Infomotions, Inc.An Inquiry Into The Nature And Causes Of The Wealth Of Nations / Smith, Adam



Author: Smith, Adam
Title: An Inquiry Into The Nature And Causes Of The Wealth Of Nations
Publisher: Eris Etext Project
Tag(s): price; labour; quantity; revenue; trade; rent; capital; great britain; corn; market; silver; greater; proportion; american literature
Contributor(s): Eric Lease Morgan (Infomotions, Inc.)
Versions: original; local mirror; HTML (this file); printable
Services: find in a library; evaluate using concordance
Rights: GNU General Public License
Size: 377,109 words (tome-like) Grade range: 16-19 (graduate school) Readability score: 38 (difficult)
Identifier: smith-inquiry-161
Delicious Bookmark this on Delicious

Discover what books you consider "great". Take the Great Books Survey.

                                      1776

                         AN INQUIRY INTO THE NATURE AND

                        CAUSES OF THE WEALTH OF NATIONS

                                 by Adam Smith

                 INTRODUCTION AND PLAN OF THE WORK

    THE annual labour of every nation is the fund which originally
supplies it with all the necessaries and conveniences of life which it
annually consumes, and which consist always either in the immediate
produce of that labour, or in what is purchased with that produce from
other nations.

    According therefore as this produce, or what is purchased with it,
bears a greater or smaller proportion to the number of those who are
to consume it, the nation will be better or worse supplied with all
the necessaries and conveniences for which it has occasion.

    But this proportion must in every nation be regulated by two
different circumstances; first, by the skill, dexterity, and
judgment with which its labour is generally applied; and, secondly, by
the proportion between the number of those who are employed in
useful labour, and that of those who are not so employed. Whatever
be the soil, climate, or extent of territory of any particular nation,
the abundance or scantiness of its annual supply must, in that
particular situation, depend upon those two circumstances.

    The abundance or scantiness of this supply, too, seems to depend
more upon the former of those two circumstances than upon the
latter. Among the savage nations of hunters and fishers, every
individual who is able to work, is more or less employed in useful
labour, and endeavours to provide, as well as he can, the
necessaries and conveniences of life, for himself, or such of his
family or tribe as are either too old, or too young, or too infirm
to go a hunting and fishing. Such nations, however, are so miserably
poor that, from mere want, they are frequently reduced, or, at
least, think themselves reduced, to the necessity sometimes of
directly destroying, and sometimes of abandoning their infants,
their old people, and those afflicted with lingering diseases, to
perish with hunger, or to be devoured by wild beasts. Among
civilised and thriving nations, on the contrary, though a great number
of people do not labour at all, many of whom consume the produce of
ten times, frequently of a hundred times more labour than the
greater part of those who work; yet the produce of the whole labour of
the society is so great that all are often abundantly supplied, and
a workman, even of the lowest and poorest order, if he is frugal and
industrious, may enjoy a greater share of the necessaries and
conveniences of life than it is possible for any savage to acquire.

    The causes of this improvement, in the productive powers of
labour, and the order, according to which its produce is naturally
distributed among the different ranks and conditions of men in the
society, make the subject of the first book of this Inquiry.

    Whatever be the actual state of the skill, dexterity, and judgment
with which labour is applied in any nation, the abundance or
scantiness of its annual supply must depend, during the continuance of
that state, upon the proportion between the number of those who are
annually employed in useful labour, and that of those who are not so
employed. The number of useful and productive labourers, it will
hereafter appear, is everywhere in proportion to the quantity of
capital stock which is employed in setting them to work, and to the
particular way in which it is so employed. The second book, therefore,
treats of the nature of capital stock, 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
employed.

    Nations tolerably well advanced as to skill, dexterity, and
judgment, in the application of labour, have followed very different
plans in the general conduct or direction of it; those plans have
not all been equally favourable to the greatness of its produce. The
policy of some nations has given extraordinary encouragement to the
industry of the country; that of others to the industry of towns.
Scarce any nation has dealt equally and impartially with every sort of
industry. Since the downfall of the Roman empire, the policy of Europe
has been more favourable to arts, manufactures, and commerce, the
industry of towns, than to agriculture, the industry of the country.
The circumstances which seem to have introduced and established this
policy are explained in the third book.

    Though those different plans were, perhaps, first introduced by
the private interests and prejudices of particular orders of men,
without any regard to, or foresight of, their consequences upon the
general welfare of the society; yet they have given occasion to very
different theories of political economy; of which some magnify the
importance of that industry which is carried on in towns, others of
that which is carried on in the country. Those theories have had a
considerable influence, not only upon the opinions of men of learning,
but upon the public conduct of princes and sovereign states. I have
endeavoured, in the fourth book, to explain, as fully and distinctly
as I can, those different theories, and the principal effects which
they have produced in different ages and nations.

    To explain in what has consisted the revenue of the great body
of the people, or what has been the nature of those funds which, in
different ages and nations, have supplied their annual consumption, is
the object of these four first books. The fifth and last book treats
of the revenue of the sovereign, or commonwealth. In this book I
have endeavoured to show, first, what are the necessary expenses of
the sovereign, or commonwealth; which of those expenses ought to be
defrayed by the general contribution of the whole society; and which
of them by that of some particular part only, or of some particular
members of it: secondly, what are the different methods in which the
whole society may be made to contribute towards defraying the expenses
incumbent on the whole society, and what are the principal
advantages and inconveniences of each of those methods: and, thirdly
and lastly, what are the reasons and causes which have induced
almost all modern governments to mortgage some part of this revenue,
or to contract debts, and what have been the effects of those debts
upon the real wealth, the annual produce of the land and labour of the
society.

                            BOOK ONE

  OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS. OF LABOUR,

  AND OF THE ORDER ACCORDING TO WHICH ITS. PRODUCE IS NATURALLY

      DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE.

                            CHAPTER I

                    Of the Division of Labour

    THE greatest improvement in the productive powers of labour, and
the greater part of the skill, dexterity, and judgment with which it
is anywhere directed, or applied, seem to have been the effects of the
division of labour.

    The effects of the division of labour, in the general business
of society, will be more easily understood by considering in what
manner it operates in some particular manufactures. It is commonly
supposed to be carried furthest in some very trifling ones; not
perhaps that it really is carried further in them than in others of
more importance: but in those trifling manufactures which are destined
to supply the small wants of but a small number of people, the whole
number of workmen must necessarily be small; and those employed in
every different branch of the work can often be collected into the
same workhouse, and placed at once under the view of the spectator. In
those great manufactures, on the contrary, which are destined to
supply the great wants of the great body of the people, every
different branch of the work employs so great a number of workmen that
it is impossible to collect them all into the same workhouse. We can
seldom see more, at one time, than those employed in one single
branch. Though in such manufactures, therefore, the work may really be
divided into a much greater number of parts than in those of a more
trifling nature, the division is not near so obvious, and has
accordingly been much less observed.

    To take an example, therefore, from a very trifling manufacture;
but one in which the division of labour has been very often taken
notice of, the trade of the pin-maker; a workman not educated to
this business (which the division of labour has rendered a distinct
trade), nor acquainted with the use of the machinery employed in it
(to the invention of which the same division of labour has probably
given occasion), could scarce, perhaps, with his utmost industry, make
one pin in a day, and certainly could not make twenty. But in the
way in which this business 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 likewise peculiar trades. One man
draws out the wire, another straights it, a third cuts it, a fourth
points it, a fifth grinds it at the top for receiving, the head; to
make the head requires two or three distinct operations; to put it
on is a peculiar business, to whiten the pins is another; it is even a
trade by itself to put them into the paper; and the important business
of making a pin is, in this manner, divided into about eighteen
distinct operations, which, in some manufactories, are all performed
by distinct hands, though in others the same man will sometimes
perform two or three of them. I have seen a small manufactory of
this kind where ten men only were employed, and where some of them
consequently performed two or three distinct operations. But though
they were very poor, and therefore but indifferently accommodated with
the necessary machinery, they could, when they exerted themselves,
make among them about twelve pounds of pins in a day. There are in a
pound upwards of four thousand pins of a middling size. Those ten
persons, therefore, could make among them upwards of forty-eight
thousand pins in a day. Each person, therefore, making a tenth part of
forty-eight thousand pins, might be considered as making four thousand
eight hundred pins in a day. But if they had all wrought separately
and independently, and without any of them having been educated to
this peculiar business, 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 thousand eight
hundredth part of what they are at present capable of performing, in
consequence of a proper division and combination of their different
operations.

    In every other art and manufacture, the effects of the division of
labour are similar to what they are in this very trifling one; though,
in many of them, the labour can neither be so much subdivided, nor
reduced to so great a simplicity of operation. The division of labour,
however, so far as it can be introduced, occasions, in every art, a
proportionable increase of the productive powers of labour. The
separation of different trades and employments from one another
seems to have taken place in consequence of this advantage. This
separation, too, is generally called furthest in those countries which
enjoy the highest degree of industry and improvement; what is the work
of one man in a rude state of society being generally that of
several in an improved one. In every improved society, the farmer is
generally nothing but a farmer; the manufacturer, nothing but a
manufacturer. The labour, too, which is necessary to produce any one
complete manufacture is almost always divided among a great number
of hands. How many different trades are employed in each branch of the
linen and woollen manufactures from the growers of the flax and the
wool, to the bleachers and smoothers of the linen, or to the dyers and
dressers of the cloth! The nature of agriculture, indeed, does not
admit of so many subdivisions of labour, nor of so complete a
separation of one business from another, as manufactures. It is
impossible to separate so entirely the business of the grazier from
that of the corn-farmer as the trade of the carpenter is commonly
separated from that of the smith. The spinner is almost always a
distinct person from the weaver; but the ploughman, the harrower,
the sower of the seed, and the reaper of the corn, are often the same.
The occasions for those different sorts of labour returning with the
different seasons of the year, it is impossible that one man should be
constantly employed in any one of them. This impossibility of making
so complete and entire a separation of all the different branches of
labour employed in agriculture is perhaps the reason why the
improvement of the productive powers of labour in this art does not
always keep pace with their improvement in manufactures. The most
opulent nations, indeed, generally excel all their neighbours in
agriculture as well as in manufactures; but they are commonly more
distinguished by their superiority in the latter than in the former.
Their lands are in general better cultivated, and having more labour
and expense bestowed upon them, produce more in proportion to the
extent and natural fertility of the ground. But this superiority of
produce is seldom much more than in proportion to the superiority of
labour and expense. In agriculture, the labour of the rich country
is not always much more productive than that of the poor; or, at
least, it is never so much more productive as it commonly is in
manufactures. The corn of the rich country, therefore, will not
always, in the same degree of goodness, come cheaper to market than
that of the poor. The corn of Poland, in the same degree of
goodness, is as cheap as that of France, notwithstanding the
superior opulence and improvement of the latter country. The corn of
France is, in the corn provinces, fully as good, and in most years
nearly about the same 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 those of
France, and the corn-lands of France are said to be much better
cultivated than those of Poland. But though the poor country,
notwithstanding the inferiority of its cultivation, can, in some
measure, rival the rich in the cheapness and goodness of its corn,
it can pretend to no such competition in its manufactures; at least if
those manufactures suit the soil, climate, and situation of the rich
country. The silks of France are better and cheaper than those of
England, because the silk manufacture, at least under the present high
duties upon the importation of raw silk, does not so well suit the
climate of England as that of France. But the hardware and the
coarse woollens of England are beyond all comparison superior to those
of France, and much cheaper too in the same degree of goodness. In
Poland there are said to be scarce any manufactures of any kind, a few
of those coarser household manufactures excepted, without which no
country can well subsist.

    This great increase of the quantity of work which, in
consequence of the division of labour, the same number of people are
capable of performing, is owing to three different circumstances;
first, to the increase of dexterity in every particular workman;
secondly, to the saving of the time which is commonly lost in
passing from one species of work to another; and lastly, to the
invention of a great number of 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 necessarily
increases the quantity of the work he can perform; and the division of
labour, by reducing every man's business to some one simple operation,
and by making this operation the sole employment of his life,
necessarily increased very much dexterity of the workman. A common
smith, who, though accustomed to handle the hammer, has never been
used to make nails, if upon some particular occasion he is obliged
to attempt it, will scarce, I am assured, be able to make above two or
three hundred nails in a day, and those too very bad ones. A smith who
has been accustomed to make nails, but whose sole or principal
business has not been that of a nailer, can seldom with his utmost
diligence make more than eight hundred or a thousand nails in a day. I
have seen several boys under twenty years of age who had never
exercised any other trade but that of making nails, and who, when they
exerted themselves, could make, each of them, upwards of two
thousand three hundred nails in a day. The making of a nail,
however, is by no means one of the simplest operations. The same
person blows the bellows, stirs or mends the fire as there is
occasion, heats the iron, and forges every part of the nail: in
forging the head too he is obliged to change his tools. The
different operations into which the making of a pin, or of a metal
button, is subdivided, are all of them much more simple, and the
dexterity of the person, of whose life it has been the sole business
to perform them, is usually much greater. The rapidity with which some
of the operations of those manufacturers are performed, exceeds what
the human hand could, by those who had never seen them, be supposed
capable of acquiring.

    Secondly, the advantage which is gained by saving the time
commonly lost in passing from one sort of work to another is much
greater than we should at first view be apt to imagine it. It is
impossible to pass very quickly from one kind of work to another
that is carried on in a different place and with quite different
tools. A country weaver, who cultivates a small farm, must lose a good
deal of time in passing from his loom to the field, and from the field
to his loom. When the two trades can be carried on in the same
workhouse, the loss of time is no doubt much less. It is even in
this case, however, very considerable. A man commonly saunters a
little in turning his hand from one sort of employment to another.
When he first begins the new work he is seldom very keen and hearty;
his mind, as they say, does not go to it, and for some time he
rather trifles than applies to good purpose. The habit of sauntering
and of indolent careless application, which is naturally, or rather
necessarily acquired by every country workman who is obliged to change
his work and his tools every half hour, and to apply his hand in
twenty different ways almost every day of his life, renders him almost
always slothful and lazy, and incapable of any vigorous application
even on the most pressing occasions. Independent, therefore, of his
deficiency in point of dexterity, this cause alone must always
reduce considerably the quantity of work which he is capable of
performing.

    Thirdly, and lastly, everybody must be sensible how much labour is
facilitated and abridged by the application of proper machinery. It is
unnecessary to give any example. I shall only observe, therefore, that
the invention of all those machines by which labour is so much
facilitated and abridged seems to have been originally owing to the
division of labour. Men are much more likely to discover easier and
readier methods of attaining any object when the whole attention of
their minds is directed towards that single object than when it is
dissipated among a great variety of things. But in consequence of
the division of labour, the whole of every man's attention comes
naturally to be directed towards some one very simple object. It is
naturally to be expected, therefore, that some one or other of those
who are employed in each particular branch of labour should soon
find out easier and readier methods of performing their own particular
work, wherever the nature of it admits of such improvement. A great
part of the machines made use of in those manufactures in which labour
is most subdivided, were originally the inventions of common
workmen, who, being each of them employed in some very simple
operation, naturally turned their thoughts towards finding out
easier and readier methods of performing it. Whoever has been much
accustomed to visit such manufactures must frequently have been
shown very pretty machines, which were the inventions of such
workmen in order to facilitate and quicken their particular part of
the work. In the first fire-engines, a boy was constantly employed
to open and shut alternately the communication between the boiler
and the cylinder, according as the piston either ascended or
descended. One of those boys, who loved to play with his companions,
observed that, by tying a string from the handle of the valve which
opened this communication to another part of the machine, the valve
would open and shut without his assistance, and leave him at liberty
to divert himself with his playfellows. One of the greatest
improvements that has been made upon this machine, since it was
first invented, was in this manner the discovery of a boy who wanted
to save his own labour.

    All the improvements in machinery, however, have by no means
been the inventions of those who had occasion to use the machines.
Many improvements have been made by the ingenuity of the makers of the
machines, when to make them became the business of a peculiar trade;
and some by that of those who are called philosophers or men of
speculation, whose trade it is not to do anything, but to observe
everything; and who, upon that account, are often capable of combining
together the powers of the most distant and dissimilar objects. In the
progress of society, philosophy or speculation becomes, like every
other employment, the principal or sole trade and occupation of a
particular class of citizens. Like every other employment too, it is
subdivided into a great number of different branches, each of which
affords occupation to a peculiar tribe or class of philosophers; and
this subdivision of employment in philosophy, as well as in every
other business, improves dexterity, and saves time. Each individual
becomes more expert in his own peculiar branch, more work is done upon
the whole, and the quantity of science is considerably increased by
it.

    It is the great multiplication of the productions of all the
different arts, in consequence of the division of labour, which
occasions, in a well-governed society, that universal opulence which
extends itself to the lowest ranks of the people. Every workman has
a great quantity of his own work to dispose of beyond what he
himself has occasion for; and every other workman being exactly in the
same situation, he is enabled to exchange a great quantity of his
own goods for a great quantity, or, what comes to the same thing,
for the price of a great quantity of theirs. He supplies them
abundantly with what they have occasion for, and they accommodate
him as amply with what he has occasion for, and a general plenty
diffuses itself through all the different ranks of the society.

    Observe the accommodation of the most common artificer or
day-labourer in a civilised and thriving country, and you will
perceive that the number of people of whose industry a part, though
but a small part, has been employed in procuring him this
accommodation, exceeds all computation. The woollen coat, for example,
which covers the day-labourer, as coarse and rough as it may appear,
is the produce of the joint labour of a great multitude of workmen.
The shepherd, the sorter of the wool, the wool-comber or carder, the
dyer, the scribbler, the spinner, the weaver, the fuller, the dresser,
with many others, must all join their different arts in order to
complete even this homely production. How many merchants and carriers,
besides, must have been employed in transporting the materials from
some of those workmen to others who often live in a very distant
part of the country! How much commerce and navigation in particular,
how many ship-builders, sailors, sail-makers, rope-makers, must have
been employed in order to bring together the different drugs made
use of by the dyer, which often come from the remotest corners of
the world! What a variety of labour, too, is necessary in order to
produce the tools of the meanest of those workmen! To say nothing of
such complicated machines as the ship of the sailor, the mill of the
fuller, or even the loom of the weaver, let us consider only what a
variety of labour is requisite in order to form that very simple
machine, the shears with which the shepherd clips the wool. The miner,
the builder of the furnace for smelting the ore, the seller of the
timber, the burner of the charcoal to be made use of in the
smelting-house, the brickmaker, the brick-layer, the workmen who
attend the furnace, the mill-wright, the forger, the smith, must all
of them join their different arts in order to produce them. Were we to
examine, in the same manner, all the different parts of his dress
and household furniture, the coarse linen shirt which he wears next
his skin, the shoes which cover his feet, the bed which he lies on,
and all the different parts which compose it, the kitchen-grate at
which he prepares his victuals, the coals which he makes use of for
that purpose, dug from the bowels of the earth, and brought to him
perhaps by a long sea and a long land carriage, all the other utensils
of his kitchen, all the furniture of his table, the knives and
forks, the earthen or pewter plates upon which he serves up and
divides his victuals, the different hands employed in preparing his
bread and his beer, the glass window which lets in the heat and the
light, and keeps out the wind and the rain, with all the knowledge and
art requisite for preparing that beautiful and happy invention,
without which these northern parts of the world could scarce have
afforded a very comfortable habitation, together with the tools of all
the different workmen employed in producing those different
conveniences; if we examine, I say, all these things, and consider
what a variety of labour is employed about each of them, we shall be
sensible that, without the assistance and co-operation of many
thousands, the very meanest person in a civilised country could not be
provided, even according to what we very falsely imagine the easy
and simple manner in which he is commonly accommodated. Compared,
indeed, with the more extravagant luxury of the great, his
accommodation must no doubt appear extremely simple and easy; and
yet it may be true, perhaps, that the accommodation of a European
prince does not always so much exceed that of an industrious and
frugal peasant as the accommodation of the latter exceeds that of many
an African king, the absolute master of the lives and liberties of ten
thousand naked savages.

                            CHAPTER II

  Of the Principle which gives occasion to the Division of Labour

    THIS division of labour, from which so many advantages are
derived, is not originally the effect of any human wisdom, which
foresees and intends that general opulence to which it gives occasion.
It is the necessary, though very slow and gradual consequence of a
certain propensity in human nature which has in view no such extensive
utility; the propensity to truck, barter, and exchange one thing for
another.

    Whether this propensity be one of those original principles in
human nature of which no further account can be given; or whether,
as seems more probable, it be the necessary consequence of the
faculties of reason and speech, it belongs not to our present
subject to inquire. It is common to all men, and to be found in no
other race of animals, which seem to know neither this nor any other
species of contracts. Two greyhounds, in running down the same hare,
have sometimes the appearance of acting in some sort of concert.
Each turns her towards his companion, or endeavours to intercept her
when his companion turns her towards himself. This, however, is not
the effect of any contract, but of the accidental concurrence of their
passions in the same object at that particular time. Nobody ever saw a
dog make a fair and deliberate exchange of one bone for another with
another dog. Nobody ever saw one animal by its gestures and natural
cries signify to another, this is mine, that yours; I am willing to
give this for that. When an animal wants to obtain something either of
a man or of another animal, it has no other means of persuasion but to
gain the favour of those whose service it requires. A puppy fawns upon
its dam, and a spaniel endeavours by a thousand attractions to
engage the attention of its master who is at dinner, when it wants
to be fed by him. Man sometimes uses the same arts with his
brethren, and when he has no other means of engaging them to act
according to his inclinations, endeavours by every servile and fawning
attention to obtain their good will. He has not time, however, to do
this upon every occasion. In civilised society he stands at all
times in need of the cooperation and assistance of great multitudes,
while his whole life is scarce sufficient to gain the friendship of
a few persons. In almost every other race of animals each
individual, when it is grown up to maturity, is entirely
independent, and in its natural state has occasion for the
assistance of no other living creature. But man has almost constant
occasion for the help of his brethren, and it is in vain for him to
expect it from their benevolence only. He will be more likely to
prevail if he can interest their self-love in his favour, and show
them that it is for their own advantage to do for him what he requires
of them. Whoever offers to another a bargain of any kind, proposes
to do this. Give me that which I want, and you shall have this which
you want, is the meaning of every such offer; and it is in this manner
that we obtain from one another the far greater part of those good
offices which we stand in need of. It is not from the benevolence of
the butcher, the brewer, or the baker that we expect our dinner, but
from their regard to their own interest. We address ourselves, not
to their humanity but to their self-love, and never talk to them of
our own necessities but of their advantages. Nobody but a beggar
chooses to depend chiefly upon the benevolence of his fellow-citizens.
Even a beggar does not depend upon it entirely. The charity of
well-disposed people, indeed, supplies him with the whole fund of
his subsistence. But though this principle ultimately provides him
with all the necessaries of life which he has occasion for, it neither
does nor can provide him with them as he has occasion for them. The
greater part of his occasional wants are supplied in the same manner
as those of other people, by treaty, by barter, and by purchase.
With the money which one man gives him he purchases food. The old
clothes which another bestows upon him he exchanges for other old
clothes which suit him better, or for lodging, or for food, or for
money, with which he can buy either food, clothes, or lodging, as he
has occasion.

    As it is by treaty, by barter, and by purchase that we obtain from
one another the greater part of those mutual good offices which we
stand in need of, so it is this same trucking disposition which
originally gives occasion to the division of labour. In a tribe of
hunters or shepherds a particular person makes bows and arrows, for
example, with more readiness and dexterity than any other. He
frequently exchanges them for cattle or for venison with his
companions; and he finds at last that he can in this manner get more
cattle and venison than if he himself went to the field to catch them.
From a regard to his own interest, therefore, the making of bows and
arrows grows to be his chief business, and he becomes a sort of
armourer. Another excels in making the frames and covers of their
little huts or movable houses. He is accustomed to be of use in this
way to his neighbours, who reward him in the same manner with cattle
and with venison, till at last he finds it his interest to dedicate
himself entirely to this employment, and to become a sort of
house-carpenter. In the same manner a third becomes a smith or a
brazier, a fourth a tanner or dresser of hides or skins, the principal
part of the nothing of savages. And thus the certainty of being able
to exchange all that surplus part of the produce of his own labour,
which is over and above his own consumption, for such parts of the
produce of other men's labour as he may have occasion for,
encourages every man to apply himself to a particular occupation,
and to cultivate and bring to perfection whatever talent or genius
he may possess for that particular species of business.

    The difference of natural talents in different men is, in reality,
much less than we are aware of; and the very different genius which
appears to distinguish men of different professions, when grown up
to maturity, is not upon many occasions so much the cause as the
effect of the division of labour. The difference between the most
dissimilar characters, between a philosopher and a common street
porter, for example, seems to arise not so much from nature as from
habit, custom, and education. When they came into the world, and for
the first six or eight years of their existence, they were perhaps
very much alike, and neither their parents nor playfellows could
perceive any remarkable difference. About that age, or soon after,
they come to be employed in very different occupations. The difference
of talents comes then to be taken notice of, and widens by degrees,
till at last the vanity of the philosopher is willing to acknowledge
scarce any resemblance. But without the disposition to truck,
barter, and exchange, every man must have procured to himself every
necessary and conveniency of life which he wanted. All must have had
the same duties to perform, and the same work to do, and there could
have been no such difference of employment as could alone give
occasion to any great difference of talents.

    As it is this disposition which forms that difference of
talents, so remarkable among men of different professions, so it is
this same disposition which renders that difference useful. Many
tribes of animals acknowledged to be all of the same species derive
from nature a much more remarkable distinction of genius, than what,
antecedent to custom and education, appears to take place among men.
By nature a philosopher is not in genius and disposition half so
different from a street porter, as a mastiff is from a greyhound, or a
greyhound from a spaniel, or this last from a shepherd's dog. Those
different tribes of animals, however, though all of the same
species, are of scarce any use to one another. The strength of the
mastiff is not, in the least, supported either by the swiftness of the
greyhound, or by the sagacity of the spaniel, or by the docility of
the shepherd's dog. The effects of those different geniuses and
talents, for want of the power or disposition to barter and
exchange, cannot be brought into a common stock, and do not in the
least contribute to the better accommodation ind conveniency of the
species. Each animal is still obliged to support and defend itself,
separately and independently, and derives no sort of advantage from
that variety of talents with which nature has distinguished its
fellows. Among men, on the contrary, the most dissimilar geniuses
are of use to one another; the different produces of their
respective talents, by the general disposition to truck, barter, and
exchange, being brought, as it were, into a common stock, where
every man may purchase whatever part of the produce of other men's
talents he has occasion for.

                            CHAPTER III

  That the Division of Labour is limited by the Extent of the Market

    AS it is the power of exchanging that gives occasion to the
division of labour, so the extent of this division must always be
limited by the extent of that power, or, in other words, by the extent
of the market. When the market is very small, no person can have any
encouragement to dedicate himself entirely to one employment, for want
of the power to exchange all that surplus part of the produce of his
own labour, which is over and above his own consumption, for such
parts of the produce of other men's labour as he has occasion for.

    There are some sorts of industry, even of the lowest kind, which
can be carried on nowhere but in a great town. A porter, for
example, can find employment and subsistence in no other place. A
village is by much too narrow a sphere for him; even an ordinary
market town is scarce large enough to afford him constant
occupation. In the lone houses and very small villages which are
scattered about in so desert a country as the Highlands of Scotland,
every farmer must be butcher, baker and brewer for his own family.
In such situations we can scarce expect to find even a smith, a
carpenter, or a mason, within less than twenty miles of another of the
same trade. The scattered families that live at eight or ten miles
distance from the nearest of them must learn to perform themselves a
great number of little pieces of work, for which, in more populous
countries, they would call in the assistance of those workmen. Country
workmen are almost everywhere obliged to apply themselves to all the
different branches of industry that have so much affinity to one
another as to be employed about the same sort of materials. A
country carpenter deals in every sort of work that is made of wood:
a country smith in every sort of work that is made of iron. The former
is not only a carpenter, but a joiner, a cabinet-maker, and even a
carver in wood, as well as a wheel-wright, a plough-wright, a cart and
waggon maker. The employments of the latter are still more various. It
is impossible there should be such 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 thousand nails a day, and three hundred
working days in the year, will make three hundred thousand nails in
the year. But in such a situation it would be impossible to dispose of
one thousand, that is, of one day's work in the year.

    As by means of water-carriage a more extensive market is opened to
every sort of industry than what land-carriage alone can afford it, so
it is upon the sea-coast, and along the banks of navigable rivers,
that industry of every kind naturally begins to subdivide and
improve itself, and it is frequently not till a long time after that
those improvements extend themselves to the inland parts of the
country. A broad-wheeled waggon, attended by two men, and drawn by
eight horses, in about six weeks' time carries and brings back between
London and Edinburgh near four ton weight of goods. In about the
same time a ship navigated by six or eight men, and sailing between
the ports of London and Leith, frequently carries and brings back
two hundred ton weight of goods. Six or eight men, therefore, by the
help of water-carriage, can carry and bring back in the same time
the same quantity of goods between London and Edinburgh, as fifty
broad-wheeled waggons, attended by a hundred men, and drawn by four
hundred horses. Upon two hundred tons of goods, therefore, carried
by the cheapest land-carriage from London to Edinburgh, there must
be charged the maintenance of a hundred men for three weeks, and
both the maintenance, and, what is nearly equal to the maintenance,
the wear and tear of four hundred horses as well as of fifty great
waggons. Whereas, upon the same quantity of goods carried by water,
there is to be charged only the maintenance of six or eight men, and
the wear and tear of a ship of two hundred tons burden, together
with the value of the superior risk, or the difference of the
insurance between land and water-carriage. Were there no other
communication between those two places, therefore, but by
land-carriage, as no goods could be transported from the one to the
other, except such whose price was very considerable in proportion
to their weight, they could carry on but a small part of that commerce
which at present subsists between them, and consequently could give
but a small part of that encouragement which they at present
mutually afford to each other's industry. There could be little or
no commerce of any kind between the distant parts of the world. What
goods could bear the expense of land-carriage between London and
Calcutta? Or if there were any so precious as to be able to support
this expense, with what safety could they be transported through the
territories of so many barbarous nations? Those two cities, however,
at present carry on a very considerable commerce with each other,
and by mutually affording a market, give a good deal of
encouragement to each other's industry.

    Since such, therefore, are the advantages of water-carriage, it is
natural that the first improvements of art and industry should be made
where this conveniency opens the whole world for a market to the
produce of every sort of labour, and that they should always be much
later in extending themselves 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 separates them from the sea-coast, and the great
navigable rivers. The extent of their market, therefore, must for a
long time be in proportion to the riches and populousness of that
country, and consequently their improvement must always be posterior
to the improvement of that country. In our North American colonies the
plantations have constantly followed either the sea-coast or the banks
of the navigable rivers, and have scarce anywhere extended
themselves to any considerable distance from both.

    The nations that, according to the best authenticated history,
appear to have been first civilised, were those that dwelt round the
coast of the Mediterranean Sea. That sea, by far the greatest inlet
that is known in the world, having no tides, nor consequently any
waves except such as are caused by the wind only, was, by the
smoothness of its surface, as well as by the multitude of its islands,
and the proximity of its neighbouring shores, extremely favourable
to the infant navigation of the world; when, from their ignorance of
the compass, men were afraid to quit the view of the coast, and from
the imperfection of the art of shipbuilding, to abandon themselves
to the boisterous waves of the ocean. To pass beyond the pillars of
Hercules, that is, to sail out of the Straits of Gibraltar, was, in
the ancient world, long considered as a most wonderful and dangerous
exploit of navigation. It was late before even the Phoenicians and
Carthaginians, the most skilful navigators and ship-builders of
those old times, attempted it, and they were for a long time the
only nations that did attempt it.

    Of all the countries on the coast of the Mediterranean Sea,
Egypt seems to have been the first in which either agriculture or
manufactures were cultivated and improved to any considerable
degree. Upper Egypt extends itself nowhere above a few miles from
the Nile, and in Lower Egypt that great river breaks itself into
many different canals, which, with the assistance of a little art,
seem to have afforded a communication by water-carriage, not only
between all the great towns, but between all the considerable
villages, and even to many farmhouses in the country; nearly in the
same manner as the Rhine and the Maas do in Holland at present. The
extent and easiness of this inland navigation was probably one of
the principal causes of the early improvement of Egypt.

    The improvements in agriculture and manufactures seem likewise
to have been of very great antiquity in the provinces of Bengal, in
the East Indies, and in some of the eastern provinces of China; though
the great extent of this antiquity is not authenticated by any
histories of whose authority we, in this part of the world, are well
assured. In Bengal the Ganges and several other great rivers form a
great number of navigable canals in the same manner as the Nile does
in Egypt. In the Eastern provinces of China too, several great
rivers form, by their different branches, a multitude of canals, and
by communicating with one another afford an inland navigation much
more extensive than that either of the Nile or the Ganges, or
perhaps than both of them put together. It is remarkable that
neither the ancient Egyptians, nor the Indians, nor the Chinese,
encouraged foreign commerce, but seem all to have derived their
great opulence from this inland navigation.

    All the inland parts of Africa, and all that part of Asia which
lies any considerable way north of the Euxine and Caspian seas, the
ancient Scythia, the modern Tartary and Siberia, seem in all ages of
the world to have been in the same barbarous and uncivilised state
in which we find them at present. The Sea of Tartary is the frozen
ocean which admits of no navigation, and though some of the greatest
rivers in the world run through that country, they are at too great
a distance from one another to carry commerce and communication
through the greater part of it. There are in Africa none of those
great inlets, such as the Baltic and Adriatic seas in Europe, the
Mediterranean and Euxine seas in both Europe and Asia, and the gulfs
of Arabia, Persia, India, Bengal, and Siam, in Asia, to carry maritime
commerce into the interior parts of that great continent: and the
great rivers of Africa are at too great a distance from one another to
give occasion to any considerable inland navigation. The commerce
besides which any nation can carry on by means of a river which does
not break itself into any great number of branches or canals, and
which runs into another territory before it reaches the sea, can never
be very considerable; because it is always in the power of the nations
who possess that other territory to obstruct the communication between
the upper country and the sea. The navigation of the Danube is of very
little use to the different states of Bavaria, Austria and Hungary, in
comparison of what it would be if any of them possessed the whole of
its course till it falls into the Black Sea.

                            CHAPTER IV

                   Of the Origin and Use of Money

    WHEN the division of labour has been once thoroughly
established, it is but a very small part of a man's wants which the
produce of his own labour can supply. He supplies the far greater part
of them by exchanging that surplus part of the produce of his own
labour, which is over and above his own consumption, for such parts of
the produce of other men's labour as he has occasion for. Every man
thus lives by exchanging, or becomes in some measure a merchant, and
the society itself grows to be what is properly a commercial society.

    But when the division of labour first began to take place, this
power of exchanging must frequently have been very much clogged and
embarrassed in its operations. One man, we shall suppose, has more
of a certain commodity than he himself has occasion for, while another
has less. The former consequently would be glad to dispose of, and the
latter to purchase, a part of this superfluity. But if this latter
should chance to have nothing that the former stands in need of, no
exchange can be made between them. The butcher has more meat in his
shop than he himself can consume, and the brewer and the baker would
each of them be willing to purchase a part of it. But they have
nothing to offer in exchange, except the different productions of
their respective trades, and the butcher is already provided with
all the bread and beer which he has immediate occasion for. No
exchange can, in this case, be made between them. He cannot be their
merchant, nor they his customers; and they are all of them thus
mutually less serviceable to one another. In order to avoid the
inconveniency of such situations, every prudent man in every period of
society, after the first establishment of the division of labour, must
naturally have endeavoured to manage his affairs in such a manner as
to have at alltimes by him, besides the peculiar produce of his own
industry, a certain quantity of some one commodity or other, such as
he imagined few people would be likely to refuse in exchange for the
produce of their industry.

    Many different commodities, it is probable, were successively both
thought of and employed for this purpose. In the rude ages of society,
cattle are said to have been the common instrument of commerce; and,
though they must have been a most 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
Diomede, says Homer, cost only nine oxen; but that of Glaucus cost
an hundred oxen. Salt is said to be the common instrument of
commerce and exchanges in Abyssinia; a species of shells in some parts
of the coast of India; dried cod at Newfoundland; tobacco in Virginia;
sugar in some of our West India colonies; hides or dressed leather
in some 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 instead of money to the baker's shop or the alehouse.

    In all countries, however, men seem at last to have been
determined by irresistible reasons to give the preference, for this
employment, to metals above every other commodity. Metals can not only
be kept with as little loss as any other commodity, scarce anything
being less perishable than they are, but they can likewise, without
any loss, be divided into any number of parts, as by fusion those
parts can easily be reunited again; a quality which no other equally
durable commodities possess, and which more than any other quality
renders them fit to be the instruments of commerce and circulation.
The man who wanted to buy salt, for example, and had nothing but
cattle to give in exchange for it, must have been obliged to buy
salt to the value of a whole ox, or a whole sheep at a time. He
could seldom buy less than this, because what he was to give for it
could seldom be divided without loss; and if he had a mind to buy
more, he must, for the same reasons, have been obliged to buy double
or triple the quantity, the value, to wit, of two or three oxen, or of
two or three sheep. If, on the contrary, instead of sheep or oxen,
he had metals to give in exchange for it, he could easily proportion
the quantity of the metal to the precise quantity of the commodity
which he had immediate occasion for.

    Different metals have been made use of by different nations for
this purpose. Iron was the common instrument of commerce among the
ancient Spartans; copper among the ancient Romans; and gold and silver
among all rich and commercial nations.

    Those metals seem originally to have been made use of for this
purpose in rude bars, without any stamp or coinage. Thus we are told
by Pliny, upon the authority of Timaeus, an ancient historian, that,
till the time of Servius Tullius, the Romans had no coined money,
but made use of unstamped bars of copper, to purchase whatever they
had occasion for. These bars, therefore, performed at this time the
function of money.

