But in the courfe of thefe fixty-four
years there happened two events which mufl have produced
a m>uch greater fcarcity of corn than what the courfe of the
feafons would otherwife have occafioned, and which, there-
fore, without fuppofing any further reduction in the value
of filver, will much more than account for this very fmall
enhancement of price.
Th]5
THE WEALTH OF NATIONS. ip-p
The firft of tliefe events was the civil war, which, by dif-
couraging tillage and interrupting commerce, mu(l have raif-
ed the price of corn much above what the courfe of the fea-
fons would otherwife have occafioned. It muft have had
this efFeiH: more or lefs at all the diiferent markets in the
kingdom, but particularly at thofe in the neighboui^hood of
London, which require to be fupplied from the greateil dif-
tance. In 1648, accordingly, the price of the belt wheat at
AVindfor market, appears, from the fame accounts, to have
been 4/. 5/, and in 1649 ^^ have been 4/. the quarter of nine
bufliels. The excefs of thofe two years above 2/. 10/. (the
average price of the fixtecn years preceding 1637) is 3/. 5r. ;
which divided among the Gxty-four laft yearsof the laft cen-
tury, will alone very nearly account for that fmall enhance-
ment of price which feems to have taken place in them.
Thefe, however, though the higheft, are by no means the
only high prices which feeni to have been occaiioned by the
civil wars^i
The fecond event was the bounty upon the exportation of
corn, granted in 1688, The bounty, it has been thought
by many people, by encouraging tillage, may, in a long courfe
of years, have occafioned a greater abundance, and confe-
quently a greater cheapnefs of corn in the home-market, than
what would otherwife have taken place there. Ho .v far the
bounty could produce this eUcO: at any time, I fliall examine
hereafter ; I fnall only obferve at prefent, that between i683
and 1 700, it had not time to produce any fuch eflccl. During
this ihort period its only efFecl muft have been, by encou-
raging the exportation of the furplus produce of every year,
and thereby hindering the abundance of one year from com-
psnfating the fcarcity of another, to raife the price in the
home-market. The fcarcity which prevailed in England
from 1693 to 1699, both inclufive, though no doubt princi-
pally owing to the badnefs of the feafons, and, therefoie, ex-
tending through a confiderable part of Europe, muft have
been fomewhat enhanced by the bounty. In 1699, accord-
ingly, the furtlicr exportation of corn was prohibited for
nine months.
There was a third event which occurred in the courfe of
the fame period, and which, though it could not occaflon any
fcarcity of corn, nor, perhaps, any augmentation in the real
quantity of filver which was ufually paid for it, muft neceHa-
rily
200 THE NATURE AND CAUSES OF
rily have occafioned fome augmentation in the nominal fum.
This event was the great debafement of the fdver coin, by
clipping and wearing. This evil had begun in the reign of
Charles II. and had gone on continually increafing till 1695 j
at which time, as we may learn from Mr. Lowndes, the cur-
rent filver coin was, at an average, near five-and-twenty per
cent, below its ftandard value. But the nominal fum which
conflirutes the market price of every commodity is neceflari*
ly regulated, not fo much by the quantity of filver, which,
according to the ftandard, ought to be contained in it, as by
that which, it is found by experience, actually is contained
in it. This nominal fum, therefore, is neceflarily higher
when the coin is much debafed by clipping and wearing,
than when near to its ftandard value.
In the courfe of the prefent century, the filver coin has not
at any time been more below its ftandard v/eight than it is at
prefent. But though very much defaced, its value has been
kept up by that of the gold coin for which it is exchanged*
For though before the late re-coinage, the gold coin was a
good deal defaced too, it was lefs fo than the filver. In 1695,
on the contrary, the value of the filver coin was not kept up
by the gold coin ; a guinea then commonly exchanging for
thirty Ihilhngs of the worn and dipt filver. Before the late
re-coinage cf the gold, the price of filver bullion was feldom
higher than five {hillings and feven-pence an ounce, which is
but five-pence above the mint price. But in 1695, the com-
mon price of filver bullion was fix {hillings and five-pence ai^'
ounce *, which is fifteen-pence above the mint-price. Even
before the late re-coinage of the gold, therefore, the coin,
gold and filver together, when compared with filver bullionj
was not fuppofed to be more than eight per cent, below its
ftandard value. In 1695, on the contrary, it had been fup-
. pofed to be near five-and-twenty per cent, below that value.
But in the beginning of the prefent century, that is, imme-
diately after the great re-coinage in King William's time, the
greater part of the current filver coin muft have been ftill
nearer to its ftandard weight than it is at prefent. In the
courfe of the prefent century too there has been no great
public calamity, fuch as the civil war, which could either
difcourage tillage, or interrupt the interior commerce of the
country. And though the bounty which has taken placa
through
♦ Jjowndcs's Effay on the Silver Coin, p. 68.
THE WEALTH OF NATIONS. 201
through the greater part of this century, muft ahv:iys raiic
the price of corn fomewliat higher than it otherwife would
be in the acfbual flate of tillage ; yet as, in the courle of this
century, the bounty has had full time to produce all tlic good
effecfts commonly imputed to it, to encourage tillage, and
thereby to inert; afe the quantity of corn in the home market,
it may, upon the principles of a fyftem which I iliall explain
and examine hereafter, be fappofed to have done fomething
to lower the price of that commodity the one way, as well as
to raife it the other. It is by many people fuppofed to have
done more. In the fixty-four hril years of the prefent ccrt-
tury accordingly, the average price of the quarter of nine
bufhels of the bed wheat at Windfor market, appears, by the
accounts of Eton College, to have been 2/. 0/. 6d. 4|,
which is about ten iliillings and fixpence, or more than
five-and-twenty per cent- cheaper than it had been during
the fixty-four lafl years of the laft century ; and about nine
Shillings and fixpence cheaper than it had been during the
fixteen years preceding 1636, when the difcovery of the
abundant mines of America may be fuppofed to have pro-
<luced its full eifeft ; and about one {lulling cheaper than
it had been in the twenty-Hx years preceding 1620, before
that difcovery can well be fuppofed to have produced its
full effe(ft- According to this account, the average price
©f middle wheat, during thefe fixty-four firll years of
the prefent century, comes out to have been about thrity-
two ihillings the quarter of eight bufliels.
The value of filver, therefore, feems to have rifen fomc-
what in proportion to that of corn during the courfe of the
prefent century, and it had probably begun to do io even fome
time before the end of the laft.
In 1687, the price of the quarter of nine bufiiek of the
bed wheat at Windfor market was i/. 5^-. 2d. the ioivctl
price at which it had ever been from 1595*
In 1688, Mr. Gregory King, a man famous for his know-
ledge in matters of this kind, eftimated the average price of
wheat in years of moderate plenty to be to the grower y. 6d.
the bufhel, or eight-and-twenty fliillings the quarter. The
grower's price I underftand to be the fame with what is feme-
times called the contrail price, or the price at which a farmer
^ntracts for a certain number of years to deliver a certain
(quantity
-02. THE NATURK AND CAUSES OF
quantity of corn to a dealer. Asa contradl of this kind faves
the farmer the expence and trouble of marketnig,tlie contra6l
price is generally lower than what is fuppofed to be the ave-
rage market price. Mr. Kmg had judged eight-and-twenty
fhiiiings the quarter to be at that time the ordinary contraft
price in years of moderate plenty. Before the fcarcity occa-
fioned by the late extraordinary courfe of bad feafons, it
was, I have been allured, the ordinary contract price in all
common years.
In 1 68^3 \yas granted the parliamentary bounty upon the
exportation of corn. The country gentlemen, who then
compofed a (liil greater proportion of the iegiflature than they
do at prefent, had felt that the- money price of corn was fai-
ling. The bounty was an expedient to raife it artiiicially to
the high price at which it had frequently been fold in the
time of Charles I. and II. It was to take place, therefore,
till wheat was fo high as forty-eight fliillings the quarter;
that is twenty fliillings, or ^ths dearer than Mr. King had in
that very year eftimated the grower's price to be in times of
moderate plenty. If his calculations deferve any part of the
reputation which they have obtained very univerfally, eight-
and-forty fliillings the quarter was a price which, without
fome fuch expedient as the bounty, could not at that time be
expelled, except in years of extraordinary fcarcity. But the
government of King "William was not then fully Tettled. It
v/as in no condition to refufe any thing to the country gentle-
men, from whom it was at that very time foliciting the lirft
eftablifliment of the annual land-tax.
The value of filver, therefore, in proportion to that of
corn, had probably rifen fomewhat before the end of the
]a(l century ; and it feems to have continued to do fo dur-
ing the courfe of the greater part of the prefent ; though
the necelTary operation of the bounty mull have hindered
that rife from being fo fenfible as it otherwife would have
been in the-a<51ual flate of tillage.
In plentiful years the bounty, by occafioning an extraordi-
nary exportation, necefl'arily raifes the price of corn above
wdiat it otherwife would be in thofe years. To encourage
tillage, by keeping up the price of corn even in the mofl
plentiful years, was the avowed end of the inftitution.
In
THE WEALTH OF NATIONS. 203
In years of great fcarcity, indeed, the bounty has gene-
rally been lufpended. It muil, however, have had Tome
eliedl even upon the prices of many of thofe years. By the
extraordinary exportation which it occafions in years of
plenty, it mull frequently hinder the plenty of one year
from compenfating the fcareicy of another.
Doth In years of plenty, and in years of fcarcity, there-
fore, the bounty raifes the pvice of corn above v/har it natu-
rally would be in the a^flual Hate of tili ige. If, during the
fixty-four firft years of the prefent century, therefore, the
average price has been lower than during the fixty-four lail
years of the lall century, it mull, in the fame itate of til-
lage, have been mucli more fo, had it not been for this
-operation of the bounty.
But without the bounty, it may l)e faid, the Hate of
tillage would not have been the fame. What may have been
the eifb£ls of this inflitutlon upon the agriculture of the
country, I fnall endeavour to explain hereafter, when I come '
to treat particularly of bounties, I Ihall only obferve at pre-
fent, that this rife in the value of filver, in proportion to that
of corn, has not been peculiar to England. It has been ob-
ierved to have taken place in France during the fame period,
and nearly in the fame proportion too, by three very faithful,
diligent, and 'laborious colledlors of the prices of corn,
ivir. Dupre de St. Maur, Mr. MeiTance, and the author of
the Effay on the police of grain. But in France, till 1764,
the exportation of grain was by law prohibited; and it is
iomewltat difEcult to fuppofe, that nearly the fame diminu-
tion of price which took place in one country, not with (land-
ing this proliibition, fliould in another be owing to the ex-
traordinary encouragement given to exportation.
It would be more proper, perhaps, to confider this vari-
ation in the average money price of corn as the eife6l rather
of fome gradual rife in the real value of filver in tlie European
market, than of any fall in the real average value of com.
Corn, it has already been obferved, is at diftant periods of
time a more accurate meafure of value than either filver, or
perhaps any other commodity. When, after the difcovery
of the abundant mines of America, corn rofe to three and four
rimes its former money price, this change was univerfally
itfaibed, not to ^ny rife in the real value gf gorn, but to a
fall
204 THE NATURE AND CAUSES Ot
fall in the real value of filver. If during the fixty-four fird
years of the prefent century, therefore, the average money
price of corn has fallen fomcwhat below what it had been
during the greater part of the lait century, we fhould in the
fame manner impute this change, not to any fall in the real
value of corn, but to fome rife in the r^ai value of filver in the
European market.
The high price of corn during thefe ten or twelve years
paft indeed, has occafioned a fufpicion that the real value of
iilver (1111 continues to fail in the European market. This
high price of corn, however, feems evidently to have been
the effect of the extraordinary unfavourablenefs of the fea-
fons, and ought therefore to be regarded, not as a perma-
nent, but as a tranfitory and occafional event. The feafons
for thefe ten or twelve years pail have been unfavourable
through the greater part of Europe ; and the diforders of Po-
land have very much increafed the fcarcity in all thofe coun-
tries, which, in dear years, uf^rd to be fupplied from that
market. So long a courfe of bad feafons, though not a very
common event, is by no means a fmgular one j and who-
ever has enquired much into the hiftory of the prices of
corn in former ti n'^s, will be at no lofs to recolleft feveral
other exampleti of the fame kind. Ten years of extraordi-
nary fcarcity, befides, are not more wonderful than ten
years of extraordinary plenty. The low price of corn from
1 74 1 to I'j^Of both inclufive, may very well be fet in op-
pofition to its high price during thele lail eight or ten years.
From 1 74 1 to 1750, the average price of the quarter of
nine bufnels of the befi: wheat at Wind for market, it ap-
pears from the accounts of Eton College, was only
i/. 13/. gd. -J, which is nearly 6s. id. below the average
price of the fixty-four firft years of the prefent century.
The average price of the quarter of eight bufhels of middle
wheat, comes out, according to this account, to have been,
during thefe ten years, only i/. 6s. Bd.
Between 1741 and 1750, however, the bounty mufl
have hindered the price of corn from falling fo low in the
home market as it naturally vv^ould have done. During thefo
ten years the quantity of all forts of grain exported, it ap-
pears from the cuftom-houfe books, amounted to no lefs than
eight millions twenty-nine thoufand one hundred and fifty-
Cix
THE WEALTH OF NATIONS. 20^^
^x quarters one bufliel. The bounty paid for this^ amounted
to 1,514,962/. 17X. 4^/. . In 1749 accordingly, Mr. Pel-
ham, at that time prime minifter, obferved to the Houfe
of Commons, that for the three years preceding, a very
extraordinary fum had been paid as bounty for the expor-
tation of corn. He had good reafon to make this obferva-
tion, and in the following year he might have had Hill bet-
ter. In that fingle year the bounty paid amounted to no
lefs than 324,176/. ioj. 6ci. * It is unneceiTary to obferve
how much this forced exportation muft have raifed the
price of corn above what it otherwife would have been in
the home market.
At the end of the accounts annexed to this chapter, the
reader will find the particular account of thofe ten years fe-
parated from the reft. He will find there too the particular
account of the preceding ten years, of which the average is
likewife below, though not fo much below the general ave-
rage of the iixty-four firft years of the century. The
year 1740, however, was a year of extraorcii.iary Icarcity.
Thefe twenty years preceding 175:0^ may very well be fet in
oppofitioi. to che twenty preceding 1770. Ao the form":;r
were a good deal below the general average of the century,
notwithftanding the iTitervention of one or two dear years ; lb
the latter have been a good deal above it, notv.-ii.jiflanding the
intervention of one or two cheap ones, f^i 1 750, for c.: n'ple.
If the former have not been as much below the general av>:-
rage, as the latter have been above it, ■'ve cuoht probably to
impute it to the bounty. The cl-ange has evidently been
too fudden to be afcribed to any change in the value of
filver, which is always flow and gradual. The fuddennefs
of the effe6t can be accounted for only by a caufe which
can operate fuddenly, the accidental variation of the feafons.
The money price of labour in Great Britain has^ indeed,
rifen during the courfe of the prefent century. Thi. , how-
ever, feems to be the efFe(^, not fo much of any diminuti i in
the value of fdver m the European market, as of an incrc ^e
in the demand for labour in Great Britain, ariijn^ from ti e
p;reat, and almoft univerfal prolpc^ity of the country. In
JFrance, a country not altogether fo profperous, the money
price of labour has, fmce the middle of the laft century^ t,een
obfcived
# See Trails on the Corn Trade j Tra<a 3d,
2o5 THE NATURE AND CAUSES OP*
ohiervrd to fjnk gradually with the average money price
of corn. Both in the lalt century and in the prefent, the
day-wages of common labour are' there faid to have been
pretty uniformiy about the tv/entieth part of the average
price of the feptier of wheat, a meafure which contains a
little more than four Winchefter bufliels. In Great Bri-
tain the real recompence of labour, it has already been
Ihown^ the real quantities of the necefiaries and convenien-
cics of life which are given to the labourer, has increafed
confiderably during the courfe of the prefent century. The
rik in its money price feems to have beeh the effed:, not
of any diminution of the value of lilver in the general
market of Europe, but of a rife in the real price of labour
in the particular market of Great Britain, ov/ing to the
peculiarly happy circumitances of the country.
For fome time after the firft difcovery of America, filver
would continue to fell at its former, or not much below its
former price. The profits ot mining would for fome time
be very great, and much above their natural rate. Thofe
who imported that metal into Europe, hov/ever, would foon
find that tlie whole annual importation could not be difpofed
of at .this high price. Silver would gradually exchange for a
fmaller and a fmailer quantity of goods. Its price would fink
gradually lower and lower till it fell to its natural price ; or to
what was juft fufficient to pay, according to their natural
rates, the wages of the labour, the prohts of the ilock, and
the rent of the land, which muil be paid in order to bring it
from the mine to the market. In the greater part of the fil-
ver mines of Peru, the tax of the king of Spain, amounting
to a tenth of the grofs produce, eats up, it has already been
obferved, the whole rent of the land. This tax was ori-inal-
]y a half; it ibon afterwards fell to a third, then to a^fifth,
noai at laft to a tenth, at which rate it it ill continues. In
the greater part of the filver mines of Peru this, it feems,
is ail that remains after replacing the ftock of the under-
taker of the work, together with its ordinary profits ; and
n feems to be univerfally acknowledged that' thefe profits,
which were once very high, are now as low as they can
well be, confidently with carrying on their v/orks.
TfTE tax of the king of Spain was reduced to a fifth part
of the regiflered filver in 1504 *, one-and-forty years before
J 545*
* Sclorzano, vol. ii.
THE WEALTH CF NATIONS. 207
1545, the date of the difcovevy of the mines of Potofi. In
the courfe of ninety years, or before i636,thefe mines, the
mod fertile in all America, had time fulhcient to produce
their full efFert, or to reduce the value of filver in the Eu-
ropean market as low as it could well fall, while it conti-
nued to pay this tax to the king of Spain. Ninety years is
time fufficient to reduce any commodity, of which there is
no monopoly, to its natural price, or to the lovv'-efc price
at which, while it pays a particular tax, it can continue to
be fold for any confiderable time together.
The price of (ilver in tlie European market miglit perhaps
have fallen itill lower, and it might have become neceflary
cither to reduce the tax upon it, not only to one tenth, as in
1736, but to one twentieth, in the fame manner as that upon
gold, or to give up working the greater part of the American
mines which are now v/rought. The gradual increafe of the
demand for filver, or the gradual enlargement of the market
for the produce of the filver mines of America, is probably,
the caufe which has prevented this from happening, and
which has not only kept up the value of filver in the Euro-
pean market, but has perhaps even raifed it fomewhat
higher than it was about the middle of tiie laft century.
Since the fird difcovery of America, the market for the
produce of its filver mines has been growing gradually more
and more extenfive. ^
First, tlie market of Europe has become gradually more
and more extenfive. Since the difcovery of America, the
greater part of 1: urope has been much improved. England,
Holland,France,and Germany; even Sweden, Denmark, and
RufTia, have all advanced confiderably both in agriculture and
in manufactures. Italy feems not to have gone backwards.
The fall of Italy preceded the conqueft of Peru. Since that
time it feems rather to have recovered a little. Spain and
Portugal, indeed, are fuppofed to have gone backwards. Por-
tugal, however, is but a very fmall part of Europe, and the
declcnfion of Spain, is not, perhaps, fo great as is commonly
imagined. In the beginning of the fixteenth century, Spain
was a very poor country, even in comparifon with France,
which has been fo much improved fmce that time. It was
the well-known remark of the Emperor Charles V. who had
liavellcd fo fre(]^uently through both countries;, that every
tiling
2o8 THE NATURE AND CAUSES OF
thmg abounded in France, but that every thing was want^
ing ill Spain. The increafing produce of the agriculture
and manufa£lL5rjs of Europe mufl neceflarily have required
2 gradual increafe in the quantity of filver coin to circu-
late it ; and the increafing number of wealthy individuals
xnuft have required the like increafe in the quantity of their
plate and other ornaiiients of filver.
Secondly, America is itfelf a new market for the produce
of its own filver mines ; and as its advances in agriculture,
induf^ry, and population, are much more rapid than thofe of
the moft thriving countries in Europe, its demand mud in-
creafe much more rapidly. The Englifh colonies are altoge-
ther a new market, which, partly for coin and partly for
plate, requires a continually augmenting fupply of filver
through a great continent where there never was any demand
before. The greater part too of the Spanifli and Portuguefe
colonies are altogether new markets. New Granada, the
Yucatan, Paraguay, and the Brazils were, before difcovered
by the Europeans, inhabited by favage nations, who had nei-
ther arts nor agriculture. A confiderable degree of both has
now been introduced into all of them. Even Mexico and
Peru, though they cannot be confidered as altogether new
markets, are certainly much more extenfive ones than they
ever were before. After all the wonderful tales which have
been publiflied concerning tlie fplendid (late of thofe coun-
tries in antient times, whoever reads, with any degree of fo-
ber judgment, thehiftory of their firft difcovery and conqueft,
will evidently difcern that, in arts, agriculture, and commerce,
their inhabitants were much more ignorant than the Tartars
of the Ukraine are at prefent. Even the Peruvians, the more
civilized nation of the two, though they made ufe of gold
and filver as ornaments, had no coined money of any kind.
Their whole commerce was carried on by barter, and there
was accordingly fcarce any divifion of labour among them.
Thofe who cultivated the ground were obliged to build their
own houfes, to make their own houffiold furniture, their ovv^n
clothes, (hoes, and inftruments of agriculture. The few arti-
ficers among them are faid to have been all maintained by the
fovereign, the nobles, and the priefts, and were probably their
fervants or flaves. All the antient arts of Mexico and Peru
have never furnifhed one fingle manufa6lure to Europe. The
Spanilh armies, though they fcarce ever exceeded five Imndred
men, and frec^uently did not amount to lialf that number,
found
THE WEALTH OF NATIONS. 209
found almofl every where great dKHculty In procuring fub-
fiftence. The famines which they are faid to have occa-
fioned almofl wherever they went, in countries too which
at the fame time are reprefented a:} very populous and well-
cultivated, fufficiently demonilrate that the ftory of this
populoufnefs and high cultivation is in a great meafure fa-
bulous. The Spaniih colonies are under a government in
many rcfpe^s lefs favourable to agriculture, improvement
and population, than that of the Englidi colonies. They
feem, however, to be advancing in all thcfe much more
rapidly tlian any country in Europe. In a fertile foil and
Iiappy climate, the great abundance and cheapnefs of land,
a circumftance common to all new colonies, is, it feems,
fo great an advantage as to compenilite many defeifts in
civil government, Frezier, who vifited Peru in 17 13,
reprefents Lima as containing between twenty-five and
twenty-eight thoufand inhabitants. Uiloa, who refid-
ed in the fame country between 1740 and 1746, repre-
fents it as containing more than fifty thoufand. The dilFe-
rence in their accounts of the populoufnefs of feveral other
principal towns in Chili and Peru is nearly the fame.; and
as there feems to be no reafon to doubt of the good infor-
mation of either, it marks an increafe which is fcarce infe-
rior to that of the Englifh colonies. America, therefore,
is a new market for the produce of its own filver mines,
of which the demand muft increafe much more rapidly than
that of the moil thriving country in Europe.
Thirdly, The Eaft Indies is another market for the pro-
duce of the filver mines of America, and a market which,
from the time of the firfl difcovery of thofc mines, has been
continually taking off a greater and a greater quantity of filver.
Since that time, the dire(ft trade between America and the
Eaft Indies, v/hich is carried on by means of the Acapulco
fhips, has been continually augmencing, and the indiretl: in-
tercourfe by the way of Europe has been augmenting in a
ftill greater proportion. During the fixteenth century, the
Portugufe were the only European nation who carried on
any regular trade to the Eaft Indies. la the laft years of that
century the Dutch began to encroach upon this monopolv,
and in a few years expelled them from their principal fettle-
ments in India. During the greater part of the laft century
thofe two nations divided the moft confiderable part of the
Eaft India trade between them ; the trade of the Dutch con-
tinually augmenting in a ftill greater proportion than that of
Vol. L P the
2IO THE NATURE AND CAUSES OF
the Portuguefe declined. The Englifli and French carried
on fome trade with India in the laft century, but it has been
greatly augmented in the courfe of the prefent. The Eaft
India trade of the Swedes and Danes began in the courfe of
the prefent century. Even the Mufcovites now trade regular-
ly with China by a fort of cnravans which go over land
through Siberia and Tartary to Pekin. The Eaft India trade
of all thefe nations, if we except that of the French, which
the lafl war had well nigh annihilated, has been almoft
continually augmenting. The increafing confumption of
E'afb India goods in Europe is, it feems, fo great, as to afford
a gradual increafe of employment to them all. Tea, for ex-
ample, was a drug very little ufed in Europe before the middle
of the laft century. At prefent the value of tlie tea annually
im.ported by the Englifh Eaft India Company, for the ufe of
their own countrymen, amounts to more than a million and a
half a yertr ; and even this is not enough ; a great deal more
being conftantly fmuggled into the country from the ports of
Holland, from Gottenburgh in Sweden, and from the coaft of
France too, as long as the French Eaft India Company was in
prcfperity. The confumption of the porcelain of Cuma,
of the fpicerier. of the Moluccas, of the piece goods cS Ben-
gal, and of ityiuraerable other articles, has increafed very
nearly in a like proportion. The tonnage accordingly of
all the European ftiipping employed in the Eaft India trade,
at any one time during the laft century, was not, perhaps,
much greater tlian that of the Englifli Eaft India Com-
pany before the late redu<51ion of their fliipping.
But in the Eaft Indies, particuhriy in China and Indof-
tan, the value- of the precious metals, when the Europeans
firft bcuan to trade to thofe countries, was much higher than
in Europe ) and it ft ill continues to be fo. In rice countries,
which generally yield two, fometimes three crops in the year,
each of tiicm more plentiful than any common crop of corn,
- the abundance of food muft be much greater than in any corn
countrv of equal extent. Such countries are accordingly
much more populous. In them too the rich, having a greater
funer-abundance of food to difpofe of beyond whi.t they
themfelves can confume, have the means* of purchafing a
much greater quantity of the labour of other people. The
retinue of a grandee in China or Indoftan accordingly is, by
all accourits, much more numerous and fplendid than that of
the richeft fubje6ls in Europe. The fame fuper-abundance
of
THE WEALTH OF NATIONS. 211
of food, of which they have the difpofal, enables tliem to give
a greater quantity of it for all thofe liagular and rare produc-
tions which nature furniflies but in very fmall quantities ;
fuch as the precious metals and the precious i bones, the great
objecfls of the competition of the rich. Though the mines,
therefore, which fupplied the Indian market had been as
abundant as thofe which fupplied the European, fuch com-
modities would naturally exchange for a greater quantity of
food in India than in Europe. But the mines wiiich fupplied
the Indian market with the precious metals feem to have been
a good deal lefs abundant, and thofe whicii fupplied it with
the precious (tones a good deal more fo, than the mines which
fupplied the European. The precious metals, therefore,
would naturally exchange in India for fomewhat a greater
quantity of the precious (tones, and for a much greater quan-
tity of food than in Europe. The money price of diamonds,
the greateft of all fuperiluities, would be fomewhat lower,
and that of food, the firft of all necefTaries, a great deal lower,
in the one country than in the other. But the real price of
labour, the real quantity of the nec^ITaries of life which is
given to tlie labourer, it has already been obfcrved, is lower
both in China and Indoftan, the two great markets of India,
than it is through the greater part of Europe, The wages of
the labourer v/ill there purchafe a fmaller quantity of food ;
and as the money price of food is much lower in India than
in Europe, the money price of labour is there lower upon a
double account ; upon account both of the finall quantity of
food which it will purchafe, and of^the low price of that food.
But in countries of equal art and induftry, the money price of
the greater part of manufactures will be in proportion to the
money price of labour ; and in manufadluring art and induf-
try, China and Indoftan, though inferior, feem not to be
much inferior to any part of Europe. The money price of
the greater part of manufactures, therefore, will naturally be
much lower in thofe great empires than it is any-where in
Europe. Through the greater part of Europe too the ex-
pence of land-carriage increafes very much both the real and
nominal price of molt manufaftures. It colts more labour,
and therefore more money, to bring firlt the materials, and
afterwards the complete manufacture to market. In China
and Indoftan the extent and variety of inland navigations fave
the greater part of this labour, and confequently of this mo-
ney, and thereby reduce (till lower both the real and the no-
minal price of the greater part of their manufactures. Up-
P 2. on.
212 THE NATURE AND CAUSES OF
on all thefe accounts, the precious metals are a commodity
which it always has been, and ilill continues to be, extremely
advantageous to carry from Europe to India. There is fcarce
any commodity which brings a better price tliere •, or which,
in proportion tothe quantity of labour and commodities which
it cofls in Europe, will purchafe or command a greater quan-
tity of labour and commodities in India. It is more advan-
tageous too to carry filver thither than gold ; becaufe in Chi-
na, and the greater part of the other markets of India, the
proportion between tine filver and fine gold is but as ted, or
at moft as twelve, to one j whereas in Europe it is as fcui teen
or fifteen to one In China, and the greater part of the other
markets of India, ten, or at moil twelve, ounces of filver v^ ill
purchafe an ounce of gold : in Europe it requires from four-
teen to fifteen ounces. In the cargoes, therefore, of the
greater part of European fhips which fail to India, filvt r has
generally been one of the mofl: valuable articles. It is the
mod valuable article in the Acapulco ihips which fail to Ma-
nilla. The filver of the new continent feems in this manner
to be one of the principal commodities by v/hich the com-
merce between the tv>'o extremities of tlie old one is carried
on, and it is by means of it, in a great meafure, that thofe
diitant parts of the world are connedled with one another.
In order to fupply fo very widely extended a market,
the quantity of filver annually brought from the mines mull
not only be fufficient to fupport that continual increafe both
of coin and of plate which is required in all thriving countries;
but to repair that continual waile and confumption of filver
Vv'hich takes place in all countries v/here that m^etal is ufed.
The continual confumption of the precious metals in
coin by wearing, and in plate both by wearing and cleaning,
is verv fenfible ; and in commodities of which the ufe is fo
very widely extended, -would alone require a very great an-
nual fupply. The confumption of thofe metals in fome par-
ticular manufactures, though it may not perhaps be greater
upon the whole than this gradual confumption, is, however,
much more fenfible, as it is much more rapid. In the ma-
nufactures of Birmingham alone, the quantity of gold and
filver annually employed in gilding; and plating, and thereby
difqualificd from ever afterwards appearing in the fliape of
thofe metals, is faid to amount to more than fifty thoufimd
pounds fterling. "We may from thence form fome notion
how
THE WEALTH OF NATIONS. 213
how great mud be the annual confuniption in all the different
parts of t}.i world, either in manufa6lures of the fame kind
with thofe of Birmmgham, or in laces, embroideries, gold and
filver ftuffs^ tiie gilding of books, furniture, &c. A confider-
able quantiiy too mult be annually lort in tranfporting thofe
metals from one place to auvother both by fea and by land.
In the greater part of the governments of Afia, befides, the
almofl: univerfal cuftom of concealing treafures in the bowels
of the earth, of which the knowled ;e frequently dies with
the perfon who makes the concealment, mult occafion the
lofs of- a ftill greater quantity.
The quantity of gold and fdver imported at both Cadijs
and Liibon ; includmg not only what comes under regiller,
but what may be fuppofed to be fmuggled) amounts, accord-
ing to the belt accounts, to about fix millions fterling a year.
AccoRDiNG to Mr. Meggens * the annual importation
of the precious metals into Spain, at an average of fix years ;
viz. from 1748 to 1753, both iuclufive ; and into Portugal,
at an average of (cvqu years; viz. froni 1747 to 1753,
both inclufive -, amounted in filver to 1,101,107 pounds
weight ; and in gold to 49,940 pounds weight. The filver,
at fixty-two flnllings the pound Troy, amounts to
3,-413,431/. I0J-. (terling. The gold, at forty-four guineas
and a half the pound Troy, amounts to 2,333,446/. 14;.
fterling. Both together amount to 5,746,878/. 4s, fterl-
ing. The account of what was imported under regif-
ter, he aflures us is exa(fb. He gives us the detail of the
particular places from which the gold and filver were
brought, and of the particular quantity of each metal,
v.diich, according to the reglfler, each of them afforded.
He makes an allowance too for the quantity of each metal
which he fuppofes may have been fmuggled. The gteat
experience of this judicious merclianC renders his opinion
of confiderable weight.
According to the eloquent and, fometlmes, well-inform-
ed Author of the Philofophical and Political Hiftory of the
eftablifhment of the Europeans in the two Indies, the annual
importation of regiftcred gold and filver into Spain, at au
average
* Paftfcript to the Univerfal Merchant, p. 15, and 16. This Poftfcript
was not printed till 1 756, three years ufter the publication of the book,
which has never had a fecond edition. The poftfcript is, therefore, to br
found in few copies : U corrc(5l6 fcveral errors in the book.
214 THE NATURE AND CAUSES OF
average of eleven years; viz. from 1754 to 1764, both in-
clufive •, amounted to 13,984,1855 piaftres of ten reals.
On account of what may have been fmiiggled, however,
the wliole annual importation, he fuppofes, may have
amounted to feventeen millions of piaitres ; which, at
4/. 6d. the piaftre, is equal to 3,825,000/. ilerling. He
gives die detail too of the' particular places from which the
gold and fih-er were brought, and of the particular quantities
cf each metal which, according to the regifter, each of them
afforded. He informs us too, that if we were to judge of the
quantity of gold annually imported from the Brazils into
Lilhon by the amount of the tax paid to the king of Portugal,
which it feeras is one-fifth of the ftandard metal, we might
value it at eighteen millions of cruzadoes, or forty-five milli-
ons of French livres, equal to about two millions (lerling. On
account of what may have been fmuggled, however, we may
fafely, lie fays, add to this fum an eighth more, or 250,000/.
fterling, fo that the whole v/ill amount to 2,250,00c/. fteri-
ing. According to this account, therefore, the whole an-
nual importation of the precious metals into both Spain and
Portugal, amounts to about 6,075,00c/. fterling.
Several other very well authenticated, though manu-
fcript, accounts, I have been aflured, agree, in making
this whole annual importation amount at an average to
about fix millions fterling •, fometimes a little more, fome-
times a little lefs.
The annual importation of the precious metals into Ca-
diz and [.ift^on, indeed, is not equal to thcvwhole annual pro-
duce of the m.ines of Am.erica. Some part is fent annually
by the Acapulco ftrips to Manilla 5 feme part is employed
in the contraband trade which the Spanifli colonies carry on
with thofe of other European nations •, and fome part, no
doubt, remains in the country. 'J'he mines of America, be-
fides, are by no means the only gold and filver mines in the
world. They are, hov/ever, by far the moft abundant. The
produce of all the other mines which ar€ known, is infignifi-
cant, it is acknowledged, in comparifon with theirs*, and the far
greater part of their produce, it is likewife acknowledged, is an-
nually imported into Cadiz and Eift>on. But the confumption
of Birmingham alone, at the rate of fifty thoufand pounds a
year, is equal to the hundred-and-twentieth part of this an-
nual importation at the rate of fix millions a year. The whole
annual
THE WEALTH OF NATIONS. 215
annual coiifumption of gold and filver, therefore, in all the
ditFerent countries of the world where thofe metals are
ufed, may perhaps be nearly equal to the whole annual
produce. The remainder may be no more than fuihcient
to fupply the increafing demand of all thriving countries.
It may even have fallen fo far (hort of this demand as fome-
what to raife the price of thofe metals in the European
market.
The quantity of brafs and iron annually brought from the
. mine to the market is out of all proportion greater than that
of ^old and Giver. We do not, however, upon this ac-
count, imagine that thofe coarfe metals are likely to multiply
beyond the" demand, or' to become gradually cheaper and
cheaper. Why fliould we imagine that the precious me-
tals are likely to do io ? The coarfe metals, indeed, though
harder, are put to much harder ufes, and, as they are of
lefs value, lefs care is employed in their prefervation. The
precious metals, however, are not neceliarily immortal any
more than they, but are liable to be loft, wafted, and con-
fumed in a great variety of ways.
The price of all metals, though liable to flow and gradual
variations, varies lefs from year to year than that of almoft
any other part of the rude produce of land ; and the price of
the precious metals is even lefs liable to fudden variations
than that of the coarfe ones. The durablenefs of metals is
the foundation of this extraordinary fteadinefs of price. The
corn which was brought to market laft year, will be all or
almoft all confumed long before the end of this year. But
fom.e part of the iron which was brought from the mine two
or three hundred years ago, may be ftiil in ufe, and perhaps
,fome part of the gold which was brought from It two or three
thouHuid years ago. The diiTercnt maffes of corn which in
different years muft fupply the confumption of the world, will
always be nearly in proportion to the refpc6live produce of
thofe diiFcrent years. But the proportion between the dif-
ferent maiTes of iron which may be in ufe in two different
years, will be very little aiTe^led by any accidental difference
in the produce of the iron mines- of thofe two years ; and
the proportion between the maffes of gold will be ft ill lefs
affedted by any fuch difference in the produce of the gold
mines. Though the produce of tlie greater p^rt of metallick
minesj
2i6 THE NATURE AND CAUSES OF
mines, therefore, varies, perhaps, flill more from year to'
year than that of the greater part of corn-fields, thofe varia-
tions have not the fame efftS: upon the price of the one
fpecies of commodities, as upon that of the other.
Variations in the Proportion between the refpeclive Value
ef Gold and Silver.
X^ EFORE the difcovery of the miines of America, the
vaUie of fine gold to fine filver was regulated in the different
mints of Europe, between the proportions of one to ten and
one to twelve ; that is, an ounce of fine gold was fuppofed
to be worth from ten to twelve ounces of fine filver.
About the middle of the laft century it came to be regulated,
between the proportions of one to fourteen and one to fif-
teen j that is, an ounce of fine gold came to be fuppofed
w^orth between fourteen and fifteen ounces of fine filver.
Gold rofe in its nominal value, or in the quantity of filver
which was given for it. Both metals funk in their real va-
lue, or in the quantity of labour which they could purchafe j
but filver funk more than gold. Though both the gold
and filver mines of America exceeded in fertility all thofe
which had ever been known before, the fertility of the fil-
ver m.ines had, it feems, been proportionably fi:ill greater
than that of the gold ones.
The great quantities of filver carried annually from
Europe to India, have, in fome of the Enghfh fettlements,
gradually reduced the value of that metal in proportion to
gold. In the mint of Calcutta, an ounce of fine gold is
fuppofed to be worth fifteen ounces of fine filver, in the fame
manner as in Europe. It is in the mint perhaps rated too
high for the value which it bears in the market of Bengal,
In China, the proportion of gold to filver fi:ill continues as
one to ten, or one to twelve. In Japan, it is faid to be as
one to eight.
The proportion between the quantities of gold and filver
annually imported into Europe, according to Mr. Meggens's
account, is as one to twenty-two nearly ; that is, for one
ounce of gold there are imported a little more than twenty-
two
THE WEALTH OF NATIONS. 217
two ounces of lilver. The great quantity of filver fent an-
nually to the Eaft Indies, reduces, he fuppofes, the quantities
of thofe metals which remain in Europe to the proportion of
one to fourteen or fifteen, the proportion of their values.
The proportion between their values, he feems to think, mult
neceflarily be the fame as that between their quantities, and
would therefore be as one to twenty-two, were it not for
this greater exportation of filver.
But the ordinary proportion between the refpeclivc
values of two commodities is not neceflarily the fame as that
between the quantities of them which arc commonly in the
market. The price of an ox, reckoned at ten guineas, is
about threefcore times the price of a lamb, reckoned at
3J-. 6(1. It would be abfurd, however, to infer from thencS,
that there are commonly in the market threefcore lambs for
one ox J and it would be juft as abfurd to infer, becaufe
an ounce of gold will commonly purchafe from fourteen
to fifteen ounces of filver, that there are comnnonly in the
market only fourteen or fifteen ounces of filver for one ounce
of gold.
The quantity of filver commonly in the market, it is pro-
bable, is much greater in proportion to that of gold, than
the value of a certain quantity of gold is to that of an equal
quantity of fibber. The whole quantity of a cheap commo-
dity brought to market, is commonly not only greater, but of
greater value, than the whole quantity of a dear one. The
whole quantity of bread annually brought to market, is not
only greater, but of greater value than the whole quantity of
butcher's-micat ; the whole quantity of butcher's-meat, than
the whole quantity of poultry ; and the whole quantity of
poultry, than the whole quantity of wild fowl. There are
fo many more purchafers for the cheap than for the dear
commodity, that, not only a greater quantity of it, but a
greater value can commonly be difpofed of The whole
quantity, therefore, of the cheap commodity muft commonly
be greater in proportion to the whole quaiuity of the dear
one, than the value of a certain quantity of the dear one, is to
the value of an equal quantity of the cheap one. When we
compare the precious metals with one another, filver is a
cheap, and gold a dear commodity. We ought naturally to
expeft, therefore, that there lliould always be in the market,
iiot only a greater quantity, but a greater value of filver
than
2i8 THE NATURE AND CAUSES OF
than of gold. Let any man, who has a little of both, com-
pare his o\vn filver with his gold plate, and he will probably
find, that, not only the quantity, but the value of the former
greatly exceeds that of the latter. Many people, befides,
have a good deal of filver who have no gold plate, which,
even with thofe who have it, is generally confined to watch-
cafes, fnuff-boxcs, and fuch like trinkets, of which the whole
amount is feldom of great value. In the Britifh coin, indeed,
the value of the gold preponderates greatly, but it is not fo
in that of all countries. In the coin of fome countries the
value of the two metals is nearly equal. In the Scotch coin,
before the union with England, the gold preponderated very
little, though it did fomev/hat *, as it appears by the accounts
cf the mint. In the coin of many countries the filver prepon-'
derates. In France, the largefl funis are commonly paid in
that metal, and it is there dillicult to get more gold than what
is necelTary to carry about in your pocket. The fuperior va-
lue, however, of the filver plate above that of the gold, which
takes place in all countries, will much more than compenfate
the preponderancy of the gold coin above the filver, which
takes place only in fome countries.
Though, in one kn{c of the word, filver alv/ays has
been, and probably always will be, much cheaper than gold ;
vet in another fenfe, gold may, perhaps in the prefent ftate
of the Spanilli market, be faid to be fomewhat cheaper than
filver. A commodity may be faid to be dear or cheap, not
only according to the abfolute greatnefs or fmallhefs of its
ufual price, but according as that price is more or lefs above
the loweft for which it is polTibletp bring it to market for any
confiderable time together. This lowell price is that which
barely replaces, with a moderate profit, the flock which muft
be employed in bringing the commodity thither. It is the
price which affords nothing to the landlord, of which rent
makes not any component part, but which refolves itfelf al-
together into wages and profit. But in the prefent ftate of
the Spanifli market, gold is certainly fomewhat nearer to this
lowell price than filver. The tax of the King of Spain upon
gold is only one-twentieth part of the ftandard metal, or five
per cent. ; whereas his tax upon filver amounts to one-tenth
part of it, or to ten per cent. In thefe taxes too, it has al-
ready been obferved, eonfiits the whole rent of the greater
part
* See Ruddlman's Prefdce to Anderfon'sDipIomat3,.&c. Scotix.
THE WEALTH OF NATIONS. 219
part of the gold and fiivcr mines of Spanifli America; and-
that upon gold is ftill worfc paid than that upon filver. The
profits of the undertakers of gold mines too, as they more
rarely make a fortune, muft, in general, be ftill more mode-
rate than thoCc of the undertakers of Giver, mines. The price
of Spanifh gold, therefore, as it affords both Icfs rent and lefs
profit, mud, in the Spanifh market, be fomewhat nearer to
the loweft price for whick it is poflible to bring it thither,
than the price of Spanifh fdver. When all expences are
computed, the whole quantity of the one metal, it would
feem, cannot, in the Spanilli market, be difpof^d of fo ad-
vantageoully as the whole quantity of the other. The tax,
indeed, of the King of Portugal upon the gold of the Brazils,
is the. fame with the ancient tax of the King of Spain upon
the filver of Mexico and Peru ; or one-fifth part of the (laad-
ard metal. It may therefore, be uncertain whether to
the general market of Europe the whole mafs of American
gold comes at a price nearer to the loweft for v/hich it is pof-
fible to bring it thither^ than the whole mafs of American
filver.
The price of diamonds and other precious ftones may,
perhaps, be ftill nearer to the loweft price at which it
is poflible to bring them to market, than even the price of
gold.
Though it is not very probable, that any part of a tax,
which is not only impofed upon one of the moll proper fub-
jefts of taxation, a mere luxury and fuperiluity, but which
affords fo very important a revenue, as the tax upon filver,
will ever be given up as long as it is polfible to pay it ; yet
the fame impollibility of paying it, which in. 1736 made it
neceffary to reduce it from one-fifth to one-tenth, may in
time make it neceflary to reduce it itill further ; in the fame
manner as it made it neceflary to reduce the tax upon gold to
one-twentieth. That the filver mines of Spanifh America,
like all other m/ines, become gradually more expentl^/e in tiie
working, on account of the greater depths at wftich it isi."-
cefTary to carry on the works, and of the greater expcnce of
drawing out the water and of fupplying them with frefh air
at thofe depths, is acknowledged by every body who has en-
<]uired into the ftate of thofe mines.
These
220 THE NATURE AND CAUSES OF
These caufes, which are equivalent to a growing fcarcity
of (liver for a commodity may be faid to grow fcarcerwhen
it becomes more dilficult and expenfive to collect a cert lin
quantity of it) mull, in time, produce one or other ot the
three following events. The increafe of the expence mufl ei-
ther, frlf, be compenfated altogether by a prcpcrtionAulc in-
creafe in the price of the metal ; or, fecondly, it nruit be
compenfated altogether by a proportionable dimunution of the
tax upon filvcr ; or, thirdly, it mult be compenfated partly
by ihe one, and partly by the ether of thofe two expedients.
This third ev^nt is very poliible. As gold rofe in its price in
proportion to filver, notwithifanding a great diminution of
the tax upon gold j fo filver might rife in its price in propor-
tion to laboiu- and commodities, notwithflanding an esual di-
minution of the tax upon filver.
Such fucccfhve reductions of the tax, hovv'ever, though
they may not prevent altogether, muft certainly retard, more
or lefs, the rife of the value of filver in the European market.
In confequence of fuch redudlions, many mines may be
wrought which could not be wrought before, becaufe they
could not alTord to pay the old tax j and the quantity of filver
annually brought to market, muft always be fomewhat great-
er, and, therefore, the value of any given quantity fomev/hat
lefs, than it otlierwife would have been. In confequence of
the reduction in 1736, the value of filver in the European
market, though it may not at this day be lower than before
that reduftion, is, probably, at leaft ten per cent, lower than
it would have been, had the Court of Spain continued to ex-
act the old tax.
That, notv.-ithftanding this redu^ion, the value of filver
has, during the courfe of the prefent century, begun to rife
fomewhat in the European market, the fa<5ts and arguments
whicli have been alledged above, difpofe me to believe, or
more properly to fufpeCt and conjectures for the beft opinion
which I can form upon this fubje(ft, fcarce, perhaps, de-
fer\es the name of belief. The rife, indeed, fuppofing there,
has been any, has hitherto been fo very fmall, that after all
that has been faid, it may, perhaps, appear to many people
uncertain, not only whether this _event has a(ftually taken
place ; but whether the contrary may not have taken place,
or whether the value of filver may not ftill continue tc fall in
the European market.
It
THE WEALTH OF NATIONS. 221
It muft be obferved, however, that whatever may be the
fuppofed annual importation of gold and filver, there muft be
a certain period, at whicli the annual confumption of thole
metals will be equal to that annual importation. Their con-
fumption mull increafe as their mafs increafes, or rather in a
much greater proportion. As their mafs increafes, their va-
lue diminilhcs. They are more ufed, and lefs cared for, and
their confumption confequently increafes in a greater pro-
portion than their m.afs. After a certain period, therefore,
the annual confumption of thofe metals mud, in this man-
ner become equal to their annual importation, provided that
importation is not continually increafing -, which, in the
prefent times, is not fuppofed to be the caie.
If, when the annual confumption has become equal to the
annual importation, the annual importation fhould gradually
diminifli, the annual confumption may, for fome time, ex-
ceed the annual importation. The mafs of thofe metals may
gradually and infenfibly dimlnifh, and their value gradually
and infenfibly rife, till the annual importation becoming
ao-ain ftationary, the annual confumption will gradually and
infenfibly accommodate itfelf to what that annual importa-
tion can maintain.
Grounds of the Sufpicion that the Value of Silver Jlill continue f
to decreafe,
1 H E increafe of tlie wealth of Europe, and the popular
notion tliat, as the quantity of the pvccious metals naturally
increafes with the increafe of wealth, fo their value dimi-
niflies as their quantity increafes, may, perhaps, difpofc
many people to believe that their value iiill continues to fall
in the European market ; and the ftill gradually increafing
price of many parts of the rude produce of land may con-
firm them ftill further in this opinion.
That that Increafe in the quantity of the precious metals,
which arifes in any country from the increafe of wealth, has
no tendency to diminifli their value, I have endeavoured to
fliew already. Gold and filver naturally refort to a rich
country, for the fame reafon that all forts of luxuries and cu-
riofities refort to it \ not becaufe they arc cheaper there than
in
222 THE NATURE AND CAUSES OF
In poorer countries, bat becaufc they arc dearer, or becaufc
a better price is given for them. It is the fuperiority of price
which attracts them, and as foon as that faperiorlty ceafes,
they neccilarily ceafe to go thither.
If you except corn and fach other vegetables as arc raifed
altogether by human iiiduriry, that all other forts of rude pro-
duce, cattle, poultry, game of all kinds, the ufeful foflils and
minerals of the earth, Sic. naturally grow dearer as the focie-
ty advances in wealth and improvement, I have endeavoured
to ihew already. Though fuch commodities, therefore, come
to exchange for a greater quantity of lilver than before,* it
will not from thence follow, that filver has become really
cheaper, or will purchafe lefs labour than before, but that
fuch commodities have become really dearer, or will purchafe
more labour than before. It is not their nominal price only,
but their real price which rifes in the progrefs of improve-
ment. The rife of their nominal price is the eftecSl, nL;t of
any degradation of the value of fdver, but of the rife in their
real price.
Different Effecfs of the Pragnfs of Improvement upon three
different Sorts of rude Produce.
1 H E S E different forts of rude produce may be divided
into three clafies. The tirft comprehentls thofe which it is
fcarce in the power of hum.an mdullry to multiply at all.
The fecond, thofe which it can multiply in proportion to the
demand. The third, thofe in which the efhcacy of inouftry
is either limited or uncertain. In the progrefs of vvealth and
improvement, tlie real price of the firil: may rife to any de-
gree of extravagance, and feems not to be limited by any cer-
tain boundary. That of the fecond, though it may rife
greatly, has, however, a certain boundary beyond which it
cannot well pafs for any confiderable time together. That of
the third, tliough its natural tendency is to rife in the progrefs
of improvement, yet in the fame degree of improvement it
may iometimes happen even to fall, fometimes to continue
the fame, and fometim.es to rife more or lefs, according as
different accidents render the efforts of human indullry, in
multiplving this fort of rude produce, m.oreorlefs fucccistuL
The
THE WEALTH OF NATIONS. 223^
Flrft Sii-t.
The firft fort of rude produce of wliich the price rifes iii ,
the progvefs of improvement, is that which it is fcarce in the
power of human induftry to multiply at all. It confifts in
thofe things which nature produces only in certain quantities,
and which being of a very perifliable nature, it is impolhble
to accumulate together the produce of many dilFerent feafons.
Such arc the greater part of rare and fmgular birds and nflies,
many diiF.^rent forts of game, almofl all wild-fowl, all birds
of pafTage in particular, as well as many other things. When
wealth and the luxury which accomparries it increafe, the de-
mand for thefe is likely to increafe with them, and no effort
of human induftry may be able to increafe the fupply much
beyond what it was before this increafe of the demand. The
quantity of fuch commoditieas therefore, remaining the fame,
or nearly the fame, while the competition to purchafe them
Is continually increafing, their price may rife to any degree
of extravagance, and feems not to be limited by any certain
boundary. If woodcocks fhould become fo fafiiionable as to
fell for twenty guineas a-piece, no effort of human induftry
could increafe the number of thofe brought to market, much
beyond what it is at prefent. The high price paid by the
Romans, in the^time of their greatell grandeur, for rare
birds and fifties, may in this manner eafily be accounted for.
Thefe prices were not the effe£ls of the low value of filver in
thofe times, but of the high value of fuch rarities and curiofi-
ties as human induftry could not miultiply at pleafure. The
real value of filver was higher at Rome, for fome time before
and after the fall of the republic, than it is through the great-
er part of Europe at prefent. Three fsftertii, equal to about
fixpence flerling, was the price which the republic paid for
the modius or peck of the tithe w^heat of Sicily. This price,
however, was probably below the average market price, the
obligation to deliver their wheat at this rate, being confidered
as a tax upon tlie Sicilian farmers. When the Romans,
therefore, had occafion to order more corn than the tithe of
wheat amounted to, thev were bound by capitulation to pay
for the furplus at the r.ite of four feilertii, or eight-pence
fterling the peck ; and this had probably been reckoned the
moderate and reafonable, that is, the ordinary or average
contracl price of thofe times ; it is equal to about one-and-
twcnty
224 THE NATURE AND CAUSES OF
twenty {hillings the quarter. E-ight-and-tvventy {hilHngs the
quarter was, before the late years of fcarcity, the ordinary
contract: price of Englifn wheat, which in quality is inferior
to the Sicilian, and generally fells for a lower, price in the
European market. The value of filver, therefore, in thofe
antient times, muft have been to its value in the prefent, as
three ta four inverfely, that is, three ounces of filver v/ouid
then have purchafed the fame quantity of Jabour and commo-
dities which four ounces v/ill do at prefent. When we read
m Pliny^ therefore, that Seius * bought a white nightingale,
as a prefent for the Emprefs Agrippina, at the price of fix
thoufand feilertii, equal to about fifty pounds of our prefent
monev, and that A^fmius Cclcr f purchafed a furmullet at the
pri^e of eight thoufand feftertii, jqiial to about fixty-fix pounds
thirteen fiiiilings and four-pence of our prefent money -, the
extravagance of thofe prices, how much foever it may furprizc
us, is apt, nctwithflanding, to appear to us about one-third
lefs than it really vras. Their real price, the quantity of 1j^-
hour and fubfrience which was given away for tlici;, was
about one-third more than their nominal price is apt to ex-'
prcfs to us in the prefent times. Seius g«ve for-the nightin-
gale the command cf a quantity of labour and fubfiRcnce,
equal to what 661. :Qr. 4^/. v/culd pur chafe in the prefent
times i and Afmius Celer gave for the furmullet the convnand
cf a quantity equal to v/hat 88/. i yj. g' d. would purchafe.
What occafioned the extrav<"'gance of thofe high pYices was.,
not fo much the abundance of filver, as the abundance of la-
bour and fubfiftence, of which tliofc Romans had the dif-
pofal, beyond vrhat was nece/Iary for their own ufe. The
quantity of filver, of which they had the drfpofal, v.^as a good
deal lefs than what the command of the fame quntity of la-
bour and fubfiftence would have procured to them in the
prefent times»
Second ^ori.
The fecond fort of rude produce of which the price rifes
in the proo;refs of improvement, is that which human induflry
€an multiply in proportion to the demand. It confifts in
thofe ufef ul plants and animals, which, in uncultivated coun-
tries, nature produces with fuch profufe abunda?^ce, that they
are
'" Lib. ?:. c :;q | Lib. j.-:, c. 17.
THE WEALTH OF NATIONS. 225
arc of little or no value, and which, as cultivation ad-
vances, are therefore forced to give place to fome more
profitable produce. During a long period in the progrefs
of improvement, the quantity of thefe rs continually dimi-
nifhing, vi^hile at the fame time the demand for them is
continually increafing. Their real value, therefore, the
real quantity of labour, which they will purchafe or com-
mand, gradually rifes, till at lafl it gets fo high as to ren-
der them as profitable a produce as any thing elfe which
human induitry can raife upon the moft fertile and beit
cultivated land. When it has got fo high it cannnot well
go higher. If it did, more land and more induftry would
foon be employed to increafe their quantity.
When the price of cattle, for example, rifes fo high that
it is as profitable to cultivate land in order to raife food for
them, as in order to raife food for man, it cannot well go
higher. If it did, more corn land would foon be turned into
pafture. The extenfion of tillage, by diminifhing the quan-^
tityof wildpafbure, diminilhes the quantity of butcher' s-meat
which the country naturally produces without labour or cul-
tivation, and by increafing the number of thofe who have
cither corn, or, what comes to the fame thing, the price of
corn, to give in exchange for it, increafes the demand. The
price of butcher's meat, therefore, and confequently of cat-
tle, muft gradually rife till it gets fo high, that it becomes as
profitable to employ the moft fertile and beft cultivated lands
in raifing food for them as in raifing corn. But it muft al-
ways be late in the progrefs of improvement before tillage
can be fo far extended as to raife the price of cattle to this
height ; and till it has got to this height, if the country is ad.«
vancing at all, their price muft be continually rifing. There
are, perhaps, fome parts of Europe in which the price of cat-
tie has not yet got to this height. It had not got to this
height in any part of Scotland before the union. Had the
Scotch cattle been always confined to the market of Scotland,
in a country in which the quantity of land, which can be ap-
plied to no other purpofe but the feeding of cattle, is fo great
in proportion to what can be applied to other purpofes, it is
fcarce pofiible, perhaps, that their price could ever have rifen
fo high as to render it profitable to cultivate land for the fake
of feeding them. In England, the price of cattle, it has al-
ready been obferved, feems, in the neighbourhood of Lon-
don, to have got to this height about the beginning of the laft
Vol. I. Q^ century;
2z6^ THE NATURE AjSTD CAUStS CTF
century ; but it was much later probably before it got to it
throup,h the greater part of the remoter counties ; in fome
of which, perhaps, it may fcarce yet have got to it. Of
all the different fubftances, however, which compofe this
fecond fort of rude produce, cattle is, perhaps, that of
which the price, in the progrefs of improvement, firfl rifes
to this heio;ht.
Till the price of cattle, indeed, has got to this height,
it feems fcarce poflible that the greater parr, even of thofc
lands which are capable of the higheft cultivation, can be
completely cultivated. In all farms too diflant from any town
to carry manure- from it, that is, in the far greater part of
thofe of every extenfivc country, the quantity of well-culti-
vated land muft be m proportion to the quantity of manure
which the farm* itfelf produces ; and this again mufl be in
proportion to the flock of cattle which are maintained upon
it. The land is manured either by pafturing the cattle upon
it, or by feeding them in the ftable, and from thence carry-
ing out their dung to it. But unlefs the price of the cattle
be fufhcient to pay both the rent and profit of cultivated land,
the farmer cannot afford to pafture them upon it ; and he
can ftill lefs afford to feed' them- in the flable. It is with the
produce of improved and' cultivated land only, that cattle can
be fed in the ftable; becaufe to colie6l the fcantyand fcattered
produce of wafte and unimproved Lands would require too
much labour and be too expenfive. If the price of the cattle,
therefore, is not fufBcient to pay for the produce of improved
nnd cultivated land, when they are allowed to pafture it, that
]n\ce will be ftill lefs fufficient to pay for that produce when
it nraft be collected with a good deal of additional labour, and
brous'ht into the ftable to them. In thefe circumftances,
therefore, no more cattle can, with profit, be fed in the lia-
ble, than what are necefTary for tillage. But thefe can never
afford manure enough for keeping conftaritly in good condi-
tion, nil the lands which they are capable of cultivating.
Wliat they afford being infufhcient for the whole farm, will
naturally be refcrved for the lands to which it can be moft ad-
vanrajjeoufly or conveniently applied ; the moft fertile, or
thofc, perhaps, in the neighbourhood of the farm-yard. Thefe,
therefore, will be kept conftantly in good condition and fit
for tillage. The refl will, the greater part of them, be al-
lowed to lie wafte, producing fcarce any thing but fome mi-
ferable pafture, juft fufticient to keep alive a few ftraggling,
half
THE WEALTH OF NATIONS. 227
half-ftarved cattle ; the farm, though much underflocked in
proportion to what would be neceflary for its complete culti-
vation, being very frequently overilocked in proportion to its
a£lual produce. A portion of this wafte land, hov/ever, after
having been paftured in this wretched manner for fix or feven
years together, may be ploughed up, when it will yield, per-
haps, a poor crop or two of bad oats, or of fome other coarfe
grain, and then, being entirely cxhaufted, it muft be refted
and paftured again as before, and another portion ploughed
up to be in the fame manner exhaufted and refted again in its
turn. Such accordingly was the general fyilem of manage-
ment all over the low country of Scotland before the union:
The lands which were kept conftantly well manured and in
good condition, feldom exceeded a third or a fourth part of
the whole farm, and fometimes did not amount to a fifth or a
fixth part of it. The reft v/ere never manured, but a certain
portion of them was in its turn, notwithftanding, regularly
cultivated and exhaufted. U nder this fyftem of management,
it is evident, even that part of the lands of Scotland which is
capable of good cultivation, could produce but little in com-
parifon of what it may be capable of producing. But how
dlfadvantageous foever this fyftem may appear, yet before the
union the low price of cattle feems to have rendered it almoft
unavoidable. If, notwithftanding a great rife in their price,
it ftill continues to prevail through a confiderable part of the
country, it is owing, in many places, no doubt, to ignorance
and attachment to old cuftoms, but in moft places to the un-
avoidable obftrucfions which the natural courfe of things op-
pofes to the immediate or fpeedy eftablifliment of a better
fy^em : iirft, to the po\^rty of the tenants, to their not hav-
ing yet had time to acquire a ftock of cattle fafficient to cul-
tivate their lands more compleatfy, the fame rife of price
which would render it advantageous for them to maintain a
greater ftock, rendering it more difficult for them to acquire
it ; and, fecondly, to their not having yet had time to put
their lands in condition to maintain this great ftock properly,
fuppofmg they were capable of acquiring it. The increafe of
ftock and the improvement of land are two events which muft
go hand in hand, and of which the one can no where much
out-run the other. "Without fome increafe of ftock, there
can be fcarce any improvement of land, but there can be no
confiderable increafe of ftock but in confequence of a confi-
derable improvement of land ; becaufe othervvife the land
could not maintain it. Thefe natural obftruftions to the
0^2 eftablifhmcnt
228 THE NATURE AND CAUSES OF
eflabliflimcnt of a better fyilem, cannot be removed but hf
a long courfe of frugality and induftry; and half a century or
a century more, perhaps, muft pafs away before the old fyC-
tem, which is wearing out gradually, can be complcatly abo-
liihed through ail the different parts of the country. Of all
the commeTcIal advantages, however, which Scotland has
derived from the union with England, this rife in the price
of cattle is, perhaps, the greateft- It has not only raifed the
value of all highland eftates, but it has, perhaps, been thc
principal caufe of the improvement of the low country.
In all new colonies the great quantity of wafte land, which
can for many years be applied to no other purpofe but the
feeding of cattle, foon renders-them extremely abundant, and
in every thing great cheapnefs istheneceflary confequence of
great abundance. Though all the cattle of the European co-
lonies In America were originally carried from Europe, they
foon multiplied fo much there, and became of fo little valuc^,
that even horfes were allowed to run wild in the woods with-
out any owner thinking it worth while to claim them. It
muft be a long time after the firft eflabliflimcnt of fuch colo-
nies, before it can become profitable to feed cattle upon the
produce of cultivated land. The fame caufes, therefore, the
want of manure, and the difproportion between the (lock
employed in cultivation, and the land which it is deftined ta
euitivate, are likely to introduce there a fyftem of hufbandry
not unlike that which (till continues to take place in fo many
parts of Scotland. Mr. Kalm, the Swedifh traveller, when
he gives an itccount of the huihandry of fome of the Englifh
colonies in North America, as he found it in 1 749, obferves,
accordingly, that he can with difiiculty difcover there the
charaiSter ©f the Engliili nation, fo well {killed in all the dif-
f'^rent branches of agriculture. They make fcarce any ma-
nure for their corn-fields, he fays, but when one piece of
ground has been exhaufted by continual cropping, they clear
and cultivate another piece of frefli land ; and v/hen that is
exhnultf tl, proceed to a third. Their cattle are allowed to
wander thruugh the woods and othxr uncultivated grounds,
where they are haif-fbarved ; having long ago extirpated al-
moft all the annual graffes by cropping them too early in the
•fpring, before they had time to form their flowers, or to fhed
their feeds. *. The annual graffes were, it feems, the befl
natural
* Kalm's TravcU, vol. i. p. 343. 3 4»
THE WEALTH OF NATIONS. aip
natural grafles in that part of North America •, and when the
Europeans firft fettled there, they ufed to grow very thrck,
and to rife three or four feet high. A piece of ground whicl),
when he wrote, could not maintain one cow, would in for-
mer times, he was afluretl, have maintained four, each of
which would have given four times the quantity of milk,
which that one was capable of giving. The poornefs of the
paflure had, in his opinion, occafioned the degradation of
their cattle, whichdegenerated fenfibly from one generation
to another. They were probably not unlike that ftunted
breed which was common all over Scotland thirty or forty
years ago, and which is now fo i)iuch mended through the
greater part of the low country, not fo much by a change of
the breed, though that expedient has been employed in fome
P'laces, as by a more plentiful method of fe>edin^ them,
Thouch it is late, therefore, in the pragrefs of improve-
ment before cattle can bring fuch a price as to render it pro-
fitable to cultivate land for the fake of feeding them ; yet of
all the different parts which compofethis fccond fort of rude
produce, they are perhaps the hrft whieli bring this price ;
becaufe till they bring it, it feems mipofFible that improve-
ment can be brought near even to that degree of perfedtion
to which it has .aiTived in many parts of Europe.
As cattle are ^miong theftrft, fo perhaps venifon is among
the laft parts of this for4: of rude produce which bring this
price. The price of venifon, in Great Britain, how extra-
vagant foeveritmay appear, is not near fulHcient to compen-
iate the expenceof a deer park, as is well known to all thofe
who have had any experience in the feeding of deer. If it
'was otherwifc, the feeding of deer would loon become an
article of common farming ; in the fame manner as the
feeding of thofe fmall birds called Turdi was among the
antient Romans. Varro and Columella aflure us that it
was a moft profitable article. The fattening cf Ortolans,
birds of paflage which arrive lean in the country, is faid to
be fo in fome parts of France. If venifon continues in
fafliion, and the wealth and luxury of Great Britain in-
creafe as they have done for fome time paft, its price may
very probably rife ftill higher than it is at prefent.
Between that period in the progrefs of improvement
whicli brings to its height the price cf fo neceflary an article
as
230 THE NATURE AND CAUSES OF
as cattle, and that which brings to it the price of fuch s
fuperfluity as venifon, there is a very long interval, in the
courfe of whicli many other forts of rude produce gradually
arrive at their highell price, fome fooner and fome later,
according to diiFerent circumR^nces,
Thus in every farm the offals of the barn and (lables will
maintain a certain number of poultry. Thefe, as they are -
fed with what would otherwife be lofl, are a mere fave-
all j and as they cofl the farmer fcarce any thing, fo he
can afford to felj^theni for very little. Almoft all that he
gets is pure gain, and their price can fcarce be fo low as
to difcourage him from feeding this number. But in coun-
tries ill cultivated, and, therefore, but thinly inhabited,
the poultry, which are thus raifed without expence, a^
often fully fufhcient to fupply the whole demand. In this
{late of things, therefore, they are often as cheap as butcherV
rneat, or any other fort of animal food. But the whole
quantity of poultry, which the farm in this manner produces
without expence, mufl ahvays be much fmalier than Fhe
whole quantity of butcher's-meat which is reared upon it ;
and in times of wealth and luxury what is rare, with only
nearly equal merit, is always preferred to wliat is common.
As wealth and luxury increafe, therefore, in confequence
of improvement and cultivation, the price of poultry gra-
dually rifes above that of butcher's-meat, till at lafl it gets
fo high that it becomes profitable to cultivate land for the
fake of feeding them. When it has got to this height, it
cannot well go higher. If it did, more land would foon
be turned to this purpofe. In feveral provinces of France,
the feeding of poultry is confidered as a very important ar-
ticle in rural ceconomv, and fufficiently profitable to encou-
rage the farmer to raife a confiderable quantity of Indian
corn and buck-wheat for this purpofe. A middling farmer
will there fometimes have four hundred fowls in his yard.
The feeding of poultry feems fcarce yet to be generally
confidered as a matter of fo much importance in England.
They are certainly, however, dearer in England than in.
France, as England receives confiderable fupplies from
France. In the progrefs of improvement, the period at
which every particular fort of animal food is dearefl, muft
naturally be that which immediately precedes the general
pra(n:ice of cultivating land for the fake of raifing it. For
fome time before this practice becomes general, the fcarcity
mull neceffarily raife the price. After it has become general,
new
THE WEALTH OF NATIONS. 231
new methods of feeding are commonly fallen upon, wliich
enable the farmer to raife upon the fame quantity of ground
a much greater quantity of that particular fort of animal food.
1 he plenty not only obliges him to fell cheaper, but in confc-
<juence of thefe improvements he can afford to fell cheaper •,
for if he could not afford it, the plenty would not be of long
continuance. It has been probably in this manner that the
introducftion of clover, turnips, carrots, cabbages, &c. has
contributed to fmk the common price of butcher's-meat in
the London market fomewhat below what it was about the
beginning -of the lad ^century.
The hog, that finds his food among ordure, and greedily
xlevours many things rejected by every other ufeful animal,
is, like poultry, originally kept as a fave-all. As long as
the number of fuch animals, which can thus be reared at
little or no expence, is fully fufEcient to fupply .the -de^
mand, this fort of butcher's-meat £omes to market at a
much lower price than any other. But when the demand
rifes beyond what this quantity can fupply, when it be-»
comes neceffary to raife food on purpofe for feeding and
fattening hogs, in the fame manner as for feeding and fat-
tening other cattle, the price neceffar-ily rifes, and becomes
proportionably either higher or lower than that of other
butcher's-meat, according as the nature of the country,
and the ftate of its agriculture, Iiappen to render the feed-
ing of hogs more «r lefs expenfive than that of other cattle.
In France, according to Mr. Buffbn, the price of pork is
nearly equal -to that of beef. In moff parts of Great Bri-
tain it is at prefeut fomewhat higher.
The great rife in the price hoth of hogs and poultry has in
Great Britain been frequently imputed to the diminution of
the number of cottagers and other fmall occupiers of land-,
an event which has in every part of Europe been the imme-
diate fore-runner of improvement and better cultivation, but
■which at the fame time may have contributed to raife the
price of thofe articles, both fomewhat fooner and fomewhat
fafler than it would otherwife have rifen. As the pooreil fa-
mily can often maintain a cat or a dog, without any expence,
fo the pooreft occupiers of land can commonly maintain a
few poultry, or a fow and a few pigs, at very little. The
little offals of their own table, their whey, fkimmed milk,
and butter milk, fupply thofe animals with a part of their
food, and they find the red in the neighbouring fields with-
out
232 THE NATURE AND CAUSES OF
out doing any fenfible damage to any body. By diminifb*
ing the number of thofe fmall occupiers, thereforCj the
quantity of this fort of provifions which is thus produced
at little or no expence, mull certainly have been a good
deal diminiflied, and their price mull confequently have
been raifcd both fooner and falter than it would otherwife
have rifen. Sooner or later, however, in the progrefs of
improvement, it mull at any rate have rifen to the utmofl
height to which it is capable of rifing j or to the price
\vhich pays the labour and expence of cultivating the land
which furnilhes them with food as vi^ell as thefe are paid
upon the greater part of other cultivated land.
The bufmefs of the dairy, like the feeding of hogs and
poultry, is originally carried on as a fave-all. The cattle net
ceflariiy kept upon the farm, produce more milk than either
the rearing of their own young, or the confumption of the
farmer's family requires ; and they produce mod at one par-
ticular feafon. But of all the productions of land, milk is
perhaps the mod perifhable. In the warm feafon, when it is
mofl abundant, it will fcarce keep four-and-twenty hours.
The farmer, by making it into frefli butter, {lores a fmall
part of it for a week : by making it into fait butter, for a
year : and by making it into cheefe, he ftores a much greater
part of it for feveral years. Part of all thefe is referved for
the ufe of his own family. The reft goes to market, in or-«
<der to find the beft price which is to be had, and which can
fcarce be fo low as to difcourage him from fending thither
■whatever is over and above the ufe of his own family. If it is
veTy low, indeed, he will be likely to manage his dairy in a
very flovenly and dirty manner, and will fcarce perhaps think
it worth while to have a particular room or building on pur-
pofe for it, but will fuffer the bufm?fs to be carried on amidft
the fmoke, filth, and naflinefs of his own kitchen, as was the
cafe of almoll all the farmers dairies in Scotland thirty or
forty yea IS ago, and as is the cafe of many of them (lill. The
fame caufes which gradually raifed the price of butcher's-
nieat, the increafe of the demand, and, in confequence of
the improvement of the country, the diminution of the quan-
tity which can be fed at little or no expence, raife, in the
fame manner, that of the produce of the dairy, of which the
price naturally conneCls with that of butcher's meat, or with
the expence of feeding cattle. The increafe of price pays for
more labour, care, and cleanlinefs. The dairy becomes more
worthy
THE WEALTH OF NATIONS. 233
worthy of the farmer's attention, and the quality of its pro-
duce gradually improves. The price at laft gets io high that
it becomes worth while to employ fome of tlie moll rerti.e
and bell: cultivated lands in feeding cattle cierely lor the pur-
pofe of the dairy •, and when it has got to this height, it can-
not well go higher. If it did, more land would Toon b.^
turned to this purpofe. It feems to have got to this heiglit
through the greater part of England, where much good land
is commonly employed in this manner. If you except the
neighbourhood of a few confiderable towns, it feenis not yet
to have got to this height any where in Scotland, where coiu^
mon farmers feldom employ much good land in raifing food
for cattle merely for the purpofe of the dairy. The price of
the produce, though it has rifen very confiderably within chefe
few years, is probably (till too low to admit of it. The infe-
riority of the quality, indeed, compared with that of the pro-
duce of Englilh dairies, is fully equal to that of the price.
But this inferiority of quality is, perhaps, rrtther the eiTeifl of
this lownefs of price than the caufe of it. Though the qua-
lity was much better, the greater part of what is brouglit to
market could not, I apprehend, in the prefent circumihiiices
of the country, be difpofed of at a much better price ; and
the prefent price, it is probable, would not pay the expence
of the land and labour necelTary for producing a much better
quality. Through the greater part of England, notwitL-
ilanding the fuperiority of price, the dairy is not reckoned a
more profitable employment of land than the raihiig of corri,
or the fattening of cattle, the two great obje(£fs of agricul-
ture. Through the greater part of Scotland, therefore, it
cannot yet be even fo profitable.