    The use of metals in this rude state was attended with two very
considerable inconveniencies; first, with the trouble of weighing;
and, secondly, with that of assaying them. In the precious metals,
where a small difference in the quantity makes a great difference in
the value, even the business of weighing, with proper exactness,
requires at least very accurate weights and scales. The weighing of
gold in particular is an operation of some nicety. In the coarser
metals, indeed, where a small error would be of little consequence,
less accuracy would, no doubt, be necessary. Yet we should find it
excessively troublesome, if every time a poor man had occasion
either to buy or sell a farthing's worth of goods, he was obliged to
weigh the farthing. The operation of assaying is still more difficult,
still more tedious, and, unless a part of the metal is fairly melted
in the crucible, with proper dissolvents, any conclusion that can be
drawn from it, is extremely uncertain. Before the institution of
coined money, however, unless they went through this tedious and
difficult operation, people must always have been liable to the
grossest frauds and impositions, and instead of a pound weight of pure
silver, or pure copper, might receive in exchange for their goods an
adulterated composition of the coarsest and cheapest materials,
which had, however, in their outward appearance, been made to resemble
those metals. To prevent such abuses, to facilitate exchanges, and
thereby to encourage all sorts of industry and commerce, it has been
found necessary, in all countries that have made any considerable
advances towards improvement, to affix a public stamp upon certain
quantities of such particular metals as were in those countries
commonly made use of to purchase goods. Hence the origin of coined
money, and of those public offices called mints; institutions
exactly of the same nature with those of the aulnagers and
stamp-masters of woolen and linen cloth. All of them are equally meant
to ascertain, by means of a public stamp, the quantity and uniform
goodness of those different commodities when brought to market.

    The first public stamps of this kind that were affixed to the
current metals, seem in many cases to have been intended to ascertain,
what it was both most difficult and most important to ascertain, the
goodness or fineness of the metal, and to have resembled the
sterling mark which is at present affixed to plate and bars of silver,
or the Spanish mark which is sometimes affixed to ingots of gold,
and which being struck only upon one side of the piece, and not
covering the whole surface, ascertains the fineness, but not the
weight of the metal. Abraham weighs to Ephron the four hundred shekels
of silver which he had agreed to pay for the field of Machpelah.
They are said, however, to be the current money of the merchant, and
yet are received by weight and not by tale, in the same manner as
ingots of gold and bars of silver are at present. The revenues of
the ancient Saxon kings of England are said to have been paid, not
in money but in kind, that is, in victuals and provisions of all
sorts. William the Conqueror introduced the custom of paying them in
money. This money, however, was, for a long time, received at the
exchequer, by weight and not by tale.

    The inconveniency and difficulty of weighing those metals with
exactness gave occasion to the institution of coins, of which the
stamp, covering entirely both sides of the piece and sometimes the
edges too, was supposed to ascertain not only the fineness, but the
weight of the metal. Such coins, therefore, were received by tale as
at present, without the trouble of weighing.

    The denominations of those coins seem originally to have expressed
the weight or quantity of metal contained in them. In the time of
Servius Tullius, who first coined money at Rome, the Roman as or pondo
contained a Roman pound of good copper. It was divided in the same
manner as our Troyes pound, into twelve ounces, each of which
contained a real ounce of good copper. The English pound sterling,
in the time of Edward I, contained a pound, Tower weight, of silver,
of a known fineness. The Tower pound seems to have been something more
than the Roman pound, and something less than the Troyes pound. This
last was not introduced into the mint of England till the 18th of
Henry VIII. The French livre contained in the time of Charlemagne a
pound, Troyes weight, of silver of a known fineness. The fair of
Troyes in Champaign was at that time frequented by all the nations
of Europe, and the weights and measures of so famous a market were
generally known and esteemed. The Scots money pound contained, from
the time of Alexander the First to that of Robert Bruce, a pound of
silver of the same weight and fineness with the English pound
sterling. English, French, and Scots pennies, too, contained all of
them originally a real pennyweight of silver, the twentieth part of an
ounce, and the two-hundred-and-fortieth part of a pound. The
shilling too seems originally to have been the denomination of a
weight. When wheat is at twelve shillings the quarter, says an ancient
statute of Henry III, then wastel bread of a farthing shall weigh
eleven shillings and four pence. The proportion, however, between
the shilling and either the penny on the one hand, or the pound on the
other, seems not to have been so constant and uniform as that
between the penny and the pound. During the first race of the kings of
France, the French sou or shilling appears upon different occasions to
have contained five, twelve, twenty, and forty pennies. Among the
ancient Saxons a shilling 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 ancient Franks.
From the time of Charlemagne among the French, and from that of
William the Conqueror among the English, the proportion between the
pound, the shilling, and the penny, seems to have been uniformly the
same as at present, though the value of each has been very
different. For in every country of the world, I believe, the avarice
and injustice of princes and sovereign states, abusing the
confidence of their subjects, have by degrees diminished the real
quantity of metal, which had been originally contained in their coins.
The Roman as, in the latter ages of the Republic, was reduced to the
twenty-fourth part of its original value, and, instead of weighing a
pound, came to weigh only half an ounce. The English pound and penny
contain at present about a third only; the Scots pound and penny about
a thirty-sixth; and the French pound and penny about a sixty-sixth
part of their original value. By means of those operations the princes
and sovereign states which performed them were enabled, in appearance,
to pay their debts and to fulfil their engagements with a smaller
quantity of silver than would otherwise have been requisite. 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 state were
allowed the same privilege, and might pay with the same nominal sum of
the new and debased coin whatever they had borrowed in the old. Such
operations, therefore, have always proved favourable to the debtor,
and ruinous to the creditor, and have sometimes produced a greater and
more universal revolution in the fortunes of private persons, than
could have been occasioned by a very great public calamity.

    It is in this manner that money has become in all civilised
nations the universal instrument of commerce, by the intervention of
which goods of all kinds are bought and sold, or exchanged for one
another.

    What are the rules which men naturally observe in exchanging
them either for money or for one another, I shall now proceed to
examine. These rules determine what may be called the relative or
exchangeable value of goods.

    The word value, it is to be observed, has two different
meanings, and sometimes expresses the utility of some particular
object, and sometimes the power of purchasing other goods which the
possession of that object conveys. The one may be called "value in
use"; the other, "value in exchange." The things which have the
greatest value in use have frequently little or no value in
exchange; and, on the contrary, those which have the greatest value in
exchange have frequently little or no value in use. Nothing is more
useful than water: but it will purchase scarce anything; scarce
anything can be had in exchange for it. A diamond, on the contrary,
has scarce any value in use; but a very great quantity of other
goods may frequently be had in exchange for it.

    In order to investigate the principles which regulate the
exchangeable value of commodities, I shall endeavour to show:

    First, what is the real measure of this exchangeable value; or,
wherein consists the real price of all commodities.

    Secondly, what are the different parts of which this real price is
composed or made up.

    And, lastly, what are the different circumstances which
sometimes raise some or all of these different parts of price above,
and sometimes sink them below their natural or ordinary rate; or, what
are the causes which sometimes hinder the market price, that is, the
actual price of commodities, from coinciding exactly with what may
be called their natural price.

    I shall endeavour to explain, as fully and distinctly as I can,
those three subjects in the three following chapters, for which I must
very earnestly entreat both the patience and attention of the
reader: his patience in order to examine a detail which may perhaps in
some places appear unnecessarily tedious; and his attention in order
to understand what may, perhaps, after the fullest explication which I
am capable of giving of it, appear still in some degree obscure. I
am always willing to run some hazard of being tedious in order to be
sure that I am perspicuous; and after taking the utmost pains that I
can to be perspicuous, some obscurity may still appear to remain
upon a subject in its own nature extremely abstracted.

                           CHAPTER V

          Of the Real and Nominal Price of Commodities,

        or their Price in Labour, and their Price in Money

    EVERY man is rich or poor according to the degree in which he
can afford to enjoy the necessaries, conveniences, and amusements of
human life. But after the division of labour has once thoroughly taken
place, it is but a very small part of these with which a man's own
labour can supply him. The far greater part of them he must derive
from the labour of other people, and he must be rich or poor according
to the quantity of that labour which he can command, or which he can
afford to purchase. The value of any commodity, therefore, to the
person who possesses it, and who means not to use or consume it
himself, but to exchange it for other commodities, is equal to the
quantity of labour which it enables him to purchase or command.
Labour, therefore, is the real measure of the exchangeable value of
all commodities.

    The real price of everything, what everything really costs to
the man who wants to acquire it, is the toil and trouble of
acquiring it. What everything is really worth to the man who has
acquired it, and who wants to dispose of it or exchange it for
something else, is the toil and trouble which it can save to
himself, and which it can impose upon other people. What is bought
with money or with goods is purchased by labour as much as what we
acquire by the toil of our own body. That money or those goods
indeed save us this toil. They contain the value of a certain quantity
of labour which we exchange for what is supposed at the time to
contain the value of an equal quantity. Labour was the first price,
the original purchase-money that was paid for all things. It was not
by gold or by silver, but by labour, that all the wealth of the
world was originally purchased; and its value, to those who possess
it, and who want to exchange it for some new productions, is precisely
equal to the quantity of labour which it can enable them to purchase
or command.

    Wealth, as Mr. Hobbes says, is power. But the person who either
acquires, or succeeds to a great fortune, does not necessarily acquire
or succeed to any political power, either civil or military. His
fortune may, perhaps, afford him the means of acquiring both, but
the mere possession of that fortune does not necessarily convey to him
either. The power which that possession immediately and directly
conveys to him, is the power of purchasing; 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 less, precisely in proportion to the
extent of this power; or to the quantity either of other men's labour,
or, what is the same thing, of the produce of other men's labour,
which it enables him to purchase or command. The exchangeable value of
everything must always be precisely equal to the extent of this
power which it conveys to its owner.

    But though labour be the real measure of the exchangeable value of
all commodities, it is not that by which their value is commonly
estimated. It is of difficult to ascertain the proportion between
two different quantities of labour. The time spent in two different
sorts of work will not always alone determine this proportion. The
different degrees of hardship endured, and of ingenuity exercised,
must likewise be taken into account. There may be more labour in an
hour's hard work than in two hours' easy business; or in an hour's
application to a trade which it cost ten years' labour to learn,
than in a month's industry at an ordinary and obvious employment.
But it is not easy to find any accurate measure either of hardship
or ingenuity. In exchanging, indeed, the different productions of
different sorts of labour for one another, some allowance is
commonly made for both. It is adjusted, however, not by any accurate
measure, but by the higgling and bargaining of the market, according
to that sort of rough equality which, though not exact, is
sufficient for carrying on the business of common life.

    Every commodity, besides, is more frequently exchanged for, and
thereby compared with, other commodities than with labour. It is
more natural, therefore, to estimate its exchangeable value by the
quantity of some other commodity than by that of the labour which it
can purchase. The greater part of people, too, understand better
what is meant by a quantity of a particular commodity than by a
quantity of labour. The one is a plain palpable object; the other an
abstract notion, which, though it can be made sufficiently
intelligible, is not altogether so natural and obvious.

    But when barter ceases, and money has become the common instrument
of commerce, every particular commodity is more frequently exchanged
for money than for any other commodity. The butcher seldom carries his
beef or his mutton to the baker, or the brewer, in order to exchange
them for bread or for beer; but he carries them to the market, where
he exchanges them for money, and afterwards exchanges 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
purchase. It is more natural and obvious to him, therefore, to
estimate 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; and rather to say 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 small beer.
Hence it comes to pass that the exchangeable value of every
commodity is more frequently estimated 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 silver, however, like every other commodity, vary in
their value, are sometimes cheaper and sometimes dearer, sometimes
of easier and sometimes of more difficult purchase. The quantity of
labour which any particular quantity of them can purchase or
command, or the quantity of other goods which it will exchange for,
depends always upon the fertility or barrenness of the mines which
happen to be known about the time when such exchanges are made. The
discovery of the abundant mines of America reduced, in the sixteenth
century, the value of gold and silver in Europe to about a third of
what it had been before. As it costs less labour to bring those metals
from the mine to the market, so when they were brought thither they
could purchase or command less labour; and this revolution in their
value, though perhaps the greatest, is by no means the only one of
which history gives some account. But as a measure of quantity, such
as the natural foot, fathom, or handful, which is continually
varying in its own quantity, can never be an accurate measure of the
quantity of other things; so a commodity which is itself continually
varying in its own value, can never be an accurate measure of the
value of other commodities. Equal quantities of labour, at all times
and places, may be said to be of equal value to the labourer. In his
ordinary state of health, strength and spirits; in the ordinary degree
of his skill and dexterity, he must always laydown the same portion of
his ease, his liberty, and his happiness. The price which he pays must
always be the same, whatever may be the quantity of goods which he
receives in return for it. Of these, indeed, it may sometimes purchase
a greater and sometimes a smaller quantity; but it is their value
which varies, not that of the labour which purchases them. At all
times and places that is dear which it is difficult to come at, or
which it costs much labour to acquire; and that cheap which is to be
had easily, or with very little labour. Labour alone, therefore, never
varying in its own value, is alone the ultimate and real standard by
which the value of all commodities can at all times and places be
estimated and compared. It is their real price; money is their nominal
price only.

    But though equal quantities of labour are always of equal value to
the labourer, yet to the person who employs him they appear
sometimes to be of greater and sometimes of smaller value. He
purchases them sometimes with a greater and sometimes with a smaller
quantity of goods, and to him the price of labour seems to vary like
that of all other things. It appears to him dear in the one case,
and cheap in the other. In reality, however, it is the goods which are
cheap in the one case, and dear in the other.

    In this popular sense, therefore, labour, like commodities, may be
said to have a real and a nominal price. Its real price may be said to
consist in the quantity of the necessaries and conveniences of life
which are given for it; its nominal 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 nominal price of his labour.

    The distinction between the real and the nominal price of
commodities and labour is not a matter of mere speculation, but may
sometimes be of considerable use in practice. The same real price is
always of the same value; but on account of the variations in the
value of gold and silver, the same nominal price is sometimes of
very different values. When a landed estate, therefore, is sold with a
reservation of a perpetual rent, if it is intended that this rent
should always be of the same value, it is of importance to the
family in whose favour it is reserved that it should not consist in
a particular sum of money. Its value would in this case be liable to
variations of two different kinds; first, to those which arise from
the different quantities of gold and silver which are contained at
different times in coin of the same denomination; and, secondly, to
those which arise from the different values of equal quantities of
gold and silver at different times.

    Princes and sovereign states have frequently fancied that they had
a temporary interest to diminish the quantity of pure metal
contained in their coins; but they seldom have fancied that they had
any to augment it. The quantity of metal contained in the coins, I
believe of all nations, has, accordingly, been almost continually
diminishing, and hardly ever augmenting. Such variations, therefore,
tend almost always to diminish the value of a money rent.

    The discovery of the mines of America diminished the value of gold
and silver in Europe. This diminution, it is commonly supposed, though
I apprehend without any certain proof, is still going on gradually,
and is likely to continue to do so for a long time. Upon this
supposition, therefore, such variations are more likely to diminish
than to augment the value of a money rent, even though it should be
stipulated to be paid, not in such a quantity of coined money of
such a denomination (in so many pounds sterling, for example), but
in so many ounces either of pure silver, or of silver of a certain
standard.

    The rents which have been reserved in corn have preserved their
value much better than those which have been reserved in money, even
where the denomination of the coin has not been altered. By the 18th
of Elizabeth it was enacted that a third of the rent of all college
leases should be reserved in corn, to be paid, either in kind, or
according to the current prices at the nearest public market. The
money arising from this corn rent, though originally but a third of
the whole, is in the present times, according to Dr. Blackstone,
commonly near double of what arises from the other two-thirds. The old
money rents of colleges must, according to this account, have sunk
almost to a fourth part of their ancient value; or are worth little
more than a fourth part of the corn which they were formerly worth.
But since the reign of Philip and Mary the denomination of the English
coin has undergone little or no alteration, and the same number of
pounds, shillings and pence have contained very nearly the same
quantity of pure silver. This degradation, therefore, in the value
of the money rents of colleges, has arisen altogether from the
degradation in the value of silver.

    When the degradation in the value of silver is combined with the
diminution of the quantity of it contained in the coin of the same
denomination, the loss is frequently still greater. In Scotland, where
the denomination of the coin has undergone much greater alterations
than it ever did in England, and in France, where it has undergone
still greater than it ever did in Scotland, some ancient rents,
originally of considerable value, have in this manner been reduced
almost to nothing.

    Equal quantities of labour will at distant times be purchased more
nearly with equal quantities of corn, the subsistence of the labourer,
than with equal quantities of gold and silver, or perhaps of any other
commodity. Equal quantities of corn, therefore, will, at distant
times, be more nearly of the same real value, or enable the
possessor to purchase or command more nearly the same quantity of
the labour of other people. They will do this, I say, more nearly than
equal quantities of almost any other commodity; for even equal
quantities of corn will not do it exactly. The subsistence of the
labourer, or the real price of labour, as I shall endeavour to show
hereafter, is very different upon different occasions; more liberal in
a society advancing to opulence than in one that is standing still;
and in one that is standing still than in one that is going backwards.
Every other commodity, however, will at any particular time purchase a
greater or smaller quantity of labour in proportion to the quantity of
subsistence which it can purchase at that time. A rent therefore
reserved in corn is liable only to the variations in the quantity of
labour which a certain quantity of corn can purchase. But a rent
reserved in any other commodity is liable not only to the variations
in the quantity of labour which any particular quantity of corn can
purchase, but to the variations in the quantity of corn which can be
purchased by any particular quantity of that commodity.

    Though the real value of a corn rent, it is to be observed,
however, varies much less from century to century than that of a money
rent, it varies much more from year to year. The money price of
labour, as I shall endeavour to show hereafter, does not fluctuate
from year to year with the money price of corn, but seems to be
everywhere accommodated, not to the temporary or occasional, but to
the average or ordinary price of that necessary of life. The average
or ordinary price of corn again is regulated, as I shall likewise
endeavour to show hereafter, by the value of silver, by the richness
or barrenness of the mines which supply the market with that metal, or
by the quantity of labour which must be employed, and consequently
of corn which must be consumed, in order to bring any particular
quantity of silver from the mine to the market. But the value of
silver, though it sometimes varies greatly from century to century,
seldom varies much from year to year, but frequently continues the
same, or very nearly the same, for half a century or a century
together. The ordinary or average money price of corn, therefore, may,
during so long a period, continue the same or very nearly the same
too, and along with it the money price of labour, provided, at
least, the society continues, in other respects, in the same or nearly
in the same condition. In the meantime the temporary and occasional
price of corn may frequently be double, one year, of what it had
been the year before, or fluctuate, for example, from five and
twenty to fifty shillings 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 is when at the former, or will
command double the quantity either of labour or of the greater part of
other commodities; the money price of labour, and along with it that
of most other things, continuing the same during all these
fluctuations.

    Labour, therefore, it appears evidently, is the only universal, as
well as the only accurate measure of value, or the only standard by
which we can compare the values of different commodities at all times,
and at all places. We cannot estimate, it is allowed, the real value
of different commodities from century to century by the quantities
of silver which were given for them. We cannot estimate it from year
to year by the quantities of corn. By the quantities of labour we can,
with the greatest accuracy, estimate it both from century to century
and from year to year. From century to century, corn is a better
measure than silver, because, from century to century, equal
quantities of corn will command the same quantity of labour more
nearly than equal quantities of silver. From year to year, on the
contrary, silver is a better measure than corn, because equal
quantities of it will more nearly command the same quantity of labour.

    But though in establishing perpetual rents, or even in letting
very long leases, it may be of use to distinguish between real and
nominal price; it is of none in buying and selling, the more common
and ordinary transactions of human life.

    At the same time and place the real and the nominal price of all
commodities are exactly in proportion to one another. The more or less
money you get for any commodity, in the London market for example, the
more or less labour it will at that time and place enable you to
purchase or command. At the same time and place, therefore, money is
the exact measure of the real exchangeable value of all commodities.
It is so, however, at the same time and place only.

    Though at distant 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 consider but
their money price, or the difference between the quantity of silver
for which he buys them, and that for which he is likely to sell
them. Half an ounce of silver at Canton in China may command a greater
quantity both of labour and of the necessaries and conveniences of
life than an ounce at London. A commodity, therefore, which sells
for half an ounce of silver at Canton may there be really dearer, of
more real importance to the man who possesses it there, than a
commodity which sells for an ounce at London is to the man who
possesses it at London. If a London merchant, however, can buy at
Canton for half an ounce of silver, a commodity which he can
afterwards sell at London for an ounce, he gains a hundred per cent by
the bargain, just as much as if an ounce of silver was at London
exactly of the same value as at Canton. It is of no importance to
him that half an ounce of silver at Canton would have given him the
command of more labour and of a greater quantity of the necessaries
and conveniences 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 these which half an ounce could have done there, and this is
precisely what he wants.

    As it is the nominal or money price of goods, therefore, which
finally determines the prudence or imprudence of all purchases and
sales, and thereby regulates almost the whole business of common
life in which price is concerned, we cannot wonder that it should have
been so much more attended to than the real price.

    In such a work as this, however, it may sometimes be of use to
compare the different real values of a particular commodity at
different times and places, or the different degrees of power over the
labour of other people which it may, upon different occasions, have
given to those who possessed it. We must in this case compare, not
so much the different quantities of silver for which it was commonly
sold, as the different quantities of labour which those different
quantities of silver could have purchased. But the current prices of
labour at distant times and places can scarce ever be known with any
degree of exactness. Those of corn, though they have in few places
been regularly recorded, are in general better known and have been
more frequently taken notice of by historians and other writers. We
must generally, therefore, content ourselves with them, not as being
always exactly in the same proportion as the current prices of labour,
but as being the nearest approximation which can commonly be had to
that proportion. I shall hereafter have occasion to make several
comparisons of this kind.

    In the progress of industry, commercial nations have found it
convenient to coin several different metals into money; gold for
larger payments, silver for purchases of moderate value, and copper,
or some other coarse metal, for those of still smaller
consideration. They have always, however, considered one of those
metals as more peculiarly the measure of value than any of the other
two; and this preference seems generally to have been given to the
metal which they happened first to make use of as the instrument of
commerce. Having once begun to use it as their standard, which they
must have done when they had no other money, they have generally
continued to do so even when the necessity was not the same.

    The Romans are said to have had nothing but copper money till
within five years before the first Punic war, when they first began to
coin silver. Copper, therefore, appears to have continued always the
measure of value in that republic. At Rome all accounts appear to have
been kept, and the value of all estates to have been computed either
in asses or in sestertii. The as was always the denomination of a
copper coin. The word sestertius signifies two asses and a half.
Though the sestertius, therefore, was originally a silver coin, its
value was estimated in copper. At Rome, one who owed a great deal of
money was said to have a great deal of other people's copper.

    The northern nations who established themselves upon the ruins
of the Roman empire, seem to have had silver money from the first
beginning of their settlements, and not to have known either gold or
copper coins for several ages thereafter. There were silver 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 Britain. In England, therefore, and for the same reason, I
believe, in all other modern nations of Europe, all accounts are kept,
and the value of all goods and of all estates is generally computed in
silver: and when we mean to express the amount of a person's
fortune, we seldom mention the number of guineas, but the number of
pounds sterling which we suppose 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, which was peculiarly
considered as the standard or measure of value. In England, gold was
not considered as a legal tender for a long time after it was coined
into money. The proportion between the values of gold and silver money
was not fixed by any public law or proclamation; but was left to be
settled by the market. If a debtor offered payment in gold, the
creditor might either reject such payment altogether, or accept of
it at such a valuation of the gold as he and his debtor could agree
upon. Copper is not at present a legal tender except in the change
of the smaller silver coins. In this state of things the distinction
between the metal which was the standard, and that which was not the
standard, was something more than a nominal distinction.

    In process of time, and as people became gradually more familiar
with the use of the different metals in coin, and consequently
better acquainted with the proportion between their respective values,
it has in most countries, I believe, been found convenient to
ascertain this proportion, and to declare by a public law that a
guinea, for example, of such a weight and fineness, should exchange
for one-and-twenty shillings, or be a legal tender for a debt of
that amount. In this state of things, and during the continuance of
any one regulated proportion of this kind, the distinction between the
metal which is the standard, and that which is not the standard,
becomes little more than a nominal distinction.

    In consequence of any change, however, in this regulated
proportion, this distinction becomes, or at least seems to become,
something more than nominal again. If the regulated value of a guinea,
for example, was either reduced to twenty, or raised to two-and-twenty
shillings, all accounts being kept and almost all obligations for debt
being expressed in silver money, the greater part of payments could in
either case be made with the same quantity of silver money as
before; but would require very different quantities of gold money; a
greater in the one case, and a smaller in the other. Silver would
appear to be more invariable in its value than gold. Silver would
appear to measure the value of gold, and gold would not appear to
measure the value of silver. The value of gold would seem to depend
upon the quantity of silver which it would exchange for; and the value
of silver would not seem to depend upon the quantity of gold which
it would exchange for. This difference, however, would be altogether
owing to the custom of keeping accounts, and of expressing the
amount of all great and small sums rather in silver than in gold
money. One of Mr. Drummond's notes for five-and-twenty or fifty
guineas would, after an alteration of this kind, be still payable with
five-and-twenty or fifty guineas in the same manner as before. It
would, after such an alteration, be payable with the same quantity
of gold as before, but with very different quantities of silver. In
the payment of such a note, gold would appear to be more invariable in
its value than silver. Gold would appear to measure the value of
silver, and silver would not appear to measure the value of gold. If
the custom of keeping accounts, and of expressing promissory notes and
other obligations for money in this manner, should ever become
general, gold, and not silver, would be considered as the metal
which was peculiarly the standard or measure of value.

    In reality, during the continuance of any one regulated proportion
between the respective values of the different metals in coin, the
value of the most precious metal regulates the value of the whole
coin. Twelve copper pence contain half a pound, avoirdupois, of
copper, of not the best quality, which, before it is coined, is seldom
worth sevenpence in silver. But as by the regulation twelve such pence
are ordered to exchange for a shilling, they are in the market
considered as worth a shilling, and a shilling can at any time be
had for them. Even before the late reformation of the gold coin of
Great Britain, the gold, that part of it at least which circulated
in London and its neighbourhood, was in general less degraded below
its standard weight than the greater part of the silver.
One-and-twenty worn and defaced shillings, however, were considered as
equivalent to a guinea, which perhaps, indeed, was worn and defaced
too, but seldom so much so. The late regulations have brought the gold
coin as near perhaps to its standard weight as it is possible to bring
the current coin of any nation; and the order, to receive no gold at
the public offices but by weight, is likely to preserve it so, as long
as that order is enforced. The silver coin still continues in the same
worn and degraded state as before the reformation of the gold coin. In
the market, however, one-and-twenty shillings of this degraded
silver coin are still considered as worth a guinea of this excellent
gold coin.

    The reformation of the gold coin has evidently raised the value of
the silver coin which can be exchanged for it.

    In the English mint a pound weight of gold is coined into
forty-four guineas and a half, which, at one-and-twenty shillings
the guinea, is equal to forty-six pounds fourteen shillings and
sixpence. An ounce of such gold coin, therefore, is worth L3 17s. 10
1/2d. in silver. In England no duty or seignorage is paid upon the
coinage, and he who carries a pound weight or an ounce weight of
standard gold bullion to the mint, gets back a pound weight or an
ounce weight of gold in coin, without any deduction. Three pounds
seventeen shillings and tenpence halfpenny an ounce, therefore, is
said to be the mint price of gold in England, or the quantity of
gold coin which the mint gives in return for standard gold bullion.

    Before the reformation of the gold coin, the price of standard
gold bullion in the market had for many years been upwards of L3
18s. sometimes L3 19s. and very frequently L4 an ounce; that sum, it
is probable, in the worn and degraded gold coin, seldom containing
more than an ounce of standard gold. Since the reformation of the gold
coin, the market price of standard gold bullion seldom exceeds L3 17s.
7d. an ounce. Before the reformation of the gold coin, the market
price was always more or less above the mint price. Since that
reformation, the market price has been constantly below the mint
price. But that market price is the same whether it is paid in gold or
in silver coin. The late reformation of the gold coin, therefore,
has raised not only the value of the gold coin, but likewise that of
the silver coin in proportion to gold bullion, and probably, too, in
proportion to all other commodities; through the price of the
greater part of other commodities being influenced by so many other
causes, the rise in the value either of gold or silver coin in
proportion to them may not be so distinct and sensible.

    In the English mint a pound weight of standard silver bullion is
coined into sixty-two shillings, containing, in the same manner, a
pound weight of standard silver. Five shillings and twopence an ounce,
therefore, is said to be the mint price of silver in England, or the
quantity of silver coin which the mint gives in return for standard
silver bullion. Before the reformation of the gold coin, the market
price of standard silver bullion was, upon different occasions, five
shillings and fourpence, five shillings and fivepence, five
shillings and sixpence, five shillings and sevenpence, and very
often five shillings and eightpence an ounce. Five shillings and
sevenpence, however, seems to have been the most common price. Since
the reformation of the gold coin, the market price of standard
silver bullion has fallen occasionally to five shillings and
threepence, five shillings and fourpence, and five shillings and
fivepence an ounce, which last price it has scarce ever exceeded.
Though the market price of silver bullion has fallen considerably
since the reformation of the gold coin, it has not fallen so low as
the mint price.

    In the proportion between the different metals in the English
coin, as copper is rated very much above its real value, so silver
is rated somewhat below it. In the market of Europe, in the French
coin and in the Dutch coin, an ounce of fine gold exchanges for
about fourteen ounces of fine silver. In the English coin, it
exchanges for about fifteen ounces, that is, for more silver than it
is worth according to the common estimation of Europe. But as the
price of copper in bars is not, even in England, raised by the high
price of copper in English coin, so the price of silver in bullion
is not sunk by the low rate of silver in English coin. Silver in
bullion still preserves its proper proportion to gold; for the same
reason that copper in bars preserves its proper proportion to silver.

    Upon the reformation of the silver coin in the reign of William
III the price of silver bullion still continued to be somewhat above
the mint price. Mr. Locke imputed this high price to the permission of
exporting silver bullion, and to the prohibition of exporting silver
coin. This permission of exporting, he said, rendered the demand for
silver bullion greater than the demand for silver coin. But the number
of people who want silver coin for the common uses of buying and
selling at home, is surely much greater than that of those who want
silver bullion either for the use of exportation or for any other use.
There subsists at present a like permission of exporting gold bullion,
and a like prohibition of exporting gold coin: and yet the price of
gold bullion has fallen below the mint price. But in the English
coin silver was then, in the same manner as now, under-rated in
proportion to gold, and the gold coin (which at that time too was
not supposed to require any reformation) regulated then, as well as
now, the real value of the whole coin. As the reformation of the
silver coin did not then reduce the price of silver bullion to the
mint price, it is not very probable that a like reformation will do so
now.

    Were the silver coin brought back as near to its standard weight
as the gold, a guinea, it is probable, would, according to the present
proportion, exchange for more silver in coin than it would purchase in
bullion. The silver coin containing its full standard weight, there
would in this case be a profit in melting it down, in order, first, to
sell the bullion for gold coin, and afterwards to exchange this gold
coin for silver coin to be melted down in the same manner. Some
alteration in the present proportion seems to be the only method of
preventing this inconveniency.

    The inconveniency perhaps would be less if silver was rated in the
coin as much above its proper proportion to gold as it is at present
rated below it; provided it was at the same time enacted that silver
should not be a legal tender for more than the change of a guinea,
in the same manner as copper is not a legal tender for more than the
change of a shilling. No creditor could in this case be cheated in
consequence of the high valuation of silver in coin; as no creditor
can at present be cheated in consequence of the high valuation of
copper. The bankers only would suffer by this regulation. When a run
comes upon them they sometimes endeavour to gain time by paying in
sixpences, and they would be precluded by this regulation from this
discreditable method of evading immediate payment. They would be
obliged in consequence to keep at all times in their coffers a greater
quantity of cash than at present; and though this might no doubt be
a considerable inconveniency to them, it would at the same time be a
considerable security to their creditors.

    Three pounds seventeen shillings and tenpence halfpenny (the
mint price of gold) certainly does not contain, even in our present
excellent gold coin, more than an ounce of standard gold, and it may
be thought, therefore, should not purchase more standard bullion.
But gold in coin is more convenient than gold in bullion, and
though, in England, the coinage is free, yet the gold which is carried
in bullion to the mint can seldom be returned in coin to the owner
till after a delay of several weeks. In the present hurry of the mint,
it could not be returned till after a delay of several months. This
delay is equivalent to a small duty, and renders gold in coin somewhat
more valuable than an equal quantity of gold in bullion. If in the
English coin silver was rated according to it proper proportion to
gold, the price of silver bullion would probably fall below the mint
price even without any reformation of the silver coin; the value
even of the present worn and defaced silver coin being regulated by
the value of the excellent gold coin for which it can be changed.

    A small seignorage or duty upon the coinage of both gold and
silver would probably increase still more the superiority of those
metals in coin above an equal quantity of either of them in bullion.
The coinage would in this case increase the value of the metal
coined in proportion to the extent of this small duty; for the same
reason that the fashion increases the value of plate in proportion
to the price of that fashion. The superiority of coin above bullion
would prevent the melting down of the coin, and would discourage its
exportation. If upon any public exigency it should become necessary to
export the coin, the greater part of it would soon return again of its
own accord. Abroad it could sell only for its weight in bullion. At
home it would buy more than that weight. There would be a profit,
therefore, in bringing it home again. In France a seignorage of
about eight per cent is imposed upon the coinage, and the French coin,
when exported, is said to return home again of its own accord.

    The occasional fluctuations in the market price of gold and silver
bullion arise from the same causes as the like fluctuations in that of
all other commodities. The frequent loss of those metals from
various accidents by sea and by land, the continual waste of them in
gilding and plating, in lace and embroidery, in the wear and tear of
coin, and in that of plate; require, in all countries which possess no
mines of their own, a continual importation, in order to repair this
loss and this waste. The merchant importers, like all other merchants,
we may believe, endeavour, as well as they can, to suit their
occasional importations to what, they judge, is likely to be the
immediate demand. With all their attention, however, they sometimes
overdo the business, and sometimes underdo it. When they import more
bullion than is wanted, rather than incur the risk and trouble of
exporting it again, they are sometimes willing to sell a part of it
for something less than the ordinary or average price. When, on the
other hand, they import less than is wanted, they get something more
than this price. But when, under all those occasional fluctuations,
the market price either of gold or silver bullion continues for
several years together steadily and constantly, either more or less
above, or more or less below the mint price, we may be assured that
this steady and constant, either superiority or inferiority of
price, is the effect of something in the state of the coin, which,
at that time, renders a certain quantity of coin either of more
value or of less value than the precise quantity of bullion which it
ought to contain. The constancy and steadiness of the effect
supposes a proportionable constancy and steadiness in the cause.

    The money of any particular country is, at any particular time and
place, more or less an accurate measure of value according as the
current coin is more or less exactly agreeable to its standard, or
contains more or less exactly the precise quantity of pure gold or
pure silver which it ought to contain. If in England, for example,
forty-four guineas and a half contained exactly a pound weight of
standard gold, or eleven ounces of fine gold and one ounce of alloy,
the gold coin of England would be as accurate a measure of the
actual value of goods at any particular time and place as the nature
of the thing would admit. But if, by rubbing and wearing, forty-four
guineas and a half generally contain less than a pound weight of
standard gold; the diminution, however, being greater in some pieces
than in others; the measure of value comes to be liable to the same
sort of uncertainty to which all other weights and measures are
commonly exposed. As it rarely happens that these are exactly
agreeable to their standard, the merchant adjusts the price of his
goods, as well as he can, not to what those weights and measures ought
to be, but to what, upon an average, he finds by experience they
actually are. In consequence of a like disorder in the coin, the price
of goods comes, in the same manner, to be adjusted, not to the
quantity of pure gold or silver which the corn ought to contain, but
to that which, upon an average, it is found by experience, it actually
does contain.

    By the money-price of goods, it is to be observed, I understand
always the quantity of pure gold or silver for which they are sold,
without any regard to the denomination of the coin. Six shillings
and eightpence, for example, in the time of Edward I, I consider as
the same money-price with a pound sterling in the present times;
because it contained, as nearly as we can judge, the same quantity
of pure silver.

                            CHAPTER VI

        Of the Component Parts of the Price of Commodities

    IN that early and rude state of society which precedes both the
accumulation of stock and the appropriation of land, the proportion
between the quantities of labour necessary for acquiring different
objects seems to be the only circumstance which can afford any rule
for exchanging them for one another. If among a nation of hunters, for
example, it usually costs twice the labour to kill a beaver which it
does to kill a deer, one beaver should naturally exchange for or be
worth two deer. It is natural that what is usually the produce of
two days' or two hours' labour, should be worth double of what is
usually the produce of one day's or one hour's labour.

    If the one species of labour should be more severe than the other,
some allowance will naturally be made for this superior hardship;
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 species of labour requires an uncommon degree of
dexterity and ingenuity, the esteem which men have for such talents
will naturally give a value to their produce, superior to what would
be due to the time employed about it. Such talents can seldom be
acquired but in consequence of long application, and the superior
value of their produce may frequently be no more than a reasonable
compensation for the time and labour which must be spent in
acquiring them. In the advanced state of society, allowances of this
kind, for superior hardship and superior skill, are commonly made in
the wages of labour; and something of the same kind must probably have
taken place in its earliest and rudest period.

    In this state of things, the whole produce of labour belongs to
the labourer; and the quantity of labour commonly employed in
acquiring or producing any commodity is the only circumstance which
can regulate the quantity exchange for which it ought commonly to
purchase, command, or exchange for.

    As soon as stock has accumulated in the hands of particular
persons, some of them will naturally employ it in setting to work
industrious people, whom they will supply with materials and
subsistence, in order to make a profit by the sale of their work, or
by what their labour adds to the value of the materials. In exchanging
the complete manufacture either for money, for labour, or for other
goods, over and above what may be sufficient to pay the price of the
materials, and the wages of the workmen, something must be given for
the profits of the undertaker of the work who hazards his stock in
this adventure. The value which the workmen add to the materials,
therefore, resolves itself in this ease into two parts, of which the
one pays their wages, the other the profits of their employer upon the
whole stock of materials and wages which he advanced. He could have no
interest to employ them, unless he expected from the sale of their
work something more than what was sufficient to replace his stock to
him; and he could have no interest to employ a great stock rather than
a small one, unless his profits were to bear some proportion to the
extent of his stock.

    The profits of stock, it may perhaps be thought are only a
different name for the wages of a particular sort of labour, the
labour of inspection and direction. They are, however, altogether
different, are regulated by quite different principles, and bear no
proportion to the quantity, the hardship, or the ingenuity of this
supposed labour of inspection and direction. They are regulated
altogether by the value of the stock employed, and are greater or
smaller in proportion to the extent of this stock. Let us suppose, for
example, that in some particular place, where the common annual
profits of manufacturing stock are ten per cent, there are two
different manufactures, in each of which twenty workmen are employed
at the rate of fifteen pounds a year each, or at the expense of
three hundred a year in each manufactory. Let us suppose, too, that
the coarse materials annually wrought up in the one cost only seven
hundred pounds, while the finer materials in the other cost seven
thousand. The capital annually employed in the one will in this case
amount only to one thousand pounds; whereas that employed in the other
will amount to seven thousand three hundred pounds. At the rate of ten
per cent, therefore, the undertaker of the one will expect a yearly
profit of about one hundred pounds only; while that of the other
will expect about seven hundred and thirty pounds. But though their
profits are so very different, their labour of inspection and
direction may be either altogether or very nearly the same. In many
great works almost the whole labour of this kind is committed to
some principal clerk. His wages properly express the value of this
labour of inspection and direction. Though in settling them some
regard is had commonly, not only to his labour and skill, but to the
trust which is reposed in him, yet they never bear any regular
proportion to the capital of which he oversees the management; and the
owner of this capital, though he is thus discharged of almost all
labour, still expects that his profits should bear a regular
proportion to his capital. In the price of commodities, therefore, the
profits of stock constitute a component part altogether different from
the wages of labour, and regulated by quite different principles.

    In this state of things, the whole produce of labour does not
always belong to the labourer. He must in most cases share it with the
owner of the stock which employs him. Neither is the quantity of
labour commonly employed in acquiring or producing any commodity,
the only circumstance which can regulate the quantity which it ought
commonly to purchase, command, or exchange for. An additional
quantity, it is evident, must be due for the profits of the stock
which advanced the wages and furnished the materials of that labour.

    As soon as the land of any country has all become private
property, the landlords, like all other men, love to reap where they
never sowed, and demand a rent even for its natural produce. The
wood of the forest, the grass of the field, and all the natural fruits
of the earth, which, when land was in common, cost the labourer only
the trouble of gathering them, come, even to him, to have an
additional price fixed upon them. He must then pay for the licence
to gather them; and must give up to the landlord a portion of what his
labour either collects or produces. This portion, or, what comes to
the same thing, the price of this portion, constitutes 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
must be observed, is measured by the quantity of labour which they
can, each of them, purchase or command. Labour measures the value
not only of that part of price which resolves itself into labour,
but of that which resolves itself into rent, and of that which
resolves itself into profit.

    In every society the price of every commodity finally resolves
itself into some one or other, or all of those three parts; and in
every improved society, all the three enter more or less, 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 employed in producing it, and the third pays the
profit of the farmer. These three parts seem either immediately or
ultimately to make up the whole price of corn. A fourth part, it may
perhaps be thought, is necessary for replacing the stock of the
farmer, or for compensating the wear and tear of his labouring cattle,
and other instruments of husbandry. But it must be considered that the
price of any instrument of husbandry, such as a labouring horse, is
itself made up of the same 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 who advances both the rent of this land, and the
wages of this labour. Though the price of the corn, therefore, may pay
the price as well as the maintenance of the horse, the whole price
still resolves itself either immediately or ultimately into the same
three parts of rent, labour, and profit.

    In the price of flour or meal, we must add to the price of the
corn, the profits of the miller, and the wages of his servants; in the
price of bread, the profits of the baker, and the wages of his
servants; and in the price of both, the labour of transporting the
corn from the house of the farmer to that of the miller, and from that
of the miner to that of the baker, together with the profits of
those who advance the wages of that labour.

    The price of flax resolves itself into the same three parts as
that of corn. In the price of linen we must add to this price the
wages of the flaxdresser, of the spinner, of the weaver, of the
bleacher, etc., together with the profits of their respective
employers.

    As any particular commodity comes to be more manufactured, that
part of the price which resolves itself into wages and profit comes to
be greater in proportion to that which resolves itself into rent. In
the progress of the manufacture, not only the number of profits
increase, but every subsequent profit is greater than the foregoing;
because the capital from which it is derived must always be greater.
The capital which employs the weavers, for example, must be greater
than that which employs the spinners; because it not only replaces
that capital with its profits, but pays, besides, the wages of the
weavers; and the profits must always bear some proportion to the
capital.

    In the most improved societies, however, there are always a few
commodities of which the price resolves itself into two parts only,
the wages of labour, and the profits of stock; and a still smaller
number, in which it consists altogether in the wages of labour. In the
price of sea-fish, for example, one part pays the labour of the
fishermen, and the other the profits of the capital employed in the
fishery. Rent very seldom makes any part of it, though it does
sometimes, as I shall show hereafter. It is otherwise, at least
through the greater part of Europe, in river fisheries. A salmon
fishery pays a rent, and rent, though it cannot well be called the
rent of land, makes a part of the price of a salmon as well as wages
and profit. In some parts of Scotland a few poor people make a trade
of gathering, along the sea-shore, those little variegated stones
commonly known by the name of Scotch Pebbles. The price which is
paid to them by the stone-cutter is altogether the wages of their
labour; neither rent nor profit make any part of it.

    But the whole price of any commodity must still finally resolve
itself into some one or other, or all of those three parts; as
whatever part of it remains after paying the rent of the land, and the
price of the whole labour employed in raising, manufacturing, and
bringing it to market, must necessarily be profit to somebody.

    As the price or exchangeable value of every particular
commodity, taken separately, resolves itself into some one or other or
all of those three parts; so that of all the commodities which compose
the whole annual produce of the labour of every country, taken
complexly, must resolve itself into the same three parts, and be
parcelled out among different inhabitants of the country, either as
the wages of their labour, the profits of their stock, or the rent
of their land. The whole of what is annually either collected or
produced by the labour of every society, or what comes to the same
thing, the whole price of it, is in this manner originally distributed
among some of its different members. Wages, profit, and rent, are
the three original sources of all revenue as well as of all
exchangeable value. All other revenue is ultimately derived from
some one or other of these.

    Whoever derives his revenue from a fund which is his own, must
draw it either from his labour, from his stock, or from his land.
The revenue derived from labour is called wages. That derived from
stock, by the person who manages or employes it, is called profit.
That derived from it by the person who does not employ it himself, but
lends it to another, is called the interest or the use of money. It is
the compensation which the borrower pays to the lender, for the profit
which he has an opportunity of making by the use of the money. Part of
that profit naturally belongs to the borrower, who runs the risk and
takes the trouble of employing it; and part to the lender, who affords
him the opportunity of making this profit. The interest of money is
always a derivative revenue, which, if it is not paid from the
profit which is made by the use of the money, must be paid from some
other source of revenue, unless perhaps the borrower is a spendthrift,
who contracts a second debt in order to pay the interest of the first.
The revenue which proceeds altogether from land, is called rent, and
belongs to the landlord. The revenue of the farmer is derived partly
from his labour, and partly from his stock. To him, land is only the
instrument which enables him to earn the wages of this labour, and
to make the profits of this stock. All taxes, and an the revenue which
is founded upon them, all salaries, pensions, and annuities of every
kind, are ultimately derived from some one or other of those three
original sources of revenue, and are paid either immediately or
mediately from the wages of labour, the profits of stock, or the
rent of land.

    When those three different sorts of revenue belong to different
persons, they are readily distinguished; but when they belong to the
same they are sometimes confounded with one another, at least in
common language.

    A gentleman who farms a part of his own estate, after paying the
expense of cultivation, should gain both the rent of the landlord
and the profit of the farmer. He is apt to denominate, however, his
whole gain, profit, and thus confounds rent with profit, at least in
common language. The greater part of our North American and West
Indian planters are in this situation. They farm, the greater part
of them, their own estates, and accordingly we seldom hear of the rent
of a plantation, but frequently of its profit.

    Common farmers seldom employ any overseer to direct the general
operations of the farm. They generally, too, work a good deal with
their own hands, as ploughmen, harrowers, etc. What remains of the
crop after paying the rent, therefore, should not only replace to them
their stock employed in cultivation, together with its ordinary
profits, but pay them the wages which are due to them, both as
labourers and overseers. Whatever remains, however, after paying the
rent and keeping up the stock, is called profit. But wages evidently
make a part of it. The farmer, by saving these wages, must necessarily
gain them. Wages, therefore, are in this case confounded with profit.

    An independent manufacturer, who has stock enough both to purchase
materials, and to maintain himself till he can carry his work to
market, should gain both the wages of a journeyman who works under a
master, and the profit which that master makes by the sale of the
journeyman's work. His whole gains, however, are commonly called
profit, and wages are, in this case too, confounded with profit.

    A gardener who cultivates his own garden with his own hands,
unites in his own person the three different characters of landlord,
farmer, and labourer. His produce, therefore, should pay him the
rent of the first, the profit of the second, and the wages of the
third. The whole, however, is commonly considered as the earnings of
his labour. Both rent and profit are, in this case, confounded with
wages.

    As in a civilised country there are but few commodities of which
the exchangeable value arises from labour only, rent and profit
contributing largely to that of the far greater part of them, so the
annual produce of its labour will always be sufficient to purchase
or command a much greater quantity of labour than what employed in
raising, preparing, and bringing that produce to market. If the
society were annually to employ all the labour which it can annually
purchase, as the quantity of labour would increase greatly every year,
so the produce of every succeeding year would be of vastly greater
value than that of the foregoing. But there is no country in which the
whole annual produce is employed in maintaining the industrious. The
idle everywhere consume a great part of it; and according to the
different proportions in which it is annually divided between those
two different orders of people, its ordinary or average value must
either annually increase, or diminish, or continue the same from one
year to another.

                            CHAPTER VII

          Of the Natural and Market Price of Commodities

    THERE is in every society or neighbourhood an ordinary or
average rate both of wages and profit in every different employment of
labour and stock. This rate is naturally regulated, as I shall show
hereafter, partly by the general circumstances of the society, their
riches or poverty, their advancing, stationary, or declining
condition; and partly by the particular nature of each employment.

    There is likewise in every society or neighbourhood an ordinary or
average rate of rent, which is regulated too, as I shall show
hereafter, partly by the general circumstances of the society or
neighbourhood in which the land is situated, and partly by the natural
or improved fertility of the land.

    These ordinary or average rates may be called the natural 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 less than what
is sufficient to pay the rent of the land, the wages of the labour,
and the profits of the stock employed in raising, preparing, and
bringing it to market, according to their natural rates, the commodity
is then sold for what may be called its natural price.

    The commodity is then sold precisely for what it is worth, or
for what it really costs the person who brings it to market; for
though in common language what is called the prime cost of any
commodity does not comprehend the profit of the person who is to
sell it again, yet if he sell it at a price which does not allow him
the ordinary rate of profit in his neighbourhood, he is evidently a
loser by the trade; since by employing his stock in some other way
he might have made that profit. His profit, besides, is his revenue,
the proper fund of his subsistence. As, while he is preparing and
bringing the goods to market, he advances to his workmen their
wages, or their subsistence; so he advances to himself, in the same
manner, his own subsistence, which is generally suitable to the profit
which he may reasonably expect from the sale of his goods. Unless they
yield him this profit, therefore, they do not repay him what they
may very properly be said to have really cost him.

    Though the price, therefore, which leaves him this profit is not
always the lowest at which a dealer may sometimes sell his goods, it
is the lowest at which he is likely to sell them for any
considerable time; at least where there is perfect liberty, or where
he may change his trade as often as he pleases.

    The actual price at which any commodity is commonly sold is called
its market price. It may either be above, or below, or exactly the
same with its natural price.

    The market price of every particular commodity is regulated by the
proportion between the quantity which is actually brought to market,
and the demand of those who are willing to pay the natural price of
the commodity, or the whole value of the rent, labour, and profit,
which must be paid in order to bring it thither. Such people may be
called the effectual demanders, and their demand the effectual demand;
since it may be sufficient to effectuate the bringing of the commodity
to market. It is different from the absolute demand. A very poor man
may be said in some sense to have a demand for a coach and six; he
might like to have it; but his demand is not an effectual demand, as
the commodity can never be brought to market in order to satisfy it.

    When the quantity of any commodity which is brought to market
falls short of the effectual demand, all those who are willing to
pay the whole value of the rent, wages, and profit, which must be paid
in order to bring it thither, cannot be supplied with the quantity
which they want. Rather than want it altogether, some of them will
be willing to give more. A competition will immediately begin among
them, and the market price will rise more or less above the natural
price, according as either the greatness of the deficiency, or the
wealth and wanton luxury of the competitors, happen to animate more or
less the eagerness of the competition. Among competitors of equal
wealth and luxury the same deficiency will generally occasion a more
or less eager competition, according as the acquisition of the
commodity happens to be of more or less importance to them. Hence
the exorbitant price of the necessaries of life during the blockade of
a town or in a famine.

    When the quantity brought to market exceeds the effectual
demand, it cannot be all sold to those who are willing to pay the
whole value of the rent, wages, and profit, which must be paid in
order to bring it thither. Some part must be sold to those who are
willing to pay less, and the low price which they give for it must
reduce the price of the whole. The market price will sink more or less
below the natural price, according as the greatness of the excess
increases more or less the competition of the sellers, or according as
it happens to be more or less important to them to get immediately rid
of the commodity. The same excess in the importation of perishable,
will occasion 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 just sufficient to supply
the effectual demand, and no more, the market price naturally comes to
be either exactly, or as nearly as can be judged of, the same with the
natural price. The whole quantity upon hand can be disposed of for
this price, and cannot be disposed 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 less.

    The quantity of every commodity brought to market naturally
suits itself to the effectual demand. It is the interest of all
those who employ their land, labour, or stock, in bringing any
commodity to market, that the quantity never should exceed the
effectual demand; and it is the interest of all other people that it
never should fall short of that demand.

    If at any time it exceeds the effectual demand, some of the
component parts of its price must be paid below their natural rate. If
it is rent, the interest of the landlords will immediately prompt them
to withdraw a part of their land; and if it is wages or profit, the
interest of the labourers in the one case, and of their employers in
the other, will prompt them to withdraw a part of their labour or
stock from this employment. The quantity brought to market will soon
be no more than sufficient to supply the effectual demand. All the
different parts of its price will rise to their natural rate, and
the whole price to its natural price.

    If, on the contrary, the quantity brought to market should at
any time fall short of the effectual demand, some of the component
parts of its price must rise above their natural rate. If it is
rent, the interest of all other landlords will naturally prompt them
to prepare more land for the raising of this commodity; if it is wages
or profit, the interest of all other labourers and dealers will soon
prompt them to employ more labour and stock in preparing and
bringing it to market. The quantity brought thither will soon be
sufficient to supply the effectual demand. All the different parts
of its price will soon sink to their natural rate, and the whole price
to 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 sometimes keep them suspended a good deal
above it, and sometimes force them down even somewhat below it. But
whatever may be the obstacles which hinder them from settling in
this centre of repose and continuance, they are constantly tending
towards it.

    The whole quantity of industry annually employed in order to bring
any commodity to market naturally suits itself in this manner to the
effectual demand. It naturally aims at bringing always that precise
quantity thither which may be sufficient to supply, and no more than
supply, that demand.

    But in some employments the same quantity of industry will in
different years produce very different quantities of commodities;
while in others it will produce always the same, or very nearly the
same. The same number of labourers in husbandry will, in different
years, produce very different quantities of corn, wine, oil, hops,
etc. But the same number of spinners and weavers will every year
produce the same or very nearly the same quantity of linen and woollen
cloth. It is only the average produce of the one species of industry
which can be suited in any respect to the effectual demand; and as its
actual produce is frequently much greater and frequently much less
than its average produce, the quantity of the commodities brought to
market will sometimes exceed a good deal, and sometimes fall short a
good deal, of the effectual demand. Even though that demand
therefore should continue always the same, their market price will
be liable to great fluctuations, will sometimes fall a good deal
below, and sometimes rise a good deal above their natural price. In
the other species of industry, the produce of equal quantities of
labour being always the same, or very nearly the same, it can be
more exactly suited to the effectual demand. While that demand
continues the same, therefore, the market price of the commodities
is likely to do so too, and to be either altogether, or as nearly as
can be judged of, the same with the natural price. That the price of
linen and woolen cloth is liable neither to such frequent nor to
such great variations as the price of corn, every man's experience
will inform him. The price of the one species of commodities varies
only with the variations in the demand: that of the other varies,
not only with the variations in the demand, but with the much
greater and more frequent variations in the quantity of what is
brought to market in order to supply that demand.

    The occasional and temporary fluctuations in the market price of
any commodity fall chiefly upon those parts of its price which resolve
themselves into wages and profit. That part which resolves itself into
rent is less affected by them. A rent certain in money is not in the
least affected by them either in its rate or in its value. A rent
which consists either in a certain proportion or in a certain quantity
of the rude produce, is no doubt affected in its yearly value by all
the occasional and temporary fluctuations in the market price of
that rude produce; but it is seldom affected by them in its yearly
rate. In settling the terms of the lease, the landlord and farmer
endeavour, according to their best judgment, to adjust that rate,
not to the temporary and occasional, but to the average and ordinary
price of the produce.

    Such fluctuations affect both the value and the rate either of
wages or of profit, according as the market happens to be either
overstocked or understocked with commodities or with labour; with work
done, or with work to be done. A public mourning raises the price of
black cloth (with which the market is almost always understocked
upon such occasions), and augments the profits of the merchants who
possess any considerable quantity of it. It has no effect upon the
wages of the weavers. The market is understocked with commodities, not
with labour; with work done, not with work to be done. It raises the
wages of journeymen tailors. The market is here understocked with
labour. There is an effectual demand for more labour, for more work to
be done than can be had. It sinks the price of coloured silks and
cloths, and thereby reduces the profits of the merchants who have
any considerable quantity of them upon hand. It sinks, too, the
wages of the workmen employed in preparing such commodities, for which
all demand is stopped for six months, perhaps for a twelvemonth. The
market is here over-stocked both with commodities and with labour.

    But though the market price of every particular commodity is in
this manner continually gravitating, if one may say so, towards the
natural price, yet sometimes particular accidents, sometimes natural
causes, and sometimes particular regulations of police, may, in many
commodities, keep up the market price, for a long time together, a
good deal above the natural price.

    When by an increase in the effectual demand, the market price of
some particular commodity happens to rise a good deal above the
natural price, those who employ their stocks in supplying that
market are generally careful to conceal this change. If it was
commonly known, their great profit would tempt so many new rivals to
employ their stocks in the same way that, the effectual demand being
fully supplied, the market price would soon be reduced to the
natural price, and perhaps for some time even below it. If the
market is at a great distance from the residence of those who supply
it, they may sometimes be able to keep the secret for several years
together, and may so long enjoy their extraordinary profits without
any new rivals. Secrets of this kind, however, it must be
acknowledged, can seldom be long kept; and the extraordinary profit
can last very little longer than they are kept.

    Secrets in manufactures are capable of being longer kept than
secrets in trade. A dyer who has found the means of producing a
particular colour with materials which cost only half the price of
those commonly made use of, may, with good management, enjoy the
advantage of his discovery as long as he lives, and even leave it as a
legacy to his posterity. His extraordinary gains arise from the high
price which is paid for his private labour. They properly consist in
the high wages of that labour. But as they are repeated upon every
part of his stock, and as their whole amount bears, upon that account,
a regular proportion to it, they are commonly considered as
extraordinary profits of stock.

    Such enhancements of the market price are evidently the effects of
particular accidents, of which, however, the operation may sometimes
last for many years together.

    Some natural productions require such a singularity of soil and
situation that all the land in a great country, which is fit for
producing them, may not be sufficient to supply the effectual
demand. The whole quantity brought to market, therefore, may be
disposed of to those who are willing to give more than what is
sufficient to pay the rent of the land which produced them, together
with the wages of the labour, and the profits of the stock 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 sold at this high price; and that part of it which
resolves itself into the rent of land is in this case the part which
is generally paid above its natural rate. The rent of the land which
affords such singular and esteemed productions, like the rent of
some vineyards in France of a peculiarly happy soil and situation,
bears no regular proportion to the rent of other equally fertile and
equally well-cultivated land in its neighbourhood. The wages of the
labour and the profits of the stock employed in bringing such
commodities to market, on the contrary, are seldom out of their
natural proportion to those of the other employments of labour and
stock in their neighbourhood.

    Such enhancements of the market price are evidently the effect
of natural causes which may hinder the effectual demand from ever
being fully supplied, and which may continue, therefore, to operate
for ever.

    A monopoly granted either to an individual or to a trading company
has the same effect as a secret in trade or manufactures. The
monopolists, by keeping the market constantly understocked, by never
fully supplying the effectual demand, sell their commodities much
above the natural price, and raise their emoluments, whether they
consist in wages or profit, greatly above their natural rate.

    The price of monopoly is upon every occasion the highest which can
be got. The natural price, or the price of free competition, on the
contrary, is the lowest which can be taken, not upon every occasion,
indeed, but for any considerable time together. The one is upon
every occasion the highest which can be squeezed out of the buyers, or
which, it is supposed, they will consent to give: the other is the
lowest which the sellers can commonly afford to take, and at the
same time continue their business.

    The exclusive privileges of corporations, statutes of
apprenticeship, and all those laws which restrain, in particular
employments, the competition to a smaller number than might
otherwise go into them, have the same tendency, though in a less
degree. They are a sort of enlarged monopolies, and may frequently,
for ages together, and in whole classes of employments, keep up the
market price of particular commodities above the natural price, and
maintain both the wages of the labour and the profits of the stock
employed about them somewhat above their natural rate.

    Such enhancements of the market price may last as long as the
regulations of police which give occasion to them.

    The market price of any particular commodity, though it may
continue long above, can seldom continue long below its natural price.
Whatever part of it was paid below the natural rate, the persons whose
interest it affected would immediately feel the loss, and would
immediately withdraw either so much land, or so much labour, or so
much stock, from being employed about it, that the quantity brought to
market would soon be no more than sufficient to supply the effectual
demand. Its market price, therefore, would soon rise to the natural
price. This at least would be the case where there was perfect
liberty.

    The same statutes of apprenticeship and other corporation laws
indeed, which, when a manufacture is in prosperity, enable the workman
to raise his wages a good deal above their natural rate, sometimes
oblige him, when it decays, to let them down a good deal below it.
As in the one case they exclude many people from his employment, so in
the other they exclude him from many employments. The effect of such
regulations, however, is not near so durable in sinking the
workman's wages below, as in raising them above their natural rate.
Their operation in the one way may endure for many centuries, but in
the other it can last no longer than the lives of some of the
workmen who were bred to the business in the time of its prosperity.
When they are gone, the number of those who are afterwards educated to
the trade will naturally suit itself to the effectual demand. The
police must be as violent as that of Indostan or ancient Egypt
(where every man was bound by a principle of religion to follow the
occupation of his father, and was supposed to commit the most horrid
sacrilege if he changed it for another), which can in any particular
employment, and for several generations together, sink either the
wages of labour or the profits of stock below their natural rate.

    This is all that I think necessary to be observed at present
concerning the deviations, whether occasional or permanent, of the
market price of commodities from the natural price.

    The natural price itself varies with the natural rate of each of
its component parts, of wages, profit, and rent; and in every
society this rate varies according to their circumstances, according
to their riches or poverty, their advancing, stationary, or
declining condition. I shall, in the four following chapters,
endeavour to explain, as fully and distinctly as I can, the causes
of those different variations.

    First, I shall endeavour to explain what are the circumstances
which naturally determine the rate of wages, and in what manner
those circumstances are affected by the riches or poverty, by the
advancing, stationary, or declining state of the society.

    Secondly, I shall endeavour to show what are the circumstances
which naturally determine the rate of profit, and in what manner, too,
those circumstances are affected by the like variations in the state
of the society.

    Though pecuniary wages and profit are very different in the
different employments of labour and stock; yet a certain proportion
seems 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 stock. 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
society in which they are carried on. But though in many respects
dependent upon the laws and policy, this proportion seems to be little
affected by the riches or poverty of that society; by its advancing,
stationary, or declining condition; but to remain the same or very
nearly the same in all those different states. I shall, in the third
place, endeavour to explain all the different circumstances which
regulate this proportion.

    In the fourth and last place, I shall endeavour to show what are
the circumstances which regulate the rent of land, and which either
raise or lower the real price of all the different substances which it
produces.

                            CHAPTER VIII

                       Of the Wages of Labour

    THE produce of labour constitutes the natural recompense or
wages of labour.

    In that original state of things, which precedes both the
appropriation of land and the accumulation of stock, the whole produce
of labour belongs to the labourer. He has neither landlord nor
master to share with him.

    Had this state continued, the wages of labour would have augmented
with all those improvements in its productive powers to which the
division of labour gives occasion. All things would gradually have
become cheaper. They would have been produced by a smaller quantity of
labour; and as the commodities produced by equal quantities of
labour would naturally in this state of things be exchanged for one
another, they would have been purchased likewise with the produce of a
smaller quantity.

    But though all things would have become cheaper in reality, in
appearance many things might have become dearer than before, or have
been exchanged for a greater quantity of other goods. Let us
suppose, for example, that in the greater part of employments the
productive powers of labour had been improved to ten fold, 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 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 purchase 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
before. In reality, however, it would be twice as cheap. Though it
required five times the quantity of other goods to purchase it, it
would require only half the quantity of labour either to purchase or
to produce it. The acquisition, therefore, would be twice as easy as
before.

    But this original state of things, in which the labourer enjoyed
the whole produce of his own labour, could not last beyond the first
introduction of the appropriation of land and the accumulation of
stock. It was at an end, therefore, long before the most
considerable improvements were made in the productive powers of
labour, and it would be to no purpose to trace further what might have
been its effects upon the recompense or wages of labour.

    As soon as land becomes private property, the landlord demands a
share of almost all the produce which the labourer can either raise,
or collect from it. His rent makes the first deduction from the
produce of the labour which is employed upon land.

    It seldom happens that the person who tills the ground has
wherewithal to maintain himself till he reaps the harvest. His
maintenance is generally advanced to him from the stock of a master,
the farmer who employs him, and who would have no interest to employ
him, unless he was to share in the produce of his labour, or unless
his stock was to be replaced to him with a profit. This profit,
makes a second deduction from the produce of the labour which is
employed upon land.

    The produce of almost all other labour is liable to the like
deduction of profit. In all arts and manufactures the greater part
of the workmen stand in need of a master to advance them the materials
of their work, and their wages and maintenance till it be completed.
He shares in the produce of their labour, or in the value which it
adds to the materials upon which it is bestowed; and in this share
consists his profit.

    It sometimes happens, indeed, that a single independent workman
has stock sufficient both to purchase the materials of his work, and
to maintain himself till it be completed. He is both master and
workman, and enjoys the whole produce of his own labour, or the
whole value which it adds to the materials upon which it is
bestowed. It includes what are usually two distinct revenues,
belonging to two distinct persons, the profits of stock, and the wages
of labour.

    Such cases, however, are not very frequent, and in every part of
Europe, twenty workmen serve under a master for one that is
independent; and the wages of labour are everywhere understood to
be, what they usually are, when the labourer is one person, and the
owner of the stock which employs him another.

    What are the common wages of labour, depends everywhere upon the
contract usually made between those two parties, whose interests are
by no means the same. The workmen desire to get as much, the masters
to give as little as possible. The former are disposed to combine in
order to raise, the latter in order to lower the wages of labour.

    It is not, however, difficult to foresee which of the two
parties must, upon all ordinary occasions, have the advantage in the
dispute, and force the other into a compliance with their terms. The
masters, being fewer in number, can combine much more easily; and
the law, besides, authorizes, or at least does not prohibit their
combinations, while it prohibits those of the workmen. We have no acts
of parliament against combining to lower the price of work; but many
against combining to raise it. In all such disputes the masters can
hold out much longer. A landlord, a farmer, a master manufacturer, a
merchant, though they did not employ a single workman, could generally
live a year or two upon the stocks which they have already acquired.
Many workmen could not subsist a week, few could subsist a month,
and scarce any a year without employment. In the long run the
workman may be as necessary to his master as his master is to him; but
the necessity is not so immediate.

    We rarely hear, it has been said, of the combinations of
masters, though frequently of those of workmen. But whoever
imagines, upon this account, that masters rarely combine, is as
ignorant of the world as of the subject. Masters are always and
everywhere in a sort of tacit, but constant and uniform combination,
not to raise the wages of labour above their actual rate. To violate
this combination is everywhere a most unpopular action, and a sort
of reproach to a master among his neighbours and equals. We seldom,
indeed, hear of this combination, because it is the usual, and one may
say, the natural state of things, which nobody ever hears of. Masters,
too, sometimes enter into particular combinations to sink the wages of
labour even below this rate. These are always conducted with the
utmost silence and secrecy, till the moment of execution, and when the
workmen yield, as they sometimes do, without resistance, though
severely felt by them, they are never heard of by other people. Such
combinations, however, are frequently resisted by a contrary defensive
combination of the workmen; who sometimes too, without any provocation
of this kind, combine of their own accord to raise the price of
their labour. Their usual pretences are, sometimes the high price of
provisions; sometimes the great profit which their masters make by
their work. But whether their combinations be offensive or
defensive, they are always abundantly heard of. In order to bring
the point to a speedy decision, they have always recourse to the
loudest clamour, and sometimes to the most shocking violence and
outrage. They are desperate, and act with the folly and extravagance
of desperate men, who must either starve, or frighten their masters
into an immediate compliance with their demands. The masters upon
these occasions are just as clamorous upon the other side, and never
cease to call aloud for the assistance of the civil magistrate, and
the rigorous execution of those laws which have been enacted with so
much severity against the combinations of servants, labourers, and
journeymen. The workmen, accordingly, very seldom derive any advantage
from the violence of those tumultuous combinations, which, partly from
the interposition of the civil magistrate, partly from the necessity
superior steadiness of the masters, partly from the necessity which
the greater part of the workmen are under of submitting for the sake
of present subsistence, generally end in nothing, but the punishment
or ruin of the ringleaders.

    But though in disputes with their workmen, masters must
generally have the advantage, there is, however, a certain rate
below which it seems impossible to reduce, for any considerable
time, the ordinary wages even of the lowest species of labour.

    A man must always live by his work, and his wages must at least be
sufficient to maintain him. They must even upon most occasions be
somewhat more; otherwise it would be impossible for him to bring up
a family, and the race of such workmen could not last beyond the first
generation. Mr. Cantillon seems, upon this account, to suppose that
the lowest species of common labourers must everywhere earn at least
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 necessary attendance on the children, being supposed no
more than sufficient to provide for herself. But one half the children
born, it is computed, die before the age of manhood. The poorest
labourers, therefore, according to this account, must, one with
another, attempt to rear at least four children, in order that two may
have an equal chance of living to that age. But the necessary
maintenance of four children, it is supposed, may be nearly equal to
that of one man. The labour of an able-bodied slave, the same author
adds, is computed to be worth double his maintenance; and that of
the meanest labourer, he thinks, cannot be worth less than that of
an ablebodied slave. Thus far at least seems certain, that, in order
to bring up a family, the labour of the husband and wife together
must, even in the lowest species of common labour, be able to earn
something more than what is precisely necessary for their own
maintenance; but in what proportion, whether in that above
mentioned, or in any other, I shall not take upon me to determine.

    There are certain circumstances, however, which sometimes give the
labourers an advantage, and enable them to raise their wages
considerably above this rate; evidently the lowest which is consistent
with common humanity.

    When in any country the demand for those who live by wages,
labourers, journeymen, servants of every kind, is continually
increasing; when every year furnishes employment for a greater
number than had been employed the year before, the workmen have no
occasion to combine in order to raise their wages. The scarcity of
hands occasions a competition among masters, who bid against one
another, in order to get workmen, and thus voluntarily break through
the natural combination of masters not to raise wages.

    The demand for those who live by wages, it is evident, cannot
increase but in proportion to the increase of the funds which are
destined for the payment of wages. These funds are of two kinds;
first, revenue which is over and above what is necessary for the
maintenance; and, secondly, the stock which is over and above what
is necessary for the employment of their masters.

    When the landlord, annuitant, or monied man, has a greater revenue
than what he judges sufficient to maintain his own family, he
employs either the whole or a part of the surplus in maintaining one
or more menial servants. Increase this surplus, and he will
naturally increase the number of those servants.

    When an independent workman, such as a weaver or shoemaker, has
got more stock than what is sufficient to purchase the materials of
his own work, and to maintain himself till he can dispose of it, he
naturally employs one or more journeymen with the surplus, in order to
make a profit by their work. Increase this surplus, and he will
naturally increase the number of his journeymen.

    The demand for those who live by wages, therefore, necessarily
increases with the increase of the revenue and stock of every country,
and cannot possibly increase without it. The increase of revenue and
stock is the increase of national wealth. The demand for those who
live by wages, therefore, naturally increases with the increase of
national wealth, and cannot possibly increase without it.

    It is not the actual greatness of national wealth, but its
continual increase, which occasions a rise in the wages of labour.
It is not, accordingly, in the richest countries, but in the most
thriving, or in those which are growing rich the fastest, that the
wages of labour are highest. England is certainly, in the present
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 England. In the province of New York, common labourers earn
three shillings and sixpence currency, equal to two shillings
sterling, a day; ship carpenters, ten shillings and sixpence currency,
with a pint of rum worth sixpence sterling, equal in all to six
shillings and sixpence sterling; house carpenters and bricklayers,
eight shillings currency, equal to four shillings and sixpence
sterling; journeymen tailors, five shillings currency, equal to
about two shillings and tenpence sterling. These prices are all
above the London price; and wages are said to be as high in the
other colonies as in New York. The price of provisions is everywhere
in North America much lower than in England. A dearth has never been
known there. In the worst seasons they have always had a sufficiency
for themselves, though less for exportation. If the money price of
labour, therefore, be higher than it is anywhere in the mother
country, its real price, the real command of the necessaries and
conveniencies of life which it conveys to the labourer must be
higher in a still greater proportion.

    But though North America is not yet so rich as England, it is much
more thriving, and advancing with much greater rapidity to the further
acquisition of riches. The most decisive mark of the prosperity of any
country is the increase of the number of its inhabitants. In Great
Britain, and most other European countries, they are not supposed to
double in less than five hundred years. In the British colonies in
North America, it has been found that they double in twenty or
five-and-twenty years. Nor in the present times is this increase
principally owing to the continual importation of new inhabitants, but
to the great multiplication of the species. Those who live to old age,
it is said, frequently see there from fifty to a hundred, and
sometimes many more, descendants from their own body. Labour is
there so well rewarded that a numerous family of children, instead
of being a burthen, is a source of opulence and prosperity to the
parents. The labour of each child, before it can leave their house, is
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 so little chance for
a second husband, is there frequently courted as a sort of fortune.
The value of children is the greatest of all encouragements to
marriage. We cannot, therefore, wonder that the people in North
America should generally marry very young. Notwithstanding the great
increase occasioned by such early marriages, there is a continual
complaint of the scarcity of hands in North America. The demand for
labourers, the funds destined for maintaining them, increase, it
seems, still faster than they can find labourers to employ.

    Though the wealth of a country should be very great, yet if it has
been long stationary, we must not expect to find the wages of labour
very high in it. The funds destined for the payment of wages, the
revenue and stock of its inhabitants, may be of the greatest extent;
but if they have continued for several centuries of the same, or
very nearly of the same extent, the number of labourers employed every
year could easily supply, and even more than supply, the number wanted
the following year. There could seldom be any scarcity of hands, nor
could the masters be obliged to bid against one another in order to
get them. The hands, on the contrary, would, in this case, naturally
multiply beyond their employment. There would be a constant scarcity
of employment, and the labourers would be obliged to bid against one
another in order to get it. If in such a country the wages of labour
had ever been more than sufficient to maintain the labourer, and to
enable him to bring up a family, the competition of the labourers
and the interest of the masters would soon reduce them to this
lowest rate which is consistent with common humanity. China has been
long one of the richest, that is, one of the most fertile, best
cultivated, most industrious, and most populous countries in world. It
seems, however, to have been long stationary. Marco Polo, who
visited it more than five hundred years ago, describes its
cultivation, industry, and populousness, almost in the same terms in
which they are described by travellers in the present times. It had
perhaps, even long before his time, acquired that full complement of
riches which the nature of its laws and institutions permits it to
acquire. The accounts of all travellers, inconsistent in many other
respects, agree in the low wages of labour, and in the difficulty
which a labourer finds in bringing up a family in China. If by digging
the ground a whole day he can get what will purchase a small
quantity of rice in the evening, he is contented. The condition of
artificers is, if possible, still worse. Instead of waiting indolently
in their workhouses, for the calls of their customers, as in Europe,
they are continually running about the streets with the tools of their
respective trades, offering their service, and as it were begging
employment. The poverty of the lower ranks of people in China far
surpasses that of the most beggarly nations in Europe. In the
neighbourhood of Canton many hundred, it is commonly said, many
thousand families have no habitation on the land, but live
constantly in little fishing boats upon the rivers and canals. The
subsistence which they find there is so scanty that they are eager
to fish up the nastiest garbage thrown overboard from any European
ship. Any carrion, the carcase of a dead dog or cat, for example,
though half putrid and stinking, is as welcome to them as the most
wholesome food to the people of other countries. Marriage is
encouraged in China, not by the profitableness of children, but by the
liberty of destroying them. In all great towns several are every night
exposed in the street, or drowned like puppies in the water. The
performance of this horrid office is even said to be the avowed
business by which some people earn their subsistence.

    China, however, though it may perhaps stand still, does not seem
to go backwards. Its towns are nowhere deserted by their
inhabitants. The lands which had once been cultivated are nowhere
neglected. The same or very nearly the same annual labour must
therefore continue to be performed, and the funds destined for
maintaining it must not, consequently, be sensibly diminished. The
lowest class of labourers, therefore, notwithstanding their scanty
subsistence, must some way or another make shift to continue their
race so far as to keep up their usual numbers.