The lands of no country. It is evident, can ever be com-
pleatly cultivated and improved, till once the price of every
produce, which human induftry is obliged to raife upon them,
lias got fo high as to pay for the expence of complete improve-
ment and cultivation. In order to do this, the price of each
particular produce muft be fufficient, firft, to pay the rent of
good corn land, as it is that which regulates the rent of the
greater part of other cultivated land •, and, fecondly, to pay
the labour and expence of the farmer as v/ell as they are com-
monly paid upon good corn-land ; or, in other words, to re-
place v/ith the ordinary profits the (lock v.hlch he employs
about it. This rife in the price of each particular produce,
mull evidently be previous to the improvement and cultiva-
tion
::34 THE NATURE AND CAUSES OF
tion of the land which is deflincd for raifing it. Gain is the
end of all improvement, and nothing could deferve that name
of which lofs was to be the necellary confequence. But lofs
niUil be the necellary confequence of improving land for the
fake of a produce of which the price could never bring baclc
the expence. If the compieat improvement and cultivation
of the country be, as it mod certainly is, the greateft of all
public advantages, this rife in the price of all thofe different
ibrts of rude produce, inftead of being confidered as a public
calamity, ought to be regarded as the neceflary fore-
runner and attendant of the greateft of all public advan-
tages.
This rife too in the nominal or money price of all thofc
different forts of rude produce has been the effed:, not of any
degradation in the value of fdver, but of a rife in their real
price. They have become woith, not only a greater quan-
tity of filver, but a greater quantity of labour and fubfiilence
than before. As it coils a greater quantity of labour and
fubfiilence to bring them to market, fo when they are
brought thither, they reprefent or are equivalent to a greater
ciuantity.
iThircl Sort,
The third and lafl fort of rude produce, of which the
price naturally rifes in the progrefs of improvement, is that
in which the efficacv of human indufhry, in augmenting the
quantity, is either limited or uncertain. Though the real
price of this fort of rude produce!, therefore, naturally tends
to rife in the progrefs of improvement, yet, according as dif-
ferent accidents happen to render the efforts of human in-
duftry more or lefs fuccefsful in augmenting the quantity,
it may happen fometimes even to fall, fometimes to continue
the fame m very different periods of improvement, and
(ometimes to rife more or lefs in the fame period.
There are fome forts of rude produce which nature has
rendered a kind of appendages to other forts ; fo that the
quantity of the one which any country can afford, is neceffa-
j-ily limited by that of the bther. The quantity of wool or
of raw hides, for example, which any country can afford, is
iieceffarily limited by the number. of great and fmall cattle
that
THE WEALTH OF NATIONS. 235
that are kept in it. The ftate of its improvement, and the
nature of its agriculture, again neccflarily, determine tliis
number..
The fame caufes which, in the progrefs of improvement,
gradually raife the price of butcher's-meat, fhould have the
fame effect:, it may be thought, upon tlie prices of wool and
Taw hides, and raife them too nearly in the fame proportion.
It probably would be fo, if in the rude beginnings of improve-
ment the market for the latter commodities was confined
within as narrow bounds as that for the former. But the ex-
tent of their refpe£\ive markets is commonly extremely dif-
ferent.
The market for butcherVmeat is almoft every-where con^
fnied to the country which produces it. Ireland, and fome
part of Britifh America indeed, carry on a confiderable trade
in falfproviiions ; but they are, I believe, the only countries
in the commercial world vvdifch do fo, or which export to
other countries any confiderable part of their butcher's^
meat.
The market for wool and raw hides, on the contrary, is
In the rude beginnings of improvement very feldom confined
to the country which produces them. They can eafily be
tranfported to d 1ft ant countries, wool without any prepara-
tion, and raw hides with very little 5 and as they are the ma-r
terials of many manufadlures, the induftry of other coun-
tries may occafion a demand for them, though that of the
country which produces them might not occafion any.
In countries ill cultivated, and therefore but thinly inhabit;-
ed, the price of the wool and the hide bears always a much
greater proportion to that of the Vv'hole bead, than in other
countries where, improvement and population being further
advanced, there is more demand for butcher's-meat. Mr.
Hume obferves, that in the Saxon times, the fleece wasefti-
mated at two-fifths of the value of the whole fheep, and that
this was much above the proportion of its prefent eilimation„
In fome provinces of Spain, I have been ailured, the llicep is
frequently killed merely for the fake of the fleece and the
tallow. The carcafe is often left to rot upon the ground, or
to be devoured by beafts and birds of prey. If this fome-
times happens even in Spain, it happens almofl conflantly in
Chili, at Buenos Ayres, and in many other parts of Spanifh
America,
236 THE NATURE AND CAUSES OF
America, where the horned cattle are ahnoft conftantly kilU
ed merely for the fake of the hide and the tallow. This too
ufed to hcippen almofl. conftantly in Hifpaniola, while it was
infeftcd by the Buccaneers, and before the fettlement, im-
provement, and populoufnefs of the French plantations
(v.diich now extend round the coail of almoft the whole
weftern half of the ifland) had given fome valud to the cattle
of the Spaniards, who ftill continue to poftefs, not only the
caflern part of the coaft, but the whole inland and moun-
tainous part of the country.
/Though in the progrefs of improvemicnt and population,
the price of the whole beaft necelTarily rifes, yet the price of
the carcafe is likely to be much more affefted by this rife than
that of the wool and the hide. The market for the carcafe,
being in [he rude ftate of fociety confined always to the coun-
try which produces it, mull necefiarily be extended in propor-
tion to the improvement and population of that country'.
But the market for the wool and the hides even of a barba-
rous country often extending to the whole commercial world,
it can very feldom be enlarged in the fame proportion. The
fiate of the whole conimercial world can feldom be much af-
fetled by the improvement of any particular country ; and
the market for fuch commodities may remain the fame or ve-
ry nearly the fame, after fuch nnprovements, as before. It
ihould, however, in the natural courfe of things, rather upon
the whole be fomewhat extended in confequence of them.
If the manufactures, efpecialiy, of which thofe commodities
are the materials, fliould ever come to llourilh in the country,
the market, though it might not be much enlarged, would at
leaft be brought much nearer to the place of growth than be-
fore j and the price of thofe materials might at leaft be in-
creafed by what had ufually been the expence of tranfport-
ing them to diitant countries. Though it might not rife
therefore in the fame proportion as that of butcherVmeat,"
it ought naturally to rife fomewhat, and it ought certainly
not to fail.
In England, however, notwithftanding the flouriftiing
ilate of its woollen manufa(Slure,the price of Englifh wool has
fallen very confiderably fince the time of Edward III. There
are many authentic records which demonftrate that during
the reign of that prince (towards the middle of the fourteenth
century, or about 1 339) what was reckoned the moderate and
reafonable
THE WEALTH OF NATIONS. 237
reafonable price of the tod or twenty-eight pounds of Englifli
wool was not lefs than ten fhillings of the money of thofe
times*, containing, at the rate of twenty-pence the ounce, fix
ounces of filver Tower-weight, equal to about thirty fliiihngs
of our prefent money. In the prefent times, one-and-twenry
flnlUngs the tod may be reckoned a good price for very good
EngHfli wool. The money price of wool, therefore, in the
time of Edward III. was to its money price in the prefent
times as ten to feven. The fuperiority of its real price was
Hill greater. At the rate of fix fliillings and eight-pence the
quarter, ten fliillings was in thofe antient times the price of
twelve bufhels of wheat. At the rate of twenty-eight {hillings
the quarter, one-and-twenty fliillings is in the prefent times
the price of fix bufliels only. The proportion bctvv'^een the
real prices of antient and modern times, therefore, is as
twelve to fix, or as two to one. In thofe antient times a
tod of wool would have purchafed twice the quantity of fub-
fillence which it will purchafe at prefent ; and confequently
twice the quantity of labour, if the real recompence of la-
bour had been the fame in both periods.
This degradation both in the real and nominal value of
wool, could never have happened in confequence of the na-
tural courfe of things. It has accordingly been the effecl of
violence and artifice : Firft of the abfolute prohibition of ex-
porting wool from England ; Secondly, of the permiffion of
importing it from Spain duty free; Thirdly of the prohibition
of exporting it from Ireland to any other country but England.
In confequence of thefe regulations, the market for Englifii
wool, inftead of being fomewhat extended in confequence of
the improvement of England, has been confined to the
home market, where the wool of feveral other countries is
allowed to come into competion with it, and where that of
Ireland is forced into competition with it. As the woollen
manufaftures too of Ireland are fully as much difcouraged
as is confident with julfice and fair dealing, the Iriflr can
work up but a fmall part of their own wool at home, and
are, therefore, obliged to fend a greater proportion of it to
Great Britain, the only market they are allowed.
I HAVE not been able to find any fuch authentic records
concerning the price of raw hides in antient times. "Wool
was
* See Smith's Meinoirs of Wool, vol. i. c 5. 6. an.l 7; alfo,vcI. ii. c, 176.
23S THE NATURE AND CAUSES OF
u'as commonly paid as ii fubfidy to the king, and its valua-
tion in tiiat fubfidy afcertains, at leafl in feme degree, what
wai its ordinary price. But this fcems not to have been the
cafe with raw hides. Fleetwood, however, from an account
in 1425, between the prior of Burcefter Oxford and one of
his canons, gives us their price, at leafl as it was ftated,
upon that particular occafion ; viz. five ox hides at
tM'elve shillings *, five cow hides at feven (hillings and
three pence -y thirty-fix fheep fkins of two years old at nine
flrillings -, fixteen calve {kins at two fhillings. In 1425, twelve
fhillings contained about the fame quantity of iilver as four-
and-twenty (hillings of our prefent money. An ox hidc^
therefore, was in this account valued at the fame quantity of
filver as 4/. -^ths of our prefent money. Its nominal price
was a good deal lower than at prefent. But at the rate of fix
fliillings and eight-pence the quarter, twelve fhillings would
in thofe times have purchafed fourteen bufhels and four-fifths
of a bufhel of wheat, which, at three and fix-pence the bufli-
el, would in the prefent times cod 515. 4^. An ox hide,
therefore, would in thofe times have purchafed as much com
ns ten fhillings and three-pence would purchafe at prefent.
Its real value was equal to ten (hillings and three-pence of our
prefent money. In thofe antient times when the cattle were
lialf ftarved during the greater part of tlie winter, we cannot
fuppofe that they were of a very large fize. An ox hide
which weighs four ftone of fixteen pounds averdupols, is not
in the prefent times reckoned a bad one ; and in thofe an-
tient times would probably have been reckoned a very good
one. But at half a crown the ftone, which at this moment
(February, 1773) I underftand to be the common price,fuch
a hide would at prefent coft only ten fliillings. Though its
nominal price, therefore, is higher in the prefent than it was
in thofe antient times, its real price, the real quantity of fub-
fiftence which it will purchafe or command, is rather fome-
what lower. The price of cow hides, as ftated in the above
account, is nearly in the common proportion to that of ox
hides. That of (heep (kins is a good deal above it. They
had probably been fold with the \^'OoI. That of calve fkins,
on the contrary, is greatly below it. In countries where the
price of cattle is very low, the calves, which are not intended
to be reared in order to keep up the Hock, are generally killed
very young •, as was the cafe in Scotland twenty or thirty
years ago. It faves the mdlk, which their price would not
pay for. Their fkins, therefore, sre commonly good for little.
The
THE WEALTH OF NATIONS. 239
The price of raw hides is a good deal lower at prefert
than it was a few years ago ; owning probably to the talcing
off the duty upon feal fkins, and to the allowing, for a limit-
ed time, the importation of rawhides from Ireland and from
the plantations duty free, which was done in 1769. Take
the whole of the prefent century at an average, their real
price has probably been fomewhat higher chan it was in thofe
antient times. The nature of the commodity renders it not
quite fo proper for being tranfported to diftant markets as
wool. It fuffers more by keepmg. A falted hide is reckon-
ed inferior to a frefii one, and fells for a lower price. Thh
circuitiftance muft neceflarily have fome tendency to fmk the
price of raw hides produced in a country'which does not ma-
nufacture them, but is obliged to export them ; and compa-
ratively to raife that of thofe produced in a country which
does manufacture them. It mud have fome tendency to
fnik their price in a barbarous, and to raife it in an improved
and manufacturing country. It mufh have had fome tenden-
cy therefore to fmk it in antient, and to raife it in modern
times. Our tanners befides have not been quite fo fuccefs-
ful as our clothiers, in convincing the wifdom of the nation,
that the fafety of the commonwealth depends upon the prof-
perity of their particular manufacture. They have accord-
ingly been much lefs favoured. The exportation of raw hides
has, indeed, been prohibited, and declared a nuifance : but
their importation from foreign countries has been fubjfeCted
to a duty; and though this duty has been taken off from
thofe of Ireland and the plantations (for the limited time of
five years only), yet Ireland has not been confined to the
market of Great Britain for the fale of its furplus hides, or of
thofe which are not manufactured at home. The hides of
common cattle. have but within thefe few years been put
among the enumerated commodities which the plantations
can fend nowhere but to the mother country j neither has
the commerce of Ireland been in this cafe oppreffed hitherto,
in order to fupport the manufaClures of Great Britain.
Whatever regulations tend to fink the price either of
wool or of raw hides below what it naturally would be, muft,
in an improved and cultivated country, have fome tendency
to raife the price of butcherVmeat. The price both of the
great and fmall cattle, which are fed on improved and culti-
vated land, muft be fulHcient to pay the rent which the land-
lord, and the profit which the farmer has reafon to expeCt
from
140 THE NxlTURE AND CAUSES Of
from improved and cultivated land. If it is not, they will
foon ceate to feed them. Whatever |(art of this price, there-
fore, is not paid by the wool and the hide, muil be paid by
the carcafe. The lefs there is paid for the one, the more muft
be paid for the other. In what manner this price is to be
divided upon the different parts of the bead, is indifferent to
the landlords and farmers, provided it is all paid to them.
In an improved and cultivated country, therefore, their intc-
reft as landlords and farmers cannot be much affe(fl:edby fuch
regulations, though their interefl as confumers may, by the
rife in the price of provifions. It would be quite otherwife,
however, in an unimproved and uncultivated country, where
the greater part of the lands could be applied to no other pur-
pofe but the feeding of cattle, and where the wool and the
hide make the principal part of the value of thofe cattle.
Their interefh as landlords and farmers would in this cafe be
very deeply affecled by fuch regulations, and their interefl as
confumers very little* The fall in the price of the wool and
the hide, would not in this cafe raife the price of the carcafe ;
becaufe the greater part of the lands of the country being ap-
plicable to no other purpofe but the feeding of cattle, the
fame number would ftill continue to be fed. The fame quan-
tity of butcher's-meat would ftill come to market. The de-
tn nd for it would be no greater than before. Its price, there-
fore, would be the fame as before. The whole price of
cattle would fall, and along with it both the rent and the pro-
fit of all thofe lands of which cattle was the principal produce,
that is, of the greater part of the lands of the country. The
perpetual prohibition of the exportation of wool, v/hich is
conniionly, but very falfely, afcribed to Edward III. would,
in the then circumilances of the country, have been the moil
deftrucftive regulation which could well have been thought
of. It would not only have reduced the aftual value of the
greater part of the lands of the kingdom, but by reducing the
price of the mcft important fpecies of fmall cattle, it would
have retarded very much its fubfequent improvement.
The wool of Scotland fell very confiderably in its price in
confequence of the union with England, by which it was ex-
cluded from the great market of Europe, and confined to the
narrow one of Great Britain. The value of the greater part
of the lands in the fouthern counties of Scotland, which arc
chiefly a flieep country, would have been very deeply affecfled
by
THE WEALTH OF NATIONS. 241"
hy this event, had not the rife in the price of butcher's-meat
fully compenUted the fidl in the price of wool.
As the efficacy of human induflry, in increafmg the quan-
tity cither of the wool or of raw hides, is limited, fo far as it
depend.^ upon the produce of the country where it is exerted ;
fo it is uncertain fo far as it depends upon the, produce of
ether countries. It fo far depends, not fo much upon the
quantity which they produce, as upon that which they do not
nianufatlure ; and upon the reilraints which they may or
may not think proper to impofe upon the exportation of this
fort of rude produce. Thefe circumfianccs, as they are alto-
gether independent of domelllc induftry, fo they neceflarily
render the efficacy of its eMbrts more or lefs uncertain. In
multiplying this fort of rude produce, therefore, the efficacy
of human induftry -is not only limited, but uncertain.
In multiplying another very inapontawt fort of rude pro-
duce, the quantity of fifh that is brought to market, it is
likewife both limited and uncertain. It is limited by the lo-
cul fituation of the couutry, by the proximity or diltance of
its different provinces from the fea, by tlie number of its
lakes and rivers, and by what may be called the fertility or
barrenncfs of thofe feas, lakes and rivers, as to this fort of
rude produce. As population incrcafes, as the annual pro-
duce of the land and labour of the country grovv's o-reater
and greater, there come to be more buyers of iiffi, and
tliofe buyers to have a greater quantity and variety of
other goods, or, vvdiat is the fame thing, the price of a
greater quantity and var'cty of other goods, to buy with.
But it will generally be impoffible to fupply the o-reat
and extended market without employing a quantity of la-
bour greater than in proportion to what had been rcquifite
for fupplying the narrov/ and confined one^ A market
which, from requiring only one thoufand, comes to require
annually ten thoufand ton of fid;, can feUom be fupplied
without employing more than ten times the quantity of la-
bour which had before been fufficient to fupply it. The fiiJi
mult generally be fought for at a greater diftance, larger vef-
fels muO; be employed, and more e;i:penGve machinery of
every kind made ufe of. The real price of this commodity,
therefore, naturally rifes in the progrefs of improvement. It
has accordingly done fo, I beheve, more or icfs in every '
country.
Vol. I. R Though •
242 THE NATURE AND CAUSES OF
Though thefuccefs of a particular day's fifliing may be a
very uncertain matter, yet the local fituation of the country
being fuppofed, the general efficacy of induftry in bringing a
certain quantity of fifh to market, taking the courfe of a year,
or of feveral years together, it may perhaps be thought, is
certain enough j and it, no doubt, is fo. As it depends
more, however, upon the local fituation of the country, than
upon the ftate of its wealth and induftry j as upon this ac-
count it may in different countries be the fame in very dif-
ferent periods of improvement, and very different in the
fame period ; its conne6f ion with the ftate of improvement
is uncertain, and it is of this fort of uncertainty that I am
here fpeaking.
In increafing the quantity of the different minerals and
metals which are drawn from the boM'els of the earth, that of
the more precious ones particularly, the efficacy of human
induftry feems not to be limited, but to be altogether un-
f:ertain.
The quantity of the precious metals which is to be found
in any country is not limited by any thing in its local fitua-
tion, fuch as the fertility or barrennefs of its ovv^n mines.
Thofe metals frequently abound in countries which pofiefs no
jiiines. Their quantity in every particular country feems to
depend upon two diffi^rent circumftances •, firft, upon its
power of purchafing, upon the ftate of its induftry, upon
the annual produce of its land and labour, in confequence of
which it c^n affiDrd to employ a greater or a fmaller quantity
of labour and fubfiftence in bringing or purchafing fuch fu-
perfluities ^s gold and filver, either from its own mines or
from thofe of other countries ; and fecondly, upon the fer-
tility or barrennefs of the mines which may happen at any
particular time to fupply the commercial world with thofe
metals. The quantity of thofe metals in the countries moll
remote from the mines, muft be more or lefs affe6led by this
fertility or barrennefs, on account of the eafy and cheap
tranfportation of thofe metals, of their fmall bulk and great
value. Their quantity in China and Indoftan muft have
been more or iefs affecfted by the abundance of the mines of
America.
So far as their quantity in any particular coimtry depends
ypon the former of thofe two circumftances (the power of
' ' * ' , purchafing),
THE WEALTH OF NATIONS. 243
fiurcKafing), their real price, like that of all other luxuries
and fuperfluities, is likely to rife with the wealth and im-
provement of the country, and to fall with its poverty and
depreffion. Countries which have a great quantity of labour
and fubfiftence to fpave, can afFord to purchafe any particular
quantity of thofe metals at the expence of a greater quantity
of labour and fubfiftence, than countries which have lefs to
fpare.
So far as their quantity in any particular country depends
-Wpon the latter of thofe two circum fiances (the fertility or
'barrennefs of the mines which happcii to fupply the commer-
cial world) their real price, the real quantity of labour and
fubfiftence which they will purchafe or exchange for, will,
no doubt, (ink more or lefs in proportion to the fertility, and
rife in proportion to the barrennefs of thofe mines.
The fertility or barrennefs of the mines, however, which
jtnay happen at any particular time to fupply the comuiercial
world, is a circumftance which, it is evi'dent, may have no
fort of connecSlion with the ftate of induftry in a pa tic alar
country. It feems to have no very neceffary connedlion
v/ith that of the world in general. As arts and commerce,
indeed, gradually fprea^ themfelves over a greater and a
greater part of the earth, the fearch for new mi ;i.:.s, being
extended over a wider furface, may have fomswhat a better
chance for being fuccefsful, than when confined within nar-
rower bounds. The difcovery of i.iew mines, however, as
the old ones come to be gradually exhaufted, is a matter of
the greateft uncertainty, and fuch as no human (kill or in-
duftry can enfure. AH indications, it is acknowledged, are
doubtful, and the actual difcovery and fuccefsful workin-^j
of a new mine can alone afcertain the reality of its value, or
even of its exiftence. In this fearch there feem to be no cer-
tain limits either to the poffible fuccefs^ or to the pofiible dif-
appointment of human induftry. In the courfe of a ccnturv
or two, it is poffible that new mines may be difcovered
more fertile than any that have ever yet been known ; and it
is juft equally pofHble that the moft fertile mine then known
may be more barren than any that was wrought before the
difcovery of the mines of America, Whether the one or
the other of thofe two events may happen to take place, is of
very little importance to the real wealth and profperity of the
world, to the real value of the annual produce of the hiid
R 2 and
244 THE NATURE AND CAUSES OF
and labour of mankind. Its nominal value, the quantity of
gold and (ilver by vvluch this annual produce could be ex-
preffed or reprefented, would, no doubt, be very different *,
but its real value, the real quantity of labour w^hich it could
purchafe or command, would be precifely the fame. A fliil-
ling might in the one cafe reprefent no more labour than a
penny does at prefcnt ; and a penny in the other m.ight re-
prefent as much as a fliilling does now. But in the one cafe
he who had a (hilling in his pocket, would be no richer than
he who has a penny at prefent ; and in the other he who had
a penny would be juft as rich as he who has a {hilling now.
The cheapnefs and abundance of gold and filver plate, would
be the fole advantage which the world could derive from the
one event, and the dearnefs and fcarclty of thofe trifling fu-
perfiuities the only inconveniency it could fulfer from the
other.
Couclufton of the Digrejfion concerning the WariatioJis in the
Value of Silver.
The greater part of the writers who have collected the
money prices of things in antient times, feem to have confi-
dered the low money price of corn, and of goods in general,
or, in other words, the high value of gold and filver, as a
proof, not only of the fcarclty of thofe metals, but of the po-
verty and barbarifm of the country at the time when it took
place. This notion is connefted with the fyitcm of politi-
cal oeconomy which reprefents national wealth as confiding
in the abundance, and national poverty in the fcarcity of gold
and filver ; a fyflem which I fhall endeavour to explain and
examine at great length in the fourth book of this enquiry.
I flirjl only obferve at prefent, that the high value of the pre-
cious metals can be no proof of the poverty or barbarifm of
any particular country at the time when it took place. It is
a proof only of the barrennefs of the mines which happened
at that time to fupply the commercial world. A poor coun-
try, as it cannot atford to buy more, fo it can as little afford
to pay dearer for gold and filver than a rich one; and the
value oi thofe metals, therefore, is not likely to be higher in
the former than in the latter. In China, a country much
richer than any part of Europe, the value of the precious
metals is much higher than in any part of Europe. As the
wealth of Europe, indeed, has increafed greatly fmce the
difcoverv
THE WEALTH OF NATIONS. 245
difcovery of the mines of America, fo the value of gold and
filver has gr.idually diminiflied. This diminution of their
value, however, has not been owing to the increafe of the
real wealth of Europe, of the annual produce of its land and
labour, but to the accidental difcovery of more abundant
mines than any that were known before. The increafe of
the quantity of gold and filver in Europe, and the increafe of
its manufaflures and agriculture, are two events which,
though they have happened nearly about the fame time, yet
have arlfen from very di:Ferent caufes, and have fcarce any
natural connecftion with one another. The one has arifen
from a mere accident, in which neither prudence nor policy
either had or could have any fhare : The other from the fall
of the feudal fyflem, and from the ellabliOiment of a govern-
ment which aiPorded to induitry, the only encouragement
v/hich it requires, fome tolerable fecurity that it fliall enjoy
the fruits of its own labour. Poland, where the feudal iyf-
tem ftill continues to take place, is at this day as beggarly a
country as it was before the difcovery of America. The
money price of corn, however, has rifen ; the real value
of the precious metals has fallen in Poland, in the fame man-
ner as in other parts of Europe. Their quantity, therefore,
muft have increafed there as in other places, and nearly in
the fame proportion to the annual produce of its land and
.labour. This increafe of the quantity of thofe metals, how-
ever, has not, it feems, increafed that annual produce, has
neither improved the manufavTlures and agriculture of the
country, nor mended the clrcumftances of its inhabitants.
Spain and Portugal, the countries which poflefs the mines,
are, after Poland, perhaps, the two moft beggarly countries
in Europe. The value of the precious metals, however, muft
be lower in Spain and Portugal than in any other part of
Europe ; as they come from thofe countries to all other
parts of Europe, loaded, not only with a freight and an infur-
ance, but Vv'ith the expence of fmuggling, their exportation
being either prohibited, or fubjecfted to a duty. In propor-
tion to the annual produce of the land and labour, therefore,
their quantity muft be greater in thofe countries than in anv
other part of Europe : Thofe countries, however, are poorer
than the greater part of Europe. Though t" e feudal fyftem
has been abohfhed in Spain and Portugal, it has not been
fucceeded by a much better.
As
246 THE NATURE AND CAUSES OF
As the low value of gold and filver, therefore. Is no prooi
of the wealth and flouriiliing ftate of the country where it
takes place ; fo neither is their high value, or the low money
price either of goods in general, or of corn in particular, any
proof of its poverty and barbarifm.
But though the low money price either of goods in
general, or of corn in particular, be no proof of the
poverty or barbarifm of the times, the lov/ money price of
fome particular forts of goods, fuch as cattle, poultry,
game of all kinds, &c. in proportion to that of corn, is a
mod decilive one. It clearly demonftrates, firft, their
great abundance in proportion to that of corn, and confe-
quently the great extent of the land which they occupied
in proportion to what was occupied by corn ; and fecond-
ly, the low value of this land in proportion to that of corn
land, and confequently the uncultivated and unimproved-
ftate of the far greater part of the lands of the country. It
clearly demonftrates that the (lock and population of the
country did not bear the fame proportion to the extent of
Its territory, which they commonly do in civilized countries,
and that fociety was at that time, and in ~^that country,
but in its infancy. From the high or low money price
either of goods in general, or of corn in particular, we can
infer only that the mines which at that time happened to
fupply the comnaerclal world with gold and filver, were fer-*"
tile or barren, not that the country was rich or poor. But
from the high or low money price of fome forts of goods irr
proportion to that of others, we can Jnfer with a degree of
probability that approaches almoft to a certainty, that it was-
rich or poor, that the greater part of its lands were Improved
or unimproved, and that it was either in a more or lefs bar-'
barous ftate, or in a more or lefs civilized one.
Any rife In the money price of goods which proceeded al-
together from the degradation of the value of filver, would
aff'efl all forts of goods equally, and raife their prices univer-^
fally a third, or a fourth, or a fifth part higher, according as
filver happened to lofe a third, or a fourth, or a fifth part of
its former value. But the rife in the price of provifions,
which has been the fubjedl: of fo much reafoning and con-
verfation, does not affevft all forts of provifions equally.
Taking the courfe of the prefent century at an average, the
price
THE WEALTH OF NATIONS. 247
price of corn, it is ackno'v(^ledged, even by thofe who accounir
for this rife by the degradation of the value of filver, has rifen
much lefs than that of fome other forts of provifions. The
rife in the price of thofe other forts of provifions, therefore,
cannot be owing altogether to the degradation of the value of
filver. Some other caufes muil be taken into the account,
and thofe which have been above affigned, will, perhaps,
without having recourfe to the fuppofed degradation of the
value of filver, fufficicntly explain this rife in thofe particular
forts of provifions of which the price has a6lually rifen in
proportion to that of corn.
As to the price of corn itfelf, it has, during the fixty-four
fiift years of the prefcnt century, and before the late-extraor-
diuary courfe of bad feafons, been fomewhat lower than
it was during the fixty-four lad years of the preceding cen-
tury. This fadl: is attefted, not only by the accounts of
"Windfor market, but by the public fiars of the different
counties of Scotland, and by the accounts of feveral different
markets in France, which have been collefted with great di-
ligence and fidelity by Mr. Meflance, and by Mr. Dupre de
St. Maur. The evidence is more ccmpleat than could well
have been expelled in a matter which is naturally fo very dif-
ficult to be afcertained*
As to the high price of corn during thefe lafl ten or twelve
years, it can be fufticiently accounted for from the badnefs
of the feafons, without fuppofing any degradation in the
value of filver.
The opinion, therefore^ that filver is continually finking
in its value, feems not to be founded upon any good obfer-
Vations, either upon the prices of corn, or upon thofe of other
provifions.
The fame quantity of fidver, it rtiay, perhaps, be faid,
will in the prefent times, even according to the account which
has been here given, purchafe a much fmaller quantity of fe-
veral forts of provifions than it would have done during fome
part of the laft century ; and to afcertaln whether this change
be owing to a rife in the value of thofe goods, or to a fall in
the value of filver is only to eftablifib a vain and ufelcfs dif-
tin6lion, which can be of no fort of fervice to the man who
has only a certain quantity of filvei* to go to malrkct with, or
a certaizi
248 THE NATURE AND CAUSES OF
a certain fixed revenue in money. I certainly do not pretend
that the knowledge of this diftinclion will enable him to buy
cheaper. It may not, however, upon that account be alto-
gether uielefs.
I r may be of fome ufe to the public by affording an eafy
proof of the profperous condition of the country. If the rife
in the price of fome forts of provifions be owing altogether to
a fall in the value of filYer, it is owing to a circumftance from
which nothiaig can be inferred but the fertility of the Ame-
rican mines. The real wealth of the country, the annual
produce of its land and labour, may, notwithflanding this
circumftance, be either gradually declining, as in Portugal
and Pol.'.nd ; or gradually advancing, as in moll other parts
of Euro-pe. But if this rife in the price of fome forts of pro-
vifions be o\\'Ing to a rife in the real value of the land which
produces" them, to its increafcd fertility ; or, in confequence
of more extended improvement and good cultivation, to its
having been rendered fit for producing corn ; it is owing to a
circumftance which Indicates in the cleareft manner the prof-
perous and advancing ftate of the country. The land confli-
tutes by far the greateft, the moft important, and the mod
durable part of the wealth of every extcnlive country. It
may furely be of fome ufe, or, at leaft, it may give fome fa-
tisfadlion to the Public, to have fo decifive a proof of the in-
creafmg value of by far the greateft, the moil im-portanty and
the moll durable part of its wealth.^
It may too be of fome ufe to the Public in regulating the
pecuniary reward of fome of its inferior fervants. If this rife
in the price of fome forts of provifions be owing to a fall in
the value of filver, their pecuniary reward, provided it was
not too large before, ought certainly to be augmented in pro-
portion to the extent of this fall. If it is not augmented, tlieir
real recompcnce will evidently be fo much diminiflied. But
if this rife of price is owing to the increafed value, in confe-
quence of the improved fertility of the land which produces
fuch provifons, it becomes a much nicer matter to judge ei-
ther in wli^t proportion any pecuniary reward ought tp be
augmented, or whether it ought to be augmented at alL
Tlie extenficn of improvement and cultivation, as it necef*
farily rifes more or lefs, in proportion to the price of corn,
tliat of every fort cf animal food, fo it as necefiurily lowers
that of, I believe, every fort of vegetable food. It raifes the
price
THE WEALTH OF NATI0>[3, 249
vj)rice of animal food ; becaufe a great part of the land vvhicli
produces it, being rendered fit for producing corn, rnuil af-
ford to the landlord and farmer the rent and profit of corn-
land. It lowers the price of vegetable food ; becaufe, by in-
creafmg the fertility of the land, it increafes its abundanc-e.
The improvements of agriculture too introduce many forts of
vegetable focd, which, requiruig lefs land and not more la-
bour than corn, come much cheaper to market. Such are
potatoes and maize, or wliat Is called Indian corn, the two
mod important improvements which the agricuhure of Eu-
rope, perhaps, which Europe itfelf, has received from the
great extenfion of its commerce and navigation. Many forts
of vegetable food, bcfides, which in the riide (bate of agricul-
ture are confined to the kitchen-garden, and raifed only by
the fpade, come in its improved Itate to be introduced into
common fields, and to be raifed by the plough : luch as tur-
nips, carrots, cabbages, &c. If in the progrefs of im.prove-
ment, therefore, the real price of one fpecies of food rtecef-
farily rifes, that of another as neceflarily falls, and it becomes
a matter of more nicety to judge how far the rife in the one
may be compenf<Tted by the fall in the other. When the real
price ot butcher's meat has once got to its height (which witii
regard to every fort, except, perhaps, tliat of hogs fieili, it
fcems to have done through a great part of England, more
than a century ago), any rife which can afterwards happen in
that of any other fort of animal food, cannot much aflecl the
circumfi.ances of tlie inferior ranks of people. The circum-
(lances of the poor through a great part of England cannot
furely be [o much diftrefied by any rife In the price of poul-
try, fiih, wild-fowl, or venifon, as they muil be relieved bv
the fall in that of potatoes.
In the prefent feafon of fcarclty the high price of corn no
doubt dlilrefTes the poor. But in times of moderate plenty,
when corn is at its ordinary or average price, tlie natural rife
in the price of any other fjrt ox rude produce canno;- much
affecl tiiem. Theyfuifer more, perliaps, by the artificial rife-
which has been occalioned by taxes in rhe price of fome ma-
nufadured commodities •, as of filt, foap, leather, candles^
malt, beer and ale, &c.
Jsf'.ls
250 THE NATURE AND CAUSES OF
Effects of the Progreff of Improvement upon the real Price
of ManufaElures,
JlT is the natural effefl of improyement, however, to di-
i^iiniih gradually the real price of almoft all manufactures*
That of the nnanufacluring workmanfliip diminirnes, per-
haps, in all of them v/ithout exception. In confequence of
better machinery, of greater dexterity, and of a more proper
divifion and diflribution of work, all of which are the natural
eifeifls of improvement, a much fmaller quantity of labour
becomes requifite for executing any particular piece of work ;
and though, hi confequence of the flourirning circumflances
of the fociety, the real price of labour fiiould rife very confi-
derably, yet the great diminution of the quantity will gene-
raUy much more than eompenfate the greateft rife which can
happen in the price»
There are, indeed, a few manufactures, in which the
necelTary rife in the real price of the rude materials will more
than eompenfate all the advantages which improvement can
introduce into the execution of the work. In carpenters and
joiners v/ork, and in the coarfer fort of cabinet work, the ne-^
celTary rife in the real price of barren timber, in confequence
of the improvement of land, will more than eompenfate all
the advantages which can be derived f^om the beft machine-
?y, the greateft dexterity, and the moft proper divifion and
diftribution of work.
But in all cafes in which the real price of the rude
materials either does not rife at all, or does not rife very
much, that of the manufactured commodity finks very confi-
derably.
This diminution of price has, in the courfe of theprefent
and preceding century, been moft remarkable in thofe ma-
nufactures of which the materials are the coarfer metals.
A better movement of a watch, than about the middle of the
laft century could have been bought for twenty pounds, may
now perhaps be had for twenty Ibillings. In the work of
cutlers
THE WEALTH OF NATIONS. 25^
cutlers and lockfmiths, in all the toys which are made of tlis
coarfer metals, and in all thofe goods which are commonly-
known by the name of Birmingham and Sheltield ware, there
has been, during the fame period, a very great redud^ion of
price, though not altogether fo great as in watch-work. It
has, hov/ever, been fufficient to aftonifli the workmen of
every other part of Europe, who in many cafes acknowledge
that they can produce no work of equal goodnefs for double,
or even for triple the price. There are perhaps no manufac-
tures in which the divifion of labour can be carried further,
or in which fhe machinery employed admits of a greater va-
riety of improvements, than thofe of which the materials are
the coarfer metals.
In the dothing manufacture there has, during the fame
period, been no fuch fenfible redudlion of price. The price
of fuperfine cloth, I have been alTured, on the contrary, has,
within thefe five-and-twenty or thirty years, rifen fomewhat
in proportion to its quality j owing, Jt was faid, to a confi-
derable rife in the price of the material, which confifts alto-
gether of Spanifli wool. That of the Yorkfhire cloth, which
is made altogether of Englifh wool, is faid indeed, during the
tourfe of the prefent century, to have fallen a good deal in^
proportion to its quality. Quality, however, is fo very dif-
putable a matter, that I look upon all information of this
kind as fomewhat uncertain. In the clothing manufa61:ure,
the divifion of labour is nearly the fame now as it was a cen-
tury ago, and the machinery employed is not very dif-
ferent. There may, however, have been fonie fmall im-
provements in both, which may have occafioned fome reduc-
tion of price.
BtTT the reduflion will appear much more fenfible and
undeniable, if we compare the price of this manufadl:urc
in the prefent times Vvath what it was in a much remoter
period, towards the end of the fifteenth century, when
the labour was probably mucli lefs fubdivided, and the
machinery employed much more h'nperfe<5i than it is at
i^rcfcnt.
A
In 1487, being the 4th^of Henry VII. it wis enaifled,
that " whofoever fliall ft 11 by retail a broad yard o( the finelt
** fcarlet grained, or of otiier graiiKd clotli of the hneft
" making'
252 THE NATURE AND CAUSES OF
" making, above fixteen fhilllngs, fhall forfeit forty fliillings
*« for every yard fo fold." Sixteen fliillings, therefore, con-
taining about the fame quantity of filver as four-and-twenty
{hilhngs of our prefent money, was, at that time, reckoned
not an unreafonable price for a yard of the fined cloth ; and
as this is a fumptuary law, fuch cloth, it is probable, hadufu-
aliy been fold fomewhat dearer. A guinea may be reckoned
the higheft price in the prefent times. Even though the qua-
lity of the cloths, therefore, fhould be fuppofed equal, and
that of the prefent times is moft probably much fuperior, yet,
even upon this fuppofition, the money price of the fineft cloth
appears to have been confiderably reduced fince the end of the
fifteenth century. But its real price has been much more
reduced. Six (liillings and eight-pence was then, and long
afterwards, reckoned the average price of a quarter of wheat.
Sixteen fhillings, therefore, was the price of two quarters
and more than three bufliels of wheat. Valuing a quarter of
wheat in the prefent times at eight-and-twenty fhillings, the
real price of a yard of fine cloth muft, in thofe times, have
been equal to at leaft three pounds fix fliillings and fix-pence
of our prefent money. The man who bought it mull have
parted with the command of a quantity of labour and fubfift-
ence equal to what that fum would purchafe in the prefent
times.
The reduiflion in the real price of the coarfe manufacture,
though confiderable, has not been fo great as in that of the
fine.
In 1463, being the 3d of Edward IV. it was enacled, that
f' no fervant in hufbandry, nor common labourer, nor
** fervant to any artificer inhabiting out of a city or burgh,
*^ jfhall ufe or wear in their clothing any cloth above two
*' fliillings the broad yard." In the 3d of Edward IV.
two fliillings contained very nearly the fame quantity of
lilver as four of our prefent money. But the Yorkdiiie
cloth which is now fold at four fhillings the yard, is pro-
bably much fuperior to any that was then made for the
wearing of the very poorell order of common fervants.
Even the money price of their cloathing, therefore, may>
in proportion to the quality, be fomewhat cheaper in
the prefent than it was in thofe antient times. The rerd
price is certainly a good deal cheaper. Ten pence was
then
THE WEALTH OF NATIONS. 253
then reckoned what is called the moderate and reafon-
able price of a bufliel of wheat. Two fhilhngs, there-
fore, was the price of two bufliels and near two pecks
of wheat, which in the prefent times, at three fliilHngs
and fix-pence the builiel, would be worth eight Ihillings and
nine-pence. For a yard of this cloth the poor fervant mult
have parted with the power of purchafing a quantity of fub-
nilence equal to what eight fliillings and nine-pence would
purchafe in the prefent times. This is a fumptuary Uw too,
reftraining the luxury and extravagance of the poor. Their
cloathing, therefore, had commonly been much more ex-
penfive.
The Tame order of people are, by the fame law,
prohibited from wearing hofe, of which the price fhould
exceed fourteen-pence the pair, equal to about eight-
and-twenty-pence of our prefent money. But fourteen-
pence was in thofe times the price of a bufliel and near
two pecks of wheat -, which, in the prefent times, at three
and fix-pence the bufhel, would coil five (hillings and three-
pence. We fliould in the prefent times confider this
as a very high price for a pair of ftockings to a fervant of
the pooreft and loweft order. He muft, however, in thofe
times have paid what was really equivalent to this price for
them.
In the time of Edward IV. the art of knitting (lockings
was probably not known in any part of Europe. Their hofe
were made of common cloth, which may have been one of
the caufcs of their dearnefs. The firll perfon that wore
ftockings in England is faid to have been Queen Elizabeth.
She received them as a prefent from the Spanilh ambaf-
fador.
Both in tlie coarfe and in the fine woollen manufac-
ture, the machinery employed was much more imperfe(rt iu
thofe antient, than it is in the prefent times. It has (ince
received three very capital improvements, befides, probably,
many fmaller ones of which it may be difficult to afcertain
either the number or the importance. The three capital
improvements are ; firft. The exchange of the rock and
fpindle for the fpinning-wheel, which, Vv^ith tlie fame
quantity of labour, will perform mors than double the
quantity
254 THE NATURE AND CAUSES OF
quantity of work. Secondly, the ufc of feveral very In-
genious machines which facilitate and abridge in a dill
greater proportion the winding of the worfted and woollen
yarn, or the proper arrangement of the warp and woof
before they are put into the loom ; an operation which, pre-
vious to the invention of thofe machines, muft have been
extremely tedious and troublefome. Thirdly, The employ-
ment of the fulling mill for thickening the cloth, imlead of
treading it in water. Neither wind nor water mills of any
kind were known in England fo early as the beginning of the
fixteenth century, nor, fo far as I know, in any other part
of Europe north of the Alps. They had been introduce4
into Italy fome time before.
The confideration of thefe circumfliances may, per-
haps, in fome meafure explain to us why the real price
both of the coarfe and of the fine manufacfture, was fo much
higher in thofe antient, than it is in the prefent times. It
coft a greater quantity of labour to bring the goods to
market. Vv^hen they were brought thither, therefore, they
muft have purchafed or exchanged for the price of a greater
quantity.
The coarfe manufa£lure probably was, in thofe antient
times, carried on in EngLind, in the fame manner as it al-
ways has been in countries where arts and manufactures are
in their infancy. It was probably a houfehold manufaOure,
In which every different part of the work was occafionaliy
performed by all the different members of almoft every pri-
vate family ; but fo a^ to be their v/ork only when they had
nothing elfe to do, and not to be the principal bufinefs from
which any of them derived the greater part of their fubfif-
tence. The work which is performed in this manner, it has
already been obferved, comes always much cheaper to market
than that which is the principal or fole fund of the work-
man's fubfiflence. The fine rnanufacfure, on the other
hand, was not in thofe times car^-ied on in England, but
in the rich and commercial country of Flanders ; and it
was probably conducted then, in the fame manner as
now, by people who derived the whole, or the principal
part of their fubfiflence from it. It was befides a foreign
manufacture, and muft have paid fome duty, the an-
tient cuftom of tonnage and poundage at Icaft, to the king.
'J,l-us
THE WEALTH OF NATIONS. 255
This duty, indeed, would not probably be very great.
It was not then the policy of Europe to reftrain, by high
duties, the importation of foreign manutacfburcs, but ra-
ther to encourage it, in order that merchants might be
enabled to fupply, at as eafy a rate as poflible, the great
men with the conveniencies and luxuries which thev want-
ed, and which the indullry of their own country could not
afford them.
The confideration of thefe circumftances may perhaps In
fome meafure explain to us why, in thofe antient times,
the real price of the coarfe manufa6lure was, in propor-
tion to that of the fine, fo much lower than in the prefent
funes.
Conclusion of the Chapter.
SHALL conclude this very long chapter with obferv-
ing that every improvement in the circumftances of the
fociety tends either directly or indirectly to raife the real rent
of land, to increafe the real wealth of the landlord, his
power of purchafmg the labour, or the produce of the la-
bour of other people.
The extenfion of improvement and cultivation tends to
raife it direc^lly. The landlord's Ihare of the produce necef-
farily increafes with the increafe of the produce.
That rife in the real price of thofe parts of the rude pro-
duce of land, which Is firft the effect of extended improve-
ment and cultivation, and afterwards the caufe of their being
(lill furtlter extended, the rife in the price of cattle, for ex-
ample, tends too to raife the rent of land directly, and in a
ftill greater proportion. The real value of the landlord's
fhare, his real conamand of the labour of other people, not
only rifes with the real value of the produce, but the propor-
tion of his ffiare to the whole produce rifes with it. That
produce, after the rife in its real price, requires no more
labour to collect it than before. A fnialler proportion of
it will, therefore, be fullicient to replace, with the ordi-
nary profit, the . ftock which employs that labour. A
greater proportion of it muii, confcquently, belong to the
landlord.
All
2=6 THE NATURE AND CAUSES OF
All thofc improvements in the producflive powers of la-
bour, which tend direcftiy to reduce the real price of ma-
ijufafturesj tend indirecS^ly to raife the real rent of land.
The landlord exchanges that part of his rude produce, ^v'hich
is over and above his own confumption, or v/hat comes to
the fame thing, the price of that part of it, for manufac-
tured produce. Whatever reduces the real price of the lat-
ter, raifes that of the former. An equal quantity of the
former becomes thereby equivalent to a greater quantity of
the latter 5 and tli€ landlord is enabled to purchafe a greater
^quantity of the conveniencies, ornaments, or luxuries,
\yhich he has occafion for.
Every increafe in the real wealth of the fociety, every
increafe in the quantity of ufeful labour employed Vv^thin
it, tends indiredlly to raife the real rent of land. A certain
proportion of this labour naturally goes to the land. A
greater number of men and cattle are employed in its culti-
vation, the pro.duce increafes with the increafe of the (lock
which is thus employed in rainng it, and the rent increafes
with the produce.
The contrary circumdarices, the neglecl of cultivation
and improvement, the fall in the real price of any part of
the rude produce of land, the rife in the real price of ma-
nufaftures from the decay of manufacturing art and induf-_
tr'V, the declenfion of the real wealth of the focietv, all
tend, on the other hand, to lower the real rent of land,
to reduce the real wealth of the landlord, to diminifli his
power of purchafing either the labour, or the produce of
the labour of other people*
The whole annual produce of the land and Labour of
every country, or what comes to the fame thing, the whole
price of that annual produce, naturally divides itfelf, it has
already been obferved, into three parts ; the rent of land,
the wages of labour, and the profits of ftock ; and conftitutcs
a revenue to three different orders of people •, to thofe who
live by rent, to thofe who live by wages, and to thofe who
live by profit. Thefe are the three great, original and con-
ftituent orders of every civilized fociety, from whofe revenue
that of every other order is ultimately derived.
The
THE WEALTH OF NATIONS. 257
The intereft of the firft of thofe three great orders, it ao-
pears from what has been juft now faid, is itri6lly and infe-^
parably connecfted with the general intereft of the fociety.
Whatever either promotes or obflru6ls the one, neceffariiy
promotes or obftrucSls the other. When the pubUc dehbe«^
rates concerning any regulation of commerce or poUce, the
proprietors of land never can miflead itj with a view to pro-
mote the intereft of tlicir own particular order; at leaft, if
they have any tolerable knowledge of that intereft. They
are, indeed, too often defective in this tolerable knowledge.
They are the only one of the three orders whofe revenue
cofts them neither labour nor care, but comes to them, as it
were, of its own accord, and independent of any plan or
projedl of their own. That indolence, which is the na-
tural efFc61: of the eafe and fecurity of their fituation,
renders them too often, not only ignorant, but incapa-
ble of that application of mind which is neceilary in order
to forefee and underftand the confequences of any public re-
gulation.
The intereft of the fecond order, that of thofe who live
by wages, is as ftri^lly connected with the intereft of the
fociety as that of the hrft. The wages of the labourer, it
has already been ftiewn, are never fo high as when the de-
mand for labour is continually rifing, or when the quantity
employed is every year increafing confiderably. When this
real wealth of the fociety becomes ftationary, his wages are
foon reduced to what is barely enough to enable him to brin^
up a family, or to continue the race of labourers. W^hcn
the fociety declines, they fall even below this. The order of
proprietors may perhaps, gain more by the profperity of the
fociety, than that of labourers : but there is no order that
fufters fo cruelly from its decline. But thourh the intereft
of the labourer is ftrictly connected with that of the fociety,
he is incapable either of comprehending that intereft, or of
underftanding its conne(5\Ion with his own. His condition
leaves him no time to receive the neccflary information, and
his education and habits are commonly fuch as to render him
unfit to judge even though he was fully informed. In the
public deliberations, tlierefore, his voice is little heard and
lefs regarded, except upon fome particular occafions, when
his clamour is animated, fet on, and fupported by his em-
ployers, not for his, but their own particular purpofes.
Vol.. I. S His
258 THE NATURE AND CAUSES OF
His employers conftitute the third order, that of thofc
who live by profit. It is the flock that is employed for the
fake of profit, which puts into motion the greater part of the
ufeful labour of every fociety. The plans and projects of
the employers of flock regulate and direct all the moft im-
portant operations of labour, and profit is the end propofed
by all thofe plans and proje<Cls. But the rate of profit does
not, like rent and wages, rife with the profperity, and fall
with the declenfion of the fociety. On the contrary, it is
jiaturally low in rich, and high m poor countries, and it is
always highefl in the countries which are going faflefl to
ruin. The intcrefl of this third order, therefore, has not
the fame connecSlion with the general interefl of the fociety
as that of the other two. Merchants and mafler manufac-
turers are, in this order, the two clafles of people who com-
monly employ the largeft capitals, and who by their wealth
draw to thcmfelves the greatefl fhare of the public confi-
deration. As during their whole lives they are engaged in
plans and proje£ls, they have frequently more acutenefs of
underflanding than the greater part of country gentlemen.
As their thoughts, however, are commonly exercifed rather
about the interefl of their own particular branch of bufmefs,
than about that of the foeiety, their judgment even when
given with the greatefl candour (which it had not been upon
every occafion) is much more to be depended upon with re-
gard to the former of thofe two obje^ls, than with regard to
the latter. Their fuperiority over the country gentleman is,
not fo much in their knowledge of the public interefl, as
in their having a better knowledge of their own interefl
than he has of his. It is by this fuperior knowledge of
their own interefl that they have frequently impofed upon
his generofity, and perfuaded him to give up both his own
interefl and that of the public, from a very fimple but
honefl convi6lion, that their interefl, and not his, was the
interefl of the public. The interefl of the dealers, however^
in any particular branch of trade or manufacftures, is always
in fome refpedls different from, and even oppofite to, that
of the public. To widen the market and to narrow the
competition, is always the interefl of the dealers. To widen
the market may frequently be agreeable enough to the in-
terefl of the public ; but to narrow the competition muft
always be againfl it, and can ferve only to enable the dealers,
by raifmg their profits above what they naturally would be,
to
THE WEALTH OF NATIONS.
2S9
to levy, for their own benefit, an abfurd tax upon the reft
of their fellow-citizens. The propofal of any new law or
regulation of commerce which comes from this order, ought
always to be liftened to with great precaution, and ought
never to be adopted till after having been long and carefully
examined, not only with the moft fcrupulous, but with the
moft fufpicious attention. It comes from an order of men,
whofe intereft is never exa^lly the fame with that of the pub-
lic, who have generally an intereft to deceive and even to op-
prefs the public, and who accordingly have, upon many oc*
cafions, both deceived and opprefied it.
Years
XII.
1202
1205
1223
1237
1243
1244
1246
1247
1257
1258
1270
1286
Price of the Quar-
ter of Wheat each
Year.
Average of the dif-
ferent Prices of the
fame Year.
d.
17 —
12 —
9 4
The average Pric« of
each Year in Money
of the prefentTimes,
£■
I
2
I
J". d,
16 —
16 —
ID
6 —
6 —
8 -—
12 —
II —
16 16 —
I 8 —
Total, 35 9 3
Average Price, 2 19 i
S 2
26o THE NATURE AND CAUSES OF
Years
XII.
Price
of the
Quar-
Average of the dif-
The average
Price of
ter
of Wht
"at each
ferent Prices of the
each Year in Money
Year.
fame Year.
of the prefent Times.
£■
/.
r/.
£, s. d.
£■ ^-
d.
1287
3
4
8--
10
I
I
4
128S
i
I
I
2
3
9
12
6
4
4^
- 3 -k
-- 9
4-
1289
2
10
■ - |>
8
— 10 i;^
I 10
4j
1290
16
2 8
1294
16
2 8
1302
4
— 12
1309
7
2
I I
6
^315
I
r ■
-j
3
1316
2
10
12
^
I 10 6
4 II
6
" 2
4
14
f>
J317
<j 2
A
13
I 19 6
5 18
6
4
6
8J
-
1336
2
6
1338
3
4
— 10
Total,
Average Price,
23 4
11^
I 18
8
THE WEALTH OF NATIONS.
26
Years
XII.
Price of the Quar-
ter of Wheat each
Year.
Average of the dif-
ferent Prices of the
fame Year.
1339
1349
1359
1361
1363
1369
1379
1387
1390
1401
1407 J n
1416. —
n
i
s.
9
2
6
2
4
4
2
13
14
16
16
4
3
16
d.
'}
The average Price of
each Year in Money
of the prcfcnt Times.
£'
d.
£'
14
10
£'
s.
d.
£■
1423
8
1425
4
1434
I
6
8
1435
5
4
C T
a^
1439^ I
6
I
1440
I
4
1444
)
4
4
4 ?
1445
4
6
1447
8
1448
6
8
1449
5
1450
^
—
Total, 15
Average Price i
s.
d.
— 4
;^.'
J".
7
5
4
15
9
4
13
17
8
12
J.
2
2
8
4
II
9t
16
8
13
10
6
8
8
9
16
13
10
16
Total, 12 15 4
Average Price i i 3^
■i62 THE NATURE AND CAUSES OF
Years
XII.
M53
1455
1457
1459
1460
1463
1464
i486
J491
1494
^A9S
1497
Price of the Quar-
ter of Wheat each
Year.
ATcrage of the dif-
ferent Prices of the
fame Year.
Tbe average Price of
each Year in Money
of the prefcnt Times.
£' ^•
d.
£■ '•
d.
£>' X. d-
5
4
— —
—
— 10 8
— I
2
— —
— 2 4
7
8
— —
— 15 4
5
—
— ^—
—
— 10 —
— 8
— ^-
—
— 16 —
{- ^
.(
— I
10
- 3 8
— 6
8
— —
— 10 ^—
2 4
—
— —
I 17 —
— 14
8
—
I 2 —
— 4
—
— —
-^ 6 -"^
— 3
4
— -^
— 5 —
I —
—
— —
III —
Total, 89 —
Averasje,
—
14
1
£•
/.
d.
£•
s. d.
£■
S,
d.
1409
4
—
— —
—
6
—
1504
—
5
8
— •
—
8
6
I52I
I
— —
I
10
—
M^-I
8
— —
2
—
^553
8
—
— —
—
8
—
^554
8
—
- —
—
—
8
— '
^SS^^
8
—
— —
8
—
JS5^
B
4
~
""
~
8
~
^557
^ 2
5
8
13
4-^
—
17 H
—
17
8^
1558
8
— —
—
8
U59
^
—
8
1560
8
—
8
Total,
Average Price,
10
. 5
T5-
THE WEALTH OF NATIONS.
263
Years
xfr.
Price of the Quar-
ter of Wheat each
Year.
Average of the dif-
ferent Prices of the
fame Year.
The average Price of
each Year in Money
of the prcfentTime.
1561
1562
£• -
— 8
8
d.
£■ ^- d-
£■ -
8
- 8
d.
1574
C 2 i6
C I 4
2
^ -
—
1587
3 4
3 4
—
1594
2 16
2 16
1594
2 13
— —
2 13
1596
4
--~
4
"*""
1597
\\ -
4 12
4 12
—
1598
2 16
8
— — —
2 16
8
1599
x6oo
I 19
I 17
2
8
I 19
I 17
2
8
1601
1 14
19
Total,
Average Pric<
I 14
10
28 9
4
•> 2 7
Si
264 THE NATURE AND CAUSES OF
prices of the ^larterofnine Bujhels of the heft or highejl priced
Wheat at Windfor Market^ on Lady-Day and MichaelmaSy
from 1595 to 1764, both inclufive i the Price of each Tear
being the medium between the htghejl Prices of thofe Two
Market Days.
^Vheat per quarter. |
Wheat ]
Der quarter
Years.
l.s.
^.
Years.
I
. s, d.
^S9S
-
2 0
0
1621
I
10 4
1596
-
2 8
0
1622
2
18 8
1597
-
3 9
6
1623
2
12 0
1598
-
2 16
8
1624
2
8 0
^S99
-
I 19
2
1625
2
12 0
1600
-
I 17
8
1626 -
2
9 4
1601
.
I 14
10
1627
I
16 0
1602
-
I 9
4
1628 .
I
8 0
1603
-
I 15
4
1629
2
2 0
1604
>
I 10
8
1630 -
2
15 8
1605
-
^ 15
10
1631 -
3
8 0
j6q6
-
^ 13
0
1632 -
2
^3 4
1607
»
I 16
8
1^33 -
2
18 0
1608
-
2 16
8
1634 -
2
16 0
1609
-
2 10
0
1635 -
2
16 0
1610
-
I 15
I 18
10
8
1636 .
2
16 8
1611
-
1612
-
2 2
4
16)40
0 0
1613
-
2 8
8
1614
-
2 I
H
2
10 0
1615
-
I 18
8
1616
-
2 0
4
1617
^
2 8
8
1618
-
2 6
8
1619
-
I 15
4
1620
I 10
4
26)54 0
6i
2 I
^h
THE WEALTH OF NATIONS.
255
Years.
1^37
1638
1639
1640
1 64 1
1642
1643
1644
1645
1646
164J
1648
1649
1650
1651
1652
1654
1655
1656
1657
1658
1659
1660
1661
1662
1663
1664.
1665
1666
1667
1668
1669
1670
Wheat
per
quarter. 1
;^-
J-.
d.
^
2
13
0
-
2
17
4
-
2
4
IC
-
2
4
8
f
2
8
0
the
The
fup-
0
0
0
0
!r
•73
.S 0 ^^
^3
0
0
0
0
0
0
0
0
C U 4J
<u
e>
0
0
'0
rt rt >^
"p^tH
8
^
2
0
3
K^
8
-
4
5
0
-
4
0
0
-
3
16
8
-
3
13
4
-
0
4t<
9
6
-
I
15
6
«
J
(5
0
-
I
13
4
-
2
3
0
-
2
6
8
-
3
5
0
- ■
3
6
0
1.
2
16
6
3 lo
3 14
17
o
9
16
16
o
4
I
^Carry over, 79 14 10
Wheat per quarter.
Years.
£' '- ^'
Brought over.
79 14 10
1671
-
220
1672
-
;i T 0
1673
-
268
1674
-
3 8 S
1675
-
348
1676
-
I 18 0
1677
-
220
1678
-
2 19 0
1679
-
300
l(;8o
-
250
1681
-
268
1682
-
240
1683
-
200
1684
to
240
1685
-
268
1686
-
I 14 0
1687
-
I 5 2
1688
-
260
1689
-
I 10 0
1690 -
-
I 14 8
1 69 I
-
I 14 0
1692
-
268
1693
-
3 7 B
1694
-
340
^^95
-
2 13 0
1696
-
3 II 0
1697
-
300
1698
-
3 8 4
1699
-
340
1700
60)
200
153 I 8
2 IX 0^
i66 THE NATURE AND CAUSES OF
Wheat per quarter.
Wheat per quarter.
Years.
i-
S,
d.
Years.
c-
J-. d*
1701
•
I
17
8
Brought
over,
69
8 8
1702
-
I
9
6
1734
-
I
18 10
1703
I
16
0
1735
-
2
3 <^
1704
-
2
6
6
173^
-
2
0 4
J705
-
I
10
^
1737
.
}
18 0
1706
-
I
6
0
1738
.
I
15 6
1707
-
I
8
6
1739
-
I
18 6
1708
-
2
I
6
1740
-
2
10 8
1709
-
3
i8
6
1741
•
2
6 8
1710
-
3
18
0
1742
-
I
14 0
1711
•
2
14
0
1743
-
I
4 10
1712
-
2
6
4
1744
-
I
4 10
1713
-
2
II
0
1745
-
J
7 6
1714
r
2
10
4
1746
-
I
19 0
1715
»•
2
3
0
1747
."
I
14 10
1716
-
2
8
c
1748
SP
I
17 0
1717
-
2
5
8
1749
k>
I
17 0
1718
•
18
10
1750
->
I
12 6
1719
=-
li^
0
1751
-
X
18 6
1720
-
17
0
1752
-
2
I 10
172,1
-
17
6
1753
-
2
4 8
1722
-
\6
0
1754
-
I
14 8
1723
-
14
8
1755
-
1
13 10
1724
-
17
0
1756
-
2
5 3
1725
-
2
8
6
1757
-
3
0 0
1726
-
2
6
0
1758
••
2
10 0
2727
-
2
2
0
1759
^
I
19 10
1728
-
2
14
6
1760
f»
I
16 6
1729
-
2
6
10
1761
-
I
10 3
1730
-
I
\6
6
1762
-
I
19 0
1731
-
I
12
10
17^3
-
2
0 9
n32
-
I
6
8
1764
«9
2
6 9
^733
-
I
8
4
^ \
y'
64)
129
13 6
Carrv over. 60
8
8
4
* ^
2 (
Years.
THE WEALTH OF NATIONS. ^6^
Wheat per quarter, i Wheat per quarter.
£. /. d. Years.
I73I
1 12
10
174X
268
1732
-
I 6
8 1742
-
I 14 0
1733
-
I 8
4 1 1743
-
I 4 10
1734
-
1 18
10
1744
.-
I 4 lO
1735
-
2 3
0
I74V
-
I 7 6
i73<5
-
2 0
4
1746
-
I 19 0
1737
-
I 18
0
1747
-
1 14 TO
1738
-
I ^5
6
1748
-
I 17 0
^739
«
I 18
6
1749
-
I 17 0
1740
2 10
8
1750
112 6
10) 18 12
8
10) 16 18 2
I 17
3t
I 13 9f
BOOK 11.
NTRODUCTION.
Of the Nature, Accumulation, and Employment
of Stock.
In that rude ftate of fociety in which there Is no divifion
of labour, in which exchanges are feldom made, and in which
every man provides every thing for himfelf, it is not necefTary
that any ftock fliould be accumulated or ftored up before-
hand in order to carry on the bufinefs of the fociety. Every
man endeavours to fupply by his own induflry his own occa-
fional wants as they occur. When he is hungry, he goes ta
the foreft to hunt ; when his coat is worn out, he cloaths
himfelf with the fkin of the firft large animal he kills ; and
when his hut begins to go to ruin, he repairs it, as well as
he can, 'w4th the trees and the turf that are neareft it*
But when the divifion of labour has once been thoroughly
introduced, tl^e produce of a man*s own labour can fupply
but a very fmall part of his occafional wants. The far
greater part of them are fupplied by the produce of other
mens labour, which he purchafes with the produce, or, what
is the fame thing, with the price of the produce of his own.
But this purchafe cannot be made till fuch time as the pro-
duce of his own labour has not only been compleatcd, but
fold, A flock of goods of different kinds, therefore, muft be
ftored up fomewhere fufficient to maintain him, and to fup-
ply him with the materials and tools of his work till fuch
time, at leaft, as both thefe events can be brought about.
A weaver cannot apply himfelf entirely to his peculiar bufi-
nefs, unlefs there is beforehand ftorcd up fomewhere, either
in his own i^-orefhon or in that of fome other perfon, a ftock
fufficient
270 THE NATURE AND CAUSES OF
Sufficient to maintain him, and to fiipply him with the ma^
Aerials and tools of his work, till he has not only compleated,
but fold his web. This acctimitlation muft, evidently, hs
previous to his applying his induftry for fo long a time to
fuch 3 peculiar bufmefs.
As the accumulation of ftock mud, in the nature of things,
be previous to the divifion of labour, fo labour can be more
and more fubdivided in proportion only as flock is previouily
more and more accumulated. The quantity of materials
lyhich the fame number of people can work up, increafes in
a great proportion as labour comes to be more and more fub*
divided 5 and as the operations of each workman are gradu-
ally reduced to a greater degree of fimplicity, a variety of
nev/ machines come to be invented for facilitating arid abridg-
ing thofe operations. As the divifion of labour advances,
therefore, in order to give conftant employriient to an equal
number of workmen, an equal flock of provifions, and a
greater itock of materials and tools than what would have
been necefTary in a ruder fiate of things, mufl be accumu-
lated beforehand. But the number of workmen in every
branch of bufinefs generally increafes with the divifion of la-
bour in that branch, or rather it is the increafe of their
number which enables them to clafs and fubdivide them-
felves in this manner.
As the accumulation of flock is prcvioufly necefTary for
carrying on this great improvement in the produftive powers
of labour, fo that accumulation naturally leads to this im-
provement. The perfon who employs his flock in maintain-
ing labour, neceflarily wiflies to employ it in fuch a manner
as to produce as great a quantity of w^ork as pofTible. He en-
deavours, therefore, both to make among his workmen the
mofl proper diftribution of employment, and to furnifh them
with the befl machines which he can either invent or afford
to purchafe. His abilities in both thefe refpedls are generally
in proportion to the extent of his flock, or to the number of
people whom it can employ. The quantity of induftry,
therefore, not only increafes in every country with the in-
creafe of the flock which employs it, bi^t, in confequence
of that increafe, the fame quantity of induflry produces a
much greater quantity of work.
Such
THE WEALTH OF NATIONS. 271
Such are in general the efFefls of the increafe of ftock
upon induilry and its produdlive powers.
In the following book I have endeavoured to explain the
nature of ftock, the effects of its accumulation into capitals
of different kinds, and the effects of the different employ-
ments of thofe capitals. This book is divided into five
chapters. In the firft chapter, I have endeavoured to fhew
what are the different parts or branches into which the
ftock, either of an individual, or of a great fociety, natu-
rally divides itfelf. In the fecond, I have endeavoured to
explain the nature and operation of money confidered as a
particular branch of the general ftock of the fociety. The
ftock which is accumulated into a capital, may either be
employed by the perfon to v/hom it belongs, or it may be
lent to fome other perfon. In the third and fourth chap-
ters, I have endeavoured to examine the manner in which
it operates in both thefe fituations. The fifth and laf^
chapter treats of the different effecfts which the different
employments of capital immediately produce upon the
quantity both of national induftry, and of the annual pro-
duce of land and labour.
CHAP.
272 THE NATURE AND CAtJSE5> OF
G H A P. L
Of the Div'ifiOfi of Stock.
HEN the (lock which a man pofleiTes is no more than
futlicient to maintain him for a few days or a few weeks, he
feldom thinks of deriving any revenue from it. He confumes
It as fparinc;Iy as he can, and endeavours by his habour to ac-
quire fome^hing which may fupply its place before it be
confumed altoi^ether. His revenue is, in this cafe, derived
from his labour only. This is the ftate of the greater part
of the labouring poor in all countries.
But when he pciTeiTes (lock fufEcient to nialntain him
fdr months or years, he natm'ally endeavours to derive a
revenue from the greater part of it j referving only fo m.nch
for his immediate confumpticn as may maintain him till
this revenue begins to come in. His v/hole (lock, there-
fore, is diftinguiflied into two parts. That part which, he
expetls, is to afford him this revenue, is called his capital.
The other is that which fupplies his immediate confump-
tion'; and which confiils either, firft, in that portion of
his whole ftock which was originally referred for this pur-
pofe ; or, fecondly, in his revenue, from whatever fource
derived, as it gradvially comes in; or, thirdly, in fuch
things as had been purchafed by either of thefe in former
years, and which are not yet entirely confumed ; fuch as a
flock of cloaths, houfehold furniture, and the like. In one,
or other or all of thefe three articles, confifhs the ftock
which men commonly referve for their own immediate
confumption.
There are two different tvays in which a capital may
be employed fo as to yield a revenue or profit lo its em-
ployer.
First, it may be employed in raifing, manufacturing, or
purchaiing goods, and felling them again with a profit. The
capital employed in this manner yields no revenue or profit
4 to
THE WEALTH OF NATIONS. 273
to its employer, while it either remains in his poflefTion, or
continues in the lame (liape. The goods of the merchant
yield him no revenue or profit till he fells them for money,
and the money yields him as little till it is again exchanged
for goods. His capital is continually going from him in one
fhape, and returning to him in another, and it is only by
means of fuch circulation, or fuccefTive exchanges, that it
can yield him any profit. Such capitals, therefore, may very
properly be called circulating capitals.
"Secondly, it may be employed in the improvement of
land, in the purchafe of ufeful machines and inftrumcnts of
trade, or in fuch-like things as yield a revenue or profit with-
out changing mafters, or circulating any further. Such ca-
pitals, therefore, may very properly be called fixed ca-
pitals.
Different occupations require very different propor-
tions between the fixed and circulating capitals employed in
them.
The capital of a merchant, for example, is altogether a
circulating capital. He has occafion for no machines or in-
ftrumcnts of trade, unlefs his fhop, or warehoufe, be confi-
dered as fuch.
Some part of the capital of every mafter artificer or ma-
nufa(£lurer muft be fixed in the inftrumcnts of his trade.
This part, however, is very fmall in fome, and very great in
others. A mafter taylor requires no other inftrumcnts o£
trade but a parcel of needles. Thofe of the mafter fhoc-
maker are a little, though but a very little, more expenfive.
Thofe of the weaver rife a good deal above thofe of the ihoe-
maker. The far greater part of the capital of all fuch maf-
ter artificers, however, is circulated, either in the wages of
their workmen, or in the price of their materials, and repaid
with a profit by the price of the work.
In other works a much greater fixed capital is required.
In a great iron-work, for example, the furnace for melting
the ore, the forge, the flitt-mill, are inftruments of trade
which cannot be ere£ted without a very great expence. In
coal-works and mines of every kind, the machinery necefTary
Vol. I. T both
274 THE NATURE AND CAUSES OF
both for drawing out the water and for other purpofes, Is fre--
quently {till more expenfive.
That part of the capital of the farmer which is employed
in the inilrumeiits of agriculture is a fixed -, that which is
employed In the wages and maintenance of his labouring
fervants, is a circulating capital. He makes a profit of the
one by keeping it in hrs own pofieffsDn, and of the other by
parting with it. The price or value of his labouring cattle is
a fixed capital in the fame manner as that of the rnltruments
cf hufbandry : Their maintenance is a circulating capital in
the fame manner as that cf the labouring fervants. The
farmer makes his profit by keeping, the labouring cattle, and
by parting with their m.vintenance. Both the price and the
maifitenance of the cattle which are brought in and fattened,
not for labour, but for fale, are a circulating^ capital. The
farmer makes his profit by parting with them. A flock of
flicep or a herd of cattle tliatj, in a breeding country, is
bought in, neitlier for labour, nor for fale, but in order to
make a profit by their wool, by their milk, and by their in-
crcafe, is a fixed capital. The profit is made by keeping
them. Their maintenance is a circulating capital. The
profit is made by parting with it ; and it comes back with
both its own profit, and the profit upon the whole price of
the cattle, in the price of the wool, the milk, and the in-
creafe* The whole value of the feed too is properly a fixed
capital. Though it goes backwards and forwards between
the ground and the granary, it never changes mailers, and
tliereforc does not properly circukite. The farmer makes Ms
profit, not by its fale, but by its increafe.
The general flock of any country or fociety is the fame
with that of all its inhabitants or members, and therefore
naturally divides itfelfinto the fame three portions, each of
which has a,diftin6l fundion or office.
The Firft, is that portion which Is referved for immediate
confumption, and of which the characleriftic is, that it af-
foids no revenue or profit. It confiils in the Itock of food,
cloaths, houfchold furniture, Sec. which have been pur-
chafed by their proper confumers, but which are not yet eii-
tirelv confumed. Th-: whole (lock of mere dwelling-houfes
too fubfilling at any one time in the country, make a part of
this firft portion. The flock that is laid out in a houfe, if it
is
THE WEALTH OF NATIONS. 275
is to be the dwelling-houfe of the proprietor, ceafes from that
moment to ferve in the funftion of a capital, or to afford any
revenue to its owner. A dwelling houfe, as fuch, contri-
butes nothing to the revenue of its mhabltant ; and though it
is, no doubt, extremely ufeful to him, it is as his cloaths
and houihold furniture are ufeful to him, which, howevt;r,
make a part of his expence, and not of his revenue. If it is
to be let to a tenant for rent, as the houfe itfelf can produce
nothing, the tenant muft always pay the rent out of fome
other revenue which he derives either from labour or ftock,
or land. Though a houfe, therefore, may yield a revenue
to its proprietor, and thereby ferve in the function of a ca-
pital to him, it cannot yield any to the public, nor ferve in
the function of a capital to it, and the revenue of the whole
body of the people can never be in the fmallefl: degree in-
creafed by it. Cloaths, and houfehold furniture, in the fame
manner, fometimes yield a revenue, and thereby ferve in the
function of a capital to particular perfons. In countries
where mafquerades are common, it is a trade to let out maf-
querade drefles for a night. Upholfterers frequently let
furniture by the month or by the }'^ar. Undertakers let the
furniture of funerals by the day and by the week. Many
people let furniihed houfes, and get a rent, not only for
the ufe of the houfe, but for that of the furniture. The re-
venue, hoVvever, which is derived from fuch things, mult
always be ultimately drawn from fome other fource of re-
venue. Of all parts of the ftock, either of an individual, or
of a fociety, referved for immediate confumption, what is
laid out in houfes is moft flowly confumed. A ftock of
cloaths may lad feveral years : a ftock of furniture half a
century or a century : but a ftock of houfes, well built and
properly taken care of, may laft many centuries. Though
the period of their total confumption, however, is more
diftant, they are ftill as really, a ftock referved for im-
mediate confumption, as either cloaths or houfehold furni-
ture.