    But it would be otherwise in a country where the funds destined
for the maintenance of labour were sensibly decaying. Every year the
demand for servants and labourers would, in all the different
classes of employments, be less than it had been the year before. Many
who had been bred in the superior classes, not being able to find
employment in their own business, would be glad to seek it in the
lowest. The lowest class being not only overstocked with its own
workmen, but with the overflowings of all the other classes, the
competition for employment would be so great in it, as to reduce the
wages of labour to the most miserable and scanty subsistence of the
labourer. Many would not be able to find employment even upon these
hard terms, but would either starve, or be driven to seek a
subsistence either by begging, or by the perpetration perhaps of the
greatest enormities. Want, famine, and mortality would immediately
prevail in that class, and from thence extend themselves to all the
superior classes, till the number of inhabitants in the country was
reduced to what could easily be maintained by the revenue and stock
which remained in it, and which had escaped either the tyranny or
calamity which had destroyed the rest. This perhaps is nearly the
present state of Bengal, and of some other of the English
settlements in the East Indies. In a fertile country which had
before been much depopulated, where subsistence, consequently,
should not be very difficult, and where, notwithstanding, three or
four hundred thousand people die of hunger in one year, we may be
assured that the funds destined for the maintenance of the labouring
poor are fast decaying. The difference between the genius of the
British constitution which protects and governs North America, and
that of the mercantile company which oppresses and domineers in the
East Indies, cannot perhaps be better illustrated than by the
different state of those countries.

    The liberal reward of labour, therefore, as it is the necessary
effect, so it is the natural symptom of increasing national wealth.
The scanty maintenance of the labouring poor, on the other hand, is
the natural symptom that things are at a stand, and their starving
condition that they are going fast backwards.

    In Great Britain the wages of labour seem, in the present times,
to be evidently more than what is precisely necessary to enable the
labourer to bring up a family. In order to satisfy ourselves upon this
point it will not be necessary to enter into any tedious or doubtful
calculation of what may be the lowest sum upon which it is possible to
do this. There are many plain symptoms that the wages of labour are
nowhere in this country regulated by this lowest rate which is
consistent with common humanity.

    First, in almost every part of Great Britain there is a
distinction, even in the lowest species of labour, between summer
and winter wages. Summer wages are always highest. But on account of
the extraordinary expense of fuel, the maintenance of a family is most
expensive in winter. Wages, therefore, being highest when this expense
is lowest, it seems evident that they are not regulated by what is
necessary for this expense; but by the quantity and supposed value
of the work. A labourer, it may be said indeed, ought to save part
of his summer wages in order to defray his winter expense; and that
through the whole year they do not exceed what is necessary to
maintain his family through the whole year. A slave, however, or one
absolutely dependent on us for immediate subsistence, would not be
treated in this manner. His daily subsistence would be proportioned to
his daily necessities.

    Secondly, the wages of labour do not in Great Britain fluctuate
with the price of provisions. These vary everywhere from year to year,
frequently from month to month. But in many places the money price
of labour remains uniformly the same sometimes for half a century
together. If in these places, therefore, the labouring poor can
maintain their families in dear years, they must be at their ease in
times of moderate plenty, and in affluence in those of extraordinary
cheapness. The high price of provisions during these ten years past
has not in many parts of the kingdom been accompanied with any
sensible rise in the money price of labour. It has, indeed, in some,
owing probably more to the increase of the demand for labour than to
that of the price of provisions.

    Thirdly, as the price of provisions varies more from year to
year than the wages of labour, so, on the other hand, the wages of
labour vary more from place to place than the price of provisions. The
prices of bread and butcher's meat are generally the same or very
nearly the same through the greater part of the United Kingdom.
These and most other things which are sold by retail, the way in which
the labouring poor buy all things, are generally fully as cheap or
cheaper in great towns than in the remoter parts of the country, for
reasons which I shall have occasion to explain hereafter. But the
wages of labour in a great town and its neighbourhood are frequently a
fourth or a fifth part, twenty or five-and-twenty per cent higher than
at a few miles distance. Eighteenpence a day may be reckoned the
common price of labour in London and its neighbourhood. At a few miles
distance it falls to fourteen and fifteenpence. Tenpence may be
reckoned its price in Edinburgh and its neighbourhood. At a few
miles distance it falls to eightpence, the usual price of common
labour through the greater part of the low country of Scotland,
where it varies a good deal less than in England. Such a difference of
prices, which it seems is not always sufficient to transport a man
from one parish to another, would necessarily occasion so great a
transportation of the most bulky commodities, not only from one parish
to another, but from one end of the kingdom, almost from one end of
the world to the other, as would soon reduce them more nearly to a
level. After all that has been said of the levity and inconstancy of
human nature, it appears evidently from experience that a man is of
all sorts of luggage the most difficult to be transported. If the
labouring poor, therefore, can maintain their families in those
parts of the kingdom where the price of labour is lowest, they must be
in affluence where it is highest.

    Fourthly, the variations in the price of labour not only do not
correspond either in place or time with those in the price of
provisions, but they are frequently quite opposite.

    Grain, the food of the common people, is dearer in Scotland than
in England, whence Scotland receives almost every year very large
supplies. But English corn must be sold dearer in Scotland, the
country to which it is brought, than in England, the country from
which it comes; and in proportion to its quality it cannot be sold
dearer in Scotland than the Scotch corn that comes to the same
market in competition with it. The quality of grain depends chiefly
upon the quantity of flour or meal which it yields at the mill, and in
this respect English grain is so much superior to the Scotch that,
though often dearer in appearance, or in proportion to the measure
of its bulk, it is generally cheaper in reality, or in proportion to
its quality, or even to the measure of its weight. The price of
labour, on the contrary, is dearer in England than in Scotland. If the
labouring poor, therefore, can maintain their families in the one part
of the United Kingdom, they must be in affluence in the other. Oatmeal
indeed supplies the common people in Scotland with the greatest and
the best part of their food, which is in general much inferior to that
of their neighbours of the same rank in England. This difference,
however, in the mode of their subsistence is not the cause, but the
effect of the difference in their wages; though, by a strange
misapprehension, I have frequently heard it represented as the
cause. It is not because one man keeps a coach while his neighbour
walks afoot that the one is rich and the other poor; but because the
one is rich he keeps a coach, and because the other is poor he walks
afoot.

    During the course of the last century, taking one year with
another, grain was dearer in both parts of the United Kingdom than
during that of the present. This is a matter of fact which cannot
now admit of any reasonable doubt; and the proof of it is, if
possible, still more decisive with regard to Scotland than with regard
to England. It is in Scotland supported by the evidence of the
public fiars, annual valuations made upon oath, according to the
actual state of the markets, of all the different sorts of grain in
every different county of Scotland. If such direct proof could require
any collateral evidence to confirm it, I would observe that this has
likewise been the case in France, and probably in most other parts
of Europe. With regard to France there is the clearest proof. But
though it is certain that in both parts of the United Kingdom grain
was somewhat dearer in the last century than in the present, it is
equally certain that labour was much cheaper. If the labouring poor,
therefore, could bring up their families then, they must be much
more at their ease now. In the last century, the most usual
day-wages of common labour through the greater part of Scotland were
sixpence in summer and fivepence in winter. Three shillings a week,
the same price very nearly, still continues to be paid in some parts
of the Highlands and Western Islands. Through the greater part of
the low country the most usual wages of common labour are now
eightpence a day; tenpence, sometimes a shilling about Edinburgh, in
the counties which border upon England, probably on account of that
neighbourhood, and in a few other places where there has lately been a
considerable rise in the demand for labour, about Glasgow, Carron,
Ayrshire, etc. In England the improvements of agriculture,
manufactures, and commerce began much earlier than in Scotland. The
demand for labour, and consequently its price, must necessarily have
increased with those improvements. In the last century, accordingly,
as well as in the present, the wages of labour were higher in
England than in Scotland. They have risen, too, considerably since
that time, though, on account of the greater variety of wages paid
there in different places, it is more difficult to ascertain how much.
In 1614, the pay of a foot soldier was the same as in the present
times, eightpence a day. When it was first established it would
naturally be regulated by the usual wages of common labourers, the
rank of people from which foot soldiers are commonly drawn. Lord Chief
Justice Hales, who wrote in the time of Charles II, computes the
necessary expense of a labourer's family, consisting of six persons,
the father and mother, two children able to do something, and two
not able, at ten shillings a week, or twenty-six pounds a year. If
they cannot earn this by their labour, they must make it up, he
supposes, either by begging or stealing. He appears to have inquired
very carefully into this subject. In 1688, Mr. Gregory King, whose
skill in political arithmetic is so much extolled by Doctor
Davenant, computed the ordinary income of labourers and out-servants
to be fifteen pounds a year to a family, which he supposed to consist,
one with another, of three and a half persons. His calculation,
therefore, though different in appearance, corresponds very nearly
at bottom with that of Judge Hales. Both suppose the weekly expense of
such families to be about twenty pence a head. Both the pecuniary
income and expense of such families have increased considerably
since that time through the greater part of the kingdom; in some
places more, and in some less; though perhaps scarce anywhere so
much as some exaggerated accounts of the present wages of labour
have lately represented them to the public. The price of labour, it
must be observed, cannot be ascertained very accurately anywhere,
different prices being often paid at the same place and for the same
sort of labour, not only according to the different abilities of the
workmen, but according to the easiness or hardness of the masters.
Where wages are not regulated by law, all that we can pretend to
determine is what are the most usual; and experience seems to show
that law can never regulate them properly, though it has often
pretended to do so.

    The real recompense of labour, the real quantity of the
necessaries and conveniences of life which it can procure to the
labourer, has, during the course of the present century, increased
perhaps in a still greater proportion than its money price. Not only
grain has become somewhat cheaper, but many other things from which
the industrious poor derive an agreeable and wholesome variety of food
have become a great deal cheaper. Potatoes, for example, do not at
present, through the greater part of the kingdom, cost half the
price which they used to do thirty or forty years ago. The same
thing may be said of turnips, carrots, cabbages; things which were
formerly never raised but by the spade, but which are now commonly
raised by the plough. All sort of garden stuff, too, has become
cheaper. The greater part of the apples and even of the onions
consumed in Great Britain were in the last century imported from
Flanders. The great improvements in the coarser manufactures of both
linen and woollen cloth furnish the labourers with cheaper and
better clothing; and those in the manufactures of the coarser
metals, with cheaper and better instruments of trade, as well as
with many agreeable and convenient pieces of household furniture.
Soap, salt, candles, leather, and fermented liquors have, indeed,
become a good deal dearer; chiefly from the taxes which have been laid
upon them. The quantity of these, however, which the labouring poor
are under any necessity of consuming, is so very small, that the
increase in their price does not compensate the diminution in that
of so many other things. The common complaint that luxury extends
itself even to the lowest ranks of the people, and that the
labouring poor will not now be contented with the same food, clothing,
and lodging which satisfied them in former times, may convince us that
it is not the money price of labour only, but its real recompense,
which has augmented.

    Is this improvement in the circumstances of the lower ranks of the
people to be regarded as an advantage or as an inconveniency to the
society? The answer seems at first sight abundantly plain. Servants,
labourers, and workmen of different kinds, make up the far greater
part of every great political society. But what improves the
circumstances of the greater part can never be regarded as an
inconveniency to the whole. No society can surely be flourishing and
happy, of which the far greater part of the members are poor and
miserable. It is but equity, besides, that they who feed, clothe,
and lodge the whole body of the people, should have such a share of
the produce of their own labour as to be themselves tolerably well
fed, clothed, and lodged.

    Poverty, though it no doubt discourages, does not always prevent
marriage. It seems even to be favourable to generation. A half-starved
Highland woman frequently bears more than twenty children, while a
pampered fine lady is often incapable of bearing any, and is generally
exhausted by two or three. Barrenness, so frequent among women of
fashion, is very rare among those of inferior station. Luxury in the
fair sex, while it inflames perhaps the passion for enjoyment, seems
always to weaken, and frequently to destroy 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 so cold a soil and so severe a climate, soon
withers and dies. It is not uncommon, I have been frequently told,
in the Highlands of Scotland for a mother who has borne twenty
children not to have two alive. Several officers of great experience
have assured me, that so far from recruiting their regiment, they have
never been able to supply it with drums and fifes from all the
soldiers' children that were born in it. A greater number of fine
children, however, is seldom seen anywhere than about a barrack of
soldiers. Very few of them, it seems, arrive at the age of thirteen or
fourteen. In some places one half the children born die before they
are four years of age; in many places before they are seven; and in
almost all places before they are nine or ten. This great mortality,
however, will everywhere be found chiefly among the children of the
common people, who cannot afford to tend them with the same care as
those of better station. Though their marriages are generally more
fruitful than those of people of fashion, a smaller proportion of
their children arrive at maturity. In foundling hospitals, and among
the children brought up by parish charities, the mortality is still
greater than among those of the common people.

    Every species of animals naturally multiplies in proportion to the
means of their subsistence, and no species can ever multiply beyond
it. But in civilised society it is only among the inferior ranks of
people that the scantiness of subsistence can set limits to the
further multiplication of the human species; and it can do so in no
other way than by destroying a great part of the children which
their fruitful marriages produce.

    The liberal reward of labour, by enabling them to provide better
for their children, and consequently to bring up a greater number,
naturally tends to widen and extend those limits. It deserves to be
remarked, too, that it necessarily does this as nearly as possible
in the proportion which the demand for labour requires. If this demand
is continually increasing, the reward of labour must necessarily
encourage in such a manner the marriage and multiplication of
labourers, as may enable them to supply that continually increasing
demand by a continually increasing population. If the reward should at
any time be less than what was requisite for this purpose, the
deficiency of hands would soon raise it; and if it should at any
time be more, their excessive multiplication would soon lower it to
this necessary rate. The market would be so much understocked with
labour in the one case, and so much overstocked in the other, as would
soon force back its price to that proper rate which the
circumstances of the society required. It is in this manner that the
demand for men, like that for any other commodity, necessarily
regulates the production of men; quickens it when it goes on too
slowly, and stops it when it advances too fast. It is this demand
which regulates and determines the state of propagation in all the
different countries of the world, in North America, in Europe, and
in China; which renders it rapidly progressive in the first, slow
and gradual in the second, and altogether stationary in the last.

    The wear and tear of a slave, it has been said, is at the
expense of his master; but that of a free servant is at his own
expense. The wear and tear of the latter, however, is, in reality,
as much at the expense of his master as that of the former. The
wages paid to journeymen and servants of every kind must be such as
may enable them, one with another, to continue the race of
journeymen and servants, according as the increasing, diminishing,
or stationary demand of the society may happen to require. But
though the wear and tear of a free servant be equally at the expense
of his master, it generally costs him much less than that of a
slave. The fund destined for replacing or repairing, if I may say
so, the wear and tear of the slave, is commonly managed by a negligent
master or careless overseer. That destined for performing the same
office with regard to the free man, is managed by the free man
himself. The disorders which generally prevail in the economy of the
rich, naturally introduce themselves into the management of the
former: the strict frugality and parsimonious attention of the poor as
naturally establish themselves in that of the latter. Under such
different management, the same purpose must require very different
degrees of expense to execute it. It appears, accordingly, from the
experience of all ages and nations, I believe, that the work done by
freemen comes cheaper in the end than that performed by slaves. It
is found to do so even at Boston, New York, and Philadelphia, where
the wages of common labour are so very high.

    The liberal reward of labour, therefore, as it is the effect of
increasing wealth, so it is the cause of increasing population. To
complain of it is to lament over the necessary effect and cause of the
greatest public prosperity.

    It deserves to be remarked, perhaps, that it is in the progressive
state, while the society is advancing to the further acquisition,
rather than when it has acquired its full complement of riches, that
the condition of the labouring poor, of the great body of the
people, seems to be the happiest and the most comfortable. It is
hard in the stationary, and miserable in the declining state. The
progressive state is in reality the cheerful and the hearty state to
all the different orders of the society. The stationary is dull; the
declining, melancholy.

    The liberal reward of labour, as it encourages the propagation, so
it increases the industry of the common people. The wages of labour
are the encouragement of industry, which, like every other human
quality, improves in proportion to the encouragement it receives. A
plentiful subsistence increases the bodily strength of the labourer,
and the comfortable hope of bettering his condition, and of ending his
days perhaps in ease and plenty, animates him to exert that strength
to the utmost. Where wages are high, accordingly, we shall always find
the workmen more active, diligent, and expeditious than where they are
low: in England, for example, than in Scotland; in the neighbourhood
of great towns than in remote country places. Some workmen, indeed,
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 case with the greater part. Workmen, on the contrary, when they
are liberally paid by the piece, are very apt to overwork
themselves, and to ruin their health and constitution in a few
years. A carpenter in London, and in some other places, is not
supposed to last in his utmost vigour above eight years. Something
of the same kind happens in many other trades, in which the workmen
are paid by the piece, as they generally are in manufactures, and even
in country labour, wherever wages are higher than ordinary. Almost
every class of artificers is subject to some peculiar infirmity
occasioned by excessive application to their peculiar species of work.
Ramuzzini, an eminent Italian physician, has written a particular book
concerning such diseases. We do not reckon our soldiers the most
industrious set of people among us. Yet when soldiers have been
employed in some particular sorts of work, and liberally paid by the
piece, their officers have frequently been obliged to stipulate with
the undertaker, that they should not be allowed to earn above a
certain sum every day, according to the rate at which they were
paid. Till this stipulation was made, mutual emulation and the
desire of greater gain frequently prompted them to overwork
themselves, and to hurt their health by excessive labour. Excessive
application during four days of the week is frequently the real
cause of the idleness of the other three, so much and so loudly
complained of. Great labour, either of mind or body, continued for
several days together, is in most men naturally followed by a great
desire of relaxation, which, if not restrained by force or by some
strong necessity, is almost irresistible. It is the call of nature,
which requires to be relieved by some indulgence, sometimes of ease
only, but sometimes, too, of dissipation and diversion. If it is not
complied with, the consequences are often dangerous, and sometimes
fatal, and such as almost always, sooner or later, brings on the
peculiar infirmity of the trade. If masters would always listen to the
dictates of reason and humanity, they have frequently occasion
rather to moderate than to animate the application of many of their
workmen. It will be found, I believe, in every sort of trade, that the
man who works so moderately as to be able to work constantly not
only preserves his health the longest, but, in the course of the year,
executes the greatest quantity of work.

    In cheap years, it is pretended, workmen are generally more
idle, and in dear ones more industrious than ordinary. A plentiful
subsistence, therefore, it has been concluded, relaxes, and a scanty
one quickens their industry. That a little more plenty than ordinary
may render some workmen idle, cannot well be doubted; but that it
should have this effect upon the greater part, or that men in
general should work better when they are ill fed than when they are
well fed, when they are disheartened than when they are in good
spirits, when they are frequently sick than when they are generally in
good health, seems not very probable. Years of dearth, it is to be
observed, are generally among the common people years of sickness
and mortality, which cannot fail to diminish the produce of their
industry.

    In years of plenty, servants frequently leave their masters, and
trust their subsistence to what they can make by their own industry.
But the same cheapness of provisions, by increasing the fund which
is destined for the maintenance of servants, encourages masters,
farmers especially, to employ a greater number. Farmers upon such
occasions expect more profit from their corn by maintaining a few more
labouring servants than by selling it at a low price in the market.
The demand for servants increases, while the number of those who offer
to supply that demand diminishes. The price of labour, therefore,
frequently rises in cheap years.

    In years of scarcity, the difficulty and uncertainty of
subsistence make all such people eager to return to service. But the
high price of provisions, by diminishing the funds destined for the
maintenance of servants, disposes masters rather to diminish than to
increase the number of those they have. In dear years, too, poor
independent workmen frequently consume the little stocks with which
they had used to supply themselves with the materials of their work,
and are obliged to become journeymen for subsistence. More people want
employment than can easily get it; many are willing to take it upon
lower terms than ordinary, and the wages of both servants and
journeymen frequently sink in dear years.

    Masters of all sorts, therefore, frequently make better bargains
with their servants in dear than in cheap years, and find them more
humble and dependent in the former than in the latter. They naturally,
therefore, commend the former as more favourable to industry.
Landlords and farmers, besides, two of the largest classes of masters,
have another reason for being pleased with dear years. The rents of
the one and the profits of the other depend very much upon the price
of provisions. Nothing can be more absurd, however, than to imagine
that men in general should work less when they work for themselves,
than when they work for other people. A poor independent workman
will generally be more industrious than even a journeyman who works by
the piece. The one enjoys the whole produce of his own industry; the
other shares it with his master. The one, in his separate
independent state, is less liable to the temptations of bad company,
which in large manufactories so frequently ruin the morals of the
other. The superiority of the independent workman over those
servants who are hired by the month or by the year, and whose wages
and maintenance are the same whether they do much or do little, is
likely to be still greater. Cheap years tend to increase the
proportion of independent workmen to journeymen and servants of all
kinds, and dear years to diminish it.

    A French author of great knowledge and ingenuity, Mr. Messance,
receiver of the taillies in the election of St. Etienne, endeavours to
show that the poor do more work in cheap than in dear years, by
comparing the quantity and value of the goods made upon those
different occasions in three different manufactures; one of coarse
woollens carried on at Elbeuf; one of linen, and another of silk, both
which extend through the whole generality of Rouen. It appears from
his account, which is copied from the registers of the public offices,
that the quantity and value of the goods made in all those three
manufactures has generally been greater in cheap than in dear years;
and that it has always been greatest in the cheapest, and least in the
dearest years. All the three seem to be stationary manufactures, or
which, though their produce may vary somewhat from year to year, are
upon the whole neither going backwards nor forwards.

    The manufacture of linen in Scotland, and that of coarse
woollens in the West Riding of Yorkshire, are growing manufactures, of
which the produce is generally, though with some variations,
increasing both in quantity and value. Upon examining, however, the
accounts which have been published of their annual produce, I have not
been able to observe that its variations have had any sensible
connection with the dearness or cheapness of the seasons. In 1740, a
year of great scarcity, both manufactures, indeed, appear to have
declined very considerably. But in 1756, another year of great
scarcity, the Scotch manufacture made more than ordinary advances. The
Yorkshire manufacture, indeed, declined, and its produce did not
rise to what it had been in 1755 till 1766, after the repeal of the
American Stamp Act. In that and the following year it greatly exceeded
what it had ever been before, and it has continued to advance ever
since.

    The produce of all great manufactures for distant sale must
necessarily depend, not so much upon the dearness or cheapness of
the seasons in the countries where they are carried on as upon the
circumstances which affect the demand in the countries where they
are consumed; upon peace or war, upon the prosperity or declension
of other rival manufactures, and upon the good or bad humour of
their principal customers. A great part of the extraordinary work,
besides, which is probably done in cheap years, never enters the
public registers of manufactures. The men servants who leave their
masters become independent labourers. The women return to their
parents, and commonly spin in order to make clothes for themselves and
their families. Even the independent workmen do not always work for
public sale, but are employed by some of their neighbours in
manufactures for family use. The produce of their labour, therefore,
frequently makes no figure in those public registers of which the
records are sometimes published with so much parade, and from which
our merchants and manufacturers would often vainly pretend to announce
the prosperity or declension of the greatest empires.

    Though the variations in the price of labour not only do not
always correspond with those in the price of provisions, but are
frequently quite opposite, we must not, upon this account, imagine
that the price of provisions has no influence upon that of labour. The
money price of labour is necessarily regulated by two circumstances;
the demand for labour, and the price of the necessaries and
conveniences of life. The demand for labour, according as it happens
to be increasing, stationary, or declining, or to require an
increasing, stationary, or declining population, determines the
quantity of the necessaries and conveniencies of life which must be
given to the labourer; and the money price of labour is determined
by what is requisite for purchasing this quantity. Though the money
price of labour, therefore, is sometimes high where the price of
provisions is low, it would be still higher, the demand continuing the
same, if the price of provisions was high.

    It is because the demand for labour increases in years of sudden
and extraordinary plenty, and diminishes in those of sudden and
extraordinary scarcity, that the money price of labour sometimes rises
in the one and sinks in the other.

    In a year of sudden and extraordinary plenty, there are funds in
the hands of many of the employers of industry sufficient to
maintain and employ a greater number of industrious people than had
been employed the year before; and this extraordinary number cannot
always be had. Those masters, therefore, who want more workmen bid
against one another, in order to get them, which sometimes raises both
the real and the money price of their labour.

    The contrary of this happens in a year of sudden and extraordinary
scarcity. The funds destined for employing industry are less than they
had been the year before. A considerable number of people are thrown
out of employment, who bid against one another, in order to get it,
which sometimes lowers both the real and the money price of labour. In
1740, a year of extraordinary scarcity, many people were willing to
work for bare subsistence. In the succeeding years of plenty, it was
more difficult to get labourers and servants.

    The scarcity of a dear year, by diminishing the demand for labour,
tends to lower its price, as the high price of provisions tends to
raise it. The plenty of a cheap year, on the contrary, by increasing
the demand, tends to raise the price of labour, as the cheapness of
provisions tends to lower it. In the ordinary variations of the
price of provisions those two opposite causes seem to counterbalance
one another, which is probably in part the reason why the wages of
labour are everywhere so much more steady and permanent than the price
of provisions.

    The increase in the wages of labour necessarily increases the
price of many commodities, by increasing that part of it which
resolves itself into wages, and so far tends to diminish their
consumption both at home and abroad. The same cause, however, which
raises the wages of labour, the increase of stock, tends to increase
its productive powers, and to make a smaller quantity of labour
produce a greater quantity of work. The owner of the stock which
employs a great number of labourers, necessarily endeavours, for his
own advantage, to make such a proper division and distribution of
employment that they may be enabled to produce the greatest quantity
of work possible. For the same reason, he endeavours to supply them
with the best machinery which either he or they can think of. What
takes place among the labourers in a particular workhouse takes place,
for the same reason, among those of a great society. The greater their
number, the more they naturally divide themselves into different
classes and subdivisions of employment. More heads are occupied in
inventing the most proper machinery for executing the work of each,
and it is, therefore, more likely to be invented. There are many
commodities, therefore, which, in consequence of these improvements,
come to be produced by so much less labour than before that the
increase of its price is more than compensated by the diminution of
its quantity.

                            CHAPTER IX

                      Of the Profits of Stock

    THE rise and fall in the profits of stock depend upon the same
causes with the rise and fall in the wages of labour, the increasing
or declining state of the wealth of the society; but those causes
affect the one and the other very differently.

    The increase of stock, which raises wages, tends to lower
profit. When the stocks of many rich merchants are turned into the
same trade, their mutual competition naturally tends to lower its
profit; and when there is a like increase of stock in all the
different trades carried on in the same society, the same
competition must produce the same effect in them all.

    It is not easy, it has already been observed, to ascertain what
are the average wages of labour even in a particular place, and at a
particular time. We can, even in this case, seldom determine more than
what are the most usual wages. But even this can seldom be done with
regard to the profits of stock. Profit is so very fluctuating that the
person who carries on a particular trade cannot always tell you
himself what is the average of his annual profit. It is affected 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
customers, and by a thousand other accidents to which goods when
carried either by sea or by land, or even when stored in a
warehouse, are liable. It varies, therefore, not only from year to
year, but from day to day, and almost from hour to hour. To
ascertain what is the average profit of all the different trades
carried on in a great kingdom must be much more difficult; and to
judge of what it may have been formerly, or in remote periods of time,
with any degree of precision, must be altogether impossible.

    But though it may be impossible to determine, with any degree of
precision, what are or were the average profits of stock, either in
the present or in ancient times, some notion may be formed of them
from the interest of money. It may be laid down as a maxim, that
wherever a great deal can be made by the use of money, a great deal
will commonly be given for the use of it; and that wherever little can
be made by it, less will commonly be given for it. According,
therefore, as the usual market rate of interest varies in any country,
we may be assured that the ordinary profits of stock must vary with
it, must sink as it sinks, and rise as it rises. The progress of
interest, therefore, may lead us to form some notion of the progress
of profit.

    By the 37th of Henry VIII all interest above ten per cent was
declared unlawful. More, it seems, had sometimes been taken before
that. In the reign of Edward VI religious zeal prohibited all
interest. This prohibition, however, like all others of the same kind,
is said to have produced no effect, and probably rather increased than
diminished the evil of usury. The statute of Henry VIII was revived by
the 13th of Elizabeth, c. 8, and ten per cent continued to be the
legal rate of interest till the 21st of James I, when it was
restricted to eight per cent. It was reduced to six per cent soon
after the Restoration, and by the 12th of Queen Anne to five per cent.
All these different statutory regulations seem to have been made
with great propriety. They seem to have followed and not to have
gone before the market rate of interest, or the rate at which people
of good credit usually borrowed. Since the time of Queen Anne, five
per cent seems to have been rather above than below the market rate.
Before the late war, the government borrowed at three per cent; and
people of good credit in the capital, and in many other parts of the
kingdom, 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 continually advancing, and, in the course of their progress,
their pace seems rather to have been gradually accelerated than
retarded. They seem not only to have been going on, but to have been
going on faster and faster. The wages of labour have been
continually increasing during the same period, and in the greater part
of the different branches of trade and manufactures the profits of
stock have been diminishing.

    It generally requires a greater stock to carry on any sort of
trade in a great town than in a country village. The great stocks
employed in every branch of trade, and the number of rich competitors,
generally reduce the rate of profit in the former below 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 stocks to employ frequently cannot get the number of
workmen they want, and therefore bid against one another in order to
get as many as they can, which raises the wages of labour, and
lowers the profits of stock. In the remote parts of the country
there is frequently not stock sufficient to employ all the people, who
therefore bid against one another in order to get employment, which
lowers the wages of labour and raises the profits of stock.

    In Scotland, though the legal rate of interest is the same as in
England, the market rate is rather higher. People of the best credit
there seldom borrow under five per cent. Even private bankers in
Edinburgh give four per cent upon their promissory notes, of which
payment either in whole or in part may be demanded at pleasure.
Private bankers in London give no interest for the money which is
deposited with them. There are few trades which cannot be carried on
with a smaller stock in Scotland than in England. The common rate of
profit, therefore, must be somewhat greater. The wages of labour, it
has already been observed, are lower in Scotland than in England.
The country, too, is not only much poorer, but the steps by which it
advances to a better condition, for it is evidently advancing, seem to
be much slower and more tardy.

    The legal rate of interest in France has not, during the course of
the present century, been always regulated by the market rate. In 1720
interest was reduced from the twentieth to the fiftieth penny, or from
five to two per cent. In 1724 it was raised to the thirtieth penny, or
to 3 1/3 per cent. In 1725 it was again raised to the twentieth penny,
or to five per cent. In 1766, during the administration of Mr.
Laverdy, it was reduced to the twenty-fifth penny, or to four per
cent. The Abbe Terray raised it afterwards to the old rate of five per
cent. The supposed purpose of many of those violent reductions of
interest was to prepare the way for reducing that of the public debts;
a purpose which has sometimes been executed. France is perhaps in
the present times not so rich a country as England; and though the
legal rate of interest has in France frequently been lower than in
England, the market rate has generally been higher; for there, as in
other countries, they have several very safe and easy methods of
evading the law. The profits of trade, I have been assured by
British merchants who had traded in both countries, are higher in
France than in England; and it is no doubt upon this account that many
British subjects choose rather to employ their capitals in a country
where trade is in disgrace, than in one where it is highly
respected. The wages of labour are lower in France than in England.
When you go from Scotland to England, the difference which you may
remark between the dress and countenance of the common people in the
one country and in the other sufficiently indicates the difference
in their condition. The contrast is still greater when you return from
France. France, though no doubt a richer country than Scotland,
seems not to be going forward so fast. It is a common and even a
popular opinion in the country that it is going backwards; an
opinion which, apprehend, is ill founded even with regard to France,
but which nobody can possibly entertain with regard to Scotland, who
sees the country now, and who saw 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 borrows at two per cent,
and private people of good credit at three. The wages of labour are
said to be higher in Holland 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 some people, is decaying,
and it may perhaps be true some particular branches of it are so.
But these symptoms seem to indicate sufficiently that there is no
general decay. When profit diminishes, merchants are very apt to
complain that trade decays; though the diminution of profit is the
natural effect of its prosperity, or of a greater stock being employed
in it than before. During the late war the Dutch gained the whole
carrying trade of France, of which they still retain a very large
share. The great property which they possess both in the French and
English funds, about forty millions, it is said, in the latter (in
which I suspect, however, there is a considerable exaggeration); the
great sums which they lend to private people in countries where the
rate of interest is higher than in their own, are circumstances
which no doubt demonstrate the redundancy of their stock, or that it
has increased beyond what they can employ with tolerable profit in the
proper business of their own country: but they do not demonstrate that
that has decreased. As the capital of a private man, though acquired
by a particular trade, may increase beyond what he can employ in it,
and yet that trade continue to increase too; so may likewise the
capital of a great nation.

    In our North American and West Indian colonies, not only the wages
of labour, but the interest of money, and consequently the profits
of stock, are higher than in England. In the different colonies both
the legal and the market rate of interest run from six to eight per
cent. High wages of labour and high profits of stock, however, are
things, perhaps, which scarce ever go together, except in the peculiar
circumstances of new colonies. A new colony must always for some
time be more understocked in proportion to the extent of its
territory, and more underpeopled in proportion to the extent of its
stock, than the greater part of other countries. They have more land
than they have stock to cultivate. What they have, therefore, is
applied to the cultivation only of what is most fertile and most
favourably situated, the land near the sea shore, and along the
banks of navigable rivers. Such land, too, is frequently purchased
at a price below the value even of its natural produce. Stock employed
in the purchase and improvement of such lands must yield a very
large profit, and consequently afford to pay a very large interest.
Its rapid accumulation in so profitable an employment enables the
planter to increase the number of his hands faster than he can find
them in a new settlement. Those whom he can find, therefore, are
very liberally rewarded. As the colony increases, the profits of stock
gradually diminish. When the most fertile and best situated lands have
been all occupied, less profit can be made by the cultivation of
what is inferior both in soil and situation, and less interest can
be afforded for the stock which is so employed. In the greater part of
our colonies, accordingly, both the legal and the market rate of
interest have been considerably reduced during the course of the
present century. As riches, improvement, and population have
increased, interest has declined. The wages of labour do not sink with
the profits of stock. The demand for labour increases with the
increase of stock whatever be its profits; and after these are
diminished, stock may not only continue to increase, but to increase
much faster than before. It is with industrious nations who are
advancing in the acquisition of riches as with industrious
individuals. A great stock, though with small profits, generally
increases faster than a small stock with great profits. Money, says
the proverb, makes money. When you have got a little, it is often easy
to get more. The great difficulty is to get that little. The
connection between the increase of stock and that of industry, or of
the demand for useful labour, has partly been explained already, but
will be explained more fully hereafter in treating of the accumulation
of stock.

    The acquisition of new territory, or of new branches of trade, may
sometimes raise the profits of stock, and with them the interest of
money, even in a country which is fast advancing in the acquisition of
riches. The stock of the country not being sufficient for the whole
accession of business, which such acquisitions present to the
different people among whom it is divided, is applied to those
particular branches only which afford the greatest profit. Part of
what had before been employed in other trades is necessarily withdrawn
from them, and turned into some of the new and more profitable ones.
In all those old trades, therefore, the competition comes to be less
than before. The market comes to be less fully supplied with many
different sorts of goods. Their price necessarily rises more or
less, and yields a greater profit to those who deal in them, who
can, therefore, afford to borrow at a higher interest. For some time
after the conclusion of the late war, not only private people of the
best credit, but some of the greatest companies in London, commonly
borrowed at five per cent, who before that had not been used to pay
more than four, and four and a half per cent. The great accession both
of territory and trade, by our acquisitions in North America and the
West Indies, will sufficiently account for this, without supposing any
diminution in the capital stock of the society. So great an
accession of new business to be carried on by the old stock must
necessarily have diminished the quantity employed in a great number of
particular branches, in which the competition being less, the
profits must have been greater. I shall hereafter have occasion to
mention the reasons which dispose me to believe that the capital stock
of Great Britain was not diminished even by the enormous expense of
the late war.

    The diminution of the capital stock of the society, or of the
funds destined for the maintenance of industry, however, as it
lowers the wages of labour, so it raises the profits of stock, and
consequently the interest of money. By the wages of labour being
lowered, the owners of what stock remains in the society can bring
their goods at less expense to market than before, and less stock
being employed in supplying the market than before, they can sell them
dearer. Their goods cost them less, and they get more for them.
Their profits, therefore, being augmented at both ends, can well
afford a large interest. The great fortunes so suddenly and so
easily acquired in Bengal and the other British settlements in the
East Indies may satisfy us that, as the wages of labour are very
low, so the profits of stock are very high in those ruined
countries. The interest of money is proportionably so. In Bengal,
money is frequently lent to the farmers at forty, fifty, and sixty per
cent and the succeeding crop is mortgaged for the payment. As the
profits which can afford such an interest must eat up almost the whole
rent of the landlord, so such enormous usury must in its turn eat up
the greater part of those profits. Before the fall of the Roman
republic, a usury of the same kind seems to have been common in the
provinces, under the ruinous administration of their proconsuls. The
virtuous Brutus lent money in Cyprus at eight-and-forty per cent as we
learn from the letters of Cicero.

    In a country which had acquired that full complement of riches
which the nature of its soil and climate, and its situation with
respect 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 stock would probably be very
low. In a country fully peopled in proportion to what either its
territory could maintain or its stock employ, the competition for
employment would necessarily be so great as to reduce the wages of
labour to what was barely sufficient to keep up the number of
labourers, and, the country being already fully peopled, that number
could never be augmented. In a country fully stocked in proportion
to all the business it had to transact, as great a quantity of stock
would be employed in every particular branch as the nature and
extent of the trade would admit. The competition, therefore, would
everywhere be as great, and consequently the ordinary profit as low as
possible.

    But perhaps no country has ever yet arrived at this degree of
opulence. China seems to have been long stationary, and had probably
long ago acquired that full complement of riches which is consistent
with the nature of its laws and institutions. But this complement
may be much inferior to what, with other laws and institutions, the
nature of its soil, climate, and situation might admit of. A country
which neglects or despises foreign commerce, and which admits the
vessels of foreign nations into one or two of its ports only, cannot
transact the same quantity of business which it might do with
different laws and institutions. In a country too, where, though the
rich or the owners of large capitals enjoy a good deal of security,
the poor or the owners of small capitals enjoy scarce any, but are
liable, under the pretence of justice, to be pillaged and plundered at
any time by the inferior mandarins, the quantity of stock employed
in all the different branches of business transacted within it can
never be equal to what the nature and extent of that business might
admit. In every different branch, the oppression of the poor must
establish the monopoly of the rich, who, by engrossing the whole trade
to themselves, will be able to make very large profits. Twelve per
cent accordingly is said to be the common interest of money in
China, and the ordinary profits of stock must be sufficient to
afford this large interest.

    A defect in the law may sometimes raise the rate of interest
considerably above what the condition of the country, as to wealth
or poverty, would require. When the law does not enforce the
performance of contracts, it puts all borrowers nearly upon the same
footing with bankrupts or people of doubtful credit in better
regulated countries. The uncertainty of recovering his money makes the
lender exact the same usurious interest which is usually required from
bankrupts. Among the barbarous nations who overran the western
provinces of the Roman empire, the performance of contracts was left
for many ages to the faith of the contracting parties. The courts of
justice of their kings seldom intermeddled in it. The high rate of
interest which took place in those ancient times may perhaps be partly
accounted for from this cause.

    When the law prohibits interest altogether, it does not prevent
it. Many people must borrow, and nobody will lend without such a
consideration for the use of their money as is suitable not only to
what can be made by the use of it, but to the difficulty and danger of
evading the law. The high rate of interest among all Mahometan nations
is accounted for by Mr. Montesquieu, not from their poverty, but
partly from this, and partly from the difficulty of recovering the
money.

    The lowest ordinary rate of profit must always be something more
than what is sufficient to compensate the occasional losses to which
every employment of stock is exposed. It is this surplus only which is
neat or clear profit. What is called gross profit comprehends
frequently, not only this surplus, but what is retained for
compensating such extraordinary losses. The interest which the
borrower can afford to pay is in proportion to the clear profit only.

    The lowest ordinary rate of interest must, in the same manner,
be something more than sufficient to compensate the occasional
losses to which lending, even with tolerable prudence, is exposed.
Were it not more, charity or friendship could be the only motive for
lending.

    In a country which had acquired its full complement of riches,
where in every particular branch of business there was the greatest
quantity of stock that could be employed in it, as the ordinary rate
of clear profit would be very small, so the usual market rate of
interest which could be afforded out of it would be so low as to
render it impossible for any but the very wealthiest people to live
upon the interest of their money. All people of small or middling
fortunes would be obliged to superintend themselves the employment
of their own stocks. It would be necessary that almost every man
should be a man of business, or engage in some sort of trade. The
province of Holland seems to be approaching near to this state. It
is there unfashionable not to be a man of business. Necessity makes it
usual for almost every man to be so, and custom everywhere regulates
fashion. As it is ridiculous not to dress, so is it, in some
measure, not to be employed, like other people. As a man of a civil
profession seems awkward in a camp or a garrison, and is even in
some danger of being despised there, so does an idle man among men
of business.

    The highest ordinary rate of profit may be such as, in the price
of the greater part of commodities, eats up the whole of what should
go to the rent of the land, and leaves only what is sufficient to
pay the labour of preparing and bringing them to market, according
to the lowest rate at which labour can anywhere be paid, the bare
subsistence of the labourer. The workman must always have been fed
in some 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 servants
of the East India Company carry on in Bengal may not perhaps be very
far from this rate.

    The proportion which the usual market rate of interest ought to
bear to the ordinary rate of clear profit, necessarily varies as
profit rises or falls. Double interest is in Great Britain reckoned
what the merchants call a good, moderate, reasonable profit; terms
which I apprehend mean no more than a common and usual profit. In a
country where the ordinary rate of clear profit is eight or ten per
cent, it may be reasonable that one half of it should go to
interest, wherever business is carried on with borrowed money. The
stock is at the risk of the borrower, who, as it were, insures it to
the lender; and four or five per cent may, in the greater part of
trades, be both a sufficient profit upon the risk of this insurance,
and a sufficient recompense for the trouble of employing the stock.
But the proportion between interest and clear profit might not be
the same 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 interest;
and more might be afforded if it were a good deal higher.

    In countries which are fast advancing to riches, the low rate of
profit may, in the price of many commodities, compensate the high
wages of labour, and enable those countries to sell as cheap as
their less thriving neighbours, among whom the wages of labour may
be lower.

    In reality high profits tend much more to raise the price of
work than high wages. If in the linen manufacture, for example, the
wages of the different working people, the flax-dressers, the
spinners, the weavers, etc., should, all of them, be advanced twopence
a day; it would be necessary to heighten the price of a piece of linen
only by a number of twopences equal to the number of people that had
been employed about it, multiplied by the number of days during
which they had been so employed. That part of the price of the
commodity which resolved itself into wages would, through all the
different stages of the manufacture, rise only in arithmetical
proportion to this rise of wages. But if the profits of all the
different employers of those working people should be raised five
per cent, that part of the price of the commodity which resolved
itself into profit would, through all the different stages of the
manufacture, rise in geometrical proportion to this rise of profit.
The employer of the flaxdressers would in selling 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
spinners would require an additional five per cent both upon the
advanced price of the flax and upon the wages of the spinners. 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 raising the price of commodities the rise of wages
operates in the same manner as simple interest does in the
accumulation of debt. The rise of profit operates like compound
interest. Our merchants and master-manufacturers complain much of
the bad effects of high wages in raising the price, and thereby
lessening the sale of their goods both at home and abroad. They say
nothing concerning the bad effects of high profits. They are silent
with regard to the pernicious effects of their own gains. They
complain only of those of other people.

                            CHAPTER X

        Of Wages and Profit in the different Employments

                       of Labour and Stock

    THE whole of the advantages and disadvantages of the different
employments of labour and stock must, in the same neighbourhood, be
either perfectly equal or continually tending to equality. If in the
same neighbourhood, there was any employment evidently either more
or less advantageous than the rest, so many people would crowd into it
in the one case, and so many would desert it in the other, that its
advantages would soon return to the level of other employments. This
at least would be the case in a society where things were left to
follow their natural course, where there was perfect liberty, and
where every man was perfectly free both to choose what occupation he
thought proper, and to change it as often as he thought proper.
Every man's interest would prompt him to seek the advantageous, and to
shun the disadvantageous employment.

    Pecuniary wages and profit, indeed, are everywhere in Europe
extremely different according to the different employments of labour
and stock. But this difference arises partly from certain
circumstances in the employments themselves, which, either really,
or at least in the imaginations of men, make up for a small
pecuniary gain in some, and counterbalance a great one in others;
and partly from the policy of Europe, which nowhere leaves things at
perfect liberty.

    The particular consideration of those circumstances and of that
policy will divide this chapter into two parts.

                               PART 1

  Inequalities arising from the Nature of the Employments themselves

    THE five following are the principal circumstances which, so far
as I have been able to observe, make up for a small pecuniary gain
in some employments, and counterbalance a great one in others:
first, the agreeableness or disagreeableness of the employments
themselves; secondly, the easiness and cheapness, or the difficulty
and expense of learning them; thirdly, the constancy or inconstancy of
employment in them; fourthly, the small or great trust which must be
reposed in those who exercise them; and, fifthly, the probability or
improbability of success in them.

    First, the wages of labour vary with the ease or hardship, the
cleanliness or dirtiness, the honourableness or dishonourableness of
the employment. Thus in most places, take the year round, a journeyman
tailor earns less than a journeyman weaver. His work is much easier. A
journeyman weaver earns less than a journeyman smith. His work is
not always easier, but it is much cleanlier. A journeyman
blacksmith, though an artificer, seldom earns so much in twelve
hours as a collier, who is only a labourer, does in eight. His work is
not quite so dirty, is less dangerous, and is carried on in
daylight, and above ground. Honour makes a great part of the reward of
all honourable professions. In point of pecuniary gain, all things
considered, they are generally under-recompensed, as I shall endeavour
to show by and by. Disgrace has the contrary effect. The trade of a
butcher is a brutal and an odious business; but it is in most places
more profitable than the greater part of common trades. The most
detestable of all employments, that of public executioner, is, in
proportion to the quantity of work done, better paid than any common
trade whatever.

    Hunting and fishing, the most important employments of mankind
in the rude state of society, become in its advanced state their
most agreeable amusements, and they pursue for pleasure what they once
followed from necessity. In the advanced state of society,
therefore, they are all very poor people who follow as a trade what
other people pursue as a pastime. Fishermen have been so since the
time of Theocritus. A poacher is everywhere a very poor man in Great
Britain. In countries where the rigour of the law suffers no poachers,
the licensed hunter is not in a much better condition. The natural
taste for those employments makes more people follow them than can
live comfortably by them, and the produce of their labour, in
proportion to its quantity, comes always too cheap to market to afford
anything but the most scanty subsistence to the labourers.

    Disagreeableness and disgrace affect the profits of stock in the
same manner as the wages of labour. The keeper of an inn or tavern,
who is never master of his own house, and who is exposed to the
brutality of every drunkard, exercises neither a very agreeable nor
a very creditable business. But there is scarce any common trade in
which a small stock yields so great a profit.

    Secondly, the wages of labour vary with the easiness and
cheapness, or the difficulty and expense of learning the business.

    When any expensive machine is erected, the extraordinary work to
be performed by it before it is worn out, it must be expected, will
replace the capital laid out upon it, with at least the ordinary
profits. A man educated at the expense of much labour and time to
any of those employments which require extraordinary dexterity and
skill, may be compared to one of those expensive machines. The work
which he learns to perform, it must be expected, over and above the
usual wages of common labour, will replace to him the whole expense of
his education, with at least the ordinary profits of an equally
valuable capital. It must do this, too, in a reasonable time, regard
being had to the very uncertain duration of human life, in the same
manner as to the more certain duration of the machine.

    The difference between the wages of skilled labour and those of
common labour is founded upon this principle.

    The policy of Europe considers the labour of all mechanics,
artificers, and manufacturers, as skilled labour; and that of all
country labourers as common labour. It seems to suppose that of the
former to be of a more nice and delicate nature than that of the
latter. It is so perhaps in some cases; but in the greater part is
it quite otherwise, as I shall endeavour to show by and by. The laws
and customs of Europe, therefore, in order to qualify any person for
exercising the one species of labour, impose the necessity of an
apprenticeship, though with different degrees of rigour in different
places. They leave the other free and open to everybody. During the
continuance of the apprenticeship, the whole labour of the
apprentice belongs to his master. In the meantime he must, in many
cases, be maintained by his parents or relations, and in almost all
cases must be clothed by them. Some money, too, is commonly given to
the master for teaching him his trade. They who cannot give money give
time, or become bound for more than the usual number of years; a
consideration which, though it is not always advantageous to the
master, on account of the usual idleness of apprentices, is always
disadvantageous to the apprentice. In country labour, on the contrary,
the labourer, while he is employed about the easier, learns the more
difficult parts of his business, and his own labour maintains him
through all the different stages of his employment. It is
reasonable, therefore, that in Europe the wages of mechanics,
artificers, and manufacturers, should be somewhat higher than those of
common labourers. They are so accordingly, and their superior gains
make them in most places be considered as a superior rank of people.
This superiority, however, is generally very small; the daily or
weekly earnings of journeymen in the more common sorts of
manufactures, such as those of plain linen and woollen cloth, computed
at an average, are, in most places, very little more than the day
wages of common labourers. Their employment, indeed, is more steady
and uniform, and the superiority of their earnings, taking the whole
year together, may be somewhat greater. It seems evidently, however,
to be no greater than what is sufficient to compensate the superior
expense of their education.

    Education in the ingenious arts and in the liberal professions
is still more tedious and expensive. The pecuniary recompense,
therefore, of painters and sculptors, of lawyers and physicians, ought
to be much more liberal; and it is so accordingly.

    The profits of stock seem to be very little affected by the
easiness or difficulty of learning the trade in which it is
employed. All the different ways in which stock is commonly employed
in great towns seem, in reality, to be almost equally easy and equally
difficult to learn. One branch either of foreign or domestic trade
cannot well be a much more intricate business than another.

    Thirdly, the wages of labour in different occupations vary with
the constancy or inconstancy of employment.

    Employment is much more constant in some trades than in others. In
the greater part of manufacturers, a journeyman may be pretty sure
of employment almost every day in the year that he is able to work.
A mason or bricklayer, on the contrary, can work neither in hard frost
nor in foul weather, and his employment at all other times depends
upon the occasional calls of his customers. He is liable, in
consequence, to be frequently without any. What he earns, therefore,
while he is employed, must not only maintain him while he is idle, but
make him some compensation for those anxious and desponding moments
which the thought of so precarious a situation must sometimes
occasion. Where the computed earnings of the greater part of
manufacturers, accordingly, are nearly upon a level with the day wages
of common labourers, those of masons and bricklayers are generally
from one half more to double those wages. Where common labourers
earn four and five shillings a week, masons and bricklayers frequently
earn seven and eight; where the former earn six, 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 species of skilled
labour, however, seems more easy to learn than that of masons and
bricklayers. Chairmen in London, during the summer season, are said
sometimes to be employed as bricklayers. The high wages of those
workmen, therefore, are not so much the recompense of their skill,
as the compensation for the inconstancy of their employment.

    A house carpenter seems to exercise rather a nicer and more
ingenious trade than a mason. In most places, however, for it is not
universally so, his day-wages are somewhat lower. His employment,
though it depends much, does not depend so entirely upon the
occasional calls of his customers; and it is not liable to be
interrupted by the weather.

    When the trades which generally afford constant employment
happen in a particular place not to do so, the wages of the workmen
always rise a good deal above their ordinary proportion to those of
common labour. In London almost all journeymen artificers are liable
to be called upon and dismissed by their masters from day to day,
and from week to week, in the same manner as day-labourers in other
places. The lowest order of artificers, journeymen tailors,
accordingly, earn there half a crown a-day, though eighteenpence may
be reckoned the wages of common labour. In small towns and country
villages, the wages of journeymen tailors frequently scarce equal
those of common labour; but in London they are often many weeks
without employment, particularly during the summer.

    When the inconstancy of employment is combined with the
hardship, disagreeableness and dirtiness of the work, it sometimes
raises the wages of the most common labour above those of the most
skilful artificers. A collier working by the piece is supposed, at
Newcastle, to earn commonly about double, and in many parts of
Scotland about three times the wages of common labour. His high
wages arise altogether from the hardship, disagreeableness, and
dirtiness of his work. His employment may, upon most occasions, be
as constant as he pleases. The coal-heavers in London exercise a trade
which in hardship, dirtiness, and disagreeableness, almost equals that
of colliers; and from the unavoidable irregularity in the arrivals
of coal-ships, the employment of the greater part of them is
necessarily very inconstant. If colliers, therefore, commonly earn
double and triple the wages of common labour, it ought not to seem
unreasonable that coal-heavers should sometimes earn four and five
times those wages. In the inquiry 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 six to ten shillings a day. Six shillings are
about four times the wages of common labour in London, and in every
particular trade the lowest common earnings may always be considered
as those of the far greater number. How extravagant soever those
earnings may appear, if they were more than sufficient to compensate
all the disagreeable circumstances of the business, there would soon
be so great a number of competitors as, in a trade which has no
exclusive privilege, would quickly reduce them to a lower rate.

    The constancy or inconstancy of employment cannot affect the
ordinary profits of stock in any particular trade. Whether the stock
is or is not constantly employed depends. not upon the trade, but
the trader.

    Fourthly, the wages of labour vary accordingly to the small or
great trust which must be reposed in the workmen.

    The wages of goldsmiths and jewellers are everywhere superior to
those of many other workmen, not only of equal, but of much superior
ingenuity, on account of the precious materials with which they are
intrusted.

    We trust our health to the physician: our fortune and sometimes
our life and reputation to the lawyer and attorney. Such confidence
could not safely be reposed in people of a very mean or low condition.
Their reward must be such, therefore, as may give them that rank in
the society which so important a trust requires. The long time and the
great expense which must be laid out in their education, when combined
with this circumstance, necessarily enhance still further the price of
their labour.

    When a person employs only his own stock in trade, there is no
trust; 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 prudence. The different rates of profit,
therefore, in the different branches of trade, cannot arise from the
different degrees of trust reposed in the traders.

    Fifthly, the wages of labour in different. employments vary
according to the probability or improbability of success in them.

    The probability that any particular person shall ever be qualified
for the employment to which he is educated is very different in
different occupations. In the greater part of mechanic trades, success
is almost certain; but very uncertain in the liberal professions.
Put your son apprentice to a shoemaker, there is little doubt of his
learning to make a pair of shoes; but send him to study the law, it is
at least twenty to one if ever he makes such proficiency as will
enable him to live by the business. In a perfectly fair lottery, those
who draw the prizes ought to gain all that is lost by those who draw
the blanks. In a profession where twenty fail for one that succeeds,
that one ought to gain all that should have been gained by the
unsuccessful twenty. The counsellor-at-law who, perhaps, at near forty
years of age, begins to make something by his profession, ought to
receive the retribution, not only of his own so tedious and
expensive education, but that of more than twenty others who are never
likely to make anything by it. How extravagant soever the fees of
counsellors-at-law may sometimes appear, their real retribution is
never equal to this. Compute in any particular place what is likely to
be annually gained, and what is likely to be annually spent, by all
the different workmen in any common trade, such as that of
shoemakers or weavers, and you will find that the former sum will
generally exceed the latter. But make the same computation with regard
to all the counsellors and students of law, in all the different
inns of court, and you will find that their annual gains bear but a
very small proportion to their annual expense, 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 a perfectly fair
lottery; and that, as well as many other liberal and honourable
professions, are, in point of pecuniary gain, evidently
under-recompensed.

    Those professions keep their level, however, with other
occupations, and, notwithstanding these discouragements, all the
most generous and liberal spirits are eager to crowd into them. Two
different causes contribute to recommend them. First, the desire of
the reputation which attends upon superior excellence in any of
them; and, secondly, the natural confidence which every man has more
or less, not only in his own abilities, but in his own good fortune.

    To excel in any profession, in which but few arrive at mediocrity,
is the most decisive mark of what is called genius or superior
talents. The public admiration which attends upon such distinguished
abilities makes always a part of their reward; a greater or smaller in
proportion as it is higher or lower in degree. It makes a considerable
part of that reward in the profession of physic; a still greater
perhaps in that of law; in poetry and philosophy it makes almost the
whole.

    There are some very agreeable and beautiful talents of which the
possession commands a certain sort of admiration; but of which the
exercise for the sake of gain is considered, whether from reason or
prejudice, as a sort of public prostitution. The pecuniary recompense,
therefore, of those who exercise them in this manner must be
sufficient, not only to pay for the time, labour, and expense of
acquiring the talents, but for the discredit which attends the
employment of them as the means of subsistence. The exorbitant rewards
of players, opera-singers, opera-dancers, etc., are founded upon those
two principles; the rarity and beauty of the talents, and the
discredit of employing them in this manner. It seems absurd at first
sight that we should despise their persons and yet reward their
talents with the most profuse liberality. While we do the one,
however, we must of necessity do the other. Should the public
opinion or prejudice ever alter with regard to such occupations, their
pecuniary recompense would quickly diminish. More people would apply
to them, and the competition would quickly reduce the price of their
labour. Such talents, though far from being common, are by no means so
rare as is imagined. Many people possess them in great perfection, who
disdain to make this use of them; and many more are capable of
acquiring them, if anything could be made honourably by them.

    The overweening conceit which the greater part of men have of
their own abilities is an ancient evil remarked by the philosophers
and moralists of all ages. Their absurd presumption in their own
good fortune has been less taken notice of. It is, however, if
possible, still more universal. There is no man living who, when in
tolerable health and spirits, has not some share of it. The chance
of gain is by every man more or less overvalued, and the chance of
loss is by most men undervalued, and by scarce any man, who is in
tolerable health and spirits, valued more than it is worth.

    That the chance of gain is naturally overvalued, we may learn from
the universal success of lotteries. The world neither ever saw, nor
ever will see, a perfectly fair lottery; or one in which the whole
gain compensated the whole loss; because the undertaker could make
nothing by it. In the state lotteries the tickets are really not worth
the price which is paid by the original subscribers, and yet
commonly sell in the market for twenty, thirty, and sometimes forty
per cent advance. The vain hope of gaining some of the great prizes is
the sole cause of this demand. The soberest people scarce look upon it
as a folly to pay a small sum for the chance of gaining ten or
twenty thousand pounds; though they know that even that small sum 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
respects it approached much nearer to a perfectly fair one than the
common state lotteries, there would not be the same demand for
tickets. In order to have a better chance for some of the great
prizes, some people purchase several tickets, and others, small
share in a still greater number. There is not, however, a more certain
proposition in mathematics than that the more tickets you adventure
upon, the more likely you are to be a loser. Adventure upon all the
tickets in the lottery, and you lose for certain; and the greater
the number of your tickets the nearer you approach to this certainty.

    That the chance of loss is frequently undervalued, and scarce ever
valued more than it is worth, we may learn from a very moderate profit
of insurers. In order to make insurance, either from fire or sea-risk,
a trade at all, the common premium must be sufficient to compensate
the common losses, to pay the expense of management, and to afford
such a profit as might have been drawn from an equal capital
employed in any common trade. The person who pays no more than this
evidently pays no more than the real value of the risk, or the
lowest price at which he can reasonably expect to insure it. But
though many people have made a little money by insurance, very few
have made a great fortune; and from this consideration alone, it seems
evident enough that the ordinary balance of profit and loss is not
more advantageous in this than in other common trades by which so many
people make fortunes. Moderate, however, as the premium of insurance
commonly is, many people despise the risk too much to care to pay
it. Taking the whole kingdom at an average, nineteen houses in twenty,
or rather perhaps ninety-nine in a hundred, are not insured from fire.
Sea risk is more alarming to the greater part of people, and the
proportion of ships insured to those not insured is much greater. Many
fail, however, at all seasons, and even in time of war, without any
insurance. This may sometimes perhaps be done without any
imprudence. When a great company, or even a great merchant, has twenty
or thirty ships at sea, they may, as it were, insure one another.
The premium saved upon them all may more than compensate such losses
as they are likely to meet with in the common course of chances. The
neglect of insurance upon shipping, however, in the same manner as
upon houses, is, in most cases, the effect of no such nice
calculation, but of mere thoughtless rashness and presumptuous
contempt of the risk.

    The contempt of risk and the presumptuous hope of success are in
no period of life more active than at the age at which young people
choose their professions. How little the fear of misfortune is then
capable of balancing the hope of good luck appears still more
evidently in the readiness of the common People to enlist as soldiers,
or to go to sea, than in the eagerness of those of better fashion to
enter into what are called the liberal professions.

    What a common soldier may lose is obvious enough. Without
regarding the danger, however, young volunteers never enlist so
readily as at the beginning of a new war; and though they have
scarce any chance of preferment, they figure to themselves, in their
youthful fancies, a thousand occasions of acquiring honour and
distinction which never occur. These romantic hopes make the whole
price of their blood. Their pay is less than that of common labourers,
and in actual service their fatigues are much greater.

    The lottery of the sea is not altogether so disadvantageous as
that of the army. The son of a creditable labourer or artificer may
frequently go to sea with his father's consent; but if he enlists as a
soldier, it is always without it. Other people see some chance of
his making something by the one trade: nobody but himself sees any
of his making anything by the other. The great admiral is less the
object of public admiration than the great general, and the highest
success in the sea service promises a less brilliant fortune and
reputation than equal success in the land. The same difference runs
through all the inferior degrees of preferment in both. By the rules
of precedency a captain in the navy ranks with a colonel in the
army; but he does not rank with him in the common estimation. As the
great prizes in the lottery are less, the smaller ones must be more
numerous. Common sailors, therefore, more frequently get some
fortune and preferment than common soldiers; and the hope of those
prizes is what principally recommends the trade. Though their skill
and dexterity are much superior to that of almost any artificers,
and though their whole life is one continual scene of hardship and
danger, yet for all this dexterity and skill, for all those
hardships and dangers, while they remain in the condition of common
sailors, they receive scarce any other recompense but the pleasure
of exercising the one and of surmounting the other. Their wages are
not greater than those of common labourers at the port which regulates
the rate of seamen's wages. As they are continually going from port to
port, the monthly pay of those who sail from all the different ports
of Great Britain is more nearly upon a level than that of any other
workmen in those different places; and the rate of the port to and
from which the greatest number sail, that is the port of London,
regulates that of all the rest. At London the wages of the greater
part of the different classes of workmen are about double those of the
same classes at Edinburgh. But the sailors who sail from the port of
London seldom earn above three or four shillings a month more than
those who sail from the port of Leith, and the difference is
frequently not so great. In time of peace, and in the merchant
service, the London price is from a guinea to about seven-and-twenty
shillings the calendar month. A common labourer in London, at the rate
of nine or ten shillings a week, may earn in the calendar month from
forty to five-and-forty shillings. The sailor, indeed, over and
above his pay, is supplied with provisions. Their value, however,
may not perhaps always exceed the difference between his pay and
that of the common labourer; and though it sometimes should, the
excess will not be clear gain to the sailor, because he cannot share
it with his wife and family, whom he must maintain out of his wages at
home.

    The dangers and hairbreadth escapes of a life of adventures,
instead of disheartening young people, seem frequently to recommend
a trade to them. A tender mother, among the inferior ranks of
people, is of afraid to send her son to school at a seaport town, lest
the sight of the ships and the conversation and adventures of the
sailors should entice him to go to sea. The distant prospect of
hazards, from which we can hope to extricate ourselves by courage
and address, is not disagreeable to us, and does not raise the wages
of labour in any employment. It is otherwise with those in which
courage and address can be of no avail. In trades which are known to
be very unwholesome, the wages of labour are always remarkably high.
Unwholesomeness is a species of disagreeableness, and its effects upon
the wages of labour are to be ranked under that general head.

    In all the different employments of stock, the ordinary rate of
profit varies more or less with the certainty or uncertainty of the
returns. These are in general less uncertain in the inland than in the
foreign trade, and in some 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 rises more or less with the risk.
It does not, however, seem to rise in proportion to it, or so as to
compensate it completely. Bankruptcies are most frequent in the most
hazardous trades. The most hazardous of all trades, that of a
smuggler, though when the adventure succeeds it is likewise the most
profitable, is the infallible road to bankruptcy. The presumptuous
hope of success seems to act here as upon all other occasions, and
to entice so many adventurers into those hazardous trades, that
their competition reduces their profit below what is sufficient to
compensate the risk. To compensate it completely, the common returns
ought, over and above the ordinary profits of stock, not only to
make up for all occasional losses, but to afford a surplus profit to
the adventurers of the same nature with the profit of insurers. But if
the common returns were sufficient for all this, bankruptcies would
not be more frequent in these than in other trades.

    Of the five circumstances, therefore, which vary the wages of
labour, two only affect the profits of stock; the agreeableness or
disagreeableness of the business, and the risk or security with
which it is attended. In point of agreeableness, there is little or no
difference in the far greater part of the different employments of
stock; but a great deal in those of labour; and the ordinary profit of
stock, though it rises with the risk, does not always seem to rise
in proportion to it. It should follow from all this, that, in the same
society or neighbourhood, the average and ordinary rates of profit
in the different employments of stock should be more nearly upon a
level than the pecuniary wages of the different sorts of labour.
They are so accordingly. The difference between the earnings of a
common labourer and those of a well employed lawyer or physician, is
evidently much greater than that between the ordinary profits in any
two different branches of trade. The apparent difference, besides,
in the profits of different trades, is generally a deception arising
from our not always distinguishing what ought to be considered as
wages, from what ought to be considered as profit.

    Apothecaries' profit is become a bye-word, denoting something
uncommonly extravagant. This great apparent profit, however, is
frequently no more than the reasonable wages of labour. The skill of
an apothecary is a much nicer and more delicate matter than that of
any artificer whatever; and the trust which is reposed in him is of
much greater importance. He is the physician of the poor in all cases,
and of the rich when the distress or danger is not very great. His
reward, therefore, ought to be suitable to his skill and his trust,
and it arises generally from the price at which he sells his drugs.
But the whole drugs which the best employed apothecary, in a large
market town, will sell in a year, may not perhaps cost him above
thirty or forty pounds. Though he should sell them, therefore, for
three or four hundred, or at a thousand per cent profit, this may
frequently be no more than the reasonable 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 disguised
in the garb of profit.

    In a small seaport town, a little grocer will make forty or
fifty per cent upon a stock of a single hundred pounds, while a
considerable wholesale merchant in the same place will scarce make
eight or ten per cent upon a stock of ten thousand. The trade of the
grocer may be necessary for the conveniency of the inhabitants, and
the narrowness of the market may not admit the employment of a
larger capital in the business. The man, however, must not only live
by his trade, but live by it suitably to the qualifications which it
requires. Besides possessing a little capital, he must be able to
read, write, and account, and must be a tolerable judge too of,
perhaps, fifty or sixty different sorts of goods, their prices,
qualities, and the markets where they are to be had cheapest. He
must have all the knowledge, in short, that is necessary for a great
merchant, which nothing hinders him from becoming but the want of a
sufficient capital. Thirty or forty pounds a year cannot be considered
as too great a recompense for the labour of a person so
Accomplished. Deduct this from the seemingly great profits of his
capital, and little more will remain, perhaps, than the ordinary
profits of stock. The greater part of the apparent profit is, in
this case too, real wages.

    The difference between the apparent profit of the retail and
that of the wholesale trade, is much less in the capital than in small
towns and country villages. Where ten thousand 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 so great a
stock. The apparent profits of the wealthy retailer, therefore, are
there more nearly upon a level with those of the wholesale merchant.
It is upon this account that goods sold by retail are generally as
cheap and frequently much cheaper in the capital than in small towns
and country villages. Grocery goods, for example, are generally much
cheaper; bread and butcher's meat frequently as cheap. It costs no
more to bring grocery goods to the great town than to the country
village; but it costs a great deal more to bring corn and cattle, as
the greater part of them must be brought from a much greater distance.
The prime cost of grocery goods, therefore, being the same in both
places, they are cheapest where the least profit is charged upon them.
The prime cost of bread and butcher's meat is greater in the great
town than in the country village; and though the profit is less,
therefore, they are not always cheaper there, but often equally cheap.
In such articles as bread and butcher's meat, the same cause, which
diminishes apparent profit, increases prime cost. The extent of the
market, by giving employment to greater stocks, diminishes apparent
profit; but by requiring supplies from a greater distance, it
increases prime cost. This diminution of the one and increase of the
other seem, in most cases, nearly to counterbalance one another, which
is probably the reason that, though the prices of corn and cattle
are commonly very different in different parts of the kingdom, those
of bread and butcher's meat are generally very nearly the same through
the greater part of it.

    Though the profits of stock both in the wholesale and retail trade
are generally less in the capital than in small towns and country
villages, yet great fortunes are frequently acquired from small
beginnings in the former, and scarce ever in the latter. In small
towns and country villages, on account of the narrowness of the
market, trade cannot always be extended as stock extends. In such
places, therefore, though the rate of a particular person's profits
may be very high, the sum or amount of them can never be very great,
nor consequently that of his annual accumulation. In great towns, on
the contrary, trade can be extended as stock increases, and the credit
of a frugal and thriving man increases much faster than his stock. His
trade is extended in proportion to the amount of both, and the sum
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 seldom happens, however, that great fortunes are
made even in great towns by any one regular, established, and
well-known branch of business, but in consequence of a long life of
industry, frugality, and attention. Sudden fortunes, indeed, are
sometimes made in such places by what is called the trade of
speculation. The speculative merchant exercises no one regular,
established, or well-known branch of business. He is a corn merchant
this year, and a wine merchant the next, and a sugar, tobacco, or
tea merchant the year after. He enters into every trade when he
foresees that it is likely to be more than commonly profitable, and he
quits it when he foresees that its profits are likely to return to the
level of other trades. His profits and losses, therefore, can bear
no regular proportion to those of any one established and well-known
branch of business. A bold adventurer may sometimes acquire a
considerable fortune by two or three successful speculations; but is
just as likely to lose one by two or three unsuccessful ones. This
trade can be carried on nowhere but in great towns. It is only in
places of the most extensive commerce and correspondence that the
intelligence requisite for it can be had.

    The five circumstances above mentioned, though they occasion
considerable inequalities in the wages of labour and profits of stock,
occasion none in the whole of the advantages and disadvantages, real
or imaginary, of the different employments of either. The nature of
those circumstances is such that they make up for a small pecuniary
gain in some, and counterbalance a great one in others.

    In order, however, that this equality may take place in the
whole of their advantages or disadvantages, three things are requisite
even where there is the most perfect freedom. First, the employments
must be well known and long established in the neighbourhood;
secondly, they must be in their ordinary, or what may be called
their natural state; and, thirdly, they must be the sole or
principal employments of those who occupy them.

    First, this equality can take place only in those employments
which are well known, and have been long established in the
neighbourhood.

    Where all other circumstances are equal, wages are generally
higher in new than in old trades. When a projector attempts to
establish a new manufacture, he must at first 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 otherwise
require, and a considerable time must pass away before he can
venture to reduce them to the common level. Manufactures for which the
demand arises altogether from fashion and fancy are continually
changing, and seldom last long enough to be considered as old
established manufactures. Those, on the contrary, for which the demand
arises chiefly from use or necessity, are less liable to change, and
the same form or fabric may continue in demand for whole centuries
together. The wages of labour, therefore, are likely to be higher in
manufactures of the former than in those of the latter kind.
Birmingham deals chiefly in manufactures of the former kind; Sheffield
in those of the latter; and the wages of labour in those two different
places are said to be suitable to this difference in the nature of
their manufactures.

    The establishment of any new manufacture, of any new branch of
commerce, or of any new practice in agriculture, is always a
speculation, from which the projector promises himself extraordinary
profits. These profits sometimes are very great, and sometimes, more
frequently, perhaps, they are quite otherwise; but in general they
bear no regular proportion to those of other old trades in the
neighbourhood. If the project succeeds, they are commonly at first
very high. When the trade or practice becomes thoroughly established
and well known, the competition reduces them to the level of other
trades.

    Secondly, this equality in the whole of the advantages and
disadvantages of the different employments of labour and stock, can
take place only in the ordinary, or what may be called the natural
state of those employments.

    The demand for almost every different species of labour is
sometimes greater and sometimes less than usual. In the one case the
advantages of the employment rise above, in the other they fall
below the common level. The demand for country labour is greater at
hay-time and harvest than during the greater part of the year; and
wages rise with the demand. In time of war, when forty or fifty
thousand sailors are forced from the merchant service into that of the
king, the demand for sailors to merchant ships necessarily rises
with their scarcity, and their wages upon such occasions commonly rise
from a guinea and seven-and-twenty shillings, to forty shillings and
three pounds a month. In a decaying manufacture, on the contrary, many
workmen, rather than quit their old trade, are contented with
smaller wages than would otherwise be suitable to the nature of
their employment.

    The profits of stock vary with the price of the commodities in
which it is employed. As the price of any commodity rises above the
ordinary or average rate, the profits of at least some part of the
stock that is employed in bringing it to market, rise above their
proper level, and as it falls they sink below it. All commodities
are more or less liable to variations of price, but some are much more
so than others. In all commodities which are produced by human
industry, the quantity of industry annually employed is necessarily
regulated by the annual demand, in such a manner that the average
annual produce may, as nearly as possible, be equal to the average
annual consumption. In some employments, it has already been observed,
the same quantity of industry will always produce the same, or very
nearly the same quantity of commodities. In the linen or woollen
manufactures, for example, the same number of hands will annually work
up very nearly the same quantity of linen and woollen cloth. The
variations in the market price of such commodities, therefore, can
arise only from some accidental variation in the demand. A public
mourning raises the price of black cloth. But as the demand for most
sorts of plain linen and woollen cloth is pretty uniform, so is
likewise the price. But there are other employments in which the
same quantity of industry will not always produce the same quantity of
commodities. The same quantity of industry, for example, will, in
different years, produce very different quantities of corn, wine,
hops, sugar, tobacco, etc. The price of such commodities, therefore,
varies not only with the variations of demand, but with the much
greater and more frequent variations of quantity, and is
consequently extremely fluctuating. But the profit of some of the
dealers must necessarily fluctuate with the price of the
commodities. The operations of the speculative merchant are
principally employed about such commodities. He endeavours to buy them
up when he foresees that their price is likely to rise, and to sell
them when it is likely to fall.

    Thirdly, this equality in the whole of the advantages and
disadvantages of the different employments of labour and stock can
take only in such as are the sole or principal employments of those
who occupy them.

    When a person derives his subsistence from one employment, which
does not occupy the greater part of his time, in the intervals of
his leisure he is often willing to work as another for less wages than
would otherwise suit the nature of the employment.

    There still subsists in many parts of Scotland a set of people
called Cotters or Cottagers, though they were more frequent some years
ago than they are now. They are a sort of outservants of the landlords
and farmers. The usual reward which they receive from their masters is
a house, a small garden for pot-herbs, as much grass as will feed a
cow, and, perhaps, an acre or two of bad arable land. When their
master has occasion for their labour, he gives them, besides, two
pecks of oatmeal a week, worth about sixteenpence sterling. During a
great part of the year he has little or no occasion for their
labour, and the cultivation of their own little possession is not
sufficient to occupy the time which is left at their own disposal.
When such occupiers were more numerous than they are at present,
they are said to have been willing to give their spare time for a very
small recompense to anybody, and to have wrought for less wages than
other labourers. In ancient times they seem to have been common all
over Europe. In countries ill cultivated and worse inhabited, the
greater part of landlords and farmers could not otherwise provide
themselves with the extraordinary number of hands which country labour
requires at certain season. The daily or weekly recompense which
such labourers occasionally received from their masters was
evidently not the whole price of their labour. Their small tenement
made a considerable part of it. This daily or weekly recompense,
however, seems to have been considered as the whole of it, by many
writers who have collected the prices of labour and provisions in
ancient times, and who have taken pleasures in representing both as
wonderfully low.