The Second of the three portions into which the general
ftock of the fociety divides itfelf, is the fixed capital; of which
the characfteriftic is, that it affords a revenue or profit with-
out circulating or changing mafters. It confifts chiefly of the
four following articles :
T2 First,
2-}6 THE NATURE AND GAUS-ES OF
First, of all ufeful machines and inftruments of trade,
which facilitate and abridge labour:
Secondly, of all thdfe profitable buildings which are the
means of procuring a revenue, not only to their proprietor
who lets them for a rent, but to the perfon who poffefles
them and pays that rent for them ; fuch as fhops, ware-
houfes, workhoufes, farmhoufes, with all their necefiary
buildings ; (tables, granaries, &:c. Thefe are very different
from mere dwelling houfes. They are a fort of inftruments
of trade, aiid may be confidered in the fame light :
Thirdly, of the improvements of land, of what has
been profitably laid out in clearing, draining, enclofing, ma-
nuring, and reducing it into a condition moft proper for
tillage and culture. An improved farm may very juftly be
regarded in the fame light as thofe ufeful machines which fa-
cilitate and abridge labour, and'by means of which, an equal
circulatincr capital can afford a m-uch greater revenue to its
employer. An improved farm is equally advantageous and
more durable than any of thofe machines, frequently re-
quiring no other repairs than the moft profitable application
of the farmer's capital employed in cultivating it ;
Fourthly, of the acquired and ufeful abilities of all the
inhabitants or members of the fociety. The acquifition of-
fuch talents, by the maintenance of the acquirer during his
edu-cation, ftudy, or apprenticeihip, ahvays cofts a real ex«
pence, which is a capital fixed and realized, as it were, in
his perfon. Thofe talents, as they make a part of his for-
tune, fo do they likewife of that of the fociety to which he
belongs. The improved dexterity of a workman may be con-
fidered in the fame light as a niachine or inftrument of trade
which facilitates and abridges labour, and which, though it
cbfts a certain expence, repays that expence with a profit.
The third and laft of the three portions into which the ge-
neral ftock of the fociety naturally divides itfelf, is the cir-
culating capital -, of which the characteriftic is, that it affords.
a revenue only by circulating or changing mafters. It is com-
pofed likewife of four parts :
First, of the money by means of which all the other three-
are circulated and diftributed to their proper confumers :
2 Secondly,
THE WEALTH OF NATIONS. 277
Secondly, of the flock of provifions which are in the
poflefiion of the butcher, the grazier, the farmer, the corn-
merchant, the brew,er> &c. and from the fale of which they
exped: to derive a profit :
Thirdly, of the materials, whether ahogcther rude, or
more or lefs manufactured, of cloaths, furniture, and build-
ing, which are not yet made up into any of thofe three
fhapes, but which remain in the hands of the growers, the
jtnanufadlurers, the mercers and drapers, the timber-mer-
.chants, the carpenters and joiners, the brick-makers, &c.
Fourthly, and laftly, of the work which is made up
and compleated, but which is ftill in the hands of the mer-
chant or manufadlurer, and not yet difpofed.of or diftributed
;to the proper confumers ■j fuch as the finifhed work which
-we frequently find ready-made in the fliops of the fmith, the
cabinet-maker, the goldfmith, the jeweller, the china-mer-
chant, &c. The circulating capital -confifts in this manner,
of the provifions, materials, and finifhed work of all kinds,
that are in the hands of their ref^eftive dealers, and of the
money that is necefTary for circulating and diftributing them
to thofe who are finally to ufc, or to confume them.
Of thefe four parts three, provifions, materials, and fi-
nifhed work, are, either annually, or in a longer or fhortcr
period, regularly withdrawn from it, and placed either in the
fixed capital or in the ftock referved for immediate con-
sumption.
Every fixed capital Is both originally derived from, and
requires to be continually fupported by a circulating capital.
All ufeful machines and inftruments of trade are originally
derived from a circulating capital, which furnifhcs the ma-
terials of which they are made, and the mainteiiance of the
workmen who make them. They require too a capital of
the fame kind to keep them in conftant repair.
No fixed capital can yield any revenue but by means of a
circulating capital. The moft ufeful machines and infi:iu-
ments of trade will produce nothing without the circulating
capital which aftbrds the materials they are e^mploycd upon,^^jj^
and the maintenance of the workmen who employ them.
Land, however improved, will yield no revenue wiiliout a
circuiating
278 THE NATURE AND CAUSES OF
circulating capital, which maintains the labourers who cul*
tivate and colle£l its produce.
To maintain and augment the flock which may be referv-
ed for immediate confumption, is the fole end and purpofe
both of the fixed and circulating capitals. It is this flock
which feeds, cloaths, and lodges the people. Their riches
or poverty depends upon the abundant or fparing fupplies
-which thofe two capitals can afford to the; flock referved fox
immediate confumption.
So great a part of the circulating capital being continually
withdrawn from it, in order to be placed in the other two
branches of the general flock of the fociety ; it mufl in its
turn require continual fupplies, without which it would foon
ceafe to exifl. Thefe fupplies are principally drawn from
three fources, the produce of land, of mines, and of fifh-
eries. Thefe afford continual fupplies of provifions and ma-
terials, of which part is afterwards wrought up into finiflied
work, and by which are replaced the provifions, materials,
and finiflied work continually withdrav/n from the circulating
capital. From mines too is drawn what is neceffary for
maintaining and augmenting that part of it which confifls in
^money. For though, in the ordinary courfe of bufinefs, this
part is not, like the other three, necefTarily withdrawn from
it, in order to be placed in the other two branches of the ge-
neral flock of the fociety, it mufl, however, like all other
things, be wafted and worn out at laft, and fometimes too be
either loft or fent abroad, and muft, therefore, require con^,
tinual, though, no doubt, much fmaller fupplies, '^
Land, mines, and fiiheries, require all both a fixed and
a circulating capital to cultivate them ; and their produce re-
places with a profit, not only thofe capitals, but all the others
in the fociety. Thus the farmer annually replaces to the ma-
nufa(Slurer the provifions which he had confumed, and the
materials which he had wrou^-rht up the year before ; and the
manufa£lurer replaces to the farmer the finifhed work which
he had wafted and worn out in the fanie time. This is the
real exchange that is annually made bet\7een thofe two or-
ders of people, though it feldom happens'thit the rude pro-
duce of the one and the manufadlured produte of the other,
are dire£lly bartered for one another ; becaufe it feldom hap-
pens that the farmer fells his corn and his cattle, his ilax and
■■■'■■ bis
THE WEALTH OF NATIONS. 279
his wool, to the very fame perfon of whom he chufes to pur-
chafe the cloaths, furniture, and inftruments of trade which
he wants. He fells, therefore, his rude produce for money,
with which he can purchafe, wherever it is to be had, the
manufatlured produce he has occafion for. Land even re-
places, in part, at leait, the capitals with which hflieries and
mines are cultivated. It is the produce of land which draws
the fifh from the waters ; and it is the produce of the furface
of the earth which extra£ls the minerals from its bowels.
The produce of land, mines, and fifherjes, when their na-
tural fertility is equal, is .in proportion to the extent and
proper application of the capitals employed about them.
When the capitals are equal and equally well applied, it is in
proportion to their natural fertility.
In all countries where there Is tolerable fecurity, every
man of common underilanding. will endeavour to employ
whatever llock he can command in procuring either prefent
enjoyment or future profit. If it is employed in procuring
prefent enjoyment, it is a ftock referve4 for immediate con-
fumptlon. If it is employed in procuring future profit, it
muft procure this profit either by ftaying with him, or by
going from him. In the one cafe it is a fixed, in the other
it is a circulating capitaL A man muft be perfe6lly crazy
who, where there is tolerable fecurity, does not employ aU
the ftock which he commands, whether it be his own or
borrowed of other people, in fome one or other of thofe
three ways.
In thofe unfortunate countries, indeed, where men are
<:ontInually afraid of the violence of their fuperiors, they frc-
tjuently bury and conceal a great part of their ftock, in order
to have it always at hand to carry with them to fome place of
fafety, in cafe of their being threatened with any of thofe
difafiers tov/hich tliey confider themfeives as at all times
expofed. This is faid to be a- common practice in Turkey, in
Indoftan, and, I believe, in moft other governments of Afia.
It feems to have been a common praftice among our ancef-
tors during the violence of the feudal government. Treafure-
trove was in thofe times confidered as no contemptible part
of the revenue of the greateft fovereigns in Europe. It con-
fifled in fuch treafure as was found concealed in the earth,
and to which no particular perfon could prove any right.
This
28o THE NATURE AND CAUSES OF
This was regarded in thofe times as fo important an obje<5l>
that it was always confidered as belonging to the fovereign*
and neither to the findt^r nor to the proprietor of the land)
unlefs the right to it had been conveyed to the latter by an
exprefs claufe in the charter. It was put upon the fame foot-
ing with gold and filver mines, which, without a fpecial
claufe in the charter, were never fuppofed to be compre-
hended in the general grant of the lands, though mines of
lead, copper, tin, and coal were, as things of fmaller confe~
quence, . . . . ,
CHAP.
THE WEALTH OF NATIONS. 2S1
CHAP. 11.
Of Money conjidered as a particular Bra?ich of the general
Stock of the Society, or of the Expcnce of nmintainlng the
National Capital.
JL T has been fliewn in the firfl: Book, that the price of
the greater part of commodities refolves itfelf into three
parts, of which one pays the wages of the labour, another
the profits of the ftock, and a third the rent of the land
which had been employed in producing and bringing them
to market : that there are, indeed, fome commodities of
which the price is made up of two of thofe parts only, the
wages of labour, and the profits of Hock : and a very few
in which it confifts altogether in one, the wages of labour :
biit that the price of every commodity necelTarily refolves
itfelf into fome one, or other, or all of thefe three parts ;
every part of it which goes neither to rent nor to wages,
being neceflarily profit to fomebody.
Since this is the cafe, it has been obferved. with regard
to every particular commodity, taken feparately ; it mull be
fo with regard to all the commodities which compof.^ the
whole annual produce of the land and labour of every
country, taken complexly. The whole price or exchange-
able value of that annual produce, inuft refolve itfeif into
the fame three parts, and be parcelled out among the dif-
ferent inhabitants of the country, either as the wages of
their labour, the profits of their flock, or the rent of their
land.
But though the whole value of the annual produce of
the land and labour of every country is thus divided among
and conflitutes a revenue to its different inhabitants, yet as
in the rent of a private eflate we diftinguifh between the
grofs t*ent and the neat rent, fo may we likewife in the re-
venue of all the inhabitants of a great country.
The grofs rent of a private eflate comprehends whatever
is paid by the farmer j the neat rent, what remains free to
' - the
282 THE NATURE AND CAUSES OF
the landlord, after dedu(Sling the expence of management,
of repairs, and all other necefTary charges ; or what, with-
out hurting his eflate, he can afford to place in his ftock
refcrved for immediate confumption, or to fpend upon his
table, equipage, the ornaments of his houfe and furniture,
his private enjoyments and amufements. His real wealth
is in proportion, not to his grofs, but to his neat rent.
The grofs revenue of all the inhabitants of a great coun-
try, comprehends the whole anjiual produce of their land
and labour •, the neat revenue, what remains free to them
•after dedu£ling the expence of maintaining; firft, their
fixed ; and, fecondly, their circulating capital ; or what,
without encroaching upon their capital^ they can place in
their ftock referved for imm.ediate confumption, or fpend
upon their fubfiftence, conveniencies and amufements.
Their real wealth too is in proportion, not tQ their grofs,
but to their neat revenue.
The whole expence of maintaining the fixed capital,
mufl evidently be excluded from -the neat revenue of the
fociety. Neither the m.aterlals neceiTary for fupporting
their ufeful machines and inftruments of trade, their pro-
fitable buildings, &c. nor the produce of the labovir necef-
fary for fafnioning thofe materials into the proper form,
can ever make any part of it. The price of that labour
may indeed make a part of it ; as the workmen fo emplqyed
may place the whole value of their wages in their ftock re^
fcrved for immediate confumption. But in other forts of
labour, both the price and the produce go to this ftock,
the price to that of the workmen, the produce to that o|"
other people, whofe fubfiftence, conveniencies, and amufe-
ments, are augmented by the labour of thofe workmen.
Till: intention of the fixed capital is to Increafe the pro-
ductive powers of labour, or to enable the fame number of
labourers to perform a much greater quantity of work. In
a farm wliere all the necefTary buildings, fences, drains, com-
munications, &c. are in the moft perfeQ good order, the
fame number of labourers and labouring cattle will raife a
much greater produce, than in one of equal extent and
equally good ground, but not furnifhed with equal conveni-
encies. '^ In manufadiures the fame number of hands, afiifted
with the beft machinery, will work up a much greater quan-
tity of goods than with more imperfett inftruments of trade.
The
THE WEALTH OF NATIONS. 2^2
The expence which is properly hiid out upon a fixed capital
of any kind, is always repaid with great profit, and increaics
the annual produce by a much greater value than that ot the
lupport which fuch improvements require. This iupport,
however, flill requires a certain portion of that produce.
A certain quantity of materials, and the labour of a certain
number of workmen, both of which might have been imme-
diately employed to augment the food, cloathing and lodg-
ing, the fubfillence and convenienciesof the fociety, are thus
diverted to another employment, highly advantageous indeed,
but flill different from this one. It is upon this accout that
all fuch improvements in mechanicks, as enable the fame
number of workmen to perform an equal quantity of work,
with cheaper and fimpler machinery than liad been ufual
before, are always regarded as advantageous to every fo-
ciety. A certain quantity of materials, and the labour of
a certain number of workmen, which had before been em-
ployed in fupporting a more complex znd expenfive machi-
nery, can afterwards be applied to augment the quantity of
work which that or any other machinery is ufeful only for
performing. The undertakei; of fome great manufactory
who employs a thoufand a-year in the maintenance of his
machinery, if he can reduce this expence to five hundred,
^vill naturally employ the other five hundred in purchafing
an additional quantity of materials to be wrought up by an
additional number of workmen. The quantity of that work,
therefore, which his machinery was ufeful only for per-
forming, will naturally be augmented, and with it all the
advantage and conveniency which the fociety can derive
from that work.
The expence of maintaining the fixed capital in a great
country, may very properly be compared to that of repairs
in a private eftate. The expence of repairs may frequently
be neceflary for fupporting the produce of the eftate, and
confequently both the grofs and the neat rent of the land-
lord. When by a more proper direction, however, it can
be diminlflied without occafioning any diminution of pro-
duce, the grofs rent remains at leaft the fame as before,
^nd the neat rent is necefl^arily augmented.
But though the whole expence of maintaining the fixed
capital is thus neceffarily excluded from the neat revenue of
the fociety, it is not the fame cafe with that of maintaining
the circulating capital. Of the four parts of which this latter
ppital is compofed, money, pro%ufions, materials, and finiflied
■2 work.
-2S4 THE NATURE AND CAUSES OF
^vork, the three lafl, it has already been obferved, are regu-
larly withdrawn from it, and placed either in the fixed capital
of the fociety, or in their llock referved for immediate con-
fumption. V/hatever portion of thofe confumable goods is
not employed in maintaining the former, goes all to the
latter, and makes a part of the neat revenue of the fociety.
The maintenance of thofe three parts of the circulating ca-
pital, theri^fore, withdraws no portion of the annual pro-
duce from the neat revenue of the fociety, bcfides what h
neceffijry for maintaining the fixed capital.
The circulating capital of a fociety is in this refpeO: dif-
ferent from that of an individual. That of an individual
is totally excluded from making any part of his neat reve-
nue, which m-uft confiil altoe^ether in his profits. But
though the circulating capital of every individual makes a
part of that of the focioty to which he belongs, it is not
upon that account totally excluded from making a part like-
wife of their neat revenue. Though the whole goods in a
merchant's fhop mud by no means be placed in his own
itock referved for immediate confumption, they may in that
of other people, who, from a revenue derived ifom other
funds, m4,ay regularly replace their -value to Km, together
with Its profits, without occafioning any diminJlion eithejr
of his capital or of theirs^
Money, therefore, is the only part of the circulating
capital of a fociety, of which the maintenance can occafion
any diminution in their neat revenue.
The fixed capital, and that part of the circulating capital
which confiils in money fo far as they r^ecfl the revenue of
the fpciety, bear a very great refemblance to one another.
First, as thofe machines and infi;ruments of trade, &c.
require a certain expence, firft to ere6l them, and afterwards
to fupport them, both which expences, though they make
a part of the grofs, are deduftions from the neat revenue of
the fociety ; fo the flock of money which circulates in any
country muft require a certain expence, firft to colledl it,
and afterwards to fupport it, both which expences, though
they make a part of the grofs, are, in the fame manner, de-
du6tions from the neat revenue of the fociety. A certain
quantity of very valuable materials, gold and filver, and of
<Yery curious labour, inltead of augmenting the flock referved
for
THE WEALTH OF NATIONS. 2.85
for Immediate confumption, the fubfiftence, convenienclcs,
and amufements, of individuals, is employed in fupporting
that great but expenfive inllrument of commerce, by means
of which every individual in the fociety has his fuhfillence,
conveniencies, and amufements, regularly diitributed to
him in their proper proportions.
Secondly, as the miachines and indruments of trade, Sec.
which compofe the fixed capital either of an individual
or of a fociety, make no part either of the grofs or of the
nea;t revenue of either ; fo money, by means of which the
whole revenue of the fociety is regularly diftributed among
all its different members, makes itfelf no part of that reve-
nue. The great wheel of circulation is altogether different
from the goods which are circulated by means of it. The
revenue of the fociety confifts altogether in thofe goods,
and not in the wheel which circulates them. In comput-
ing either the grofs or the neat revenue of any fociety, we
mufl always, from their whole annual circulation of morfCy
and goods, deduft the whole value of the money, of which
not a fingle farthing can ever make any part of either.
It is the ambiguity of language only which can make thi'^
pvopofition appear either doubtful or paradoxical. When
properly explained and uiiderflood, it is almoit feif-evident.
When we talk of any particular fum of money, we fome-
times mean nothing but the metal pieces of which it is com-
pofed ; and fometimes we include in our meaning fome ob-
fcure reference to the goods which can be had in exchange
for it, or to the power of purchafing which the pofTefTion
of it conveys. Thus when we fay, that the circulating
money of England has been computed at eighteen millions,
we mean only to exprefs the amount of the metal pieces^
which fome writers have computed, or rather have fuppofed
to circulate in that country. But when we fay that a man
is worth fifty or a hundred pounds a-vear, we mean com-
monly to exprefs not only the amount of the metal pieces
which are annually paid to him, but the value of the gocds
which he can annually purchafe or confume. We mean
commonly to afcertain what is or ought to be his way of
living, or the quantity and quality of the neeefTaries and
conveniencies of life in wliich he can with propriety in-
dulge himfelf.
When, by any particular fum of money, we mean not
only to exprefs the amount of the metul pieces of which it is
compofed^
1^6 THE NATURE AND CAUSES OF
eompofed, bnt to include in its fignification fome obfcure
reference to the goods which can be had in exchange for
them, the wealth or revenue which it in this cafe denotes,
is equal only to one of the two values which are thus inti-
mated fomewhat ambiguoufly by the fame word, and to the
latter more properly than to the former, to the money's
worth more properly than to the money.
Thus if a guinea be the weekly penfion of a particular
perfon, he CTin in the courfe of the week purchafe with it
a certain quantity of fubfi Hence, conveniencies, and amufe-
ments. In proportion as this quantity is great or fmall, fo
are his real richesj his real weekly revenue* His weekly
revenue is certainly not equal both to the guinea, and to what
can be purchafcd with it, but only to one or other of thofe
rvvo equal values ; o.nd to the latter more properly than to
tlie former, to the guinea's worth rather than to the guinea.
If the penfion of fuch a perfon was paid to him, not in
gold, but in a weekly bill for a guinea, his revenue furely
would not 10 properly confiil in th^ piece of paper, as in
what he could get for it. A guinea may be confidered as a
bill for a certain quantity of neceflaries and conveniences upon
all the tradcfmen in the neiu:hbourhood. The revenue of
the perfon to whom it is paid, does not fo properly confift
in the piece of gold, as in what he can get for it, or in
what he can exchange it for. If it could be exchanged for
nothing, it would, like a bill upon a bankrupt, be of no
more value than the moii ufelefs piece of paper.
Though the weekly, or yearly revenue of all the dif-
ferent inhabitants of any country, in the f^me manner,
mny be, and in reality frequcritly is paid to them in money,
^leh- real riclies, however, the real weekly or yearly reve-
ime of all of them taken together, mud always be great or
fmall in p-roportion to the quantity of confumable goods
which they can all of them purchafe with this money. The
whole revenue of all of them taken together is evidently not
equal to both the money and the confumable goods ; but
only to one or other of tliofe two values, and to the latter
more properly than to the former.
Though we frequenilr, therefore, exprefs a perfon's
revenue by the metal pieces which are annually paid to him,
it is becaufc the amount of thof^ pieces regulates the extent
of
THE WEALTH OF NATIONS. 287*
of his power of purchafing, or the value of the goods which
he can annually afford to confume. We (llll confider his
revenue as confilting in this power of purchafing or confum-
ing, and not in the pieces which convey it.
But If this is fufficiently evident even with regard to an
individual, it is ftill more fo with regard to a foclety* The
amount of the metal pieces which are annually paid to an
individual, is often precifely equal to his revenue, and is
upon that acccount the lliorteft and belt e^preffion of its value.
But the amount of the metal pieces which circulate in a
fociety, can never be equal to the revenue of all its members.
As the fame guinea which pays the weekly penfion of one
man to-day, may pay that of another to-morrow, and that of
a thirdthe day thereafter, the amountof the metal pieces which
annually circulate in any country, muft always be of much
lefs value than the whole money penfions annually paid with
them. But the power of purchafing, or the goods which
can fucceffively be bought with the whole of thofe money
penfions as they are fuccefilvely paid, mufl always be precifely
of the fame value with thofe penfions ; as mult likewife be
the revenue of the different perfons to whom they are paid.
That revenue, therefore, cannot confilt in thofe metal pieces,
of which the amount is fo much inferior to its value, but in
the power of purchafing, in the goods which can fuccef-
fively be bought with them as they circulate from hand to
hand.
Money, therefore, the great wheel of circulation, the
great inftrument of commerce, like all other inftruments o£
trade, though it makes a part and a very valuable part of the
capita], makes no part of the revenue of the fociety to which
it belongs *, and though the metal pieces of which it is com-
pofed, in the coiirfe of their annual circulation, diftribute to
every man the revenue which properly belongs to him, they
make themfelves no part of that revenue.
Thirdly, and laflly, the machines and inflruments of
trade, &c. which compofe the fixed capital, bear il.,s further
refemblance to that part of the circulating capital uliich con-
fifts in money ; that as every favingin the expence of erecting
and fupporting thofe machines, which does not diminlfli the
produdive powers of labour, is an improvement of the neat
revenue of the fociety ; fo every faving in the expence of col-
ledling and fupporting that part of the ( irculating capital
which
a88 THE NATURE AND CAUSES OF
which confifts in money, is an Improvement of exa£lly the
fame kind.
It is fufficiently obvious, and It has partly too been explained
already, in what manner every faving in the expence of fup-
porting the fixed capital Is an improvement of the neat reve-
nue of the fociety. The whole capital of the undertaker of
every work is neceflarily divided between his fixed and his
circulating capital. While his whole capital remains the fame,
the fmaller the one part, the greater muft necefl^arily be the
other. It is the circulating capital which furniflies the mate-
rials and wages of labour, and puts induftry into motion.
Every faving, therefore, in the expence of maintaining the
fixed capital, which does not diminifh the productive powers
of labour, muft increafe the fund which puts induftry Into
motion, and confequently the annual produce of land and
labour, the real revenue of every fociety.
The fubftltutlon of paper In the room of gold and filver
money, replaces a very expenfive Inftrument of commerce
with one much lefs coftly, and fometimes equally convenient.
Circulation comes to be carried on by a new wheel, which
it cofts lefs both to erecft and to maintain than the old one.
Bi^t in what manner this operation Is performed, and in
what manner it tends to increafe either the grofs or the
neat revenue of the fociety, is not altogether fo obvious,
and may therefore require fome further explication.
There are feveral diiTerent forts of paper money ; but
the circulating notes of banks and bankers are the fpecies
which is beft known, and which feems bed adapted for this
purpofe.
Whfn the people of any particular country have fuch
confidence in the fortune, probity, and prudence of a parti-
cular banker, as to believe that he is always ready to pay
upon demand fuch of his promiflbry notes as are likely to be
at any time prefented to him ; thofe notes come to have the
fame currency as gdd and filver money, from the confidence
that fuch money can at any time be had for them.
A PARTICULAR banker lends among his cuftomers his
own prom i (Tory notes, to the extent, we fliall fuppofe, of a
hundred thoufand pounds. As thofe notes ferve all the pur-
poses
- THE WEALTH OF NATIONS. 289
pofes of money, his debtors pay him the fame intereft as if
he had lent them fo much money. This intereft is the fource
of his gain. Though fome of thofe notes are continually
coming back upon him for payment, part of them continue
to circulate for months and years together. Though he has
generally in circulation, therefore, notes to the extent of a
hundred thoufand pounds, twenty thoufand pounds in gold
andfilver may, frequently,be a fufficient provifion for anfwer-
ing occafional demands. By this operation, therefore, twenty
thoufand pounds in gold and fih^er perform all the functions
which a hundred thoufand could otherwife have performed.
The fame exchanges may be made, the fame quantity of con-
fumable goods may be circulated and diftributed to their pro-
per confumers, by means of his promiilbry notes, to the
value of a hundred thoufand pounds, as by an equal value of
gold and filver money. Eighty thoufand pounds of gold and
filver, therefore, can, in this manner, be fpared from the
circulation of the country j and if different operations of the
fame kind fhould, at the fame time, be carried on by many
different banks and bankers, the whole circulation may thus
be condu<Sled with a fifth part only of the gold and filver
-which would otherwife have been requifite.
Let us fuppofe, for example, that the whole circulating
money of fome particular country amounted, at a parti-
cular time, to one million fterling, that fum being then
fufficient for circulating the whole annual produce of their
land and labour. Let us fuppofe too, that fome time there-
after, different banks and bankers iffued promiffory notes,
papable to the bearer, to the extent of one million, re-
ferviug in their different coffers two hundred thoufand
pound? for anfwering occafional demands. There would
remain, therefore, in circulation, eight hundred thoufand
pounds in goli and filver, and a million of bank notes, or
eighteen hundred thoufand pounds of paper and money toge-
ther. But the annual produce of the land and labour of the
country had before required only one million to circulate and
dittribute it to its proper consumers, and chat annual produce
cannot be immediately augmented by tliofe operations of
banking.- One million, therefore, will be fufficient to circu-
late it after them. The goods to bj bought and fold being
precifelythe {cime as before, the fame quantityof money will
be fufficient for buying and felling them. Thec'iannel of
circulation, if I may be allowed fuch an expreffion, will
Vol. L U remain
%go THE NATURE AND CAUSES OF
remain precifely the fame as before. One million we have
fuppofed fuiTicient to fill that channel. "Whatever, therefore,
is poured into it beyond this fum, cannot run in it, but
mufl overflow. One million eight hundred thouland pounds
are poured into it. Eight Imndred thoufand pounds, there-
fore, muft overflow, tliat fum being over and above what
can be employed in the circulation of the country. But
though this fum cannot be employed at home, it is too valu-
able to be allowed to lie idle. It will, therefore, be fent
abroad^, in order to feek that profitable employment which it
cannot find at home. But the paper cannot go abroad ; be-
caufe at a diftance from the banks which iflue it, and from
the country in which payment of it can be exacted by law,
it will not be received in common payments. Gold and fil-
ver, therefore, to the amount of eight hundred thoufand
pounds will be fent abroad, and the channel of home circu-
lation will remain filled M^ith a million of paper, inftead of
the million of thofe metals which filled it before.
But though fo great a quantity of gold and filver is thus
fent abroad, we mufl not imagine that it is fent abroad for
nothing, or that its proprietors make a prefent of it to fo-
reign nations. They will exchange it for foreign goods of
fome kind or another, in order to fupply the confumption ei-
ther of fome other foreign country, or of their own.
If they employ it in purchafing goods in one foreign coun-
try in order to fupply the confumption of another, or in what
is called the carrying trade, whatever profit they make will
be an addition to the neat revenue of their own country. It
is like a new fund, created for carrying on a liew trade ; do-
meflic bufinefs b^ing now iranfacfled by paper, and the gold
and filver being converted into a fund for this new trade.
If they cmplqy it in purchafing foreign goods for home
'confumption, they m.ay either, firft, purchafe fuch goods as
are likely to be confumed by idle people v/ho produce no-
thing, fuch as foreign wines, foreign fiiks, &c. ; or, fe-
condiy, they may purchafe an additional (lock of materials,
tools, and provifions, in order to maintain and employ
an additional number of induftrious people, whore-produce,
with a profit, the value of their annual confumption.
So
THE WEALTH OF NATIONS. 291
So far as it is employed in the firft way, it promotes pro-*
digality, increafes expence and confumption without increaf-
ing production, or ellabHfliing any permanent fund for fup-
porting that expence, and is in every refpe£t hurtful to the
fociety.
So far as it is employed in the fccond way, it promotes
induftry; and though it increafes the confumption of the
fociety, it provides a permanent fund for fupporting that con-
fumption, the people v/ho confume re-producing, with a
profit, the whole value of their annual confumption. The
grofs revenue of the fociety, the annual produce of their land
and labour, is increafed by the whole value which the labour
of thofe workmen adds to the materials upon which they arc
employed ; and their neat revenue by what remains of this
value, after deducfting what is necefTary for fupporting the
tools and inftruments of their trade.
That the greater part of the gold and filver which, being
forced abroad by thofe operations of banking, is employed in
purchafing foreign goods for home confumption, is and mufl
be employed in purchafing thofe of this fecond kind, feems
not only probable but almoft unavoidable. Though fome
particular men may fometimes increafe their expence very
confiderably though their revenue does not increafe at all, we
may be afiured that no clafs or order of men ever does fo ;
becaufe, though the principles of common prudence do not
always govern the condu(ft of every individual, they always
influence that of the majority of every clafs or order. But
the revenue of idle people confidered as a clafs or order, can-
not, in the fmalleil degree, be increafed by thofe operations
of bankmg. Their expence in general, therefore, cannot be
much increafed by them, though that of a few individuals
among them may, and in reality fometimes is. The demand
of idle people, therefore, for foreign goods, being the fame,
or very nearly the fame, as before, a very fmall oart of the
money, which being forced abr'rad by thofe operations of
banking, is employed in purchafing foreign goods for home
confumption, is likely to be employed in purchafing thofe for
their ufe. The greater part of it will narurally be deflined
for the employment of induflry, and not for the maintenance
of idlenefs.
tT 2 WHE^'
292 THE NATURE AND CAUSES OF
When we compute the quantity of induftry which the
circulating capital of any fociety can employ, we niuft always
have regard to thofe parts of it only, which confift in provi-
fions, materials, and finifhed work : the other, which confifts
in money, and which fervcs only to circulate thofe three,
mud always be dedu(fled. In order to put induftry into
motion, three things are requifite j materials to \vork upon,
tools to work with, and the wages or recompence for the fake
of which the work is done. Money is neither a material to
work upon, nor a tool to work with ; and though the wages
of the workman are commonly paid to him in money, his real
revenue, like that of all other men, confifts, not in the m.oney,
but in the money's-worth ; not in the metal pieces, but in
what can be got for them.
The quantity of Induftry which any capital can employ,
muft, evidently, be equal to the number of workmen whom
it can fupply with materials, tools, and a maintenance fuita-
ble to the nature of the work. Money may be requifite for
purchafing the materials and tools of the M'ork, as well as the
maintenance of the workmen. But the quantity of induftry
which the whole capital can em.ploy, is certainly not equal
both to the money which purchafes, and to the materials,
tools, and maintenance, which are purchafed with it •, but
only to one or otheV of thofe two values, and to the latter
more properly than the former.
When paper is fubftltuted in the room of gold and filver
money, the quantity of the miiterials, tools, and maintenance,
which the whole circulating capital can fupply, may be in-
creafed by the whole value of gold and filver which ufed to
be employed in purchafing them. The whole value of the
great wheel of circulation and diftribution, is added to the
goods vvhlch are circulated and diftributed by means of it.
The operation, in fome meafure, refembles that of the un-
dertaker of forne great work, who, in confequence of fome
Improvement in. mechanics takes down his old machinery,
and adds the difterence between its price and that of the new
to his circulating capital, to the fund from which he furnifties
aiaterials and wages to his v/orkmen.
What Is 'the proportion which the circulating money of
anv country bears to tlie whole value of the annual produce
circulated by means of it is, perhaps, impoftible to de-
T termine.
THE WEALTH OF NATIONS.' 293
termine. It has been computed by different authors at a
fifth, at a tenth, at a twentieth, and at a thirtieth part of that
value. But how fmall foever the proportion which the cir-
culating money may bear to the whole value of the annual
produce, as but a part, and frequently but a fmall part, of
that produce, is ever deilined for the maintenance of induitry,
it muft always bear a very conOderable proportion to that
part. When, therefore, by the fubftitution of paper, the
gold and filver neccfiary for circulation is reduced to, per-
haps, a fifth part of the former quantity, if the value of only
the greater part of the other four-fifths be added to the funds
which are dellined for the maintenance of indu dry, it mufl
make a very confiderable addition to the quantity of that in-
duftry, and, confequently, to the value of the annual produce
of land and labour.
An operation of this kind has, within thefe five-and-
twenty or thirty years, been performed in Scotland, by the
ereftion of new banking companies in almoil every confider-
able town, and even in fome country villages. The effects
of it have been precifely thofe above defcribed. The bufinefs
of the country is almoft entirely carried on by means of the
paper of thofe different banking companies, with which pur-
chafes and payments of all kinds are commonly made.
Silver very feldom appears except in the change of a twenty
(hillings bank note, and gold ftill feldomer. But though the
condudl: of ail thofe different companies has not been unex-
ceptionable, and has accordingly required an a£i: of parlia-
ment to regulate it ; the country, notwithilanding, has evi-
dently derived great benefit from their trade. I have heard
it afferted, that the trade of the city of Glafgow doubled in
about fifteen years after the firft erection of the banks there;
and that the trade of Scotland has more than quadrupled
fince the firfi erecl^ion of the two public banks at Edinburgh,
of which the one, called The Bank of Scotland, was efla-
bliflied by a<ft of parliament in 1695 ; the othercalled The
Royal Bank, by royal charter in 1727. Whether the trade,
either of Scotland in general, or of the city of Glafgow in
particular, has really increafed in fo great a proportion,
during fo fiiort a period, I do not pretend to know. If
either of them has increafed in tliis proportion, it feems to
be an effect too great to be accounted for by the fole opera-
tion of this caufe. That the trade and induftry of Scotland,
however, have increafed very confiderably during this period,
3nd
^94 THE NATURE AND CAUSES OF
and that the banks have contributed a good deal to this in-*
creafe, cannot be doubted.
The value of the fiiver money which circulated in Sect-
land before the union, in i 707, and which, immediately after
it, was brought into the bank of Scotland in order to be re-
coined, amounted to 41 1, 1 17/. I ox. 9^. llerling. No ac-
count has been got of the gold coin ; but it appears from the
anticnt accounts of the mint of Scotland, that the value of the
gold annually coined fomewhat exceeded that of the filver*.
There were a good rrjany people too upon this occafion, who,
from a diilidence of repayment, did not bring their filver
into the bank of Scotland •, and there was, befides, fome
Enolifh coin, which was not called in. The whole value of
the gold and fdver, therefore, which circulated in Scotland
before the union, cannot be eftimated at lefs than a million
fterling. It feems to have confhituted almoft the whole cir-
culation of that country ; for though the circulation of the
bank of Scotland, which- had then no rival, was confider-
'able, it feems to have made but a very fmall part of the
whole. In the prefent times the whole circulation of Scot-
land cannot be eftimated at lefs than two millions, of which
that part which confifts in gold and filver, moft probably,
does not amount to half a million. But though the circu-
lating gold and filver of Scotland have fuffered fo great a
diminution during this period, its real riches and prof-
peri y do not appear to have fuffered any. Its agricul-
ture, manufacftures, and trade, on the contrary, the annual
produce gf its land and labour, have evidently been aug-
mented.
It is chiefly by difcounting bills of exchange, that is, by
advancing money upon them before they are due, that the
greater part of banks and bankers iiTue their promiffory notes.
They dedutfb always, upon whatever fum they advance, the
legal intereft till tiie bill fhall become due. The payment of
the bill when it becomes due, replaces to the bank the value
of what had been advanced, together with a clear profit of
the intereft. The banker who advances to the merchant
whofe bill he difcounts, not gold and filver, but his own pro-
mifibry notes, has the advantage of being able to difcount to
a ejreater amount, by the whole value of his promiflbry notes,
which he finds by experience, are commonly in circulation.
He
« See Ruddiman's Preface to Anderfon's Diplomata, &c. Scotlae.
THE WEALTH OF NATIONS. 293
He is thereby enabled to make his clear gain of intereft on Co
much a larger fum.
The commerce of Scotland, which at prefent is not very
great, was (till more inconfiderable when the two firil bank-
ing companies were eftabliihed ; and thofe companies would
have had but little trade, had they confined their bufinefs
to the difcounting of bills of exchange. They invented,
therefore, another method of ifluing their promiiTory notes ;
by granting, what they called, cafh accounts, that is by giving
credit to the extent of a certain fum (two or three thoufand
poun^fs, for example), to any individual who could procure
two perfons of undoubted credit and good landed eflate to
become furety for him, that whatever money fhould be ad-
vanced to him, within the fum for which the credit had been
given, fliould be repaid upon demand, together with the legal
intereft. Credits of this kind are, I believe, commonly
granted by banks and bankers in all' different parts of the
world. But the eafy terms upon which the Scotch banking
companies accept of re-payment are, fo far as I know, pecu-
liar to them, and have, perhaps, been the principal caufe,
both of the great trade of thofe companies, and of the bene-
fit which the country has received from it.
Whoever has a credit of this kind with one of thofe
companies, and borrows a thoufand 'rounds upon it, for ex-
ample, may repay this fum piece-meal, by twenty and thirty
pounds at a time, the company difcounting a proportionable
part of the intereft of the great fum from the day on which
each of thofe fmall funis is paid in, till the whole be in this"
manner repaid. All merchants, therefore, and almoft all
men of bufinefs, find it convenient to keep fuch cafh ac-
counts with them, and are thereby interefted to promote the
trade of thofe companies, by readily receiving their notes in
all payments, and by encouraging all thofe with whom they
have any influence to do the fame. The banks, when their
ciiftomers apply to them for money, generally advance it to
them in their own promifTary notes. Thefe the merchants
pay away to the manufa6lurers for goods, the manufafturers
to the farmers for materials and provifions, the farmers to
their landlords for rent, the landlords repay them to the mer-
chants for the conveniencies and luxuries with which they
fupply them, and the merchants again return them to the
bank*
296 THE NATURE AND CAUSES OF
banks in order to balance their cafli accounts, or to re-
place v.hat they may have borrowed of them ♦, and thus
almofl the whole money bufincfs of the country is tranf-
afted by means of them. Hence, the great trade of thofe
companies.
By means of thofe cafh accounts every merchant can,
without imprudence, carry on a greater trade than he other-
wife could do. If there are two merchants, one in London,
2nd the other in Edinburgh, who employ equal ftocks in the
fame branch of trade, the Edinburgh merchant can, without
imprudence, carry on a greater trade, and give employment
to a greater number ot people than the London merchant.
The London merchant mull always keep by him a confider-
able fum of money, either in his own coffers, or in thofe of
his banker, who gives him no intereft for it, in order to an-
fwer the demands continually coming upon him for payment
of the goods v/lich he purchafes upon credit. Let the ordi-
nary amount of this fum be fuppofed five hundred pounds.
The value of the goods in his warehoufe muft always be lefs
by five hundred pounds than it would have been, had he not
been obliged to keep fuch a fum unemployed. Let us fuppofe
that he generally difpofes of his whole (lock upon hand, or of
goods to the value of his whole flock upon hand, once in the
year. By being obliged to keep fo great a fum unemployed,
he mufl fell in a year five hundred pounds worth lefs goods
than he might otherwife have done. His annual profits muft
be lefs by all that he could have made by the fale of five
hundred pounds worth more goods ; and the number of peo-
ple employed in preparing his goods for the market, muft be
lefs by all thofe that five hundred pounds more ftcck could
have employed. The merchant in Edinburgh, on the other
hand, keeps no money unemployed for anfwering fuchocca-
fional demands. When they aftually come upon him, he
fatisfies them from his cafii account with the bank, and
gradually replaces the fum borrowed with the money or
paper which comes in from the occafional fales of his goods.
With the fame ftock, therefore, he can, without imprudence,
have at all times in his warehoufe a larger quantity of goods
than th., London merchant ; and can thereby both make a
greater profit himfelf, and give conftant employment to a
greater number of induftrious people who prepare thofe goods
for
THE WEALTH OF NATIONS. 297
for the market. Hence the great benefit which the country
has derived from this trade.
The facihty of difcounting bills of, exchange, it may be
thought indeed, gives the Englilh merchants a conveniency
equivalent to the caflr accounts of the Scotch merchants.
But the Scotch merchants, it muit be remembered, can dif-
count their bills of exchange as eafily as the Englifli mer-
chants ; and have, befides, the additional conveniency of
their cafli accounts.
The whole paper money of every kind which can eafily
circulate in any country never can exceed the value of the
gold and filver, of which it fupplies tlie place, or which (the
commerce being fuppofed the fame) would circulate there,
if there was no paper money. If twenty fliilling notes, for
example, are the lowed paper money current in Scotland,
the whole of that currency which can eafily circulate there
cannot exceed the fum of gold and filver, which v.ould be
neceffary for tranfacting the annual exchanges of twenty
{hillings value and upwards ufually tianfa£led within that
country. Should the circulating paper at any time exceed
that fum, as the excefs could neither be fent abroad nor oe
employed in the circulation of the country, it muil immedi-
ately return upon the banks to be exchanged for gold and
filver. Many people would immediately perceive that they
had more of this paper than was neceiTary for tranfacbing
their bufinefs at home, and as they could not fend it abroad,
they would immediately demand payment of it from the
banks. When this fuperiliious paper was converted into
gold and filver, they could eafily find a ufe for it by f nding
it abroad ; but they could find none while it remained in the
Ihape of paper. There would immediately, therefore, be a
run upon the banks to the whole extent of this fuperfluous
paper, and, if they fibowed any diihcuhy or backwardnefs in
paym,ent, to a much greater extent ; the alarm, which this
would occafion, neceflarily increafing the run.
Over and above the expences which are common to every
branch of trade ; fuch as the expencc of houfe-rent, the wa-
ges of fervants, clerks, accountants, &c. j the expences pe-
culiar to a bank confiil chiefly in two articles : Firft, in the
cxpence of keeping at all times in its coffers, for anfwering
the
293 THE NATURE AND CAUSES OF
the occafional demands of the holders of its notes, a large
fum of money, of which it lofes the intereft : And, fe-
condly, in the expence of replcnifhing thofe coffers as fad
as they are emptied by anfwering fuch occafional demands.
A BANKING company, which iffiies more paper than can
be employed in the circulation of the country, imd of which
the excefs is continually returning upon them for payment,
ought to increafe the quantity of gold a^d filver, which they
keep at" all times in their coffers, not only in proportion to
this exceffive increafe of their circulation, but in a much
greater proportion ; their notes returning upon them much
fafter than in proportion to the excefs of their quantity.
Such a company, therefore, ought to increafe the firft
article of their expence, not only in proportion to this forced
increafe cf their bufinefs, but in a much greater proportion.
The coffers of fuch a company too, though they ought to
be filled much fuller, yet muil empty themfelves much fafler
than if their bufinefs was confined within more reafonable
bounds, and muff require, not only a more violent, but a
more conftant and uninterrupted exertion of expence in or-
der to repleniili them. The coin too, which is thus conti-
nually drawn in fuch large quantities from their coffers, can-
not be employed in the circulation of the country. It comes
in place of a paper which is over and above what can be em-
ployed in that circulation, and is therefore over and above
•what can be employed in it too. But as that coin will not
be allowed to lie idle, it mud, in one fhape or another, be
fent abroad, in order to find that profitable employment
which it cannot find at home ; and this continual exportation
of gold and filver, by enhancing the difficulty, muft neceffa-
rilv enhance Rill further the expence of the bank, in find-
ing new gold and filver in order to replenifli thofe coffers,
which empty themfelves fo very rapidly. Such a company,
therefore, niuf!:, in proportion to this forced increafe of their
bufinefs, increafe the fecond article of their expence ftill
more than the firft.
Let us fuppofe that all the paper of a particular bank,
which the circulation of the country can eafily abforb and
employ, amounts exactly to forty thoufand pounds j and that
for arifwering occafional demands, this bank is obliged to
' y kecD
THE WEALTH OF NATIONS. 299
keep at all times in its coffers ten thoufand pounds in gold
and filver. Should this bank attempt to circulate forty-four
thoufand pounds, the four thoufand pounds which are over
and above what the circulation can eafily abforb and employ,
will return upon it almoft as faft as they are ilTued. For an-
fwering occafional demands, therefore, this bank ought to
keep at all times in its coffers, not eleven thoufand pounds
only, but fourteen thoufand pounds. It will thus gain no-
thing by tlic interefl of the four thoufand pounds excelhve
circulation ; and it will lofe the whole expence of continually
colle£liRg four thoufand pounds in gold and filver, which
will be continually going out of its coiTers as fait as they
are brought into them.
Had every particular banking company always under-
flood and attended to its own particular interefl, the circu-
lation never could have been overftocked with paper money.
But every particular banking company has not always under-
ftood or attended to its own particular intereft, and the
circulation has frequently been overftocked with paper
money.
By ifluing too great a quantity of paper, of which the ex-
cefs was continually returning, in order to be exchanged for
gold and filver, the bank of England was for many years to-
gether obliged to coin gold to the extent of between eight
hundred thoufand pounds and a million a ye?r ; or at an ave-
rage, about eight hundred and fifty thoufand pounds. For
this great coinage the bank 1 in confequence of the worn and
degraded Rate into which the gold coin had fallen a few years
ago) was frequently obliged to purchafe gold bullion at the
high price of four pounds an ounce, which it foon after if-
fued in coin at 3/. i']s. 10 d. an ounce, lofing in this man-
ner between two and a half and three per cent, upon the
coinage of fo very large a fum. Though the bank therefore
paid no fcignorage, though the government was properly
at the expence of the coinage, this liberality of government
did not prevent altogether the expence of the bank.
The Scotch banks, in confequence of an excefs of the
fame kind, were ail obliged to employ conftantly agents at
London to collect money for them, at an expence which was
feldom below one zw^X a half or two per cent. This money
was
300 THE NATURE AND CAUSES OF
was fent clown by the waggon, and infured by the carriers
at an additional expence of three quarters per cent, or fif-
teen fnilhngs on the hundred pounds. TKofe agents were
not always able to replenifh the coffers of their employers
fo faft as they were emptied. In this cafe the refource of the
banks was, to draw upon their correfpondents in Lon-
don bills of exchange to thp extent of the fum which
they wanted. When thofe correfpondents afterwards drew
upon them for the payment of this fum, together with
the intereft and the commiflion, fome of thofe banks,
from the diftrefs into which their exceiTive circulation had
thrown them, had fometimes no other means of Satisfying
this draught but by dravi'ing a fecond fet of bills either upon
the fame or upon fome other correfpondents in London ; and
the fame fum, or rather bills for the fame fum, would in this
manner make fometimes more than two or three journies j
the debtor bank, paying always the intereft and commiflion
upon the whole accumulated fum. Even thofe Scotch
banks which never diftinguifhed themfelves by their extreme
imprudence, were fometimes obliged to employ this ruinous
refource.
The gold coin which was paid out either by the bank of
England, or by the Scotch banks, in exchange for that part
of their paper which was over and above what could be
employed in the circulation of the country, being likewife
over and above what could be employed in that circula-
tion, was fometimes fent abroad in the iliape of coin, fome-
times melted down and fent abroad in the fhape of bullion,
and fometimes melted down and fold to the bank of England
at the high price of four pounds an ounce. It was the
neweil, the heavleft, and the beft pieces only which were
carefully picked out of the whole coin, and either fent
abroad or melted down. At home, and while they re-
mained in the {hape of coin, thofe heavy pieces were of
no more value than the light, but they were of more value
abroad, or when melted down into bullion, at home. The
bank of England, notwithftanding their great annual coin-
age, found to their aftonifliment, that there was every year
the fame fcarcity of coin as there had been the year before •,
and that notwithftanding the great quantity of good and new
coin which was every year iflued from the bank, the ftate of
the coin, inftead of growing better and better, became every
year worfe and worfe. Every year they found themfelves
under
THE WEALTH OF NATIONS. 3or
under the necefTity of coining nearly the fame quantity of
gold as they had coined the year before, and from the con-
tinual rife in the price of gold bullion, in confequence of
the continual wearing and clipping of the coin, the expence
of this great annual coinage became every year greater and
greater. The bank of England, it is to be obferved, by
fupplying its own coffers with coin, is indireftly obliged to
fupply the whole kingdom, into which coin is continually
flowing from thofe coffers in a great variety of ways. What-
ever coin therefore was wanted to fupport this exceffive cir-
culation both of Scotch and Englifli paper money, whatever
vacuities this exceffive circulation occafioned in the neceffary
coin of the kingdom, the bank of England was obliged to
fupply them. The Scotch banks, no doubt, paid all of
them very dearly for their own imprudence and inattention.
But the bank of England paid very dearly, not only for its
own imprudence, but for the much greater imprudence of
almofl all the Scotch banks.
The over-trading of fome bold projecSlors in both parts
of the united kingdom, was the original caufe of this ex-
ceffive circulation of paper money.
What a bank can with propriety advance to a merchant
or undertaker of any kind, is not, either the whole capital
with which he trades, or even any confiderable part of that
capital j but that part of it only, which he would otherwife
be obliged to keep by him unemploye'd, and in ready money
for anfwering occafional demands. If the paper money
which the bank advances never exceeds this value, it can
never exceed the value of the gold and- filver, which would
neceffarily circulate in the country if there was no paper
money ; it can never exceed the quantity which the circu-
lation of the country can eafily abforb and employ.
When a bank difcounts to a merchant a real bill of
exchange drawn by a real creditor upon a real debtor, and
which, as foon as it becomes due, is really paid by that
debtor ; it only advances to him a part of the value which
he would otherwife be obliged to keep by him unemployed,
and in ready money for anfwering occafional demands. The
payment of the bill, when it becomes due, replaces to the
bank the value of what it had advanced, together v/ith the
intereft.
302 THE NATURE AND CAUSES OF
intereft. The coffers of the bank, (o far as its dealings ar^
confined to fuch cudomers, refemble a water pond, from
which, though a llrcam is continually running out, yet
another is continually running in, fully equal to that which
runs out ; fo that, without any further care or attention,
the pond keeps always equally, or very near equally full.
Little or no expence can ever be necelThry for replenifliing
the coffers of fuch a bank.
A MERCHANT, without OYcr-trading, may frequently have
occafion for a fum of ready money, even when he has na
bills to difcount. When a banl>, befides difcounting his bills,
advances him likewife upon fuch occafions, fuch fums upon
his calh account, and accepts of a piece-meal repayment as
the money comes in from the occafional fale of his goods,
upon the eafy terms of the banking companies of Scotland *,
it difpenfes him entirely from the necelFity of keeping any
part of his flock by hini unemployed, and in ready money
for anfwering occafional demands. When fuch demands
aiftually come upon him, he can anfwer them fufficiently
from his cafh account. The bank, however, in dealing with
Juch cuftomers, ought to obferve with great attention, whe-
ther in the courfe of fom.e fliort period (of four, five, fix, or
eight months, for example) the fum of the repayments
which it commionly receives from them, is, or is not, fully
equal to that of the advances which it commonly makes to
them. If, within the courfe of fuch fhort periods, the fum
of the repayments from certain cuftomers is, upon mofb
occafions, fully equal to that of the advances, it may fafely
continue to deal with fuch cuftomers. Though the ftream
which is in this cafe continually running out from its coffers
may be very large, that which is continually running into
them muft be at leaft equally large ; fo that without any fur-
ther care or attention thofe coffers are fikely to be always
equally or very near equally full ; and fcarce ever to require
any extraordinary expence to rcplenifli them. If, on the con-
trary, the fum of the r(#payments from certain other cuftom-
ers falls commonly vcv much fliort of the advances which
it makes to them, it cimnot with any fifety coutlnue to deal
with, fuch cuftomers, at leaft if they continue to deal with it
in this manner. The ftream which is in this cafe continually
running out from its cofiers is neceffarlly much larger than
that which is continually running in j fo that, unlefs they are
replenilhed
THE WEALTH OF NATIONS. 30;^
repleniflied by fome great and continual eflbrt of expeiice'
thofe coffers mud Toon be exhauited altogether.
The banking companies of Scotland, accordingly, were
for a long time very careful to require frequent and regular
repayments from all their cuftomers, and did not care to dca;l
with any perfon, whatever might be his fortune or credit,
who did not make, what they called, frequent and regular
operations with them. By this attention, befuies faving almoll
entirely the extraordinary expence of replenifliing their cof-
fers, they gained two other very confiderable advantages.
First, by this attention they were enabled to make fome
tolerable judgment concerning the thriving or declining cir-
cumltances of their debtors, without being obliged to look
out for any other evidence befides what their own books
afforded them *, men being for the moft part either regular
or irregular in their repayments, according as their circum-
ftances are either thriving or declining. A private man who
lends out his money to perhaps half a dozen or a dozen of
debtors, may, either by himfeif or his agents, obferve and
enquire both conftantly and carefully into the condudl: and
fituation of each of them. But a banking comipany, which
lends money to perhaps five hundred different people, and
of which the attention is continually occupied by objects of
a very different kind, can have no regular information con-
cerning the conducl and circumflances of the greater part
of its debtors beyond what its own books afford it. In re-^
quiring frequent and regular payments from all their cuf-
tomers, the banking companies of Scotland had probably
this advantage in view.
Secondly, by this attention they fecured themfelves fron\
the poffibility of iffuing more paper money than what the
circulation of the country could eafdy abforb and employ.
When they obfcrvecl, that within moderate periods of time
the repayments of a particular cuffomer were upon mofl
occafions fully equal to the advances which they had made to
him, they might be affured that the paper money which they
had advanced to him, had not at any time exceeded the quan-
tity of gold and filver which he would otherwife have been
obliged to keep by him for anfwering occafional demands ;
and that, confequently the paper money, which they had
circulated
304 THE NATURE AND CAUSES OF
circulated by his means, had not at any time exceeded the
quantity of gold and filver which would have circulated in
the country, had there been no pap?r money. The fre-
quency, regularity and amount of his repayments would
iuiliciently demonilrate that the amount of their advances
had at no time exceeded that part of his capital wdiicjii he
would otherwife have been obliged to keep by him unem-
ployed and in ready money for anfwering occafional de-
mands j that is, for the purpofe of keeping the reft of his
capital in conitant employment. It is this part of his capital
only which: within moderate periods of time,- is continually
returning to every dealer in the fhape of money, whether
paper or coin, and continually going from him in the fame
Ihape. If the advances of the bank had commonly exceeded
this part of his capital, the Ordinary amount of his repay-
ments could not, within moderate periods of time, have
equalled the ordinary ami^uilt of its advances. The flream
which, by means of his dealings, was continually running
into the coficrs of the bank, could not have been equal to
the liream vv'hich, by means of the fame dealings, was con-
tinually running out. The advances of the bank paper, by
exceeding the quantity cf gold and filver which, had there
been no fuch advances, he would have been obliged to keep
by him for anfwering occafional demands, might foon come
to exceed the whole quantity of gold and filver which (the
commerce being fuppofed the fame) would have circulated in
the country had there been no paper money ; and confe-
quently to exceed the quantity which the circulation of the
country could eafily abforb and employ *, and the excefs of
this paper money would immediately have returned upon
the bank in order to be exchanged for gold and filver. This
fecond advantage, though equally real, was not perhaps fo
well underftood by all the different banking companies of
■^' Scotland as the fir ft.
When, partly by the conveniency of difcounting bills,
and partly by that of cafh accounts, the creditable traders of
any country can be difpenfed from the necelTity of keeping
any part of their ftock by them, unemployed and in ready
money, for anfwering occafional demands, they can reafonably
expeO: no further affiilance from banks and bankers, who,
when they have gone thus far, cannot, confiftently with their
oxvn intereft and fafety, go farther- A bank cannot, con-
fiftently
THE WEALTH OF NATIONS. 305
fiRently with its own ititevcft, advance to a trader the wliolc
or even the greater part ot the cireulating capital with which
he trades *, becaufe, though that capital is continually return-
ing to him in the ihape of money, and going from him iu
the lame Ihape, yet the whole of the returns is too diilant
from the whole of the out-goings, and the fum of his repay-
ments coukl not equal the fum of its advances within fuch
moderate periods ot time as fuit tlie conveniency of a bank.
'Still lefs could a bank afford to advance him any corfidcrabla
p^art of his fixed capitrtl ^ of the capital which the under-
taker of an iron forge, for example, employs in ere£ling
his forge and fmelting-houfe, his work-houfes and ware-
houies, the dwelhng-houfes of his work-men, S:c. ; of the
capital which the undertaker o'f a rrilne employs in finking
his (halts, in creeling engines for drawing out the water, iu
making roads and waggon-w^ays, &c. ; of the capital which
the perfon who undertakes to improve land employs in clear-
ing, draining, enclofmg, manuring and ploughing wade and
uncultivated fields, in building farm-houfes, with all their
neceiiary appendages of HableSj granaries, &c. The returns
of the fixed capital are in almoft all cafes much flower
than thcfe of the circulating capital ; and fuch expcnces,
even when laid out with the greateit prudence and judgment.
Very feldom return to the undertaker till after a period of
many years, a period by far too didant to fuit the conveni-
ency of a bank. Traders and other undertakers may^ no
doubt, with great propriety, carry on a very confiderablc
part of their projefts with borrowed money. In jufiice to
their creditors, however, their own capital ought, in this
cafe, to be fuiHcient to .enfure, if I may lay (oj the capital
of tliofe creditors ; or to render it extremely improbable that
tliofe creditors (hould incur any lofs, even though the fuccefs
of the project fhouKl fall very much fliort of the expeiflatioii
of the projeftors. Evefi with this precaution too, the money
which is borrowed, and which It is meant ihould not be re-
paid till after a period of fcveral years, ought not to be
borrowed of a bank, but ought to be borrowed upon bond
or mortgage, of fuch private people as propofe to live upon
the intereli oF their m.oney, without taking the trouble them-
selves to employ the capital ; and who are upon that account
willing to lend that capital to fuch people of good credit ?>
are likely to keep it for feveral years. A bank, indeed,
which lends its money without the expence of flampt paper.
Or of attornlcs fees for drawln<4 bonds and mortgages, and
Vor.. I. X which
3o6 THE NATURE AND CAUSES Of
which accepts of repayment upon the eafy terms of the bank-
ing companies of Scotland ; would, no doubt, be a very
convenient creditor to fuch traders and undertakers. But
fuch traders and undertakers would^ furely,be mofl incon-
I'cnient debtors to fuch a bank.
It is now more th^n five-and-twenty years fmce the paper
money ifilied by the different banking companies of Scotland
was fully equal, or rather was fomewhat more than fully
equal, to what the circulation of the country could eafdy
abforb and employ. Thofe companies, therefore, had fo long
a^o f^ivcn all the afiiftanceto tiie traders and other undertakers
of Scotland which it is podible for banks and bankers, con-
^>^.ilentjy v/ith their own intereft, to give. They had even
done fomewhat more. 1 hey had overtraded a little, and
had brought upon themfeives that lofs, or at leall that duTJi-
nution of profit, which in this particular bufinefs never fails
to attend the fmalleft degree of over-trading. Thofe traders
and other undertakers having got fo much affiilance from
banks and bankers, wiflied to get flill more. The banks^
they feem to have thought^ could extend their credits to
whatever fum might be wanted, without incurring any other
expence beiides that of a few reams of paper. They com-
plained of the contracted views and daftardly fpirit of the
dire£i"ors of thofe banks, v/hich did not, they faid, extend
their credits in proportion to -the extenfion of the trade of
the country •, meaning, no doubt, by the extenfion of that
trade the extenfion of their own projects beyond what they
could carry on, either with their own capital, or with what
thcv had credit to bcrrov/ of private people in the ufual way
of bond or mortgage. The banks, they feem to have thought,
were in honour bound to fupply the deficiency, and to pro-
•vide them with all the capital which they wanted to trade
with. , The banks, however, were of a different opinion,
and upon their refufing to e;ctend theiir credits, fome of thofe
traders had recourfe to an expedient which, for a time,
ferved their purpofe, though at a much greater expence, yet
as eifeClually as the utmoft extenfion of bank credits could
have done. This expedient M^as no other than the well-known
fiiift of dravv'ing and redrawing ; the fliift to which unfortu-
. uate traders have fometimes recourfe when they are upon
the brink of bankruptcy. The pradfice of raifing money in
this manner had been long known in England, and during
ihe courfe of the late war, when the high profits of trade
afforded
THE WEALTH OF NATIONS. 307
afforded a great temptation to over-trading, is faid to have
been carried on to a very great extent. From England it
was brought into Scotland, where, in proportion to the very
limited commerce, and to the very moderate capital of the
country, it was foon carried on to a much greater extent
than it ever had been in England,
The pra£lice of drawing and re-drawing is fo well known
to all men of bufmefs, that it may perhaps be thought unne-
ceflary to give any account of it. But as this book m.ay rome
into the hands of many people who are not men of bufmefs,
and as the efFe(fl:s of this practice upon the banking trade are
not perhaps generally underilood even by men of bufinefs
themfelves, I fliall endeavour to explain it as diflindily as
I can.
The cuftoms of merchants, which were eftablifhed when
the barbarous laws of Europe did not enforce the performance
of their contrafts, and which during the courfe of trie two
laft centuries have been adopted into the laws of all European
nations, have given fuch extraordinary privileges to bills of
exchange, that money is more readily advanced upon them,
than upon any other fpecies of obligation •, efpecially when
they are m^de payable within fo fhort a period as two or
three months alter their date. If, when the bill becomes
due, the acceptor does not pay it as foon as it is prefented,
he becomes from that moment a bankrupt. The bill is pro-
tePted, and returns upon the drav/er, who, if he does not
immediately pay it, becomes likewife a bankrupt. If, before
it came to the perfon who prefents it to the acceptor for pay-
pent, it had palled through the hands of feveral other pei -
fons, who had fucceflively advanced to one another the
contents of it either in money or goods, and who, to exprefs
that each of them had in his turn received thofe contents,
had all of them in their order endorfed, that is, written their
names upon the back of the bill ; each endorier becornes in
his turn liable to the owner of the bill for thofe contents,
and, if he fails to pay, he becomes too from that moment
a bankrupt. Though the drawer, acceptor, and endorfers
of the bill fliould, all of them, be perfons of doubtful credit ;
yet iiill the Ihortnefs of the date gives fome fecurity tu the
owner of the bill. Though all of them may be very likely
to become bankrupts ; it is a chance if they all become fo in
fo fhort a time. The houfe is crazy, fays a weary traveller
, X 2 tQ
3o3 THE NATURE AND CAUSES OF
to hlmfelf, and will not Hand very long ; but It is a cliancc
il it tails to-ni'jht, and 1 will venture, therefore, to lleen in it
tei-night.
Tjje trader A in Edinburgh, we fliali fuppofe, draws a
bill upon X) m lA)ncion, payable two months afterdate. In
reality B in London ovv'es nothing to A in Edinburgh ; but
lie agrees to aeeept of A's bill upon eondition that before the
term of payment he lliall re-draw upon A in Edinburgh, for
the fame ium, ti):^et!ier with the intereft and a commiffion,
anotlur bill, payable likewiXe two months after date. B ae-
cordinglv, before the expiration of the liril two months, re-
draws tliis bill upon A in Edinburgh •, who again, before the
expiration of the fecond tv>'o months, draws a fecond bill
upon B in London, pavable likewife two months after date ;
and before the expiration of the third two months, B in Lon-
don re-dravv's upon A in Edinburgh another bill, payable alfo
two months after date. This praiffice has fometimes gone
on, not onlv for feveral months, but for feveral years to-
gether, the bill always returning upon A in Edinburgh, with
tfie aceuniulated intereib and commilFion of all the former
hills. The iiitereil was five per eent. in the year, and the
eommilFion was never lefs than one half per cent, on each
dTaViidit. This commiflion being repeated more than fix
times in the year, whatever money A might raife by this ex-
pedient muih neeefiinilv have coil him fomething more than
eight per cent, In the year, and fometimes a great deal more ;
V. hen eitlier the price of the commiifion happen to rife, or
when he w^s oblicjcdto pay compound interell upon the in-
■teix'il: and eommiiuoii of former bills. This practice wa*
c-alied rai:":n!T^ nionev bv circulation.
i^ •■ /
In a country where the ordinary profits of ftock In the
gre;ii.er part of mercantile projects are fuppofed to run be-
tween Cix and ten per cent. ; it mull have been a very fortu-
ivr.te fpeculation of which the returns could not only repay
ti:e enormous expence at which the money was thus bor-
rowed i'oY carrying it on ; but afibrd, befides, a good furplus
profit to the proje(il:or. Many vaft and extenfive projects,
ho^^'ever, were undertaken, and for feveral years carried on
without any other fund to fupport them beiides what was
raifed at this enormous expence. The projecftors, no doubt,
had in their golden dreams the moll dlilin6l vifion of this
great proiit. LTpou their awaking, however, either at the
end
THE WEALTH OF NATIONS. 5c()
end of their projects, or wbcn tlicy ^^-ere no longer nble to
carry tliem on, tlicv very feldom, I believe, had the good for-
tune to find it *.
The bills which A in Edinburgh drew ujwn B in LoiVion,
he reeularlv difcounted two montlis before thev were due
V'itli fome bank or banker in Edinburgh ; :\nd tlie bills which
B in London re-drew upon A in Edinburgh, he as re-gnhrly
difcounted either with the bank of England, or witii fome
other bankers in London. Whatever was advanced upon
fuch circulating bills, was, In lulinburgh, advanced in the
paper of the Scotch banks, and in London, when ihev were
difcounted at the bank of England, in the p^per of tlint
bank. Though the bills upon which this paper had been
ndvanced, were all of them repaid in their turn as foon as
they became due ; yet the value which had been really ad.-!-
vanced upon tl;e fuTt bill, was never really returned to the
* The mefhoci dtfcribcd In tlie text wa--^ by no meanseklier the mnll covfr
non or tlie mod expenlive one in ■which thol}i adventurers fometimc«i raifcd
money by circulation. It frequently happened that A in F.diubur^h ^ynliid
enable B in I^ondon to pay the firfi: hill of exchanc^e by drawing, a few dars
before it became due, a feccnd bill at tierce niontlis dale npon xhe laine B in
London. This bill, being- payable to his own ord.er, A /qld iy E(Jinbiu;gh a.t
par; and with its contents purchafed bills upon I/ondon payal)]e M. (i;;ht to the
order of B, to whom he ftnt them by polh Towards tlie end ei the late
war, the exchange between Edinburgh and London v/asVrcq=uently' three per
cent, a^ainft Edinburgh, and thofe bills at fight mufl: freqtie?itly have coft A
tJiat premium. 'J'his tranfadiion therefore being repeated! at Icafl four times
in the year, and being loadffd with a commifnon of at leall one half per cent,
upon each repetition, muft at that period l-.ave coft A :it leaf!: fotu-teen per
cent, in the year. At other times A would enable B t« d'ifch -i rge tlu' firfl bill
of exchange by drawing, a few days before it became due, a ferond bill at two
months date; not upon 15, but upon fome third perfon, C, for example, in
London. This other bill was made pr.yab'ie to tlic oriler of B, AYho,upo,n
its being accepted by C, difcounted it witii fome banker in l,ondon ; an«i A
enabled C to difcharge it by drawing, a fi-w days before it became due, a third
bill, likewife at two montlis date, fonnrtimes upon his firR corrcfpoiident B,
and fometimes upon fome fourth or fifth pcrfon, D or E, for example. This
third bill was made payable to the order of C; who as foon as it was accepted,
difcounted it in the fame manner with fome banker in I^ondon. Such opera-
tions being repeated at leafl; fiK times in the year, and being loaded with a
rommifTion of at leaft one-half percent, upon each repetition, together witli
t"he legal intereft of five percent, this method ofraifmg monwy, in the fame
muB^^er as that deferibcd in the text,muft have coll A fonxthi'ng more than
eight per cent. By faving, however, the exchange between Edinburgli and
London it w~4s lefs expenfive than that mentioned in the foregoing part .of-^his
note; but then it required an eftablifned credit v.'ith more houfcstiiac one in
London, an advantage which nvany of thcfe adventurers could notiilways find
it cafy to procure.
banks
3 TO THE NAttTRE AND CAUSES OF
banks which advanced it ; becaufe, before each bill became
due, another bill was always drawn to fomewhat a greater
amount than the bill which was foon to be paid ; and the
difcounting of this other bill was effentialiy neceflary towards
the pi^yment of that which was foon to be due This pay-
ment, therefore, was altogether ficSliticus. The ftream,
w*-hich, by means of thofe circulating bills of exchange,
had once been made to run out from the coffers of the
'' banks, was never replaced by any flream which really ruii
into them.
The paper which was iffued upon thofe circulating bills of
exchange, amounted, upon many occafions, to the whole
jfund deitined for carrying on fome vaft ar,d extenfive project,
of agriculture, commerce, or manufacftures ; and not merely
to that part of it which, had there been no paper money,
the proje£lor would have been obliged to keep by him, un-
employed and in ready money for anfwering occafional de-
mands. The greater part of this paper was confequently,
over and above the value of the gold and filver which would
have circulated in the country, had there been no paper
money. It was over and above, therefore, what the circu-
lation of the country could eafily abforb and employ, and,
upon that account, immediately returned upon the banks in
order to be exchanged for gold and fdver, which they were
to iind as they could. It was a capital which thofe projectors
had very artfully contrived to draw from thofe banks, not
only without their knowledge or deliberate confent, but for
fome time, perhaps, without their having the mod diftant
fufpicion that they had really advanced it.
When two people, who are continually drawing and re»
drawing upon one another, difcount their bills always with
the fame banker, he mud immediately difcover what they
are about, and fee clearly that they are trading, not with any ,
capital of their own, but with the capital which he advances
to them. But this difcovery is not altogether fo eafy when
they difcount their bills foriietimes with one banker, and
fometimes with another, and when the fame two perfons do
not conftantly draw and re-draw upon one another, but oc-
Cafionally run the round of a great circle of projecliors, who
find it for their intereft to aflift one another in this method
of railing money, and to render it, upon that account, as
difBcult as poffible to diftinguifh between^ a real and a fictiti-
ous
THE WEALTH OF NATIONS. 31 e
ous bin of exchange ; between a bill drawn by a r^al creditor
upon a real debtor, and a bill for whicli there was properly
no real creditor but the bank which difcounted it ; nor any
real debtor but the projecfior who made ufe of the money.
When a banker had even made this difcovery, he might
fometimes make it too late, and might fuid that he had al-
ready difcounted the bjlls of thofe projectors to fo great aji
extent, that, by refufing to difcount any more, he would ne-
.ceflarily make them all bankrupts, and thus, bv ruining them,
might perhaps ruin himfelf. For his ov/n interefl: and fafety,
therefore, he might fmd it necelfary, in this very perilous
fituation, to go on for fome time, endeavouring^ however, to
withdraw gradually, and upon that account making every 4ay
greater and greater difficulties about difcounting, in or-der
to force thofe projectors by degrees to have recourfe, either
to other bankers, or to other methods of railing money ; fo
as that he himfelf might, as foon as poffible, get out of ^the
circle. The difficulties, accordingly, which the bank of
England, which the principal bankers in Loiidon, and which
even the more prudent Scotch banks began, after a certairi
time, and when all of them had already gone too far, to
make about difcounting, not only alarmed, but enraged in the
higheft degree thofe projectors. Their own diitrefs, of
which this prudent and necelTary referve of the banks was, *
no doubt, the immediate occafion, they called the diitrefs of
the country ; and this diitrefs of the country, they faid, wag
altogether owing to the ignorance, pufilianimity, and bad
conduct of the banks, which did not give a fuffixcientiy liber
ral aid to the fpirited undertakings of thofe who exerted
themfelves in or<ler to beautify, improve, and enrich the
country. It was the duty of the banks, they feemed to
think, to lend for as long a time, and to as great an extent
as they might wifh to borrow. 1'he banks, however, by re-
fufing in this manner to give more credit to thofe to whom
they had already given a great deal too much, took the only
method by which it was now poffible to fave either their own
credit, or the public credit of the country.
In the midft of this clamour and diitrefs, a new bank was
eftablifficd in Scotland for the exprefs purpofe of relieving
the diftrefs of the country. The defign was generous ; but
the execution wa5 imprudent, and the nature and caufes of
the diitrefs which it meant to relieve, were not, perhaps,
well underftood. This bank was more liberal than any other
had
312 THE NATURE AND CAITSES OF
had ever been, both in granting cafli accounts, and in difw
counting bills of exchange. With regard to the latter, it
feems to have made fcarce any dillinc^ion between real and
circulating bills, but to have difcoiinted all equally. It \Vc\^
the avowed principle of this bank to advance, upon any
reafonable fecurity, the whole capital which was to be em-
ployed in thofe improvements of wliich the returns are the
moil How and diftant, fuch as the improvements of land.