    The produce of such labour comes frequently cheaper to market than
would otherwise suitable to its nature. Stockings in many parts of
Scotland are knit much cheaper than they can anywhere be wrought
upon the loom. They are the work of servants and labourers, who derive
the principal part of their subsistence from some other employment.
More than a thousand pair of Shetland stockings are annually
imported into Leith, of which the price is from fivepence to
sevenpence a pair. At Lerwick, the small capital of the Shetland
Islands, tenpence a day, I have been assured, is a common price of
common labour. In the same islands they knit worsted stockings to
the value of a guinea a pair and upwards.

    The spinning of linen yarn is carried on in Scotland nearly in the
same way as the knitting of stockings by servants, who are chiefly
hired for other purposes. They earn but a very scanty subsistence, who
endeavour to get their whole livelihood by either of those trades.
In most parts of Scotland she is a good spinner who can earn
twentypence a week.

    In opulent countries the market is generally so extensive that any
one trade is sufficient to employ the whole labour and stock of
those who occupy it. Instances of people's living by one employment,
and at the same time deriving some little advantage from another,
occur chiefly in poor countries. The following instance, however, of
something of the same kind is to be found in the capital of a very
rich one. There is no city in Europe, I believe, in which house-rent
is dearer than in London, and yet I know no capital in which a
furnished apartment can be hired as cheap. Lodging is not only much
cheaper in London than in Paris; it is much cheaper than in
Edinburgh of the same degree of goodness; and what may seem
extraordinary, the dearness of house-rent is the cause of the
cheapness of lodging. The dearness of house-rent in London arises
not only from those causes which render it dear in all great capitals,
the dearness of labour, the dearness of all the materials of building,
which must generally be brought from a great distance, and above all
the dearness of ground-rent, every landlord acting the part the part
of a monopolist, and frequently exacting a higher rent for a single
acre of bad land in a town than can be had for a hundred of the best
in the country; but it arises in part from the peculiar manners and
customs of the people, which oblige every master of a family to hire a
whole house from top to bottom. A dwelling-house in England means
everything that is contained under the same roof. In France, Scotland,
and many other parts of Europe, it frequently means no more than a
single story. A tradesman in London is obliged to hire a whole house
in that part of the town where his customers live. His shop is upon
the ground-floor, and he and his family sleep in the garret; and he
endeavours to pay a part of his house-rent by letting the two middle
stories to lodgers. He expects to maintain his family by his trade,
and not by his lodgers. Whereas, at Paris and Edinburgh, the people
who let lodgings have commonly no other means of subsistence and the
price of the lodging must pay, not only the rent of the house, but the
whole expense of the family.

                            PART 2

             Inequalities by the Policy of Europe

    SUCH are the inequalities in the whole of advantages and
disadvantages of the different employments of labour and stock,
which the defect of any of the three requisites above mentioned must
occasion, even where there is the most perfect liberty. But the policy
of Europe, by not leaving things at perfect liberty, occasions other
inequalities of much greater importance.

    It does this chiefly in the three following ways. First, by
restraining the competition in some employments to a smaller number
than would otherwise be disposed to enter into them; secondly, by
increasing it in others beyond what it naturally would be; and,
thirdly, by obstructing the free circulation of labour and stock, both
from employment to employment and from place to place.

    First, the policy of Europe occasions a very important
inequality in the whole of the advantages and disadvantages of the
different employments of labour and stock, by restraining the
competition in some employments to a smaller number than might
otherwise be disposed to enter into them.

    The exclusive privileges of corporations are the principal means
it makes use of for this purpose.

    The exclusive privilege of an incorporated trade necessarily
restrains the competition, in the town where it is established, to
those who are free of the trade. To have served an apprenticeship in
the town, under a master properly qualified, is commonly the necessary
requisite for obtaining this freedom. The bye laws of the
corporation regulate sometimes the number of apprentices which any
master is allowed to have, and almost always the number of years which
each apprentice is obliged to serve. The intention of both regulations
is to restrain the competition to a much smaller number than might
otherwise be disposed to enter into the trade. The limitation of the
number of apprentices restrains it directly. A long term of
apprenticeship restrains it more indirectly, but as effectually, by
increasing the expense of education.

    In Sheffield no master cutler can have more than one apprentice at
a time, by a bye law of the corporation. In Norfolk and Norwich no
master weaver can have more than two apprentices, under pain of
forfeiting five pounds a month to the king. No master hatter can
have more than two apprentices anywhere in England, or in the
English plantations, under pain of forfeiting five pounds a month,
half to the king and half to him who shall sue in any court of record.
Both these regulations, though they have been confirmed by a public
law of the kingdom, are evidently dictated by the same corporation
spirit which enacted the bye-law of Sheffield. The silk weavers in
London had scarce been incorporated a year when they enacted a bye-law
restraining any master from having more than two apprentices at a
time. It required a particular Act of Parliament to rescind this bye
law.

    Seven years seem anciently to have been, all over Europe, the
usual term established for the duration of apprenticeships in the
greater part of incorporated trades. All such incorporations were
anciently called universities, which indeed is the proper Latin name
for any incorporation whatever. The university of smiths, the
university of tailors, etc., are expressions which we commonly meet
with in the old charters of ancient towns. When those particular
incorporations which are now peculiarly called universities were first
established, the term of years which it was necessary to study, in
order to obtain the degree of master of arts, appears evidently to
have been copied from the terms of apprenticeship in common trades, of
which the incorporations were much more ancient. As to have wrought
seven years under a master properly qualified was necessary in order
to entitle any person to become a master, and to have himself
apprenticed in a common trade; so to have studied seven years under
a master properly qualified was necessary to entitle him to become a
master, teacher, or doctor (words anciently synonymous) in the liberal
arts, and to have scholars or apprentices (words likewise originally
synonymous) to study under him.

    By the 5th of Elizabeth, commonly called the Statute of
Apprenticeship, it was enacted, that no person should for the future
exercise any trade, craft, or mystery at that time exercised in
England, unless he had previously served to it an apprenticeship of
seven years at least; 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 statute are very general, and seem plainly to include the whole
kingdom, by interpretation its operation has been limited to market
towns, it having been held that in country villages a person may
exercise several different trades, though he has not served a seven
years' apprenticeship to each, they being necessary for the
conveniency of the inhabitants, and the number of people frequently
not being sufficient to supply each with a particular set of hands.

    By a strict interpretation of the words, too, the operation of
this statute has been limited to those trades which were established
in England before the 5th of Elizabeth, and has never been extended to
such as have been introduced since that time. This limitation has
given occasion to several distinctions which, considered as rules of
police, appear as foolish as can well be imagined. It has been
adjudged, for example, that a coachmaker can neither himself make
nor employ journeymen to make his coach-wheels, but must buy them of a
master wheel-wright; this latter trade having been exercised in
England before the 5th of Elizabeth. But a wheelwright, though he
has never served an apprenticeship to a coachmaker, may either himself
make or employ journeyman to make coaches; the trade of a coachmaker
not being within the statute, because not exercised in England at
the time when it was made. The manufactures of Manchester, Birmingham,
and Wolverhampton, are many of them, upon this account, not within the
statute, not having been exercised in England before the 5th of
Elizabeth.

    In France, the duration of apprenticeships is different in
different towns and in different trades. In Paris, five years is the
term required in a great number; but before any person can be
qualified to exercise the trade as a master, he must, in many of them,
serve five years more as a journeyman. During this latter term he is
called the companion of his master, and the term itself is called
his companionship.

    In Scotland there is no general law which regulates universally
the duration of apprenticeships. The term is different in different
corporations. Where it is long, a part of it may generally be redeemed
by paying a small fine. In most towns, too, a very small fine is
sufficient to purchase the freedom of any corporation. The weavers
of linen and hempen cloth, the principal manufactures of the
country, as well as all other artificers subservient to them,
wheel-makers, reel-makers, etc., may exercise their trades in any town
corporate without paying any fine. In all towns corporate all
persons are free to sell butcher's meat upon any lawful day of the
week. Three years in Scotland is a common term of apprenticeship, even
in some very nice trades; and in general I know of no country in
Europe in which corporation laws are so little oppressive.

    The property which every man has in his own labour, as it is the
original foundation of all other property, so it is the most sacred
and inviolable. The patrimony of a poor man lies in the strength and
dexterity of his hands; and to hinder him from employing this strength
and dexterity of his hands; and to hinder him from employing this
strength and dexterity in what manner he thinks proper without
injury to his neighbour is a plain violation of this most sacred
property. It is a manifest encroachment upon the just liberty both
of the workman and of those who might be disposed to employ him. As it
hinders the one from working at what he thinks proper, so it hinders
the others from employing whom they think proper. To judge whether
he is fit to be employed may surely be trusted to the discretion of
the employers whose interest it so much concerns. The affected anxiety
of the law-giver lest they should employ an improper person is
evidently as impertinent as it is oppressive.

    The institution of long apprenticeships can give no security
that insufficient workmanship shall not frequently be exposed to
public sale. When this is done it is generally the effect of fraud,
and not of inability; and the longest apprenticeship can give no
security against fraud. Quite different regulations are necessary to
prevent this abuse. The sterling mark upon plate, and the stamps
upon linen and woollen cloth, give the purchaser much greater security
than any statute of apprenticeship. He generally looks at these, but
never thinks it worth while to inquire whether the workman had
served a seven years' apprenticeship.

    The institution of long apprenticeships has no tendency to form
a young people to industry. A journeyman who works by the piece is
likely to be industrious, because he derives a benefit from every
exertion of his industry. An apprentice is likely to be idle, and
almost always is so, because he has no immediate interest to be
otherwise. In the inferior employments, the sweets of labour consist
altogether in the recompense of labour. They who are soonest in a
condition to enjoy the sweets of it are likely soonest to conceive a
relish for it, and to acquire the early habit of industry. A young man
naturally conceives an aversion to labour when for a long time he
receives no benefit from it. The boys who are put out apprentices from
public charities are generally bound for more than the usual number of
years, and they generally turn out very idle and worthless.

    Apprenticeships were altogether unknown to the ancients. The
reciprocal duties of master and apprentice make a considerable article
in every modern code. The Roman law is perfectly silent with regard to
them. I know no Greek or Latin word (I might venture, I believe, to
assert that there is none) which expresses the idea we now annex to
the word Apprentice, a servant bound to work at a particular trade for
the benefit of a master, during a term of years, upon condition that
the master shall teach him that trade.

    Long apprenticeships are altogether unnecessary. The arts, which
are much superior to common trades, such as those of making clocks and
watches, contain no such mystery as to require a long course of
instruction. The first invention of such beautiful machines, indeed,
and even that of some of the instruments employed in making them,
must, no doubt, have been the work of deep thought and long time,
and may justly be considered as among the happiest efforts of human
ingenuity. But when both have been fairly invented and are well
understood, to explain to any young man, in the completest manner, how
to apply the instruments and how to construct the machines, cannot
well require more than the lessons of a few weeks: perhaps those of
a few days might be sufficient. In the common mechanic trades, those
of a few days might certainly be sufficient. The dexterity of hand,
indeed, even in common trades, cannot be acquired without much
practice and experience. But a young man would practice with much more
diligence and attention, if from the beginning he wrought 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
sometimes spoil through awkwardness and inexperience. His education
would generally in this way be more effectual, and always less tedious
and expensive. The master, indeed, would be a loser. He would lose all
the wages of the apprentice, which he now saves, for seven years
together. In the end, perhaps, the apprentice himself would be a
loser. In a trade so easily learnt he would have more competitors, and
his wages, when he came to be a complete workman, would be much less
than at present. The same increase of competition would reduce the
profits of the masters as well as the wages of the workmen. The
trades, the crafts, the mysteries, would all be losers. But the public
would be a gainer, the work of all artificers coming in this way
much cheaper to market.

    It is to prevent this reduction of price, and consequently of
wages and profit, by restraining that free competition which would
most certainly occasion it, that all corporations, and the greater
part of corporation laws, have been established. In order to erect a
corporation, no other authority in ancient times was requisite in many
parts of Europe, but that of the town corporate in which it was
established. In England, indeed, a charter from the king was
likewise necessary. But this prerogative of the crown seems to have
been reserved rather for extorting money from the subject than for the
defence of the common liberty against such oppressive monopolies. Upon
paying a fine to the king, the charter seems generally to have been
readily granted; and when any particular class of artificers or
traders thought proper to act as a corporation without a charter, such
adulterine guilds, as they were called, were not always
disfranchised upon that account, but obliged to fine annually to the
king for permission to exercise their usurped privileges. The
immediate inspection of all corporations, and of the bye-laws which
they might think proper to enact for their own government, belonged to
the town corporate in which they were established; and whatever
discipline was exercised over them proceeded commonly, not from the
king, but from the greater incorporation of which those subordinate
ones were only parts or members.

    The government of towns corporate was altogether in the hands of
traders and artificers, and it was the manifest interest of every
particular class of them to prevent the market from being overstocked,
as they commonly express it, with their own particular species of
industry, which is in reality to keep it always understocked. Each
class was eager to establish regulations proper for this purpose, and,
provided it was allowed to do so, was willing to consent that every
other class should do the same. In consequence of such regulations,
indeed, each class was obliged to buy the goods they had occasion
for from every other within the town, somewhat dearer than they
otherwise might have done. But in recompense, they were enabled to
sell their own just as much dearer; so that so far it was as broad
as long, as they say; and in the dealings of the different classes
within the town with one another, none of them were losers by these
regulations. But in their dealings with the country they were all
great gainers; and in these latter dealings consists the whole trade
which supports and enriches every town.

    Every town draws its whole subsistence, and all the materials of
its industry, from the country. It pays for these chiefly in two ways:
first, by sending back to the country a part of those materials
wrought up and manufactured; in which case their price is augmented by
the wages of the workmen, and the profits of their masters or
immediate employers; secondly, by sending to it a part both of the
rude and manufactured produce, either of other countries, or of
distant parts of the same country, imported into the town; in which
case, too, the original price of those goods is augmented by the wages
of the carriers or sailors, and by the profits of the merchants who
employ them. In what is gained upon the first of those two branches of
commerce consists the advantage which the town makes by its
manufactures; in what is gained upon the second, the advantage of
its inland and foreign trade. The wages of the workmen, and the
profits of their different employers, make up the whole of what is
gained upon both. Whatever regulations, therefore, tend to increase
those wages and profits beyond what they otherwise would be, tend to
enable the town to purchase, with a smaller 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 break down
that natural equality which would otherwise take place in the commerce
which is carried on between them. The whole annual produce of the
labour of the society is annually divided between those two
different sets of people. By means of those regulations a greater
share of it is given to the inhabitants of the town than would
otherwise fall to them; and a less to those of the country.

    The price which the town really pays for the provisions and
materials annually imported into it is the quantity of manufactures
and other goods annually exported from it. The dearer the latter are
sold, the cheaper the former are bought. The industry of the town
becomes more, and that of the country less advantageous.

    That the industry which is carried on in towns is, everywhere in
Europe, more advantageous than that which is carried on in the
country, without entering into any very nice computations, we may
satisfy ourselves by one very simple and obvious observation. In every
country of Europe we find, at least, a hundred people who have
acquired great fortunes from small beginnings by trade and
manufactures, the industry which properly belongs to towns, for one
who has done so by that which properly belongs to the country, the
raising of rude produce by the improvement and cultivation of land.
Industry, therefore, must be better rewarded, the wages of labour
and the profits of stock must evidently be greater in the one
situation than in the other. But stock and labour naturally seek the
most advantageous employment. They naturally, therefore, resort as
much as they can to the town, and desert the country.

    The inhabitants of a town, being collected into one place, can
easily combine together. The most insignificant trades carried on in
towns have accordingly, in some place or other, been incorporated, and
even where they have never been incorporated, yet the corporation
spirit, the jealousy of strangers, the aversion to take apprentices,
or to communicate the secret of their trade, generally prevail in
them, and often teach them, by voluntary associations and
agreements, to prevent that free competition which they cannot
prohibit by bye-laws. The trades which employ but a small number of
hands run most easily into such combinations. Half a dozen
wool-combers, perhaps, are necessary to keep a thousand spinners and
weavers at work. By combining not to take apprentices they can not
only engross the employment, but reduce the whole manufacture into a
sort of slavery to themselves, and raise the price of their labour
much above what is due to the nature of their work.

    The inhabitants of the country, dispersed in distant places,
cannot easily combine together. They have not only never been
incorporated, but the corporation spirit never has prevailed among
them. No apprenticeship has ever been thought necessary to qualify for
husbandry, the great trade of the country. After what are called the
fine arts, and the liberal professions, however, there is perhaps no
trade which requires so great a variety of knowledge and experience.
The innumerable volumes which have been written upon it in all
languages may satisfy us that, among the wisest and most learned
nations, it has never been regarded as a matter very easily
understood. And from all those volumes we shall in vain attempt to
collect that knowledge of its various and complicated operations,
which is commonly possessed even by the common farmer; how
contemptuously soever the very contemptible authors of some of them
may sometimes affect to speak of him. There is scarce any common
mechanic trade, on the contrary, of which all the operations may not
be as completely and distinctly explained in a pamphlet of a very
few pages, as it is possible for words illustrated by figures to
explain them. In the history of the arts, now publishing by the French
Academy of Sciences, several of them are actually explained in this
manner. The direction of operations, besides, which must be varied
with every change of the weather, as well as with many other
accidents, requires much more judgment and discretion than that of
those which are always the same or very nearly the same.

    Not only the art of the farmer, the general direction of the
operations of husbandry, but many inferior branches of country
labour require much more skin and experience than the greater part
of mechanic trades. The man who works upon brass and iron, works
with instruments and upon materials of which the temper is always
the same, or very nearly the same. But the man who ploughs the
ground with a team of horses or oxen, works with instruments of
which the health, strength, and temper, are very different upon
different occasions. The condition of the materials which he works
upon, too, is as variable as that of the instruments which he works
with, and both require to be managed with much judgment and
discretion. The common ploughman, though generally regarded as the
pattern of stupidity and ignorance, is seldom defective in this
judgment and discretion. He is less accustomed, indeed, to social
intercourse than the mechanic who lives in a town. His voice and
language are more uncouth and more difficult to be understood by those
who are not used to them. His understanding, however, being accustomed
to consider a greater variety of objects, is generally much superior
to that of the other, whose whole attention from morning till night is
commonly occupied in performing one or two very simple operations. How
much the lower ranks of people in the country are really superior to
those of the town is well known to every man whom either business or
curiosity has led to converse much with both. In China and Indostan
accordingly both the rank and the wages of country labourers are
said to be superior to those of the greater part of artificers and
manufacturers. They would probably be so everywhere, if corporation
laws and the corporation spirit did not prevent it.

    The superiority which the industry of the towns has everywhere
in Europe over that of the country is not altogether owing to
corporations and corporation laws. It is supported by many other
regulations. The high duties upon foreign manufactures and upon all
goods imported by alien merchants, all tend to the same purpose.
Corporation laws enable the inhabitants of towns to raise their
prices, without fearing to be undersold by the free competition of
their own countrymen. Those other regulations secure them equally
against that of foreigners. The enhancement of price occasioned by
both is everywhere finally paid by the landlords, farmers, and
labourers of the country, who have seldom opposed the establishment of
such monopolies. They have commonly neither inclination nor fitness to
enter into combinations; and the clamour and sophistry of merchants
and manufacturers easily persuade them that the private interest of
a part, and of a subordinate part of the society, is the general
interest of the whole.

    In Great Britain the superiority of the industry of the towns over
that of the country seems to have been greater formerly than in the
present times. The wages of country labour approach nearer to those of
manufacturing labour, and the profits of stock employed in agriculture
to those of trading and manufacturing stock, than they are said to
have done in the last century, or in the beginning of the present.
This change may be regarded as the necessary, though very late
consequence of the extraordinary encouragement given to the industry
of the towns. The stock accumulated in them comes in time to be so
great that it can no longer be employed with the ancient profit in
that species of industry which is peculiar to them. That industry
has its limits like every other; and the increase of stock, by
increasing the competition, necessarily reduces the profit. The
lowering of profit in the town forces out stock to the country, where,
by creating a new demand for country labour, it necessarily raises its
wages. It then spreads itself, if I may say so, over the face of the
land, and by being employed in agriculture is in part restored to
the country, at the expense of which, in a great measure, it had
originally been accumulated in the town. That everywhere in Europe the
greatest improvements of the country have been owing to such
overflowings of the stock originally accumulated in the towns, I shall
endeavour to show hereafter; and at the same time to demonstrate that,
though some countries have by this course attained to a considerable
degree of opulence, it is in itself necessarily slow, uncertain,
liable to be disturbed and interrupted by innumerable accidents, and
in every respect contrary to the order of nature and of reason. The
interests, prejudices, laws and customs, which have given occasion
to it, I shall endeavour to explain as fully and distinctly as I can
in the third and fourth books of this Inquiry.

    People of the same trade seldom meet together, even for
merriment and diversion, but the conversation ends in a conspiracy
against the public, or in some contrivance to raise prices. It is
impossible indeed to prevent such meetings, by any law which either
could be executed, or would be consistent with liberty and justice.
But though the law cannot hinder people of the same trade from
sometimes assembling together, it ought to do nothing to facilitate
such assemblies, much less to render them necessary.

    A regulation which obliges all those of the same trade in a
particular town to enter their names and places of abode in a public
register, facilitates such assemblies. It connects individuals who
might never otherwise be known to one another, and gives every man
of the trade a direction where to find every other man of it.

    A regulation which enables those of the same trade to tax
themselves in order to provide for their poor, their sick, their
widows and orphans, by giving them a common interest to manage,
renders such assemblies necessary.

    An incorporation not only renders them necessary, but makes the
act of the majority binding upon the whole. In a free trade an
effectual combination cannot be established but by the unanimous
consent of every single trader, and it cannot last longer than every
single trader continues of the same mind. The majority of a
corporation can enact a bye-law with proper penalties, which will
limit the competition more effectually and more durably than any
voluntary combination whatever.

    The pretence that corporations are necessary for the better
government of the trade is without any foundation. The real and
effectual discipline which is exercised over a workman is not that
of his corporation, but that of his customers. It is the fear of
losing their employment which restrains his frauds and corrects his
negligence. An exclusive corporation necessarily weakens the force
of this discipline. A particular set of workmen must then be employed,
let them behave well or ill. It is upon this account that in many
large incorporated towns no tolerable workmen are to be found, even in
some of the most necessary trades. If you would have your work
tolerably executed, it must be done in the suburbs, where the workmen,
having no exclusive privilege, have nothing but their character to
depend upon, and you must then smuggle it into the town as well as you
can.

    It is in this manner that the policy of Europe, by restraining the
competition in some employments to a smaller number than would
otherwise be disposed to enter into them, occasions a very important
inequality in the whole of the advantages and disadvantages of the
different employments of labour and stock.

    Secondly, the policy of Europe, by increasing the competition in
some employments beyond what it naturally would be, occasions
another inequality of an opposite kind in the whole of the
advantages and disadvantages of the different employments of labour
and stock.

    It has been considered as of so much importance that a proper
number of young people should be educated for certain professions,
that sometimes the public and sometimes the piety of private
founders have established many pensions, scholarships, exhibitions,
bursaries, etc., for this purpose, which draw many more people into
those trades than could otherwise pretend to follow them. In all
Christian 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 expense. The long, tedious, and expensive
education, therefore, of those who are, will not always procure them a
suitable reward, the church being crowded with people who, in order to
get employment, are willing to accept of a much smaller recompense
than what such an education would otherwise 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, however, may very properly be considered as of the
same nature with the wages of a journeyman. They are, all three,
paid for their work according to the contract which they may happen to
make with their respective superiors. Till after the middle of the
fourteenth century, five merks, containing about as much silver as ten
pounds of our present money, was in England the usual pay of a
curate or a stipendiary parish priest, as we find it regulated by
the decrees of several different national councils. At the same period
fourpence a day, containing the same quantity of silver as a
shilling of our present money, was declared to be the pay of a
master mason, and threepence a day, equal to ninepence of our
present money, that of a journeyman mason. The wages of both these
labourers, therefore, supposing them to have been constantly employed,
were much superior to those of the curate. The wages of the master
mason, supposing him to have been without employment one third of
the year, would have fully equalled them. By the 12th of Queen Anne,
c. 12, it is declared, "That whereas for want of sufficient
maintenance and encouragement to curates, the cures have in several
places been meanly supplied, the bishop is, therefore, empowered to
appoint by writing under his band and seal a sufficient certain
stipend or allowance, not exceeding fifty and not less than twenty
pounds a year." Forty pounds a year is reckoned at present very good
pay for a curate, and notwithstanding this Act of Parliament there are
many curacies under twenty pounds a year. There are journeymen
shoemakers in London who earn forty pounds a year, and there is scarce
an industrious workman of any kind in that metropolis who does not
earn more than twenty. This last sum indeed does not exceed what is
frequently earned by common labourers in many country parishes.
Whenever the law has attempted to regulate the wages of workmen, it
has always been rather to lower them than to raise them. But the law
has upon many occasions attempted to raise the wages of curates, and
for the dignity of the church, to oblige the rectors of parishes to
give them more than the wretched maintenance which they themselves
might be willing to accept of. And in both cases the law seems to have
been equally ineffectual, and has never either been able to raise
the wages of curates, or to sink those of labourers to the degree that
was intended; because it has never been able to hinder either the
one from being willing to accept of less than the legal allowance,
on account of the indigence of their situation and the multitude of
their competitors; or the other from receiving more, on account of the
contrary competition of those who expected to derive either profit
or pleasure from employing them.

    The great benefices and other ecclesiastical dignities support the
honour of the church, notwithstanding the mean circumstance of some of
its inferior members. The respect paid to the profession, too, makes
some compensation even to them for the meanness of their pecuniary
recompense. In England, and in all Roman Catholic countries, the
lottery of the church is in reality much more advantageous than is
necessary. The example of the churches of Scotland, of Geneva, and
of several other Protestant churches, may satisfy us that in so
creditable a profession, in which education is so easily procured, the
hopes of much more moderate benefices will draw a sufficient number of
learned, decent, and respectable men into holy orders.

    In professions in which there are no benefices, such as law and
physic, if an equal proportion of people were educated at the public
expense, the competition would soon be so great as to sink very much
their pecuniary reward. It might then not be worth any man's while
to educate his son to either of those professions at his own
expense. They would be entirely abandoned to such as had been educated
by those public charities, whose numbers and necessities would
oblige them in general to content themselves with a very miserable
recompense, to the entire degradation of the now respectable
professions of law and physic.

    That unprosperous race of men commonly called men of letters are
pretty much in the situation which lawyers and physicians probably
would be in upon the foregoing supposition. In every part of Europe
the greater part of them have been educated for the church, but have
been hindered by different reasons from entering into holy orders.
They have generally, therefore, been educated at the public expense,
and their numbers are everywhere so great as commonly to reduce the
price of their labour to a very paltry recompense.

    Before the invention of the art of printing, the only employment
by which a man of letters could make anything by his talents was
that of a public or private teacher, or by communicating to other
people the curious and useful knowledge which he had acquired himself:
and this is still surely a more honourable, a more useful, and in
general even a more profitable employment than that other of writing
for a bookseller, to which the art of printing has given occasion. The
time and study, the genius, knowledge, and application requisite to
qualify an eminent teacher of the sciences, are at least equal to what
is necessary for the greatest practitioners in law and physic. But the
usual reward of the eminent teacher bears no proportion to that of the
lawyer or physician; because the trade of the one is crowded with
indigent people who have been brought up to it at the public
expense; whereas those of the other two are encumbered with very few
who have not been educated at their own. The usual recompense,
however, of public and private teachers, small as it may appear, would
undoubtedly be less than it is, if the competition of those 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 scholar and a
beggar seem to have been terms very nearly synonymous. The different
governors of the universities before that time appear to have often
granted licences to their scholars to beg.

    In ancient times, before any charities of this kind had been
established for the education of indigent people to the learned
professions, the rewards of eminent teachers appear to have been
much more considerable. Isocrates, in what is called his discourse
against the sophists, reproaches the teachers of his own times with
inconsistency. "They make the most magnificent promises to their
scholars," says he, "and undertake to teach them to be wise, to be
happy, and to be just, and in return for so important a service they
stipulate the paltry reward of four or five minae. They who teach
wisdom," continues he, ought certainly to be wise themselves; but if
any man were to sell such a bargain for such a price, he would be
convicted of the most evident folly." He certainly does not mean
here to exaggerate the reward, and we may be assured that it was not
less than he represents it. Four minae were equal to thirteen pounds
six shillings and eightpence: five minae to sixteen pounds thirteen
shillings and fourpence. Something not less than the largest of
those two sums, therefore, must at that time have been usually paid to
the most eminent teachers at Athens. Isocrates himself demanded ten
minae, or thirty-three pounds six shillings and eightpence, from
each scholar. When he taught at Athens, he is said to have had a
hundred scholars. I understand this to be the number whom he taught at
one time, or who attended what we could call one course of lectures, a
number which will not appear extraordinary from so great a city to
so famous a teacher, who taught, too, what was at that time the most
fashionable of all sciences, rhetoric. He must have made, therefore,
by each course of lectures, a thousand minae, or L3333 6s. 8d. A
thousand minae, accordingly, is said by Plutarch in another place,
to have been his Didactron, or usual price of teaching. Many other
eminent teachers in those times appear to have acquired great
fortunes. Gorgias made a present to the temple of Delphi of his own
statue in solid gold. We must not, I presume, suppose that it was as
large as the life. His way of living, as well as that of Hippias and
Protagoras, two other eminent teachers of those times, is
represented by Plato as splendid even to ostentation. Plato himself is
said to have lived with a good deal of magnificence. Aristotle,
after having been tutor to Alexander, and most munificently
rewarded, as it is universally agreed, both by him and his father
Philip, thought it worth while, notwithstanding, to return to
Athens, in order to resume the teaching of his school. Teachers of the
sciences were probably in those times less common than they came to be
in an age or two afterwards, when the competition had probably
somewhat reduced both the price of their labour and the admiration for
their persons. The most eminent of them, however, appear always to
have enjoyed a degree of consideration much superior to any of the
like profession in the present times. The Athenians sent Carneades the
Academic, and Diogenes the Stoic, upon a solemn embassy to Rome; and
though their city had then declined from its former grandeur, it was
still an independent and considerable republic. Carneades, too, was
a Babylonian by birth, and as there never was a people more jealous of
admitting foreigners to public offices than the Athenians, their
consideration for him must have been very great.

    This inequality is upon the whole, perhaps, rather advantageous
than hurtful to the public. It may somewhat degrade the profession
of a public teacher; but the cheapness of literary education is surely
an advantage which greatly overbalances this trifling inconveniency.
The public, too, might derive still greater benefit from it, if the
constitution of those schools and colleges, in which education is
carried on, was more reasonable than it is at present through the
greater part of Europe.

    Thirdly, the policy of Europe, by obstructing the free circulation
of labour and stock both from employment to employment, and from place
to place, occasions in some cases a very incovenient inequality in the
whole of the advantages and disadvantages of their different
employments.

    The Statute of Apprenticeship obstructs the free circulation of
labour from one employment to another, even in the same place. The
exclusive privileges of corporations obstruct it from one place to
another, even in the same employment.

    It frequently happens that while high wages are given to the
workmen in one manufacture, those in another are obliged to content
themselves with bare subsistence. The one is in an advancing state,
and has, therefore, a continual demand for new bands: the other is
in a declining state, and the superabundance of hands is continually
increasing. Those two manufactures may sometimes be in the same
town, and sometimes in the same neighbourhood, without being able to
lend the least assistance to one another. The Statute of
Apprenticeship may oppose it in the one case, and both that and an
exclusive corporation in the other. In many different manufactures,
however, the operations are so much alike, that the workmen could
easily change trades with one another, if those absurd laws did not
hinder them. The arts of weaving plain linen and plain silk, for
example, are almost entirely the same. That of weaving plain woollen
is somewhat different; but the difference is so insignificant that
either a linen or a silk weaver might become a tolerable work in a
very few days. If any of those three capital manufactures,
therefore, were decaying, the workmen might find a resource in one
of the other two which was in a more prosperous condition; and their
wages would neither rise too high in the thriving, nor sink too low in
the decaying manufacture. The linen manufacture indeed is, in England,
by a particular statute, open to everybody; but as it is not much
cultivated through the greater part of the country, it can afford no
general resource to the workmen of other decaying manufactures, who,
wherever the Statute of Apprenticeship takes place, have no other
choice but either to come upon the parish, or to work as common
labourers, for which, by their habits, they are much worse qualified
than for any sort of manufacture that bears any resemblance to their
own. They generally, therefore, choose to come upon the parish.

    Whatever obstructs the free circulation of labour from one
employment to another obstructs that of stock likewise; the quantity
of stock which can be employed in any branch of business depending
very much upon that of the labour which can be employed in it.
Corporation laws, however, give less obstruction to the free
circulation of stock from one place to another than to that of labour.
It is everywhere much easier 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 obstruction 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 Laws is, so far as I know,
peculiar to England. It consists in the difficulty which a poor man
finds in obtaining a settlement, or even in being allowed to
exercise his industry in any parish but that to which he belongs. It
is the labour of artificers and manufacturers only of which the free
circulation is obstructed by corporation laws. The difficulty of
obtaining settlements obstructs even that of common labour. It may
be worth while to give some account of the rise, progress, and present
state of this disorder, the greatest perhaps of any in the police of
England.

    When by the destruction of monasteries the poor had been
deprived of the charity of those religious houses, after some other
ineffectual attempts for their relief, it was enacted by the 43rd of
Elizabeth, c. 2, that every parish should be bound to provide for
its own poor; and that overseers of the poor should be annually
appointed, who, with the churchwardens, should raise by a parish
rate competent sums for this purpose.

    By this statute the necessity of providing for their own poor
was indispensably imposed upon every parish. Who were to be considered
as the poor of each parish became, therefore, a question of some
importance. This question, after some variation, was at last
determined by the 13th and 14th of Charles II when it was enacted,
that forty days' undisturbed residence should gain any person a
settlement in any parish; but that within that time it should be
lawful for two justices of the peace, upon complaint made by the
churchwardens or overseers of the poor, to remove any new inhabitant
to the parish where he was last legally settled; unless he either
rented a tenement of ten pounds a year, or could give such security
for the discharge of the parish where he was then living, as those
justices should judge sufficient.

    Some frauds, it is said, were committed in consequence of this
statute; parish officers sometimes bribing their own poor to go
clandestinely to another parish, and by keeping themselves concealed
for forty days to gain a settlement there, to the discharge of that to
which they properly belonged. It was enacted, therefore, by the 1st of
James II that the forty days' undisturbed residence of any person
necessary to gain a settlement should 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 overseers
of the parish where he came to dwell.

    But parish officers, it seems, were not always more honest with
regard to their own, than they had been with regard to other parishes,
and sometimes connived at such intrusions, receiving the notice, and
taking no proper steps in consequence of it. As every person in a
parish, therefore, was supposed to have an interest to prevent as much
as possible their being burdened by such intruders, it was further
enacted by the 3rd of William III that the forty days' residence
should be accounted only from the publication of such notice in
writing on Sunday in the church, immediately after divine service.

    "After all," says Doctor Burn, "this kind of settlement, by
continuing forty days after publication of notice in writing, is
very seldom obtained; and the design of the acts is not so much for
gaining of settlements, as for the avoiding of them, by persons coming
into a parish clandestinely: for the giving of notice is only
putting a force upon the parish to remove. But if a person's situation
is such, that it is doubtful whether he is actually removable or
not, he shall by giving of notice compel the parish either to allow
him a settlement uncontested, by suffering him to continue forty days;
or, by removing him, to try the right."

    This statute, therefore, rendered it almost impracticable for a
poor man to gain a new settlement in the old way, by forty days'
inhabitancy. But that it might not appear to preclude altogether the
common people of one parish from ever establishing themselves with
security in another, it appointed four other ways by which a
settlement might be gained without any notice delivered or
published. The first was, by being taxed to parish rates and paying
them; the second, by being elected into an annual parish office, and
serving in it a year; the third, by serving an apprenticeship in the
parish; the fourth, by being hired into service there for a year,
and continuing in the same service during the whole of it.

    Nobody can gain a settlement by either of the two first ways,
but by the public deed of the whole parish, who are too well aware
of the consequences to adopt any new-comer who has nothing but his
labour to support him, either by taxing him to parish rates, or by
electing him into a parish office.

    No married man can well gain any settlement in either of the two
last ways. An apprentice is scarce ever married; and it is expressly
enacted that no married servant shall gain any settlement by being
hired for a year. The principal effect of introducing settlement by
service has been to put out in a great measure the old fashion of
hiring for a year, which before had been so customary in England, that
even at this day, if no particular term is agreed upon, the law
intends that every servant is hired for a year. But masters are not
always willing to give their servants a settlement by hiring them in
this manner; and servants are not always willing to be so hired,
because, as every last settlement discharges all the foregoing, they
might thereby lose their original settlement in the places of their
nativity, the habitation of their parents and relations.

    No independent workman, it is evident, whether labourer or
artificer, is likely to gain any new settlement either by
apprenticeship or by service. When such a person, therefore, carried
his industry to a new parish, he was liable to be removed, how healthy
and industrious soever, at the caprice of any churchwarden or
overseer, unless he either rented a tenement of ten pounds a year, a
thing impossible for one who has nothing but his labour to live by; or
could give such security for the discharge of the parish as two
justices of the peace should judge sufficient. What security they
shall require, indeed, is left altogether to their discretion; but
they cannot well require less than thirty pounds, it having been
enacted that the purchase even of a freehold estate of less than
thirty pounds' value shall not gain any person a settlement, as not
being sufficient for the discharge of the parish. But this is a
security which scarce any man who lives by labour can give; and much
greater security is frequently demanded.