To promote fuch improvements was even faid to be the chief
of the public fpirited purpofes for which it v/as inilitutedo
By its liberality in granting cafn accounts, and in clifcounting
bills of exchange, it, no doubt, iilued great quantities of it.i
bank-notes. But thofe bank-notes being, the greater part of
them, over and above what the circulation of the country
could eafily ahforb and employ, returned upon it, in order to
be exchanged for gold and fiiver, as faft as they v*^ere iflued.
Its coffers were never well-hlled. The capital which had
been fubfcribed to this bank at two difTererit fuhfcviptions..
amounted to one hundred aiid fixty tlxoufand pounds, of
which eight per cent, only vras paid up. This fum ought
to have been paid in at feveral ditlei-'ent inllaiments. A
great part of the proprietors, when they paid in their ivrit in-
iialment, opened a calh account with the bank ; and the di-
re(fi:ors, thinking themfelves obli^ged to treat their own pro-
prietors vvdth the fame liberality with which they treated all
other men, allowed many of them to borrow upon this cafli
account what they paid in upon all their fubfequent inflal-
mentSo Such payments, therefore, only put into one cofferj
what had the moment before been taken out of another.
33ut had the cofrers of this bank been filled ever fo well, its
excelTive circulation mufh have emptied them faller than they
could have been repleniflied by any other expedient but the
ruinous one of drawing upon London, and when the bill
became due, paying it, together with intercft and commif-
fion, by another draught upon the fjime place. I'es coffers
having been filled fo very ill, it is laid to have been driven to
this refource within a very few months after it began to do
burners. The eflates of the proprietors of this bank were
v/orth feveral millions, and by their fubfcription to the ori-
ginal bond or contracl of the bank, were really pledged for
anfwering all its engagements. By means of the great cre-
dit which fo great a pledge neceflarily gave it, it was, not-
withftanding its too liberal coiiducl, enabled to carry on
bufinefs for more than two years. When it was obliged to
flop,
THE WEALTH OF NATIONS. 313
(lop, it had in the circulation about two hundred thouf.ind
pounds in bank-notes. In order to fupport tlie circulation
of thofe notes, which were continually returning upon it as
faft as they were iflued, it had been conftantlv in the praClicr
.G-f drawing bills of exchange upon London, of which the
j^timber and value were continually increafmg, and, when it
ftopt, amounted to upwards of fix hundred thoufand pounds.
This bank, therefore, had, hi little more than the courfe of
two years, advanced to dllFerent people upwards of eight
hundred thoufand pounds at five per cent. Upon the two
hundred thoufand pounds which it circulated in bank-notes,
this five per cent, might, perhaps, bc confidered ns clear
gain, without any other dedu6fion befides the expencc of
ntianagement- But upon upwards of fix hundred thoufand
pounds, 'for which it was continually drawing bills of ex-
change upon London, it was paying;, in the way of intereft
and commiflion, upwards of eight per cent., and was confi^-
quently lofing more than three per cent, upon more than
three-fourths of ail its 4eaUngs.
The operations of this bank feem to have produced eF-
fedls quite oppofite to thofe which were intended by the par-
ticular pcrfons who planned and cliredled it. They feem to
have hitended td fuppo; t the fpirited undertakings, for as fuch
they confidered them, which Were at that time carrying on
in different parts of the country ; and at the fame time, by
drawing the whole banking buiinefs to themfelvcs, to fnp-
plant all the other Scotch banks; particularly thofe eltablifiud
at Edinburgh, whofe backwardnefs in difcou-nting bills of ex-
change had given fome offence. This bank, no doubt, gave
fome temporary relief to thofe projetftors, and enabled thcni
to carry on their proje^ls for about two years longer than
they could othervvife have done. But it thereby only en-
abled them to get fo much deeper into debt, fo that when
ruin came, it fell fo much the heavier both upon them and
upon their creditors. The operations of this bank, therefore,
inflead of relieving, in reality aggravated in the long-run the
diflrefs which thofe projectors had brought both upon them-
felvcs and upon their country. It would have been 'much
better for themfelves, their creditors and their country, had
the greater part of them been obliged to (lop two years fooner
than they aftually did. The temporary relief, hov/ever,
which this bank afforded to thofe projectors, proved a real
and permanent relief to the other Scotch banks. All the
" ' ' dealers
314 THE NATURE AND CAUSES OF
dealers in circulating bills of exchange, which thofe other
banks had become fo backward in dilcounting, had recourfe
to this new bank, where they were received with open arms.
Thofe other banks, therefore, were enabled to get very eafily
out of tliat fatal circle, from which they could not otherwife
have difengaged themfelves without incurring a confiderable
lofs, and perhaps too even fome degree of difcredit.
In the long-run, therefore, the operations of this bank
increafed the real diftrefs of the country v/hich it rneant to
relieve -, and etTeftually relieved from a very great diftrefs
thofe rivals whom it meant to fupplant.
At the firfl fetting out of this bank, it v/as the opinion
cf fome people, that how faft foever its coffers might be
emptied, it might eafily replenilh them by raifing money
upon the fecurities of thofe to v.^hom it had advanced its
paper. Experience, I believe, foon convinced them that this
method of raifmg money was by much too flow to anfwer
their purpofe ; and that coffers which originally were fo ill
filled, and which emptied themfelves fo very fall, could be re-
plenifiied by no other expedient but the ruinous one of draw-
ing bills upon London, and when they became due, paying
them hy other draughts upon the fame place with accumu-
lated intereft and commiffion. But though they had been
able by this method to raife money as faft as they wanted it ;
yet, inflead of making a profit, they muft have fuffered a lofs
by every fuch operation ; fo that in the long-run they muft
have ruined themfelves as a mercantile company, though,
perharps, not fo foon as by the more expenfive pracSlice of
drawing and re-drawing. They could llill have made nothing
by the intereft of the paper, which, being over and above
what the circulation of the country could abforb and employ,
returned upon them, in order to be exchanged for gold and
filver, as faft as they iffued it ; and for the payment of which
they were themfelves continually obliged to borrow money.
On the contrary, the Vt'hole expence of this borrowing, of
employing agents to look out for people who had money to
lend, of negociating with thofe people, and of drawing the
proper bond or ailignment, muft have fallen upon them,
•and have been fo much clear lofs upon the balance of their
accounts. The project of replenifiiing their coffers in this
manner may be compared to that of a man who had a
water-pond from which a ftream was continually running
out.
THE WEALTH OF NATIONS. 315
out, and into which no flream was continually running,
but who propofed to keep it always equally full by employ in«^
^ number of people to go continually with buckets to a well '
at fome miles diftance in order to bring water to repie-
nifh it.
But though this operation had proved, not only prafti-
cable, but profitable to the bank as a mercantile company ;
yet the country could have derived no benefit from it ; but,
on the contrary, mud haje fufiered a vexy confiderable lols
by it. This operation could not augment in the fiiialleil
degree the quantity of money to be lent. It could only have
ere<ft ed this bank into a fort of a general loan office for the
whole country. Thofe who wanted to borrow, muit have
applied to this bank, inflead of applying to the private per-
fons who had lent it their money. But a bank which lends
money, perhaps, to five hundred different people, the greater
part of whom its direftors can know very little about, is not
likely to be more judicious in the choice of its debtors, than
a private perfon v/lio lends out his money among a few
people whom he knows, and in whofe fober and frugal con-
duS: he thinks he has good reafon to confide. The debtors
of fuch a bank, as that whofe condu6l I have been sivingr
fome account of, were likely, the greater part of them, to
be chimerical projectors, the drawers and re-drawers of cir-
culating bills of exchange, who would employ the money in
extravagant undertakings, Vvdiich, with all the afliftance that
could be given them, they would probably never be able to
compleat, and which, if they fhould be compleated, would
never repay the expence which they had really cofl, would
never afford a fund capable of maintaininga quantity of labour
equal to that which had been employed about them. The
fober and frugal debtors of private perfons, en the contrary,
would be more likely to employ the money borrowed in fober
undertakings which were proportioned to their capitals, and
which, though they might have lefs of the grand and the
marvellous, would have more of the foiid and the profitable,
which would repay with a large profit whatever had been
laid out upon them, and which would thus afford a fund
capable of maintaining a much greater quantity of labour
than that which had been employed about them. The fuccefs
of this operation, therefore, without incrcafing in the fmalleft
degree the capital of the country, would only have tranf-
2 ferred
3i6 THE NATITRE AND CAUSES OF
ferred a great part of It from prudent and profitable, to im-
prudent and unprofitable undertakings.
That the induftry of Scotland ianguiOied for ^vant of mo-?
ney to employ it, was the opinion of the famous Mr. Law.
By eflablllhing a bank of a particular kind, which he feems
to have imagined, might illue paper to the an;ount of the
v/hole value of all the lands in the country, he propofcd to
remedy this want of money, The parliament of Scotland,
when he firft propofed his projetl, did not think proper to
r.dopt it. It was afterwards adopted, with fomc variations,
by the duke of Orleans, at that time regent of France. The
idea of the poffibility of multiplying paper money to almoft
any extent, was the real foundation of what is called the
MifTilTippi feheme, the mod extravagant project both of bank-
ing and flock-jobbing that, perhaps, the vv-^orlq. ever faw.
The different operations of this feheme are explained (o fully,
fo clearly, and with fo much order and difbincftnefs, by
Mr. Du Verney, in his Examination of the Polilical Reflec-
tions upon Commerce and Finances of Mr. Du Tot, that I
fliall not give any account of them, llie principles upon
which it was founded are explained by Mr. Law himfelf, in
a difcourfe concerning money and trade, which he publiOicd
in Scotland when he firfl propofed his projecl. The fplen-
did, but vifionary ideas which are fet forth in that and fome
other works upon the fame principles, fhiil continue to make
an Iraprefhon upon many people, and have, perhaps, in
part, contributed to that excefs of banking, \^'hich has of
late been complained of both in Scotland and in other
places.
The bank of England is the greateft bank of circulation
in Europe. It was incorporated, in purfuance of an a£l of
parliament, by a charter under the great fea), dated the
27th of July, 1694. It at that time advanced to govern-
ment the fum of one million two hundred thoufand pounds,
for an annuity of one hundred thoufand pounds ; or for
96,000/. a year intereft, at the rate of eight per cent, and
4,000/. a year for the expcnce of management. The credit
of the new government, eftabliflied by the Revolution, we
may believe, mull have been very low, when it was obliged
to borrow at fo high, an intereft.
THE WEALTH OF NATIONS. 317
111 1697 the bank was allowed to enlarge Its capital ftock
by an engraftment of 1,001,171/. lor. Its whole capital
ftock, therefore, amounted at this time to 2,201, 17 i/. loj.
This engraftment Is faid to have been for the fupport of pub-
lic credit. In 1696, tallies had been at forty, and fifty, and
fixty per cent, difcount, and bank note-s at twenty per cent *.
Inuring the great recoinage of the filver, which was goin'^-
on at this time, the bank had thought proper to difcontinue
the payment of its notes, which neccllarily occafioned their
difcredit.
In purfuance of the 7th Anne, c. vii. tlic bank advanced
aiid paid Into the exchequer, the lum of 400,000/. ; making
in all the fum of i,6co,ooo/. which it had advanced upon
its original annuity of 96,00c/. interell and 4,000/. for ex-
pence of management. In 1708, therefore, the credit of
government was as good as that of private perfons, fmce It
could borrow at fix per cent, interell, the common legal
and market rate of thofe times. In purfuance of the fame
adb, the bank cancelled exchequer bills to the amount of
1,775,027/. 17/. 10'//. at Ik per cent, intereft, and was at
tlie fame time allowed to take in fubfcrlptlons for doubling
ks capital. In 1708, therefore, the capital of the bank
amounted to 4,402,343/. ; and it had advanced to govern-
ment the fum of 3,375,027/. jjs. loV.
By a call of fifteen per cent. In 1700, there \^'as paid-in
and made ilock 656,204/. js. 9//. 9 and by another of ten
per cent, in 17 10, 50 1,448/. 12s. iid. In confequence
of thofe two calls, therefore, the bank capital amounted to
In purfuance of the 3d George I. c. 8. the bank delivered
lip Vxo millions of exchequer bills to be cancelled. It
had at this time, therefore, advanced to government
5,375,027/. 17/. \od. In purfuance of the 8th George I.
c. 21. the bank purchafed of the South Sea Company, itock
lo the amovmt of 4,000,000/. ; and in 1722, in confequence of
x]ic fubfcriptions which it had taken in for en^ibling it to make
tin's purchale, its capital ilock was increafed by 3,400,000/.
At this time, therefore, the bank had advanced to the pub-
^'<^ ih^lSi'^-l^' 'V' 1^1^- "j '^'i^ its capital iiock amounted
only
■^ Ja-mes PofllethwaJte's Hiftory of the Public Revenue, page 301.
3ig THE NATURE AND CAUSES OF
only to 8,959,995/. 14s, Sd. It was upon this occafion that
the Aim which the bank had advanced to the pubHc, and for
which it received intereft, began firfl to exceed its capital
flock, or the fum for which it paid a dividend to the propri-
etors of bank ftock ; or, in other words, that the bank began
to have an undivided capital, over and above its divided one.
It has continued to have an undivided capital of the fame
kind ever fince. In 1746, the bank had, upon different oc-
cafions, advanced to the public 1 1,686,800/. and its divided
capital had been raifed by diiferent calls and fubfcriptions to
10,780,000/. The ftate of thofe two fums has continued to
be the fame ever iince. In purfuance of the 4th of George
III. c. 25. the bank agreed to pay to government for the
renewal of its charter 110,000/. without intereft or repay-
ment. This fum, therefore,- did not increafe either of
thofe two other fums.
The dividend of the bank has varied according to the va-
riations in the rate of the intereft which it has, at different
times, received for the money it had advanced jto the public,
as well as according to other circumftances. This rate of in-
tereft has gradually been reduced from eight to three per
cent. For fome years paft the bank dividend has been at
five and a half per cent.
The ftability of the bank of England is equal to that of
the Britifti government. . All that it has advanced to the pub-
lic muft be loit before its creditors can fuftain any lofs. No
other banking company in England can be eftabliflied by a£l
of parliament, or can confift of more than fix members. It
a^ls, not only as an ordinary bank, but as a great engine of
ftate. It receives and pays the greater part of the annuities
which are due to the creditors of the public, it circulates ex-
chequer bills, and it advances to government the annual
amount of the land and malt taxes, v/hich are frequently not
paid up till fome years thereafter. In thofe difterent opera-
tions, its duty to the public may fometimes have obliged it,
without any fault of its direilors, to overftock the circulation
with paper money. It likewife difcounts merchants bills, and
has, upon feveral difterent occafions, fupported the credit of
the principal houfes, not only of England, but of Hamburgh
and Holland. Upon one occafion, in 1 763, it is faid to have
advanced for this purpofe, in one week, about 1,600,000/. ;
a great part of it in bullion. I do not, however, pretend to
warrant
THE WEALTH OF NATIONS. 319
warrant either the greatnefs of the fum, or the fliortnefs of
the time. Upon other occafions, this great company has
been reduced to the neceffity of paying in fixpences.
It is not by augmenting the capital of the country, but by-
rendering a greater part of that capital aftive and produ£live
than would otherwife be fo, that the mofl judicious operati-
ons of banking can increafe the indullry of the country.
That part of his capital wliich a dealer is obliged to keep by
him unemployed, and in ready money for anfwering occafi-
onal demands, is fo much dead ftock, which, fo long as it
remains in this fituation, produces nothing either to him or
to his country. The judicious operations of banking enable
him to convert this dead ftock into active and producSlive
ftock J into materials to work upon, into tools to work with,
and into provifions and fubfiftence to work for; into flock
which produces fomething boifh to himfelf and to his country.
The gold and filver money which circulates in any country,
and by means of which, the produce of its land and labour
is annually circulated and diftributed to the proper con-
fumers, is, in the fame manner as the ready money of the
dealer, all dead ftock. It is a very valuable part of the capi-
tal of the country, which produces nothing to the country.
The judicious operations of banking, by fubftituting paper in
the room of a great part of this gold and filver, enable the
country to convert a great part of this dead ftock into a£^ive
and produ£live ftock ; into ftock which produces fomething
to the country. The gold and filver money which circulates
in any country may very properly be compared to a highway,
which, whale it circulates and carries to market all the graf$
and corn of the country, produces itfelf not a (ingle pile of
either. The judicious operations of banking, by providing-,
if I m.ay be ailov/ed fo violent a metaphor, a fort of waggon-
way through the air ; enable the country to convert, as it
were, a great part of its highways into good paftures and
corn fields, and thereby to increafe very confidcrably the an-
nual produce of its land and labour. The commerce and in-
duftry of the country, however, it muft be acknowledged,
though they may be fomewhat augmented, cannot be altoge-
tlier fo fecure, when they are thus, as it were, fufpended
upon the Dsdalian wings of paper money, as when they tra-
vel about up6n the folid ground of gold and filver. Over and
above the accidents to which they are expofed from the un-
Ikilfulnefs of the conductors of this paper money, they are lia-
ble
3 20 THE NATURE AND CAUSES OF
ble to feveral others, from whicii no prudence or fklll of
thole coiiduclors can guard them.
An unfuccefsful war, for example, in which tlie enemy
got poflelhon of the capita^, and confequently of that treafure
which fupported the credit of the paper money, woukl occa-
fion a much greater confufion in a country where the whole
GirculaHon v/?ts carried on by paper, than in one where the
greater part of it was carried on by gold and filver. The
ufual inRrument of commerce having loft its value, no ex-
chaniieb could be made bu-t either by barter or upon credit.
All ta^es having. been ufiiaUy paid in paper money, the prince
wotild not have wherewithal either to pay his troops, or to
furnilh his magazines ; and the (late of the country would be
much more irretriev.vble than if the greater part of its circu-
lation had coniiited in gold and filver. A prince, anxious to
maintain his domin'k*T>s at all times in the ftate in which he
can moil eahly defend them, ought, upon this account, to'
guatd, not only againil that excelhve multiplication of paper
moncy^ vv^hich ruins the very banks which iflue if, but even
' jiQ^ainlt that multiplication of it, which enables them
, to hU tl\e greater part of the circulation of the country
U'ith it.
The circulation of every country may be conndered as di-
vided iuro'two different branches •, the circulation of the deal-
ers with one another, and the circulation' between the dealers'
and the confumers. Though the l^ime pieces of money, whe-
ther paper or metal, may be employed fometimes in the one
circulation and fometh-nes in the other, yet as both are con-^
llantly going on at the fame time, each requires a certain
iiiock of money of one kind or another, to carry it on. The
value of the goods circijlated between the different dealers,--
never can exceed the value of thofe circulated between the
dealers and the confumers •, whatever is bought by the deal-
ers, being ultimately deilined to be fold to the confumers.-
The circulation betv/een the dealer:5, as it is carried on by
wholefale, requires generally a pretty large fum for every
particular traniac"\ion. That between the dealers and the
confumers, on the contrary, as it is generally carried on by
retail, frequently requires but very fmall ones, a (liilling, or
even a halfpennv, being often fulRcient. But fmall turns
circulate much fafter than large ones. A fnilling changes
m-Alters more frequently than a guinea, and a halfpenny more
frequently
THE WEALTH OF NATIONS. 3T1
frequently than a {billing. Though the annual purchafes of
all the confumers, therefore, ate at leaft equal in value to
thofe of all the dealers, they can generally be tranfacfted with
3 much fmaller quantity of money ; the fame pieces, by a
more rapid circulation, ferving as the inilrument of many
more purchafes of the one kind than of the other.
Paper money may be fo regulated, as either to confine it*
felf very much to the circulation between tht different deal-
ers, or to extend itfelf likewife to a great part of that between
the dealers and the confumers* Where no bank notes are
circulated under ten pounds value, as in London, paper mo-
ney confines itfelf very much to the circulation between the
dealers. AVhen a ten pound bank note comes into the hands
of a confumer, he is generally obliged to change it at the firll
fliop where he has occafion to purchafe five fliiliings worth of
goods, fo that it often returns into the hands of a dealer, be-
fore the confumer has fpent the fortieth part of the money.
Where bank notes are iflued for fo fmall fums as twenty (luU
lings, as in Scotland, paper money extends itfelf to a confi-
derable part of the circulation between dealers and confumers.
Before the a£t of parliament, which put a (top to the circu-
lation of ten and five (lulling notes, it filled a (liil greater
part of that circulation. In the currencies of North Ame-
rica, paper was commonly iiTued for fo fmall a fum as a (hil-
ling, and filled almoft the whole of that circulation.
In fome paper currencies of Yorkfhire, it was ilTued even
for fo fmall a fum as a fixpence.
Where the ilTuing of bank notes for fuch very fmall
fums is allowed and commonly pra6f ifed, many mean people
are both enabled and encouraged to become bankers. A
perfon whofe promiflbry note for five pounds, or even for
twenty (hillings, would be reje61:ed by every body, will get
it to be received witliout fcruple when it is ifTued for (o
fmall a fum. as a fixpence. But the frequent bankruptcies
to which fuch beggarly bankers muft be liable, may occafion
a very confiderable inconveniency, and fometimes even a
very great calamity to many poor people who had received
their notes in payment.
I r were better, perhaps, that no bank notes were KTued in
any part of the kingdom for a fmaller fum than five pounds.
Paper money would then, probably, confine itfelf, in every
Vol. I. Y part
322 THE NATURE AND CAUSES Of
part of the kingdom, to tlie circulation between the differcnc
dealers, as much as it does at prefent in London, where no
bank notes are iffued under ten pounds value ; five pounds-
being, in moft parts of the kingdom, a fum which, though-
it will purchafe, perhaps, httle more than half the quantity
of goods, is as much confidered, and is as feldom fpent all-
at once, as ten pounds are amidil the profufe expencC' of
London*;
Where paper money, it Is to be ob'ferved, is pretty much-
confined to the circulation between dealers and dealers, as at
London, there is always plenty of gold and filver. "Where it
extends itfelf to a confiderable part of the circulation betweei>
dealers and confumers, as in Scotland, and ftill more in
North America, it baniflies gold and filver almoll entirely
from the country y airaoil all the ordinary tranfaOions of its
mterior commerce being thus carried on by paper. The
fuppreffion of ten and five flnlllTg bai>k notes, fomewhatf
relieved the fcarcity of gold and filvsr in Scotland ; and the
fupprefllon of twenty fiiilHIng notesy wouAd probably relieve
It ilill more, Thof-e- nietals are faid to have become more
abundant in America, fince the fupprciFion of fomc of their
paper currencies. They are fald, likewife,. to have been-,
more' abundant before the inilitutron of thofe currencies.
Though paper money fliould be pretty much confined
to the circulation between dealers and dealers, yet banks and
bankers might (lill be able to give nearly the fame aififtance'
to the Induilry and com.merce cjf the country, as they had
done when paper money filled almoil the whole circulationo-
The ready money which a dealer is obliged to keep l>y him,.'
for anfwering oecafional demands, is deftined altogether for
the circulation between himfelf and other dealers^ ef whom
he buys goods. He has no occafion to keep any by him for
the circulation between himfeff and the confumers, who are
his cuftomers,. and who bring ready money to him, inftead
of taking any from him. Though no paper money, there--
fore, was allowed to be IlTued, but for fuch fums as would
confine it pretty much to the circulationbetween dealers and;
dealers •, yet, partly by difcounting real bills of exchange, and
partly by lending upon cafh accounts, banks and bankers
might dill be able to relieve the greater part of thofe dealers
from the necelfity of keeping any confiderable part of their
flock by them, unemployed and in ready money, for anfwering
^ ' oecafional
3
THE WEALTH OF NATIONS. 323
occafional demands. They might flill be able to give tlie
utmoft afliftance which banks and bankers can, with pro-*
priety, give to traders of every kind*
To reflrain private people, it may be faid, from
receiving in payment the promifTory notes of a banker, for
anyfum whether great or fmall, when they themfelves ars
willing to receive them ; or, to reftrain a banksr from ilTuiiig
fuch notes, when all his neighbours are willing to accept of
them, is a manifeft: violation of that natural liberty, which it
is the proper bufinefs of law, not to infringe, but to fupport.
Such regulations may, no doubt, be confidered as in fome
refpedl a violation of natural liberty. But thofe exertions of
the natural liberty of a few individuals, which might endan-
ger the fecurity of the Vvdiole fociety, are, and Ought to be,
reftrained by the laws of all governments 5 of the mod free,
as well as of the mod defpotical. The obligation of buildin^j
party walls, in order to prevent the communication of fire,
is a violation of natural liberty, exa61:ly of the fame kind with
the regulations of the banking trade which are here pro-
pofedi
A PAPER money confiding u\ bank notes, iiTaed by people
of undoubted credit, payable upon demand without any con-
dition, and in faft always readily paid as foon as prefentedj
15", in every refpeft, equal in value to gold and fdver money j
fmce gold and filver money can at any time be had for it.
Whatever is either bought or fold for fuch paper, mud
neceffarily be bought or fold as cheap as it could have been
for gold and fdver*
The increafe of paper money, it has been faid, by aug-
menting the quantity, and confequently diminidiing the va-
lue of the v/hole currency, necedarily augments the monev
price of commodities* But as the quantity of ^old and fil-
ver, which is taken from the currency, is always equal to
the quan ity of paper which is added to it, paper money does
not neceffarily increafe the quantity of the whole currency.
From the beginning of the lad century to the prefent time,
provifions never were cheaper in Scotland than in 1759,
though, from the circulation of ten and five fhilling bank
notes, there was then more paper money in the country than
at prefent. The proportion between the price of provifions
in Scotland and that in England, is the fame now as before
the great multiplication of banking companies in Scotland.
^ ^ Corn
324 THE NATURE AlSiD CAUSES 01^
Corn Is, upon moll occafions, fully as cheap in England as^
in France •, though there is a great deal of paper money irr
England, and fcarce any in France. In 175 i and in 1752,:
when Mr. Hume published his Political Difcourfes, and foon
after the great multiplication of paper money in Scotland^
there was a very fenfible rife in the price of provifions,
owing, probably, to the badnefs of the feafons, and not to
the multiplication of paper money.
It would be otherwife,, indeed,, with a paper rtioney con-
fiding in promifTory notes, of which the immediate payment
depended, in any refpe61:, either upon the good will of thofe
who iiTued them ; or upon a condition which the holder of
the notes might not always have it in his power to fulfil ; or
of which the payment was not exigible till after a certairf
number of years, and which in the mean time bore no in-*
tereft. Such a paper money would,, no doubt, fall more or
lefs below the value of gold and fiber, according as the dif-*
ficuky or uncertainty of obtaining immediate payment was
fuppofed to be greater or lefs •, or according to the greater
or lefs diftanee of time at which payment was exigible-
Some years ago the difFereiit banking compar^ies of Scot-*
land were in the pra6\ice of infertlng into their bank notes^
w^iat they called an Optional Claufe, by which they promifed
payment to the bearer, either as foon as the note fhould be
prefented, or, in the option of the dire(5lors> fix months af-
ter fuch prefentment, together with the legal interefl for the
faid fix months. The dire£lors of fome of thofe banks fome-
times took advantage of this optional claufe,- and fometimes
threatened thofe who demanded gold and fitver in exchange
for a confiderable number of their notes, that they would-
take advantage of it, unlefs fuch demanders would content
themfelves with a part of what they demanded.^ The j^romif-
fory notes of thofe banking companies cenftituted at that time
the far greater part of the currency of Scotland, whichthisun-
certainty of payment necelTarily degraded below the value of
gold and filver money. During the continuance of this abufe
(which prevailed chiefly in 1762, 1763, and 1764), while
the exchange between London and Carlifle was at par, that
between London and Dumfries would fometimes be four per
cent, againft Dumfries, though this town is not thirty miles
dillant from Carlille. But at Carlifle, bills were paid in gold
and filver j whereas at Dumfries they were paid in Scotch
bank
THE WEALTH OF NATIONS, 325
bank note3, and the uncertainty of getting tliofe bank notes
exchanged for gold and lilver coin had thus degraded them
four per cent, below the value of that coin. The fame a(ft
of parliament v/hich fupprefled ten and five fliilling bank
notes, fupprefled likewife this optional claufe, and thereby
reitored the exchange between England and Scotland to its
natural rate, or to what the courfe of trade and remittances
might happen to make it.
In the paper currencies of Yorkfliire, the payment of fo
fmall a fum as a fixpence fometimes depended upon the con^
dition that the holder of the note fhould bring the change of
ji guinea to the perfon who iflued it ; a condition, which the
holders of fuch notes might frequently find it very difficult to
fulfil, and '"hich muft have degraded this currency below the
value of gold and filver money. An acl of parliament," ac-^
cordingly, declared all fuch claufes unlawful, and fuppreffed,
in the fame manner as in Scotland, all promilTory notes, pay-
able to the bearer, under twenty fliillings value.
The paper currencies of North America confifted, not in
bank notes payable to the bearer on demand, but in a govern-
ment paper, of which the payment was not exigible till feve-
ral years after it was iffued : And though the colony govern^
ments paid no intereft to the holders of this paper, they de^
glared it to be, and in fa(5l rendered it, a legal tender of pave-
ment for the full value for which it v/as ilTued. But allowing
the colony fecurity to be perfectly good, t^ hundred pounds
payable fifteen years hence, for example, in a country where
intereft Is at fix per cent, is worth httle more than forty
pounds ready money. To oblige a creditor, therefore, to
accept of this as full payment for a debt of a hundred pounds
actually paid down in ready money, was an aft of fuch vio-
lent injuftice, as has fcarce, perhaps, been attempted by the
government of any other country which pretended to be free.
It bears the evident marks of having originally been, what
the honeft and downright Doftor Douglas aflures us it was, a
fcheme of fraudulent debtors to cheat their creditors. The
government of Penfylvania, indeed, pretended, upon their
firft emifTion of paper money, in 1722, to render their paper
of equal value with gold and filver, by enading penalties
againft all thofe who made any difference in the price of their
goods when they fold them for a colony paper, and when
they fold them for g©Id and filver , a regulation equally
tyrannicalj,
0
26 THE NATURE AND CAUSES OF
tyrannical, but much lefs effecflual than that which it Vv'as
meant to fupport. A pofitive law may render a fliilling a le-
gal tender for a guinea ; becaufe it may direcft the courts of
juiUce tg afcharge the debtor who has made that tender.
But no pofitive law can oblige a perfonwho fells goods, and
who is at liberty to fell or not to fell, as he pleafcs, to accept
of a fhiiling as equivalent to a guinea in the price of them.^
Notwithflanding any regulation of this kind, it appeared by
the courfe of exchange with Great Britain, that a hundred
pounds fterling was occafionally confidered as equivalent, in
feme of the colonies, to a hundred and thirty pounds, and in
others to fo great a fum as eleven hundred pounds currency j
this difference in the value arifmg from the difference in the
quantity of paper emitted in the different colonies, and in
the diftance and probability of the term of its final difcharge
and redemption.
No -law, therefore, could be more equitable than the
a£l of parliament, fo unjuftly complained of in tlie co-
lonies, which declared that no paper currency to be
emitted there in time coming, fliould be a legal tender of
payment.
Pensylvania was always more moderate in its emifllons
of paper money than any other of our colonies. Its paper cur-
rency accordingly is faid never to have funk below the value
of the gold and filver which was current in the colony before
the firlt emifhon of its paper money. Before that emlfnon,
the colony had raifed the denomination of its coin, and had,
by a<ff of affembly, ordered five fliillings fterling to pafs in
the colony for fix and three-pence, and nfterwards for fix and
eight-pence. A pound colony currency, therefore, even
when that currency was gold and filver, was more than
thirty per cent, below the value of a pound fterling, and
when that currency was turned into paper, it was fcldom
much more than thirty per cent, below that value. The pre-
tence for raifing the denomination of the coin, was to prevent
the exportation of gold and filver, by making equal quanti-
ties of thofe metals pafs for greater fums in the colony than
they did in the mother country. It was found, however,
that the price of all goods from the mother country rofe ex-
a6llv in proportion as they raifed the denomination of their
coin, fo that their gold and filVer were exported as faft as
ever.
Thc
THE WEALTH OF NATIONS. 327
The paper of each colony being received in the payment
G-f the provincial taxes, for the full value for which it had
been illued, it neceflarily derived from this ufe fome additi-
iOnal value, over and above what it would have had, from
the real or fuppofed diftance of the term of its final difcharge
and redemption. This additional value was greater or lefs,
accordmg as the quantity of paper iffued was more or lefs
above what could be employed in the payment of the taxes of
the particular colony which iflued it. It was in all the colo-
jaies very much above what could be employed in this mannen
A PRINCE, who fliould ena£l that a certain proportion of
Ills taxes fliould be paid in a paper money of a certain kind,
might thereby gi-v^e a certain value to this paper money ; even
though the term of its final difciiarge and redemption (hould
depend altogether upon the will of the prince. If the bank
which iflued this paper was careful to keep the quantity of it
always fomewhat below what could eafily be employed in this
manner, the demand for it might be fuch as to make it even
bear a premium, or fell for fomewhat more in the market
than the quantity of gold or fiker currency for which it was
iflued. Some people account in .this manner for what is called
the Agio of the bank of An^ifterdam, or for the fuperiority of
bank money over current money, though thisbank money, as
they pretend, cannot be taken out of the bank at the will of
the owner. The greater part of foreign bills of exchange
mud be paid in bank money, that Is, by a transfer in the
books of the bank ; and the direciors of the bank, they al-
kdge, are careful to keep the whole quantity of bank money
always below what this ufe oceafions a demand for. It is
upon this account, they fay, that bank money fells for a pre-
mium, or bears an agio of four or five per cent, above tli.g
fame nominal fum of the gold and filver currency of the
.i:ountry. This account of the bank of Amflierdam, hovrever,
it will appear hereafter, is In a great meafure chimerical.
A PAPER currency which falls below the value of gold and
filver coin, does not thereby fink the value of thofe metals, or
occafion equal quantities of them to exchange for a fmaller
quantity of goods of any other kind. The proportion between
the value of gold and filver and that of goods of any other
kind, depends in all cafes, not upon the nature or quantity
of any particular paper money, which may be current in any
particular country, but upon the richnefs or poverty of the
nilncs^
328 THE NATURE AND CAUSES OF
mines, which happen at any particular time to fupply the
great market of the commercial world with thofe metals. It
depends upon the proportion between the quantity of labour
which is neceffary in order to bring a certain quantity of gold
and filver to market, and that which is necelTary m order to
bring thither a certain quantity of any other fort of goods.
If bankers are reftrained from iiTuing any circulating bank
notes, or notes payable to the bearer, for lefs than a certain
fum ; and if they are fubje£led to the obligation of an imme-
diate and unconditional payment of fuch bank notes as foon as
prefented, their trade may, with fafcty to the public, be ren^
dered in all other refpeO:s perfecftly free. The late multi-
plication of banking companies in both parts of the united
kingdom, an event by which many people have been much
alarmed, inftead of diminifhing, increafes the fecurity of the
public. It obliges all of them to be more circumfpecl in their
conducl, and, by not extending their currency beyond its due
proportion to their cafh, to guard themfelves againll thofe
malicious runs, which the rivalfliip of fo many competitors
is- always ready to bring upon them. It reltrains the circu-
lation of each particular company within a narrower circle,
and reduces their circulating notes to a fmaller number. By
dividing the whole circulation into a greater number of parts,
the failure of any one company^ an accident which, in the
courfe of things, muft fometimes happen, becomes of lefs
confequence to the public. This free competition too obliges
all bankers to be more liberal in their dealings with their
cuftomers, left their rivals fhould carry them away. In
general, if any branch of trade, or any divifion of labour,
be advantageous to the public, the freer and more general
^he competition, it will always be the more fo.
CHAP.
THE WEALTH OF NATIONS. 329
*
CHAP. III.
Of the Accumulation of Capital y or of produBlvc a?id unpro*-
du^ive Labour,
X HERE is one fort of labour which adds to the value
of the fubjedl upon which it is beflowed : There is another
which has no fuch efFecft. The former, as it produces a va-
lue, may be called produ£live j the latter, unproducSlive *
labour. Thus the labour of a manufacturer adds, generally,
to the value of the materials which he works upon, that of
his own maintenance, and of his mailer's profit. The la-;,
hour of a menial fervant, 01^ the contrary, adds to the value
of nothing. Though the manufacturer has his wages ad^
vanced to him by his matter, he, in reality, cofts him no cx-
pence, the value of thole wages being generally reflored, to-
gether with a profit, in the improved value of the fubje6l
upon which his labour is beflowed. But the maintenance of
a menial fervant never is reflored, A man grows rich by-
employing a multitude of mapufacfturers : He grows poor,
by maintaining a multitude^'of m.enial fervants. The labour
of the latter, however, ms its value, and deferves its reward
as well as that of the former. But the labour of the manu-
facturer fixes and realizes itfelf in fome particular fubjeCt
or vendible commodity, which lafts for fome time at leaft af-
ter that labour is paft. It is, as it were, a certain quantity
of labour flocked and flored up to be employed, if neceflaryj.
Upon fome other occafion. That fubje(n:, or what is the
fame thing, the price of that fubjeCt, can afterwards, if ne-
cefTary, put into motion a quantity of labour equal to that
which had originally produced it. The labour of the menial
fervant, on the contrary, does not fix or realize itfelf in any
particular fubject or vendible commodity. His fervices
generally perifh in the very inflant of their perform-r
* Some French authors of great learning and Ingenuity have ufed thofr
words in a diiferent fenfe. In the lall chapter of the fourth book, I fliall en-
deavpur to Ihow that their fenfe is an improper one.
ancc.
330 THE NATURE AND CAUSES OF
ance, and felclom leave any trace or value behind tliemj,
for which an equal quantity of fervice could afterwards be
procured.
The labour of fome of the moft refpeftable orders in the
fociety is, like that of menial fervants, unproductive of any
value, and does i)ot fix or realize itfelf in any permanent fub^e
je6l, or vendible commodity, which endures after that
labour is paft, and for which an equal quantity of labour
could afterwards be procured. The fovereign, for example,
with all the officers both of jullice and war who ferve under
himj, the -whole army and navy, are unprodu6live labourers.
They are the fervants of the public, and are maintained by a
part of the annual produce of the induftry of other people.
Their fervice, how honourable, how ufelul, or how necef-
fary foever, produces nothing for which an equal quantity of
fervice can afterwards be procured. The protection, fecur
iitv, and defence of the common-wealth, the effed; of their
labour this year, will not purchafe its proteClion, fecurity,
and defence, for the year to come. In the fame clafs mull
be ranked, fome both of the graved and mod important, and
fame of the moH frivolous profefiions: chuvchmen., la\vvyerS|
phyficians, men of letters of all kinds j players, buffoons,
muficians, opera-fingers, opera-dancers, ^^c. The labofir of
the meaneft of thefe has a certain value, regulated by the
very fame principles which regulate fhat of every other fort
of labour •, and that of the noblefl and moft ufeful, produce^
nothing which could afterwards purchafe or procure an
equal quantity of labour. Like the declamation of the
aftor, the harangue of the orator, or the tune of the mufi-e
cian, the work of all of them perilhes in the very inftant of iti;
produftioR.
Both productive and unproduclive labourers, and thofe
who do not labour at all, are all equally maintained by the
annual produce of the land and labour of the country.
This produce, how great foever, can never be infinite, but
muft have certain limits. According, therefore, as a fmialler
or greater proportion of it is in any one year employed in
maintaining unproductive hands, the more in the one cafe
and the lefs in the other will remain for the produClive,
and the next year's produce will be greater or fmaller ac-
cordi^igly , the whole annual produce, if we except the fpon-
tanccus
THE WEALTH OF NATIONS. 331
taneous produdlions of the earth, being the efFecTt of produc-
tive labour.
Though the whole annual produce of the land and la-
bour of every country, is, no doubt, ultimately deftined for
fupplying the confumption of its inhabitants, and for pro-
curing a revenue to them -, yet vv-hen it firft comes either
from the ground, or from the hands of the produ(flive labour-
CTS, it naturally divides itfelf into two parts. One of them,
and frequently the largeft, is, in the firft place, deflined for
replacing a capital, or for renewing the provifions, materials,
and finiihed work, which had been withdrawn from a capital ;
the other for conflituting a revenue either to the owner of this
capital, as the profit of his flock ; or to fome other perfon,
as'-the rent of his land. Thus, of the produce of land, one
part replaces the capital of tlie farmer ; the other pavs his
profit and the rent of the landlord ; and thus conflitutes a re-
venue both to the owner of this capital, as the profits of his
flock ; and to fome other perfon, as the rent of his land.
Of the produce of a great manufa6lory, in the fame man-
ner, one part, and that ahvays the largeft, replaces the
capital of the undertaker of the work ; the other pavs
his profit, and thus conflitutes a revenue to the owner of
this capital.
That part of the annual produce of the land and labour
of any country which replaces a capita), never is immedi-
ately employed to maintain any but produ6live hands. It
pays the wages of produ(Slive labour only. That which is
immediately deflined for conflituting a revenue either as pro-
fit or as rent, may maintain indifferently either produclive or
unprodu(Slive hands.
Whatever part of his ftock a man employs as a capital,
he always exped:s it to be replaced to him with a- profit. He
employs it, therefore, in maintaining produc^Hve hands only ;
and after having ferved in the function of a capital to him,
it conflitutes a revenue to 'them. Whenever he emplovs
any part of it in maintaining unproduftive hands of any
kind, that part is, from that moment, withdrawn from his
capital, and placed in his flock refcrved for immediate
confumption.
Unproductive
532 THE NATURE AND CAUSfiS OF
Unproductive labourers, and thofe who do not labour
at all, are all maintained by revenue ; either, firfl, by that
part of the annual produce which is originally deftined for
conflituting a revenue to fome particular perfons, either as
the rent of land or as the profits of ftock ; or, fecondly, by
that part which, though originally deftined for replacing ^
capital and for maintaining productive labourers only, yet
when it comes into their hands, whatever part of it is over
and above their neceilary fubfiftence, may be employed m
maintaining indifferently either productive or unprcduft ive
hands. Thus, not only the great landlord or the rich merr
chant, but even the common workman, if his wages are con-
fiderable, may maintain a menial fervant ; or he may fome^
times go to a play or a puppet-ihow, and fo contribute hig
fhare towards ma.intaining one fet of unproductive labourers;
or he may pay fome taxes, and thus help to maintain another
fet, more honourable and ufeful, indeed, but equally unpro-
ductive. No part of the annual produce, however, which
had been originally deftined to replace a capital, is ever di-
rected towards maintaining unproductive hands, till after it
has put into motion its full complement of productive labour,
pr all that it could put into motion in the way in which it
was employed. The workman mufl: have earned his wage§
by w.ork done, before he can employ any part of them in
this manner. That part too is generally but a fmall one. It
is his fpare revenue only, of which productive labourers
have feldom a great deal. They generally have fome, how-
ever j and in the payment of taxes the greatnefs of their
number may compenfate, in fome meafure, the fmallnefs of
their contribution. The rent of land and the profits of flock
are every where, therefore, the principal fources from which
unproductive hands derive their fubfiftence. Thefe are the
two forts of revenue of which the owners have generally
moft to fpare. They might both maintain indifferently
either productive or unproCtive hands. They feem, how-
jsver, to have fome predileCtion for the latter. The expence
of a great lord feeds generally more idle than induftrious
people. The rich merchant, though with his capital he
maintains induftrious people only, yet by his expence, that ie^
by the employment of his revenue, he feeds commonly th&
very fame fort as the great lord,
The proportion, therefore, between the productive and
unproductive hands, depends very much in every country
upoii
THE WEALTH OF NATIONS. 333
Upon the proportion between that part of the annual pro-^
duce, which as foon as it comes either from the ground or
from the hands of the produdive labourers, is dcltined for
replacing a capital, and that which is deilined for confti-
tuting a revenue, either as rent, or as profit. This pro-
portion is very different in rich from what it is in poor
countries*
Thus, a(t prefent, In the opulent countries of Europe, a
very large, frequently the largeft portion of the produce of
the land, is dcltined for replacing the capital of the rich and
independent farmer ; the other for paying his profits, and
the rent of the landlord* But antiently, during the preva-
lency of the feudal government, a very fmall portion of the
produce was fuflicient to replace the capital employed in cul-
tivation. It confifted commonly in a few wretched cattle,
maintained altogether by the fpontaneous ptoduce of uncul-
tivated land, and which might, therefore, be confidered as a
part of that fpontaneous- produce. It generally too belonged
to the landlord, and was by him advanced to the occupier? of
the land. All the red of the produce properly belonged to
him too, either as rent for his land, or as profit upon tliis
paultry capital. The occupiers of land were generally bond-
men, whole perfons and efi'e^ls were equally his property.
Thofe who were not bondmen were tenants at will, and
though the rent which they paid was often nominally little
more than a quit-rent, it really amounted to the whole pro-
duce of the land. Their lord could at all times command
their labour' in peace, and their fervice in war. Though
they lived at a didance from his houfe, they were equally de-
pendant upon him as his retainers v/ho lived in It. But the
whole produce of the land undoubtedly belongs to him, who
can difpofe of the labour and fervice of all thofe whom it
maintains. In the prcfent ftate of Europe, the {hare of the
landlord feldom exceeds a third, fometlmes not a fourth part
of the whole produce of the land. The rent of land, how-
ever, in all the improved parts of the country, has been
tripled and quadrupled fmce thofe antient times ; and this
third or fourth part of the annual prodncc is, it feems, three
or four times greater than the whole had been before. In
the progrefs of improvement, rent, though it Increafes in pro-
portion to the extent, diminifl-ies in proportion to the pro-
iluce of the land.
334 THIl nature AND CAUSES OV
In the opulent countries of Europe, great capitals arc at
prefent employed in trade and manufa6luves. In the antient
ftate, the little trade that was ftirring, and the few homely
and coarfe manufactures that were carried on, required but
very fmall capitals. Thefe, however, mull have yielded
very large profits. The rate of intereft was no where lefs
than ten per cent, and their profits muft have been fufhcient
to afford this great intereft. At prefent the rate of interetl,
in the improved parts of Europe, is no where higher than
fix per cent, and in fome of the moft improved it is fo low
as four> three, and two per cent. Though that part of the
revenue of the inhabitants which is derived from the profits
of flock is always much greater in rich than in poor coun-^
tries, it is becaufe the fiiock is much greater : in proportion
to the flock the profits are generally much lefs.
That part of the annual produce, therefore, which, as
foon as it comes either from the ground, or from the hands
of the produ6live labourers, is defi:ined for replacing a capital,
is not only much greater in rich than in poor countries, but
bears a much greyer proportion to that which is immediately
deftined for conftituting a revenue either as rent or as profit*
The funds deftined for the maintenance of produ6live labour,
are not only much greater in- the former than in the latter,
but bear a much greater proportion to thofe which, though
they may be employed to maintain either productive or unpro-
du(flive hands, have generally a prediledlion for the latter.'
The proportion between thofe dilTerent futids neceflarily
determines in every country the general chara£ler-of theinha--
bitants as to induftry or idlenefs. We are more induftrlous
than our forefathers ; becaufe in the prefent times the funds
deftined for the maintenance of induftry, are much greater
in proportion to thofe which are likely to be employed in the
maintenance of idlenefs, than they were two or three centu-
ries ago. Our anceftors were idle for want of a fufhcient
encouragement to Induftry. It is better, fays the proverb, to
play for nothing, than to work for nothing. In mercantile
and manufaOuring towns, where the Inferior ranks of people
are chiefly maintained by the employment of capital, they are
in general induftrious, fober, and thriving; as in manyEnglifh
and in moft Dutch towns. In thofe towns which are princi*
pally fupported by the conftant or occafional refidence of a
court, and in which the inferior ranks of people are chiefly
maintained
THE WEALTH OF NATIONS. 33^^
inaintained by the fpending of revenue, they are in general
idle, difloKite, and poor •, as at Rome, Verfailles, Compiegne,
and Fontauibleau. If you except Rouen" and Bourdeaux,
there is little trade or induilry in any of the parliament towns
of France -, and the inferior ranks of people, being chiefly
maintained by the expence of the m»embers of the courts of
julf ice, and of thofe who come to plead before them, are
in general idle and poor. The great trade of Rouen and
Bourdeaux feems to be altogether the efFc^Sl of their fituation.
Rouen is neceflarily the entrepot of almofl: all the goods
which are brought either from foreign countries, or from
t'he maritime provinces of France, for the confumption of
the great city of Paris. Bourdeaux is in the fame manner
the entrepot of the wines which grow upon the banks of the
Garonne, and of the rivers which run into it, one of the
richeft wine countries in the world, and which feems to pro-
duce the wine fitted for exportation, or befl fuited to the
tafle of foreitrn nations. Such advantageous fituations necef-
farily attra6f a great capital by the great employment which
they afford it -, and the employment of this capital is the
caufe of the induilry of thofe two cities. In the other par-
liament towns of France, very little more capital feems to
be employed than' what is neceffary for fupplying their own
confumption ; that is, little more than the f^mallefl capital
which can be employed in them. The fame thing may be
fald of Paris, Madrid, and Vienna. Of thofe three cities,
Paris is by far the mroft induftrious ; but Paris itft If is the
principal market of all the manufaclures eifabliflied at Paris,
and its own confumption is the principal object of all the
trade which it carries on, London, Liibon, and Copen-
hagen, are, perhaps, the only three cities in Europe, which
are both the conftant refidence of a court, and can at the
fame time be confidered as trading cities, or as cities which
trade not only for their own confumption, but for that of
other cities and countries. The fituation of all the three is
extremely advantageous, and naturally fits them to be the
entrepots of a great part of the goods deflined for the con-
fumption of difcant places- In a city where a great revenue is
fpent, to employ with advantage a capital for any other purpofe
than for fupplying the confumption of that city, is probably-
more difhcult than in one in which the inferior ranks of people
have no other maintenance but what they derive from the
employment of fuch a capital. The idlenefs of the greater
part of the people who are maintained by the expence of
revenue,
33<5 TH£ nature and CAUSES OF
revenue, corrupts, it is probable, the induflry of thofe who
ought to be maintained by the employment of capital, and
renders it lefs advantageous to employ a capital there than in
other places. There was little trade or induflry in Edinburgh
before the union. When the Scotch parliament was no longer
to be allembled in it, when it ceafed to be the neceilary refi-
dence of the principal nobility and gentry^ of Scotland, it
became a city of fome trade and induftry. It ftill continues,
however, to be the refidence of the principal courts of juflice
in Scotland, of the boards of cuftoms and excife, &c, A con-
(iderable revenue, therefore, ftill continues to be fpent in it.
In trade and induftry it is much inferior to Glafgow, of
which tlie inhabitants are chiefly maintained by the employ-
ment of capital. The inhabitants of a large village, it has
fometimes been obferved, after having made confiderable
progrefs in nianufaftures, have become idle and poor, in
confcquence of a great lord's having taken up his refidence
in their neighbourhood.
The proportion between capital and revenue, therefore,
feems every where to regulate the proportion between induf-
try and idlenefs. Wherever capital predo*:iinates, induftry
prevails : wherever revenue, idlenefs. li,very increafe or
diminution of capital, therefore, naturally tends to increafe
or diminifh the real quantity of induftry, the number of pro*-
dudHve hands, and confequently the exchangeable value of
the annual produce of the land and labour of the country^
the real wealth and revenue of all its inhabitants*
Capitals are increafed by parfimony, and diminiilied by
prodigality and mifconduft.
Whatever a perfon faves from his revenue he adds to
his capital, and either employs it himfelf in maintaining an
additional number of producflive hands, or enables fome
other perfon to do fo, by lending it to him for an intereft,that
is, for a fliare of the profits. As the capital of an indivi-
dual can be increafed only by what he faves from his annual
revenue or his annual gains, fo the capital of a fociety,
which is the fame with that of all the individuals who com-
pofe it, can be increafed only in the fame manner.
Parsimony, and hot induftry, is the immediate caufe
of the increafe of capital. Induftry, indeed, provides the
fubjecf}-
ITHE WEALTH OF NATIONS. 337
fubje£l which parfimony accumulates. But whatever induf-
try might acquire, if parfimany did not fave a?nd ftore up,
the capital would never be the greater.
Parsimony, by increafmg the fund which is dedined for
the maintenai'^ce of producSlive hands, tends to increafe the
number of thofe hands wdiofe labour adds to the value of the
fubje^l upon which it is beftowed. It tends therefore to
increafe the exchangeable value of the annual produce of
the land and labour of the country. It puts into motion an
additional quantity of induftry, which gives an additional
value to the annual produce.
"What is annually faved Is as regularly confumed as what
is annually fpent, and nearly in the fame time too ; but it
is confumed by a different fet of people. That portion of his
revenue which a rich man annually fpends, is in mod cafes
confumed by idle guefts, and menial fervants, who leave
nothing behind them in return for their comfumption. That'
portion which he annually faves, as for the fike of the profit
it is immediately employed as a capital, is confumed in the
fame manner, and nearly in the fame time too, but by a dif-
ferent fet of people, by labourers, manufa(fturers, and arti-
ficers, who re-produce with a profit the value of their an-
nual confumiption. His revenue, we {hall fuppofe, is paid
him in money. Had he fpent the whole, the food, cloath-
ing, and lodging which the v.diole could have purchafed,
would have been diflributed among the former fet of peo-
ple. By faving a part of it, as that part is for the fake of
the profit immediately employed as a capital either by him-
felf or by fome other perfpn, the food, cloathing, and
lodging, which may be purchafed with it, are neceflarily
refcrved for the latter. The confumption is the fame, but
the confumers are different.
By what a frugal man annually faves, he not only afford^5
maintenance to an additional number of productive hands,
for that or the enfuing year, but, like the founder of a pub-
lic wovk-houfe, he eftablillies as it were a perpetual fund
for the maintenance of an equal number in all times to come.
-The perpetual allotment and deflinaticn of this fund, indeed,
IS not always guarded by any pofitive law, by any trufl-right
or deed of mortmain. It is always guarded, however, by
a very pov/erful principle, the plain and evident jntereft of
Vol, I. ,Z every
338 THE NATURE AND CAUSES OF
every individual to whom any fliare of it (hall ever belong*
No part of it can ever afterwards be employed to maintain-
any but prodaftive hands, without an evident lofs to the-
perfon who thus perverts it from its proper deftination.
The prodigal perverts it in this manner. By not con-
Sning his expence within his income, he encroaches upon
his capital. Like him who perverts the revenues of fome
pious foinidation to profane purpofcs, he pays the wages of
idienels with thofc funds which the frugality of his fore-
fathers had,, as it were, confecrated to the maintenance of
iriduitry.- By dlminilliing the funds dellined for the employ-
ment of produtlrve labour,, he necelTarily diminiflies, fo far
as it depends upon him, the quantity of that labour which
adds a value to th^ fubjetl: upon which it is bellowed, and^
confcquently,- the value of the annual produce of the land
and labour of the whole country, the real wealth and revenue
of its inhabitants^- If the prodigality of fome was not com-
pcnfated by the frugality of others, the condu^ of every
prodigal, by feeding the idle ^\Tth the bread of the induf-
trious, tends not only to beggar himfelf, but to impoverifh
his country.^
Thougk the expence of the prodigal fhould be altogether
in home-made, and no part of it in foreign commodities,
its e(te£l upon the producftive funds of the fociety would
ftiil be the lame. Every year there would (till be a certain-
quantity oi food and cloathing, which ought to have m-ain-
tained produclilve, employed in maintaining unproductive
hands. Every year, therefore, there would ftill be fome
diminution in what would otherwife have been the value
of the annual produce of the land and labour of the country .-
This expence, it may be faid indeed, not being in foreign
goods, and not occafioning any exportation of gold and filver,
the fam.e quantitv of money would remain in the country a&
before. But if the quantity of food and cloathing, which
were thus confurned by unproductive, had been diilributed
among produ'flive hands, they Vv'ould have reproduced^
together with a profit, the full value of their confumption.
The fame quantity of money would in this cafe equally
have remained in the country, and there would befides have
been a reprodutlion of an equal value of confumable goods.
There would have been two values inftead of one.
Ths
THE WEALTH OF NATIONS. 339
The fame quantity of money, befides, cannot long re-
main in any country, in which the value of the annual pro-
duce diminiflies. The fole ufe of money is to circulate con-
fumable goods. By means of it, provifions, materials, and
fniifhed work, are bought and fold, and dillributed to their
proper confumers. The quantity of money, therefore, which
can be annually employed in any country muft be determined
by the value of the confumable goods annually circulated
within it. Thefe muft confift either in the immediate pro-
duce of the land and labour of the country itfelf, or in fome-
thing which had been purchafed with fome part of that pro-
duce. Their value, therefore, muft diminilh as the value of
that produce diminifhes, and along with it the quantity of
money which can be employed in circulating them. But the
money which by this annual diminution oF produce is annu-
ally thrown out of domeftic circulation will not be allowed to
lie idle. The intereft of whoever poiTeiTes it, requires that
it fhould be employed. But having no employment at home,
it will, in fpite of all laws and prohibitions, be fent abroad,
and employed in purchafing confumable goods which may
be of fome ufe at home. Its annual exportation will in this
manner continue for fome time to add fomething to the an-
nual confumption of the country beyond the value of its
ov/n annual produce. What in the days of its profperity
had been faved from that annual produce, and employed in
purchafing gold and filver, will contribute for fome little
time to fupport its confumption in adverfity. The exporta-
tion of gold and filver is, in this cafe, not the caufe, but
the eife(Sl of its declenfion, and may even, for fome little
time, alleviate the mifery of that declenfion.
The quantity of money, on the contrary, muft in every
country naturally increafe as the value of the annual produce
increafes. The value of the confumable goods annually cir-
culated Vv'ithin the fociety being greater, will require a greater
quantity of money to circulate them. A part of the in-
creafed produce, therefore, will naturally be employed in
purchafmg, wherever it is to be had, the additional quantity
of gold and filver neceffary for circulating the reft. The in-
creafe of thofe metals will in this cafe be the effeiH:, not the
caufe, of the public profperity. Gold and filver are pur-
chafed every where in the fame manner. The food,
cloathing, and lodging, the revenue and maintenance of all
thofe whofe labour or ftock is employed in bringing them
Z 2 from
J40 THE NATURE AND CAUSES OF
■from the mine to the market, is the price pakl for them in
■ Peru as \veil as in England. The country which has
this price to pay, will never be long without the quan-
tity of thofe metals which it has occafion for \ and no ■
country will ever long retain a quantity which it has no
occafion for.
VV^HAitVER, therefore, we may imagiric the real wealth
and revenue of a country to confifl in, whether in the value
of the annual produce of its land and labour, as plain reafor^
fe?.nJ3 to diO:ate ; or in the quantity of the precious me-
tals which circulate within ir, aB vulgar prejudices fup-
pofc J in either view of the matter, every prodigal appears-
to be a public enemy, and ev^ry frugal man a public be-
ne faclor.
The eite£i3 of mifconducl are often the fame as- thofe of
prodigality, Evtry injudicious and unfuccefsful projeft ia
agriculture, mines, fiiheriesj trade, or man^fadf ures, tends in
the fame manner to dim/miOi the funds deftined for the
maintenance of prodiii£tive labour. In every fuch project,
though the capital ia confumed by produftlve hands only,
yet, as by the injudicious manner in which they are em-
ployed, they do not reproduce the full value of their con-
fumption, there mud always he fome diminution in what
would othcrwife have beei) the productive funds of th?
fociety. J
It c^ir^ feidom liappen, indeed, that the circnmftances of
a great nation can be much afFe(n:cd either by the prodiga-
lity or mifconduft of Individuals ; the profufion or impru-^
dence of fome being always more than compenfated by the
frugality and good condutb of otliQrs.
With regard to profuiion, the principle^ which prompts
to expence, is the paflion for prefent enjoyment •, whichj
though fometimes violent and very dilnculttobe reftrained^
is in general only momentary and occafionah But the prin-
ciple which prompts to favc, is the defire of bettering our
condition, a defire vvhich, thour^h g^rnr^rally calm and difpaf-
jicp.ate, comes with vjft trom tlic womb, and never leaves us
till v/e go into the grave. In the whole interval which fe-
parates thofe two monients, there is fcnrce perhaps a fmgle
inflant in wliich any" man is fo perfe<fl:ly and complereh/
fatisae^i
2
THE WEALTH OF NATIONS. 34"!
feisfied with his fituation, as to be without anjt wifli of alte-
ration or iinprovement of any kind. An augmentation of
fortune is the means by which the greater part of men pro-
pofe and wifli to better their condition. It is the means the
mod vulgar and the molt obvious ; and the moli likely way
of augmenting their fortune, is to fave and accumulate fome
part of what .they acquire, either regularly and annually, or
U'^on fome extraordinary occafions. Though the principle
of cxpence, therefore, prevails in almoii all men upon fome
occafions, and in fome men upon almoii all occafions, yet
in the greater part of men, taking the whole courfe of their
.life at an average, the principle of frugality feems not only
Xo predominate, but. to predominate very greatly^
With -regftrd to -miGcondu£l, the number of prudent and
fuccefsful undertakings is every where nuich greater than
that of injudicio.us and unfticcefsfui ones. After all our
complaints of the frequency of bankruptcies, the unhappy
men who fall into this miGfortune make but a very fmali
part of the whole number engaged In trade^ and all other
ibrts of bufinefs *, not miich more perhaps than one in a
.thoufand. Bankruptcy is perhaps the greateft and moft hu-
.Uiiliating calamity which can betal an innocent man. The
greater part of men, therefore, are fufiiciently careful to
avoid it. Some, indeed, do not avoid it 3 :a3-.rome do not
a^/oid the gallows.
Great nations are never im|)crv€rlfhed by private, though
they fometimes are by public prodigality and mifconduft.
The whole, or almoit tl^c whole p.ublic revenue, is in molt
countries employed in maintaining unprodudlive hands.
Such are the people who compofe a numerous and fplendid
court, a great ecclefiaftical eilablirnment, 'great fleets and
armies, wlio in time of peace produce nothing, and in time
of war acquire nothing which can compenfate the expence of
maintaining them, even while the war lalls. Such people,
as they diem^felves produce nothing, are all m.aintnined by
the produce of other men's labour. When multiplied, there-
fore^ to an unneceffary numiber, they may in a particular
year confume fo great a fliare of this produce, as not to leave
a fuilciency for maintcdniiig the productive labourers, who
fliould re^ roduce it next year. The next year's produce,
therefore, will be lefs than that of the foregoing, and if the
fdiPS diforder Hiould continue, that of the third year will be
Itill
34^ THE NATURE AND GAUGES OF
dill lefs than that of the fecond. Thofe unproducflive hand^,
who iliould be mauitained by a part only of the fpare re-
venue of the people, may confume (o great a fhare of their
whole revenue, and thereby oblige io great a number to en-
croach upon their capitals, upon the funds deftined for the
maintenance of productive labour, tliat all the frugality and
good condu6l of individuals may not be able to compenfate
the wafle and degradation of produce occafioned by this
violent and forced encroachment.
This frugality and good conduct, however, is upon moffc
occafions, it appears from experience, fuflicient to compen-
fate, not only the private prodigality and mifcondu6l of in-
dividuals, but the public extravagance of government. The
uniform, conftnnt, and uninterrupted effort of every man to
better his condition, the principle from v/hich public and
^rational, as well as private opulence is originally derived, is
frequently powerful enough to maintain the natural progrefs
of things toward improvement, in fpite both of the extrava-
gance of government, and of the greateft errors of admi-
iiiffration. Like the unknov/ii principle of animal life, it
frequently reilores health and vigour to the conilitution, in
fpite, not only of the difeafe, but of the abfurd prefcrip-
tioRS of the doctor.
The annual produce of the land ^lud labour of any nation
can be incrcafed in its value by no other means, but by in-
creafm^ either the number cf its productive labourers, or
the productive powers of thofe labourers who had before
been employed. The number of its productive labourers, it
is evident, can never be much increafed, but in confequence
of an increafe of capital, or of the funds deftined for main-
taining them. Tlie produCtive powers of the fame number
of labourers cannot be increafed, but in confequence either
of fomic addition and improvement to thofe machines and in-
flrumcnts which facilitate and abridge labour ; or of a more
proper divifion and diftribution of employment. In either
cafe an additional capital is almoft always required. It is by
means of an additional capital only that the undertaker of
any work can either provide his workmen with better ma-
chinerv, or make a more proper diftribution of employment
among them. When the work to be done confifts of a num-
ber of parts, to keep every man conftantly emxployed in one
way, requires a much greater capital than where every man
THE WEALTH OF NATIONS. 34s
is occafionally employed in every difFerent part of the work.
When we compare, tlicrefore, the Hate ot a nation at two
ditlercnt periods, and find, that the annual produce of its
land and labour is evidently greater at the latter than at the
former, that its lands are better cultivated, its manufacflures
more numerous and more Houriiliing, and its trade more ex-
tenfive, we may be afl'ured .tliat its capital muft have in-
creafed during the interval between thofe two periods, and
that more mult have hteen added to it by the good conducSl
of fomie, than had been taken from it either by the private
mifcondu£l of others, ov by the pubUc extravagance of
government. But we ihall find tlxis to have been the cafe
.of almoft all nations^ in all tolerably quiet and peaceable
times, even of thofe who have iiot enjoyed the n^oll prudent
and parfimonious governments. To form a riglit judgment
of it, indeed, Nve muil compart; the itate of the country at
periods fomewhat diftant from one another. The progrefs
is frequently fo gradual, that, at near periods^ the improve-
ment is not only not fennble, but from the declenfion eitlier
of certain branches of indullry, o-r of cerraia d;ill;icl:3 of the
country, things which fometimes happen tliough ihe country
in general be in grc:it profperity, there frequently arifes a
fufpicion, that the riches and induftry of the whple are
decaying^
The annual produce of the land and labour of England,
for example, is certainly much greater than it was, a little
more than a century ago, at the reftoration of Charles II,
Though at prefent, few people, I believe, doubt of this,
yet during this period, five years have feldom pafled away in
which fome book or pamphlet' has not been publifhed, writ-
ten too with fuch abilities as to gain fome authority with the
public, and pretending to demonllrate that the v»'-eakh of the
nation was fall declining, that the country was depopulated,
agriculture negkfted, manufactures decaying, and trade un-
done. Nor have thefe publications been all party pamphlets,
the wretched offspring of falfiiood and venality. Many of
them have been written by very candid and very intelligent
people ', who wrote nothing but what they believed, and for
no other reafon but becaufe they believed it.
The annual produce of the land and labour of England
again, was certainly much greater at the rcfloration, than we
^an fuppofe it to have been about an hundred years before , at
the
344 'tKE NATURE AND CAU'SES OP'
the accefTion of Elizabeth. At this period too, we have all
reafon tx) believe, the country was much more advanced in
improvement, than it had been about a century before,
towards the clofc of the difTentions between the houfes of
York and Lancaftcr. Even then it was, probably, in a bet-
ter condition than it had been ^t the Norman conquell, and
at the Norman conquelt, than during the confufion of the
Saxon Heptarchy. Even at this early period, it was cer-
tainly a more improved country than at tlie invafion of
Julius Ciefar, when its iuhabitarits were nearly in the fame
ftate with the favages in North America.
In each of thofc ^^eriods, however, there was, not only
much private and public profulion, many expenfive and
unneceffary wars, great per^^erfion of theannual produce from
maintaining produclive to n^r^intain unproductive hands j
but fometimes, in the confufion of (?ivii difcord, fuch abfo-
lute wade and deltrufliop of ftock, as might be fuppofed,
not only to retard, as it certainly did, the natural accumula-
tion of riches, but lo have left the country, at the end of the
period, poorer than at the beginning. Thus, in the hap-
pieft and mod fortunate period of them all, that which has
paffed nnce the reftoration, liow many diforders and misfor-
tunes have occurred, which could they have been forefeen,
not only the impoverilliment, but the total ruin of the counr
try would have been expected from them ? The fire and the
plague of London, the two Dutch wars, the diforders of the
revolution, the war in Ireland, the four expenfive French
^ wars of 168H, 1702, 1742, and 1756,* together with the
two rebellions of 1715 and ] 745. In the courfe of the four
French wars, the nation has COntradl;ed more than a hundred
and forty-five millions of debt, over and above all the other
extraordinary annual expence which they occafioned, fo that
the whole cannot be computed at lefs than two hundred mil-
lions. So great a fiiare oi the annual produce of the land
and labour of the country, has, fince the revolution, been
employed upon different occafions, in maintaining an extra-
ordinary number of unproductive hands. But had not thofe
wars given this particular direftion to fo large a capital, the
greater part of it would naturally have been employed in
maintaining produCfive hands, whofe hibour would have re-
placed, with a profit, the whole value of their consumption.
The value of the annual produce of the land and labour of the
country, would have been confidcrably increafcd by it every
year^
THE WEALTH OF NATIONS. 34^
year, and every year's increafe would have augmented ftill
more that of the following year. .More houfes would have
been built, more lands would have been improved, and thofc
which had been improved before would have been better cul-
tivated, more manufactures would have been eftabliihed, and
thofe which had been eilabliiiied before would have been
more extended ; and to what hciglit the real wealth and
revenue of the country bright, by tliis time, have been raifed,
it is not perhaps very eafy even to imagine.
But though the profufion of government muR:, undoubt-
edly, have retarded tlic natural progrcfs of England towards
wealth and improvement, it has not been al3le to liop it.
The annual produce of its land and labour is, undoubtedly,
much greater at prefent than it was either at the rcftoratioa
or at tlie revolution. The capital, therefore, annually em-
ployed in cultivating this land, and in maintaining this
labour, muil nkevvife be "^much greater. In the midit of all
the exactions of government, this capital has been filently
and gradually accumulated by the private frugality and good
condudl of individuals, by their univerfal, continual, and
uninterrupted effort to better their own condition. It is this
effort, prctefbed by law and allowed by liberty to exert itfelf
in the mianner that is moft advantageous, which has main-
tained the progrefs of England towards opulence and im-
provement in almoil all former times, and which, it is to be
hoped, will do fo in all future times. England, however,
as it has never been bleifed with a very parfimonious govern-
ment, fo parfimony has at no time been the chara(il:eri{lical
virtue of its inhabitants. It is the higheft impertinence and
prefumption therefore, in kings and miniflers, to pretend
to watch over the ooeconomy of private people, and to reftraiii
their expence either by fumptuary laws, or by prohibiting the
importation of foreign hixuries. They are themfelves aiwaysj
and without any exception, the greateft fpendthrifts in the
fociety. Let them look well after their own expence, and
they may fafely trufl private people with theirs, if their own
extravagance does not ruin the ftate, that of their fubjed'ts
never will. -
As frugality increafes, and prodigality diminifhes the pubr
lie capital, fo the conduct of thofe, whbfe expence juft
equals their revenue, without either accumulating or en-
croaching, neither increafes nor diminiihcs it. Some modes
Qf
34^ THE NATURE AND CAUSES OF
of expence, however, fccm to contribute more to the growth
of pubHc opulence than others.
The revenue of an individual may be fpent, either in
things which are confamed immediately, and in which one
day's expence can neither alleviate nor lupport that of ano-
ther \ or it may be fpent in things more durable, which can
therefore be accumulated, and in which every day's expence
may, as he chufes, either alleviate or fupport and heighten
the efte£l of that of the following day. A man of fortune,
for example, may either fpend his revenue in a profufe and
fumptuous table, and in maintaining a great number of
menial fervants, and a multitude of dogs and horfes j or con-
tentlng[ himfelf with a frup;al table and fev/ attendants, he
may lay out the greater part of it in adorning his houfe or
his country villa, in ufeful or ornamental buildings,^in ufe-
ful or ornamental furniture, in colle(Sling books, flatues,
pictures j or in things more frivolous, jewels, baubles,
ingenious trinkets of different kinds ; or, what is moft tri-
fling of all, in amafling a great wardrobe of fine cloathsj,
like the favourite and minifter of a great prince who died
a few years ago. Were two men of equal fortune to fpend
their revenue, the one chiefly in the one v/ay, the other
in the other, the magnificence of the perfon whofe ex-
pence had been chiefly in durable commodities, would
be continually increafmg, every day's expence contributing-
ibmething to fupport and heighten the efFevSl of that of the
follov^'ing day : that of the other, on the contrary, would
be no greater at the end of the period than at the be-
ginning. The -former too would, at the end of the pe-
riod, be the richer man of the two. He would have a
ilock of goods of fome kind or other, which, though it
might not be worth all that it coft, would always be worth
fomething. No trace or veflige of the expence of the latter
would remain, and the effe£l:s of ten or twenty years pro-
fufion v/ould be as completely annihilated as if they ha4
never exiftcd.
As the one mode of expence Is more favourable than the
other to the opulence of an individual, fo it is likewife to
that of a nation. The houfes, the furniture, the cloathing
of the rich, in a little time, become ufeful to the inferior
and middle ranks of people. They are able to purchafe
them, when their fuperiors grow weary of them, and the
general
THE WEALTH OF NATIONS. 347
general accommodation of the whole people is thus gradually
improved, when this mode of expence becomes univerfal
among men of fortune. In countries wliich have long been
rich, you will frequently find the inferior ranks of people in
pofiefiion both of houfes and furniture perfectly good and en-
tire, but of which neither the one could have been built, nor
the other have been made for their ufe. What was formerly
a feat of the family of Seymour, is novi'- an inn upon the
Bath road. The marriage-bed of James the Firft of Great
Britain, which his Queen brought vv'ith her from Denmark,
as a prefent fit for a fovereign to make to a fovereign, was,
a few years ago, the ornament of an ale-houfe at Dunferm-
line. In fome ancient cities, which either have been long
ftationary, or have gone fornewhat to decay, you will fome-
times fcarce find a fingle houfe which could have been built
for its prefent inhabitants. If you go into -thofe houfes too,
you will frequently find many excellent, though antiquated
pieces of furniture, which are ftill very fit for ufe, and
which could as little have been made for them. Noble pa-
laces, magnificent villas, great colletSlions of books, ftatues,
pi£fures, and other curiofities, are frequently both an orna-
ment and an honour, not only to the neighbourhood, but to
the wdiole country to which they belong. Verfiiilles is an orna-
ment and an honour to France, Stowe and Wilton to Eng-
land. Italy dill continues to command fome fort of venera-
tion by the number of monuments of this kind w^hicli it
pofielTes, though the wealth which produced them has de-
cayed, and though the genius which planned them feems to
be extinguiihed, perhaps from not having the fame em-
ployment.
The expence too, which is laid out in durable commodi-
ties, is favourable, not only to accumulation, but to fruga-
lity. If a perfon fiiould at any time exceed in it, he can
eafily reform without expofing himfelf to the cenfure of the
public. To reduce very much the number of his fervants,
to reform his table from great profufion to great frugality,
to lay down his equipage after he has once fet it up, arc
changes which cannot efcape the obfervation of his neio-h-
bours, and which are fuppofed to imply fome acknowledg-
ment of preceding bad conduft. Few, therefore, ofthofc
who have once been fo unfortunate as to launch out too far
into this fort of expence, have afterwards the courage to
reform, till jruin and bankruptcy oblige them. But if a per-
fon
348 THE NATURE AND CAUSES OF
{on has, at any time, been at too great an expence in build**
ingj in furnicure, in books or piiliures, no imprudence can
be inferred from his changing his conduct. Thefe are things
in v/hicli further expence is frequently rendered unneceffary
by former expence j and when a perfort Hops fhort, he ap-f
pears to do fo, not becaufe he has exceeded his fortune, but
becaufe he has fatisfied his fancy.
The expence, befides> that h laid out in durable com?
jpodities, gives maintenance, commonly, to a greater numr
ber of- people, than that which is employed in the mofl
profufe hofpit^iity, Of two or three hundred weight of
provilions, which may fometiraes be ferved up at a great
feif ivai, oncrhaifj perhaps, is thrown to the dunghill, and
thei-e is alviays a great deal wafted and abufed. But if the
expence of this entertainment had been employed in fettlng
to work, mafons, carpenters, upholfterers, mechanics, &c«
a quantity of provifions, of equal value, would have been
diltributcd among a ftiil greater number of people, who
would have bought them in penny-worths and pound weights,
and not have loft or thrown away a fingle ounce of them.
In the one way, befides, this expence maintains produOive,
ill the other unprodutffive hands. In the one way, therefore,
it increafes, in the other, it does not increafe, the exchange-
able value of the annual produce of the land and labour pf
the country.
I WOULD not, however, by all this be underftood to
mean, that the one fpecies of expence always betokens a more
UberaJ or generous fpirit than the other. When a man of
fortune fpeads his revenue chiefly in hofpitality, he (hares the^
greater p^rt of it with his friends and companions j but when
he employs it in purchaling fuch durable commodi^'Ies, he
often fpends the whole upon his own perfon, and gives
nothing to any body without an equivalent. The latter fpe-
cies of expence, therefore, efpecially when directed towards
frivolous objecfs, the little ornaments of drefs and furniture,
jewels, trmkets, gewgaws, frequently indicates, not only a
triflhig, but a bafe and fellifh difpofition. All that I moan
is, that the one fort of expence, as it always occafions fome
accumulation of vajuable commodities, as it is more favour-
able to private frugality, and, confequently, to the increafe
of the public canital, and as it maintains produ6f ive, rather
than unproduftive hands, conduces more than the other to
tjie growth of public opulence.
/ ^ CHAR
THE WEALTH OF NATIONS. 34^
CHAP. IV.
Of Stock knUat Jnterejlo
Jl H E dock which is lent at intered is always ccnudercd
as a capital by the lender. He experts that \n due time it is
to be reftored to him, and that in the mean time the borrower
is to pay him a (Tertain annual rent for the ufe of it. The bor-
rower may ufe it cither as a capital, or as a ilock referved for
immediate confumptioru If he ufes it as a capital, he em-
ploys it in the maintenance of productive labourers, who re-
produce the value with a profit. He can, in this cafe, both
rellore the capital and pay the intereft without alienating or
encroaching upon any other fource of revenue. If he ufes it
as a flock referved for immediate confumption, he a<fts the
part of a prodigal, and difTipates in the maintenance of the
idle, what was.deftined for the fupport of the induftrious.
He can, in this cafe, neither reftore the capital nor pay the
intereft, without either alienating or encroaching upon fome
other fource of revenue, fuch as the propeuy or the rent of
land.
The ftock which is lent at intereft is, no doubt, occarion-
ally employed in both thefe ways, but in the former much
more frequently than in the latter. The man who borrows
in order to fpend will foon be ruined, and he who lends to
him will generally have occafion to repent of liis folly. To
borrow or to lend for fuch a purpofe, therefore, is in all
cafes, where grofs ufury is out of the queflion, contrary to
the intereft of both parties •, and though it no doubt happens
fometimes that people do both the one and the other, yet,
from the regard that all men have for their own intereft, we
may be afTured, tha^ it cannot happen fo /very frequently as
we are fometimes ap^ to imagine. Af^ any rich man of
common prudence, to which of the tv/o forts of people he
has lent the greater part of his flock, to thofe who, he thinks,
will employ it profitably, or to thofe who Vvill fpend it idly,
a\i4 he will laugh at you for propofing tlie rjuellion. Even
3^o THE NATURE AND CAUSES 0F
among borrowers, therefore, not the people in the world
moil famous for frugality, the number of the frugal
and induflrious furpafles considerably that of the prodigal and
idle.
The only people to whom flock is commonly lent, with-
out their being expecled to make any very profitable ufe of it,
are country gentlemen who borrow upon m^ortgage. Even
they fcarcc ever borrow merely to fpend. What they bor-
row, one may fay, is commonly fpent before they borrow it.
They have generally confumed fo great a quantity of goods,
advanced to them upon credit by fhopkeepers and tradefmen,
that they find it necefiary to borrow at intereft in order to
pay the debt. The capital borrowed replaces the capitals of
thofe fhopkeepers and tradefmen, which the country gentle-
men could not have replaced from the rents of their eftates.
It is not properly borrowed in order to be fpent, but in order
to replace a capital which had been fpent before.
Almost all loans at intereft are made in money, either
of paper, or of gold and filver. But what the borrower
really wants, and what the lender really fupplies him withj
IS not the money, but the money's worth, or the goods
which it can purchafe. If he wants it as a ftock for imme-
diate confumption, it is thofe goods only which he can place
in that flock. If he wants it as a capital for employing in-
duftry, it is from thofe goods only that the induflrious can be
furnillied with the tools, materials, and maintenance, necef-
fary for carrving on their work. By means of the loan, the
lender, as it were, affigns to the borrower his right to
a certain portion of the annual produce of the land and
labour of the country, to be employed as the borrower
pleafes.
Th^ quantity of flock, therefore, or, as it is commonly
exprefTed, of money which can be lent at intereft in any
countrv, is not regulated by the value of the money, whe-
ther paper or coin, which ferves as the inftrument of the dif-
ferent loans made in that country, but by the value of that
part of the annual produce which, as foon as it comes either
from the ground, cr from the hands of the produ6live la-
bourers, is deftined not only for replacing a capital, but fuch
a capital as the owner does not care to be at the trouble of
employing himfclf. As fuch capitals are commonly lent out
aiii
iTHE WEALTH OF NATIONS. 351
and paid back in money, they conftitute what is called the
monied intcrefl'. It is diftindl:, not only from the landed,
but from the trading and manufa£luring intereils, as in thefe
lad the owners themfelves employ their own capitals. Even
in the monied interelt, however, the money is, as it were,
but the deed of aflignment, which conveys from one hand to
another thofe capitals which the owners do not care to em-
ploy themfelves. Thofe capitals may be greater in almoil
any proportion, than the amount of the money which ferves
as the inftrument of their conveyance ; the fame pieces of
money fucceflively ferving for many different loans, as well
as for many different purchafes. A, for example, lends to
W a thoufand pounds, with which W immediately purchafes
of B a thoufand pounds w^orth of goods. B having no occa-
fion for the money himfelf, lends the identical pieces to X,
with which X immediately purchafes of C another thoufand
pounds worth of goods. C in the fame manner, and for the
fame reafon, lends them to Y, who again purchafes goods
with them of D. In this manner the fame pieces, either of
coin or of paper, may, in the courfe of a few days, ferve as
the inftrument of three different loans, and of three different
purchafes, each of which is, in value, equal to the whole
amount of thofe pieces. What the three monied men A, B,
and C, affign to the three borrowers, W, X, Y, is the power
of making thofe purchafes. In this pov/er confift both the
value and the ufe of the loans. The ftock lent by the three
monied men, is equal to the value of the goods which can be
purchafed with it, and is three times greater than that of the
money with which the purchafes aje made. Thofe leans,
however, may be all perfccflly well fecured, the goods pur-
chafed by the different debtors being fo employed, as, in
due time, to bring back, with a profit, an equal value
either of coin or of paper. And as the fame pieces of
money can thus ferve as the inftrument of different loans
to three, or, for the fame reafon, to thirty times their value,
fo they may likewife fucceffively ferve as the inftrument of
repayment.
A CAPiTiiLlent at Intereft may. In this manner, be con-
fidered as an aifignment from the lender to the borrower of a
certain conlidcrable portion of the annual produce ; upon
condition that the borrower in return lliall, during the conti-
nuance of the loan, annually aiUgn to the lender a fmaller
portion, called the intereft ; and at the end of it a portion
equally
352 THE NATURE AND CAUSES OF
equally confiderable with that which had originally been af*
Cgned to him, called the repay>ment. Though money,
either coin or paper, ferves generally as the deed of af-
lignment both to the fmaller, and to the more confiderable
portion, it is itfelf altogether different from what is affigned
by It.
In proportion afi that (hare of the annual produce whlch^
as foon as it comes either from the ground, or from the
hands of the produ£l:ive labourers, is deftined for replacing a
capital, increafes in any country, what is called the monied
intered naturally increafes with it. The increafe of thofe
particular capitals from which the owners wifh to derive a
revenue, without being at the trouble of employing them
themfelves, naturally accompanies the general increafe of ca-
pitals ; or, in other words, as ftock increafes, the quantity
of ilock to be lent at interefl grows gradually greater and
greater.
As tlie quantity of ftock to be lent at interefl increafes, the
intereft, or the price which mud be paid for the ufe of that
ftock, neceilarily diminldies, not only from thofe general
caufes which make the market price of things com.monly di-
mlnlfh as their quantity increafes, but from other caufes
which are peculiar to this particular cafe. As capitals increafe
in any country, the profits which can be made by employing
them neceifarlly diminlfli. It becomes gradually more and
more diiTicult to find within the country a profitable method
of employing any new capital. There arifes in confequence
a competition between different capitals, the owner of one
endeavouring to get poffeflion of that employment which is
occupied by another. But upon mod occafions he can hope
to jufde that other out of this employment, by no other
means but by dealing upon more reafonable terms. He
muft not only fell what he deals in fomev/hat cheaper, but
in order to get it to fell, he muft fometimes too buy it dearer.
The demand for productive labour, by the increafe of the
funds which are delllned for maintaining it, grows every day
greater and greater. Labourers eafdy find employment, but
the owners of capitals find it difficult to get labourers to em-
ploy. Their competition raifes the wages of labour* and
iinks the profits of ftock. But when the profits which can
be made by the vnc of a capital are in this manner diminifned,
as it were, at both ends, the price which can be paid fpr the
ufe
THE WEALTH OF NATIONS. 353
life of it, that is, the rate of intereft, muft neceflarily be
diminiflied with them.
Mr. Locke, Mr. Law, and Mr. Montefquieu, as well a^
many other writers, feem to have imagined that the increafe
of the quantity of gold and fdver, in confequence of the dif-
covery of the Spanifli Welt Lidies, was the real caufe of the
lowering of the rate of intereft through the greater part of
Europe. Thofe metalfJ, they fliy, having become of lefs va-
lue themfelves, the ufe of any particular portion of them ne-
celTarily became of lefs value too, and confequently the price
which could be paid for it. This notion, which at firft fight
feems fo plaufible, has been fo fully expofed by Mr. Hume,
that it is, perhaps, unneceffary to fay any thing more about
it. The following very fliort and plain argument, however,
may ferve to explain more diftindly the fallacy which feems
to have milled thofe gentlemen.-
Before the difcoVery of the Spanifli Weft Lidies, teri
per cent, feems to have been the common rate of intereft
through the greater part of Europe. It has fmce that time in
different countries funiv to fix, five, four, and three per cent;
Let us fuppofe that in ^very particular country the value of
filver has funk precifely in the fame proportion as the rate of
intereft ; and that in thofe countries, for example, where in-
tereft has been reduced from ten to five per cent. ; the fame
quantity of filver can now purchafe juft half the quantity of
goods which it could have purchafed before. This fuppofi-
tion will not, I believe, be found any where agreeable to the
truth, but it is the moft favourable to the opinion which we
are going to examine ; and even upon this fuppofition it is
utterly impcffible that the lowering of the value of filver could
have the fmalleft tendency to lower the rate of intereft. If a
hundred pounds are in thofe countries now of no more value
than fifty pounds were then, ten pounds muft now be of no
more value than five pounds were then. Whatever were the
caufes which lowered the value of the capital, the fame
muft necefi'arily have lowered that of the intereft, and exaftly
in the fame proportion. The proportion between the value of
the cajT^tal and that of the intereft, muft have remained the
fame, though the rate had never been altered. By altering
the rate, on the contrary, the proportion between thofe two
values is necefiarily altered. If a hundred pounds now are
worth no more than fifty were then, fwQ pounds now can be.
Vol, I. ' A 3 worth
3S4 THE NATURE AND CAUSES OF
worth np more than two pounds ten {liillings were then,,
By reducing the rate of intereft, therefore, from ten to five
per cent., we give for the ufe of a capital, which is fuppofed
to be equal to one-half of its former value, an mtereft which
is equal tQ one-fourth only of the value of the former
intereft.
Any increafe in the quantity of "filvcr, while that of the
commodities circulated by means of it remained the famCj,
could have no other effeft than to diminilh the value of that
metal. The nominal value of all forts of goods would be
greater, but their real yalue would be precifely the fame as
before.- They would be exchanged for a greater number of
pieces of filver j but the quantity of labour, which they could
command, the number of people whom they could maintain
and employ,^ would be precifely the fame. The capital of
the country would be the fame;^ though a greater number of
pieces might be requifite for conveying any equal portion
of it from one hand to another. The deeds of affignment,.
like the conveyances- of a verbofe attorney,, would be more
cumberfome, but the thing afligned would be precifely the
fame as before, and could pi-oduce only the fame effecls^
The funds for maintaining- productive labour being the fime^
the demand for it would be the fame. Its price or wages,
therefore,' though nomina-Uy greater, would really be the
fame. They would be paid in a greater number of pieces of
filver ; but they would purchafe only the fame quantity of
goods. The profits of fcock wouJd be the fame both nomi-
nally and really. The v/ages of labour are com.mcnly com-
puted by the quantity of filver which is paid to the labourerc
When that is increafed,. therefore, his wages appear to be
increafed, though they m.ay fometimes be no greater than
before. But the profits of flock are not computed by the
number of pieces of filver with which they are paid, but by
the proportion which thofe pieces bear to the whole capital
employed. Thus in a particular country five fnillings a week
are faid to be the common wages of labour, and ten per
cent, tue comxmon profits of ftock. But the whole capital of
the country being the fame as before, the competition be-
tv/eeli the different capitals of individuals into which it was
xiivided v/ould likewife be the fame. They would all trade
v/ith the fame advantages and difadvantages. The common
proportion between capital and profit, therefore, would be
the fame, and confequently the common interell of money ;
what
THE WEALTH OF NATIONS. 355
what can commonly be given for the ufe of money being
neceflarily regulated by what can commonly be made by the
ufe of it.
Any increafe in the quantity of commodities annually
circulated within the country, while that of the money which
circulated them remained the fame, would, on the contrary,
produce many other important effecfts, befides that of raifing
the value of the money. The capital of the country, though
it might nominally be the fame, would really be augmented.
It might continue to be exprefled by the fame quantity of
money, but it would command a greater quantity of la-
bour. The quantity of produ£live labour which it could
maintain and employ would be increafed, and confequently
the demand for that labour. Its wages would naturally rife
with the demand, and yet might appear to fink. They might
be paid with a fmaller quantity of money, but that fiTialler
quantity might purchafe a greater quantity of goods than
a greater had done before. The profits of (lock would be
diminifiied both really and in appearance. The whole capital
of the country being augmented, the competition between
the different capitals of which it was compofed, would natu-
rally be augmented along with it. The owners of thofe par-
ticular capitals would be obliged to content themfelves with
a fmaller proportion of the produce of that labour which their
rcfpe^live capitals employed. The interefl of money, keep-
ing pace always with the profits of ftock, might, in this
manner, be greatly diminiihed, though the value of money,
or the quantity of goods which any particular fum could
purchafe, was greatly augmented.
In fome countries the interefl: of money has been prohi-
bited by law. But as fomething can every where be made
by the ufe of money, fomething ought every where to be
paid for the ufe of it. This regulation, initead of prevent-
ing, has been found from experience to increafe the evil of
ufury •, the debtor being obliged to pay, not only for the ufe
of the money, but for the riflv which his creditor runs by
accepting a compenfation for that ufe. He is obliged, if
one may fay fo, to infure his creditor from the penalties of
ufury.
In countries where interefl: is permitted, the law, in order
to prevent the extortion of ufury, generally fixes the highefl:
rate whidi can be taken without incurring a penalty. This
A a 2 rar^
3:^6 THE NATURE AND CAUSES O^
rate ought always to be fomcwhat above the loweft markef;
price, or the price which is commonly paid for the ufe of
money by thofe who can give the molt undoubted fecurity.
If this legal rate Ihould be fixed below the loweft market rate,
the efFe(^ls of this fixation muft be nearly the fame as thofe of
a total prohibition of intereft. The creditor will not lend
his money for lefs thaathe ufe of it is worth, and the debtor
Txiuft pay him for the rifk which he runs by accepting the
full value of that ufe. If it is fixed precifely at the lowelt
market price, it ruins with honeft people, who refpect the
laws of their country, the credit of all thofe who cannot give
the very beft fecurity, and obliges them to have recourfe to
exorbitant ufurers. In a country, fuch as Great Britain,
where money is lent to government at three per cent, and
to private people upon good fecurity at four, and four and
a half, the prefent legal rate, five per cent., is, perhaps,^
a§- proper as any.
The legal rate, it is to be obferved, though It ought to be-
fomewhat above, ought not to be much above the loweft
market rate. If the legal rate of intereft in Great Britain,.
■ for example,- was fixed fo high as eight or ten per cent., the
greater part of the money which wtis to be lent, would be
lent to prodigals and projectors, who alone would be willing
to give this high intereft. Sober people, who will give for
the ufe of money no more than a part of what they are likely
to make by the ufe of it, would not venture into the com-
petition. A great part of the capital of the country would
thus be kept out of the hands which were moft likely to make
a profitable and advantageous ufe of it, and thrown into
thofe which were moft likely to wafte and deftroy it. Where
the legal' rate of intereft, on the contrary, is fixed but a very
little above the loweft market rate, fober people are univer-
fally preferred, as borrowers, to prodigals and proj colors.
The perfon who lends money gets nearly as much intereft
from the former as he dares to take from the latter, and his
money- is much fafer in the hands of the one {ct of people,,
than in thofe of the other. A great part of the capital of
the counti'v is thus thrown into the hands In which it 4s'
moft likely to be employed with advantage.
No law can reduce the common rate of intereft below the
loweft ordinary market rate at the time when that law is
made. Notwithftanding the edicl of 1766, by which the
French
THE WEALTH OF NATIONS. 357
French king attempted to reduce the rate of intereft from
five to four per cent., money continued to be lent in France
at five per cent., the law being evaded .in feveral different
ways.
The ordinary market price of land, it is to be obfervedy
depends every where upon the ordinary market rate of
intereft. The perfon who has a capital from which he wifhes
to derive -a revenue^ without taking the trouble to employ it
himfelf, deliberates whether he fhould buy land with it, or
lend it out at intereft. The fuperior fecurity of land, toge-
,ther with fomc other advantages which almoft every where
attend upon this fpecies of property, will generally difpofe
him to content himfelf with a fmaller revenue from land,
than what he might have by lending out his money at
.intereft. Thefe advantages are fufficient to compenfate a cer-
tain difference of revenue; but they will compenfate a certain
difference only ; and if the rent of land fliould fall fhort of
the intereft of money by a greater difference, nobody Vv^ould
buy land, which would foon reduce its ordinary price. On
the contrary, if the advantages fliould much more than com-
penfate the difference, every body would buy land, which
again would foon raife its ordinary price. When intereft
was at ten per cent., land was commonly fold for ten and
twelve years purchafe. As intereft funk to fix, five, and
four per cent., the price of land rofe to twenty, five and
twenty, and thirty years purchafe. The market rate of
intereft is higher in France than in England ; and the com-
mon price of land is lower. In England it commonly fell?,
,D.t thirty ; in France at twenty years purchafe.
€ H A P.
358 THE NATURE AND CAUSES OF
CHAP. V.
Of the different Employment of Capitals.
T;
HOUGH all capitals are deftlned for the maintenance
of produ6live labour only, yet the quantity of that labour,
which equal capitals are capable of putting into motion, va-
ries extremely according to the diverfity of their employ-
ment •, as does likewife the value which that employment
adds to the annual produce of the land and labour of the
country.
A CAPITAL may be employed in four different ways : ei-
ther, firit, in procuring the rude produce annually required
for the ufe and confumption of the (ociety ; or, fecondly, in
manufa<n:uring and preparing that rude produce for immedi-
ate ufe and confumption •, or, thirdly, in tranfporting either
the rude or manufactured produce from the places where
they abound to thofe where they are wanted ; or, laflly, in
dividing particular portions of either into fuch frnall parcels
as fuit the occafional demands of thofe who want them. In
the firfl way are employed the capitals of all thofe who un-
dertake the improvement or cultivation of lands, mines, or
fiflieries *, in the fecond, thofe of all mafter manufacflurers ;
in the third, thofe of all wholefale merchants ; and in the
fourth, thofe of all retailers. It is difficult to conceive that
a capital fliould be employed in any way which may not be
claiTed under fome one or other of thofe four.
Each of thofe four methods of employing a capital is
eflentially neceflary either to the exidence or extenfion
of the other three, or to the general conveniency of the fo-
ciety.
Unless a capital was employed in furnifhing rude produce
to a certain degree of abundance, neither manufactures nor
trade of any kind could exift.
Unles
THE WEALTH OF NATIONS, 359
Unless a capital was employed in manufa6luring that
part of the rude produce which requires a good deal of prepa-
ration before it can be fit for ufe and confumption, it either
would never be produced, becaufe there could be no demand
for it -, or if it was produced fpontaueoufly, it would be of
no value in exchange, and could add nothing to the wealth
of the focletv.
Unless a capital was employed in tranfporting, either
the rude or manufa^lured produce, from the place's where
it abounds to thofe where it is wanted, nomoreof either could
be produced than was neceflary for the confumption of the
neighbourhood. The capital of the merchant exchanges
the furplus produce of one place for that of another, and
thus encourages the indullry, and increafes the enjoyments
of both.
Unless a capital was employed in breaking and dividing
certain portions either of the rude or manufactured produce,
into fuch fmall parcels as fult the occafional demands of thofe
who want them, every man would be obliged to purchafe a
greater quantity of the goods he wanted, than his immediate
occafions required. If there was no fuch trade as a butcher,
for example, every man would he obliged to purchafe a whole
ox or a whole fheep at a time. This would generally be in-,
convenient to the rich, and much more fo to the poor. If a
poor workman was obliged to purchafe a month's or fix
months provilions at a time, a great part of the itock which
he em.ploys as a capital in the inftruments of his trade, or in
the furniture of his fhop, and which yields him a revenue,
he would be forced to place in that part of his itock which is
referved for immediate confumption, and which yields him
no revenue. Nothing can be more convenient for fuxh a
perfon than to be able to purchafe his fubfiiteiice from day to
day, or even from hour to hour as he wants it. He is there-r
by enabled to employ almoR his whole (lock as a capital.
He is thus enabled to furnifh work to a greater value, and
the profit v.-hich he makes by it in this way, much more
than compenfates the additional price which the profit of the:
retailer impofes upon the goods. The prejudices of fome po-
litical writers againft fhopkeepers and tradefmen, are altoge-.
ther without foundation. So far is it from being neceflliry,
either to tax them, or to reflricfb their numbers, that they can
nev^r be niulciplied fp as to hurt the public, though they may
o
60 THE NATURE AND CAUSES OF
fo as to hurt one another. The quantity of grocery goods,
for example, which can be fold in a particular town, is li-
mited by the demand of that town and its neighbourhood.
The capital, therefore, which can be employed in tlie gro-
cery trade cannot exceed what is fuihcient to purchafe that
quantity. If this capital is divided between two different
grocers, their competition will tend to make both of them fell
cheaper, than if it were in the hands of one only -, and if it
were divided among twenty, their cor/ipetition would be juft
fo much the greater, and the chance of their combining to-
gether, in order to raife the price, juft fo much the lefs.
Their competition m.ight perhaps ruin fpme of themfelves ;
but to take care of this is the bufinefs of the parties concern-^
ed, and it may fafely be trufted to their difcretion. It can
never hurt either the ccnfum.er, or the producer j on the
contrary, it muft tend to make the retailers both fell cheaper
and buy dearer, than if the whole trade was monopolized by
one or two perfons. Son^e of them, perhaps, may fometimes
decoy a weak cuftomer to buy what he has no occafion for.
This evil, however, is of too little importance to deferve the
public attention, nor would it neceffarily be prevented by
reftri^line their numbers. It is not the multitude of ale-
• • ' ' ' 1
houfes, to give the moft fufpicious example, that occafions
a general difpofition to drunkennefs among the common
people ; but that difpofition arifing from other caufes ne-
ceffarily gives employment to a multitude of ale-houfe?.
The perfons whofe capitals are employed in any of thofc
four ways are themfelves productive labourers. Their la-
bour, wlien properly dire(fled, fixes and realizes itfelf in the
fubjecl or vendible commodity upon which it is beflowedj
and generally adds to its price the value at leaft of their own
maintenance and confumption. The profits of the farmer,
of the manufatfturer, of the merchant, and retailer, are all
drawn from the price of the goods which the two dvil pro-
duce, and the two laft buy and fell. Equal capitals, hovv'-
ever, employed in each of thofe four different ways, will
immediately put into motion very different quantities of
produ£\ive labour, and augment too in very different pro-
portions the value of the annual produce of the land and
labour of the fociety to which they belong.
The capital of the retailer replaces, together with its pro-
fits, that of the merchant of whom he purchafes goods, and
thereby
THE WEALTH OF NATIONS. 361
thereby enables lum to continue his bufinefs. The retailer
himfelf is the only produ(Si:ive labourer whom it immediately
employs. In his profits, confifts the whole value which its
employment adds to the annual produce of the land and la-
bour of the fociety.
The capital of the wholefiile merchant replaces, to<2;ether
with their profits, the capitals of the farmers and manufac-
turers of whom he purchafes the rude and manufadlured pro-
duce which he deals in, and thereby enables them to conti-
nue their refpe(f}:ive trades. It is by this fcrvice chiefly that
he contributes indirectly to fupport the produd^ive labour of
the fociety, and to increafe the value of its annual produce.
His capital employs too the failors and carriers who tranfport
his goods from one place to another, and it auQ^ments the
price of thofe goods by the value, not only of his profits, but
of their wages. This is all the produftive labour which it
immediately puts into motion, and all the value which it im-
mediately adds to the annual produce. Its operation In botli
tliefe refpedls is a good deal fuperior to that of the capital of
the retailer.
Part of the capital of the mafter manufacflurer is em.-
ployed as a fixed capital in the inftruments of his trade, and
replaces, together with its profits, that of fome other artificer
of whom he purchafes them. Part of his circulating capital
h employed in purchafing materials, and replaces, Vv-ith their
profits, the capitals of the farmers and miners of whom he
purchafes them. But a great part of it is always, either an-
nually, or in a much fhorter period, dlilributed amon<r the
different workmen whom he employs. It augments the va-
lue of thofe materials by their v/ages, and by their maflers
profits upon the whole flock of wages, materials, and inflru-
ments of trade employed in the bulniefs. It puts immedi-
ately into motion, therefore, a much greater quantity ofpro-
du^live labour, and adds a much greater value to the annual
produce of the land and labour of the fociety, than an equal
capital in the hands of any wholcfale merchant.
No equal capital puts into motion a gj-eater quantity of
produ£f ive labour than that of the farmer. Not only his la-
bouring fervants, but his labouring cattle, are productive la-
bourers. In agriculture too nature labours along with man ;
and though her labour cofls no expence, its produce lias its
value.
5^2 THE NATURE AND CAUSES OF
value, as well as that of the mod expenfive workmen. . Tlie
moft important operations of agriculture feem intended, not
fo much to increafe, though they do that too, as to direft the
fertihty of nature towards the production of the plants mofb
profitable to man. A field overgrown with briars and bram-
bles may frequently produce as great a quantity of vegetables
as the befl cultivated vineyard or corn field. Planting and
tillage frequently regulate more than they animate the aclive
fertility of nature -, and after all their labour, a great part of
the work alv/ays remains to be done by her. The labourers
and labouring cattle, therefore, employed in agriculture, not
only occafion, like the workmen in manufactures, the repro-
duiflion of a value equal to their own confumption, or to the
capital which employs them, together with its owners pro-
fits j but of a much greater value. Over and above the ca-
pital of the farmer and all its profits, they regularly occafion
the reproduction of the rent of the landlord. This rent may
be confidered as the produce of thofe powers of nature, the
ufe of which the landlord lends to the farmer. It is greater
or fmailer according to the fuppofed extent of thofe powers,
or in other words, according to the fuppofed natural or im-
proved fertility of the land. It is the woik of nature which
remains after deducting or compenfating every thing whicl^
ean be regarded as the work of man. It is feldom lefs than a
fourth, and frequently more than a third of the whole pro-
duce. No equal quantity of productive labour employed in
n\anufa£lures can ever occafion fo great a reprodu^l:ion. In
them nature does nothing *, man does all ; and the reproduc-
tion muft always be in proportion to the ftrength of the agents
that occafion it. The capital employed in agriculture, there-
fore, not only puts into motion a greater quantity of produc-
tive labour than any equal capital employed in manufatlures,
but in proportion too to the quantity of produOive labour
which it employs, it adds a much greater value to the annual
produce of the land and labour of the country, to the real
wealth and revenue of its inhabitants. Of all the ways in
which a capital can be employed, it is by far the rnoil ad-?
vantageous to the fpciety.
The capitals employed in the agriculture and in the retail
trade of any fociety, muft: always refide within that fociety.
Their employment is confined almoft to a precife fpo^ to the
farm, and to the fliop of the retailer. They muft generally
too
THE WEALTH OF NATIONS. q6
o^^
too, though there are feme exceptions to tins, belong to re-
fident members of the fociety.
The capital of a wholefale merchant, on the contrary,
feems to have no fixed or neceffary refidence any where, but
may wander about from place to place, according as it can
either buy. cheap or fell dear.
The capital of the manufadlarcr mufl no doubt refidc
where the manufa6lure is carried on ; but where this fhail be
is not always neceflarily determined. It may frequently be
at a great difiance both from the place where the materials
grow, and from that where die complete nianufa£lure is con-
fumed. Lyons is very diftant both from the places which
afford the materials of its manufactures, and from thofe
which confume them. The people of fafliion in Sicily are
cloathed in filks made in other countries, from the materials
which their own produces. Part of the wool of Spain is ma-
nufadf ured in Great Britain, and fome part of that cloth is
afterwards fent back.to Spain.
"Whether the merchant whofe capital exports the fur-
plus produce of any fociety be a native or a foreigner, is of
very little importance. If he is a foreigner, the number or
their prcdu<ftive labourers is neceffarily lefs than ifiie had
been a native by one man only •, and the value of their an-
nual produce, by the profits of that one man. 'I he failors
or carriers whom he employs may (till belong indifferently
either to his country, or to their country, or to fome third
country, in the fame manner as if he had been a native. The
capital of a foreigner gives a value to their furplus produce
equally with that of a native, by exchanging it for fomething
for which there is a demand at home. It as cfFeClually re-
places the capital of the perfon who produces that furplus,
and as efFeCfually enables him to continue his bufmefs -, the
fervice by which the capital of a wholefale mercliant chiefly
contributes to fupport the producftive labour, and to augment
the value of the annual produce of the fociety to which he
belongs.
It is of more confequence that the capital of the manu-
fafturer iliould refide within the country. It neceflarily puts
into motion a greater quantity of productive labour, and adds
a greater
04 THE NATURE AND CAUSES OF
a greater value to the annual produce of the land and laboirr
of the fociety. It may, however, be very ufeful to the
country, though it (hould not refide within it. The capitals
of the Britifli manufa6lurers who work up the flax and hemp
annually imported from the coafls of the Baltic, are furely
very ufeful to the countries which produce them. Thofe ma-
terials are a part of the furplus produce of thofe countries
which, unlefs it was annually exchanged for fomething vv^hicli
is in demand there, would be of no value, and v/ould foon
ceafe to be produced. The merchants who export it, replace
the capitals of the people who produce it, and thereby en-
courage them to continue the production ; and the Britifli
manufafturers replace the capitals .ofthofe merchants.
A PARTICULAR couulTy, in the fame manner as a parti-
cular perfon, may frequently not have capital fufficient both
to improve and cultivate all its lands, to manufaClure and
prepare their \A'hole rude produce for immediate ufe and con-
sumption, and to tranfport the furplus part either of the rude
or manuiaiftured produce to thofe dii^ant markets where it
can be exchanged for fom»ething for which there is a\iemand
at home. The inhabitants of many .different parts of Great
Britain have not capital futli,cient to improve and cultivate all
their lands. The wool of the fouthern counties of Scotland
is, a great part of it, after a long land carriage through very
bad roads, mianufa£\ured in Yorkfliire, for v/ant of a capital
to manufadlure it at home. There are many little manufac-
turing towns in Great Britain, of which the inliabitants have
not capital fuflicient to tranfport the produce of their own in-
duflry to thofe diftant markets where there is demand and
confumption for it. If there are any merchants among them.,
they are properly only the agents of wealthier merchants
who refide in fome of the greater commercial cities.
When the capital of any country is not fuilicient for all
thofe three purpofes, in proportion as a greater fhare of it is
employed in agriculture, the greater will be the quantity of
productive labour which it puts into motion v/ithin the coun-
try *, as will likev\^ife be the value which its employment adds
to the annual produce of the land and labour of the fociety.
After agriculture, the capital employed in manufaClures puts
into motion the greateft quantity of productive labour, and
adds the greatefl value to the annual produce. That which is
cmplovcd
THE WEALTH OF NATIOKS. 365
employed In the trade of exportation, has the lead efFe^l of
any of the three.
The country, Indeed, which has not capital fuHicIent for
all thofe three purpofes, has not arrived at that degree of
opulence for which it feems naturally dcltined. To attempt,
however, prematurely and with an infufficient capital, to
do all the three, is certainly not the fhorteft way for a fo-
cicty, no more than it would for an individual, to acquire
a fuilicient one. The capital of all the individuals of a na-
tion, has its limits in the fame manner as that of a fingle
individual, and is capable of executing only certain purpofes.
The capital of all the individuals of a nation is increafcd in
the fame manner as that of a fingle individual, by their con-
tinually accumulating and adding to it whatever they fave
out of their revenue. It is likely to increafe the fafteft,
therefore, when it is employed in the way that affords the
greateft revenue to all the inhabitants of the country, as they
will thus be enabled to make the greateft favings. But the-
revenue of all the inhabitants of the country is necefTariiy in
proportion to the value of the annual produce of their land
and labour.
It has been the principal caufe of the rapid progrefs of
our American colonies towards wealth and greatnefs, that
almoft their whole capitals have hitherto been employed in
rigriculture. They have no manufaclures-, thofe houOiold
and coarfer manufactures excepted which neceilarily accom-
pany the progrefs of agriculture, and which are the work of
the women and children in every private family. The
greater part both of the exportation and coafting trade of
America,, is carried on by the capitals of merchants who rc-
fide in Great Britain. Even the ftorcs and warehoufes from
which goods are retailed in fome provinces, particularly in
Virginia and Maryland, belong many of them to merchants
who refide in the mother country, and afford one of the few
Inftances of the retail trade of a fociety being carried on by
the capitals of thofe who are not refident members of it.
Were the Americans, either by combination or by any other
fort of violence, to ftop the importatio!! of European manu-
factures, and, by thus giving a monopoly to fuch of their
own countrymen as could manufacture the like goods, divert
:)nv confiderable part of their capital into this employment,.
rhev
3^6 THE NATURE AND CAUSES OF
they would retard inftead of accelerating the further increafe
in the value of their annual produce, and would obftrucl: in-
llead of promoting the progrefs of their country towards real
wealth and greatnefs. This would be ftill more the cafe,
were they to attempt, in the fame manner, to monopolize to
themfelves tlieir whole exportation trade.
The courfe of human profperity, indeed, feems fcarce
ever to have been of fo long continuance as to enable any
great country to acquire capital fufficient for all thofe three
purpofes y unlefs, perhaps, we give credit to the wonderful
accounts of the wealth and cultivation of China, of thofe of
antient Egypt, and of the antient (late of Indoftan. Even
thofe three countries, the wealthiefl, according to all ac-^
counts, that ever were in the world, are chiefly renowned for
their fuperiority in agriculture and manufa<Sl:ures. They do
not appear to have been eminent for foreign trade. The
antient Egyptians had a fuperftltious antipathy to the fea ; a
fuperllition nearly of the fame kind prevails among the Indi-
ans •, and the Chinefe have never excelled in foreign com-
merce. The greater part of the furplus produce of all thofe
three countries feems to have been always exported by
foreigners, who gave in exchange for it fomething eKe
for which they found a demand there, frequently gold and
filver.
It is thus that the fame capital will in any country put
into motion a greater or fmaller quantity of produftive la-
bour, and add a greater or fmaller value to the annual pro-
duce of its land and labour, according to the ditferent propor-
tions in which it is employed in agriculture, manufaftures,
and wholefale trade. The difference too is very great, ac-
cording to the different forts of wholefale trade in which any
part of it is employed.
All wholefale trade, all buying in order to fell again by
wholefale, mav be reduced to three different forts. The
homiC trade, the foreign trade of confum.ption, and the car-
rying trade. The home trade is employed in purchafing in
one part of the fame country, and felling in another, the
produce of the induflry of that country. It comprehends
both the inland and the coalting trade. The foreign trade of
confumption is employed in purchafing foreign goods for
home
THE WEALTH OF NATIONS. 367
home confumption. The carrying trade is employed In tranf-
a<fl:ing the commerce oi foreign countries, ox in carrying the
furpius produce of one to another.
The capital which is employed in purchafing in one part
of the country in order to feil in another the produce of the
induftry of that country, generally replaces by every fuch
operation two diftinfl: capitals that had both been employed
in the agriculture or manufa61ures of that country, and
thereby enables them to continue that employment* Vv"heii
it fends out trom the refidence of the merchant a certain
value of commodities, it generally brings back in return at
leaft an equal value of other commodities. When both are
the produce of domeflic induftry, it neceiTarily replaces by
every fuch operation two diftin^i capitals, which had both
been employed in fupportingproducftive labour, and thereby
enables them to continue that fupport. The capital which
fends Scotch manufaftures to London, and brings back
Englifh coiTi and manufaftures to Edinburgh, neceilarily re-
places, by every fuch operation, two Britifii capitals which
had both been employed in the agriculture or manufadiures
of Great Britain.
The capital employed in purchafing foreign goods for
home-confumption, v/hen this purchafe is made with the
produce of domeftic induftry, replaces too, by every fuch
operation, two diftincTl capitals 5 but one of them only is
employed in fupporting domeftic induftry. The capital which
fends Britifh goods to Portugal, and brings back Portuguefe
goods to Great Britain, replaces by every fuch operation only
one Britifh capital. The other is a Portuguefe one. Though
the returns, therefore, of the foreign trade of confump-
tion fliould be as quick as thcfe of the home-trade, the
capital emplojed in it v/ill give but one-half the encou-
ragement to the induftry or produ(flive labour of tlie
country.
But the returns of the foreign trade of confumption are
very fcldom fo quick as thofe of the home-trade. The re-
turns of the home-trade generally come in before the end of
the year, and fo-netimjes three or four times in the year.
The returns of the foreign trade of confumption feldom
come in before the end of the year, and fometlmes not till
after two or three years. A capital, therefore, employed in
die
3^3 THE NATURE AND CAUSES OF
the home-trade will fometimes make twelve operations, or
be fent out a:id returned twelve times, before a capital em-
ployed in the foreign trade of confumption has made oneo-
If the capitals are equal, therefore, the one will give four
and twenty times more encouragement and fupport to the
induttry of the country than the other.
The foreign goods for home-colifumption may fometimesf
be purchafed, not with the produce of domeflic induftry,
but with fome other foreign goods. Thefe lad, however,-
muft have been purchafed either immediately with the pro-
duce of domeilic induiiry, or with fomething elfe that had
been purchafed with it j for, the cafe of war and conqueil;
excepted, foreign" goods can never be acquired, but in ex-
change for fomxCthing that had been produced at home, either
immediately, or after two or more dirTerent exchanges.
The efFefts, therefore, of a capital employed in fuch a
round-about foreign trade of confumption, are, in every re-
fpecl, the fame as thofe of one employed in the moil direct
trade of the fame kind, exce-pt that the final returns are
likely to be Hill more diitant, as they muft depend upon the
returns of two or three diftinft foreign trades. If the flax
and hemp of Riga are purchafed with the tobacco of Vir-
ginia, which had been purchafed with Britifn manufactures,
the merchant mufl; wait for the returns of two diftincfl fo-
reign trades before he can employ the fame capital in re-
purchaGng a like quantity of Britifh manufadlures. If the
tobacco of Virginia liad been purchafed, not v^dth Britifli
manufaftures, but with the fugar and rum of Jamaica which
had been purchafed with thofe manufacture^^, he mud wait
for the re^turns of three* If thofe two or three diftincl:
foreign trades fliould happen to be carried on by two or'
three dillinvlt merchants, of whom the fecond buys the
goods imported by the firfh, and the third buys thofe im-
ported by the fecond, in order to export them agairtf each
merchant indeed will in this cafe receive the returns of his
own capital more quickly ; but the final returns of the whole
capital employed in the trade will be juft as ilow as ever.-
^Vhether the whole capital employed in fuch a round-about
trade belong to one merchant or to three, can make no dif-
ference with rega- d to the country, though it may with re-
gard to the particular merchants. Three times a greater
capital mud in both cafes be employed, in order to ex-
diange a certain value of Britifli manufactures for a certain
q,uantity
THE WEALTH OF NATIONS. 369
<juantity of Hax and hemp, than would have been neceflary,
3iad the manufacftures and the Hax and hemp been dire6ily
exchanged for one another. The whole capital employed,
therefore, in fuch a round-about foreign trade of con-
fumption, will generally give lefs encouragement and fup-
port to the produ6live Jabour of the country, than an
equal capital employed in a more rdirecl trade of the fame
l:ind.
Whatever be the foreign commodity with which the
foreign goods for home-confumption are purchafed, it can
occafion no ellential difference either in the nature of the
-trade, or in the encouragement and fupport which it can
give to the produ6live labour of the country from which it
is carried on. If they are purchafed with the gold of Brazil,
for example, or with the filver of Peru, this gold and fiiver,
like the tobacco of Virginia, mull have been purchafed
with fomething that either was the produce of the indultry
-of the country, or that had been purchafed with fomething
■€lfe that was fo. So far, therefore, as the productive labour
-of the country is concerned, the foreign trade of confump-
iion which is carried on by means of gold and filver, has all
the advantages and all the inconveniences of any other
equally round-about foreign trade of confumption, and will
replace juft as faft or juft as flow as the capital which is im-
mediately employed in fupporting that produtftive labour. It
feems even to have one advantage oyer any other equally
Tound-about foreign trade. The tranfportation of thofe
inetals from one place to another, on account of their fmall
bulk and great value, is lefs expenfive than that of almoft
any other foreign goods of equal value. Their freight is
much lefs, and their infurance not greater ; and no goods,
'befides, are lefs liable to fuller by the carriage. An equal
quantity of foreign goods, therefore, may frequently be pur-
.chafed with a fmaller quantity of the produce of clomeilic
induftry, by the intervention of gold and filver, than by
that of any other foreign goods- The demand of the coun-
try may frequently, in this manner, be fuppjied more com-
pletely and at a fmaller expence than in any other. Whe-
ther, by the continual exportation of thofe metals, a trade of
this kind is likely to impoverifli the country from which it is
carried on, in another way, I fliail have occafion to examine
at great length hereafterc
Vol, I. B b That
370 THE NATURE AND CAUSES OF
That part of the capital of any country which is em-'
ployed in the carrying trade, is altogether withdrawn from
fupporting the productive labour of that particular country,
to fupport that of fome foreign countries. Though it aiay
replace by every operation two difbincl capitals, yet neither
of them belongs to that particular country. The capital of
the Dutch merchant, vi^hich carries the corn of Poland to
Portugal, and brings back the fruits and wines of Portugal
to Poland, replaces by every fuch operation two capitals3
neither of which had been employed in fupporting the pro-
- du6live labour of Holland ; but one of them in fupporting
that of Poland, and the other that of Portugal, The profits
only return regularly to Holland, and conftitute the whole
addition which this trade necefiarily makes to the annual
produce of the land and labour of that country. When, in-
deed, the carrying trade of any particular country is carried
on with the fliips and failors of that country, that p^irt of
the capital employed in it which pays the freight, is diflri-
buted amxong, and puts into motion, a certain number of
productive labourers of that country. Almoft all nations
that have had any confiderable {hare of the carrying trade
have, in fa£f, carried it on in this manner. The trade itfelf
has probably derived its name from it, the people of fuch
countries being the carriers to other countries. It does not,
however, feem efTentlal to the nature of the trade that it
ftould be lb. A Dutch merchant may, for example, employ
his canital In tranfacftincy the commerce of Poland and Por-
tugal, by carrying part of thefurplus produce of the one fp
the Other, not in Dutch, but in Britifl* bottoms. It may be
prefumed, that he a£f ually does fo upon forne particular oc-
cafions. It is upon this account, however, that the carrying
trade has been fuppofed peculiarly advantageous to fuch a
country as Great Britain, of which the defence and fecurity
depend upon the number of its failors and (hipping. But
the fame capital may employ as many failors and flilpping,
either in the foreign trade of confumption, or even in the
home-trade, when carried on by coafting veffels, as it could
in the carrying trade. The number of failors and fhipping
Vi^hich any particular capital can employ, does not depend
upon the nature of the trade, but partly upon the bulk of
the -goods In proportion to their value, and partly upon the
diftance of the ports between which they are to be carried -,
chiefly upon the former of thofe two circumftances. Tlie
coal-trade from Newcaftje to London, for example, employs
more
THE WEALTH OF NATIONS. 371
inore fliipping than all the carrying trade of England, though
the ports are at no great diftance. To force, therefore, by
extraordinary encouragements, a larger fliare of the capital
of any country into the carrying trade, than what would na-
turally go to it, will not always neccflarily increafe the (hip-
ping of that country.
The capital, therefore, employed in the home-trade of
any country will generally give encouragement and fupport
to a greater quantity of producftive labour in that country,
and increafe the yalue of its annual produce more than an
equal capital employed in the foreign trade of confumption :
and the capital employed in this latter trade has in both thefe
rcfpe6ls a ftill greater advantage over an equal capital em-
ployed in the carrying trade. The riches, and fo far as
power depends upon riches, the power of every country,
niuft always be In proportion to the value of its annual pro-
.-ciuce, tlve fund from wliich all taxes muil ^iltimxately be paid.
But the great objeft of the political oeconomy of every coun-
try, is to encreafe the riches and power of that country. It
ought, therefore, to give no preference nor fuperior encou-,
ragement .to the foreign trad«e of confumption above the
home-trade, nor to the carrying trade above either of the
other two. It ought neither to force nor to allure into either
of thofe two channels, a greater fliare of the capital of the
country than what would naturally flow into them of its own
accord.
Each of thofe different branches of trade, however, is not
.only advantageous, but neceliary and unavoidable, when the
courfe of things, without any conftraint or violence, naturally
introduces it.
V/hjen the produce of any particular hraiich of Induflry
exceeds what the demand of the country requires, the fur-
plus muft be fent abroad, and exchanged for fomething for
which there is a demand at home. Without fuch exporta-
tion, a part of the producftive labour of the country muft
ceafe, and the value of its annual produce diminiOi. The
land and labour of Great Britain produce generally more corn,
woollens, and hard ware, than the demand of the home-
market requires. The furplus par:C of them, therefore, muit
be fent abroad, and exchanged for fomething for which there
i.3 a demand at home. It is only by means of fuch exporta-
B b 2 tion.
372 THE NATURE AND CAUSES OF
tion, that this furplus can acquire a value fufficient to com-
penfatc the labour and expence of producing it. The neigh-
bourhood of the fca coaft, and the banks of all navigable
rivers, are advantageous fituations for indultry, only bccaufe
they facilitate the exportation and exchange of fuch furplus
produce for fomething elfe which is more in demand there.
When the foreign goods which are thus purchafed with
the furplus produce of domefiic induftry exceed the demand
of the home-market, the furplus part of them muft be fent
abroad again, and exchanged for fomething more in de-
mand at home. About ninety- fix thoufand hogfheads of
tobacco are annually purchafed in Virginia and Maryland,
with a part of the furplus produce of Britifli induftry*^
But the demand of Great Britain does not require, per-
haps, more than fourteen thoufand. If the remaining
eighty- two thoufand, therefore, could not be fent abroad
and exchanged for fomething more in demand at home, the
importation of them mull ceafe immediately, and with it the
produ^live labour of all thofe inhabitants of Great Britain,
who are at prefent employed in preparing the goods with
which thefe eighty-two thoufand hogfheads are annually
purchafed. Thofe goods, which are part of the produce of
the land and labour of Great B^ritain, having no market at
home, and being deprived of that which they had abroad,
muit ceafe to be produced. The mod round-about foreign
trade of confumption, therefore, mayj upon fome occa-
fions, be as neceffary for fupporting the productive labour of
the country, and the value of its annual produce, as the
moll direct.
When the capital ftock of any country is increafed to
fuch a degree, that it cannot be all employed in fupplying
the confumption, and fupporting the productive labour of
that particular country, the furplus part of it naturally
difgorges itfelf into the carrying trade, and is employed in
performing the fame offices to other countries. The carry-
ing trade is the natural efFe£l and fymptom of great national
wealth : but it does not feem to be the natural caufe of it.
Thofe ftalefmen who have been difpofed to favour it with
particular encouragements, feem to have miflaken the eife£i
and fymptom for the caufe. Holland, in proportion to the
extent of the land and the number of its inhabitants, by
far the richeft country in Europe^ has accordingly the
greateil
THE WEALTH OF NATIONS. 373
greateft fliare of the carrying trade of Europe. England,
perhaps the fecond richell country of Europe, is Ukewife
fuppofed to have a confiderable fliare of it ; though what
commonly palTes for the carrying trade of England, will fre-
quently, perhaps, be found to be no more than a round-about
foreign trade of confumption. Such are, in a great mea~
fure, the trades which carry the goods of the Eafl and Wcfl:^
Indies, and of America, to different European markets.
Thofe goods are generally purchafed either immediately with
the produce of Britifli induftry, or with fomething elfe which
had been purchafed with that produce, and the final returns
of thofe trades are generally ufed or confumed in Great
Britain. The trade w^hich is carried on in Britilli bottoms
between the different ports of the Mediterranean, and fome
trade of the fame kind carried on by Britifh merchants be-
tv/een the different ports of India, make, perhaps, the prin-
cipal branches of what is properly the carrying trade of
Great Britaino
The extent of the home-trade and of the capital which
can be employed in it, is neceffarily limited by the value of
the furplus produce of all thofe diftant places within the
country which have occafion to exchange their refpedlive pro-
ductions with one another. That of the foreigrn trade of
confumption, by the value of the furplus produce of the^
whole country and of what can be purchafed with it. That
of the carrying trade, by the value of the furplus produce of
all the different countries in the world. Its poffible extent,
therefore, is in a manner infinite in comparifon of that of
the other two, and is capable of abforbing the greateffc
capitals.
The confideration of his own private profit, is the fole
motive which determines the ov/ner of any capital to employ
it either in agriculture, in manu failures, or in fome parti-
cular branch of the wholefale or retail trade. The different
quantities of produftive labour which it may put into motion,
and the different values which it may add to the annual pro-
duce of the land and labour of the fociety, according as it
is employed in one or other of thofe different ways, never
enter into his thoughts. In countries, therefore, where
agriculture is the mofl profitable of all employments, and
farming and improving the mofl dire£l: roads to a fplendid
fortune, the capitals of individuals will naturally be em-
ployed in the manner moil advantageous to the whole focietyo
The
374 THE NATURE AND CAUSES OF, &c.
The profits of agriculture, however, feem to have no fu*
periority over thofe of other employments in any part of
Europe. Proje6lors, indeed, in every corner of it, have
within thefe few years amufed the public with moft magnifi-
cent accounts of the profits to be made by the cultivation and
improvement of land. Without entering into any particular
difcuflion of their calculations^^ a very fimple obfervation may
fatisfy us that the refult of them muft be falfe. We fee
4every day the mod fplendid fortunes that have been acquired
in the courfe of a fingle life by trade and manufactures, fre-
qiiently from a very fmall capital, fometimes from no capital.
A fingle inltance of fuch a fortune acquired by agriculture
in the fame lime, and from fuch a capital^ has not, perhaps,
occurred in Europe during the courfe of the prefent century.
In all the great countries of Europe, however, much good
land ftill remains uncultivated, and the greater part of what
is cultivated, is far from being improved to the degree of
which it is capable. Agriculture, therefore, is almoft every-
where capable of abforbing a much greater capital than has
ever yet been employed in it. What circuraftances in the
policy of Europe have given the trades which are carried on
in towns fo great an advantage over that which is carried on
in the country, that private perfons frequently find it more
for their advantage to employ their capitals in the moft diftant
carrying trades of Afia and America, than in the improve-
ment and cultivation of the moft fertile fields in their own
neighbourhood, I fhall endeavour to explain at full length m
the two following booksv
SgiJgiaSi^'MthJ&'ava.VaUMiligB^
BOOK IIL
the different Progrefs of Opulence of
different Nations,
CHAP. L
Of the natural Progrefs cf Opulence,
X H E great commerce of every civilized fociety, is tliat
carried on between the inhabitants of the tovi^n and thofe of
the country. It confills in the exchange of rude for manu-
faftured produce, either immediately, or by the intervention
of money, or of fome fort of paper which reprefents money.
1 he country fupplies the town with the means of fubfiftence,
and the materials of manufafture. The town repays this
fupply by fending back a part of the manufadlured produce
to the inhabitants of the country. The town, in which there
neither is nor can be any reprodu6lion of fubftances, may
very properly be faid to gain its whole wealth and fubfiflence
from the country. We muffc not, however, upon this ac-
count, imagine that the gain of the town is the lofs of the
country. The gains of both are mutual and reciprocal, and
the divifion of labour is in this, as in all other cafes, advan-.
tageous to all the different perfons employed in the various
occupations into which it is fubdivided. The inhabitants of
the country purchafe of the town a greater quantity of ma-
nufacl:ured goods, with the produce of a much fmaller quan-
tity of their own labour, than they mud have employed had
they attempted to prepare them thcmfelves. The town af-
fords n inarket for the furplus produce of the country, or
what is over and above the maintenance of the cultivators,
and
376 THE NATURE AND CAUSES OF"
and it Is there that the inhabitants of the country exchange it
for fomething elfe which is in demand among them. The
greater the number and revenue of the inhabitants of the
town, the more extenfive is the market which it affords to
thofe of the country ; and the more extenfive that market, it
is always the more advantageous to a great number. The
corn which grows within a mile of the town, fells there for
.the fame price with that which comes from twenty miles
dlftance. But the price of the latter muft generally, not only
pay the expence of raifing and bringing it to market, but af-
ford too the ordinary profits of agriculture to the farmer.
The proprietors and cultivators of the country,, therefore,
which lies in the neighbourhood of the town,. over and above
the ordinary profits of agriculture, gain, in the price of what
they fell, the vi'hole value of the carriage of the like produce
that is brought from more diflant parts, and they fave, be--
fides, the whole value of this carriage in the price of what
they buy. Compare the cultivation of the lands in the
neighbourhood of any confiderable town, with that of thofe
which lie at fome diftance from it, and you will eafily fa-
tisfy yourfelf how miiich the country is benefited by the com-
merce of the town. Among all the abfurd fpeculations that
have been propagated concerning the balance of trade, it ha^-
never been pretended that either the country lofes by its com-
merce with the town, or the town by that v/ith the cauntry
which maintains it^
As fubfiflence is, in the nature of things, prior to con^ie^^
nlency and luxury, fo the induftry which procures the for-
mer, mult necelTarily be prior to that which minifters to the
latter. The cultivation and improvement af the countryj
therefore, which affords fubfiflence, mufl, necefliirily, be
prior to the increafe of the town, which furnifiies only tlie
means of conveniency and luxury. It is the furplus produce
of the country only, or what is over and above the mainte-
nance of the cultivators, that conftitutes- the fubfifcence of
the town, which can therefore increafe only with the increafe
of this furplus produce. The town, indeed, may not always
derive its whole fubfiflence from the country in its neighbour-
hood, or even from the territory to which it belongs, but
from very diflant countries ; and this, tliough it forms no ex-
ception from the general rule, has occafioned confiderable va-
riations m the progrefs of opulence in different ages and
nations.
That
THE WEALTH OF NATIONS. ^']j
That order of things which necefTity imporvjs in general,
though not in every particular country, is, in every particulai*
country, promoted by the natural inclinations of man, It
human inilitutions had never thwarted thofe natural inclina-
tions, the towns could no-where have increafed beyond what
the improvement and cultivation of the territory in which
they were fituated could fupport j till fuch time, at leaft, as
the whole of that territory was complcatly cultivated and im-
proved. Upon equal, or nearly equal profits, mod men wiR
chufe to employ their capitals, rather in the improvement
and cultivation of land, than either in manufa<f{:ures or in fo-
reign trade. The man who employs his capital in land, has
it more under his view and command, and his fortune i$
much Icfs liable to accidents than that of the trader, who is
obliged frequently to commit it, not only to the winds and
the waves, but to the more uncertain elements of human
folly and injuftice, by giving great credits in didant countries
to men, with whofe charatlet and fituation he can feldom be
thoroughly acquainted. The capital of the landlord, on the
contrary, which is fixed in the improvement of his land,
feems to be as well fecured as the nature of human affairs
can admit of. The beauty of the country befides, the
pleafures of a country life, the tranquillity of mind which it
promifes, and wherever the injuftice of human laws does not
dilfurb it, the independency which it really affords, have
charms that more criefs attra6\ every body; and as to culti-
vate the ground was the original deftination of man, fo ni
every ftage of his exiftence he i^jems to retain a predile^lion
for this primitive employment,
WiTROUT the afhilance of Xome artificers, indeed, the
cultivation of land cannot be carried on, but with great in-
conveniency and continual interruption. Smiths, carpenters,
xvheel-wrights, and plough-wrights, mafons, and bricklayers,
tanners, fnoe-makers, and tayiors, are people, whofe fervice
the farmer has frequent occafiou for. Such artilicers too
ftand, occafionally, in need of the affiflance of one another ;
and as their refidence is not, like that of the farmer, neceiTa-
rily tied down to a precife fpot, they naturally fettle in the
neighbourhood of one another and tluis form a fmall town
or village. The butcher, the brewer, and the baker, fooii
Join them, together with many other artificers and retailers,
necefiary or ufeful for fupplying their occafional wants, and
who contribute {till furtlier to augn-ient tlie town. The
inhabitants
37B THE NATURE AISTD CAUSES Ot
inhabitants of the town and thofe of the country are mutually
the fervants of one another. The town is a continual fair or
market, to which the inhabitants of the country refort, in
order to exchange their rude for manufa<fl:ured produce. It
is this commerce which fupplies the inhabitants of the town
both with the materials of their work, and the means of their
fubfillence. The quantity of the finifhed work which they
fell t& the inhabitants of the country, neceflarily regulates the
quantity of the materials and provifions which they buy^
Neither their employment nor fubfifbence, therefore, can
augment, but in proportion to the augmentation of the de-
mand from the country for finifhed work ; and this demand
can augment only in proportion to the extenlion of improve-
ment and cultivation. Had human infbitutions, therefore,
never difturbed the natural coUrfe of things, the pro-
greffive wealth and increafe of the towns would, in
every political fociety, be confequential, and in propor-
tion to the improvement and cultivation of the territory or
country.
In our North American colonies, where uncultivated land
is ft ill to be had upon eafy terms, no manufaifhures for diftant
fale have ever yet been eftabliihed in any of their towns.
Wlien an artificer has acquired a little more (lock than Is ne-
ceflary for carrying on his own bufmefs in fupplying the
neighbouring country, he does not, in North America, at-
tempt to eftablifh with it a manufacture for more diftant
fale, but employs it in the purchafe and Improvement of un-
cultivated land. From artificer he becomes planter, and nei-
ther the large wages nor the eafy fubfiftence which that coun-
try affords to artificers, can bribe him rather to work for other
people than for himfelf. He feels that an artificer is the
fervant of his cuftomers, from whom he derives his
fubfiftence ; but that a planter who cultivates his own land,
awd derives his neceffary fubfiftence from the labour of his
own family, is really a maiter, and independent of all the
world.
In countries, on the contrary, where there Is either no un-
cultivated land, or none that can be had upon eafy terms,
every artificer who has acquired more ftock than he can em-
ploy in the occafionaljobs of the neighbourhood, endeavours
to prepare work for more diftant fale. The fmith erecft s fome
fort of iron, the v/eaver fome fort of linen or woollen manu-
fadorv.
THE WEALTH OF NATIONS. 379
fa£lory. Thofe different manufa6tures come, in procefs of
time, to be gradually fubdivided, and thereby improved and
refined in a great variety ot ways, which may eaiily be con-
ceived, and which it is therefore unneceflary to explain any
further.
In feeking for employment to a capital, manufactures arc,
upon equal or nearly equal profits, naturally preferredto fo-
reign commerce, for the fame reafon that agriculture is na-
turally preferred to manufadlures. As the capital of the
landlord or farmer is more fecure than that of the manufac-
turer, fo the capital of the manufaclurer, being at all times
more within his view and command, is more fecure than that
of the foreign merchant. In every period, indeed, of every
fociety, the furplus part both of the rude and maixufacSlured
produce, or that for which there is no demand at home, muft
be fent abroad in order to be exchanged for fomething for
which there is fome demand at home. But whether the ca-
pital, which carries this furplus produce abroad, be a foreign
or a domeftic one, is of very little importance. If the fociety
has not acquired fufEcient capital both to cultivate all its
lands, and to manufacture in the compleatell manner the
whole of its rude produce, there is even a confiderable advan-
tage that that rude produce fliould be exported by a foreign
capital, in order that the whole (lock of the fociety may be
employed in more ufeful purpofes. The wealth of antient
Egypt, that of China and Indoftan, fufficiently demonflrate
that a nation may attain a very high degree of opulence,
though the greater part of its exportation trade be carried on
by foreigners. The progrefs of our North American and
Weft Indian colonies would have been muchlefs rapid, had
no capital but what belonged to themfelves been employed in
exporting their furplus produce.
According to the natural courfe of tilings, therefore,
the greater part of the capital of every growing fociety is,
lirfl, directed to agriculture, afterwards to manufacflures,
and lafl of all to foreign commerce. This order of things is
fo very natural, that in every fociety that Iiad any territory,
it has always, I believe, been in fome degree obferved. Some
of their lands mufl htlve been cultivated before any confidera-
ble towns could be eftabliflied, and fome fort of coarfe induf-
try of the maiiiifaclurins: kind mult have been carried on in
tliofti
38o THE NATURE AND CAUSES OF
thofe towns, before they could well think of employing
themfelves in foreign commerce.
But though this natural order of things mull have taken
place in fome degree in every fuch fociety, it has, in all the
modern ftates of Europe, been, in many refpefts, entirely
inverted. The foreign commerce of fome of their cities has
introduced all their finer manufa6lures, or fuch as were fit
for diftant fale ; and manufactures and foreign commerce to-
getherj^ave given birth to the principal improvements of
agriculture. The manners and cuftoms which the nature of
their original government introduced, and which remained
after that government was greatly altered, neceflarily forced
them into this unnatural and retrograde order.
CHAP.
THE WEALTH OF NATIONS. 381
CHAP. IL
Of the D'lfcouragement of Agriculture in the antieni State of
Europe after the Fall of the Roman Empire. ^
W HEN the German and Scythian nations over-ran the
weftern provinces of the Roman empire, the conluGons
which followed To great a revolution lafted for feveral cen-
tm-ies. The rapine and violence which the barbarians exer-*,
cifed againft the antient inhabitants, interrupted the com-
merce between the towns and the country. The towns were
deferted, and the country was left uncultivated, and the
weftern provinces of Europe, which had enjoyed a conGder-
able degree of opulence under the Roman empire, funk
into the loweft ftate of poverty and barbarifm. During the
continuance of thofe confufions, the chiefs and principal
leaders of thofe nations, acquired or ufurped to themfelves
the greater part of the lands of thofe countries. A great part
of them was uncultivated j but no part of them, whether
cultivated or uncultivated, was left without a proprietor.
All of them were engrolled^ and the greater part by a iiew
great proprietors^,
This original engrofTrng of uncultivated lands, though
a great, might have been but a tranfitory cviL They might
foon have been divided again, and broke into fmall parcels
either by fuccelTion or by alienation. The law of primoe;e-
niture hindered them from being divided by fucceifion : the
introduction of entails prevented their being broke into fmall
parcels by alienation, ■ "
When land, like moveables, is confidered as the means
only of fubfiftence and enjoyment, the natural law of fuccef-
fion divides it, like them, among all the children of the
family J of all of whom the fubfiftence and enjoyment: may
be fuppofed equally dear to the father. This natural law of
fucceffion accordingly took place among the RomariS; who
made no more diftin^^ion between elder and younger, be-
tween
382 THE NATURE AND CAUSES OF
tween male nnd female, in the inheritance of lands, thai^
we do in the diflribution of moveables. But when land wais
confidcred as the means, not of fubfiftence merely, but of
power and proteclion^ it was thought better that it fliould
defcend undivided to one. In thole diforderly times, every
grand landlord was a fort of petty prince. His tenants were his
iubjedfs. He was their judge, and in fome refpefts their
legi'Ilator in peace, J^nd their leader in war. He made war
a.ccording to his own difcretion, frequently againft his neigh-
bours, and fometimes againft his fovereign. The fecurity of
a landed eftate, therefore, the protection which its owner
could afford to thofe who dwelt on it, depended upon its
greatnefs. To divide it was to ruin it, and to expofe every part
of it to be opprelled and fwallowed up by the incurfions of it5
neighbours. The law of primogeniture, therefore, came to
take place, not immediately, indeed, but in procefs of time,
in the fucceilion of landed eftates, for the fame reafon that
it has generally taken place in that of monarchies, though
not always at their firft inilitution. That the power and con-
lequently the fecurity of the monarchy, may not be weak-
ened by divifion, it niufl defcend entire to one of the children.
To which of them fo important a preference fliali be given,
mull be determined l^y fome general rule, founded not upon
the doubtful diihinftions of perfonai merit, but upon fome
plain and evident difference which can admit of no difpute.
Among the children of the fame family, there can be no
indifputable difference but that of fex, and that of age.
The male fex is univerfally preferred to the female ; and
when all other things are equal, the elder every- where takes
place of the younger. Hence the origin of the right of pri«*
mogeniture, and of Vv'hat is called lineal fucceiTiona
Laws fiequenrly continue in force long after the circum-
fiances, which firfl gave occafion to them., and which could
alone render them rcafbnable, are no more. In the prefent
Hate of Europe, the proprietor of a fingle acre of land is as
perfe<ftjy fecure of hispoileilion as the proprietor of a hundred
^houfand. The right of primogeniture, hov/ever, ft ill conti-
nues to be refpe£i:e,l, and as of all iniiitutions it is the fitteft
to fupport the pride of familv diftin^lions, it is ftill likely to
endure for many centuries. In every other refpe^l, nothing
can be more contrary to the real interefl of a numerous
family, than a right which, in order to enrich one, beggars
sll the reft of the children.
Entails
THE WEALTH OF NATIONS. 383
Entails are the natural confequences of the law of pri-
jnogeniture. They were introduced to prefcrve a certain
lineal fucceflion, of which the law of primogeniture firlt
gave the idea, and to hinder any part of the original eltate
from being carried out of the propofed line either by gift,
or devife, or alienation •, either by the folly, or by the misr
fortune of any of its fucceflive owners. They were altogether
unknown to the Romans. Neither their fubilitutions nor
iideicommilTes bear any refemblance to entails, though fome
French lawyers have thought proper to drefs the modern
inftitution in the language and garb of thofe antient ones.
When great landed eftates were a fort of principalities,
entails might not be unreafonable. Like what are called the
fundamental laws of fome monarchies, they might fre-
quently hinder the fecurity of thoufands from being endan-
gered by the caprice or extravagance of one m.an. But in
the preient (late of Europe, when fmall as well as great
eftates derive their fecurity from the laws of tlieir countrv,
nothing can be more completely abfurd. They are founded
upon the mofl abfurd of all fuppofitions, the fuppofition thai
every fucceflive generation of men h^ve not an equal right
to the earth, and to all that it poffefles ; biU that the pro-
perty of the prefent generation fhould be retrained and
regulated according to the fancy of thofe who died perhaps
jive hundred years ago. Entails, however, are ftill refpe(Sled
through the greater part of Europe, in thofe countries parti-
cularly in which noble birth is a neceflliry qualification for
the enjoyment either of civil or military honours. Entails
are thought neceflary for maintaining this exclufive privilege
of the nobility to the great oflices and honours of. their
country; and that order having ufurped one unjufl advantage
over the reft of their fellow-citizens, left their poverty Ihould
render it ridiculous, it is thought reafonable that they Ihould
have another. The common law of England, indeed, is faid
to abhor perpetuities, and they are accordingly more reftricted
there than in any other European monarchy ; though even
England is not altogether without them. In Scotland more
than one-fifth, perhaps more than one-third part of the whole
lands of the country, are at prefent fuppofed to be under
ftricl entaih
Great trads of uncultivated land were, in tliis manner,
pot only engroflcd by particular families, but the poflibility
■ of
384 THE NATURE AND CASUES OF
of their being divided again was as much as pofllble precluded
for ever. It feldom happens, however, that a great proprie-
tor is a great improver. In the diforderly times which gave
birth to thofe barbarous inilltutions, the great proprietor was
fufliciently employed in defending his own territories, or in
extending his jurifdicTtion and authority over thofe of his
neighbours. He had no lelfure to attend to the cultivation
and improvement of land. When the eftabllihment of law
and order afforded him this lelfure, he often wanted the
inclination, and ahiioft always the rcquifte abilities. If the
€xpence of his houfe and perfon either equalled or exceeded
his revenue, as it did very frequently, he had no flock to
employ in this manner. If he was an oeconomifl, he gene-
rally found it more profitable to employ his annual favings
in new purchafes, than in the improvement of his old eflate.
To improve land with profit, like all other commercial prO"
jedl:s, requires an exaft attention to fmall favings and fmall
gains, of which a m.an born to a great fortune, even though
naturally frugal, is very feldom capable. The fituation of
fuch a perfon naturally difpofes him to attend rather toorna-
ment which pleafes his fancy, than to profit for which he has
fo little occafion. The elegance of his drefs, of his equipages
of his houfe, and houfehold furniture, are obje-£ls whicH
from his infancy he has been accuftomed to have fome
anxiety about. The turn of mind which this habit naturally
forms, folio v/s him when he comes to think of the im-
provement of lando Ke eiTibelliflies perhaps four or five
hundred acres in the neighbourhood of his houfe, at ten
times the expence which the land is Avorth after all his im-
provements j and £nds that if he was to improve his whole
efcate in the fame manner, and he has little tafte for any
other, he would be a bankrupt before he had finifhed the
tenth part of it. There flill remain in both parts of the
united kingdom fome great eflates which have continued
without interruption in the hands of the fame family fince
the timics of feudal anarchy. Comipare the prefent condi-
tion of thofe eflates with the poiTeflions of the fmall proprie-
tors in their neighbourhood, and you will require no other
argument to convince you how unfavourable fuch extenfive
property is to improvement.
If little improvement was to be expelled from fuch great
proprietors, ftill lefs was to be hoped for from thofe who
occupied the land under them. In the anticnt llate of Europe,
the
tHE WEALTH O^ NATIONS. 3^5
the occupiers of land were all tenants at will. They were
all or alnlort: all flaves ; but their ilavery was of a milder kind
than that known among the antient Greeks and Roman?, ot
even in our Well Indian colonieSi They were fuppofcd to
•|>elong more direiftly to the land than to their mailer. They
could, therefore, be fold with it, but not feparately. They
Could marry, provided it was with the confent of their maf-
ter J and he could not afterwards diflolve the marriage by
felling the man and wife to different perfons. If he maimed
or murdered any of them, he was liable to fome penalty,
though generally but to a fmall one. They were riot, how-
ever, capable of acquiring property. Whatever they ac*
quired was acquired to their mailer, and he could take it
from them at pleafure. Whatever cultivation and improve-
ment could be carried on by means of fuch flaves, was pro-
petly carried on by their mafler. It was at his expence.
The (cedf the cattle, and the inflruments of hufbandry were
all his. It was for his benefit. Such flaves could acquire
nothing but their daily maintenance. It was properly the
proprietor himfelf, therefore, that, in this cafe, occupied
his own lands, and cultivated them by his own bondmen.
This fpecies of Ilavery ftill fubfilts in Rufha, Poland, Hun-
gary, Bohemia, Moravia, and other parts of Germany. It
is only in the weflern and fouth-weflern provinces of Eu-
rope, that it has gradually been abolifhed altogether.
But if great improvements are feldom to be expefled
from great proprietors, they are leafl of all to be expelled
when they employ flaves for their v/orkmen. The experience
of all ages and nations, I believe, demonflrates that the
work done by flaves, though it appears to cofl only their
maintenance, is in the end the dearefl of any. A perfon
who can acquire no property, can have no other intereft but
to eat as much, and to labour as little as pofTible. Whatever
work he does beyond what is fulFicIent to purchafe his own
maintenance, can be fqueezed out of him by violence only,
and not by any interefl of his own. In antient Italy, how
much the cultivation of corn degenerated, hov/ unprofitable
it became to the mafter when it fell under the management
of flaves, is remarked by both Pliny and Columella, "in the
time of Ariflotle it had not been much better in antient
Greece. Speaking of the ideal republic defcribed in the laws
of Plato, to maintain five thoufand idle men (the number of
warriors fuppofed neceffary for its defence) together with
Vol. I. C c their
oB6 THE NATURE AND CAUSES OF
D
their women and fervaiits, would require, he fays, a ter-
xitory of boundlefs extent and fertility, like the plains of
Babylon.