    In order to restore in some measure that free circulation of
labour which those different statutes had almost entirely taken
away, the invention of certificates was fallen upon. By the 8th and
9th of William III it was enacted that if any person should bring a
certificate from the parish where he was last legally settled,
subscribed by the churchwardens and overseers of the poor, and allowed
by two justices of the peace, that every other parish should be
obliged to receive him; that he should not be removable merely upon
account of his being likely to become chargeable, but only upon his
becoming actually chargeable, and that then the parish which granted
the certificate should be obliged to pay the expense both of his
maintenance and of his removal. And in order to give the most
perfect security to the parish where such certificated man should come
to reside, it was further enacted by the same statute that he should
gain no settlement there by any means whatever, except either by
renting a tenement of ten pounds a year, or by serving upon his own
account in an annual parish office for one whole year; and
consequently neither by notice, nor by service, nor by apprenticeship,
nor by paying parish rates. By the 12th of Queen Anne, too, stat. 1,
c. 18, it was further enacted that neither the servants nor
apprentices of such certificated man should gain any settlement in the
parish where he resided under such certificate.

    How far this invention has restored that free circulation of
labour which the preceding statutes had almost entirely taken away, we
may learn from the following very judicious observation of Doctor
Burn. "It is obvious," says he, "that there are divers good reasons
for requiring certificates with persons coming to settle in any place;
namely, that persons residing under them can gain no settlement,
neither by apprenticeship, nor by service, nor by giving notice, nor
by paying parish rates; that they can settle neither apprentices nor
servants; that if they become chargeable, it is certainly known
whither to remove them, and the parish shall be paid for the
removal, and for their maintenance in the meantime; and that if they
fall sick, and cannot be removed, the parish which gave the
certificate must maintain them: none of all which can be without a
certificate. Which reasons will hold proportionably for parishes not
granting certificates in ordinary cases; for it is far more than an
equal chance, but that they will have the certificated persons
again, and in a worse condition." The moral of this observation
seems to be that certificates ought always to be required by the
parish where any poor man comes to reside, and that they ought very
seldom to be granted by that which he proposes to leave. "There is
somewhat of hardship in this matter of certificates," says the same
very intelligent author in his History of the Poor Laws, "by putting
it in the power of a parish officer to imprison 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
settlement, or whatever advantage he may propose to himself by
living elsewhere."

    Though a certificate carries along with it no testimonial of
good behaviour, and certifies nothing but that the person belongs to
the parish to which he really does belong, it is altogether
discretionary in the parish officers either to grant or to refuse
it. A mandamus was once moved for, says Doctor Burn, to compel the
churchwardens and overseers to sign a certificate; but the court of
King's Bench rejected the motion as a very strange attempt.

    The very unequal price of labour which we frequently find in
England in places at no great distance from one another is probably
owing to the obstruction which the law of settlements gives to a
poor man who would carry his industry from one parish to another
without a certificate. A single man, indeed, who is healthy and
industrious, may sometimes reside by sufferance without one; but a man
with a wife and family who should attempt to do so would in most
parishes be sure of being removed, and if the single man should
afterwards marry, he would generally be removed likewise. The scarcity
of hands in one parish, therefore, cannot always be relieved by
their superabundance in another, as it is constantly in Scotland, and,
I believe, in all other countries where there is no difficulty of
settlement. In such countries, though wages may sometimes rise a
little in the neighbourhood of a great town, or wherever else there is
an extraordinary demand for labour, and sink gradually as the distance
from such places increases, till they fall back to the common rate
of the country; yet we never meet with those sudden and
unaccountable differences in the wages of neighbouring places which we
sometimes find in England, where it is often more difficult for a poor
man to pass the artificial boundary of a parish than an arm of the sea
or a ridge of high mountains, natural boundaries which sometimes
separate very distinctly different rates of wages in other countries.

    To remove a man who has committed no misdemeanour from the
parish where he chooses to reside is an evident violation of natural
liberty and justice. The common people of England, however, so jealous
of their liberty, but like the common people of most other countries
never rightly understanding wherein it consists, have now for more
than a century together suffered themselves to be exposed to this
oppression without a remedy. Though men of reflection, too, have
sometimes complained of the law of settlements as a public
grievance; yet it has never been the object of any general popular
clamour, such as that against general warrants, an abusive practice
undoubtedly, but such a one as was not likely to occasion any
general oppression. There is scarce a poor man in England of forty
years of age, I will venture to say, who has not in some part of his
life felt himself most cruelly oppressed by this illcontrived law of
settlements.

    I shall conclude this long chapter with observing that, though
anciently it was usual to rate wages, first by general laws
extending over the whole kingdom, and afterwards by particular
orders of the justices of peace in every particular county, both these
practices have now gone entirely into disuse. "By the experience of
above four hundred years," says Doctor Burn, "it seems time to lay
aside all endeavours to bring under strict regulations, what in its
own nature seems incapable of minute limitation; for if all persons in
the same kind of work were to receive equal wages, there would be no
emulation, and no room left for industry or ingenuity."

    Particular Acts of Parliament, however, still attempt sometimes to
regulate wages in particular trades and in particular places. Thus the
8th of George III prohibits under heavy penalties all master tailors
in London, and five miles round it, from giving, and their workmen
from accepting, more than two shillings and sevenpence halfpenny a
day, except in the case of a general mourning. Whenever the
legislature attempts to regulate the differences between masters and
their workmen, its counsellors are always the masters. When the
regulation, therefore, is in favour of the workmen, it is always
just and equitable; but it is sometimes otherwise when in favour of
the masters. Thus the law which obliges the masters in several
different trades to pay their workmen in money and not in goods is
quite just and equitable. It imposes no real hardship upon the
masters. 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 masters. When masters combine together in order to reduce the
wages of their workmen, they commonly enter into a private bond or
agreement not to give more than a certain wage under a certain
penalty. Were the workmen to enter into a contrary combination of
the same kind, not to accept of a certain wage under a certain
penalty, the law would punish them very severely; and if it dealt
impartially, it would treat the masters in the same manner. But the
8th of George III enforces by law that very regulation which masters
sometimes attempt to establish by such combinations. The complaint
of the workmen, that it puts the ablest and most industrious upon
the same footing with an ordinary workman, seems perfectly well
founded.

    In ancient times, too, it was usual to attempt to regulate the
profits of merchants and other dealers, by rating the price both of
provisions and other goods. The assize of bread is, so far as I
know, the only remnant of this ancient usage. Where there is an
exclusive corporation, it may perhaps be proper to regulate the
price of the first necessary of life. But where there is none, the
competition will regulate it much better than any assize. The method
of fixing the assize of bread established by the 31st of George II
could not be put in practice in Scotland, on account of a defect in
the law; its execution depending upon the office of a clerk of the
market, which does not exist there. This defect was not remedied
till the 3rd of George III. The want of an assize occasioned no
sensible inconveniency, and the establishment of one, in the few
places where it has yet taken place, has produced no sensible
advantage. In the greater part of the towns of Scotland, however,
there is an incorporation of bakers who claim exclusive privileges,
though they are not very strictly guarded.

    The proportion between the different rates both of wages and
profit in the different employments of labour and stock, seems not
to be much affected, as has already been observed, by the riches or
poverty, the advancing, stationary, or declining state of the society.
Such revolutions in the public welfare, though they affect the general
rates both of wages and profit, must in the end affect them equally in
all different employments. The proportion between them, therefore,
must remain the same, and cannot well be altered, at least for any
considerable time, by any such revolutions.

                            CHAPTER XI

                       Of the Rent of Land

    RENT, considered as the price paid for the use of land, is
naturally the highest which the tenant can afford to pay in the actual
circumstances of the land. In adjusting the terms of the lease, the
landlord endeavours to leave him no greater share of the produce
than what is sufficient to keep up the stock from which he furnishes
the seed, pays the labour, and purchases and maintains the cattle
and other instruments of husbandry, together with the ordinary profits
of farming stock in the neighbourhood. This is evidently the
smallest share with which the tenant can content himself without being
a loser, and the landlord seldom means to leave him any more. Whatever
part of the produce, or, what is the same thing, whatever part of
its price is over and above this share, he naturally endeavours to
reserve to himself as the rent of his land, which is evidently the
highest the tenant can afford to pay in the actual circumstances of
the land. Sometimes, indeed, the liberality, more frequently the
ignorance, of the landlord, makes him accept of somewhat less than
this portion; and sometimes too, though more rarely, the ignorance
of the tenant makes him undertake to pay somewhat more, or to
content himself with somewhat less than the ordinary profits of
farming stock in the neighbourhood. This portion, however, may still
be considered as the natural rent of land, or the rent for which it is
naturally meant that land should for the most part be let.

    The rent of land, it may be thought, is frequently no more than
a reasonable profit or interest for the stock laid out by the landlord
upon its improvement. This, no doubt, may be partly the case upon some
occasions; for it can scarce ever be more than partly the case. The
landlord demands a rent even for unimproved land, and the supposed
interest or profit upon the expense of improvement is generally an
addition to this original rent. Those improvements, besides, are not
always made by the stock of the landlord, but sometimes by that of the
tenant. When the lease comes to be renewed, however, the landlord
commonly demands the same augmentation of rent as if they had been all
made by his own.

    He sometimes demands rent for what is altogether incapable of
human improvement. Kelp is a species of sea-weed, which, when burnt,
yields an alkaline salt, useful for making glass, soap, and for
several other purposes. It grows in several parts of Great Britain,
particularly in Scotland, upon such rocks only as lie within the
high water mark, which are twice every day covered with the sea, and
of which the produce, therefore, was never augmented by human
industry. The landlord, however, whose estate is bounded by a kelp
shore of this kind, demands a rent for it as much as for his corn
fields.

    The sea in the neighbourhood of the islands of Shetland is more
than commonly abundant in fish, which makes a great part of the
subsistence of their inhabitants. But in order to profit by the
produce of the water, they must have a habitation 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 sea-fish; and one
of the very few instances in which rent makes a part of the price of
that commodity is to be found in that country.

    The rent of the land, therefore, considered as the price paid
for the use 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; but to what
the farmer can afford to give.

    Such parts only of the produce of land can commonly be brought
to market of which the ordinary price is sufficient to replace the
stock which must be employed in bringing them thither, together with
its ordinary profits. If the ordinary price is more than this, the
surplus part of it will naturally go to the rent of 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 not more depends
upon the demand.

    There are some parts of the produce of land for which the demand
must always be such as to afford a greater price than what is
sufficient to bring them to market; and there are others for which
it either may or may not be such as to afford this greater price.
The former must always afford a rent to the landlord. The latter
sometimes may, and sometimes may not, according to different
circumstances.

    Rent, it is to be observed, therefore, enters into the composition
of the price of commodities in a different way from wages and
profit. High or low wages and profit are the causes of high or low
price; high or low rent is the effect of it. It is because high or low
wages and profit must be paid, in order to bring a particular
commodity to market, that its price is high or low. But it is
because its price is high or low; a great deal more, or very little
more, or no more, than what is sufficient to pay those wages and
profit, that it affords a high rent, or a low rent, or no rent at all.

    The particular consideration, first, of those parts of the produce
of land which always afford some rent; secondly, of those which
sometimes may and sometimes may not afford rent; and, thirdly, of
the variations which, in the different periods of improvement,
naturally take place in the relative value of those two different
sorts of rude produce, when compared both with one another and with
manufactured commodities, will divide this chapter into three parts.

                             PART 1

        Of the Produce of Land which always affords Rent

    AS men, like all other animals, naturally multiply in proportion
to the means of their subsistence, food is always, more or less, in
demand. It can always purchase or command a greater or smaller
quantity of labour, and somebody can always be found who is willing to
do something in order to obtain it. The quantity of labour, indeed,
which it can purchase is not always equal to what it could maintain,
if managed in the most economical manner, on account of the high wages
which are sometimes given to labour. But it can always purchase such a
quantity of labour as it can maintain, according to the rate at
which the sort of labour is commonly maintained in the neighbourhood.

    But land, in almost any situation, produces a greater quantity
of food than what is sufficient to maintain all the labour necessary
for bringing it to market in the most liberal way in which that labour
is ever maintained. The surplus, too, is always more than sufficient
to replace the stock which employed that labour, together with its
profits. Something, therefore, always remains for a rent to the
landlord.

    The most desert moors in Norway and Scotland produce some sort
of pasture for cattle, of which the milk and the increase are always
more than sufficient, not only to maintain all the labour necessary
for tending them, and to pay the ordinary profit to the farmer or
owner of the herd or flock; but to afford some small rent to the
landlord. The rent increases in proportion to the goodness of the
pasture. The same extent of ground not only maintains a greater number
of cattle, but as they are brought within a smaller compass, less
labour becomes requisite to tend them, and to collect their produce.
The landlord gains both ways, by the increase of the produce and by
the diminution of the labour which must be maintained out of it.

    The rent of land not only varies with its fertility, whatever be
its produce, but with its situation, whatever be its fertility. Land
in the neighbourhood of a town gives a greater rent than land
equally fertile in a distant part of the country. Though it may cost
no more labour to cultivate the one than the other, it must always
cost more to bring the produce of the distant land to market. A
greater quantity of labour, therefore, must be maintained out of it;
and the surplus, from which are drawn both the profit of the farmer
and the rent of the landlord, must be diminished. But in remote
parts of the country the rate of profits, as has already been shown,
is generally higher than in the neighbourhood of a large town. A
smaller proportion of this diminished surplus, therefore, must
belong to the landlord.

    Good roads, canals, and navigable rivers, by diminishing the
expense of carriage, put the remote parts of the country more nearly
upon a level with those in the neighbourhood of the town. They are
upon that account the greatest of all improvements. They encourage the
cultivation of the remote, which must always be the most extensive
circle 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 some rival commodities into the old market, they open many
new markets to its produce. Monopoly, besides, is a great enemy to
good management, which can never be universally established but in
consequence of that free and universal competition which forces
everybody to have recourse to it for the sake of self-defence. It is
not more than fifty years ago that some of the counties in the
neighbourhood of London petitioned the Parliament against the
extension of the turnpike roads into the remoter counties. Those
remoter counties, they pretended, from the cheapness of labour,
would be able to sell their grass and corn cheaper in the London
market than themselves, and would thereby reduce their rents, and ruin
their cultivation. Their rents, however, have risen, and their
cultivation has been improved since that time.

    A cornfield of moderate fertility produces a much greater quantity
of food for man than the best pasture of equal extent. Though its
cultivation requires much more labour, yet the surplus which remains
after replacing the seed and maintaining all that labour, is
likewise much greater. If a pound of butcher's meat, therefore, was
never supposed to be worth more than a pound of bread, this greater
surplus would everywhere be of greater value, and constitute a greater
fund both for the profit of the farmer and the rent of the landlord.
It seems to have done so universally in the rude beginnings of
agriculture.

    But the relative values of those two different species of food,
bread and butcher's meat, are very different in the different
periods of agriculture. In its rude beginnings, the unimproved
wilds, which then occupy the far greater part of the country, are
all abandoned to cattle. There is more butcher's meat than bread,
and bread, therefore, is the food for which there is the greatest
competition, and which consequently brings the greatest price. At
Buenos Ayres, we are told by Ulloa, four reals, one-and-twenty pence
halfpenny sterling, was, forty or fifty years ago, the ordinary
price of an ox, chosen from a herd of two or three hundred. He says
nothing of the price of bread, probably because he found nothing
remarkable about it. An ox there, he says, cost little more than the
labour of catching him. But corn can nowhere be raised without a great
deal of labour, and in a country which lies upon the river Plate, at
that time the direct road from Europe to the silver mines of Potosi,
the money price of labour could not be very cheap. It is otherwise
when cultivation is extended over the greater part of the country.
There is then more bread than butcher's meat. The competition
changes its direction, and the price of butcher's meat becomes greater
than the price of bread.

    By the extension besides of cultivation, the unimproved wilds
become insufficient to supply the demand for butcher's meat. A great
part of the cultivated lands must be employed in rearing and fattening
cattle, of which the price, therefore, must be sufficient to pay,
not only the labour necessary for tending them, but the rent which the
landlord and the profit which the farmer could have drawn from such
land employed in tillage. The cattle bred upon the most uncultivated
moors, when brought to the same market, are, in proportion to their
weight or goodness, sold at the same price as those which are reared
upon the most improved land. The proprietors of those moors profit
by it, and raise the rent of their land in proportion to the price
of their cattle. It is not more than a century ago that in many
parts of the highlands of Scotland, butcher's meat was as cheap or
cheaper than even bread made of oatmeal. The union opened the market
of England to the highland cattle. Their ordinary price is at
present about three times greater than at the beginning of the
century, and the rents of many highland estates have been tripled
and quadrupled in the same time. In almost every part of Great Britain
a pound of the best butcher's meat is, in the present times, generally
worth more than two pounds of the best white bread; and in plentiful
years it is sometimes worth three or four pounds.

    It is thus that in the progress of improvement the rent and profit
of unimproved pasture come to be regulated in some measure by the rent
and profit of what is improved, and these again by the rent and profit
of corn. Corn is an annual crop. Butcher's meat, a crop which requires
four or five years to grow. As an acre of land, therefore, will
produce a much smaller quantity of the one species of food than of the
other, the inferiority of the quantity must be compensated by the
superiority of the price. If it was more than compensated, more corn
land would be turned into pasture; and if it was not compensated, part
of what was in pasture would be brought back into corn.

    This equality, however, between the rent and profit of grass and
those of corn; of the land of which the immediate produce is food
for cattle, and of that of which the immediate produce is food for
men; must be understood to take place only through the greater part of
the improved lands of a great country. In some particular local
situations it is quite otherwise, and the rent and profit of grass are
much superior to what can be made by corn.

    Thus in the neighbourhood of a great town the demand for milk
and for forage to horses frequently contribute, together with the high
price of butcher's meat, to raise the value of grass 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 distance.

    Particular circumstances have sometimes rendered some countries so
populous that the whole territory, like the lands in the neighbourhood
of a great town, has not been sufficient to produce both the grass and
the corn necessary for the subsistence of their inhabitants. Their
lands, therefore, have been principally employed in the production
of grass, the more bulky commodity, and which cannot be so easily
brought from a great distance; and corn, the food of the great body of
the people, has been chiefly imported from foreign countries.
Holland is at present in this situation, and a considerable part of
ancient Italy seems to have been so during the prosperity of the
Romans. To feed well, old Cato said, as we are told by Cicero, was the
first and most profitable thing in the management of a private estate;
to feed tolerably well, the second; 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 ancient Italy which lay in the
neighbourhood of Rome, must have been very much discouraged by the
distributions of corn which were frequently made to the people, either
gratuitously, or at a very low price. This corn was brought from the
conquered provinces, of which several, instead of taxes, were
obliged to furnish a tenth part of their produce at a stated price,
about sixpence a peck, to the republic. The low price at which this
corn was distributed to the people must necessarily have sunk the
price of what could be brought to the Roman market from Latium, or the
ancient territory of Rome, and must have discouraged its cultivation
in that country.

    In an open country too, of which the principal produce is corn,
a well-enclosed piece of grass will frequently rent higher than any
corn field in its neighbourhood. It is convenient for the
maintenance of the cattle employed in the cultivation of the corn, and
its high rent is, in this case, not so properly paid from the value of
its own produce as from that of the corn lands which are cultivated by
means of it. It is likely to fall, if ever the neighbouring lands
are completely enclosed. The present high rent of enclosed land in
Scotland seems owing to the scarcity of enclosure, and will probably
last no longer than that scarcity. The advantage of enclosure is
greater for pasture than for corn. It saves the labour of guarding the
cattle, which feed better, too, when they are not liable to be
disturbed by their keeper or his dog.

    But where there is no local advantage of this kind, the rent and
profit of corn, or whatever else is the common vegetable food or the
people, must naturally regulate, upon the land which is fit for
producing it, the rent and profit of pasture.

    The use of the artificial grasses, of turnips, carrots,
cabbages, 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 grass, should somewhat reduce, it might be expected, the
superiority which, in an improved country, the price of butcher's meat
naturally has over that of bread. It seems accordingly to have done
so; and there is some reason for believing that, at least in the
London market, the price of butcher's meat in proportion to the
price of bread is a good deal lower in the present times than it was
in the beginning of the last century.

    In the appendix to the Life of Prince Henry, Doctor Birch has
given us an account of the prices of butcher's meat as commonly paid
by that prince. It is there said that the four quarters of an ox
weighing six hundred pounds usually cost him nine pounds ten
shillings, or thereabouts; that is, thirty-one shillings and
eightpence per hundred pounds weight. Prince Henry died on the 6th
of November 1612, in the nineteenth year of his age.

    In March 1764, there was a Parliamentary inquiry into the causes
of the high price of provisions at that time. It was then, among other
proof to the same purpose, given in evidence by a Virginia merchant,
that in March 1763, he had victualled his ships for twenty-four or
twenty-five shillings the hundredweight of beef, which he considered
as the ordinary price; whereas, in that dear year, he had paid
twenty-seven shillings for the same weight and sort. This high price
in 1764 is, however, four shillings and eightpence cheaper than the
ordinary price paid by Prince Henry; and it is the best beef only,
it must be observed, which is fit to be salted for those distant
voyages.

    The price paid by Prince Henry amounts to 3 3/4d. per pound weight
of the whole carcase, coarse and choice pieces taken together; and
at that rate the choice pieces could not have been sold by retail
for less than 4 1/2d. or 5d. the pound.

    In the Parliamentary inquiry in 1764, the witnesses stated the
price of the choice pieces of the best beef to be to the consumer
4d. and 4 1/4d. the pound; and the coarse pieces in general to be from
seven farthings to 2 1/2d. and this they said was in general one
halfpenny dearer than the same sort of pieces had usually been sold in
the month of March. But even this high price is still a good deal
cheaper than what we can well suppose the ordinary retail price to
have been the time of Prince Henry.

    During the twelve first years of the last century, the average
price of the best wheat at the Windsor market was L1 18s. 3 1/6d.
the quarter of nine Winchester bushels.

    But in the twelve years preceding 1764, including that year, the
average price of the same measure of the best wheat at the same market
was L2 1s. 9 1/2d.

    In the twelve first years of the last century, therefore, wheat
appears to have been a good deal cheaper, and butcher's meat a good
deal dearer, than in the twelve years preceding 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 these regulate the rent and profit of all other
cultivated land. If any particular produce afforded less, the land
would soon be turned into corn or pasture; and if any afforded more,
some part of the lands in corn or pasture would soon be turned to that
produce.

    Those productions, indeed, which require either a greater original
expense of improvement, or a greater annual expense of cultivation, in
order to fit the land for them, appear commonly to afford, the one a
greater rent, the other a greater profit than corn or pasture. This
superiority, however, will seldom be found to amount to more than a
reasonable interest or compensation for this superior expense.

    In a hop garden, a fruit garden, a kitchen garden, both the rent
of the landlord, and the profit of the farmer, are generally greater
than in a corn or grass field. But to bring the ground into this
condition requires more expense. Hence a greater rent becomes due to
the landlord. It requires, too, a more attentive and skilful
management. Hence a greater profit becomes due to the farmer. The crop
too, at least in the hop and fruit garden, is more precarious. Its
price, therefore, besides compensating all occasional losses, must
afford something like the profit of insurance. The circumstances of
gardeners, generally mean, and always moderate, may satisfy us that
their great ingenuity is not commonly over-recompensed. Their
delightful art is practised by so many rich people for amusement, that
little advantage is to be made by those who practise it for profit;
because the persons who should naturally be their best customers
supply themselves with all their most precious productions.

    The advantage which the landlord derives from such improvements
seems at no time to have been greater than what was sufficient to
compensate the original expense of making them. In the ancient
husbandry, after the vineyard, a well-watered kitchen garden seems
to have been the part of the farm which was supposed to yield the most
valuable produce. But Democritus, who wrote upon husbandry about two
thousand years ago, and who was regarded by the ancients as one of the
fathers of the art, thought they did not act wisely who enclosed a
kitchen garden. The profit, he said, would not compensate the
expense of a stone wall; and bricks (he meant, I suppose, bricks baked
in the sun) mouldered with the rain, and the winter storm, and
required continual repairs. Columella, who reports this judgment of
Democritus, does not controvert it, but proposes a very frugal
method of enclosing with a hedge of brambles and briars, which, he
says, he had found by experience to be both a lasting and an
impenetrable fence; but which, it seems, was not commonly known in the
time of Democritus. Palladius adopts the opinion of Columella, which
had before been recommended by Varro. In the judgment of those ancient
improvers, the produce of a kitchen garden had, it seems, been
little more than sufficient to pay the extraordinary culture and the
expense of watering; for in countries so near the sun, it was
thought proper, in those times as in the present, to have the
command of a stream of water which could be conducted to every bed
in the garden. Through the greater part of Europe a kitchen garden
is not at present supposed to deserve a better enclosure than that
recommended by Columella. In Great Britain, and some other northern
countries, the finer fruits cannot be brought to perfection but by the
assistance of a wall. Their price, therefore, in such countries must
be sufficient to pay the expense of building and maintaining what they
cannot be had without. The fruit-wall frequently surrounds the kitchen
garden, which thus enjoys the benefit of an enclosure which its own
produce could seldom pay for.

    That the vineyard, when properly planted and brought to
perfection, was the most valuable part of the farm, seems to have been
an undoubted maxim in the ancient 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 dispute among the ancient
Italian husbandmen, as we learn from Columella. He decides, like a
true lover of all curious cultivation, in favour of the vineyard,
and endeavours to show, by a comparison of the profit and expense,
that it was a most advantageous improvement. Such comparisons,
however, between the profit and expense of new projects are commonly
very fallacious, and in nothing more so than in agriculture. Had the
gain actually made by such plantations been commonly as great as he
imagined it might have been, there could have been no dispute about
it. The same point is frequently at this day a matter of controversy
in the wine countries. Their writers on agriculture, indeed, the
lovers and promoters of high cultivation, seem generally disposed to
decide with 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, seems to favour their opinion, and to indicate a
consciousness in those who must have the experience that this
species of cultivation is at present in that country more profitable
than any other. It seems at the same time, however, to indicate
another opinion, that this superior profit can last no longer than the
laws which at present restrain the free cultivation of the vine. In
1731, they obtained an order of council prohibiting both the
planting of new vineyards and the renewal of those old ones, of
which the cultivation had been interrupted for two years, without a
particular permission from the king, to be granted only in consequence
of an information from the intendant of the province, certifying
that he had examined the land, and that it was incapable of any
other culture. The pretence of this order was the scarcity of corn and
pasture, and the superabundance of wine. But had this superabundance
been real, it would, without any order of council, have effectually
prevented the plantation of new vineyards, by reducing the profits
of this species of cultivation below their natural proportion to those
of corn and pasture. With regard to the supposed scarcity of corn,
occasioned by the multiplication of vineyards, corn is nowhere in
France more carefully cultivated 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 species of
cultivation necessarily encourage the other, by affording a ready
market for its produce. To diminish the number of those who are
capable of paying for it is surely a most unpromising expedient for
encouraging the cultivation of corn. It is like the policy which would
promote agriculture by discouraging manufactures.

    The rent and profit of those productions, therefore, which require
either a greater original expense of improvement in order to fit the
land for them, or a greater annual expense of cultivation, though
often much superior to those of corn and pasture, yet when they do
no more than compensate such extraordinary expense, are in reality
regulated by the rent and profit of those common crops.

    It sometimes happens, indeed, that the quantity of land, which can
be fitted for some particular produce, is too small to supply the
effectual demand. The whole produce can be disposed of to those who
are willing to give somewhat more than what is sufficient to pay the
whole rent, wages, and profit necessary for raising 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 surplus part of the price which remains after defraying the
whole expense of improvement and cultivation may commonly, in this
case, and in this case only, bear no regular proportion to the like
surplus in corn or pasture, but may exceed it in almost any degree;
and the greater part of this excess naturally goes to the rent of
the landlord.

    The usual and natural proportion, for example, between the rent
and profit of wine and those of corn and pasture must be understood to
take place only with regard to those vineyards which produce nothing
but good common wine, such as can be raised almost anywhere, upon
any light, gravelly, or sandy soil, and which has nothing to recommend
it but its strength and wholesomeness. It is with such vineyards
only that the common land of the country can be brought into
competition; for with those of a peculiar quality it is evident that
it cannot.

    The vine is more affected by the difference of soils than any
other fruit tree. From some it derives a flavour which no culture or
management can equal, it is supposed, upon any other. This flavour,
real or imaginary, is sometimes peculiar to the produce of a few
vineyards; sometimes it extends through the greater part of a small
district, and sometimes through a considerable part of a large
province. The whole quantity of such wines that is brought to market
falls short of the effectual demand, or the demand of those who
would be willing to pay the whole rent, profit, and wages, necessary
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 whole quantity, therefore, can be disposed of to
those who are willing to pay more, which necessarily raises the
price above that of common wine. The difference is greater or less
according as the fashionableness and scarcity of the wine render the
competition of the buyers more or less eager. Whatever it be, the
greater part of it goes to the rent of the landlord. For though such
vineyards are in general more carefully cultivated than most others,
the high price of the wine seems to be not so much the effect as the
cause of this careful cultivation. In so valuable a produce the loss
occasioned by negligence is so great as to force even the most
careless to attention. A small part of this high price, therefore,
is sufficient to pay the wages of the extraordinary labour bestowed
upon their cultivation, and the profits of the extraordinary stock
which puts that labour into motion.

    The sugar colonies possessed by the European nations in the West
Indies may be compared to those precious vineyards. Their whole
produce falls short of the effectual demand of Europe, and can be
disposed of to those who are willing to give more than what is
sufficient to pay the whole rent, profit, and wages necessary for
preparing and bringing it to market, according to the rate at which
they are commonly paid by any other produce. In Cochin China the
finest white sugar commonly sells for three piasters the quintal,
about thirteen shillings and sixpence of our money, as we are told
by Mr. Poivre, a very careful observer of the agriculture of that
country. What is there called the quintal weighs from a hundred and
fifty to two hundred Paris pounds, or a hundred and seventy-five Paris
pounds at a medium, which reduces the price of the hundred-weight
English to about eight shillings sterling, not a fourth part of what
is commonly paid for the brown or muskavada sugars imported from our
colonies, and not a sixth part of what is paid for the finest white
sugar. The greater part of the cultivated lands in Cochin China are
employed in producing corn and rice, the food of the great body of the
people. The respective prices of corn, rice, and sugar, are there
probably in the natural proportion, or in that which naturally takes
place in the different crops of the greater part of cultivated land,
and which recompenses the landlord and farmer, as nearly as can be
computed according to what is usually the original expense of
improvement and the annual expense of cultivation. But in our sugar
colonies the price of sugar bears no such proportion to that of the
produce of a rice or corn field either in Europe or in America. It
is commonly said that a sugar planter expects that the rum and
molasses should defray the whole expense of his cultivation, and
that his sugar should be all clear profit. If this be true, for I
pretend not to affirm it, it is as if a corn farmer expected to defray
the expense of his cultivation with the chaff and the straw, and
that the grain should be all clear profit. We see frequently societies
of merchants in London and other trading town's purchase waste lands
in our sugar colonies, which they expect to improve and cultivate with
profit by means of factors and agents, notwithstanding the great
distance and the uncertain returns from the defective administration
of justice in those countries. Nobody will attempt to improve and
cultivate in the same manner the most fertile lands of Scotland,
Ireland, or the corn provinces of North America, though from the
more exact administration of justice in these countries more regular
returns might be expected.

    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 of Europe; but in
almost every part of Europe it has become a principal subject of
taxation, and to collect a tax from every different farm in the
country where this plant might happen to be cultivated would be more
difficult, it has been supposed, than to levy one upon its importation
at the custom-house. The cultivation of tobacco has upon this
account been most absurdly prohibited through the greater part of
Europe, which necessarily gives a sort of monopoly to the countries
where it is allowed; and as Virginia and Maryland produce the greatest
quantity of it, they share largely, though with some competitors, in
the advantage of this monopoly. The cultivation of tobacco, however,
seems not to be so advantageous as that of sugar. I have never even
heard of any tobacco plantation that was improved and cultivated by
the capital of merchants who resided in Great Britain, and our tobacco
colonies send us home no such wealthy planters as we see frequently
arrive from our sugar islands. Though from the preference given in
those colonies to the cultivation of tobacco above that of corn, it
would appear that the effectual demand of Europe for tobacco is not
completely supplied, it probably is more nearly so than that for
sugar; and though the present price of tobacco is probably more than
sufficient to pay the whole rent, wages, and profit necessary for
preparing and bring it to market, according to the rate at which
they are commonly paid in corn land, it must not be so much more as
the present price of sugar. Our tobacco planters, accordingly, have
shown the same fear of the superabundance of tobacco which the
proprietors of the old vineyards in France have of the
superabundance of wine. By act of assembly they have restrained its
cultivation to six thousand plants, supposed to yield a thousand
weight of tobacco, for every negro between sixteen and sixty years
of age. Such a negro, over and above this quantity of tobacco, can
manage, they reckon, four acres of Indian corn. To prevent the
market from being overstocked, too, they have sometimes, in
plentiful years, we are told by Dr. Douglas (I suspect he has been ill
informed), burnt a certain quantity of tobacco for every negro, in the
same manner as the Dutch are said to do of spices. If such violent
methods are necessary to keep up the present price of tobacco, the
superior advantage of its culture over that of corn, if it still has
any, will not probably be of long continuance.

    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 produce can long afford
less; because the land would immediately be turned to another use. And
if any particular produce commonly affords more, it is because the
quantity of land which can be fitted for it is too small to supply the
effectual demand.

    In Europe, corn is the principal produce of land which serves
immediately for human food. Except in particular situations,
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 situations, the
value of these is regulated by that of corn, in which the fertility of
Britain is not much inferior to that of either of those two countries.

    If in any country the common and favourite vegetable food of the
people should be drawn from a plant of which the most common land,
with the same or nearly the same culture, produced a much greater
quantity than the most fertile does of corn, the rent of the landlord,
or the surplus quantity of food which would remain to him, after
paying the labour and replacing the stock of the farmer, together with
its ordinary profits, would necessarily be much greater. Whatever
was the rate at which labour was commonly maintained in that
country, this greater surplus could always maintain a greater quantity
of it, and consequently enable the landlord to purchase or command a
greater quantity of it. The real value of his rent, his real power and
authority, his command of the necessaries and conveniencies of life
with which the labour of other people could supply him, would
necessarily be much greater.

    A rice field produces a much greater quantity of food than the
most fertile corn field. Two crops in the year from thirty to sixty
bushels each, are said to be the ordinary produce of an acre. Though
its cultivation, therefore, requires more labour, a much greater
surplus remains after maintaining all that labour. In those 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 share of this greater surplus should belong to
the landlord than in corn countries. In Carolina, where the
planters, as in other British colonies, are generally both farmers and
landlords, and where rent consequently is confounded with 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 customs of Europe, rice is not
there the common and favourite vegetable food of the people.

    A good rice field is a bog at all seasons, and at one season a bog
covered with water. It is unfit either for corn, or pasture, or
vineyard, or, indeed, for any other vegetable produce that is very
useful to men; and the lands which are fit for those purposes are
not fit for rice. Even in the rice countries, therefore, the rent of
rice lands cannot regulate the rent of the other cultivated land,
which can 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 superior to
what is produced by a field of wheat. Twelve thousand weight of
potatoes from an acre of land is not a greater produce than two
thousand weight of wheat. The food or solid nourishment, indeed, which
can be drawn from each of those two plants, is not altogether in
proportion to their weight, on account of the watery nature of
potatoes. Allowing, however, half the weight of this root to go to
water, a very large allowance, such an acre of potatoes will still
produce six thousand weight of solid nourishment, three times the
quantity produced by the acre of wheat. An acre of potatoes is
cultivated with less expense than an acre of wheat; the fallow,
which generally precedes the sowing of wheat, more than compensating
the hoeing and other extraordinary culture which is always given to
potatoes. Should this root ever become in any part of Europe, like
rice in some rice countries, the common and favourite vegetable food
of the people, so as to occupy the same proportion of the lands in
tillage which wheat and other sorts of grain for human food do at
present, the same quantity of cultivated land would maintain a much
greater number of people, and the labourers being generally fed with
potatoes, a greater surplus would remain after replacing all the stock
and maintaining all the labour employed in cultivation. A greater
share of this surplus, too, would belong to the landlord. Population
would increase, and rents would rise much beyond what they are at
present.

    The land which is fit for potatoes is fit for almost every other
useful vegetable. If they occupied the same proportion of cultivated
land which corn does at present, they would regulate, in the same
manner, the rent of the greater part of other cultivated land.

    In some 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 same doctrine held in
Scotland. I am, however, somewhat doubtful of the truth of it. The
common people in Scotland, who are fed with oatmeal, are in general
neither so strong, nor so handsome as the same rank of people in
England who are fed with wheaten bread. They neither work so well, nor
look so well; and as there is not the same difference between the
people of fashion in the two countries, experience would seem to
show that the food of the common people in Scotland is not so suitable
to the human constitution as that of their neighbours of the same rank
in England. But it seems to be otherwise with potatoes. The
chairmen, porters, and coalheavers in London, and those unfortunate
women who live by prostitution, the strongest men and the most
beautiful women perhaps in the British dominions, are said to be the
greater part of them from the lowest rank of people in Ireland, who
are generally fed with this root. No food can afford a more decisive
proof of its nourishing quality, or of its being peculiarly suitable
to the health of the human constitution.

    It is difficult to preserve potatoes through the year, and
impossible to store them like corn, for two or three years together.
The fear of not being able to sell them before they rot discourages
their cultivation, and is, perhaps, the chief obstacle to their ever
becoming in any great country, like bread, the principal vegetable
food of all the different ranks of the people.

                            PART 2

          Of the Produce of Land which sometimes does,

               and sometimes does not, afford Rent

    HUMAN food seems to be the only produce of land which always and
necessarily affords some rent to the landlord. Other sorts of
produce sometimes may and sometimes may not, according to different
circumstances.

    After food, clothing and lodging are the two great wants of
mankind.

    Land in its original rude state can afford the materials of
clothing and lodging to a much greater number of people than it can
feed. In its improved state it can sometimes feed a greater number
of people than it can supply with those materials; at least in the way
in which they require them, and are willing to pay for them. In the
one state, therefore, there is always a superabundance of those
materials, which are frequently, upon that account, of little or no
value. In the other there is often a scarcity, which necessarily
augments their value. In the one state a great part of them is
thrown away as useless, and the price of what is used is considered as
equal only to the labour and expense of fitting it for use, and can,
therefore, afford no rent to the landlord. In the other they are all
made use 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 sufficient to pay the expense of bringing them to market.
Their price, therefore, can always afford some rent to the landlord.