The pride of man makes him love to domineer, and no-
thing mortifies him fo much as to be obliged to condefcend to
perfuade his inferiors. Wherever the law allows it, and the
nature of the work can afford it, therefore, he will generally
prefer the fervice of (laves to that of freemen. The planting
of fugar and tobacco can afford the expence of flave-cultiva-
tion. The raifnig of corn, it feems, in the prefent times,
cannot. In the Englifh colonies, of which the principal
produce is corn, the far greater part of the work is done by
freemen. The late refolution of the Quakers in Penfylvania
to fet at liberty alt their negro flaves, may fatisfy lis that therr
number cannot be very great. Had they made any conGder-
able part of their property, fuch a refolution could never have
been agreed to. In our fugar colonies, on the contrary, the
whole ^^ork is done by flaves, and in our tobacco colonies a
very great part of it. The profits of a fugar plantation in any
of our Weft Indian colonies are genei'slly much greater than
thofe of any other cultivation that is known either in Europe
or America : And the profits of a tobacco plantation, though
inferior to thofe of fugar, are fuperior to thofe of corn, ijrs
lias already been obferved. Both can afford the expence of
flave-cultivation, but fugaf can afford it ftill better than to-
bacco. The number of negroes accordingly Is much greater,
-in proportion to that of whites, In our fugar than in our
tobacco colonies*
To the flave cultivators of antlent times, gradually fiicceed-
ed a fpecies of farmers known at prefent in France by the
name of Metayers. They are called in Latin, Coloni Par-
tiarii. They have been fo long in difufe in England that at
prefent I know no Englifli name for them. The proprietor
furnifned them with the feed, cattle, and inftruments of
huPoandry, the whole ftock, in fliort, neceffary for cultivat-
ing the farm. The produce was divided equally between
the proprietor and the farmer, after fetting afide what was
judged neceflhry for keeping up the ftock, wliich was re-
ftored to tlic proprietor when the farmer either quitted, or
was turned out of the farm.
THE WEALTH OF NATIONS. 387
Land occupied by fucli tcnLints is properly cultivated at
the expence of the proprietor, as much as that occupied by
Haves. Tliere is, liowcver,^ one very ellential dilTerence be-
tween them. Such tenants, being freemen, are capable of
acquiring property, and having a certain proportion of the
produce of tl^e land, they have a plain interefl that the vi^hole
produce Ihould be as great as pcffible, in order that their own
proportion may be fo. A flave, on the contrary, who can
acquire nothing but his maintenance, confults his own eafe
by making the land produce as little as poffible over and
above that maintenance. It is probable that it was partly
upon account of this advantage, and partly upon account of
the encroachments w^hich the fovereign, always jealous of the
great lords, gradually encouraged their villains to make upon
their authority, and which feem at lafb to have been fuch as
rendered this fpecies of fervitude altogether inconvenient, that
tenure in villanage gradually wore out through the greater
part of Europe. The time and manner, however, in which
fo important a revolution was brought about. Is one of the
moft obfcure points in modern hiftory. The church of Rome
claims great merit in it ; and it is certain that fo early as the
twelfth century, Alexander IIL publiflrcd a bull for the ge-
neral emancipation of flaves. It feems, however, to have
been rather a pious exhortation, than a law to which exa(fl.
obedience was required from the faithful. Slavery continued
to take place almoU: univerfally for feveral centuries after-
wards, till it was gradually aboIiOied by the joint operation of
the tv,'o intcrells above mentioned, that of the proprietor on
the one hand, and that of the fovereign on the other. A
villain enfranchifed, and'at the fame time allowed to continue
in pofTefTion of the land, having no (lock of his own, could
cultivate it only by means of wliat the landlord advanced to
hiin, and muft, therefore, have been wliat the French call
a Metayer,
It could never, however, be the Interefl even of this laft
fpecies of cultivators to lay out, In the further Improvement
of the land, any part^of the little ftock which they mi^xht
fave from their own (liare of the produce, becaufe the lord,
who laid out nothing, was to get one-half of whatever it pro-
duced. The tithe, which is but a tenth of the produce, is
found to be a very great hindrance to improvement. A tax,
therefore, 'which amounted to one Iialf, mult have been an
cfFedual bar to it. It might be the intereft of a metayer to
C c 2 make
3g8f THE NATURE AND CAUSES OF
make the land produce as much as could be brought out ci
it by means of the Hock furniflied by the proprietor ; but it
could never be his interclt to mix any part of his own with
it. In France, where five parts out of fix of the whole
kingdom are faid to be (till occupied by this fpecies of cul-*
tivators, the pi'oprietors complain that their metayers take
every opportunity of employing the mailers cattle rather in
carriage than in cultivation ; becaufe in the one cafe they get
the whole profits to themftflves, in the other they fhare theni
with their landlord. This fpecies of tenants ftill fubfifts in
fome parts of Scotland* They are called fteel-bow tenants.^
Thofe antient Englifli tenants, who are faid by Chief Baron
Gilbert and Do6lor Blackflone to have been rather bailiffs
of the landlord than farmers properly fo called, were pro^
bably of the fame kind.
To this fpecies of tenancy fucceeded, though by very flow
degrees, farmers properly fo called, who cultivated the land
with their own flock, paying a rent certain to the landlord.
When fuch farmers have a leafe for a term of years, they
may fometimes find it for their intereft to lay out part of
their capital in the further improvement of the farm *, be-
caufe they may fometimes expe<£l to recover it, with a large
profit, before the expiration of the leafe. The pofleflion even
of fuch farmers, however, w^as long extremely precarious,
and ftill is fo in many parts of Europe. Xhey could before
the expiration of their term be legally outed of their leafe, by
a new purchafer •, in England, even by the fictitious adion of
a common recovery. If they were turned out illegally by
the violence of their mafter, the a£lion by which they obtain-
ed redrefs was extremely irriperfeCl. It did not always re-
inftate them in the pofleflion of the land, but gave them da*-
mages which never amounted to the real lofs. Even in Eng-
land, the country perhaps of Europe where the yeomanry
has always been mofl refpe6led, it was not till about the jzfth
of Henry VII. that the a6lion of ejeiEIment was invented, by
which the tenant recovers, not damages only but poflefiion,
and in which his claim is not neccflarily concluded by the uiT--
certain decifion of a fingle aiTize. This a£lion has been found
fo effecftual a remedy that, in the modern pradlice, when the
landlord has occafion to fue for the poflefiion of the land, he
feldom makes ufc of the aiilions which properly belong to
him as landlord, the writ of right or the writ of entry, but
iiies in the name of his tenant, by the writ of ejectment. In
England,
THE WEALTH OF NATIONS. 389
England, therefore, the fecurlty of the tenant is equal to that
of the proprietor. In England bcfides a ieafe for life of forty
ihlUings a year value is a freehold, and entitles the leflee to
vote for a member of parliament ; and as a great part of the
yeomanry have freeholds of this kind, the whole order be-
comes refpeO-able to their landlords on account of the politi-
cal confideration which this gives them. There is, I believe,
nowhere in Europe, except in England, any inftance of the
tenant building upon the land of which he had no Ieafe, and
trufting that the honour of his landlord would take no ad-
vantage of fo important an improvement. Thofe laws and
cufloms fo favourable to the yeomanry, have perhaps contri-
buted more to the prefent grandeur of England than all their
.boafted regulations of coi^imeree taken together.
The law which fecurcs the lono-eft leafes ag-ainft fuccefTors
o o
of every kind is, fo far as I know, peculiar to Great Britain,
it was introduced into Scotland fo early as 1449, by a lav/ of
James II. Its beneficial influence, however, has been
much obllrufled by entails ; the heirs of entail being gene-
rally rcdrained from letting leafes for any long term of years,
frequently for more than one year. A late act of parliament
has, in this refpe(SV, fomewhat flackened their fetters, though
they are flill by much too ftrait. In Scotland, befides, as no
leafehold gives a vote for a member of parliament, the veo-
manry are upon this account lefs refpeciable to their land-
lords than in England.
In other parts of Europe, after it was found convenient to
l^cure tenants both againfl heirs and purchafers, the term of
their fecurity was ftill limited to a very fliort period ; in
f'rance, for example, to nine years from the commencement
of the Ieafe. It has in that country, indeed^ been lately ex-
tended to twenty-feven, a period Hill too (liort to encourage
the tenant to make the moll important improvenients. Tlic
proprietors of land were antiently the legiflators of every part
of Europe. The laws relating to land, therefore, were all
calculated for what they fuppofed the intereft of the propri-
etor. It was for his intereft, they had imagined, that no
Ieafe granted by any of his predeceiTors fliould hinder him
from enjoying, during a lonj:; term of years, the full value of
his land. Avarice and injuftice are always fliort-fighted, anu
they did not hr-ckc how much this ref^ulation muftobftru'.^
improvement,
yjo THE NATURE AND CAUSES OF
iniprovement, and thereby hurt in the long-run the real
intereft of the landlord.
The farmers too, befides paving the rent, were antiently,
it was fuppofed, bound to perform a great number of fervices
to the landlord, which were feldom either fpecificd in the
leale, or regulated by any precife rule, but by the ufe and
want of the manor or barony. Thefe fervices, therefore,
being almoft entirely arbitrary, fubjeft ed the tenant to many
vexations. In Scotland the abolition of all fervices, not pre-
cifely ftipulated in the leafe, has in the courfe of a few
years very much altered for the better the condition of the
yeomanry of that country.
The public fervices to which the yeomanry were bound,
were not lefs arbitrary than the private ones. To make and
maintain the high roads, a fervitude which frill fubfiils, I
believe, every where, though with different degrees of op-
prefhon in different countries, was not the only one. When
the king's troops, when his houfehold or his officers of any
kind palTed through any part of the country, the yeomanry
were bound to provide them with horfes, carriages, and pro-
vifions, at a price regulated by the purveyor. Great Bri-
tain is, I believe, the only monarchy in Europe where the
oppreifion of purveyance has been entirely aboliflied. It
Hill fubfifts in France and Germany.
The public taxes to which they were fubjecl: were as irre-
gular and oppreffive as the fervices. The antient lords,
though extremely unwilling to grant themfelves any pecuni-
ary aid to their fovereign, eafily allowed him to tallage, as
they called it, their tenants, and had not knowledge enough
to forefce hov/ much this muft in the end affecil their own
revenue. The taille, as it ftill fubfifts in France, may ferve
as an example of thofe antient tallages. It is a tax upon the
fuppofed profits of the farmer, which they eilimate by the
ilock that he has upon the farm. It is his intereft, therefore,
to appear to have as little as poffible, and confcquently to
employ as little as poffible in its cultivation, and none in its
iiTiprovement. Should any ftock happen to accumulate in the
hands of a French farmer, the taille is almoft equal to a'pro-
hibition of its ever being em.ployed upon the land. This tax
befides is fuppofed to diflionour whoever is fubjecfl to it, and
to* degrade him below net only the rank of a gentleman, but
that
THE WEALTH OF NATIONS. 391
vliat of a burgher, and whoever rents the lands of another
becomes fubjed to it. No gentleman, nor even any burgher
who has ilock, will fubmit to this degradation. This tax»
therefore, not only hinders the ilock which accumulates upon
tlie land from being employed in its improvement, but drives
awav all other Ilock from it. The ahtient tenths and iif-
teenthsp fo uUial in England in former timeji, fecm, fo far
as they affecied the land, to have been taxes of the fame
nature with the tailie.
"Under all thefe difcouragements, little improvement could
be expetfled from the occupiers of land. That order of peo-
ple, with all the liberty and fccurity which law can give,
mud always improve under great difadvantages. The farmer
compared with the proprietor, is as a merchant who trades
with borrowed money compared with one who trades with
liis own. The (lock of both may improve, but that of
the one, with only equal good condud, muit always improve,
more flbwiy than that of the other, on account of the large
fl'iare of the proiits which is confumed by the intereft of the
loan. The lands cultivated by the farmer mud, in the fame
manner, with only equal good conducl, be improved more
ilowly than thofe cultivated by the proprietor ; on account
of the large Ihare of the produce which is confumed in the
rent, and which, had the farmer been proprietor, he might
have employed in the further Improvement of the land. The
datlon of a farmer be fides is, from the nature of things,
inferior to that of a proprietor. Through the greater part
of Europe the yeomanry are regarded as an inferior rank of
people, even to the better fort of tradefmen and mechanicks,
and in all parts of Europe to the great merchants and mader
manufaclurers. It can leldom happen, therefore, that a man
of any confiderable dock lliould quit the fuperior, in order
to place himfelf in an inferior ilation. Even in the prefent
date of Europe, therefore, little dock is likely to go from
any other profellion to the improvement of land in the way
of farming. INIorc does perhaps in Great Britain than in
any other countrv, though even there the great docks which
are, in fome places, employed in farming, have generally
been acquired by farming, the trade, perhaps, in which of
all others dock is commonly acquired mod dowly. After
fmall proprietors, however, rich and great farmers are, in
every country, the principal improvers. There are more
fucli perhaps in England than in any othci: European mo-
^ . narchv.
392 THE NATURE AND CAUSES OF
narchy. In the republican governments of Jiolbnd and of
Berne in Switzerland, the farmers are faid to be not infe-
rior to thofe of England,
The antient policy of Europe was, over and above all
this, unfavourable to the improvement and cultivation of
land, whether carried on by the proprietor or by the farmer ;
firft, by the general prohibition of the exportation of corn
without a fpecial licence, w^hich feems to have been a very
univerfal regulation ; and fecondly, by the reftraints which
were laid upon the inland commerce, not only of corn but
of almoft every other part of the produce oi the farm, by the
abfurd laws againil engroflers, regrators, and foreftallers,
and by the privileges of fairs and markets. It has already
been obferved in what manner the prohibition of the expor-
tation of corn, together with fome encouragement given to
the importation of foreign corn, obftru£^ed the cultivation of
antient Italy, naturally the mofl fertile country in Europe,
and at that time the feat of the greateft empire in the world.
To what degree fuch reflraints upon the inland commerce
of this commodity, joined to the general prohibition of cx-p*
portation, mufl have difcouraged the cultivation of coun-
tries lefs fertile, and lefs favourably circvimftanced^ it b not
perhaps very eafy to imagine.
CHAT
THE WEALTH OF NATIONS. 393
CHAP. III.
Of the Rife and Progrefs of Cities and Towns^ oficr the Fall
of the Uowan Empire,
X HE inhabitants of cities and towns were after the fall
of the Roman empire, not more favoured than thofe of the
country. They confilted, indeed, of a very different order
of people from the firft inhabitants of the antient republics
of Ghreece and Italy. Thefe lalt were compofed chieilv of
the proprietors of lands, among whom the public territory was
originally divided, and who found it convenient to build their
houfes in the neighbourhood of one another, and to furround
them with a wall, for the fake of common defence. After
the fall of the Roman empire, on the contrary, the proprie-
tors of land feem generally to have lived in fortified caftles
on their own eftates, and in the midil of their own tenants
and dependants. The towns were chiefly inhabited by tradef-
men and mechanics, who feem in thofe days to have been of
fervile, or very nearly of fervile condition. The privileges
which we find granted by antient charters to the inhabitants
of fome of the principal towns in Europe, fufnciently fliew
w^hat they were before thofe grants. The people to whom it
is granted as a privilege, that they might give away their own
daughters in marriage without the confent of their lord, tha;
upon their death their own children, and not their lord, Oiould
fucceed to their goods, and that they might difpofe of their
own effects by will, mull, before thofe grants, have been cither
altogether, or very nearly in the fame (late of villanage v/ith
the occupiers of land in the country.
They feem, indeed, to have been a very poor, mean fet
of people, who ufed to travel about with their goods from
place to place, and from fair to fair, like the hawkers and
pedlars of the prefent times. In all the different countries of
Europe then, in the fame manner as in feveral of the Tartar
governments of Afia at prefent, taxes ufed to be levied upon
the perfons and goods of travellers, when they palled throui^h
certain
394 THE NATUkE AND CAUSES OF
certain manors, when tliCy went over certain bridges, when
they carried about their goods from place to place in a fair,
when they creeled in it a-booth or flail to fell them in. Thefe
diitercnt taxes were known inEngland hythe names of paflage,
pontage, laftage, and ftallage. Sometimes the king, fome-
times a great lord, who had, it feems, upon fome occafions,
authority to do this, would grant to particular traders, to fueh
|iartleularly as lived in their own demefnes, a general exemp^-
tion from fueh taxes. Such traders, though in other refpecSts
of fei>^ile or very nearly of fervile condition, were upon this
account called Free-traders. They in return ufually paid to
their proteclor a fort of annual poll-tax. In thofe days pro-
te61ion*'was feldom granted without a valuable eonfideration^
and this tax might perhaps^ be confidered as compenAition
for what^tlieir patrons might lofe by their exemption from
Cither taxcf^. At fird, both thofe poll-taxes and thofe ex-
^inptions feem to have been altogether perfonal, and to
have atleCted only particular individuals, during either their
lives, or the pleafurt; of theii* protectors. In the very im.per-
fe^ accounts which have been publilhed from Domefday-
book, of feveral of the towns of England, mention is fre-
f|uentlymade, fometimes of the tax which particular burghers
paid, each of them, either to the king, or to fome other
great lord, for this fort of protection ; and fometimes of the
general amount only of all thofe taxes*.
But how fervile foever may have been originally th^:
condition of the inhabitants of the towns, it appears evidently,
that tliey arrived at liberty and independency much earlier
than the occupiers of land in the country. That part of the
king's revenue which rofe from fueh poll-taxes in any parti-
cular town, ufed commonly to be let in farm, during a term
of vears for a rent certain, fometimes to thefneriffof the
country, and fometimes to other perfons. The burghers them-
feives frequently got credit enough to be admitted to farm
the revenues of this fort which arofe out of their own town,
they becoming jointly and feverally anfwerable for the whole
vent f.. To let a farm in this manner was quite agreeable to
the ufual oeeonomy of, I believe, the fovereigus of all thtp
ditTerent countries of Europe ; who ufed frequently to let
whole manors to all the tenants of thofe manors, they l>c»
* See BradyV. liiUorlcal trcatifc of Ciiies and Burrou;j:hs, p. 3, 8^c.
■^ Sc- Madox Firnra Buro-i. p iSjdi'o IIi:1orv of the E^ichcquer. chnp. ic.
^tCi. V. p. 223, fiiil edition,
comincr
THE WEALTH OF NATIONS. 29>
coming jointly and feverally nnfvvcvable for the whole rent;
but in' return being allowed to collecl it in their own way»
:ind to pay it into the king's exehequer by the hands of their
Own bailiff, and being thus altogether freed from the info-
lence of the king's officers ; a circumilance in thofe days
regarded as of the greatell importance.
At firft, the farm of the town was probably let to the
burghers, in the fame manner as it had been to other farmers,
for a term of years only. In procefs of time, however, it
feems to have become the general praftice to grant it to them
in fee, that is for ever, referving a rent certain never after-
wards to be augmented. The payment having thus become
perpetual, the exemptions, in return for which it was made,
naturally became perpetual too. Thofe exemptions, there-
fore, ceafed to be perfonal, and could not afterwards be con-
fidered as belonging to individuals as individuals, but as
burgers of a particular burgh, which, upon this account,
was called a Free-burgh, for the fame reafon that they had
been called Free-burghers or Free-traders.
Along with this grant, the important privileges above
naentioned, that they might give away their own daughter^*
in marriage, that their children ihould fucceed to them, and
that they might difpofe of their own eflerbs by will, were"
generally beftowed upon the burghers of the town to whom
it was given. Whether fuch privileges had before been
ufually granted along with the freedom of trade, to parti-
cular burghers, as individuals, I know not. I reckon it not
improbable that they were, though I cannot produce any
direcfl evidence of it. But however this may have been, the
principal attributes of villjanage and fiavery being thus taken
away from them, they now, at leaft, beame really free iu
our prefent fenfe of the word Freedom.
Nor was this all. They were generally at the fame time
ere(Sled into a commonalty, or corporation, witli the privi-
lege of having magillrates and a town-council of their own,
of making bye-laws for their own government, of building
walls for their own defence, and of reducing all tlieir inha-
bitants under a fort of military difcipline, by obliging them
to watch and ward ; that is, as antiently underilood, to
guard and defend thofe walls againft all attacks and furprifcs
by night as Vv'ell as by day. In England they were generally
exempted
39^ THE NATURE AND CAUSES OF
exempted from fiiit to the hundred and county courts ; and
all fuch pleas as fiiould arife among them, the pleas of the
crown excepted, were left to the decifion of their own ma-
giftrates. In other countries much greater and more exten-
live jurifdictions were frequently granted to them *.
It might, probably, be neceflary to grant to fuch towns
as were admitted to farm their own revenues, fome fort of
compulfive jurifdi<!i^ion to oblige their own citizens to make
payment. In thofe diforderly times it might have been ex-
tremely inconvenient to have left them to feek this fort of
juftice from any other tribunal. But it mufl feem extraor-
dinary that the fovereigns of all the different countries of
Europe, fliould have exchanged in this manner for a rent
certain, never more to be augmented, that branch of their
revenue, which was, perhaps, of all others the mod likely
to be improved by the natural courfe of things, without either
expence or attention of their own : and that they fliould, be-
fides, have in this manner voluntarily erected a fort of inde^
pendent republics in the heart of their own dominions.
In order to underfland this, it mufl be remembered, that
in thofe days the fovereign of perhaps no country in Europe,
was able to prote<ft, through the whole extent of his domrni"
ens, the weaker part of his fubje£ls from the oppreflion of
the great lords. Thofe whom the law could not prote^l^
and who were not ftrong enough to defend themfelves, were
obliged either to have recourfe to the prote6lion of fome
great lord, and in order to obtain it to become either his
flaves or vaiTalsj or to enter into a league of mutual defence
for the common protection of one another. The inhabitants
of cities and burghs, conHdered as fingle individuals, had na
power to defend themfelves : but by entering into a league of
mutual defence with their neighbours, they were capable of
making no contemptible refiftance. The lords defpifed the
burghers, whom they confidered not only as of a different
order, but as a parcel of emancipated flaves, almoft of a dif-
lerent fpecies from themfelves. The wealth of the burghers
never failed to provoke their envy and indignation, and they
plundered them upon every occafion without mercy or re-
morfe. The burghers naturally hated and feared the lords.
* See Madox Firma Burgi ; See alfo Pfeffcl in the remarkable events
under Frederick II, and his fuccelTors of the hoiiTc ©f Suabia.
The
THE WEALTH OF NATIONS. 397
The king hated and feared them too ; but though perhaps he
might defpife, he had no reafon either to hate or fear the
burghers. Mutual intereft, therefore, difpofed them to fup-
port the king, and the king to fupport them againft the
lords. They were the enemies of his enemies, and it was
his intereft to render them as fecure and independent of thofe
enemies as he could. By granting them magillrates of their
own, the privilege of making bye-laws for their own govern--
ment, that of building walls for their own defence, and that
of reducing all their inhabitants under a fort of military dif-
cipline, he gave them all the means of fecurity and indepen-
dency of the barons which it was in his power to beftow.
Without the eftablifliment of fome regular government of
this kind, without fome authority to compel their inhabitants
to z€i according to fome certain plan or fyflem, no volun-
tary league of mutual defence could either have afforded
them any permanent fecurity, or have enabled them to give
the king any confiderable fupport. By granting them the
farm of their town in fee^ he took away from, thofe whorri
he wiilied to have for his friends, and, if one may fay foy
for his allies, nil ground of jealoufy and fufpicion that he
'svas ever afterwards to opprefs them, either by raifmg
the farm rent of their town, or by granting it to fome
other farftier.
The princes who lived upon the word terms with their
barons, feem accordingly to have been the moll liberal iii
grants of this kind to their burghs. King John of England,-
for example, appears to have been a nioft munificent bcne-
fa(5lor to his towns *. Philip the Fif Q: ot France loll all au-
thority over his barons. Towards the end of his reign, his
fori Lewis, known afterwards by the name of Lewis the Fat,r
confulted, according to Father Daniel, with the bifliops of
the royal demeines, concerning the moft proper means of
teftraining the violence of the great lords. Their advice
confifted of two diflerent propofals. One was to ere£l a
new order of jurifdi£lion, by eflablifliing magiftrates and a
town council in every confiderable town of his demefnes.
The other was to form a new militia, by making tlie inhabi-
tants of thofe towns, under the command of their ovv^n ma-
gillrates, march out upon proper occalior.s to the aflillance
t S/e Msidox.
30JJ THE NilTURE AND CAUSES OF
of the king. It is from this period, according to the French'
antiquarians, that we are to date the intticution of the ma-
gillrates and councils of cities in France. It was during the
unprofperous reigns of the princes of the houfe of Suabia that
the greater part of the free towns of Germany received the
firft grants of their privileges, and that the famous Hanfeatic
league firft became formidable *.
Th£ militia of the cities feemsj in thofe times^i not to
have been inferior to that of the country, and as they could
be moi-e readily aflemtled upon any fudden occafion, they
frequently had the advantage in their difputes with the
neighbouring lords. In countries, fuch as Italy and Switzer-
land, in which, on account eithei" of their diitance from the
principal feat of government, of the natural flrength of the
country itfelf, or of fome other reafon, the fovereign came
to lofe the whole of his authority, the cities generally became
independent republics, and conquered all the nobility in
their neighbourhood j obliging them to pull down their
caftles in the country, and to live, like other peaceable inha-
bitants, in the city. This is the Ihort hillory of the repub-
lic of Berne, as well as of feveral other cities in Switzerland.
If you except Venice, for of that city thehiflory is fomewhat
different, it is the hiilory of all the confiderable Italian re-
publics, of which fo great a number arofe and perlfhed, be-
tween the end of the twelfth and the beginning of the fix-
teenth century.
In countries fuch as France or England, where the autho-'
rity of the fovereign, though frequently very low, never was
deilroved altogether, the cities had no opportunity of be-
coming entirely independent. They became, however, fo
confiderable that the fovereign could impofe no tax upon
them, befides the dated farm-rent of the town, without their
own confent. They were, therefore, called upon to fend
deputies to the general affembly of the ftates of the kingdom,
where they might join with the clergy and the barons in
granting, upon urgent occafions, fome extraordinary aid to
the king. Being generally too more favourable to liis power,
their deputies feem, fometimes, to have been employed by
him ai a counter-balance in thofe afTembliec? to the authority
* See PftfTcl.
A of
THE WEALTH OF NATIONS. 39^
of the great lords. Hence the origin of the reprefentation
of burghs in the ftates general of all great monarchies in
Europe,
Order and good goverjiment, and along with them the
liberty and fecurity of individuals, were, in this mannerj
ellabhflied in cities at a time when the oeeupierr, of land in
the country were cxpofed to every fort of violence. Cut
men in this defencelefs (late naturally coiltent themfelves
with their iietefliiry fubfidence ; becaufe to acquire move
might only tempt the injuftice of their oppreilbrs. On the
contrary, when they are fccure of enjoying the fruits of
their indultry, they naturally exert it to better their con-
<lition, and to acquire not only the necefTaries, but the con-
veniencies and elegancies of life. That induPcry, therefore,
which aims at fomething more than ncceflary fubfiftence, was
ellabliflied in cities long before it was coilimoniy pradlifed by
the occupiers of laiid in the country. If in the hands of a
poor cultivator, opprefled with the fervitude of villanage,
fome little (lock fiiould accumulate, lie would naturally con-
ceal it with great care from his mader, to whom it would
otherwife have belonged, and take the fivll: opportunity df
running away to a town. The law was at that time fo in-
dulgent to the inhabitants of tcAvns, and fo d-ehrous of dimi-
nilhing the authority of the lords over thofe of the country,
that if he could conceal himfelf there from tlie purfuit of his
lord for a yearj he was free for ever. ^\'"hatever itockj there-
fore, accumulated in the hands of the induftrious part of the
inhabitants of the country, naturally took refuge in cities, ^3
xht only fi^ncttiaries in which it could be fccure to the perfou
that acquired it.
TiiE inhabitants of a city, it is true^ muft always ulti-
mately derive their fubfiftence, and the whole materials aild
means of tlieir induftry from the country* But thofe of a
city, lituatcd near either the fea-coaft or the banks of a navi-
gable river, are not neceflarily confined to derive them from
the country in tlu'lr neighbourhood. They have a mucli
wider range, and may draw them from the n-jofl remote cor-
ners of the world, either in exch.incre for the manufactured
produce of their own indudry, or by performing the oflice
of carriers between dluaiit coutitrlcs, and cxchauirine the
produce oi one for that of uiic'ther. A city might in this
manner
4oa THE NATURE A*ND CAUSES 0^
manner grow up to great wealth and fplendor, while not
only the country in its neighbourhood, but all thofe to which
it traded, were in poverty aitd wretchednefs. Each of thofe
countries, perhaps, taken fnigly, could afford h but a fmall
part, either of its fubfiftence, or of its employment j but all
of them taken together could afford it both a great fubfiilence
and a great employment. There w°re, however, within the
narrow circle of the commerce of thofe times, fome coun^
tries that were opulent and induflrious* Such was the
Greek empire as long as it fiibfifted^ and that of the Saracens
during the reigns of the AbalKdes. Such too was Egypt till
it was conquered by the Turk;;^ fome part of the coaft of Bar-
bary, and all thofe provinces of Spain which were under the
government of the Moors.
The cities of Italy feem to have been the firfl: in Europe
Irhich were raifed by commerce to any confiderable degree
of opulence* Italy lay in the center of what was at that
time the improved and civilized part of the world. The
cruzades too, though by the great wafte of ftock and de**
ih'Uiflion of inhabitants which they occafioned, they muft
iieceffarily have retarded the progreis of tiie greater part of
Europe, were extremely favourable to that of fome Italian
citiesi The great armies which marched from all parts to
the conquell of the Eloly Land, gave extraordinary encou-
ragement to the fliipping of Venice, Genoa and Pifa, fome-^
times in tranfporting them thither, and always in fupplying
them with provifions. They were the commiffaries, if one
may fay fo, of thofe armies •, and the moft deftrudfive frenzy
that ever befel the European nations, was a fource of opu*
lencc to thofe republics. x
The inhabitants of trading cities, by Importing the im-
proved manufadf ures and expenfive luxuries of richer coun-
tries, afforded fome food to the vanity of the great proprie*
tors, who eagerly purchafed them with great quantities of
the rude produce of their own lands. The commerce of a
great part of Europe iii thofe times accordingly, confifled
chiefly in the exchange of their Own rude, for the manufac-
tured produce of more civilized nations. Thus the wool of
England ufed to be exchanged for the wines of France,
and the fine cloths of Flanders, in the fame manner as the
corn m Poland is at this day exchanged for the wines and
brandies
THE WEALTH OF NATIONS. 401
brandies of France, and for the filks and velvets of France
and Italy.
A TASTE for the Kner and :ir;ore improved manufa£lures,
W'as in tliis manner Introduced by foreign commerce into
countries where no fuch works were carried on. But when
this taite became fo general as to occafion a confiderable de-
mand, the merchants, in order to fave the expence of car-
riage, naturally endeavoured to eftablifli fome manufactures
of the fame kind in their own country. Hence the origin of
the firfl manufacftures for diilant fale that feem to have been
eftablilljd in the weflern provinces of Europe, after the fall
of the Roman empire.
No large country, It muft be obferved, ever did or could
fubfift without fome fort of manufactures being carried on
in it j and when it is faid of asy fuch country that it has na»
manufactures, it muft always be underftood of the finer and
more improved, or of fuch as are fit for diilant fale. In
every large country, both the clothing and houfliold furni-
ture of the far greater part of the people, are the produce
of their own Induftry. This is even more univerfally the
c?-(g in thofe poor countries which are commonly faid to
have no manufactures, than in thofe rich ones that are faid
to abound in them. In the latter, you will generally find,
both in the cloaths and houfhold furniture of the lowell rank
of people, a much greater proportion of foreign productions
than in the former.
Those manufactures which are fit for diilant fale, feem to
have been introduced into different countries in tv/o different
ways.
Sometimes they have been introduced, in the manner
abovementioned, by the violent operation, if one may fay fo,
of the (locks of particular merchants and undertakers, who
eftablifhed tliem in imitation of fome foreign manufactures
of the fame kind. Such manufactures, therefore, are the
offspring of foreign commerce, and fuch feem to have been
the antient manufactures of filks, velvets, and brocades,
which flouriflied in Lucca during the thirteenth century.^
They were baniflied from thence by the tyranny of one of
Machlavel's heroes, Caftruccio Caftracani. In 13 10, nine
Vol. I. Dd hundred
402 THE NATURE AND CAUSES OF
hundred families were driven out of Lucca, of whom thirty-,
one retired to Venice, and offered to introduce there the filk
rjianufaclure *. Their offer was accepted j many privileges
were conferred upon them, and they began the manufacture
with three hundred workmen. Such too feem to have been
the manufactures of fine cloths th.it antiently flouriflied in
FlandcrS: ind which were introduced into England in the be-
ginning of the rc^gn of Elizabeth; avidfuch are the prefent
filk m ; nufaclures c ^ Lyons and Spital-fidds. Manufadures
introduced in this manner are generally employed upon fo-
reign materials, being imitations of foreign manufacTtures.
When the Venetian manufadure was firft eftabliihed, the
materials were all brought from Sicily and the Levant. The
niore anti.?nt manufa(flure of Lucca was likewife carried on
"with foreign materials. The cultivation of mulberry trees,
and the breeding of filk worms, feem not to have been com-
mon in t'le northern parts of Italy before the fixteenth cen-
tury. Thofe arts were not introduced into France till the
reign of Charles IX. The manufactures of Flanders were
parried on chiefly with Spanifh and Englifh wool. Spanifii
Y/ool was the material, not of the hril woollen manufa^ure
of England, but of the firft that was fit for diftant fale,
Mo^e than one half the materials of the Lyons manufacture
is at tliis day foreign filk -, when it was firft eftabliftied, the
whole or very near the whole was fo. No part of the ma-
terials of the Spital-fields manufadlure is ever likely to be the
produce of England. The feat of fuch manufactures, as
they are generally introduced by the fchemeand projeO: of a
few individuals, is fometimes eftabliftied in a maritime city,
and fometimes in an inland town, according as their intereftj
judgment or caprice happen to determine.
At other times manufactures for diftant fale grow up na-
turally, and as it were of their own accord, by the gradual
refinernent of thofe houfiiold and coarfer manufactures which
muft at all times be carried on even in the pooreft and rudeit
countries. Such manufactures are generally employed upon
the materials which the country produces, and they feem fre-
quently to have been firft refined and improved in fuch in-
land countries as were, not indeed at a very great, but at a
confiderable diftance from the fea coaft, and fometimes even
* See Sandi lllorla Civile de Vinezia, Part 3, vol. T. page 247, and 25^.
from
THE WEALTH OF NATIONS. 403
from all water carriage. An inland country naturally fertile
and eafily cultivated, produces a great furplus of provifions
beyond what is necelTary for maintaining the cultivators, and
on account of the expence of land carriage, and inconveni-
ency of river navigation, it may frequently be diilicult to fend
this furplus abroad. Abundance, therefore, renders provi^
fions cheap, and encourages a great number of workmen to
fettle in the neighbourhood, who find that their induftry can
there procure them more of the necelTaries and conveniencies
of life than in other places. They work up the materials of
manufacture which the land produces, and exchange their
finiflied work, or what is the fame thing, the price of it, for
more materials and provifions. Tiiey give a new value to
the furplus part of the rude produce, by faving the expence
of carrying it to the water fide, or to fome diftant market ;
and they furnifli the cultivators with fomething in exchange
for it that is either ufeful or agreeable to them, upon eafier
terms than they could have obtained it before. The cultir
vators get a better price for their furplus produce, and can
purchafe cheaper other conveniencies which they have occa-
fion for. They are thus both encouraged and enabled to in-r
creafe this furplus produce by a further improvement and
better cultivation of the land ; and as the fertility of the land
had given birth to the manufa^ure, fo the progrefs of the
manufafture re-a6ts upon the land, and increafes ilill further
its fertility. The manufatflurers firft fupply the nelgbour-
hood, and afterwards, as their work improves and refines,
more diilant markets. For though neither the rude produce,
nor even the coarfe manufaO:ure, could, without the great-
efl difficulty, fupport the expence of a confiderable land car-
riage, the refined and improved manufafture eafily may. In
a fmall bulk it frequently contains the price of a great quan^
tity of rude produce. A piece of fine cloth, for example,
which weighs only eighty pounds, contains in it, the price,,
not only of eighty pounds M^eight of wool, but fometimes of
feveral thoufand weight of corn, the maintenance of the dif^
ferent working people, and of their immediate employers.
The corn, which could with difiiculty have been carried
abroad in its own fhape, is in this manner virtually exported
in that of the complete manufacture, and may eafily be fent
to the remotefi. corners of the world. In this manner have
grown up naturally, and as it were of their own accord, the
manufactures of Leeds, Halifax, Sheffield, Birmingham, and
— D d 2 Wolverhampton,
404 THE NATURE AND CAUSES OF
Wolverhampton. Such manufaiftures are the offspring o£
agriculture. In the modern hiftory of Europe, their exten-
fion and improvement have generally been pofterior to thofe
which were the offspring of foreign commerce. England was
noted for the manufafture of fine cloths made of Spanifh
wool, more than a century before any of thofe which now
flourifh in the places above mentioned were fit for foreign
fale. The extenfion and improvement of thefe laft could not
take place but in confequence of the extenfion and improve-
ment of agriculture, the lafl and greateft effecfl of foreign
commerce, and of the manufadlures immediately introduced
by it, and which I fhall now proceed to explain.
CHAP.
THE WEALTH OF NATIONS. 405
CHAP. IV.
How the Commerce of the Toivns contributed to the Improve^
merit ef ihe Country.
X H E Increafe and riches of commercial and manufac-
turing towns, contributed to the improvement and cultiva-
tion of the countries to which they belonged, in three differ-
ent ways.
First, by affording a great and ready market for the rude
produce of the country, they gave encouragement to its cul-
tivation and further improvement. This benefit was not
even confined to the countries in which they were lituated,
but extended more or lefs to all thofe with which they had
any dealings. To all of them they afford 'i a aia :, -t'for
fome part either of their rude or manufactured produce, and
confequently gave fome encouragement to the induftry and
improvement of all. Their own country, however, on ac-
count of its neighbourhood, neceffarily derived the ereatefl
benefit from this market. Its rude produce bein^; charged
with lefs carriage, the traders could pay the growers a better
price for it, and yet afford it as cheap to the confumers as
that of more diftant countries.
Secondly, the wealth acquired by the inhabitants of ci-
ties was frequently employed in purchaiing fuch lands as were
to be fold, of which a great part vv'ould frequently be uncul-
tivated. Merchants are commonly ambitious of becoming
country gentlemen, and when they do, they are generally the
. beft of all improvers. A merchant is acciin:omedto employ
his money chiefly in profitable projecfl.s , whereas a mere
country gentleman is accuftomed to employ it chiefly in ex-
pence. The one often fees his money go from him and re-
turn to him again with a profit : the other, wi in once he
parts with it, very feldom experts to fee any inore of it.
Thofe different habits naturally affe(rt their temper and dif-
pofition in every fort of bufiiiefs. A merchant is commonly
a bold \
4^6 THE NATURE AND CAUSES OF
a bold ; a country gentleman, a timid undertaker. The one
is not afraid to lay out at once a large capital upon the im-
provement of his land, when he has a probable profpecfb of
raifing the value of it in proportion to the expence. The
other, if he has any capital, which is not always the cafe,
feldom ventures to employ it in this manner. If he improves
at all, it is commonly not with a capital, but with what he
can fave out of his annual revenue. Whoever has had the
fortune to live in a mercantile town fituated in an unim-
proved country, muft have frequently obferved how much
more fpirited the operations of merchants were in this way,
than thofe of mere country gentlemen. The habits, befides,
of order, ceconomy and attention, to which mercan-
tile bufmefs naturally forms a merchant, render him much
fitter to execute, with profit and fuccefs, any proje(ft of im-
provement.
Thirdly, and laflly, commerce and manufactures gra-
dually introduced order and good government, and with
them, the liberty and fecurity of individuals, among the in-
habitants of the country, who had before lived almofl in a
continual flate of war with their neighbours, and of fervile
dependency upon their fuperiors. This, though it has been
the lead obferved, is by far the moll important of all their
effecls. Mr. Hume is the only writer who, fo far as I know,
has hitherto taken notice of it.
In a country which has neither foreign commerce, nor any
of the finer manufacSlures, a great proprietor, having nothing
for which he can exchange the greater part of the produce of
his lands which is over and above the maintenance of the cul-
tivators, confumes the whole in ruftic hofpitality at home.
If this furplus produce is fuilicient to maintain a hundred or
a thoufand men, he can make ufe of it in no other way than
by maintaining a hundred or a thoufand men. He is at all
times, therefore, furrounded with a multitude of retainers
and dependants, who having no equivalent to give in return
for their maintenance, but being fed entirely by his bounty,
muft obey him, for the fame reafon that foldiers muft obey
the prince who pays them. Before the extenfion of com-
merce and manufaAures in Europe, the hofpitality of the rich
and the great, from the fovereign down to the fmalleft baron,
exceeded every thing which in the prefent times we can eafily
form a notion of. Weftminfter-hall was the dining-room of
William
THE WEALTH OF NATIONS^ 407
William Riifus, and might frequently, perhaps, not be too
large for his company. It was reckoned a piece of magnifi-
cence in Thomas Becket, that he ftrowed the floor of his hall
with clean hay or rufhcs in the feafonj in order that the
knights and fquires, who could not get feats, might not fpoil
their fine cloaths when they ht down on the floor to L*<it their
dinner. The great earl of Warwick is faid to have enter-
tained every day at his different manors, thirty thoufand peo-^
pie ; and though the number here may have been exagge-
rated, it muft, however, have been very great to admit of
fuch exaggeration. A hofpitality nearly of ^he fame ki«d
was exercifed not many years ago in many dirfercnt parts of
the highlands of Scotland. It feems to be common in all na-
tions to whom commerce and manufactures are little known.
I have feen, fays Doftor Pocock, an Arabian chief dine in
the (treers of a town where he had come to fell his cattle, and
invite all paffengcrs, even common beggars, to fit down with
him and partake of his banquet.
The occupiers of land were in every refpeCl as dependent
upon the great proprietor as his retainers. Even fuch of
them as were not in a ftate of villanage, were tenants at will*
who paid a rent in no refpe£l equivalent to the fubfiftence
which the land afforded them. A crown, half a crown, a
fheep, a lamb, was fome years ago in the highlands of Scot-
land a common rent for lands which maintained a family.
In fome places It is fo at this day ; nor will money at prefent
purchafe a greater quantity of commodities there than in
other places. In a country where the furplus produce of a
large eflate muft be confumed upon the eftate itfelf, it will
frequently be more convenient for the proprietor, that part of
it be confumed at a diftance from his own houfe, provided
they who confume it are as dependent upon him as either his
retainers or his menial fervants. He is thereby faved from
the embarraflment of either too large a company or too large
a family. A tenant at will, who pofTefles land fufhcient to
maintain his family for little more than a quit-rent, is as de-
dendent upon the proprietor as any fervant or retainer what-
ever, and m.uft obey him with as little referve. Such a pro-»
prietor, as he feeds his fervants and retainers at his own houfe,
fo he feeds his tenants at their houfes. The fubfiftence of
both is derived from his bounty, and its continuance depends
upon his good pleafure.
4o8 THE NATURE AND CAUSES OF
Upon the authority which the great proprietors necefTarily
had in fuch a ftate of things over their tenants and retainers,
was founded the power of the antient barons. Thev iiccef-
farily became the judges in peace, and the leaders in war, of
all who dwelt upon their eftates. They could maintain order
and execute the law within their refpe(flive demefnes, becaufe
each of them could there turn the whole force of all the inha-
bitants againft the injuftice of any one. No other perfon
had fufficient authority to do this. The king in particular
had not. In thofe antient times he was little more than the
greateft proprietor in his dominions, to whom, for the fake
of common defence againfl their common enemies, the other
great proprietors paid certain. refpeO:s. To have enforced
payment of a fmall debt within the lands of a great proprie-
tor, where all the inhabitants were armed and accuflomed
to ftand by one another, would have cod the king, had he
attempted it by liJs own authority, almofl the fame effort as
to extinguiih a civil war. He was, therefore, obliged to
abandon the adminiftration of juftice through the greater
part of the country, to thofe who were capable of admi-
niftering it ; and for the fame rci.fon to leave the command
of the country militia to thofe wiiom that militia would
obey.
It is a miftake to knaglne that thofe territorial jurlfdlc-
tions took their origin from the feudal law. Not only the
hi^^^heft jurifdi£lions both civil and criminal, but the power
of levying troops, of coining money, and even that of mak-
ing bye-laws for the government of their own people, were
all rights pofiefTed allodially by the great proprietors of land
feveral centuries before even the name of the feudal law was
known in Europe. The authority and jurifdi6lion of the
Saxon lords in Jingland, appear to have been as great before
the conquefl, as that of any of the Norman lords after it.
But the feudal law is not fuppofed to have become the com-
mon law of England till after the conqueft. That the moft ex-
tenfive authority and jurifditlions were poffeffed by the great
lords in France allodially, long before the feudal law was
introduced into that country, is a matter of faft that admits
of no doubt. That authority and thofe jurifdiftions all necef-
farily flowed from the ftate of property zui manners jufl now
defcribed. Without remounting to the remote antiquities of
either the French or Englifli monarchies, we may find in
much
THE WEALTH OF NATIONS. 409
much later times many proofs that fuch efFe£\s mull always
flow from fuch caufes. It is not thirty years ago fmce
Mr.CameronofLochiel, a gentleman of Locliabar in Scotland,
without any legal warrant whatever, n-ot being what was
then called a lord of regality, nor even a tenant in chief, but
a vaflal of the duke of Argyie, and without being fo much
as a juftice of peace, uled, notwithftanding, to exercife the
higheft criminal jurifdiclion over his own people. He is faid
to have done fo withgreat equity, though without any of the
formalities of juftice j and it is not improbable that the ftatc
of that part of the country at that time made it neceil'ary for
him to ailume this authority in order to maintain the public
peace. That gentleman, whofe rent never exceeded five
hundred pounds a year, carried, in 1745, eight hundred of
his own people into the rebellion with him.
The introduftion of the feudal law, fo far from extend-
ing, may be regarded as an attempt to moderate the autho- ^jt
rity of the great allodial lords. It ellabliflied a regular fubor-
dination, accompanied with a long train of fervices and
duties, from the king do-wn to the fmaileft proprietor-
During the minority of the proprietor, the rent, together
with the management of his lands, fell into the hands of his
immediate fuperior, and, confequently, thole of all great
proprietors into the hands of the king who was charged with
the maintenance and education of the pupil, and who, from *
his authority as guardian, was fuppofed to have a right of
difpofmg of him in marriage, provided it was m a manner
not unfuitable to his rank. But though this inilitution neccf-
farily tended to ftrengtlien the authority of tlie king, and to
weaken tliat of the great proprietors, it could not do either
fufficiently for eftabliOiing order and good government among
the inhabitants of the country; bccaut it could not alter
fufficiently that ftate of property and manners from which
the diforders arofe. The authority of government llill con-
tinued to be, as before, too weak in the head and too flrong
in the inferior members, and the exceflive ftrcngth of the
inferior members was the caufe of the weaknefs of the head.
After the inftitution of feudal fubordination, the k'ln^r was
as incapable of refliraining the violence of the great lords as
before. They ftill continued to make war according to their
own difcretion, almoft continually upon one another, and
very frequently upon the king ; and the ooen country
m
4ro TxHE NATURE AND CAUSES OF
ftill continued to be a fcene of violence, rapine, and dif-
order.
But what all the violence of the feudal inflitutions could
never have effe6led, the filent and infenfible operation of
foreign commerce and manufadlures gradually brought about.
Thefe gradually furniflied the great proprietors with fome-
tliing for which they could exchange the whole furplus pro-
duce of their lands, and which they could confume themfelves
without fliaring it either with tenants or retainers. All for
ourfelves, and nothing for other people, feems, in every age
of the world, to have been the vile maxim of the mafters of
mankind. As foon, therefore, as they could find a method
of confuming the whole value of their rents themfelves they
had no difpoiition to fhare them with any other perfons.
For a pair of diamond buckles perhaps, or for fomething as
frivolous and ufelefs, they exchanged the maintenance, or
what is the fame thing, the price of the maintenance of
a thoufand men for a year, and with it the whole weight and
authority which it could give them. The buckles, however^
were to be all their own, and no other human creature was to
have any fliare of them ; whereas in the more antient method
of expence they mud have fhared with at lealt a thoufand
people. With the judges that were to determine the prefer-
ence, this difference was perfe^lly decifive ; and thus, for
the gratification of the mod childifh, the meaneft and the
mod fordid of all vanities, they gradually bartered their
v.-hole power and authority.
In a country where there is no foreign commerce, nor any
of the finer manufactures, a man of ten thoufand a year
cannot well employ his revenue in any other way than in
maintaining perhaps a thoufand families, who are all of them
neceflarily at his command. In the prefent date of Europe,
a man of ten thoufand a year can fpend his whole revenue,
and he generally does fo, without direclly maintaining
tv/enty people, or being able to command more than ten
footmen not worth the commanding. Indirectly, perhaps,
he maintiiins as great or even a greater number of people than
he could have done by the antient method of expence. For
though the quantity of precious produdions for which he ex-
changes his whole revenue be very fmall, the number of
workmen employed in collecting and preparing it, mud
neceflarily
THE WEALTH OF NATIONS. 411
neceflarily have been very great. Its great price generally
arifes from the wages of their labour, and the prolits of all
their immediate employers. By paying that price he indi-
recftly pays all thofe wages and profits, and thus indirecUy
contributes to the maintenance of all the workmen and their
employers. He generally contributes, however, but a very
fmall proportion to that of each, to very few perhaps a
tenth, to many not a hundredth, and to fome not a thou-
fandth, nor even a ten thoufandth part of their whole an-
nual maintenance. Though he contributes, therefore, to
the maintenance of them all, they are all more or icfs in-
dependent of him, becaufe generally they can all be main-
tained without him.
When the great proprietors of land fpend their rents in
maintaining their tenants and retainers, each of them main-
tains entirely all his own tenants and all his own retainers.
But when they fpend them in maintaining tradefmeii and
artificers, they may, all of them taken together, perhaps,
maintain as great, or, on account of the waile which at-
tends ruflic hofpitality, a greater number of people than be-
fore. Each of them, however, taken fingly, contributes
often but a very fmall fliare to the maintenance of any in-
dividual of this greater number. Each tradefman or arti-
ficer derives his fubliitence from the employment, not of
one, but of a hundred or a thoufand different culloraers.
Though in fome meafure obliged to them all, therefore, he
is not abfolutely dependent upon any one of them.
The perfonal expence of the great proprietors having in
this manner gradually increafed, it was impoflible that the
number of their retainers fliould not as graduallv diminilh,
till they were at laft difmiffed altogether. The fame caufe
gradually led them to difmifs the unneceffary part of then-
tenants. Farms were enlarged, and the occupiers of land,
notwithflanding the complaints of depopulation, reduced to
the number neceflary for cultivating it, according to the im-
perfeft ftate of cultivation and improvement in thofe times.
By the removal of the unneceffary mouths, and by exa(fi:ing
irom the farmer the full value of the farm, a greater furplus,
or what is the fame thing, the price of a greater furplus, was
obtained for the proprietor, which the merchants and manu-
fa(fl:urer3 foon furnilhed him with a method of fpending upon
hi^
412 THE NATURE AND CAUSES OF '
his own perfon in the fame manner as he had done the reft.
The fame caufe continuing to operate, he was defirous to
raife his rents above what his lands, in the a(fl:ual ftate of
their improvement, could afford. His tenants could agree
to this upon one condition only, that they fliould be fecured
in their poffefiion, for fuch a term of years as might give
them time to recover with profit whatever they (hould lay
out in the further improvement of the land. The expenfive
vanity of the landlord made him willing to accept of this
condition j and hence the origin of long leafes.
Event a tenant at will, who pays the full value of the
land, is not altogether dependent upon the landlord. The
pecuniary advantages which they receive from one another,
are mutual and equal, and fuch a tenant will expofe neither
his life nor his fortune in the fervie^ of the proprietor.
But if he has a leafe for a long term of years, he is altoge-
ther independent •, and his landlord muft not expe(ft from
him even the mod trilling fervice beyond what is either ex-
prefsly ftipulated in the leafc, or impofed upon him by the
commxon and known law of the country.
The tenants having in this manner become independent,
and the retainers being difmiifed, the great proprietors were
no longer capable of interrupting the regular execution of
juftice, or of difturbing the peace of the country. Having
fold their birth-right, not like Efau for a mefs of pottage in
time of hunger and neceffity, but in the wantonnefs of
ple^ity, for trinkets and baubles, fitter to be the play-things
of children than the ferious purfuits of men, they became
as infignilicant as any fubilantial burgher or tradefman in
a city. A regular government was eflablifl:ied in the coun-
try as well as in the city, nobody having fufhcient power
to diflurb its operations in the one, any more than in the
other.
It does not, perhaps, relate to the prefent fabje(E^, but I
cannot help remarking it, that very old families, fuch as
have poifelTed fome confiderable e ftate from father to fen
for many fucceOlve generations, are very rare in commercial
countries. In countries which have little commerce, on the
contrary, fuch as Wales or the highlands of Scotland, they
are very oommon. The Arabian hillories feem to be all full
or
THE WEALTH OF NATIONS. 413
of genealogies, and there Is a Klftory written by a Tarta^
Khan, which has been tranflated into feveral European lan-
guages, and which contains fcarce any thing elfe ; a proof
that antient famiUes are very common among thofe nations.
In countries where a rich man can fpend his revenue in no
other way than by maintaining as many people as it can
maintain, he is not apt to run out, and his benevolence It
feems is feldom fo violent as to attempt to maintain more
than he can afFord. But where he can fpend the greateft
revenue upon his own perfon, he frequently has no bounds
to his expence, becaufe he frequently has no bounds to his
vanity, or to his afFeftion for his own perfon. In com-
mercial countries, therefore, riches, in fpite of the moft
violent regulations of law to prevent their dillipation, very
feldom remain long in the fame family. Among fimple
nations, on the contrary, they frequently do without any
regulations of law j for among nations of fliepherds, fuch
as the Tartars and Arabs, the confumable nature of
their property neceflarily renders all fuch regulations im-
poflible.
A REVOLUTION of the greateft importance to the pub-
lic happinefs, was in this manner brought about by two dif-
ferent orders of people, who had not the leaft intention to
ferve the public. To gratity the moft chlldifli vanity was
the fole motive of the great proprietors. The merchants and
artificers, much lefs ridiculous, 2.€ted merely from a view to
their own intereft, and in purfuit of their own pedlar prin-
ciple of turning a penny wherever a penny was to be got.
Neither of them had either knowledge or forefight of that
great revolution which the folly of the one, and the induftry
of the other, was gradually bringing about.
It Is thus that through the greater part of Europe the
commerce and manufaftures of cities, inftead of being the
effect, have been the caufe and occafion of the improve-
ment and cultivation of the country.
This order, however, being contrary to the natural courfe
of things, is neceflarily both flow and uncertain. Compare
the flow progrefs of thofe European countries of which the
wealth depends very much upon their commerce and manu-
fa<fluresji with the rapid advances of our North American
colonies,
414 THE NATURE AND CAUSES OF
colanies, of which the wealth is founded altogether in agri-
culture. Through the greater part of Europe, the number
of inhabitants is not fuppofed to double in lefs than five
hundred years. In feveral of our North American colonies,
it is found to double in twenty or five-and-twenty years. In
Europe, the law of primogeniture, and perpetuities of dif-
ferent kinds, prevent the divifion of great eftates, and there-
by hinder the multiplication of fmall proprietors. A fmall
proprietor, however, who knows every part of his little ter-
ritory, who views it with all the afFe(fi:ion which property,
efpecially fmall property, naturally infpires, and who upon
that account takes pleafure not only in cultivating but in
adorning it, is generally of all improvers the moil induflri-
Otts, the moft intelligent, and the moft fuccefsful. The
fame regulations, befides, keep fo much land out of the
market, that there are always more capitals to buy than there
is land to fell, fo that what is fold always fells at a monopoly
price. The rent never pays the intereft of the purchafe-
money, and is befides burdened with repairs and other occa-
fiouaX charges, to which the intereft of money is not liable.
To purchafe land is every where in Europe a moft unprofit-
able employment of a fmall capital. For the fake of the
fuperior fecurity, indeed, a man of moderate circumftances,
when he retires from bufinefs, will fonietlmes chufe to lay
out his little capital in land. A man of profefiion too, whofe
rev^enue is derived from another fource, often loves to fecure
his favings in the fame way. But a young man, who, in-
Hcad of applying to trade or to fome profeihon, fhould em-
ploy a capital of two or three thoufand pounds in the pur-
chafe and cultivation of a fmall piece of land, might indeed
expecl: to live very happily, and very independently, but
muft: bid adieu, for ever, to all hope of either great fortune
or great iiluftration, which by a different employment of his
flock he might have had the fame chance of acquiring with
other people. Such a pcrfon too, though he cannot afpire at
being a proprietor, will often difdain to be a farmer. The
fmall quantity of land, therefore, which is brought to
market, and the high price of what is brought thither, pre-
vents a great number of capitals from being employed in its
cultivation and improvement which would otherwife have
taken that direftion. In North America, on the contrary,
fifty or fixty pounds is often found a fuificient (lock to begin
3 plantation with. The purchafe and improvement of un-
cultivated
THE WEALTH OF NATIONS. 415
cultivated land, Is there the moft profitable employment of
the fmallefl as well as of the greateft capitals, and the molt
dlre(51: road to all the fortune and illuftration which can be
acquired in that country. Such land, indeed, is in North
America to be had almofl for nothing, or at a price much
below the value of the natural produce ; a thmg ImpolTible
in Europe, or, indeed, in any country where all lands have
long been private property. If landed eftates, however,
were divided equally among all the children, upon the death
of any proprietor who left a numerous family, the eftate
would generally be fold. So much land would come to
market, that it could no longer fell at a monopoly price.
The free rent of the land would go nearer to pay the
interell of the purchafe-money, and a fmall capital might
be employed in purchafmg land as profitably as in any other
way.
ENGLy\ND, on account of the natural fertility of the foil,
of the great extent of the fea-coaft in proportion to that of
the whole country, and of the many navigable rivers which
run through it, and afford the conveniency of v/ater car-
riage to fome of the moil inland parts of it, is perhaps as
well fitted by nature as any large country in Europe, to be
the feat of foreign commerce, of manufadlures for diflant
fale, and of all the improvements which thefe can occafion.
From the beginning of the reign of Elizabeth too, the Eng-
llfh legillature has been peculiarly attentive to the Interefls of
commerce and manufatftures, and in reality there is no
country in Europe, Holland itfelf not excepted, of which
the law is, upon the whole, more favourable to this fort of
induftry. Commerce and manufactures have accordingly
been continually advancing during all this period. The cul-
tivation and improvement of the country has, no doubt, been
gradually advancing too: But it feems to have followed
flowly, and at a diflance, the more rapid progrefs pf com-
merce and manufaftures. The greater part of the country
muft probably have been cultivated before the reign of Eliza-
beth 5 and a very great part of it ilill remains uncultivated,
and the cultivation of the far greater part, much inferior to
what it might be. The law of England, however, favours
agriculture not only indireftly by the protedlon of com-
merce, but by feveral dlre6l encouragements. Except in
times of fcarcity, the exportation of corn is not only free,
but
416 THE NATURE AND CAUSES OF
but encouraged by a bounty. In times of moderate plenty,
the importation of foreign corn is loaded with duties that
amount to a prohibition. The importation of live cattle,
except from Ireland, is prohibited at all times, and it is
but of late that it was permitted from thence. Thofe who
cultivate the land, therefore, have a monopoly againfl their
countrymen for the two greateft and molt important articles
of land produce, bread and butcher's meat. Thefe encou-
ragements, though at bottom, perhaps, as I fliall endeavour
to fliow hereafter, altogether illufory, fufficiently demon-
ilrate at lead the good intention of the legiflature to favour
agriculture. But what is of much more importance than
all of them, the yeomanry of England are rendered as fe-
cure, as independent, and as refpeclable as law can make
them. No country, therefore, in which the right of pri-
mogeniture takes place, which pays tithes, and where per-
petuities, though contrary to the fpirit of the law, are ad-
mitted in fome cafes, can give more encouragement to agri-
.^Iture than England* Such, however, notwithftanding, is
the ftate of its cultivation. What would it have been, had
''• th'^ 'iii'^v given no dire£l encouragement to agriculture be-
fidps what arifes indirectly from the progrefs of commerce,
?nd had left the yeomanry in the fame condition as in
moft other countries of Europe ? It is now more than two
hundred years fmce the beginning of the reign of Elizabeth,
a period as long as the courfe of human profperity ufually
endures.
France feems to have had a confiderable fhare of foreign
commerce near a century before England was diftinguiihed
as a commercial country. The marine of France was con-
fiderable, according to the notions of the times, before
the expedition of Charles the Vlllth to Naples. The cul-
tivation and improvement of France, however, is, upon the
whole, inferior to that of England. The law of the coun-
try has never given the fame dire6l encouragement to
agriculture.
The foreign commerce of Spain and Portugal to the other
parts of Europe, though chiefly carried on in foreign fliips,
IS very confiderable. That to their colonies is carried on in
their own, and is much greater, on account of the great
riches and extent of thofe colonies. But it has never intro-
duced
THE WEALTH OF NATIONS. 417
duced any confiderable manufatflures for diftant fale into
either of thofe countries, and the greater part of both dill
remains uncultivated. The foreign commerce of Portugal
is of older (landing thi^rl that of any great country in Europe,
except Italy. ^
Italy is the only great country of Europe which feems to
have been cultivated and improved in every part, by means
of foreign commerce and manufacliures for diftant fale.
Before the invafion of Charles the Vlllth, Italy, according
to Guicciardin, was cultivated not lefs in the moll moun-
tainous and barren parts of the country, than in the plaineft
and moil fertile. The advantageous fituation of the country,
and the great number of independent ftates which at that
time fubfided in it, probably contributed not a little to this
general cultivation. It is not impolFible too, notwithftanding
this general exprefhon of one of the moft judicious and re-*
ferved of modern hiftorians, that Italy was not at that timti
better cultivated than England is at prefent. ^
The capital, however, that is acquired to any conntYflSf
commerce and manufaflures, is all a very precarious and un-
certain poflelTion, till fome part of it has been fecured and
realized in the cultivation and improvement of its lands. A
merchant, it has been fiid very properly, is not necelTarily
the citizen of any particular country. It is in a great mea-
fure indifferent to him from what place he carries on his
trade -, and a very trifling difguft will make him remove his
capital, and together with it all the induftry which it fup-4
ports, from one country to another. No part of it can be
faid to belong to any particular country, till it has been fpread
as it were over the face of that country, either in buildings,
dr in the lafting improvement of lands. No veftige now re-
mains of the great wealth, faid to have been pofleiied by the
greater part of the Hans towns, except in the obfcure hifto-*
ries of the thirteenth and fourteenth Centuries. It is even
uncertain where fome of them were fituated, or to what
towns in Europe the Latin names given to fome of them be-
long. But though the misfortunes of Italy in the end of the
fifteenth and beginning of the fixteenth centuries greatly di-
miniflied the commsrce and manufactures of the cities of
Lombardy and Tufi:any, thofe countries ft ill continue to bj
among the moft populous and beft cultivated in Europe.
Vol. I. E e The
4i8 THE NATURE AND CAUSES, &c.
The civil wars of Flanders, and the Spanilli government
which fucceeded them, chafed away the great commerce of
Antwerp, Ghent, and Bruges. But Flanders flill continues
to be one of the richeft, bell cultivated, and moft populous
provmces of Europe. The ordinary revolutions of war and
government eafily dry up the fources of that wealth which
arifes from commerce only. That which arifes from the
more folid improvements of agriculture, is much more dura-
ble, and cannot be dcftroyed but by thofe more violent con-
vulfions occafioned by the depredations of hoftile and barba-
rous nations continued for a century or two together *, fuch
as thofe that happened for fome time before and after the fall
of the Roman empire in the weftern provinces of Europe.
BOOK
HltmMI..Miru;Mnj!'Mgg3
BOOK IV.
Of Syftems of political Ceconomy.
INTRODUCTION.
JL O L I T I C A L cEconomy, confidered as a branch of
the fcience of a ftatefman or legiilator, propofestvvo diltin6l
objefts ; firft, to provide a plentiful revenue or fubfiftence
for the people, or more properly to enable them to provide
fuch a revenue or fubfiilence for themfelves ; and fecondlv,
to fupply the ilate or commonvi^ealth with a revenue fuflici-
ent for the public fervices. It propofes to enrich both the
people and the fovereign.
The different progrefs of opulence in different ages and
nations, has given occafion to different fyftems of politi-
cal ceeconomy, with regard to enriching the people. The
one may be called the fyftem of commerce, the other that of
agriculture. I (liall endeavour to explain both as fully and
diftin(fl:ly as I can, and fliall begin with the fyftem of com-
merce. It is the modern fyftem, and is beft underllood In
our own country and in our own times.
JE e 3 C H A P.
420 THE NATURE AND CAUSES OF
CHAP. I.
Of the Principle of the commercial y or mercafiiile Syfenu
JL H A T wealth confifls In money, or in gold and filver,
is a popular notion which naturally arifes from the double
function of money, as the inftrument of commerce, and as
the menfure of value. In confequence of its being the inftru^
«ient of commerce, when we have money we can more
readily obtain whatever elfe we have occafion for, than by
means of any other commodity. The great affair, we alwavs
find, IS to get money. When that Is obtained, there is no
difficulty in making any fubiequent purchafe. In confequence
of its being the meafure of value, we eftimate that of all
other commodities by the quantity of money which they will
exchange for. We fay of a rich man that he is worth a great
deal, and of a poor man that he is worth very little money.
A frugal man, or a man eager to be rich, is fald to love
money ; and a carelefs, a generous, or a profufe man, is
faid to be Indifferent about It. To grow rich is to get money ;
and wealth and money. In (hort, are, in common language,
confideredas In every refpecl fynonymous.
A RICH country, in the fame manner as a rich man, Is
iuppofed to be a country abounding in money ; and to heap
up gold and filver in any country is fuppofed to be the rea-
died way to enrich it. For fome time fter the difccvery of
America, the hrft enquiry oi the Spaniards, when they
arrived upon any unknown coaft, ufed to be, if there was
any gold, or filver to be found \w the neighbourhood ? By the
information which they received, they judged whether it was
worth wl.iie to make a fettiement there, or if the country
w^as worth the c';nquering. Piano Carpino, a monk fent
ambaffador from tlie king of France to one of the fons
of the famous Gcngis Khan, fays that the Tartars ufed
frequently to alk him, if there was plenty of fheep and
oxen
THE WEALTH OF NATIONS, 421
oxen in the kingdom of France ? Their enquiry had the fame
objedl with that of the Spaniards. They wanted to know
if the country was rich enough to be wortli the conquering.
Among the Tartars, as among all other nations of Ihepherds,
who are generally ignorant of the ule of money, cattle are
the inftruments of commerce and the meafures of value.
Wealth, therefore, according to them, confided in cattle,
as according to the Spaniards it confilled in gold and filver.
Of the two, the Tartar notion, perhapf^, was the neareft
to the truth,
Mr. Locke remarks a diftinflion between money and other
moveable goods. 4.11 other moveable goods, he fay^, arc c>l fo
confumable a nature tliat the wealth whichconfifls in them tan*
not be much depended on, and a nation which abounds in them
one year may, without any exportation, but merely by their own
waite and extravagance, be m great want of them the next.
Mv>ney, on the contrary, is a Heady friend, which, though it
may travel about from hand to hand, yet if it can be kept from
going out of the country, is not very liable to be waded and
confumed. Gold and fjlver, tlierefore, are, according to
him, t^ e moft folid and fubftantial part of the moveable
wealth of a nation, and to multiply thofe metals ought, he
thinks, upon that account, to be the great obje^ of its poli-
tical ceconomy.
Others admit that if a nation could be feparated from all
the world, it would be of no confequence how much, or
how little money circulated in it. The confumable goods
which were circulated by means of this money, would only
be exchanged for a greater or a fmaller number of pieces ;
but the real wealth or poverty of the country, they allow,
would depend altogether upon the abundance or fcarcity cjf
thofe confumable goods. But it is otherwife, they think,
with countries which have connecl:ion3 with foreign nations,
and which are obliged to carry on foreign wars, and to main-
tain fleets and armies in dillant countries. This, they fay,
cannot be done, but by fending abroad money to pay them
with J and a nation cannot fend much money abroad, unlefs
it has a good deal at home. Every fuch nation, therefore,
muft endeavour in time of peace to accumulate gold aid
filver, that, when occafion requires, it may liave where-
withal to carry on foreign wars.
Is
422 THE NATURE AND CAUSES OF
In confequence of thefe popular notions, all the different
nations of Europe have ftudied, though to little purpofe,
every poflible means of accumulating gold and filver in their
refpecSlive countries. Spain and Portugal, the proprietors of
the principal mines which fupply Europe with thofe metals,
have either prohibited their exportation under the fevereft
penalties, or fubjedfed it to a confiderable duty. The like
prohibition feems antiently to have made a part of the policy
of mod other European nations. It is even to be found,
where we fliould leaft of all expedl to find it, in fome old
Scotch a61:s of parliament, which forbid under heavy penalties
the carrying gold or {\\\ ex forth of the kingdom. The like
policy antiently took place both in France and England.
"When thofe countries became commercial, the merchants
found this prohibition, upon many occafions, extremely
inconvenient. They could frequently buy more advantage-
oully with gold and filver than with any other commodity.,
the foreign goods which they wanted, either to import into
their own, or to carry to fome other foreign country. They
remonftrated, therefore, ngainft this prohibition as hurtful
to trade.
They reprefented, firff, that the exportation of gold and
filver in order to purchafe foreign goods, did not ahvays
diminifli the quantity of thofe metals in the kingdom. That,
on the contrary, it might frequently increafe that quantity ;
Becaufe, if the confumption of foreign goods Vv-as not thereby
increafed in the country, thofe goods might be re-exported
to foreign countries, and being there fold for a large profit,
might bring back much more treafure than was originally
fent out to purchafe them. Mr. Mun compares this opera-
tion of foreign trade to the feed-time and harveft of agricul-
ture. " If we only behold," fays he, '^ the actions of the
*< hufbandman in the feed-time, when he caReth away much
'f good corn into the ground, we fliall account him rather
<' a madman than a hufbandman. But when we confider
^« his labours in the harveif, which is the end of his.endea-
«' vours, we fliall find tlie worth and plentiful increafe of
<* his acftions."
They reprefented, fecondly, that tins prohibition could
not hinder the exportation of gold and filver, which, on
account of the fmallnefs of their bulk in proportion to their
value,
THE WEALTH OF NATIONS. 423
value, could cafily be fmuggled abroad. That this exporta"
tion could only be prevented by a proper attention to, what
they called, the balance of trade. That when the country
exported to a greater value than it imported, a balance
became due to it fro.u foreign nations, which was neceOarily
paid to it in gold aiid filver, and thereby increafed the quan-
tity of thofe metals in the kingdom. But that when it im-
ported to a greater value than it exported, a contrary balance
became due to foreign nations, which vv^as neceiTarily paid to
them in the fame manner, and thereby diminiflied that
quantity. That in this cafe to prohibit the exportation of
thofe metals could not prevent it, but only, by making it
more dangerous, render it more expenfive. That the exchange
was thereby turned more againfl the country which owed the
balance, than it otherwife might have been ; the merchant
who purchafed a bill upon the foreign country being obliged
to pay the banker who fold it, not only for the natural rifk,
trouble and expence of fending the money thither, but for
the extraordinary rifk arifing from the prohibition. But that
the more the exchange v/as againfl any country, the more
the balance of trade became neceflarily againft it ; the money
of that country becoming necefTarily of fo much lefs value,
in comparifon with that of the country to which the balance
was due. That if the exchange between England and Hol-
land, for example, vv^as five per cent, againfl England, it
would require a hundred and five ounces of filver in England
to purchafe a bill for a hundred ounces of filver in Holland :
that a hundred and five ounces of filver in England, there-
fore, would be worth only a hundred ounces of filver in
Holland, and would purchafe only a proportionable quantity
of Dutch goods : but that a hundred ounces of filver in Hof-
land, on the contrary, would be worth a hundred and five
ounces in England, and would purchafe a proportionable
quantity of EngliOi goods : That the EngliOi goods which
were fold to Elolland would be fold fo much cheaper ; and
the Dutch goods which were fold to England, fo much
dearer by the difference of the exchange ; that the one would
draw fo much lefs Dutch money to England, and the other
fo much more Englifh money to Holland, as this diff^^rence
amounted to : and that the balance of trade, therefore
would neceffarily be fo much more againfl En'/land, and
would require a greater balance of gold and filver to be
exported to Holland.
Those
2
424 THE NATURE AND CAUSES OF
Those arguments were partly folld and partly fophiftical.
They were Ibiid fo far as they allerted that the exportation of
gold and fdver in trade might frequently be advantageous to
the country. They were iolid too in ailerting that no prohi-
bition could prevent their exportation, when private people
found any advantage in exporting them. But they were
fophiftical in fuppohng, that either to preferve or to augment
the quantity of thofe metals required more the attention of
governmenr, than to preferve or to augn^ent the quantity of
any other ufeful commodities, which the freedom of trade,
without any fuch attention, never fails to fdpply in the pro-
per quantity. They were fophiftical too, perhaps, in allert-
ing that the high price of exchange neceflarily increafed,
what they called, the unfavourable balance of trade, or occa-
fioned the exportation of a greater quantity of gold and filver.
That high price, indeed, was extremely difadvantageous to
the merchants who had any money to pay in foreign coun-
tries. They paid fo much dearer for the bills which their
bankers granted them upon thofe countries. But though the
rifk arifing from the prohibition might occafion fome extra-
ordinary expence to the bankers, it would not neceflarily
carry any more money out of the country. This expence
wouhl generally be all laid out in the countiy, in fmuggling
the money out of it, and could feldom occafion the exporta-
tion of a fmgle fix-pence beyond tlie precife fum drawn for.
The high price of exchange too would naturally difpofe the
merchants to endeavour to make their exports nearly balance
their imports, in order that they might have this high ex-
change to pay upon as fmall a fum as poflible. The high
p?ice of exchange, befuies, muft neceflarily have operated as
a tax, in raifmg the prjce of foreign goods, and thereby
diminiflilng their confumpiion. It would tend, therefore,
not to increafe, but to diminifti, \vhat they called, the
unfavourable balance of trade and confequently the expor-
tation of gold and filver,
Such as they were, however, thofe arguments convinced
the people to whom they were addrefled. They were ad-
drefi'ed by merchants to parliaments, and to the councils
of princes, to nobles and to country gentlemen ; by
thofe who were fuppofed to underftand trade, to thofe who
were confcious to themfelves that they knew nothing
about the matter. That foreign trade enriched the coun-
try, experience demonftrated to the nobles and country
gentlemen.
THE WEALTH OF NATIONS. 425
gentlemen, as well as to the merchants ; but how, or in
what manner, none of them well knew. The merchants
knew perfecSlly in what manner it enriched themfelves. It
was their bufinefs to know it. But to know in what manner
it enriched the country, was no part of their bufniefs. This
fubje(51: never came into their confideration, but when they
had occafion to apply to their country for fome change in the
laws relating to foreign trade. It then became neccflary to
fay fomething about the beneficial cfFetfts of foreign trade,
and the manner in which thofe effects were obftrucled by the
laws as they then flood. To the judges who were to decide
the bufinefs, it appeared a mod fatisiaftory account of the
matter, when they were told that foreign trade brought mo-
ney into the country, but that the laws in queftioii hindered
ic from bringing fo much as it otherwife would do. Thofe
arguments, therefore, produced the wilh.fd-for effe61:. The
prohibition of exporting gold and fih^er was in Fi;nce and
England confined to the coin of thofe refpetflive coumries.
The exportation of foreign coin and of bullion was made
free. In Holland, and in fome other places, this liberty
was extended even to the coin of the country. The atten-
tion of government M^as turned away from guarding ?.gainft
the exportation of gold and fiiver, to watch over the balance
of trade, as the only caufe which could occafion any augmen-
tation or diminution of thofe metals. From one fruitlefs care
it was turned away to another care much more intricate,
much more embarrafling, and jufl equally fruitlefs. The ti-
tle of Mun's book, England's Treafure in Foreign Trade, be-
came a fundamental maxim in the political oecopomy, not of
England only, but of all other commercial countries. The
inland or home trade, the moft important of all, the trade in
which an equal capital affords the greateft revenue, and cre-
ates the greateft employment to the people of tlie country,
was confidered as fubfidiary only to foreign trade. It neither
brought money into the country, it was faid, nor carried any
out of it The country therefore could never become either
richer or poorer by means of it, except fo far as its prcfpc-
rity or decay might indiredlly influence the ftate of foreigu
trade.
A COUNTRY that has no mines of its own muft undoubtr
edly draw its gold and fiiver from fore ign countries, in the
fame manner as one that has no vineyards of its own m'uft
draw its wines. It does not feem neceffary, however, that
tlie
426 THE NATURE AND CAUSES OF
the attention of government flioiild be more turned towards
the one than towards the other objecft. A country that has -
wherewithal to buy \vine, will always get the wine which it
has occafion for j and a country that has wherewithal to buy
gold and filver, will never be in want of thofe metals. They
are to be bought for a certain price like all other commodi-
ties, and as they are the price of all other commodities,
io all other commodities are the price of thofe metals.
V/e truft with perfetSl fecurity that the freedom of trade,,
without any attention of government, will always fupply us
with the wine which we have occafion for : and we may trufl
with equal fecurity that it will always fupply us with all the
gold and filver which we can afford to purchafe or to employ,
either in circulating our commodities, or in other ufes.
The quantity of every commodity which human induflry
can either purcliafe or produce, naturally regulates itfelf in
every country according to the efFeftual demand, or accord-
ing to the demand of thofe who are willing to pay the whole
rent, labour and profits which mufl be paid in order to pre-
pare and bring it to market. But no commodities regulate
themfclves more eahly or more exaftly according to this ef-
feelual demand than gold and filver ; becaufe on account of
the fmall bulk and great value ot thofe metals, no commodi-
ties can be more eafily tranfported from one place to another,
from the places where they are cheap, to thofe where they
arc dear, from the places where they exceed, to thofe where
thev fall fliort of this effeftual demand. If there was in
England, for example, an effeflual demand for an additional
quantity of gold, a packet-boat could bring from Lilbon, or
from vvdierever elfe it was to be had, fifty tuns of gold, which
could be coined into more than five millions of guineas. But
if there was an efTf:(^'tual demand for grain to the fame value,
to import it would require, at five guineas a tun, a million
of tuns of Snipping, or a tlioufand Ihips of a thoufand tuns
each. The navy of England would not be fufficlent.
^Vhen the quantity of gold and filver imported into any
country exceeds the eireOual demand, no vigihince of go-
vernment can prevent their exportation. All the fanguinary
laws ot Spain and Portugal arc not able to keep their gold and
ijlver at home. The continual miportations from Peru and
Brazil exceed the effecfual demand of thofe countries, and
fink the price of thofe metals there below that in the neigh- '
bouring
THE WEALTH OF NATIONS. 427
bouring countries. If, on the contrary, in any particular
country their quantity fell iliort of the eiFe^lual demand, (o
as to raife their price above that of the neighbouring coun-
tries, the government w^ould have no occafion to take any
pains to import them. . If it were even to take pains to pre-
vent their importation, it would not be able to efrecf uate it.
Thofe metals, when the Spartans had got wherewithal to
purchafe them, broke through all the barriers wliich the
laws of Lycurgus oppofed to their entrance into Lacedemon.
All the fanguinary laws of the cuftoms are not able to pre-
vent the importation of the teas of the Dutch and Gotten-
burgh Ealt India companies ; becaufe fomewhat cheaper than
thofe of the Britifh company. A pound of tea, however, is
about a hundred times the bulk of one of the highcfl prices,
fixteen fliillings, that is commonly paid for it in filver, and
more than two thoufand times the bulk of the fame price in
gold, and confequentlyjufl fo many times more difficult to
fmuggle.
It is partly owing to the eafy tranfportation of gold and
filver from the places where they abound to thofe where they
are wanted, that the price of thofe metals does not flucStuate
continually like that of the greater part of other commodities,
which are hindered by their bulk from fliifting their fituation,
when the market happens to be either over or under- (locked
with them. The price of thofe metals, indeed, is not alto-
gether exempted from variation, but the changes to which it
is liable are generally flow, gradual, and uniform. In Eu-
rope, for example, it is fuppofed, without much foundation,
perhaps, that, during the courfe of the prefent and preceding
century, they have been conftantly, but gradually, finking
in their value, on account of the continual importations from
the Spanifli Weft Indies. But to make any fudden chano;e
in the price of gold and fuver, fo as to raife or lovv-er at
once, fenfibly and remarkably, the money price of all other
commodities, requires fuch a revolution m commerce as
that occafioned by the difcovcry of America.
If, notwithllanding all this, gold and filver fhould at any
time fall fliort in a country which has v/here withal to pur-
chafe tliem, there arc more expedients for fupplying their
place, than that of almoft any other commodity. If the ma-
terials of manufafture are wanted, indufhry mufl ftop. If
proviiions are wanted, the people muft ftarve. But if mo-
ney
428 THE NATURE AND CAUSES OF
ney is wanted, barter will fupply its place, though with a
good deal of inoonveniency. Buying and felling upon credit,
and the different dealers compenfating their credits with one
another, once a month or once a year, will fupply it with
lefs inconveniency. A well regulated paper money will fup-
ply it, not only without any inconveniency, but, in fomc
c.ifes, with fome advantages Upon every account, there-
iore, the attention of government never was fo unneceflarily
employed, as when directed to watch over the prefervatiou
cr increafe of the (Quantity of money in any country.
No complaint, however, is more common than that of a
fcarcity of money. Money, like wine, muft always be fcarce
•^->ih thofe who have neither wherewithal to buy it, nor cre-
dit to borrow it. Thofe who have either, v/ill feldom be in
want either of the money, or of the wine which they have
occafion for. This complaint, however, of the fcarcity of
money, is not always confined to improvident fpendthrifcs.
it is fometimes general through a whole mercantile town,
and the country in its neighbourhood. Overtrading is the
common caufe of it. Sober men, whofe projedis have been
diiproportioned to their capitals, are as likely to have neither
wherewithal to buy money, nor credit to borrow it, as prodi-
gals whofe expence has been difproportioned to their revenue.
Before their proje£fs can be brought to bear, their ftock is
gone, and their credit with it. They run about every where
to borrow m>oney, and every body tells them that they have
none to lend. Even fuch general complaints of the fcarcity
of money do not always prove that the ufual number of gold
and filver pieces are not circulating in the country, but that
many people want thofe pieces who have nothing to give for
them. M-'hen the profits of trade happen to be greater than
ordinary, overtrading becomes a general error both among
erreatand fmall dealers. They do not always fend more m.o-
iiev abroad than ufua), but they buy upon credit both at home
and abroad, c\n unufual quantity of goods, which they fend
to fome diftant market, in hopes that the returns will come
in before the demand for payment. '1 he demand comes be^
fore the returns, and they have nothing at hand, with which
they can either purchafe money, or give folid fecurity
for borrowing. It is not any fcarcity of gold and filver,
but the difficulty which fuch people find in borrowing,
and which their creditors find m getting payment,
that
THE WEALTH OF NATIONS. 429
that occafions the general complaint of the fcarcity of
money.
It would be too ridiculous to go about ferioufly to prove,
that wealth does not confifl: in money, or in gold and iilver j
but in what money purchafes, and is valuable only for pur-
chafnig. Money, no doubt, makes always a part of the na-
tional capital ; but it has already been iliown that it gene-
rally makes but a fmall part, and always the molt unprofit-
able part of it.
It is not becaufe wealth confifts more effentlally in mo-^
ney than in goods, that the merchant finds it generally more
ealy to buy goods with money, than to buy money with goods;
but becauic money is the known and eitabliOied inftrument of
commerce, for which every thing is readily given in exchange,
but which is not always with equal readinefs to be got in ex-
change for every thing. The greater part of goods bcfides
are more perifhable than money, and he may frequently fuf-
tain a much greater lofs by keeping them. When his goods
are upon hand too, he is more liable to fuch demands for
money as he may not be able to anfwer, than when he has
got their price in his tofFers. Over and above all this, his
profit arifes more dire£lly from felling than from buying, and
he is upon all thefe accounts generally much more anxious to
exchange his goods for money, than his money for goods.
But though a particular merchant, with abundance of goods
in his warehoufe, may fometimes be ruined by not beinp- able
to fell them in time, a nation or country is not liable to the
fame accident. The whole capital of a merchant frequently
confifts in perifhable goods deitlned for purchafing money.
But it is but a very fmall part of the annual produce of the
land and labour of a country which can ever be delUned for
purchafing gold and filver from their neighbours. The far
greater part is circulated and confumed among themfelves ;
and even of the furplus which is fcnt abroad, the greater
part is generally deitlned fct the purchafe of other forei',Tn
goods. Though gold and filver, therefore, could not be hud
in exchange for the goods deftined to purchafe them, the na-
tion would not be ruined. It might, indeed, fufier fonic
lofs and inconveniency, and be forced upon fome of tl^.ofc
expedients which are necelfary for fupplying the place of mo-
ney. The annual produce of its land and labour, however,
would be the fame, or very nearly the fame, as ufual, be-
C2il.iC
430 THE NATURE AND CAUSES OF
caufe the fame, or very nearly the fame confumable capital
would be employed In maintaining it. And though goods
do not always draw money fo readily as money draws goods,
in the long-run they draw it more necellarily than even it
draws them. Goods-can ferve many other purpofes befides
purchaflng money, but money can ferve no other purpofe be-
iides purchafmg goods. Money, therefore, necefiarily runs
after goods, but goods do not always or necellarily run after
money. The man who buys, does not always mean to fell
again, but frequently to ufe or to confume ; whereas he who
fells, alv/ays means to buy again. The one may frequently
have done the whole, but the other can never have done more
than the one-half of his bufmefs. It is not for its own fake
that men dellre money, but for the fake of what they can
purchafe with it.
Consumable commodities, it is faid, are foon deftroyed ;
whereas gold and fdver are of a more durable nature, and,
were it not for this continual exportation, might be accumu-
lated for ages together, to the incredible augmentation of the
real wealth of the country. Nothing, therefore, it is pre-
tended, can be more difadvantageous to any country, than
the trade which confifts in the exchange of fuch lading for
fuch perlfliable commodities. We do not, however, reckon
that trade difadvantageous which confifls in the exchange of
the hardware of Ensfland for the wines of France ; and
yet hardware is a very durable commodity, and was it not for
this c*)ntlnual exportation, miight too be accumulated for
ages together, to the incredible augmentation of the pots and
pans of the country. B,ut it readily occurs that the number
of fuch utenlils is in every country necefiarily limited by the
ufc which there is for them ; that it would be abfurd to have
more pots and pans than were neceflary for cooking the
victuals ufually confumed there *, and that if the quantity of
viv-riuals were to increafc, the number of pots and pans would
readily incrcafe along with it, a part of the increafed quan-
tity of vi<5luals being employed in purchafing them, or in
maintaining an additional number of workmen whofe bufi-
ncfs it was to make them. It fnould as readily occur that
the quantity of gold and iilver is in every ccTuntry limited by
the ufe which there is for thofe metals ; that their ufe con-
fills in circulating commodities as coin, and in affording a
fpecles of houOiofd furniture as plate ; that the quantity of
Goin in every country is regulated by the value of the com-
modities
THE WEALTH OF NATIONS. 431
mocUtles which axe to be circulated by it : increafe that va-
Kie, and immediately a part of it will be Tent abroad to piir-
cliafe, wherever it is to be had, the additional quantity of
coin requiiite for circulating them : that the quantity of plate
is regulated by the number and wealth of thofe pri\iate fami-
lies who chufe to indulge themfelves in that fort of magnifi-
cence : increafe the immber and wealth of fuch families, and
a part of this increafed wealth will moil probably be em-
ployed in purchafing, wherever it is to be found, an additi-
onal quantity of plate : that to attempt to increafe the wealtli
of any country, either by introducing or by detaining in ir.
an unneceiTary quantity of gold and filver, is as abfurd as it
would be to attempt to increafe the good cheer of private fa-
milies, by obliging them to keep an unneceflary number of
kitchen utenfds. As the expence of purchafing thofe unne-
ceflary utenfds would dimlnilh inftead of increafmg either
the quantity or goodnefs of the family provifions ; fo the ex-
pence of purchafing an unneceflary quantity of gold and fil-
ver mufl:, in every country, as neceflarily dimlnilh the wealth
which feeds, cloaths, and lodges, which maintains and em-
ploys the people. Gold and fdver, whether in the fliape of
coin or of plate, are utenfils, it mud be remembered, as
much as the furniture of the kitchen. Increafe the ufe for
them, increafe the confumable commodities which are to be
circulated, managed, and prepared by means of them, and
you will infallibly increafe the quantity ; but if you attempt,
by extraordinary means, to increafe the quantity, you will
as infallibly diminifli the ufe and even the quantity too,
which in thofe metals can never be greater than what the
ufe requires. Were they ever to be accumulated beyond
this quantity, their tranfportation is fo eafy, and the lofs
which attends their lying idle and unemployed fo great,
that no law could prevent their being immediately feat out
of the country.
It is not always neceflary to accumulate gold and (ilver, In
order to enable a country to carry on foreign wars, and to
maintain fleets and armies in diflant countries. Fleets and
armies are maintained, not with gold and filver, but with
confumable goods. The nation which, from the an-
nual produce of its domeftic induflry, from the an-
nual revenue arifing out of its lands, labour, and con-
fumable Itock, has v.'herewitha,! to purchafe thoic con-
iuiiiabie
432 THE NATURE AND CAUSES OF
fumable goods in cllftant countries, can maintain foreign
wars there.
A NATION may purcliafe the pay and provifions of an
army in a diftant country three different ways ; by fending
abroad either, firft, fome part of its accumulated gold and
filver ', or, fecondly, fome part of the annual produce of its
manufactures ; or iaft of all, fome part of its annual rude
produce.
The gold and filver which can properly be confidered as
accumulated or (tored up in any country, may be diftinguifli-
ed into three parts ; firlt, the circulating money ; fecondly,
the plate of private families *, and Iaft of all, the money which
may have been coIle(51:ed by many years parfimony, and laid
up in the treafury of the prince.
It can feldom happen that much can be fpared from the
circulating money of the country ; becaufe in that there can
felciom be much redundancy. The value of goods annually
bou-i^ht and fold in any country requires a certain quantity of
money to circulate and diftribute them to their proper con-
fumers, and can give employment to no more. The channel
of circulation necefiarily draws to itfelf a fum fufficient to
fill it, and never admits any more. Something, however, is
generally withdrawn from this channel in the cafe of foreign
war. By the great number of people who are maintained
abroad, fewer are maintained at home. Fewer goods are
circulated there, and lefs money becomes necefiary to circu-
late them. An extraordinary quantity of jraper money, of
fome fort or other too, fuch as exchequer notes, navy bills,
and bank bills in England, is generally ilTued upon fuch oc-
cafions, rtnd bv fuppiying the place of circulating gold and
filver, skives an opportunity of fending a greater quantity of
it abroad. All this, however, could afford but a poor re-
fource for maintaining a foreign war, of great expence and
I'everal years duration.
The melting down the plate of private families, has upon
every oecafion been found a ft ill more iniignlficant one. The
French, in the beginning of the Iaft war, did not derive fo
much advantage from this expedient as to compenfate the
lofs of the fadiion.
The
THE WEALTH OF NATIONS. 433
The accumulated treafures of the prince have, in former
times, afforded a much greater and more lalling refource.
In the prefent times, if you except the king of Prufiia, to
accumulate trenfure fecms to be no part of the policy of
European princes.
The funds which maintained the foreign wars of the pre-
fent century, the molt cxpeniivc perliaps which Iiii'.ury re-
cords, feem to have had little dependency upon the exporta-
tion either of the circulating money, or of the plrde of pri-
vate families, or or the treafure of the prince. The lull
French war coll Great Britain upwards of ninety millions,
including not only the feventy-five millions of new debt that^
was contracfted, but the additional two fiiillings in the pound
land tax, and what was annually borrowed of the fmking
fund. More than two-thirds of this expence were laid out in
dillant countries ; in Germany, Portugal, America, in the
ports of the Mediterranean, in the Eail and Well Indies.
The kings of England h^.d no acciimuiated treafure. "We ne-
ver heard of any extraordinary quantity of plate being melted
down. The circulating gold and filver of the country h.ad
not been fuppofed to exceed eighteen millions. Since the
late recoinage of the gold, howfever, it is believed to have
been a good deal under-rated. Let us fuppofe, therefore,
according to the mod exaggerated computation which I re-
member to have either feen or heard of, that, gold and fil-
ver together, it amounted to thirty millions. Had the war
been carried on, by means of our money, the v/hole of it
muft, even according to this computation, have been fent
out and returned again at leaft twice, in a period of between
fix and feven y^ars. Should this be fuppofed, it would af-
ford the mod decifive argument to demonflrate how unne-
celTary it is for govenimcnt to watch over the prefervation of
money, fince upon this fuppofition the whole money of the
country mufl have gone from it and returned to it again, two
different times in fo ihort a period, without any body's knov/-
ing any thing of the matter. The channel of circulation,
however, never appeared more empty than ufual during any
part of this period. Few people vv'anted money who had
wjierewithal to pay for it. The profits of foreign trade, in-
deed, were greater than ufual during the whole war ; but
efpecially towards the end of it. This occafioned, what it
always occafions, a general overtrading in all the ports of
Vol. I. F f Gre.u
434 THE NATURE AND CAUSES OP'
Great Britain ; and tliis again occafioncd the ufual com- "
plaint of the Icarcity of money, which always follows over-
trading. Many people wanted it, who had neither where-
withal to buy it, nor credit to borrow it •, and becaufe the
debtors found it difBcuIt to borrow, the creditors found it
difficult to get payment. Gold and filver, however, were
generally to be had for their value, by thofe who had that
value to give for them.
The enormous expence of the late war, therefore, muft
have been chiefly defrayed, not by the exportation of gold
and filver, but bv that of Britifh commodities of fome kind
or other. When the government, or thofe who acled under
them, contracted with a merchant for a remittance to fome
foreign country, he would naturally endeavour to pay his fo-
reign correfpondent, upon whom he had granted a bill, by
fending abroad rather commodities than gold and filver. If^
the commodities of Great Britain were not in demand in that
country, he would endeavour to fend them to fome other
country, in which he could purchafe a bill upon that coun-
try. The tranfportation of commodities, when properly
fuited to the market, is always attended with a confiderablc
profit i where afy tliat of gold and filver is fcarce ever attended
with any. When thofe metals are fent abroad in order to
purchafe foreign commodities, the merchant's profit arifes,
not from the purchafe, but from the fale of the returns^
But when they are fent abroad merely to pay a debt, he gets
no returns, and confequently no profit. He naturally, there-
fore, exerts his invention to find out a way of paying his fo-
reign debts, rather by the exportation of commodities than
by that of gold and filver. The great quantity of Britifh
goods exported during the courfe of the late war, without"
bringing back any returns, is accordingly remarked by the
author of T/ie Prefent State of the Nation.
Besides -the three forts of gold and filver above mention-
ed, there is in all great commercial countries a good deal of
bullion alternately imported and exported for the purpofes of
foreign trade. This bullion, as it circulates among different
commercial countries in the fame manner as the national
coin circulates in every particular country, maybe confidered
as the money of the great mercantile republic. The national
coin receives its movement and direction from the commodi-
ties
THE WEALTH OF NATIONS. 435
tics circulated within the precinfts of each particular coun-
try : the money of the mercantile republic, from thole circu-
lated between different countries. Boch are employed in fa-
cilitating exchanges, the one between different individuals of
the fame, the other between thofe of diHorent nations. Part
of this money of the great mercantUe republic may have
been, and probably was, employed in carrying on the late
war. In time of a general war, it is natural to fuppofe that
a movement and dircdlion fliould be imprefTcd upon it, dif-
ferent from what it ufually follows in profound peace j that
it fliould circulate more about the feat of the war, and be
more employed in purchafms, there, and in the neighbouring
countries, the pay and provifions of the different armies.
But whatever part of this money of the mercantile republic.
Great Britain may have annually employed in this manner, it
muft have been annually purchafed, either with Britifh com-
jtiodities, or with fomething elfe that had been purchafed
with them ; which flill bring us back to commodities, to
the annual produce of the land and labour of the country, as
the ultimate refources which enabled us to carry on the war.
It is natural Indeed to fuppofe, that fo great an annual ex-
pence muft have been defrayed from a great annual produce.
The expence of 1761, fqr example, amounted to more than
nineteen millions. No accumulation could have fupported
fo great an annual profufion. There is no annual produce
even of gold and fdver which could have fupported it. The
whole gold and fdver annually imported Into both Spain and
Portugal, according to the bed accounts, does not com-
monly much exceed fix millions fterling, which, in fome
years, would fcarce liave paid four months expence of the
late war.
The commodities mofl proper for being tranfported to
diftant countries, in order to purchafe there, either the pay
and provifions of an army, or fome part of the money of tlie
mercantile republic to be employed in purchaling them, fecm
to be the finer and more improved manufa6lures ; fuch as
contain a great value in a fmall bulk, and can, therefore, be
exported to a great dlilance at little expence. A country
whofe induflry produces a great annual furplus of fuch ma-
nuiacftures, which are ufually exported to foreign countries,
may carry on for many years a very expenfive foreign war,
without either ^exporting any confiderabie quantity of gold
F f 2 and
43^ THE NATURE AND CAUSES OF
and filver, or even having any fuch quantity to export. A
confiderable part of the annual furplus of its manufactures
inuft, indeed, in this cafe be exported, without bringing
back any returns to the country, though it does to the mer-
chant •, the government purchafing of the merchant his bills
upon foreign countries, in order to purchafe there the pay
and provifions of an army. Some part of this furplus, how-
ever, may ftill continue to bring back a return. The manu-
facturers, during the war, will have a double demand upon
them, and be called upon, firft, to work up goods to be
fent abroad, for paying the bills drawn upon foreign coun-
tries for the pay and provifions of the army ; and, fecond-
ly, to v/ork up fuch as are neceflary for purchafing the com-
mon returns that had ufually been confumed in the coun-
try. In the midfl of the moft deftru6live foreign war,
therefore, the greater part of manufactures may frequently
fiourifii greatly ; and, on the contrary, they may decline on
the return of the peace. They may flourifli amidft the
ruin of their country, and begin to decay upon the return
of its profperity. The different ftate of many different
branches of the Britiih manufactures during the late war,
and for fome time after the peace, may ferve as an illuflra-
tion of what has been juil now faid.
No foreign war of great expence or duration could conve-
niently be carried on by the exportation of the rude produce
of the foil. The expence of fending fuch a quantity of it to
a foreign country as might purchafe the pay and provifions
of an army, would be too great. Few countries too produce
much more rude produce than what is fufficient for the fub-
fiftence of their own inhabitants. To fend abroad any great
quantity of It, therefore, would be to fend abroad a part of
the neceflary fubfiftence of the people. It is otherwife with
the exportation of manufactures. The maintenance of the
people employed in them is kept at home, and only the fur-
plus part of their work is exported. Mr. Hume frequently
takes notice of the inability of the ancient kings of England
to carry on, without interruption, any foreign war of long
duration. The Enghili, in thofe days, had nothing where-
v/ithal to purchafe the pay and provifions of their armies in
foreign countries, but either the rude produce of the foil, of
which no confiderable part could be fpared from the home
confumption, or a h\v manfuCtures oi the coarfeft kind, of
whlcli, as well as of the rude produce, the tranfportation was
too
THE WEALTH OF NATIONS. 437
too expenfive. This inability did not arife from the want of
money, but of the finer and more improved manufaftures.
Buying and felling M^as tranfa6led by means of nioney in
England then, as well as now. The quantity of circulating
money mud have borne the fiime proportion to the number
and value of purchafes and fales ufually tranfacled at that
time, which it does to thofe tranfa<fled at prefent •, or rather
it muft have borne a greater proportion becaufe there was
then no paper, which now occupies a great part of the em-
ployment of gold and filver. Among nations to whom com-
merce and manufactures are little known, the fovereign,
upon extraordinary occafions, can feldom draw any confider-
able aid from his fubjecfls, for reafons which fhall be explain-
ed hereafter. It is in fuch countries, therefore, that he ge-
nerally endeavours to accumulate a treafure, as the only re-
fource againft fuch emergencies. Independent of this necef-
fity, he is in fuch a fituation naturally difpofed to the parfi-
mony requifite for accumulation. In that fimple ftate, the
expence even of a fovereign is not direfted by the vanity
which delights in the gaudy finery of a court, but is employ-
ed in bounty to his tenants, and hofpitalicy to his retainers.
But bounty and hofpitality very feldom lead to extravagance ;
though vanity almoil always does. Every Tartar chief, ac-
cordingly, has a treafure. The treafures of Mazepa, chief
of the Coflacks in the Ukraine, the famous ally of
Charles XII. are faid to have been very great. Tlie French
kings of the Merovingian race had all treafures. When they
divided their kingdom among their different children, they
divided their treafure too. The Saxon princes, and the firlt
kings after the conqueft, feem iikev/ife to have accumulated
treafures. The firft exploit of every new reign was com-
monly to feize the treafure of the preceding king, as the moft
eilentlal meafure for fecuring the fucceflion. The foverelgns
of improved and commercial countries are not under the
fame neceflity of accumulating treafures, becaufe they can
generally draw from their fubje<£ls extraordinary aids upon
extraordinary occafiors. They are likewife lefs difpofed to
do fo. They naturally, perhaps necefiarily, follow the mode
of the times, and their expence comes to be regulated by the
fame extravagant vanity which direfts that of all the other
^reat proprietors in their dominions. The infignificant
pageantry of their court becomes every day more brilliant,
and the expence of it not only prevents accumulation, but
frequently encroaches upon the funds deftined for more
necefiary
438 THE NATURE AND CAUSES OF
neceffary expences. "What Dercyllidas fald of the court of
Perfia, may be applied to that of ieveral European princes,
that he faw there much fplendor but little ftrength, and
many fervants but few foldiers.
The importation of gold and filver is not the principal,
much lefs the fole benefit which a nation derives from its fo-
reign trade. Between whatever places foreign trade is car-
ried on, they all of them derive two diflinft benefits from it.
It carries out that furplus part of the produce of their land
and labour for which there is no demand among them, and
brings back in return for it fomething eife for which there is
a demand. It gives a value to their fuperfluiticc, by ex-
changing them for fomething elfe, which may fatisfy a part
of their wants, and increafe their enjoyments. By means of
it, the narrownefs of the home market does not hinder the
divifion of labour in any particular branch of art or manufac-
ture from being carried to the higheft perfedion. By open--
ing a more extenfive market for whatever part of the produce
of their labour may exceed the home confumption, it en-
courages them to improve its produ6live powers, and to aug-
ment its annual produce to the utmoft, and thereby to in-
creafe the real revenue and wealth of the foclety. Thefe
great and important fervices foreign trade is continually oc-
cupied in performing, to all the different countries between
which it is carried on. They all derive great benefit from
it, thou2;h that in which the merchant refides generally de-
rives the greateit, as he is generally more employed in fup-
plying the wants, and carrying out the fuperfluities of his
own, than of any other particular country. To import the
gold and filver which may be wanted, into the countries
which have no mines, is, no doubt, a part of the bufinefs
of foreign commerce. It is, however, a mofl infignificant
part of it. A country which carried on foreign trade merely
Upon this account, could fcarce have occafion to freight ^
fhip in a century. ^
It is not by the importation of gold and filver, that the
difcovery of America has enriched Europe. By the abund-
ance of the American mines, thofe metals have become
cheaper. A fervice of plate can now be purchafed for about
a third part of the corn, or a third part of the labour, which
it would have coft in the fifteenth century. With the fame
annual expence of labour and commodities, Europe can an-
nually
THE WEALTH OF NATIONS. 439
nually purchafe about three times the quantity of plate which
it could have purchafed at that time. ■ But when a commo-
dity comes to be fold for a third part of what had been its
ufual price, not only thofe who purchafed it before can pur-
chafe three times their former quantity, but it is brought
down to the level of a much greater number of purchafers ;
perhaps to more than ten, perhaps to more than twenty
times the former number. So that there may be in Europe
at prefent not only more than three times, but more than
twenty or thirty times the quantity of plate which would
have been in it, even in its prefent ilate of improvement, had
the difcovery of the American mines never been made. So
far Europe has, no doubt, gained a real conveniency, though
furely a very trifling one. The cheapnefs of gold and filver
renders thofe metals rather lefs fit for the purpofes of money
than they were before. In order to make the fame pur-
chafes, we muft load ourfelves with a greater quantity of
them, and carry about a {hilling in our pocket where a groat
would have done before. It is difficult to f^xy which is moft
trifling, this inconveniency, or the oppofite conveniency.
Neither the one nor the other could have made any very et-
fential change in the ftate of Europe. The difcovery of
America, however, certainly made a moft eflential one. :^y
opening a new and inexhauftible market to all^ the commoul-
ties of Europe, it gave occafion to new divifions of labour
and improvements of art, .which, in the narrow circle of
the ancient commerce, could never have taken place for
want of a market to take off the greater part of their pro-
duce. The produftive powers of labour were improved,
and its produce increafed in all the different countries of
Europe, and together with it the real revenue and wealth
of the inhabitants. The commodities of Europe were al-
moft all new to America, and many of thofe of America
were new to Europe. A new fett of exchanges, therefore,
began to take place which had never been thought of be-
fore, and which fliould naturally have proved as advan-
tageous to the new, as it certainly did to the old continent.
The favage injuftice of the Europeans rendered an event,
which ought to have been beneficial to ?.ll, ruinous and
deftrudive to feveral of thofe unfortunate countries.
The difcovery of a paffage to the Eaft Indies, by the
Cape of Good Hope, which happened much about the fame
^ tirne.
440 THE NATURE AND CAUSES OF
time, opened, perhaps, a flill more extenfive range to fo-
reign commerce than even that of America, notwithftanding
the greater diitance. There were but two nations in Ame-
rica, in any refpe£t fuperior to favages, and thefe were de-
ftroycd ahiioft as foon as difcovered. The reft were mere
favagcp But the empires of China, Indollan, Japan, as well
as feveral others in the Eaft Indies, without having richer
mines of gold or filver, were in every other refpeO; much
richer, better cultivated, and more advanced in all arts and
manufaftures than either Mexico or Peru, even though we
fliould credit, what plainly deferves no credit, the exagge-
rated accounts of the Spanifh writers concerning the antient
flate of thofe empires. But rich and civilized nations can
always exchange to a much greater value with one another,
than with favages and barbarians. Europe, however, has
hitherto derived much lefs advantage from its commerce with
the Eail Indies, than from that with. America. The Portu-
guefe monopolized the Eail India trade to themfeives for
about a century, and it was only indiredlly and through them,
that the other nations of Europe could either fend out or
receive any goods from that country. When the Dutch, in
the beginning of the laft century, began to encroach upoii
them, they vefted their whole Eaft India commerce in an
Cxclufive company. The Englifli, French, Swedes, and
Danes, have all followed their example, fo that no great
nation in Europe has ever yet had the benefit of a free com-
merce to the Eaft Indies. No other reafon need be afiigned
why it has never been fo advantageous as the trade to Ame-
rica, which, between almoft every nation of Europe and its
own colonies, is free to all its fubje6ts. The cxclufive privi-
leges of thofe Eaft India companies, their great riches, the
great favour and prote<flion which thefe have procured them
from their refpeftive governments, have excited much envy
againft them. This envy has frequently reprefented their
trade as altogether pernicious, on account of the great quan-
tities of fiiver, which it eyery year exports from tlie countries
from which it is carried on. The parties concerned have
replied, that their trade, by this continual exportation of
filver, might, indeed, tend to impoverifh Europe in general,
but not the particular country from which it was carried on ;
becaufe, by the exportation of a part of the returns to other
European countries, it annually brought home a much greater
quantity of that metal than it carried out. Both the objec-
tion
THE WEALTH OF NATIONS. 441
tion and the reply are founded in the popular notion which
I have been juit now examining. It is, therefore, unneceffaiy
to fay any thing further about either. By the annual expor-
tation of filver to the Eait Indies, phite is probably fomewhat
dearer in Europe than it otherwife might have been ; and
coined filver probably purcliafes a larger quantity both of
.labour and commodities. The former of thefe two efFeO:3 is
a very fmall lofs, t])e latter a very fmail advantage; both too
infignificant to deferve any part of the public attention. The
trade to the Eaft Indies, by opening a market to the commo-
dities of Europe, or what comes nearly to the fame thing,
to the gold and filver which is purchafed with thofe commo-
dities, mull neceffarily tend to increafe the annual produvftion
of European commodities, and confequently the real wealth
and revenue of Europe. That it has hitherto increafed them
fo little, is probably owing to the reilraints which it every
where labours under.
I THOUGHT- it necefTary, though at the hazard of being
tedious, to examine at full length this popular notion that
wealth confills in money, or in gold and filver. Money in
common language, as I have already obferved, frequently
fignifies wealth ; and this ambiguity of exprefuon has ren-
dered this popular notion fo familiar to us, that even they,
who are convinced of its abfurdity, are very apt to forget
their own principles, and in the courfe of their reafonings to
take it for granted as a certain and undeniable truth. Some
of the beft Englifh writers upon commerce fet out with ob-
ferving, that the wealth o£ a country confifts, not in its s^old
and- filver only, but in its lands, houfes, and confumable
goods of all different kinds. In the courfe of their reafon-
ings, however, the lands, houfes, and confumable goods feem
to flip out of their memory, and the (train of their argument
frequently fuppofes that all wealth confifts in gold and nlver,
and that to multiply thofe metals is the great objeft of na-
tional indultry and commerce.
The two principles being eflablifhed, however, that wealth
confifted in gold and filver, and that thofe metals could be
brought into a country which had no mines only by the ba-
lance of trade, or by exporting to a greater value than it
imported ; it neceflarily became the great obje(ft of political
oeconomy to diminifli as much as ppffible the importation of
foreign goods for home-confumption, and to increafe ar, much
as poffible the exportation of the produce of domcfllc in-
duftry.
442 THE NATURE AND CAUSES OF
duftry. Its two great engines for enriching the country,
therefore, were reftraints upon importation, and encourage-
ments to exportation.
The reftraiiits upon importation were of two kinds.
First, Reftramts upon the importation of fuch foreign
goods for home-confumption as could be produced at home,
from whatever country they were imported.
Secondly, Reftraints upon the importation of goods of
almofl all kmds from thofe particular countries with which
the balance of trade was fuppofed to be difadvantageous.
Those different reftraints confifted fometimes in high du-
ties, and fometimes in abfolute prohibitions.
Exportation was encouraged fometimes by drawbacks,
fometimes by bounties, fometimes by advantageous treaties of
commerce with foreign ftates, and fometimes by the efta-
bhftiment of colonies in diftant countries.
Drawbacks were given upon two different occafions.
When the home-manufaftures were fubjecSl to any duty or
excife, either the whole or a part of it was frequently drawn
back upon their exportation *, and when foreign goods liable
to a duty were imported in order to be exported again, either
the whole or a part of this duty was fometimes given back
upon fuch exportation.
Bounties were given for the encouragement either of
fome beginning manufaclures, or of fuch forts of induftry
of other kinds as were fuppofed to deferve particular favour.
By advantageous treaties of commerce, particular privi-i
leges were procured in fome foreign flate for the goods and
merchants of die country, beyond what were granted to
thofe of other countries. ,
By the eftabllfhmcnt of colonies in diftant countries, not
only particular privileges, but a monopoly was frequently
procured for the goods and merchants of the country which
eitablifhed them.
The
THE WEALTH OF NATIONS. 443
The two forts of reflralnts upon importation above-
mentioned, together with thefe four encouragements to ex-
portation, conftitute the fix principal means by which the
commercial fyflem propofes to increafe the quantity of gold
and filver in any country by turning the balance of trade in its
favour. I fliall confider each of them in a particular chapter,
and without taking much further notice of their fuppofed ten-
dency to bring money mto the country, I fhall examine chiefly
what are likely to be the efFe<Sls of each of them upon the an-
nual produce of its induftry. According as they tend either
to increafe or diminifh the value of this annual produce, they
muft evidently tend either to increafe or diminilh the real
wealth and revenue of the country.
CHAP.
444 THE NATURE AND CAUSES OF
CHAT. IL
Of Rcprahil^ upon the Importatwn from foreign Countries of
' fuch Goods as can he produced at Home,
^Y reftraining, either by high duties, or by abfolute pro-
hibitions, \^^z importation of fuch goods from foreign coun-
tries as can be produced at home,- the monopoly of the
home-market«is mort- ~r lefs fecured to the domeflic induftry
employed in .:>roducing them. Thus the prohibition of im-
porting either live cattle or fait provifions from foreign coun-
tries fecures to the graziers of Great Britain the monopoly
of the home-market for butchers-meat. The high duties
upon the importation of corn, which in times of moderate
plenty amount to a prohibition, give a like advantage to the
growers of that commodity. The prohibition of the impor-
tation of foreign woollens is equally favourable to the wool-
len manufafturers. The filk manufacture, though altogether
employed upon foreign materials, has lately obtained the
lame advantage. The linen manufa(flure has not yet ob-
tained it, but is making great ftrldcs towards it. Many
other forts of manufaclures have, in the fame manner, ob-
tained in Great Britain, either altogether, or very nearly, a
monopoly againft their countrymen. The variety of goods
of which the importation into Great Britain is prohibited,
either abfolutely, or under certain circumftances, greatly ex-
ceeds what can eafily be fufpe6ted by thofe who are not well
acquainted vv'ith the laws of the cuftoms.
That this monopoly of the home-market frequently gives
great encouragement to that particular fpecies of induilry
which enjoys it, and frequently turns towards that employ-
ment a greater fhare of both the labour . and ftock of the
foclety than would otherwife have gone to It, cannot be
doubted. But whether it tends either to increafe the general
induftry of the foclety, or to give it the moil advantageous
ilire(^ion, is not, perhaps, altogether fo evident.
The
THE WEALTH OF NATIONS. 445
The general Induftry of the fociety never can exceed what
the capital of the fociety can employ. As the number of
workmen that can be kept in empk>yment by any parllcular
perfon muft bear a certain proportion to his capital, fo the
number of tbofe that can be continually employed by all the
members of a great fodiety, muft bear a certain proportion to
the whole capital of that fociety, and never can exceed that
proportion. No regulation of commerce can increafe the
quantity of indullry in any fociety beyond what its capital
can maintain. It can only divert a part of it into a direction
into which it might not otherwifc have gone ; and it is by
no means certain that this artificial direcflion is likely to be
more advantageous to the fociety than that into which it
would have gone of its own accord.
Every individual is continually exerting himfelf to find
out the mofl advantageous employment for whatever capital
he can command. It is his own advantage, indeed, and not
that of the fociety, which he has in view. But the ftudy of
his own advantage naturally, or rather neceffarily leads him
to prefer that employment which is mofl advantageous to
the fociety.
First, every individual endeavours to employ his capital
as near home as he can, and confequcntly as much as he can
in the fupport of domefiiic induftry ; provided always that he
can thereby obtain the ordinary, or not a great deal lefs than
the ordinary profits of. fiock.
Thus upon equal or nearly equal profits, every wholefale
merchant naturally prefers the home-trade to the foreign trade
or confumption, and the foreign trade of confumption to the
carrying trade. In the home-trade his capital is never fo.
long out of his fight as it frequently is in the foreign trade
of confumption. He can know better the charader and
f^tuation of the perfons whom he trufts, and if he fiiould
biipnen to be deceived, he knows better the laws of the
country from which he muft feck redrefs. In the carrying
trade, the capital of the merchant is, as it were, divided
between two foreign countries, and no part of it is ever
necefTarily brought home, or placed under his own imme-
diate view and command. The capital which an Amfter-
dam merchant employs in carrying corn from Konigfberg
fn Lid'on, and fruit and wine from Lilbon to Konigiberg,
mult
44-5 THE NATURE AND CAUSES OF
muft generally be the one-half of it at Konlgfberg and
the other half at Liil^on. No part of it need ever come to
Amfterdam. The natural refidence of fucfi a merchant
fhould either be at Konigfberg or Liibon, and it can only
be fome very particular circumftances which can make him
prefer the refidence of Amfterdam. The uneafmefs, how-
ever, which he feels at being feparated fo far from his capi'
tal, generally determines him to bring part both of the
Konigfberg goods which he deftines for the market of Lif-
bon, and of the Lifbon goods which he deftines for that of
Konigfberg, to Amfterdam : and though this neceftarily
fubjecls him to a double charge of loading and unloading,
as well as to the payment of fome duties and cuftoms, yet
for the fake of having fome part of his capital always under
his own view and command, he willingly fubmits to this
extraordinary charge ; and it is in this manner that every
country which has any confiderable fhare of the carrying
trade, becomes always the emporium, or general market, for
the goods of all the different countries whofe trade it carries
on. The merchant, in order to fave a fecond loading and
unloading, endeavours always to fell in the home-market as
much of the goods of all thofe diiferent countries as he can,
and thus, fo far as he can, to convert his carrying trade
into a foreign trade of confumption. A merchant, in the
fame manner, who is engaged in the foreign trade of con-
fumption, when he collects goods for foreign markets, will
always be glad, upon equal or nearly equal profits to fell
as great a part of them at home as he can. He faves himfelf
the riik and trouble of exportation when, fo far as he can,
he thus converts his foreign trade of confumption into a
home-trade. Home is in this manner the center, if I may-
fay fo, round which the capitals of the inhabitants of every
country are continually circulating, and towards which they
are always tending, though by particular caufes they may
fometlmes be driven off and repelled from it towards more dif-
tant employments. But a capital employed in tl:e home-trade,
it has already been ihown, neceffarily puts into motion a
greater quantity of domeftic induftry, and gives revenue and
employment to a greater number of the inhabitants of the
country, than an equal capital employed in the foreign trade
of confumption : and one employed in the foreign trade
of confumption lias the fame advantage over an equal capital
employed in the carrying trade. Upon equal, or only nearly
equal profits, therefore, every individual naturally inclines
to employ his capital in the manner in which it is likely to
afford
THE WEALTH OF NATIONS. 447
atTord the greatefl: fupport to domeftic Induflry, and to give
revenue and employment to the greatefl number of people
of his own country.
Secondly, every individual vi'ho employs his capital in
the fupport of domeftic indultry, neceflarily endeavours fo to
direct that indultry, that its produce may be of the greatefl
poflible value.
The produce of Induflry Is what it adds to the fubjecl or
materials upon which it is employed. In proportion as the
value of this produce is great or fmali, fo will likewife be the
profits of the employer. But it Is only for the fake of profit
that any man employs a capital In the fupport of induftiry ;
and he will always, therefore, endeavour to employ it in the
fupport of that induftry of which the produce is likely to be
of the greatefl value, or to exchange for the greatefl quantity
either of money or of other goods.
But the annual revenue of every foclety Is always preclfely
equal to the exchangeable value of the whole annual produce
of its induflry, or rather is preclfely the fame thing with
that exchangeable value. As every individual, therefore,
endeavours as much as he can both to employ his c^spital iu
the fupport of domeflic induflry, and fo to direcft that induf-
try that its produce maybe of the greateft value *, every indi-
vidual neceflarily labours to render the annual revenue of the
fociety as great as he can. He generally, indeed, neither
intends to promote the public Intereft, nor knows how much
he is promoting it. By preferring the fupport of domeflic
to that of foreign induflry he Intends only his own fecurity ;
and by direcflhig that induftry in fuch a manner as its produce
may be of the greateft value, he Intends only his own gain,
and he Is In this, as In many other cafes, led by an invifible
hand to promote an end which was no part of his intention.
Nor is it always the worfe for the fociety that it was no
part of it. By purfuing his own intereft he frequently pro-
motes that of the fociety more efte^lually tlian when he really
Intends to promote it. I have never known much good done by
tjiofe who afledled to trade for the public good. It is an afTec-
tatloU) indeed, not very common among merchants, and very
few words need be employed in difTuadlng them from it.
"What Is the fpecles of domeftic induftry which ]iis capi-
tal can employ, and of which the produce is likely to be of
the
448 THE NATURE AND CAUSES OF
the greatefl: value, every individual, it is evident, can, in hi*
local fituatiqn, judge much better tiian any ftatefman or law-
giver can do for him. The ftatefman, who fnould attempt
to dire(5l private people in what manner they ought to emplov
their capitals, would not only load himfelf with a moft unne-
ceflary attention, but alTume an authority which could fafely
be truiled, not only to no lingle perfon, but to no couiicil or
fenate whatever, and which would nowhere be fo danc^erous
as m the hands of a man who had folly and prefumption
enough to fancy himfelf fit to exercife it.
To -give the monopoly of the home-market to the produce
of domeftic induftry, in any particular art or manufacture,
is in feme meafure to direct private people in what manner
they ought to employ their capitals, and m.uft, in almoit all
cafes, be either a ufelefs or a hurtful regulation. If the pro-
duce of domeftic can be brought there a^ cheap as that of
foreign induftry, the regulation is evidently ufelefs. If it
cannot, it muft generally be hurtful. It is the maxim of
every prudent mafter of a family, never to attempt to make
at home what it v/ill coft him more to make than to buy.
The taylor does not attempt to make his own Ihoes, but buys
them, of the ftioemaker. The flioemaker does not attempt to
make his own cloaths, but employs a taylor The farmer
attempts to make neither the one nor the other, but employs
thofe difterent artificers. All of them find it for their interelt
to employ their whole induftry in a way in which they have
fome advantage over their neighbours, and to purchafe v/ith
a part of its produce, or what is the fame thing, with the
price of a part of it, whatever elfe they have occafion for.
Vv^H AT is prudence in the condufl of every private family,
can fcarcebe folly in that of a great kingdom. If a fortign
country can fupply us with a commodity cheaper than we
ourfelvcs can make it, better buy it of them with fome part
of the produce of our own induftry, employed in a way in
which we have fom^e advantage. The general induftry of the
country, being always in proportion to the capital which em-
ploys it, will not thereby be dlminifiied, no more than that
of the above-mentioned artificers ; but only left to find out
the v/ay in which it can be employed with the greateft advan-
tage. It is certainly not employed to the greateft advantage,
wl'cn it is thus directed towards an object which it can buy
cheaper than it can make. The value of its annual produce
is
THE WEALTH OF NATIONS. 449
is certainly more or lefs dimlniflied, when it is thus turned
away from producing commodities evidently of more value
than the commodity which it is dire£led to produce. Ac-
cording to the fuppofition, that commodity could be pur-
chafed from foreign countries cheaper than it can be made
at home. It could, therefore, have been purchafed with a
part only of the commodities, or what is the fame thing,
with a part only of the price of the commodities, which the
induilry employed by an equal capital, would have produced
at home, had it been left to follow its natural courfe. The
indudry of the country, therefore, is thus turned away from
a more to a lefs advantageous employment, and the exchange-
able value of its annual produce, inflead of being increafed,
according to the intention of the lawgiver, muft neceflarily
be diminiflied by every fuch regulation.
By means of fuch regulations, indeed, a particular manu-
fa6lure may fometimes be acquired fooner than it could have
been otherwife, and after a certain tmie may be made at
home as cheap or cheaper than in the foreign country. But
though the induftry of the fociety may be thus carried with
advantage into a particular channel fooner than it could have
been otherwife, it will by no means follow that the fum
total, either of its induftry, or of its revenue, can ever be
augmented by any fuch regulation. The induftry of the
fociety can augment only in proportion as its capital aug-
ments, and its capital can augment only in proportion to
what can be gradually faved out of its revenue. But the im-
mediate cffecl of every fuch regulation is to diminifh its reve-
nue, and what diminilhes its revenue, is certainly not very
likely to augment its capital fafter than it would have aug-
mented of its own accord, had both capital and induftry been
left to find out their natural employments.
Though for want of fuch regulations the fociety fliould
never acquire the propofed manufacture, it would not, upon
that account, necelTarily be the poorer in any one period of
its duration. In every period of its duration its whole capi-
tal and induftry might ftill have been employed, though
upon different cbjetls, in the manner that was moft advan-
tageous at the time. In every period its revenue might
have been the greateft which its capital- could afford, and
both capital and revenue might have been augmented with
the greateft poffible rapidity.
Vol. I. G g The
450 THE NATURE AND CAUSES OF
The natural advantages which one country has over ano-^
ther in producing particular commodities are fometimes fo
great, that it is acknowledged by all the world to be in vain
to ilruggle with them. Cy means of glaflcs, hotbeds, and
hotwalLs, very good grapes can be railed in Scotland, and
very good wine too can be made of them at about thirty
times the expence for which at leall equally good can be
brought from foreign countries. Would it be a reafonable
law to prohibit the importation of all foreign wines, merely
to encourage the making of claret and burgundy in Scot-
land ? But if there would be a manifeft zibfurdity in turning
towards any employment, thirty times more of the capital
•and induftry of the rountry, than would be necefl'ary to pur-
chafe from foreign countries art equal quantity of the com-
modities wanted, there mull be an abfurdity, though not al-
together fo glaring, yet exadly of the fame kind, in turning
towards any fuch employment a thirtieth, or even a three
hundredth part more of either. Whether the advantages
which one country has over another, be natural or acquired,
is in this refpe£l of no confequence. As long as the one
country has thofe advantages, and the other wants them, it
will always be more advantageous for the latter, rather to
buy of the former than to make. It is an acquired advan-
tage onlv, which one artificer has over his neighbour, vidio
exercifes another trade ; and yet they both find it more ad-
vantageous to buy of one another, than to make what docs
not belong to their particular trades.
Mek CHANTS and manufacturers are- the people who de-
rive the greateft advantage from, this monopoly of the home
market. The prohibition of the importation of foreign cat-
tle, and of fait provifions, together with the high duties upon
foreirn corn, which in times of moderate plenty amount to a
prohibition, are not near fo advantageous to the graziers and
farmers of Great Britain, as other regulations of the fame
kind are to its merchants and manufacSfurers. Manufac-
tures, thofe of the finer kind efpecially, are more eafily
tranfported from one country to another than corn or cattle.
It is in the fetching and carrying manufaclures, accordingly,
that foreign trade is chiefly employed. In manufactures, a
very fmall advantage will enable foreigners to underfell our
own workmen, even in the home market. It will require a
very great one to enable them to do fo in the rude produce of
the foil. If the free importation of foreign manufaclures
were
THE WEALTH OF NATIONS. 451
were permitted, fevcral of the home manufatfbures would
probably fuficr, and Ibme of them, perhaps, go to ruin altoge-
ther, and a confiderable part of the flock and induflry at pre-
fent employed in them, would be forced to find out fome
other employment. But the freed importation of the rude
produce of the foil could have no fach eirecfl: upon the agri-
culture of the country.
If the importation of foreign cattle, for example, Avas
made ever fo free, fo few" could be imported, that tlie
grazing trade of Great Britain could be little afFevftcd by it.
Live cattle are, perhaps, the only commodity of which the
tranfportation is more expenfive by fca than by land. By
land they carry themfelves to market. By fea, not only the
cattle, but their food and their water too mud be carried at
no fmall expence and inconveniency. The fhort fea between
Ireland and Great Britain, indeed, renders the importation
of Irilh cattle more eafy. But though the free importation
of them, which was lately permitted only for a limited time,
were rendered perpetual, it could have no confiderable effeffc
upon the intereft of the graziers of Great Britain. Thofe
parts of Great Britain which border upon the IriHi fea are all
grazing countries. Irifli cattle could never be imported for
their ufe, but muft be drove through thofe very extenfive
countries, at no fmall expence and inconveniency, before
they could arrive at their proper market. Fat cattle could
not be drove fo far. Lean cattle, therefore, only could be
imported, and fuch importation could interfere, not with the
intereft of the feeding or fattening countries, to which, by re-
ducing the price of lean cattle, it would rather be advan-
tageous, but with that of the breeding countries only. The
fmall number of Iridi cattle imported fince their importation
v/as permitted, together with the good price at which lean
cattle (lill continue to fell, feem to demonftrate that even the
breeding countries of Great Britain are never likely to be
much affecfted by the free importation of Irifh cattle. The
common people of Ireland, indeed, are fa Id to have fome-
times oppofed with violence the exportation of their
cattle. But if the exporters had found any great ad-
vantage in continuing the trade, they could eafilv, when
the law was on their fide, have conquered this mobbiili op-
pofitlon.
G g 2 Feeding
452 THE NATURE AND CAUSES OF
Feeding and fattening countries, befides, mull: always
be highly improved, whereas breeding countries are generally
uncultivated. The high price of lean cattle, by augmenting
the value of uncultivated land, is like a bounty againlt im-
provement. To any country which was highly improved
throughout, it would be more advantageous to import its lean
cattle than to breed them. The province of Holland, ac-
cordingly, is faid to follow this maxim at prefent. The
mountains of Scotland, "Wales, and Northumberland, in-
deed, are countries not capable of much improvement, and
feem dellined by nature to be the breeding countries of
Great Britain. The freed importation of foreign cattle could
have no other efFedl than to hinder thofe breeding countries
from taking advantage of the increafmg population and im-
provement of the reil of the kingdom, from raifmg their
price to an exorbitant height, and from laying a real tax
upon all the more improved and cultivated parts of the
country.
The frceil importation of fait provifions, in the fame
manner, could have as little effe(Si upon the intereft of the
graziers of Great Britain as that of live cattle. Salt provifi-
ons are not only a very bulky commodity, but when com-
pared with frefli meat, they are a commodity both of worfe
qualitv, and as they coft more labour and expence, of higher
price. They could never, therefore, come into competition
with the frelh meat, though they might with the fait provifi-
ons of the country. They might be ufed for vicffualling
fbiDS for dillant voyages, and fuch like ufes, but could ne-
ver make any confiderable part of the food of the people.
The fmall quantity of fait provifions imported from Ireland
fince their importation was rendered free, is an experimen-
tal proof that our graziers have nothing to apprehend from
it. It does not appear that the price of butcher's-meat has
ever been fenfibly afFe£led by it.
Even the free importation of foreign corn could very little
affe<Sl the intereil of the farmers of Great Britain. Corn is
a much more bulky commodity than butcher's-meat. A
pound of wheat at a penny is as dear as a pound of butcher's-
meat at four-pence. The fmall quantity of foreign corn im-
ported even in times of the greateft fcarcity, may fatisfy our
farmers that they can have nothing to fear from the freeft
Importation. The average quantity imported, one year with
another,
THE WEALTH OF, NATIONS. 453
another, amounts only, according to the very well informed
author of the trails upon the corn trade, to twenty-three
thoufand (even hundred and twenty-eight quarters of all forts
of grain, and does not exceed the five hundredth and feven-
ty-one part of the annual confumption. But as the bounty
upon corn occafions a greater exportation in years of plenty,
fo it mud of confequence occafion a greater importation in
years of fcarcity, than in the a^lual Hate of tillage, would
otherwife take place. By means of it, the plenty of one year
does not compenfate the fcarcity of another, and as the ave-
rage quantify exported is neceflarily augmented by it, fo
mufb likewife, in the a6lual Hate of tillage, the average
quantity imported. If there was no bounty, as iefs corn
would be exported, fo it is probable that, one year with
another, Iefs would be imported than at prefent. The corn
merchants, the fetchers and carriers of corn, between Great
Britain and foreign countries, would have much Iefs em-
ployment, and might fufFer confiderably ; but the country
gentlemen and farmers could fuffer very little. It is in
the corn merchants, accordingly, rather than in the
country gentlemen and farmers, that I have obferved
the greateft anxiety for the renewal and continuation of the
bounty.
Country gentlemen and farmers are, to their, great ho-
nour, of all people, the lead fubjecfl: to the wretched fpirit of
monopoly. The undertaker of a great manufactory is fome-
times alarmed if another work of the fame kind is eftablifned
within twenty miles of him. The Dutch undertaker of the
woollen manufacture at Abbeville, (lipulated that no work of
the fame kind (hould be eltabliflied u'-ithin thirty leagues of
that city. Farmers and country gentlemen, on the contrarv,
are generally difpofed rather to promote than to obilruct the
cultivation and improvement of their neighbours farms and
eftates. They have no fecrets, fuch as thole of the greater
part of manufa£l:urers, but are generally rather fond of com-
municating to their neighbours, and of extending as far as
pofTible any new praftice which they have found to be advan-
tageous. Pius ^lejliis^ fays old Cato, ftahUiJfimufquey mini'
meqiie mv'id'iofus ; ininimeque male cogitantes flinty qui in eo
Jiudio occupati funt. Country gentlemen and farmers, dif-
perfed in different parts of the country, cannot fo eafily com-
bine as merchants and manufaCfurers who bein'>- collected
into towns, and accultomed to that exclufive corporation
fpirit
454 THE NATURE AND CAUSES OF
fpirit which prevails in them, naturally endeavour to obtain
againft all their countrymen, the fame exclufivc privilege
vi^hich they generally poflefs againft the inhabitants of their
refpeiflive towns. They accordingly feem to have been the
original inventors of thofe reftraints upon the importation of
foreign goods, which fecure to them the monopoly of the
home market. It was probably in imitation of them, and to
put themfelvcs upon a level with thofe who, they found,
were difpofed to opprefs them, that the country gentlemen
and farmers of Great Britain fo far forgot the generofity
which is natural to their ftation, as to demand the exclufive
privilege of fupplying their countrymen with corn and but-
cher's-meat. They did not perhaps take time to confider,
how much lefs their intereft could be afFed:ed by the freedom
of trade, than that of the people whofe example they fol-
lowed.
To prohibit by a perpetual law the Importation of foreign
corn and cattle, is in reality to en^ft, that the population and
induftry of the country fliall at no time exceed what the rude
produce of its own foil can maintain.
There feem, however, to be two cafes ni wKich it will
generally be advantageous to lay fome burden upon foreign,
for the encouragement of domeftic induftry.
The firft is when fome particular fort of induftry is ne-
cefTary for the defence of the country. The defence of
Great Britain, for example, depends very much upon the
number of its failors and fliipping. The a<5l of navigation,
therefore, very properly endeavours to give the failors and
fnipping of Great Britain the monopoly of the trade of their
own country, in fome cafes, by abfolute prohibitions, and
in others by heavy burdens upon the fliipping of foreign
countries. The following are the principal difpofitions of
this adl.
First, all fhips, of which the owners, mafters, and
three-fourths of the mariners are not Britifh fubje<fl:s,
are prohibited, upon pain of forfeiting ftiip and cargo,
from trading to the Britifii fettlenients and plantations,
or from being employed in the coafting trade of Great
Britain.
3 • ^
Secondly,
THE WEALTH OF NATIONS. 455
Secondly, a great variety of the mod bulky articles of
importation can be brought into Great Britain only, either in
fuch {hips as are above defcribed, or in (liips of tlie country
where thofe goods are produced, and of which tlie owners,
mafters, and three-fourths of the mariners, are of that parti-
cular country ; and when imported even in fliips of this lat-
ter kind, they are fubje(ft to double aliens duty. If Imported
in flilps of any other country, the penalty is forfeiture of Ihip
and goods. When this act was made, the Dutch were, what
they IHll are, the great carriers of Europe, and by this regu-
lation they were entirely excluded from being the carriers to
Great Britain, or from importing to us the goods of any
other European country.
Thirdly, a great variety of the mod bulky articles of
importation are prohibited from being imported, even In
Britilh ihips, from any country but that in which they are
produced ; under pain of forfeiting flilp and cargo. Tliis
regulation too was probably intended again ft the Dutch.
Holland was then, as now, the great emporium for all Eu-
ropean goods, and by this regulation, Britifh (hips were
hindered from loading in Holland tlic goods of any other
European country^
Fourthly, fait fifli of all kinds, whale-fins, whale-bone,
oil, and blubber, not caught by and cured on board Britilh
veflels, v/hen imported into Great Britain, are fubje^led
to double aliens duty. The Dutch, as they are ilill the
principal, were then the only fiOiers in Europe that at-
tempted to fupply foreign nations with fiili. By this regu-
lation, a very heavy burden was laid upon their fupplying
Great Britain.
When the acft of navigation M'as made, though England
and Holland were not a6f ually at war, the moil violent ani-
mofity fubfifted between the two nations. It had begun
during the government of the long parliament, which lirlt
framed this act, and it broke out foon after in the Dutch
wars during that of the Proteclor and of Charles the Second.
It is not impolhble, therefore, that fome of the regulations
of this famous aft may have proceeded from national animo-
fity. They are as wife, however, as if they had ail been
dictated by the moft deliberate wifdom. National animofity
i\t that particular time aimed at the very fame objedl:
which
456 THE NATURE AND CAUSES OF
which the moft deliberate wifdom would have recom-
mended, the diminution of the naval power of Holland,
the only naval power which could endanger the fecurity
of England.
The a6t of navigation is not favourable to foreign com-
merce, or to the growth of that opulence which can arife
from it. The intcreft of a nation in its commercial relations
to foreign nations is, like that of a merchant with regard to
the different people with whom he deals, to buy as cheap
and to fell as dear as pofTible. But it will be moil likely to
buy cheap, when by the moft perfect freedom of trade it en-
courages all nations to bring to it the goods which it has oc-
cafion to purchafe *, and, for the fame reafon, it will be moft
likely to fell dear, when its markets are thus filled with the
greateft number of buyers. The adl of navigation, it is true,
lays no burden upon foreign fliips that come to export the
produce of Britiili induftry. Even the antient aliens duty,
which ufed to be paid upon all goods exported as well as im-
ported, has, by feveral fubfequent a6ls, been taken off from
the greater part of the articles of exportation. But if fo-
reigners, either by prohibitions or high duties, are hindered
from coming to fell, they cannot always afford to come to
buy ; becaufe coming without a cargo, they muft lofe the
freight from their own country to Great Britain. By dimi-
nilhing the number of fellers, therefore, we neceftarily dimi-
nifh that of buyers, and are thus likely not only to buy fo-
reign goods dearer, but to fell our own cheaper, than if J
there was a more perfect freedom of trade. As defence, *
however, is of much more importance than opulence, the
aft of navigation is, perhaps, the wifeft of all the commer-
cial regulations of England.
The fecond cafe, in which it will generally be advantage-
ous to lay fome burden upon foreign for the encouragement
of domeftic induftry, is, when fome tax is impofed at home
upon the produce of the latter. In this cafe, it feems reafon-
able that an equal tax ftiould be impofed upon the like pro-
duce of the former. This would not give the monopoly of
the home market to domeftic induftry, nor turn towards a
particular employment a greater fhare of the ftock and labour
of the country, than what would naturally go to it. It
would only hinder any part of what would naturally go to it
from being turned avvay by the tax, into a Icfs natural direc-
tion.
THE WEALTH OF NATIONS. 457
tlon, and would leave the competition between foreign and
domeftic indullry, after the tax, as nearly as polFihle upon
the fame footing as before it. In Great Britain, when any
fuch tax is laid upon the produce of domeftic indultry, it is
ufual at the fiime time, in order to Hop the clamorous com-
plaints of our merchants and manafadurcrs, that they will
be underfold at home, to lay a much heavier duty upon the
importation of all foreign goods of the fame kind.
This fecond limitation of the freedom of trade according
to fome people fliould, upon fome occafions, be extended
much further than to the precife foreign commodities which
could come into competition with thofe which had been taxed
at home. When the neceflaries of life have been taxed in
any country, it becomes proper, they pretend, to tax not
only the like neceflaries of life imported from other coun-
tries, but all forts of foreign goods which can come into com-
petition vvitli any thing that is the produce of domeftic in-
duftry. Subfillence, they fay, becomes necefliirily doarer in
confequence of fuch taxes ; and the price of labour nmfl: al-
ways rife with the price of the labourers fubfiflence. Every
commodity, therefore, which is the produce of domeftic in-
duftry, though not immediately taxed itfelf, becomes dearer
in confequence of fuch taxes, becaufe the labour which pro-
duces it becomes fo. Such taxes, therefore, are really equi-
valent, they fay, to a tax upon every particular commodity
produced at home. In order to put domeftic upon the
fame footing with foreign induftry, therefore, it becomes
neceflliry, they think, to lay fome duty upon every foreign
commodity, equal to this enhancement of the price of
the home commodities with which it can come into com-
petition.
Whether taxes upon the neceflaries of life, fuch as thofc
in Great Britain upon foap, fait, leather, or candles, &:c. ne-
ceflarily raife the price of labour, and confequently that of all
other commodities, I fhall conflder hereafter, when I come
to treat of taxes. Suppofing, however, in the mean time,
that they have this efFe61:, and they have it undoubtedly, this
general enhancement of the price of all commodities, in con-
fequence of that of labour, ie a cafe which diflers in the two
**following refpe£ls from that of a particular commodity, of
which the price was enhanced by a particular tax immediate-
ly impofcd upon it.
First,
458 THE NATerRE AND CAUSES OF
First, it might always be known with great exa£lnefs
how far the price of fuch a commodity could be enhanced by
fiich a tax : but how far the general enhancement of the price
of labour might affecSl that of every different commodity,
about which labour was employed, could never be known
with any tolerable exactnefs. It would be impoflible, there-
fore, to proportion with any tolerable exacftnefs the tax upon
every foreign, to this^ enhancement of the price of every home
commodity.
Secondly, taxes upon the necelTaries of life have nearly
the fame effecl upon the circumftances of the people as a
poor foil and a bad climate. Provifions are thereby rendered
dearer in the fame manner as if it required extraordinary la-
bour and expence to raife them. As in the natural fcarclty
ariling from foil and climate, it would be abfurd to direft the
people in what manner they ought to employ tlieir capitals
and indullry, fo is it likewiie in the artificial fcarcicy ari Gng
from fuch taxes. To be left to accommodate, as well as they
could, their ir^duftrv to their fituation_, and to find out thofe
employn ..ats in which, notwithftanding their unfavourable
circumftances, they might have fome advantcige either in the
home or ii' iiie foreign market, h w.'iat in both caies would
evidently be moil for their advantage. To lay a new tax
upon them,,becaufe they are already overburdened with
taxes, and becaufe they already pay too dear for the necelTa-
ries of life, to make them likewife pay too dear for the greater
part of other ^ rmmodities, is certainly a moit abfurd way of
making amends.
Such taxes, when they have grown up to a certain height,
are a curfe equal to the barrennefs of the earth and the incle-
mency of the heavens; and yet it is in the richeft and moft
induilrious countries that they have been moft generally im-
pofed. No other countries could fupport fo great a diforder.
As the ftrongeft bodies only can live and enjoy health, under
an unwholefome regimen ; fo the nations only, that in every
fort of induftry have the greateft natural and acquired advan-
tages, can fubfift and profper under fuch taxes. Holland is
the country in Europe in which they abound moft, and which
from peculiar circumftances conthiues to profper, not by
means of them, as has been moft abfurdly fuppofed, but ii¥
fpite of them.
As
THE WEALTH OF NATIONS. 459
As there are two cafes in which it will generally be advan-
tageous to lay Ibme burden upon foreign, for the encourage-
ment of domeitic induftry •, lb there are two others In which
it may fometimes be a matter of deliberation; in the one, liow
far it is proper to continue the free importation of certain fo-
reign goods : and in the other, how far, or in what manner it
may be proper to reftore that free importation after it has
been for fome time interrupted.
The cafe in which it may fometimes be a matter of deli-
beration how far it is proper to continue the free importation
of certain foreign goods, is, when fome foreign nation re-
llrains by high duties or prohibitions the importation of fome
of our manufactures into their country. Revenge in this
cafe naturally di£l:ates retaliation^, and that we fliould impofe
the like duties and prohibitions upon the importation of fome
or all of their manufadfures into ours. Nations, accordinglv,
feldom fail to retaliate in this manner. The French have
been particularly forward to favour their own manufac'Ttures
by rellraining the importation of fuch foreign goods as could
come into competition with them. In this conTifted a great
part of the policy of Mr. Colbert, who, notwithilandin^ his
great abilities, feems in this cafe to have been impofed upon
by the fophiilry of merchants and m.anufa^lurers, who are
always demanding a monopoly againll their countrymen. It
is at prefent the opinion of the moil intelligent men in France
that his operations of this kind have not been benehcial to his
country. That minifler, by the tarif of 1667, impofed very
high duties upon a great number of foreign manufa£lures.
Upon his refufing to moderate them in favour of the Dutch,
they in 1671 prohibited the importation of the wines, bran-
dies, and manufa(51ures of France. Tlie war of 1672 ieems
to have been in part occafioned by this commercial difpute.
The peace of Nimeguen put an end to it in 1678, by mode-
rating fome of thofe duties in favour of the Dutch, who in
confequence took off their prohibition. It was about the fame
time that the French and Englilh began mutually to opprefs
each other's indullry, by the like duties and prohibitions, of
which the French, however, feem to have fet the firfl exam-
ple. The fpirit of hoftility which has fubfiRed between the
two nations ever fmce, has hitherto hindered them from be-
ing moderated on either fide. In J 697 the Englifli prohibited
the importation of bonelacc, the manufacture of Flanders.
The government of that country, at that time under the
dominion
46o THE NATURE AND CAUSES OF
dominion of Spain, prohibited in return the iinportation of
Englilh woollens. In 1700, the prohibition of importing bone-
lace into England, was taken off upon Cf^'ilitioh that the im-
portation of Englifh woollens into Flanders fliould be put on
the lame footing as before. ,
There may be good policy in retaliations of this kind,
when there is a probability that they will procure the repeal
of the high duties or prohibitions complained of. The re-
covery of a great foreign market will generally more than
compenfate the tranfitory inconveniency of paying dearer
during a fliort time for fome forts of goods. To judge
whether fuch retaliations are likely to produce fuch an efle^t,
does no*-, perhaps, belong (o much to the fciesce of a legi-
ilator, whofe deliberations ought to be governed by general
principles which are always the fame, as to the llcill of that
infidious and crafty animal, vulgarly called a ftatefman or po-
litician, whofe councils are direfted by the momentary fluc-
tuations of affairs. When there is no probability that any
fuch repeal can be procured, it feems a bad method of com-
penfating the injury done to^certain claffes of our people, to
do another injury ourfelves, not only to thofe claffes, but to
almoft all the other claffes of them. When our neighbours
prohibit fome manufacture of ours, we generally prohibit,
not only the fame, forlhat alone would feldom affe^l them
confiderably, but fome other manufaO:ure of theirs. This
may, no doubt, give (Tncouragement to fome particular clafs of
workmen among ourfelves, and by excluding fome of their
-rivals, may enable them to raife their price in the home-
market. Thofe workmen, however, wlio fuffered by our
neighbours prohibition will not be benefited by ours. On
the contrary, they and almoft all the other claffes of our citi-
zens will thereby be obliged to pay dearer than before for
certaiii goods. Every fuch law, therefore, impofes a real tax
upon the whole country, not in favour of that particular clafs
of workmen who were injured by our neighbours prohibi-
but of fome other clafs.
The cafe in which it may fometimes be a matter of deli-
beration, how far, or in what manner it is proper to reftore
the free importation of foreign goods, after it has been for
fome time interrupted, is, when particular manufactures, by
means of high duties or prohibitions upon all foreign goods
which can come into competition with them, have been fo
far
THE WEALTH OF NATIONS. 461
far extended as to employ a great multitude of hands.
Humanity may in this cafe require that the freedom of trade
(hould be reftored only by flow gradations, and with a good
deal of referve and clrcumfpe^lion. V/ere thofe high duties
and prohibitions taken away all at once, cheaper foreign
goods of the fame kind might be poured fo fall into the
home-market, as to deprive all at once many thoufands of our
pcopie of their ordinary employment and means of fub-
fillence. The diforder which this would occafion might no
doubt be very confulerabie. It would in all probability, how-
ever, be much lefs than is commonly imagined, for the two
following reafons :
First, all thofe manufactures, of which any part is
commonly exported to other European countries without a
bounty, could be very little afFe£led by the freeft importation
of foreign goods. Such manufaftures muft be fold as cheap
abroad as any other foreign goods of the fame quality and
kind, and confequently mult be fold cheaper at home. They
would (till, therefore, keep pofleffion of the home-market,
and though a capricious man of falhion might fometimes pre-
fer foreign wares, merely becaufe they were foreign, to
cheaper and better goods of the fame kind that were made at
home, this folly could, from the nature of things, extend to
fo few, that it could make no fenfible impreflion upon the ge-
neral employment of the people. But a great part of all the
different branches of our woolleu manufadture, of our tan-
ned leather, and of our hardware, are annually exported to
other European countries without any bounty, and thefe are
the manufactures which employ the greatelt numberof hands.
The fdk, perhaps, is the manufacture whicli would fuller tjic
molt by this freedom of trade, and after it the linen, though
the latter much lefs than the form.er.
Secondly, though a great number of people fliould, by
thus reitorlng the freedom of trade, be thrown all at once
out of their ordinary employment and common method of
fubfiftence, it would by no means follow that they would
thereby be deprived either of employment or fubfiftence.
By the reduction of the army and navy at the end of the late
war more than a hundred thoufand foldiers and feamen, a
number equal to what is employed in the greatelt manufac-
tures, were all at once thrown out of their ordinary employ-
ment ; but, though they no doubt fufFered fomc inconveni-
cncy.
4(52 THE NATURE AND CAUSES OF
f ncy, they were not thereby deprived of all employment and
fubfiltence. The greater part of the feamen, it is probable,
gradually betook themfelves to the merchant-fcrvice as they
could find occaflon, and in the mean time both they and the
foldiers were ablbrbed in the great mafs of the people, and
employed in a great variety of occupations. Not only no
great conviilfion, but no ienfible diforder arofe from fo great
a change in the (ituation of more than a hundred thoufiind
men, all accultomed to the ufe of arms, and many of them
to rapine and plunder. The number of vagrants was fcarce
any where fenfibly increafed by it, even the wages of labour
were not reduced by it in any occupation, fo far as I have
been able to learn, except in that of feamen in the merchant-
fervice. But if we compare together the habits of a foldier
and of any fort of manufaclurer, \vc lliall find that thofe of
the latter do not tend fo much to difqualifyhim from being
employed in a new trade, as thofe of the former from being
employed in any. The manufa(fl:urer has always been ac-
cuftomed to look for, his fubfillence from his labour only :
the foldier to expect it from Ins pay. Application and in-
duflry have been familiar to the one ; ialenefs and diffipation
to the other. But it is furcly much eafier to change the di-
rctlion of induftry from one fort of labour to another, than
to turn idlenefs and diffipation to any. To the greater part
of manufacftures bcfides, it has already been obferved, there
are other collateral manufatflures of fo fimilat a nature, that
a workman can eafily transfer his induilry from one of them
to another. The greater part of fuch workmen too are oc-
cafionally employed in country labour. The ftock which
employed them in a particular manufacture before, will Hill
remain in the country to employ an equal number of people
in fome other way. The capital of the country remaining
the fame, the demand for labour will likewife be the fame,
or very nearly the fame, though it may be exerted in difler-
ent places and for different occupations. Soldiers and fea-
men, indeed, wlien difchargcd from the king's fervice, are
at liberty to exercife any trade, within any town or place of
Great Britain or Ireland. Let the fame natural liberty of
rxerclfing what fpecies of induftry they pleafe be reftored to
all his majefty's fubje6ls, in the fame manner as to foldiers
and feamcn : that is, break down the exclufive privileges of
corporations, and repeal the ftatute of apprentlcefliip, both
which are real encroachments upon natural liberty, and add
vo thcfe the repeal of the law of fettlements, fo tliat a poor
v/orkman,
THE WEALTH OF NATIONS. 463
workman, when thrown out of employment cither In one
trade or in one place, may feek for it in another trade or in
another place, without the fear either of a profecntion or of
. a removal, and neither the public nor the individuals will
fuffer much more from the occafional dii banding fonie
particular dalles of manufacturers, than from that of fol-
diers. Our manufa6lurers have no doubt great merit with
their country, but they cannot have more than thofe who
defend it with their blood, nor deferve to be treated with
more delicacy.
To expect, Indeed, that the freedom of trade fhould ever
be entirely reftored in Great Britain, Is as abfurd as to expeCl
that an Oceana or Utopia iliouid ever be ellabliilied in it.
Not only the prejudices of the public, but what is much more
unconquerable, the private interefts of many individi;. Is, ir-
refiilibly oppofe it. Were the officers of the army to oppofe
with the fame zeal and unanimity any reduction in the num-
ber of forces, with which mafter manufacturers fet them-
felves againft every law that is likely to increafe tlie number
of their rivals in the home-market ; were the former to ani-
mate their foldiers, in the fame manner as the latter enfiame
their workmen, to attack with violence and outrage the pro-
pofers of any fuch regulation ^ to attempt to reduce the army
would be as dangerous as it has now become to attempt to
dimlnifh in any refpecft the monopoly which our manufactu-
rers have obtained againft us. This monopoly has {0 much
increafed the number of fome particular tribes of them, tliat,
like an over- grown ftanding army, they have become formid-
able to the government, and upon many occafions intimidate
the Icgiflature. The micmber of parliament who fup|X)rt3
every propofal for llrengthening this monopoly, is fure to ac-
quire not only the reputation of underftanding trade, but
great popularity and influence Vi^Ith an order of men whofe
numbers and wealth render them of great importance. If
he oppofes them, on the contrary, and {till more if he has
authority enough to be able to thwart them, neither the moll
acknowledged probity, nor the higheft rank, nor the greateft
public fervices can proteCt him from the molt infamous abufe
and detraction, from perfonal infults, nor fometimes from
real danger, arifing horn tlie Infolcnt outrage of furious and
difappointed jiionopulifts.
Thf.
464 THE NATURE AND CAUSES OF
The undertaker of a great manufacfture who, by the
home-markf ts being fuddenly laid open to the competition
of foreigners, fliould be obliged to abandon his trade, would
no doubt futfer very confiderably. That part of his capital
which had ufually been employed in purchafing materials
and in paying his workmen, might, without much difficulty,
perhaps, find another employment. But that part of it
which was fixed in workhoufes, and in the initruments of
trade, could fcarce be difpofed of without confiderable lofs.
The equitable regard, therefore, to his intereft requires that
changes of this kind fliould never be introduced fuddenly,
but flowly, gradually, and after a very long warning. The
legiflature, were it pofiible that its deliberations could be al-
v/ays dire6led, not by the clamorous importunity of partial
interefb, but by an extenfive view of the general good, ought
upon this very account, perhaps, to be particularly careful
neither to eflablifli any new monopolies of this kind, nor
to extend further ^ thofe which are already eftablifhed.
Every fuch regulation introduces fome degree of real dif-
order into the conftitution of the ftate, which it will be
difficult afterwards to cure without occafioning another
diforder.
How far it may be proper to impofe taxes upon the im-
portation of foreign goods, in order not to prevent their
importation, but to raife a revenue for government, I fliall
confider hereafter when I come to treat of taxes. Taxes im-
pofed with a view to prevent, or even to diminiflr importa-
tion, are evidently as deflruftive of the revenue of the cuf-
toms as of the freedom of trade.
CHAP.
THE WEALTH OF NATIONS. 46,-
C H A P. III.
Of the extraordinary ReJ^rauits upon the Importation of Goods
of almojl all Kinds ^ from thofe Coinitries luith which the
Balance isfuppofcd to be difadvantageouso
PART. I.
Of the Unreafonablenefs of thofe Reflralnts even ttpon the Prin^
clples ef the Commercial Syflem.
X O lay extraordinary reflraints upon the importation of
goods of almoft all kinds, from thofe particular countries with
which the balance of trade is fuppofed to be difadvantageous,
is the fecond expedient by which the commercial fyftem pro-
pofes to increafe the quantity of gold and filver. Thus in
Great Britain Silefia lawns may be imported for home con-
fumption, upon paying certain duties. But French cam-
bricks and lawns arc prohibited to be imported, except into
the port of London, there to be warehoufed for exportation.
Higher duties are impofed upon the wines of France than
upon thofe of Portugal, or indeed of any other country. By
what is called the impoft 1692, a duty of five and twenty per
cent, of the rate or value, was laid upon all French goods j
while the goods of other nations were, the greater part of
them, fubjected to much lighter duties, feldom exceeding
five per cent. The wine, brandy, fait and vinegar of France,
were indeed excepted ; thefe commodities being fubjefted to
other heavy duties, either by other laws, or by particular
claufes of the fame law. In 1696, a fecond duty of twenty-
five per cent, the firft not having been thought a fufficient
difcouragement, was impofed upon all French goods, except
brandy •, together with a new duty of five-and-twenty pounds
upon the ton of French wine, and another of fifteen pounds
iipon the ton of French vinegar. French good? have never
Vol. I. H h been
456 THE NATURE AND CAUSES OF
been omitted in any of thofe general fubfidies, or duties af
five per cent, which have been impofed upon all, or the
greater part of the goods enumerated in the book of rates..
If we count the one-third and two-third fubfidies as making
a compleat fubfidy between them> there have been five of
tliefe general fubfidies ; fo that before the commencement of
the prefent war feventy-five per cent, may be confidered as
the lowed duty, to which the greater part of the goods of the
growth, produce, or manufacfture of France were liable.
13ut upon the greater part of goods, thofe duties are equiva-
lent to a prohibition. The French in their turn have, I be-
lieve, treated our goods and manufacftures juft as hardly,
though I am not fo well acquainted with the particular hard-
ihips which they have impofed upon them. Thofe mutual
refiraints have put an end to slmofb all fair commerce be-
tween the two nations, and fmugglers are now the principal
importers, either of Britifh goods into France, or of French
goods into Great Britani. The principles which I have been
examining in the foregoing chapter took their origin from
private interefl and the fpirit of monopoiy ; thofe which I
am going to examine in this, from national prejudice and ani-
mofity. They are, accordingly, as might well be expefted,
llill more unreafonable. They are fo^ even upon the princi-
p-les of the commercial fyftem.
First,, though it were certain that in the cafe of a free
trade between France and England, for example, the balance
would be in favour of France, it would by no means follow
that fuch a trade would be difadvantageous to England, or
that the general balance of its whole trade would thereby be
turned more againft it. If the wines of France are better and
cheaper than thofe of Portugal, or its linens than thofe of
Germany, it would be mo-re advantageous for Great Britain
to purchafe both the wine and the foreign linen which it had
occafion for of France, than of Portugal and Germany.
Though the value of the annual importatioiis from France
would thereby be greatly augmented, the value of the whole
annual importations would he diminiflied, in proportion as
the French goods of the fame quality were cheaper than thofe
of the other two countries. This would be the cafe, even
upon the fuppofition that the whole French goods imported
were to be confumed in Great Britain.
But
THE "WEALTH OF NATIONS. 467
But, fecondly, a great part of them might be re-exported
to other countries, where, being fold with profit, they might
bring back a return equal in value, perhaps, to the prime
coft of the whole French goods imported. What has fre-
quently been faid of the Eail India trade might poflibly be
true of the French ; that though the greater part of Ealt In-
dia goods were bought with gold and filver, the re-exporta-
tion of a part of them to other countries, brought back more
gold and filver to that which carried on the trade than the
prime coft of the whole amounted to. One of the moft im-
portant branches of the Dutch trade, at prelent, confifts in
the carriage of French gocds to other European countries.
Some part even of the French wine drank in Great Britain is
clandcltinely imported from Holland and Zealand. If there
was cither a free trnde between France and England, or if
French goods could be imjDortcd upon pnyin^; only the fame
duties as thofe of other European nations, to be drawn back
upon exportation, England might have fome fliare of a trade
which is found fo advantageous to Holland.
Thtrdly, and lafily, there is no certain criterion by
which we can determine on which fide v/hat is called the ba-
lance between any two countries lies, or which of them ex-
ports to the greateft value. National prejudice and animo-
fity, prompted always by the private intereft of particular
traders, are the principles which generally direft our judg.»
ment upon all queflions concerning it. There are two crite-
rions, however, which have frequently been appealed to up*
on fuch occafions, the cuftom-houfe books and the courfe of
exchange. The cuftom-houfe books, I think, it is now ge-
nerally acknowledged, are a very uncertain criterion, on ac-
count of the inaccuracy of the valuation at which the greater
part of goods are rated in them. The courfe of exchange is,
perhaps, almoft equally lb.
When the exchange between two places, fuch as London
and Paris, is at par, it is f\iid to be a fign that the debts due
from London to Paris are compenfated by thofe due from Pa-
ris to London. On the contrary, when a premium is paid
at London for a bill upon Paris, it is faid to be a fign that the
debts due from London to Paris are not compenfated by thofe
due from Paris to London, buf that a balance in money muft
be fent out from the latter place ; for the rilk, trouble, and
H h 2 exjpencc
468 THE NATURE AND CAUSES OF
expence of exporting which, the premium is both demanded
and given. But the ordinary (late of debt and credit between
thofe two cities muft necellarily be regulated,, it is faid, by
the ordinary courfe of their dealings with one another*
When neither of them imports from the other to a greater
amount than it exports to that other, the debts and credits of
each may compenfate one another. JBut when one of them
imports from the other to a greater value than it exports to
that other, the former necefl'arily becomes indebted to the
latter in a greater fum than the latter becomes indebted to it :
the debts and credits of each do not compenfate one another,
and money muft be fent out from that place of which the
debts over-balance the credits. The ordinary courfe of ex-
change, therefore, being an indication of the ordinary ftate
of debt and credit between two places, muft likewife be an
indication of the ordinary courfe of their exports and imports,
as thefe neceiiUriiy regulate that ilate.
But though the ordinary courfe of exch.inge fhould be al-
lowed to be a fufficient indication of the ordinary fbate of
debt and credit between any two places, it would not from
thence follow, that the balance of trade was in favour of that
place which had the ordinary ftate of debt and credit in its
favour. The ordinary ftate of debt and credit between any
two places is not always entirely regulated by the ordinary
courfe of their dealings with one another j but is often influ-
enced bv that of the dealings of either with many other
places. ; If it is ufual, for example, for the merchants of
England to pay for the goods which they buy of Hamburgh,
Dantzic, Riga, &c. by bills upon Holland, the ordinary
ftate of debt and credit between England and Holland will
not be regulated entirely by the ordinary courfe of the deal-
ings of thofe two countries with one another, but will be in-
fluenced by that of the dealings of England with thofe other
places. England may be obliged to fend out every year mo-
ney to Holland, though its annual exports to that country
may exceed very much the annual value of its imports from
thence *, and though what is called the balance of trade may
be very much in favour of England.
In the way befides in which the par of exchange has hi-
therto been computed, the ordinary courfe of exchange can
afford no fufticient indication that the ordinary ftate of debt
and credit is in favour of that country which feen^^ to have,
or
3
THE WEALTH OF NATIONS. 469
or which is fuppofed to have, the ordinary courfe of exchange
in its favour : or, in other words, the real exchange may be,
and, in faiSl, often is fo very different from the computed one,
that from the courfe of the latter no certain conclufion can,
upon many occafions, be drawn concerning that of the
former.
"When for a fum of money paid in England, containing,
according to the ftandard of the Englifh mint, a certain num-
ber of ounces of pure filver, you receive a bill for a fum of
money to be paid in France, containing, according to the
ftandard of the French mint, an equal number of ounces of
pure filver, exchange is faid to be at par between England
and France. When you pay more, you are fuppofed to give
a premium, and exchange is faid to be againft England, and
in favour of France. When you pay lefs, you are fuppofed
to get a premium, and exchange is faid to be againft France,
and in favour of England.
But, firft we cannot always judge of the value of the
current money of different countries by the ftandard of their
rcfpe6live mints. In fome it is more, in others it is lefs
worn, dipt, and otherwife degenerated from that ftandard.
But the value of the current coin of every country compared
with that of any other country, is in proportion not to the
quantity of pure filver which it ought to contain, but to that
which it adlually does contain. Before the reformation of
the filver coin in king William*s time, exchange between
England and Holland, computed, in the ufual manner, ac-
cording to the ftandard of their refpeC^live mints, was five-
and-twenty per cent, againft England. But tlie value of the
current coin of England, as we learn from Mr. Lowndes,
was at that time rather more than five-and-twcnty per cent^,
below its ftandard value. The real exchange, therefore, may
even at that time have been in favour of England, notwith-
ftanding the computed exchange was fo much againft it; a
fmaller number of ounces of pure filver, a^lually paid in
England, may "have purchafcd a bill for a greater number of
ounces of pure filver to be paid in Holland, and the man who
was fuppofed to give, may in reality have got the premium.
The French coin was, before the late reformation of the
Englifti gold coin, much lefs worn than the Englifti,and was
perhaps, two or three per pent, nearer its ftandard. If the
computed
47© THE NATURE AND CAUSES OF
computed exchange with France, therefore, was not more
than two or three per cent, againfl England, the real exchange
might have been in its favour. Since the reformation of the
gold coin, the exchange has been conftantly in favour of
England, and againfl France.
Secondly, in feme countries, the expence of coinage is
defrayed by the government ; in others, it is defrayed by the
private people who carry their bullion to the mint, and the
government even derives fome revenue from the coinage. In
England, it is defrayed by the government, and if you carry
a pound weight of ftandard filver to the mint, you get back
fixty-two fliillings, containing a pound weight of the like
ftandard filver. In France, a duty of eight per cent, is de-
du<fted for the coinage, which not only defrays the expence
of it, but affords a fmall revenue to the government. In
England, as the coinage cofts nothing, the current' coin can
never be much more valuable than the quantity of bullion
which it a(flually contains. In France, the workmaniliip, as
you pay for it, adds to the value, in the fame manner as to
that of wrought plate. A fum of French money, therefore,
containing a certain weight of pure fdver, is more valuable
than a fum of Engliih money containing an equal weight of
pure filver, and mull require more bullion, or other com*
modities to purchafe it. Though the current coin of the
two countries, therefore, were equally near the ftandards of
their refpecTtive mints, a fum of Englifli money could not
well purchafe a fum of French money, containing an equal
number of ounces of pure filver, nor confequently a bill upon
France for fuch a fum. If for fuch a bill no more additional
money was paid than what was fufficient to compenfate the
expence of the French coinage, the real exchange might be
at par between the two countries, their debts and credits
'jaaight mutually compenfate one another, while the com-
puted exchange was confiderably in favour of France. If
lefs than this was paid, the real exchange might be in fa-
vour of England, while the computed was in favour of
France.
Thikdt.y, and laflily, in fome places, as at Amfterdam,
Hamburgh, Venice, &c. foreign bills of exchange are paid in
what they call bank money; while in others, as at London,
Lifbonj Antwerp, Leghorn, &c. they are paid in the com-
j;ion
THE WEALTH OF NATIONS. 471
nion currency of the country. What is called bank money
is always of more value than the fame nominal fum of com-
mon civrrency. A thoufand guilders in the bank of Amfter-
dam, for example, are of more value than a thoufand guild-
ers of Amfterdam currency. The difference between them
is called the agio of the bank, which, at Amilerdam, is ge-
nerally about five per cent. Suppofing the current money of
the two countries equally near to the ilandard of their refpec-
tive mints, and that the one pays foreign bills in this com-
mon currency, while the other pays them in bank money, it
is evident that the computed exchange maybe in favour ot
that which pays in bank money, though the real exchange
ihould be in favour of that which pays in current money ; for
the fame reafon that the computed exchange may be in
favour of that which pays in better money, or in money
nearer to its ownftandard, though the real exchange ihould
be in favour of that which pays in worfe. The computed
exchange, before the late reformation of the gold coin, was
eenerally againft London with Amfterdam, Hamburgh, Ve-
nice, and, I beUeve, with all other places which pay in
what is called bank money. It will by no means follow,
Iiowever, that the real exchange was agamft it. bince the
reformation of the gold coin, it has been in favour of London
even with thofe places. The computed exchange has ge-
nerally been in favour of London with Lilbon, Antwerp,
Leghorn, and, if you except France, I believe, with
moil other parts of Europe that pay in common cur-
rency, and it is not improbable that the real exchange
was fo too.
Digrejfion
472 THE NATURE AND CAUSES OF
D'lgrejfton concerning Bankf of Depofity particularly concerning
tl^t of Amitcrdam.
JL H E currency of a great flate, fuch as France or Eng-
land, generally confifts almofl entirely of its x)wn coin.
Should this currency, therefore, be at any time worn, dipt,
or otherwife degraded below its ftandard value, the fhate bya
reformation of its coin can effedlually re-eftablifh its cur-
rency. But the currency of a fmall ftate, fuch as Genoa or
Hamburgh, can feldom ccnfifl altogether in its own coin,
but mult be made up, in a great meafure, of the coins of all
the neighbouring ftates with w'hich its inhabitants have a
continual intercourfe. Such a flate, therefore, by reform-
ing its. coin, will not always be able to reform its currency.
If foreign bills of exchange are paid in this currency, the
uncertain value of any fum, of what is in its own nature fo
uncertain, muil render the exchange always very much
agajnft fuch a iiate, Its currency being, in all foreign ftatesj
neceflarily valued even below what it is worth.
In order to remedy the Inconvenience to which this difad-
vantageous exchange mull have fubje61:ed their merchants,
fuch fmall ftates, when they began to attend to the intereil
of trade, have frequently enacled, that foreign bills of ex-
change of a certain value fhoul.d be paid, not in common
currency, but by an order upon, or by a transfer in the books
of a certain bank, eflabllilied upon the credit,'and under the
protection of the flate ; this bank being always obliged to
pay. In good and true money, exaClly according to the
flandard of the flate. The banks of Venice, Genoa, Am-
flerdam, Hamburgh, and Nuremberg, feem to have been all
originally ellabliflicd with this view, though fome of them
may have afterwards been made fubfervient to other pur-
pofes. The money of fuch banks being better than the
common currency of the country, necefTarily bore an agio,
which was greater or fmaller, according as the currency was
fuppofed to be more or lefs degraded below the flandard of
the flate. The agio of the bank of Hamburgh, for example,
which is faid to be commonly about fourteen per cent, is the
fuppofed difference between the good Pu.indard money of the.
flatCi
THE WEALTH OF NATIONS. 473
Hate, and the clipt, worn, and dimlniilied currency poured
into It from all the neighbouring Hates.
Before idop the great quantity of dipt and worn foreign
coin, which the extenfive trade of Amiterdam brought from
all parts of Europe, reduced the value of its currency about
nine per cent, below that of good money frefli from the mint.
Such money no fooner appeared than it was melted down or
carried away, as it always Is in fuch circumitances. The
merchants, with plenty of currency, could not always find a
fufficient quantity of good money to pay their bills of ex-
change ; and the value of thofe bills, in fpite of feveral re-
gulations which were made to prevent it, became in a great
meafure uncertain.
In order to remedy thefe inconveniencles, a bank was
eftablifhed in 1609 under the guarantee of the city. Tiiis
bank received both foreign coin, and the light and worn coin
of the country at its real intrinfic value in the good llandard
money of the country, dedu(Sling only fo much as was necef-
fary for defraying the expence of coinage, and the other ne-
ceitiiry expence of management. For the value which re-
mained, after this fmall dedudlion was made, it gave a cre-
dit in its books. This credit was called bank money, which,
as it reprefented money exaciiy according to the ftandard of
the mint, was always of the fame real value, and intrinfi-
cally worth more than current money. It was at the fame
time enabled, that all bills drawn upon or negociated at
Amflerdam of the value of fix hundred guilders and upwards
fnould be paid in bank money, which at once took away all
uncertainty in the value of thofe bills. Every merchant, in
confequence of this regulation, was obliged to keep an ac-
count with the bank in order to pay his foreign bills of ex-
change, which necefiarily occafioned a certain demand for
bank money.
Bank money, over and above both its Intrinfic fuperlority
to currency, and the additional value which this demand ne-
ceflarily gives it, has likewife fome other advantages. It is
fecure from fire, robbery, and other accidents ; the city of
Amfterdam is bound for it •, it can be paid away by a fimple
transfer, without the trouble of counting, or the rifle of
tranfporting it from one place to another. In confequence
of thofe different advantages, it fecms from the beginning to
liavc
474 ' THE NATURE AND CAUSES OF
liave borne an agio, and it is generally believed that all th(S
money originally depofited in the bank was allowed to re-
main there, nobody caring to demand payment of a debt
which he could fell for a premium in the market. By de-
manding payment of the bank, the owner of a bank credit
would lofe this premium. As a fliilling frefli from the mint
will buy no more goods in the market than one of our com-
mon worn (hillings, fo the good and true money which
might be brought from the coffers of the bank into thofe of
a private perfon, being mixed and confounded with the com-
mon currency of the country, would be of no more value
than tliat currency, from which it could no longer be readily
diftinguiilied. \V hile it reniained in the coffers of the bank,
its fuperiority was known and afcertained. When it had
come into thofe of a private perfon, its fuperiority could not
well be afcertained without more trouble than perhaps the
difference was worth. By being brought from the coffers of
the bank, befides, it lofl all the ether advantages of bank
money •, its fecurity, its eafy and fafe transferability, its
\i{c in paying foreign bills of exchange. Over and above
all this, it could not be brought from thofe coffers, as
will appear by and by, without previoiifly paying for the
keeping.
Those deposits of coin, or thofe depofits which the bank
was bound to reflore in coin, conllituted the original capital
of the bank, or the whole value of what was reprefented by
what is called bank money. At prefent they are fuppofed to
conffitute but a very fmall part of it. In order to facilitate
the trade in bullion, the bank has been for thefe many years
in the practice of giving credit in its books upon depofits of
gold anJ filver bullion/ This credit is generally about five
per cent, below the mint price of fuch bullion. The bank
grants at the fame time what is called a recipice or receipt,
intitling the perfon who makes the depofit, or the bearer, to
lake out the bullion again at any time within fix months,
upon transferring to the bank a quantity of bank money
equal to that for which credit had been given in its books
when the depofit was made, and^ upon paying one-fourth
per cent, for the keeping, if the depofit was in. filver ; and
one-half per cent, if it was in gold ; but at the fame time de-
claring, that in default of fuch payment, and upon the expi-
ration of this term, the depofit fliould belong to the bank at
the price at which it had been received, or for which credit
had
THE WEALTH OF NATIONS. 475
had been given in the transfer books. What is thus paid for
the keeping of the depofit may be confidered as a fort of
warehoufe rent ; and why this warehoufe rent fliould be fo
much dearer for gold than for filver, feveral diflerent reafons
have been afligned. The finenefs of gold, it has been faid,
is more difficult to be afcertained than that of fdver. Frauds
are more eafily praftifed, and occafion a greater lofs in the
more precious metal. Silver, befides, being the (landard
metal, the (late, it has been faid, wifhes to encourage more
the making of depofits of fdver than of thofe of gold.
Deposits of bullion are mod commonly made when the
price is fomewhat lower than ordinary ; and thev are taken
out again when it happens to rife. In Holland the market
price of bullion is generally above the mint price, for the
fame reafon that it was fo in England before the late refor-
mation of the gold coin. The difi'erence is faid to be com-
monly from about fix to fixteen ftivers upon the mark, or
eight ounces of filver of eleven parts fine, and one part alloy.
The bank price, or the credit which the bank gives for depo-
fits of fuch filver (when made in foreign coin, of which the
finenefs is well known and afcertained, fuch as Mexico dol-
lars) is twenty-two guilders the mark ; the mint price is about
twenty-three guilders, and the market price is from twenty-
three guilders fix, to twenty-three guilders fixteen ftivers, or
from two to three per cent, above the mint price *. The
proportions between the bank price, the mint price, and the
market price of gold bullion, are nearly the fame. A perfon
can generally fell his receipt for the difference between the
mint price of bullion and the market price. A receipt for
bullion is almoft always worth fomething, and it very feldom
happens, therefore, that any body fuffers his receipt to ex-
pire,
* The following are the prices at which the bank of Amdcrdam at prc-
icnt (September, 1775) receives bullion and coin of different kinds:
SILVER.
Mexico dollars "^ Guilders.
French crowns C B — %% per mark.
Englifh filver coin j
Mexico dollars new coin — 21 10
Ducatoons — — 3
Rix dollars — — — Z 8
Bar filver containing Ii-i2ths. fine filver %i per mark, and in this pro-
portion down to ^ fine, oh which 5 guilders are given.
Fine bars, 23 per mark.
GOLD.
4)6 THE NATURE AND CAUSES OF
pire, or allows his bullion to fall to the bank at the price at
which it had been received, either by not taking it out b'^forc
the end of the fix months, or by neglecftlng to pay the one-
fourth or one-half per cent in order to obtain a new receipt
for another fix montlis. This, however, though it happens
fcldom, is faid to happen fometimes, and more frequently
with regard to gold, than with regard to filver, on account
of the higher warehoufe-rent which is paid for the keeping
of the more precious metal.
The perfon who by making a depofit of bullion obtains
both a bank credit and a receipt, pays his bills of exchange as
they become due with his bank credit 5 and either fells' or
keeps his receipt according as he judges that the price of bul-
lion is likely to rife or to fall. The receipt and tlie bank cre-
dit feldom keep long together, and there is no occafion that
thcv fliould. The perfon who has a receipt, and who wants
to take out bullion, finds always plenty of bank credits, or
bank money to buy at the ordinary price ; and the perfon who
has bank money, and wants to take out bullion, finds receipts
always in equal abundance.
The owners of bank credits, and the holders of receipts,,
conftitute two different forts of creditors againit the bank.
The holder of a receipt cannot drav/ out the bullion for which
it Is 8;ranted, without re-alfigning to the bank a fum of bank
money equal to the price at which the JbuUion had been re-
ceived. If he has no bank money of his own, he muft pur-
chafe it of thofe who have it. The owner of bank money
cannot draw out bullion without producing to the bank re-
ceipts for the quantity which he wants. If he has Jione of
his own, he muft buy them of thofe who have them. The
holder of a receipt, when he purchafes bank money, pur-
chafes the power of taking out a quantity of bullion, of
GOLD.
Portugal coin
Guineas ^ B — 3 10 per mark.
I '-
Louis d'ors r.nv
Ditto old — • — 3C0.
I>lew duc^^ts — — 4 19 8 per ducat.
Bar or Ingot gold is received in proportion to its finenefs compared with
the above foreign gold coin. Upon fine bars tlic bank gives 340 per mark.
3n general, hov/cvcr, foir.ething more is given upon coin of a known fine-
nefs, than upon gold aad filver bars, of which the finenefs cannot be afcer-
t;ined Ivic by a procsfs of melting and affaying,
which
THE WEALTH OF N^ATICNS, 477
which the muit price is five per cent, above the bank price.
The agio of five per cent, therefore, which he commonly
pays for it, is paid, net for an imaginary, but for a real va-
lue. The owner of bank money, when he purchafes a re-
ceipt, purchafes the power of taking out a quantity of bullion
of which the market price is commonly from two to three
per cent, above the mint price. The price which he pays
for it, therefore, is paid likewife for a real value. The
price of the receipt, and the price of the bank money,
compound or make up. between them the full value or price
of the bullion.
Upon depouts of the coin current in the country, the
bank grants receipts likewife as well as bank credits j but
thofe receipts are frequently of no value, and will bring no
price In the market. Upon ducatoons^ for example, vvhicli
in the currency pafs for three guilders three ftivers each, the
bank gives a credit of three guilders only» or five per cent,
below their current value. It grants a receipt likewife in-*"
titling the bearei: to take out the number of ducatoons depo* '^'
fited at any time within fix months, upon paying one-fourth
per cent, for the keeping. Tliis receipt will frequently bring
no price in the market. Three guilders bank money gene-
rally fell in the market for three guilders three llivers, the
full value of the ducatocns, if they were taken out of tli'^
bank ; and before they can be taken out, one- fourth per cent.-
muft be paid for the keeping, which would be mere lofs to
the holder of the receipt. If the agio of the bank, however,
iliould at any time fall to three per cent, fuch receipts might'
bring fome price In the market, and might fell for one and
three-fourths per cent. But the agio of the bank being now
generally about five per cent, fuch receipts are frequcntlr
allowed to expire, or as tHey exprefs it, to fall to the bank.
The receipts which are given for depofits of gold ducats fail
to it yet more frequently, becaufe a higher warehoufe-rent,
or one-half per cent, muft be paid for the keeplnjr of them
before they can be taken out again. The five per c-ent. whicl^
the bank gains, when depofits either of coin or bullion are
allowed to fr.H to it, may be confidered as the warehoufe-reni
for the perpetual keeping of fuch depofits.
The fum of bank m.oncy for which the receipts are ex-
pired mult be very confiderable. It muft coijiprehend the
whole original capital of the bank, which, it is generally
fuppofed.
473 THE NATURE AND CAUSES OF
^uppofed, has been allowed to remain there from the time It
was firll depofited, nobody caring either to renew his receipt
or to take out his depofit, as, for the reafons ah'eady alTign-
cd, neither the one nor the other could be done without lofs.
But whatever may be the amount of this fum, the proporti-
on which it bears to the whole mafs of bank money is fup-
pofed to be very fmall. The bank of Amiterdam has for
thefe many years paft been the great warehoufe of Europe
for bullion, for which the receipts are very feldom allowed to
expire, or, as they exprefs it, to fall to the bank. The far
greater part of the bank money, or of the credits upon the
books of the bank, is fuppofed to have been created, for thefe
many years pall, by fuch depofits which the dealers in bullion
are continually both making and withdrawing.
No demand can be made upon the bank but by means of
a recipice or receipt. The fmaller mafs of bank money, for
which the receipts are expired, is mixed and confounded
with the much greater mafs for which they are ftill in force ;
fo that, though there may be a confiderable fum of bank
money, for which there are no receipts, there is no fpecific
fum or portion of it, which may not at any time be de-
manded by one. The bank cannot be debtor to two perfons
for the fame thing ; and the owner of bank money who
has no receipt, cannot demand payment of the bank till he
buys one. In ordinary and quiet times, he can find no diffi-
culty in getting one to buy at the market price, which gene-
rally correfponds with the price at which he can fell the
coin or bullion it intitles him to take out of the bank.
It might be otherwife during a public calamity •, an Inva-
fion, for example, fuch as that of the French in 1672. The
owners of bank money being then all eager to draw^ it out of
the bank, in order to have it in their own keeping, the de-
mand for receipts might raife their price to an exorbitant
height. The holders of them might form extravagant ex-
peAatlons, and, inftead of two or three per cent, demand
half the bank money for which credit had been given upon
the depofits that the receipts had rcfpeclively been granted
for. The enemy, informed of the conftitution of the bank,
might e'^'^en buy them up In order to prevent the carrying
away of the treafure. In fuch emergencies^ the bank. It is
fuppofed, would break through its ordinary rule of making
payment only to the holders of receipts. The holders of re-
ceipts^
THE WEALTH OF NATIONS. 47^
■celpts, "wlio had no bank money, muft hav° received withiii
two or three per cent, of the value of the depolit for which
their refpecftive receipts had been granted. Tlie bank, there-
fore, it is faid, would in this cafe make no feruple of p^yiiig>
either with money or bullion, the full value of what the
owners of bank money who could get no receipts, were cre-
dited for in its books ; paying at the fame time two or three
per cent, to fucli holders of receipts as had no bank money,
that being the vidiole value which in this ftate of things could
juftly be fuppofed due to them.
Even in ordinary and quiet times it is the intereft of the
holders of receipts to deprefs the agio,* in order either to buy
bank money (and confequently the bullion, whicli their re-
ceipts would then enable them to take out of the bank) fo
much cheaper, or to fell their receipts to tliofe who have
bank money, and who Vv'ant to take out bullion, fo much
dearer j the price of a receipt being generally equal to the
ditFerence between the market price of bank money, and
that of the coin or bullion for which the receipt had been
granted. It is the intereft of the owners of bank money, on
the contrary, to raife the agio, in order either to fell their
bank money fo much dearer, or to buy a receipt fo much
cheaper. To prevent the flock-jobbing tricks which thofe
oppofite interefls might fometimes occalion, thq bank has of
late years^come to the refokition to fell at all times bank
money for currency, at live per cent, agio, and to buy it in
again at four per cent. agio. In confequence of this refolii-
tion, the agio can never either rife above five, or fink below
four per cent and the proportion between tlie market price
of bank and that of current money, is kept at all times very
near to the proportion between their intvinlic values. Be-
fore this refokition was taken, the market price of bank
money ufed fometimes to rife fo high as nine percent, agio,
and fometimes to fnik fo low as par, according as oppofite
interefls happened to influence the market-
The bank of Amflerdam profefTes to lend out no part of
what is depofited with it, but, for every guilder for vv'hich it
gives credit in its books, to keep in its repofitories the value
of a guilder either in money or bullion. That it keeps in its
-repofitories all the money or bullion for which there are re-
t'eipts in force, for which it is at all times liable to be called
iripon, and which, in realltv, is contlnual'v going from it and
rcturnin-^
4So THE NAtURE AND CAlTSES OF
returning to it again, cannot well be doubted. But whether
' it does (o Hkewife with regard to that part of its capital, for
which the receipts are long ago expired, for which in ordi-
nary and quiet times it cannot be called upon, ' and which in
reality is very likely to remain with it for ever, or as long as
the States of the United Provinces fubfdt, may perhaps ap-
pear more uncertain. At Amflerdam, however, no point
of faith is better eftablifhed than that for every guilder,
circulated as bank money, there is a correfpondent guilder in
gold or fdver to be found in the treafure of the bank. The
city is guarantee that it fhould be fo. The bank is under the
dire6\ion of the four reigning burgomafters, who are changed
every year. Each new fett of burgomaiters vifits the trea-
fure, compares it with the books, receives it upon oath, and
delivers it over, with the fame awful folemnity, to the fett
which fucceeds ; and in that fober and religious country
oaths are not yet difregarded. A rotation of this kind feems
alone a fuflicient fecurity againft any pra6lices which cannot
be avowed. Amidft all the revolutions which fa£Hon has
ever occafioncd in the government of Amflerdam, the pre-
vailing party has at no time accufed their predeceflbrs of in-
fidelity in the adminiftiation of the bank. No accufation
could have afFecled more deeply the reputation and fortune
of the difgraced party, and if fuch an accufation could have
been fupported, we may be allured that it would have beeil
brought. In 1672, when the French king was atlJtrecht,
the bank of Amfterdam paid fo readily as left no doubt of
the fidelity Vv'ith which it had obferved its engagements.
Some of the pieces which were then brought from its repo-
fitories appeared to have been fcorched with the fire which
happened in the town-houfe foon after tlie bank was eftab-
lifhed. Thofe pieces, therefore, mull have lain there from
that time.
"What maybe the amount of the treafure in the bank, is
a queftion whicli has long employed the fpeculations of the
curious. Nothing but conjedf ure can be offered concerning
it. It is generally reckoned that there are about two
thoufand people v*'ho keep accounts with the bank, and al-
lov/ing them to have, one v/ith another, the value of fifteen
hundred pounds flcrling lying upon their refpeftive accounts
(a very large allowance), the whole quantity of b^nk money,
and confequently of treafure in the bank, will amount to
about three millions flerling, or, at eleven guilders the pound
(lerling,
THE WEALTH OF NATIONS. ^8i
(terllng, thirty-three mllHons of guilders ; a great fum, and
fufHcicnt to carry on a very extenfive circulation j but vaftly
below the extravagant ideas which feme people have formed
of this treafure.
The city of Amfterdam derives a confiderable revenue
from the bank. Befides what may be called tbj warehoufe-
rent above mentioned, each pe^fon, upon fir ft opening an
account with the bank, pays a fee of ten guilders ; and for
every new account three guilders three llivers ; for every
transfer two llivers i and if the transfer is for lefs than three
hundred guilders, fix ftivers, in order to difcourage the mul-
tiplicity of fmall tranfa<ft:ions. The perfon who negieifls to
balance his account twice in the year forfeits twenty-five
guilders. The perfon who orders a transfer for more than is
upon his account, is obliged to pay three per cent, for the
fum over-drawn, ind his order is fet afide into the bargain.
The bank is fappofed too to make a confiderable profit by
the fale of the foreign coin or bullion which fometimes falls
to it by the expiring of receipts, and v/hich is aUvayslcept till
it can be fold with advantage. It makes a profit likewife by
felling bank money at five per cent, agio, and buying it in at
four. Thefe diflerent emoluments amount to a good deal
more than what is necefiary for paying the falaries of oih-
cers, and defraying the expence of management. What is
paid for the keeping of bullion upon leceipts, is alone fup-
pofed to amount to a neat annual revenue of between one
hundred and fifty thoufand and two hundred thoufand guil*
ders. Public utility, however, and not revenue, was the
original objefl: of this inllitution. Its object was to relieve
the merchants from the inconvenience of a difadvantageous
exchange. The revenue which has arifen from it wu;, un-
forefeen, and may be confidcred as accidental. But it is
now time to return from this long digreflion, into which I
have been infenfibly led in endeavouring to explain the rea-
fons why the exchange between the countries which pay in
what is called bank money, and thofe which pay in common
currency, (hould generally appear to be in favour of the
former, and againlt the latter. The former pay in a fpecies
of money of which the intrinfic value Is always the fame^
and exaclily agreeable to the flandard of their refpecftlve
mints ', the latter in a fpecies of money of which the intrinfic
value is continually varying, and is almoft always more or Icfs
bslow that ftandard.
Vol. I. II PART
4^2 THE NATURE AND CAUSES OF
PART 11.
Of the Unreafonablenefs of thofe extraordinary Refraints upon
other Principles.
1 N the foregoing Part of this Chapter I have endeavoured
to {hew, even iipon^he principles of the commercial fyftem,
how unneceifary it is to lay extraordinary reftraints upon
the importation of goods from thofe countries with which
the balance of trade is fuppofed to be difadvantageous.
Nothing, however, can be more abfurd than this whole
do6:rine qf the balance of trade, upon which, not only thefe
redrr.ints, but a 1 moll all the other regulations of commerce
are founded. When two places trade with one another, this
do(fl:rine fuppofes that, if the balance be even, neither of
them either lofes or gains *, but if it leans in any degree to
one fide, that one of them lofes, and the other gains in pro-
portion to its declenfion from the ^exaft equilibrium. Both
fuppofitions are falfe. A trade which is forced by means of
bounties and monopolies, may be, and commonly is difad-
vantageous to the country in whofe favour it is meant to be
eftabiifhed, as I ihall endeavour to fliew hereafter. But that
trade which, without force or conftraint, is naturally and re-
gularly carried on between any two places, is aKvays advan-
tageous, though not always equally fo, to both.
By advantage or gain, I underftand, not the increafe of
the quantity of gold and filver, but that of the exchangeable
value of the annual produce of the land and labour of
the country, or the increafe of the annual revenue of its in-
habitants. .
If the balance be even, and if the trade between the two
places confift altogether in the exchange of their native com-
modities, tliey will, upon moft occafions, not only both gain,
but they will gain equally, or very near equally : each will
in this cafe afford a market for a part of the furplus produce
of
THE WEALTH OF NATIONS. 483
C)f the other : each will replace a capital whlcli had been em-
ployed in raifing and preparing for the market this part of
the furplus produce of the other, and wliich had been diflri-
buted among, and given revenue and maintenance to a cer^
tain number of its inhabitants. Some part of the inhabitants
of each, therefore, will indiretflly derive their revenue and
maintenance from the other. As the commodities exchan'^ed
too are fuppofed to be of equal value, fo the two canitab
employed in the trade will, upon moil oceafions, be equal,
or very nearly equal ; and both being employed in raifinrr
the native commodities of the tvv'o countries, the revenue and
maintenance which their dlilribution will afford to the inlia^
bitants of each will be equal, or very nearly equal. This re-
venue and maintenance, thus mutually afford-^-i, will be
greater or fmaller in proportion to the extent of their deal-
ings. If thefe fliould annually amount to an hundred thou-
fand pounds, for example, or to a million on each fide, e ich
of them would afford an annual revenue, in the one cafe of
an hundred thoufand pounds, in the other, of a million to
the inhabitants of the other.
If their trade fliould be of fuch a nature that one of them
exported to the other nothing but native comm.odities, while
the returns of that other confiiled altogetlier in foreign goods •
the balance, in this cafe, would ftill be fuppofed even^ com-
modities being paid for with commodities. They would, in
this cafe too, both gain, but they would not gain equally ;
and the inhabitants of the country which exported nothin^^
but native commodities would derive the greateft revenue
from the trade. If England, for example, fliould import
from France nothing but the native commodities of that
country, and, not having fuch commodities of its own as
were in demand there, fliould annually repay them by fend-
ing thither a large quantity of foreign goods, tobacco, we
fliall fuppofe, and Eaft India goods ; this trade, thouj^h it
would give fome revenue to the inhabitants of both coun-
tries, would give more to thcf^ of France than to thofe of
England. The whole French capital annually employed in
it would annually be diftributed among the people of France.
But that part of the P^nglifh capital only which was employed
in producing the Englifh commoditi.^s with which thofe
foreign goods were purcliafed, would be annually diftributed
among the people of England. The greater part of it would
replace the capitals which had been employed in Virginia,
I i i * Indoftan,
484 THE NATURE AND CAUSES OF
Indoflan, and China, and which had given revenue and
maintenance to the inhabitants of thofe diltant countries.
If the capitals were equal, or nearly equal, therefore, this
employment of tlie French capital would augment much
more the revenue of the people of France, t'.rj that of the
Englifli capital would the revenue of the peopic of England,
France would in this cafe carry on a diredl foreign cjaJe of
confumption with England *, whereas England would carry
en a round-about trade of the fame kind with France. The
different effecfls of a capital employed n the dire^, and of
one employed in the round-about foreign trade of confump-
tion, have already been fully explained.
There is not, probably, between any two countries, a
trade which confifts altogether in the exchange either of
native commodities on both fides, or of native commccities
on one fide and of foreign goods on the other. Almoft all
countries exchange with one another partly native and partly
foreign goods. That country, however, in whofe carg.oc3
there is the greateft proportion of native, and the Icaft of
foreign goods, will always be the principal gainer.
If it was not with tobacco and Eaft India goodsj but with
gold and filver, that England paid for the commodities an-
nually imported from France, the balance, in this cafe,
would be fuppofed uneven, commodities not being paid for
with commodities, but with gold and filver. The trade,
however, would, in this cafe, as in the foregoing, give fome
revenue to the inhabitants of both countries, but more to
thofe of France than to thofe of England. It would give
fome revenue to thofe of England* The capital which had
been employed in producing the Engllfh goods that pur-
chafed this gold and filver, the capital which had been diftri-
buted among, and given revenue to certain Inhabitants of
England, would thereby be replaced, and enabled to conti-
nue that employment. The whole capital of F^ngiand would
no more be diminiflied by this exportation of gold and filver,
than by the exportation of an equal value of any other
goods. On the contrary, it would, in moft cafes, be aug-
mented. No goods are fent abroad but thofe for which the
demand Is fuppofed to be greater abroad than at home, and
of which the returns confequently, it is expecfted, will be of
more value at home than the comm.odities exported. If the
tobacco which, in England, is worth only a hundred thoufand
pounds.
THE WEALTH OF NATIONS. 485
pounds, when fent to France will purchafe wine which is,
in England, worth a hundred and ten thoufand pounds, the
exchange will augment the capital of England by ten thou-
fand pounds. If a hundred thoufand pounds of Englifli
gold, in the fame manner, purchafe French wine, which, in
England, is worth a hundred and ten thoufand, this ex-
change will equally augment the capital of England by ten
thoufand pounds. As a merchant who has a hundred and
ten thoufand pounds worth of wine in his cellar, is a richer
man than he who has only a hundred thoufand pounds worth
of tobacco in his warehoufe, fo is he likewife a richer man
than he who has only a hundred thoufand pounds worth of
gold in his coffers. He can put into motion a greater quan-
tity of induilry, and give revenue, maintenance, and em-
ployment, to a greater number of people than either of the
other two. But the capital of the country is equal to the
capitals of all its different inhabitants, and the quantity of
indultry which can be annually maintained in it, is equal to
what all thofe different capitals can maintain. Both the
capital of the country, therefore, and the quantity of induftry
which can be annually maintained in it, muft generally be
augmented by this exchange. It would, indeed, be more
advantageous for England that it could purchafe the wines of
France with its own hardware and broad-cloth, than with
either the tobacco of Virginia, or the gold and filver of
Brazil and Peru. A direct foreign trade of confumption is
always more advantageous than a round-about one. But a
round-about foreign trade of confumption, which is carried
on with gold and filver, does not feem to be lefs advanta-
geous than any other equally round-about one. Neither is a
country which has no mines more likely to be exhaufted of
gold and filver by this annual exportation of thofe metals,
than one which does not grow tobacco by the like annual
exportation of that plant. As a country which has where-
withal to buy tobacco will never be long in want of it, fo nei-
ther will one be long in want of gold and filver which has
wherewithal to purchafe thofe metals.
It Is a lofmg trade, it is faid, which a workman carries on
with the alehoufe ; and the trade which a manufa(Sluring na-
tion would naturally carry on with a wine country, may be
confidered as a trade of the fame nature. I anfwer, that
the trade with the alehoufe is not neceffarily a lofng trade.
In its own nature it is jufl as advantageous as any other,
though.
426 THE NATURE AND CAUSES OF
though, perhaps, fomewhat more liable to be abufed. Thei
employment of a brewer, and even that of a retailer of
fermented liquors, are as neceffary divilions of labour as any
otlier. It will generally be more advantageous for a work-^
n^an to buy of the brewer the quantity he has occafion for,
than to brew it himfelf, and if he is a poor workman, it will
generally be more advantageous for him to buy it, by little
and little of the retailer, than a large quantity of the brewer.
He may no doubt buy too much of either, as he may of any
other dealers in his neighbourhood, of the butcher, if he is
a glutton, or of the draper, if he alfecls to be a beau among
his companions. It is advantageous to the great body of
workmen, notwithltanding, that all thefe trades Ihould be
free, though this freedom may be abufed in all of them, and
is more likely to be fo, perhaps, in fome than in others.
Though individuals, befides, may fometimes ruin their for-
tunes by an exceffive confumption of fermented liquors,
there feems to be no rillv that a nation fliould do fo. Though
in every country there are many people who fpend upon
fuch liquors more than they can afford, there are always
many more who fpend lefs. It dcferves to be rem^arked too
that, if we confult experience, the cheapnefs of v/ine feems
to be a caufe, not of drunkennefs, but of fobriety. The
inhabitants of th.^ wine countries are in general the foberefl:
people in Europe •, witnefs the Spaniards, the Italians, and
the irhabitants of the foiithern provinces of France. People
are fcldom guilty of excels in what is their daily fare. No-
body ailecl-s the chara6r.er of liberality and good fellowfliip,
by being profufe o( a liquor which is as cheap as fmali beer.
On the contrary, in the countries v/hich, cither from excef-
five heater cold, produce no grapes, and where v/ine confe-
quently is dear and a rarity, drunkennefs is a common vice,
as among the northen nations, and all thofe who live be-
tvt'een the tropics, the negroes, for example, on the coaft of
Guinea. AVhen a French regiment comes from fome of the
northern provinces of France, where wine is fomewhat dear,
tc be quartered in the fouthern, where it is very cheap, the
foldiers, 1 have frequently heard it obferved, are at firfl de-
bauched by the cheapnefs and novelty of good wine ; but
after a fev.- months refidence, the greater part of them be-
come as fober as the reft of the inhabitants. Were the du-
ties upon foreign wines, and the excifes upon malt, beer,
■'Tid ?]c, to be taken away all at once^ it might, in the fame
manner.
THE WEALTH OF NATIONS. 487
manner, occafion In Great Britain a pretty general and tem-
porary drunkennefs among the middling and inferior rankss,
of people, which would probably be foon followed by a
permanent and almoft univerfal fobriety. At prefent drun-
kennefs is by no means the vice of people of faibion, or of
thofe who can eafily afford the moll expenfive liquors. A
gentleman drunk with ale, has fcarce even been feen among
us. The reftraints upon the wine trade in Great Britain,
befides, do not (o much fcem calculated to hinder the people
from going, if I may fay fo,to the alehoufe, as from going
where they cxn buy the befl and cheapeil liquor. They fa-
vour the wine trade of Portugal, and difcouragethatofFrance.
The Portuguefe, it is faid, indeed, are better cuilomers for
our manufacflures than the French, and fhould therefore be
encouraged in preference to them. As they give us their
cuftom, it is pretended, we fhould give them ours. Tlie
fneaking arts of underling tradefmen are thus ere6led into
political maxims for the condudl of a great empire : for it is
the mofl underling tradefmen only who make it a rule to em-
ploy chiefly their own cuftomers. A great trader purchafes
his goods always where they are cheapeft and beft, without
regard to any little intereft of this kind.
By fuch maxims as thefe, however, nations have been
taught that their intereft confifted in beggaring all their
neighbours. Each nation has been made to look with an in-
vidious eye upon the profperity of all tlie nations with which
it trades, and to conlider their gain as its own lofs. Com-
merce, which ought naturally to be, among nations, as
among individuals, a bond of union and friendfhip, has be-
come the moft fertile fource of difcord and animofity. The
capridous ambition of kmgs and minifters has not, d^-U-in.^
the prefent and the preceding century, been more fatal to
the repofe of Europe,, than the impertinent jealoufy of mer-
chants and manufacturers. The violence and injuftice of
the rulers of mankind is an ancient evil, for which, I am
afraid, the nature of human affairs can fcarce admit of a
remedy. But the mean rapacity, the monopolizing fpirit of
merchants and manufacturers, who neither are, nor ought
to be the rulers of mankind, though it cannot perhaps be
correfted, may very eafily be prevented from diiturbing the
tranquillity of any body but themfelve^.
That
48S THE NATURE AND CAUSES OF
That it was the fplrit of monopoly which originally both
mvented and propagated this doctrine, cannot be doubted ;
and they who hrli taught it were by no means fuch fools as
they who believed it. In every country it always is and
muit be the intereft of the great body of the people to
buy whatever they want of thofc who fell it cheapclh The
propofition is fo very manifefl, that it feems ridiculous to
take any pains to prove it ; nor could it ever have been called
in queilion, had not the interefled fophiilry of merchants
and manuradl:urer3 confounded the common fenfe of man-
kind. Their intereft is, in this refpedl:, direftly oppofite to
that of the great body of the people. As it is the intereft
of the freemen of a corporation to hinder the reft of the
inhabitants from employing any workmen but themfelves, fo
it is the intereft of the merchants and manufadlurers of
every country to Secure to themfelves the monopoly of the
home market. Hei\Cc in Great Britain, and in moft other
European countries, the extraordinary duties upon almoft all
goods imported by alien merchants. Hence the high duties
and prohibitions upon all thofe foreign manufacftures which
can come into competition with our own. Hence too the
extraordinary reftraints upon the importation of almoft all
forts of goods from, thofe countries with which the balance
of trade is fuppofed to be difadvantageous ; that is, from
thofe againft whom national animofity happens to be moft
violently inflamed.
The wealth of a neighbouring nation, however, though
dangerous in war and politics, is certainly advantageous in
trade. In a ftate of hoftility it may enable our enemies to
maintain fleets and armies fuperior to our own •, but in a
ii'dit of peace and commerce it muft likewife enable them to
exchange -w ith us to a greater value, and to afford a better
market, either for the imimediate produce of our own in-
duftry, or for whatever is purchafed with that produce. As
a rich man is likely to be a better cuftomer to the induftrious
people in his neighbourhood, than a poor, fo is likewife a
rich nation. A rich man, indeed, Vv'ho is himfelf a manu-
faclurer, is a very dangerous neighbour to all thofe who
deal in the fame v/ay. All the reft of the neighbourhood,
however, by far the greateft number, profit by the good
m-arket which his expence affords them. They even profit
by his under-felling the poorer workmen who deal in the
fame
THE WEALTH OF NATIONS. 489
fame way with him. The manufacturers of a rich nation,
in the fame manner, may no doubt be very dangerous rivals
to thofe of their neighbours. This very competition, how-
ever, is advantageous to the great body of tlie people, who
profit greatly befides by the good market which the great
expence of fuch a nation affords them in every other way.
Private people who want to make a fortune, never think of
retiring to the remote and poor provinces of the country,
but refort either to the capital or to fome of the great com-
mercial towns. They know, tliat, where little wealth cir-
culates, there is little to be got, but that where a great deal
is in motion, fome fliare of it may full to them. The
fame maxims which would in this manner direO: the com-
mon fenfe of one, or ten, or twenty individuals, Ihiould
regulate the judgment of one, or ten, or twenty millions,
and Ihould make a whole nation regard the riches of its
neighbours, as a probable caufe and occafion for itfelf to ac-
quire riches. A n,ation that would enrich itfelf by foreign
trade is certainly moil likely to do fo when its neighbours
are all rich, indullrious, and commercial nations. A great
nation furrounded on all fides by wandering favages and
poor barbarians might, no doubt, acquire riches by the cul-
tivation of its own lands, and by its own interior com-f
merce, but not by foreign trade. It feems to have been
in this manner that the antient Egyptians and the modern
Chinefe acquired their great wealth. The antient Egyp-
tians, it is faid, negle<£led foreign commerce, and the
modern Chinefe, it is known, hold it in the utmofh cofi-
tempt, and fcarce deign to afford it the decent protection'.
of the laws. The modern maxims of foreign commerce,
by aiming at the impoveriOiment of all our neighbours,
fo far as they are capable of producing their intended effecfl,
tend to render that very commerce infignifiicant and con-
temptible.
It is in confequence of thefe maxims that the com-
merce between France and England has in both countries-
been fubjeCled to fo many difcouragements and reftraints.
If thofe two countries, hov»'ever, were to confider their
real intereft, without either mercantile jealoufy or na-
tional animofity, the commerce of France might be more
advantageous to Great Britain than that of any other
country, and for the fame reafoii that of Great Britain
to
490 THE NATURE AND CAUSES OF
to France. France is the nearefl neighbour to Great Bri-
tain. In the trade between the fouthern coafl of England
and ths northern and north-weftern ooafts of France, the
returns might be expelled, in the fame manner as in the in.
land trade, four, five, or fix times in the year. The capital,
therefore, employed in this trade, could ia each of the two
countries keep in motion four, five, or fix times the quan-
tity of indullry, and afford employment and fubfiftence to
four, five, or fix times the number of people, which an
equal capital could do in the greater part of the other branches
of foreign trade. Between the parts of France and Great
Britain mod remote from one another, the returns might
be expe<fl:ed, at leaft, once in the year, and even this
trade would fo far be at leaft equally advantageous as the
greater part of the other branches of our foreign European
trade. It would be, at leafh, three times more advantage-
ous, than the boafted trade with our North American
colonies, in which the returns were feldom made in lefs
than three years, frequently not in lefs than four or five
years. France^ befides, is fuppofed to contain tu'enty-four
millions of inhabitants. Our North American colonies were
never fuppofed to contain more than three millions : And
France is a much richer country than North America ;
though, on account of the more unequal/ diftribution of
riches, there is much more po\>erty and beggary in the one
country, than in the other. France, therefore, could afford
a market at leaft eight times more extenfive, and, on account
of the fupcrior frequency of the returns, four and twenty
times more advantageous, than that which cur North Ame-
rican colonies ever afforded. The trade of Great Britain
would be juft as advantageous to France, and, in proportion
to the wealth, population and proximity of the refpe(Slive
countries, would have the fame fuperiority over that which
France carries on with her own colonies. Such is the very
great difference between that trade which the wifdom of
both nations has thought proper to difcourage, and that which
it has favoured the moft.
But the very fam.e circumftanccs which would have ren-
dered an open and free commerce between the two countries
fo advantageous to both, have occafioned the principal ob-
itrucftions to tU^t commerce. Being neighbours, they are
neccffarily enemies, and the wealth and power of each be-
comes.
THE WEALTH OF NATIONS. 491
comes, upon that account, more formidable to tlie other ;
and what woukl increaie the advantage of national friend-
Oiip, ferves only to inflame the violence of national animo-
fity. They are both rich and induftrious nations ; and the
merchants and manufadlurers of each, dread the competition
of the Ikill and atflivity of thofe of the other. Mercantile
jealoufy is excited, and both inflames, and is itfc:lf inflamed,
by the violence of national animofity : And the traders of
both countries have announced, with all the pafTionate con-
fidence of intcreited falfehood, the certain ruin of each, in
confequence of that unfavourable balance of trade, wiiich,
they pretend, would be the infallible effcti of an unreftralned
commerce with the other.
There Is no commercial country in Europe of which the
approaching ruin has not frequently been fore^told by the pre-
tended dodlors of this fyftem, from an unfavourable balance
of trade. After all the anxiety, however, which tliey have
excited about this, after all. the vain attempts of almofl all
trading nations to turn that balance in their own favour and
againfh their neighbours, it does not appear that any one na-
tion in Europe has been in a:r/ refpe(::l: impoverifhed by this
caufe. Every town and country, on the cona-arv, in pro-
portion as they have opened their ports to all nations ; inftead
of being ruined by Lhis free trade, as the principles of the
commercial fyflem would lead us to expecf, have been en-
riched by it. Tl^ough there are in Europe, indeed, a few
towns which in fome refpe(fl:s deferve the name of free ports,
there is no country which does fo. Holland, perhaps, ap-
proaches the neareil to this character of any, though (till very
remote from it ; and Holland, it is acknowledged, not only
derives its whole wealth, but a great part of its neceliary fub-
fiftence, from foreign trade.
There is another balance. Indeed, whicli has already been
explained, very different from the balance of trade, and which,
according as it happens to be cither favourable or unfavour-
able, necelTarily occadons the profperity or decay of every
nation. This is tlie balance of the annual produce and con-
fumptlon. If the exchangeable value of the annual produce,
it has already been obfervcd, exceeds that of the annual con-
fumptlon, the capital of the fociety mult annually increafe in
proportion to this excefs. The fociety In this cafe lives within
its revenue, and v/hat is annually ['Av^d out of its revenue, is
naturally
492 THE. NATURE ANJ3 CAUSES OF
naturally added to its capital, and emplcyed fo as to increafc
ftill further the annual produce. If the exchangeable v^luc
of the annual produce, on the contrary, fall fhiort of the an-
nual confumptior, the capital of the fociety mud annually
decay in proportion to this deficiency. The expence of the
fociety in this cafe exceeds its revenue, and neceOarily en-
croaches upon its capital. Its capital, therefore, mud necel-
larily decay, and, together with it, the exchangeable value of
the annual produce of its induftry.
This balance of produce and confumption is entirely dif-
ferent from, what is called, the balance of trade. It might
take place in a nation which had no foreign trade, but which
was entirely feparaced from all the world. It may take place
in the whole globe of rhe earth, of which the wealth, popu-
lation, and improvement may be either gradually increafing
or gradually decaying.
The balance of produce and confumption may be con-
flantly in favour ot a nation, though w^hat is called the ba-
lance of trade be generally againft it. A nation may import
to a greater value than it exports for half a century, perhaps,
together -, the gold and fdver which comes into it during all
thib time may be all immediately fent out of it*, its circulating
coin mav gradually decay, different forts of paper money be-
ing fubftituted in its place, and even the debts too which it
contrails in the principal nations with whom it deals, may
be gradually increafmg; and yet its real wealth, the exchange-
able value of the annual produce of its lan-ds and labour,
may, during the fame period, have been increafmg in a much
ijreater proportion. The ftate of our North American colo-
nies, and of the trade which they carried on wdth Great Bri-
tain, before the commencement of the prefent diflurbances%
may ferve as a pi oof that this is by no means an impoilible
fuppofition.
* This paragraph was written in the year 1775.
C H A P=
THE WEALTH OF NATIONS. 493
CHAP. IV.
, Of lyrawhacks*
iVAERCH ANTS and manufa(fl;urers arc not contented
with the monoply of the home market, but defire likewifc
the mod extenfive foreign falc for their goods. Their coun-
try has no jurifdi<5tion in foreign nations, and therefore can
feldom procure them any monopoly there. They are gene-
rally obliged, therefore, to content themfelves with petition-
ing for certain encouragements to exportation.
Of thefe encouragements what are called Drawbacks feem
to be the moft reafonable To allow the merchant to draw
back upon exportation, either the whole or a part of what-
ever excife or inland duty is impofed upon domeflic induftry,
can never occafion the exportation of a greater quantity of
goods than what would have been exported had no dutv been
impofed. Such encouragements do not tend to turn towards
any particular employment a greater fliare 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 awav
any part of that fliare to other employments. They tend not
to overturn that balance which naturally eftablifiies itfelf
among all the various employments of the fociety ; but to
hinder it from being overturned by the duty. They tend not
to deftroy, but to preferve, what it is in moft cafes advan-
tageous to preferve, the natural divifion and diftribution of
labour in the focietv-
4
The fame thing may be faid of the drawbacks upon the
re-exportation of foreign goods imported ; which ia Great
Britain jrenerally amount to by much the largelt part of the
duty upon importation. By the fecond of the rules, annexed
to the acV of parii:'ment, which impofed, what is now called,
the old fabfidy, every merchant, whether Engliih or alien,
was allowed to draw back half that duty upon exportation ;
the Englifh merchant, provided the exportation took, place
witliin twelve months ; the alien, provided it took place
within
494 THE NATURE AND CAUSES OF
within nine months, Vv'^ines, currants, and wrought filks
were the only goods which did not fall within this rule, hav-
ing other and more advantageous allowances. The duties;
impofed by this aift of parliament were, at that time, the
only duties upon the importation of foreign goocS. The term
within which this, and all other drawbacks, could he claimed,
was afterwards i^by 7 Geo. L chap. 21. (c£\:> 10.) extended
to three years.
The duties which have been Impored fnicc the old fub-
fidv, are, the greater part of them, v/holly drawn back upon
exportation. Tlv.:. general rule, however, is liable to a great
number of exceptions, and the docRjrine of drawbacks has be-
come a much lefs Lmple matter, than it was at their fiirfl in-
iiitution.
Upon the exportation of tome foreign goods, of which it
was expected that the in^.portation would greatly excet ' vhat
was necefiary for the home confumption, the whole duties
are drawn back, without retaining even half the ola fufidy.
Before the revolt of our North American colonies, we had
the monopoly of the tobacco of Maryland and Virginia. We
imported about ninety-fix thoufand hogfheads, and the home
confumption was not fuppofed to exceed fourteen thoufand.
To facilitate the great exportatio"n M^hich was neceffary, in
order to rid us of the relt, the whole duties were drawn
back, provided the exportation took place within three
years.
We ftlU have, though not altogether, yet very nearly,
the monopoly of the fugars of our Weft Indian Ifinnds. If
fugars are exported within a year, therefore, all i:he duties
upon importation are drawn back, and if expor:ed within
three years, all the duties, except half the old fubfidy, which
ilill continues to be retained upon the exportation of the
greater part of goods. Though the importation of fugar ex-
ceeds, a good deal, what is neceiTary for l-he home confump-
tion, the excefs is inconfiderable, in comparifon of what it
ufcd to be in tobacco.
Some goods, the particular objeifts of the jealoufy of our
own manufa^lurers, are prohibited to be imported fo" home
confumption. They may, however, upon paying certa \ "u-
ties, be Imj-jortcd and warchoufed for exportation. But .uon
fuch
THE WEALTH OF NATIONS. 495
fuch exportation^ no part of thefe duties are drawn back.
Our manutadfturers are unwilling, it fecms, that even this
reftri(il:ed importation fliould be encouraged, and are afraid
l£{l: fome part of thefe goods lliould be ilolen out of the
wavehoufe, and thus come into competition with their own.
It is u^der thefe regulations only that we can import wrought
filks. French cambricks and lawns, callicoes painted, printed,
framed, or dyed, &c.
We are unwilling even to be the carriers of French goods,
and choofe rather to forego a profit to ourfelves, than to fuf-
fer thofe, whom we confidcr as our enemies, to make any
profit by our means. Not only half the old fubfidy, but the
fecond twenty-five per cent, is retained upon the exportation
of all French goods.
By the fourth of the rules annexed to the old fubfidy, the
drawback allowed upon the exportation of all wines amount-
ed to a great deal more than half the duties which were, at
that time, paid upon their importation ; and it feems, at that
time, to have been the obje<fL of the legiilature to give fome-
what more than ordinary encouragement to the carrying trade
in wine. Several of the other duties too, which were im-
pofed, eitker at the fame time, or fubfequent to the old fub-
fidy ; what is called the adthtional duty, tlie new fubfidy,
the one-third and two-tliird fubfidies, the impoft 1692, the
coinage on wine, were allowed to be wholly drawn back
upon exportation. - All thofe duties, however, except the
additional duty and impoO; 16.92, being paid down in readv
money, upon importation, the intereil of fo large a funi oc-
cafioned an expence, which made it unreafonable to expe(ft
any profitable carrying trade in this article. Onlv a part,
therefore, of the duty called the impofl on wine, and no
part of the twenty-five pounds the ton upon French wines.
Or of the duties impofed in 1745, in 1763, and in 1778,
were allowed to be drawn hack upon exportation. The two
impofts of five per cent. Impofed in 1779 and 1781, upon
all the former duties of cuftoms, being allowed to be wliollv
drawn back upon the exportation of all other goods, v. ere
likewife allowed to be drawn back upon that of wine. The
lai't duty t\vdt has been particularly impofed upon wine, that
of 1780J is allowed to be wholly drawn back j an indulg-
ence, which, when fo many heavy duties are retained,
moll probablv coitld never occafion the exportation of a
496 THE NATURE AND CAUSES OF
fingle ton of wine, lliefe rules take place with regard ro all
places of lawful exportation, except the Britifli colonics in
America.
The 15th Charles It. chap, 7. called an aft for the en-
couragement of trade, had given Great Britain the monopoly
of fupplying the colonies with all the commodities of the
growth or manufacture of Europe : and confequently wath
v^ines. In a country of fo extenfive a coaft as our North
American and V/eft Indiarl colonies, where our authority
was always fo very {lender, and where the inhabitants were al-
lowed to carry out, in their own fliips, their non-enumerated
commodities, at firft, to all parts of Europe, and afterwards,
to all parts of Europe South of Cape Finifterre, it is not
very probable that this monopoly could ever be much re-
fpected ; and they probably, at all times, found means of
bringing back fome cargo from the countries to which they
were allowed to carry out one. They feem, however, to
have found fome diihculty in importing European wines
from the places of their growtli, and they could not well im-
port them from Great Britain, where they were loaded with
many heavy duties, of which a confiderable part was not
drav/n back upon exportation. Madeira wine, not being a
European commoditVj could be Imported direftly into Ame-
rica and tlie Weft Indies, countries which, in all their non-
enumerated commodities, enjoyed a free trade to the iiland of
Madeira. Thefe circumilances had probably introduced that
general tafte for Madeira wine, which cur officers found
eftablifned in all our colonies at the commencement of the
war, which began in 1755, and which they brought back
with tliem to the mother country, where that wine had not
been much in fafliion before. Upon the conclufion of that
war, in 1763 (by the 4th Geo. III. Chap. 15. Sect. 12.), all
the duties, except 3/. loj. were allowed to be drawn back,
upon the exportation to the colonies of all wines, except
French wines, to the commerce and confumption of which,
national prejudice would allcnv no fort cf encouragement.
The period between the granting of this indulgence and the
revolt of our North American colonies was probably too
fliort to adniit of any conhderable change in the cuftoms of
thofe countries.
Thf. fame aft, which, in the drawback upon all wines,
except French wines, thus favoured the colonies fo much
more
I
mZ WEALTH OF NATIONS. 4gj
niore than other countries ; in thofe, upon tlie greater pait
of other commodities, favoured them much lefs. Upon the
exportation of the greater part of commodities to other coun-
tries, half the old fubfidy was drawn back. But this law en-
acted, that no part of^ that duty iliould be drawn back upon
the exportation to the colonies of any commodities, of the
growth or manufaft ure either of Europe or the Eait Indies,
except wines, white caliicoes and mullins«
Drawbacks were, perhaps, originally granted for the en-
couragement of the carrying trade, which, as the freight of
the fhips is frequently paid by foreigners in money, was
fuppofed to be peculiarly fitted for bringing gold and filver
into the country. But though the carrying trade certainhr
deferves no peculiar encouragement, though the motive of
the inltitution was, perhaps, abundantly foolifh, the infti-
tution itfelf feems reafonable enough. Such drawbacks
cannot force into this trade a greater fliare of the capital of
the country than what would have gone to it of its own
iaccord, had there been no duties upon Importation. They
only prevent its being excluded altogether by thofe duties.
The carrying trade, though it deferves no preference,
ought not to be precluded, but to be left free like ail other
trades. It Is a necelTary refouirce for thofe capitals which
cannot find employment either in the agriculture or in the
nianufacftures of the country, either in its home trade or
in its foreign trade of confumption.
The revenue of the cufioms, inftead of fufFering, pro-
fits from fuch 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 feldom
have been exported, nor confequently imported, for want
of a market. The duties, therefore, of which a part is re-
tained, would never have been paid*
These reafons feem fufficiently to juftlfy drawbacks,
and would juftify them, .though the whole duties, whether
upon the produce of domeftic induflry, or upon foreirn
goods, were always drawn back upon exportation. The
revenue of excife would in this cafe, indeed, fuffcr a little,
nnd that of the cuftoms a good deal more j but the natural
balance of induftry, the natural divilion and diflribution of
Vol. I. K k labour,
49S THE NATURE AND CAUSES &c,
labour, which is always more or Icfs diflurbed by fucH
duties, would be more nearly re-eftablifhed by fuch a re-
gulation.
These reafons, however, will juftify drawbacks only
upon exporting goods to thofe countries which are altoge-
ther foreign and independent, not to thofe in which our
merchants and manufacturers enjoy a monopoly. A draw-
back, for example, upon the exportation of European goods
to our American colonies, will not always accafion a greater
exportation than what would have taken place without it.
By means of the monopoly which our merchants and ma-
nufadlurers enjoy there, the fame quantity might frequent-
ly, perhaps, be fent thither, though the whole duties
were retained. The drawback, therefore, may frequently
be pure lofs to the revenue of excife and cufhoms, without
altering the ftate of the trade, or rendering it in any re-
fpect more extenfive. Ho^' far fuch drawbacks can be
juftified, as a proper encouragement to the induftry of our
colonies, or how far it is advantageous to the mother
country, that they fhould be exempted from taxes which
are paid by all the reft of their fellow- fubjecfts, will appear
hereafter when I come to treat of colonies.
Dravv^backs, however, it muft always be underftood,
are ufeful only in thofe cafes in which the goods for the
exportation of which they are given, are really exported to
fome foreign country ; and not clandeftinely re-imported
into our own. That fome drawbacks, particularly thofe
upon tobacco, have frequently been abufed in this manner,
and have given occafion to many frauds equally hurtful
both to the revenue and to the fair trader, is well
known.
END OF THE FIRST VOLUME,
DATE DUE
Mim^t^i^f^^
(
DEM CO 38-297
X^lnUir''n?otl nature and causes of
Princeton Theological Seminary-Speer Ubrary
1012 00056 0179
Live Music Archive
Librivox Free Audio
Metropolitan Museum
Cleveland Museum of Art
Internet Arcade
Console Living Room
Books to Borrow
Open Library
TV News
Understanding 9/11