    The skins of the larger animals were the original materials of
clothing. Among nations of hunters and shepherds, therefore, whose
food consists chiefly in the flesh of those animals, every man, by
providing himself with food, provides himself with the materials of
more clothing than he can wear. If there was no foreign commerce,
the greater part of them would be thrown away as things of no value.
This was probably the case among the hunting nations of North
America before their country was discovered by the Europeans, with
whom they now exchange their surplus peltry for blankets, fire-arms,
and brandy, which gives it some value. In the present commercial state
of the known world, the most barbarous nations, I believe, among
whom land property is established, have some foreign commerce of
this kind, and find among their wealthier neighbours such a demand for
all the materials of clothing which their land produces, and which can
neither be wrought up nor consumed at home, as raises their price
above what it costs to send them to those wealthier neighbours. It
affords, therefore, some rent to the landlord. When the greater part
of the highland cattle were consumed on their own hills, the
exportation of their hides made the most considerable article of the
commerce of that country, and what they were exchanged for afforded
some addition to the rent of the highland estates. The wool of
England, which in old times could neither be consumed nor wrought up
at home, found a market in the then wealthier and more industrious
country of Flanders, and its price afforded something to the rent of
the land which produced it. In countries not better cultivated than
England was then, or than the highlands of Scotland are now, and which
had no foreign commerce, the materials of clothing would evidently
be so superabundant that a great part of them would be thrown away
as useless, and no part could afford any rent to the landlord.

    The materials of lodging cannot always be transported to so
great a distance as those of clothing, and do not so readily become an
object of foreign commerce. When they are superabundant in the country
which produces them, it frequently happens, even in the present
commercial state of the world, that they are of no value to the
landlord. A good stone quarry in the neighbourhood of London would
afford a considerable rent. In many parts of Scotland 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 considerable rent. But in many parts of North America the
landlord would be much obliged to anybody who would carry away the
greater part of his large trees. In some parts of the highlands of
Scotland the bark is the only part of the wood which, for want of
roads and water-carriage, can be sent to market. The timber is left to
rot upon the ground. When the materials of lodging are so
superabundant, the part made use of is worth only the labour and
expense of fitting it for that use. It affords no rent to the
landlord, who generally grants the use of it to whoever takes the
trouble of asking it. The demand of wealthier nations, however,
sometimes enables him to get a rent for it. The paving of the
streets of London has enabled the owners of some barren rocks on the
coast of Scotland to draw a rent from what never afforded any
before. The woods of Norway and of the coasts of the Baltic find a
market in many parts of Great Britain which they could not find at
home, and thereby afford some rent to their proprietors.

    Countries are populous not in proportion to the number of people
whom their produce can clothe and lodge, but in proportion to that
of those whom it can feed. When food is provided, it is easy to find
the necessary clothing and lodging. But though these are at hand, it
may often be difficult to find food. In some parts even of the British
dominions what is called a house may be built by one day's labour of
one man. The simplest species of clothing, the skins of animals,
require somewhat more labour to dress and prepare them for use. They
do not, however, require a great deal. Among savage and barbarous
nations, a hundredth or little more than a hundredth part of the
labour of the whole year will be sufficient to provide them with
such clothing and lodging as satisfy the greater part of the people.
All the other ninety-nine parts are frequently no more than enough
to provide them 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 society
becomes sufficient to provide food for the whole. The other half,
therefore, or at least the greater part of them, can be employed in
providing other things, or in satisfying the other wants and fancies
of mankind. Clothing and lodging, household furniture, and what is
called Equipage, are the principal objects of the greater part of
those wants and fancies. The rich man consumes no more food than his
poor neighbour. In quality it may be very different, and to select and
prepare it may require more labour and art; but in quantity it is very
nearly the same. But compare the spacious palace and great wardrobe of
the one with the hovel and the few rags of the other, and you will
be sensible that the difference between their clothing, lodging, and
household furniture is almost as great in quantity as it is in
quality. The desire of food is limited in every man by the narrow
capacity of the human stomach; but the desire of the conveniences
and ornaments of building, dress, equipage, and household furniture,
seems to have no limit or certain boundary. Those, therefore, who have
the command of more food than they themselves can consume, are
always willing to exchange the surplus, or, what is the same thing,
the price of it, for gratifications of this other kind. What is over
and above satisfying the limited desire is given for the amusement
of those desires which cannot be satisfied, but seem to be
altogether endless. The poor, in order to obtain food, exert
themselves to gratify those fancies of the rich, and to obtain it more
certainly they vie with one another in the cheapness and perfection of
their work. The number of workmen increases with the increasing
quantity of food, or with the growing improvement and cultivation of
the lands; and as the nature of their business admits of the utmost
subdivisions of labour, the quantity of materials which they can
work up increases in a much greater proportion than their numbers.
Hence arises a demand for every sort of material which human invention
can employ, either usefully or ornamentally, in building, dress,
equipage, or household furniture; for the fossils and minerals
contained in the bowels of the earth; the precious metals, and the
precious stones.

    Food is in this manner not only the original source of rent, but
every other part of the produce of land which afterwards affords
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 improved
and cultivated countries, the demand for them is not always such as to
afford a greater price than what is sufficient to pay the labour,
and replace, together with it ordinary profits, the stock which must
be employed in bringing them to market. Whether it is or is not such
depends upon different circumstances.

    Whether a coal-mine, for example, can afford any rent depends
partly upon its fertility, and partly upon its situation.

    A mine of any kind may be said 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 less than what can be brought
by an equal quantity from the greater part of other mines of the
same kind.

    Some coal-mines advantageously situated cannot be wrought on
account of their barrenness. The produce does not pay the expense.
They can afford neither profit nor rent.

    There are some of which the produce is barely sufficient to pay
the labour, and replace, together with it ordinary profits, the
stock employed in working them. They afford some profit to the
undertaker of the work, but no rent to the landlord. They can be
wrought advantageously by nobody but the landlord, who, being
himself undertaker of the work, gets the ordinary profit of the
capital which he employs in it. Many coal-mines in Scotland are
wrought in this manner, and can be wrought in no other. The landlord
will allow nobody else to work them without paying some rent, and
nobody can afford to pay any.

    Other coal-mines in the same country, sufficiently fertile, cannot
be wrought on account of their situation. A quantity of mineral
sufficient to defray the expense of working could be brought from
the mine by the ordinary, or even less than the ordinary, quantity
of labour; but in an inland country, thinly inhabited, and without
either good roads or water-carriage, this quantity could not be sold.

    Coals are a less agreeable fuel than wood: they are said, too,
to be less wholesome. The expense of coals, therefore, at the place
where they are consumed, must generally be somewhat less than that
of wood.

    The price of wood again varies with the state of agriculture,
nearly in the same manner, and exactly for the same reason, as the
price of cattle. In its rude beginnings the greater part of every
country is covered with wood, which is then a mere encumberance of
no value to the landlord, who would gladly give it to anybody for
the cutting. As agriculture advances, the woods are partly cleared
by the progress of tillage, and partly go to decay in consequence of
the increased number of cattle. These, though they do not increase
in the same proportion as corn, which is altogether the acquisition of
human industry, yet multiply under the care and protection of men, who
store up in the season of plenty what may maintain them in that of
scarcity, who through the whole year furnish them with a greater
quantity of food than uncultivated nature provides for them, and who
by destroying and extirpating their enemies, secure them in the free
enjoyment of all that she provides. Numerous herds of cattle, when
allowed to wander through the woods, though they do not destroy the
old trees, hinder any young ones from coming up so that in the
course of a century or two the whole forest goes to ruin. The scarcity
of wood then raises its price. It affords a good rent, and the
landlord sometimes finds that he can scarce employ his best lands more
advantageously than in growing barren timber, of which the greatness
of the profit often compensates the lateness of the returns. This
seems in the present times to be nearly the state of things in several
parts of Great Britain, where the profit of planting is found to be
equal to that of either corn or pasture. The advantage which the
landlord derives from planting can nowhere exceed, at least for any
considerable time, the rent which these could afford him; and in an
inland country which is highly cultivated, it will frequently not fall
much short of this rent. Upon the sea-coast of a well improved
country, indeed, if coals can conveniently be had for fuel, it may
sometimes be cheaper to bring barren timber for building from less
cultivated foreign countries than to raise it at home. In the new town
of Edinburgh, built within these few years, there is not, perhaps, a
single stick of Scotch timber.

    Whatever may be the price of wood, if that of coals is such that
the expense of a coal fire is nearly equal to that of a wood one, we
may be assured that at that place, and in these circumstances, the
price of coals is as high as it can be. It seems to be so in some of
the inland parts of England, particularly in Oxfordshire, where it
is usual, even in the fires of the common people, to mix coals and
wood together, and where the difference in the expense of those two
sorts of fuel cannot, therefore, be very great.

    Coals, in the coal countries, are everywhere much below this
highest price. If they were not, they could not bear the expense of
a distant carriage, either by land or by water. A small quantity
only could be sold, and the coal masters and coal proprietors find
it more for their interest to sell a great quantity at a price
somewhat above the lowest, than a small quantity at the highest. The
most fertile coal-mine, too, regulates the price of coals at all the
other mines in its neighbourhood. 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 somewhat underselling
all their neighbours. Their neighbours are soon obliged to sell at the
same price, though they cannot so well afford it, and though it always
diminishes, and sometimes 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 lowest price at which coals can be sold for any considerable
time is, like that of all other commodities, the price which is barely
sufficient to replace, together with its ordinary profits, the stock
which must be employed in bringing them to market. At as coal-mine for
which the landlord can get no rent, but which he must either work
himself or let it alone altogether, the price of coals must
generally be nearly about this price.

    Rent, even where coals afford one, has generally a smaller share
in their prices than in that of most other parts of the rude produce
of land. The rent of an estate above ground commonly amounts to what
is supposed to be a third of the gross produce; and it is generally
a rent certain and independent of the occasional variations in the
crop. In coal-mines a fifth of the gross produce is a very great rent;
a tenth the common rent, and it is seldom a rent certain, but
depends upon the occasional variations in the produce. These are so
great that, in a country where thirty years' purchase is considered as
a moderate price for the property of a landed estate, ten years'
purchase is regarded as a good price for that of a coal-mine.

    The value of a coal-mine to the proprietor frequently depends as
much upon its situation as upon its fertility. That of a metallic mine
depends more upon its fertility, and less upon its situation. The
coarse, and still more the precious metals, when separated from the
ore, are so valuable that they can generally bear the expense of a
very long land, and of the most distant sea carriage. Their market
is not confined to the countries in the neighbourhood of the mine, but
extends to the whole world. The copper of Japan makes an article of
commerce in Europe; the iron of Spain in that of Chili and Peru. The
silver of Peru finds its way, not only to Europe, but from Europe to
China.

    The price of coals in Westmoreland or Shropshire can have little
effect on their price at Newcastle; and their price in the Lionnois
can have none at all. The productions of such distant coal-mines can
never be brought into competition with one another. But the
productions of the most distant metallic mines frequently may, and
in fact commonly are. The price, therefore, of the coarse, and still
more that of the precious metals, at the most fertile mines in the
world, must necessarily more or less affect their price at every other
in it. The price of copper in Japan must have some influence upon
its price at the copper mines in Europe. The price of silver in
Peru, or the quantity either of labour or of other goods which it will
purchase there, must have some influence on its price, not only at the
silver mines of Europe, but at those of China. After the discovery
of the mines of Peru, the silver mines of Europe were, the greater
part of them, abandoned. The value of was so much reduced that their
produce could no longer pay the expense of working them, or replace,
with a profit, the food, clothes, lodging, and other necessaries which
were consumed in that operation. This was the case, too, with the
mines of Cuba and St. Domingo, and even with the ancient mines of
Peru, after the discovery of those of Potosi.

    The price of every metal at every mine, therefore, being regulated
in some measure by its price at the most fertile mine in the world
that is actually wrought, it can at the greater part of mines do
very little more than pay the expense of working, and can seldom
afford a very high rent to the landlord. Rent, accordingly, seems at
the greater part of mines to have but a small share in the price of
the coarse, and a still smaller in that of the precious metals. Labour
and profit make up the greater part of both.

    A sixth part of the gross produce may be reckoned the average rent
of the tin mines of Cornwall the most fertile that are known in the
world, as we are told by the Reverend Mr. Borlace, vice-warden of
the stannaries. Some, he says, afford more, and some do not afford
so much. A sixth part of the gross produce is the rent, too, of
several very fertile lead mines in Scotland.

    In the silver mines of Peru, we are told by Frezier and Ulloa, the
proprietor frequently exacts no other acknowledgment 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 amounted to one-fifth of the
standard silver, which till then might be considered as the real
rent of the greater part of the silver mines of Peru, the richest
which have been known in the world. If there had been no tax this
fifth would naturally have belonged to the landlord, and many mines
might have been wrought which could not then be wrought, because
they could not afford this tax. The tax of the Duke of Cornwall upon
tin is supposed to amount to more than five per cent or
one-twentieth part of the value, and whatever may be his proportion,
it would naturally, too, belong to the proprietor of the mine, if
tin was duty free. But if you add one-twentieth to one-sixth, you will
find that the whole average rent of the tin mines of Cornwall was to
the whole average rent of the silver mines of Peru as thirteen to
twelve. But the silver mines of Peru are not now able to pay even this
low rent, and the tax upon silver was, in 1736, reduced from one-fifth
to one-tenth. Even this tax upon silver, too, gives more temptation to
smuggling than the tax of one-twentieth upon tin; and smuggling must
be much easier in the precious than in the bulky commodity. The tax of
the King of Spain accordingly is said to be very ill paid, and that of
the Duke of Cornwall very well. Rent, therefore, it is probable, makes
a greater part of the price of tin at the most fertile tin mines
than it does of silver at the most fertile silver mines in the
world. After replacing the stock employed in working those different
mines, together with its ordinary profits, the residue which remains
to the proprietor is greater, it seems, in the coarse than in the
precious metal.

    Neither are the profits of the undertakers of silver mines
commonly very great in Peru. The same most respectable and
well-informed authors acquaint us, that when any person undertakes
to work a new mine in Peru, he is universally looked upon as a man
destined to bankruptcy and ruin, and is upon that account shunned
and avoided by everybody. Mining, it seems, is considered there in the
same light as here, as a lottery, in which the prizes do not
compensate the blanks, though the greatness of some tempts many
adventurers to throw away their fortunes in such unprosperous
projects.

    As the sovereign, however, derives a considerable part of his
revenue from the produce of silver mines, the law in Peru gives
every possible encouragement to the discovery and working of new ones.
Whoever discovers a new mine is entitled to measure off two hundred
and forty-six feet in length, according to what he supposes 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 interest of the Duke of
Cornwall has given occasion to a regulation nearly of the same kind in
that ancient duchy. In waste and unenclosed lands any person who
discovers a tin mine may mark 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 himself, or give it in lease to
another, without the consent of the owner of the land, to whom,
however, a very small acknowledgment must be paid upon working it.
In both regulations the sacred rights of private property are
sacrificed to the supposed interests of public revenue.

    The same encouragement is given in Peru to the discovery and
working of new gold mines; and in gold the king's tax amounts only
to a twentieth part of the standard metal. It was once a fifth, and
afterwards a tenth, as in silver; but it was found that the work could
not bear even the lowest of these two taxes. If it is rare, however,
say the same authors, Frezier and Ulloa, to find a person who has made
his fortune by a silver, it is still much rarer to find one who has
done so by a gold mine. This twentieth part seems to be the whole rent
which is paid by the greater part of the gold mines in Chili and Peru.
Gold, too, is much more liable to be smuggled than even silver; not
only on account of the superior value of the metal in proportion to
its bulk, but on account of the peculiar way in which nature
produces it. Silver is very seldom found virgin, but, like most
other metals, is generally mineralized with some other body, from
which it is impossible to separate it in such quantities as will pay
for the expense, but by a very laborious and tedious operation,
which cannot well be carried on but in workhouses erected for the
purpose, and therefore exposed to the inspection of the king's
officers. Gold, on the contrary, is almost always found virgin. It
is sometimes found in pieces of some bulk; and even when mixed in
small and almost insensible particles with sand, earth, and other
extraneous bodies, it can be separated from them by a very short and
simple operation, which can be carried on in any private house by
anybody who is possessed of a small quantity of mercury. If the king's
tax, therefore, is but ill paid upon silver, it is likely to be much
worse paid upon gold; and rent, must make a much smaller part of the
price of gold than even of that of silver.

    The lowest price at which the precious metals can be sold, or
the smallest quantity of other goods for which they can be exchanged
during any considerable time, is regulated by the same principles
which fix the lowest ordinary price of all other goods. The stock
which must commonly be employed, the food, the clothes, and lodging
which must commonly be consumed in bringing them from the mine to
the market, determine it. It must at least be sufficient to replace
that stock, with the ordinary profits.

    Their highest price, however, seems not to be necessarily
determined by anything but the actual scarcity or plenty of those
metals themselves. It is not determined by that of any other
commodity, in the same manner as the price of coals is by that of
wood, beyond which no scarcity can ever raise it. Increase the
scarcity of gold to a certain degree, and the smallest bit of it may
become more precious than a diamond, and exchange for a greater
quantity of other goods.

    The demand for those metals arises partly from their utility and
partly from their beauty. If you except iron, they are more useful
than, perhaps, any other metal. As they are less liable to rust and
impurity, they can more easily be kept clean, and the utensils
either of the table or the kitchen are often upon that account more
agreeable when made of them. A silver boiler is more cleanly than a
lead, copper, or tin one; and the same quality would render a gold
boiler still better than a silver one. Their principal merit, however,
arises from their beauty, which renders them peculiarly fit for the
ornaments of dress and furniture. No paint or dye can give so splendid
a colour as gilding. The merit of their beauty is greatly enhanced
by their scarcity. With the greater part of rich people, the chief
enjoyment of riches consists in the parade of riches, which in their
eye is never so complete as when they appear to possess those decisive
marks of opulence which nobody can possess but themselves. In their
eyes the merit of an object which is in any degree either useful or
beautiful is greatly enhanced by its scarcity, or by the great
labour which it requires to collect any considerable quantity of it, a
labour which nobody can afford to pay but themselves. Such objects
they are willing to purchase at a higher price than things much more
beautiful and useful, but more common. These qualities of utility,
beauty, and scarcity, are the original foundation of the high price of
those metals, or of the great quantity of other goods for which they
can everywhere 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
occasioning a new demand, and by diminishing the quantity which
could be employed in any other way, may have afterwards contributed to
keep up or increase their value.

    The demand for the precious stones arises altogether from their
beauty. They are of no use but as ornaments; and the merit of their
beauty is greatly enhanced by their scarcity, or by the difficulty and
expense of getting them from the mine. Wages and profit accordingly
make up, upon most occasions, almost the whole of their high price.
Rent comes in but for a very small share; frequently for no share; and
the most fertile mines only afford any considerable rent. When
Tavernier, a jeweller, visited the diamond mines of Golconda and
Visiapour, he was informed that the sovereign of the country, for
whose benefit they were wrought, had ordered all of them to be shut
up, except those which yield the largest and finest stones. The
others, it seems, were to the proprietor not worth the working.

    As the price both of the precious metals and of the precious
stones is regulated all over the world by their price at the most
fertile mine in it, the rent which a mine of either can afford to
its proprietor is in proportion, not to its absolute, but to what
may be called its relative fertility, or to its superiority over other
mines of the same kind. If new mines were discovered as much
superior to those of Potosi as they were superior to those Europe, the
value of silver might be so much degraded as to render even the
mines of Potosi not worth the working. Before the discovery of the
Spanish West Indies, the most fertile mines in Europe may have
afforded as great a rent to their proprietor as the richest mines in
Peru do at present. Though the quantity of silver was much less, it
might have exchanged for an equal quantity of other goods, and the
proprietor's share might have enabled him to purchase or command an
equal quantity either of labour 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 same.

    The most abundant mines either of the precious metals or of the
precious stones could add little to the wealth of the world. A produce
of which the value is principally derived from its scarcity, is
necessarily degraded by its abundance. A service of plate, and the
other frivolous ornaments of dress and furniture, could be purchased
for a smaller quantity of labour, or for a smaller quantity of
commodities; and in this would consist the sole advantage which the
world could derive from that abundance.

    It is otherwise in estates above ground. The value both of their
produce and of their rent is in proportion to their absolute, and
not to their relative fertility. The land which produces a certain
quantity of food, clothes, and lodging, can always feed, clothe, and
lodge a certain number of people; and whatever may be the proportion
of the landlord, it will always give him a proportionable command of
the labour of those people, and of the commodities with which that
labour can supply him. The value of the most barren lands is not
diminished by the neighbourhood of the most fertile. On the
contrary, it is generally increased by it. The great number of
people maintained by the fertile lands afford a market to many parts
of the produce of the barren, which they could never have found
among those whom their own produce could maintain.

    Whatever increases the fertility of land in producing food
increases not only the value of the lands upon which the improvement
is bestowed, but contributes likewise to increase that of many other
lands by creating a new demand for their produce. That abundance of
food, of which, in consequence of the improvement of land, many people
have the disposal beyond what they themselves can consume, is the
great cause of the demand both for the precious metals and the
precious stone, as well as for every other conveniency and ornament of
dress, lodging, household furniture, and equipage. Food not only
constitutes 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 sorts of riches. The poor inhabitants of Cuba and St.
Domingo, when they were first discovered by the Spaniards, used to
wear little bits of gold as ornaments in their hair and other parts of
their dress. They seemed to value them as we would do any little
pebbles of somewhat more than ordinary beauty, and to consider them as
just worth the picking up, but not worth the refusing to anybody who
asked them. They gave them to their new guests at the first request,
without seeming to think that they had made them any very valuable
present. They were astonished to observe the rage of the Spaniards
to obtain them; and had no notion that there could anywhere be a
country in which many people had the disposal of so great a
superfluity of food, so scanty always among themselves, that for a
very small quantity of those glittering baubles they would willingly
give as much as might maintain a whole family for many years. Could
they have been made to understand this, the passion of the Spaniards
would not have surprised them.

                             PART 3

  Of the Variations in the Proportion between the respective Values

    of that Sort of Produce which always affords Rent, and of that

       which sometimes does and sometimes does not afford Rent

    THE increasing abundance of food, in consequence of increasing
improvement and cultivation, must necessarily increase the demand
for every part of the produce of land which is not food, and which can
be applied either to use or to ornament. In the whole progress of
improvement, it might therefore be expected, there should be only
one variation in the comparative values of those two different sorts
of produce. The value of that sort which sometimes does and
sometimes does not afford rent, should constantly rise in proportion
to that which always affords some rent. As art and industry advance,
the materials of clothing and lodging, the useful fossils and minerals
of the earth, the precious metals and the precious stones should
gradually come to be more and more in demand, should gradually
exchange for a greater and a greater quantity of food, or in other
words, should gradually become dearer and dearer. This accordingly has
been the case with most of these things upon most occasions, and would
have been the case with all of them upon all occasions, if
particular accidents had not upon some occasions increased the
supply of some of them in a still greater proportion than the demand.

    The value of a free-stone quarry, for example, will necessarily
increase with the increasing improvement and population of the country
round about it, especially if it should be the only one in the
neighbourhood. But the value of a silver mine, even though there
should not be another within a thousand miles of it, will not
necessarily increase with the improvement of the country in which it
is situated. The market for the produce of a freestone quarry can
seldom extend more than a few miles round about it, and the demand
must generally be in proportion to the improvement and population of
that small district. But the market for the produce of a silver mine
may extend over the whole known world. Unless the world in general,
therefore, be advancing in improvement and population, the demand
for silver might not be at all increased 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 course of its
improvement, new mines should be discovered, much more fertile than
any which had been known before, though the demand for silver would
necessarily increase, yet the supply might increase in so much a
greater proportion that the real price of that metal might gradually
fall; that is, any given quantity, a pound weight of it, for
example, might gradually purchase or command a smaller and a smaller
quantity of labour, or exchange for a smaller and a smaller quantity
of corn, the principal part of the subsistence of the labourer.

    The great market for silver is the commercial and civilised part
of the world.

    If by the general progress of improvement the demand of this
market should increase, while at the same time the supply did not
increase in the same proportion, the value of silver would gradually
rise in proportion to that of corn. Any given quantity of silver 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 supply by some accident should increase
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 spite of all
improvements, gradually become dearer and dearer.

    But if, on the other hand, the supply of the metal should increase
nearly in the same proportion as the demand, it would continue to
purchase or exchange for nearly the same quantity of corn, and the
average money price of corn would, in spite of all improvements,
continue very nearly the same.

    These three seem to exhaust all the possible combinations of
events which can happen in the progress of improvement; and during the
course of the four centuries preceding the present, if we may judge by
what has happened both in France and Great Britain, each of those
three different combinations seem to have taken place in the
European market, and nearly in the same order, too, in which I have
here set them down.

    DIGRESSIONS CONCERNING THE VARIATIONS IN THE VALUE OF SILVER

         DURING THE COURSE OF THE FOUR LAST CENTURIES

                        FIRST PERIOD

    In 1350, and for some time before, the average price of the
quarter of wheat in England seems not to have been estimated lower
than four ounces of silver, Tower weight, equal to about twenty
shillings of our present money. From this price it seems to have
fallen gradually to two ounces of silver, equal to about ten shillings
of our present money, the price at which we find it estimated in the
beginning of the sixteenth century, and at which it seems to have
continued to be estimated till about 1570.

    In 1350, being the 25th of Edward III, was enacted what is called
The Statute of Labourers. In the preamble it complains much of the
insolence of servants, who endeavoured to raise their wages upon
their masters. It therefore ordains that all servants and labourers
should for the future be contented with the same wages and liveries
(liveries in those times signified not only clothes but provisions)
which they had been accustomed to receive in the 20th year of the
king, and the four preceding years; that upon this account their
livery wheat should nowhere be estimated higher than tenpence a
bushel, and that it should always be in the option of the master to
deliver them either the wheat or the money. Tenpence a bushel,
therefore, had, in the 25th of Edward III, been reckoned a very
moderate price of wheat, since it required a particular statute to
oblige servants to accept of it in exchange for their usual livery
of provisions; and it had been reckoned a reasonable price ten years
before that, or in the 16th year of the king, the term to which the
statute refers. But in the 16th year of Edward III, tenpence contained
about half an ounce of silver, Tower weight, and was nearly equal to
half-a-crown of our present money. Four ounces of silver, Tower
weight, therefore, equal to six shillings and eightpence of the
money of those times, and to near twenty shillings of that of the
present, must have been reckoned a moderate price for the quarter of
eight bushels.

    This statute is surely a better evidence of what was reckoned in
those times a moderate price of grain than the prices of some
particular years which have generally been recorded by historians
and other writers on account of their extraordinary dearness or
cheapness, and from which, therefore, it is difficult to form any
judgment concerning what may have been the ordinary price. There
are, besides, other reasons for believing that in the beginning of the
fourteenth century, and for some time before, the common price of
wheat was not less than four ounces of silver the quarter, and that of
other grain in proportion.

    In 1309, Ralph de Born, prior of St. Augustine's, Canterbury, gave
a feast upon his installation-day, of which William Thorn has
preserved not only the bill of fare but the prices of many
particulars. In that feast were consumed, first, fifty-three
quarters of wheat, which cost nineteen pounds, or seven shillings
and twopence a quarter, equal to about one-and-twenty shillings and
sixpence of our present money; secondly, fifty-eight quarters of malt,
which cost seventeen pounds ten shillings, or six shillings a quarter,
equal to about eighteen shillings of our present money; thirdly,
twenty quarters of oats, which cost four pounds, or four shillings a
quarter, equal to about twelve shillings of our present money. The
prices of malt and oats seem here to be higher than their ordinary
proportion to the price of wheat.

    These prices are not recorded on account of their extraordinary
dearness or cheapness, but are mentioned accidentally as the prices
actually paid for large quantities of grain consumed at a feast
which was famous for its magnificence.

    In 1262, being the 51st of Henry M, was revived an ancient statute
called The Assize of Bread and Ale, which the king says in the
preamble had been made in the times of his progenitors, sometime kings
of England. It is probably, therefore, as old at least as the time
of his grandfather Henry H, and may have been as old as the Conquest.
It regulates the price of bread according as the prices of wheat may
happen to be, from one shilling to twenty shillings the quarter of
the money of those times. But statutes of this kind are generally
presumed to provide with equal care for all deviations from the
middle price, for those below it as well as for those above it. Ten
shillings, therefore, containing six ounces of silver, Tower weight,
and equal to about thirty shillings of our present money, must, upon
this supposition, have been reckoned the middle price of the quarter
of wheat when this statute was first enacted, and must have continued
to be so in the 51st of Henry III. We cannot therefore be very wrong
in supposing that the middle price was not less than one-third of the
highest price at which this statute regulates the price of bread, or
than six shillings and eightpence of the money of those times,
containing four ounces of silver, Tower weight.

    From these different facts, therefore, we seem to have some reason
to conclude that, about the middle of the fourteenth century, and
for a considerable time before, the average or ordinary price of the
quarter of wheat was not supposed to be less than four ounces of
silver, Tower weight.

    From about the middle of the fourteenth to the beginning of the
sixteenth century, what was reckoned the reasonable and moderate, that
is the ordinary or average price of wheat, seems to have sunk
gradually to about one-half of this price; so as at last to have
fallen to about two ounces of silver, Tower weight, equal to about ten
shillings of our present money. It continued to be estimated at this
price till about 1570.

    In the household book of Henry, the fifth Earl of
Northumberland, drawn up in 1512, there are two different
estimations of wheat. In one of them it is computed at six shillings
and eightpence the quarter, in the other at five shillings and
eightpence only. In 1512, six shillings and eightpence contained
only two ounces of silver, Tower weight, and were equal to about ten
shillings of our present money.

    From the 25th of Edward III to the beginning of the reign of
Elizabeth, during the space of more than two hundred years, six
shillings and eightpence, it appears from several different
statutes, had continued to be considered as what is called the
moderate and reasonable, that is the ordinary or average price of
wheat. The quantity of silver, however, contained in that nominal
sum was, during the course of this period, continually diminishing, in
consequence of some alterations which were made in the coin. But the
increase of the value of silver had, it seems, so far compensated
the diminution of the quantity of it contained in the same nominal sum
that the legislature did not think it worth while to attend to this
circumstance.

    Thus in 1436 it was enacted that wheat might be exported without a
licence when the price was so low as six shillings and eightpence; and
in 1463 it was enacted that no wheat should be imported if the price
was not above six shillings and eightpence the quarter. The
legislature had imagined that when the price was so low there could be
no inconveniency in exportation, but that when it rose higher it
became prudent to allow importation. Six shillings and eightpence,
therefore, containing about the same quantity of silver as thirteen
shillings and fourpence of our present money (one third part less than
the same nominal sum contained in the time of Edward III), had in
those times been considered as what is called the moderate and
reasonable price of wheat.

    In 1554, by the 1st and 2nd of Philip and Mary; and in 1558, by
the 1st of Elizabeth, the exportation of wheat was in the same
manner prohibited, whenever the price of the quarter should exceed six
shillings and eightpence, which did not then contain two pennyworth
more silver than the same nominal sum does at present. But it had soon
been found that to restrain the exportation of wheat till the price
was so very low was, in reality, to prohibit it altogether. In 1562,
therefore, by the 5th of Elizabeth, the exportation of wheat was
allowed from certain ports whenever the price of the quarter should
not exceed ten shillings, containing nearly the same quantity of
silver as the like nominal sum does at present. This price had at this
time, therefore, been considered as what is called the moderate and
reasonable price of wheat. It agrees nearly with the estimation of the
Northumberland book in 1512.

    That in France the average price of grain was, in the same manner,
much lower in the end of the fifteenth and beginning of the
sixteenth century than in the two centuries preceding has been
observed both by Mr. Dupre de St. Maur, and by the elegant author of
the Essay on the police of grain. Its price, during the same period,
had probably sunk in the same manner through the greater part of
Europe.

    This rise in the value of silver in proportion to that of corn,
may either have been owing altogether to the increase of the demand
for that metal, in consequence of increasing improvement and
cultivation, the supply in the meantime continuing the same as before;
or, the demand continuing the same as before, it may have been owing
altogether to the gradual diminution of the supply; the greater part
of the mines which were then known in the world being much
exhausted, and consequently the expense of working them much
increased; or it may have been owing partly to the other of those
two circumstances. In the end of the fifteenth and beginning of the
sixteenth centuries, the greater part of Europe was approaching
towards a more settled form of government than it had enjoyed for
several ages before. The increase of security would naturally increase
industry and improvement; and the demand for the precious metals, as
well as for every other luxury and ornament, would naturally
increase with the increase of riches. A greater annual 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 silver. It is natural to suppose, too, that the
greater part of the mines which then supplied the European market with
silver might be a good deal exhausted, and have become more
expensive 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 those who
have written upon the price of commodities in ancient times that, from
the Conquest, perhaps from the invasion of Julius Caesar till the
discovery of the mines of America, the value of silver was continually
diminishing. This opinion they seem to have been led into, partly by
the observations which they had occasion to make upon the prices
both of corn and of some other parts of the rude produce of land;
and partly by the popular notion that as the quantity of silver
naturally increases in every country with the increase of wealth, so
its value diminishes as its quantity increases.

    In their observations upon the prices of corn, three different
circumstances seem frequently to have misled them.

    First, in ancient times almost all rents were paid in kind; in a
certain quantity of corn, cattle, poultry, etc. It sometimes happened,
however, that the landlord would stipulate that he should be at
liberty to demand of the tenant, either the annual payment in kind, or
a certain sum of money instead of it. The price at which the payment
in kind was in this manner exchanged for a certain sum of money is
in Scotland called the conversion price. As the option is always in
the landlord to take either the substance or the price, it is
necessary for the safety of the tenant that the conversion price
should rather be below than above the average market price. In many
places, accordingly, it is not much above one-half of this price.
Through the greater part of Scotland this custom still continues
with regard to poultry, and in some places with regard to cattle. It
might probably have continued to take place, too, with regard to corn,
had not the institution of the public fiars put an end to it. These
are annual valuations, according to the judgment of an assize, of
the average price of all the different sorts of grain, and of all
the different qualities of each, according to the actual market
price in every different county. This institution rendered it
sufficiently safe for the tenant, and much more convenient for the
landlord, to convert, as they call it, the corn rent, rather at what
should happen to be the price of the fiars of each year, than at any
certain fixed price. But the writers who have collected the prices
of corn in ancient times seem frequently to have mistaken what is
called in Scotland the conversion price for the actual market price.
Fleetwood acknowledges, upon one occasion, that he had made this
mistake. As he wrote his book, however, for a particular purpose, he
does not think proper to make this acknowledgment till after
transcribing this conversion price fifteen times. The price is eight
shillings the quarter of wheat. This sum in 1423, the year at which he
begins with it, contained the same quantity of silver as sixteen
shillings of our present money. But in 1562, the year at which he ends
with it, it contained no more than the same nominal sum does at
present.

    Secondly, they have been misled by the slovenly manner in which
some ancient statutes of assize had been sometimes transcribed by lazy
copiers; and sometimes perhaps actually composed by the legislature.

    The ancient statutes of assize seem 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 lowest, and to have proceeded
gradually to determine what it ought to be, according as the prices of
those two sorts of grain should gradually rise above this lowest
price. But the transcribers of those statutes seem frequently to
have thought it sufficient to copy the regulation as far as the
three or four first and lowest prices, saving in this manner their own
labour, and judging, I suppose, that this was enough to show what
proportion ought to be observed in all higher prices.

    Thus in the Assize of Bread and Ale, of the 51st of Henry III, the
price of bread was regulated according to the different prices of
wheat, from one shilling to twenty shillings the quarter, of the money
of those times. But in the manuscripts from which all the different
editions of the statutes, preceding that of Mr. Ruffhead, were
printed, the copiers had never transcribed this regulation beyond
the price of twelve shillings. Several writers, therefore, being
misled by this faulty transcription, very naturally concluded that the
middle price, or six shillings the quarter, equal to about eighteen
shillings of our present money, was the ordinary or average price of
wheat at that time.

    In the Statute of Tumbrel and Pillory, enacted nearly about the
same time, the price of ale is regulated according to every sixpence
rise in the price of barley, from two shillings to four shillings
the quarter. That four shillings, however, was not considered as the
highest price to which barley might frequently rise in those times,
and that these prices were only given as an example of the
proportion which ought to be observed in all other prices, whether
higher or lower, we may infer from the last words of the statute: et
sic deinceps crescetur vel diminuetur per sex denarios. The expression
is very slovenly, but the meaning is plain enough: "That the price
of ale is in this manner to be increased or diminished according to
every sixpence rise or fall in the price of barley." In the
composition of this statute the legislature itself seems to have
been as negligent as the copiers were in the transcription of the
others.

    In an ancient manuscript of the Regiam Majestatem, an old Scotch
law book, there is a statute of assize in which the price of bread
is regulated according to all the different prices of wheat, from
tenpence to three shillings the Scotch boll, equal to about half an
English quarter. Three shillings Scotch, at the time when this
assize is supposed to have been enacted were equal to about nine
shillings sterling of our present money. Mr. Ruddiman seems to
conclude from this, that three shillings was the highest price to
which wheat ever rose in those times, and that tenpence, a shilling,
or at most two shillings, were the ordinary prices. Upon consulting
the manuscript, however, it appears evidently that all these prices
are only set down as examples of the proportion which ought to be
observed between the respective prices of wheat and bread. The last
words of the statute are: reliqua judicabis secundum proescripta
habendo respectum ad pretium bladi. "You shall judge of the
remaining cases according to what is above written, having a respect
to the price of corn."

    Thirdly, they seem to have been misled, too, by the very low price
at which wheat was sometimes sold in very ancient times; and to have
imagined that as its lowest price was then much lower than in later
times, its ordinary price must likewise have been much lower. They
might have found, however, that in those ancient times its highest
price was fully as much above, as its lowest price was below
anything that had even been known in later times. Thus in 1270,
Fleetwood gives us two prices of the quarter of wheat. The one is four
pounds sixteen shillings of the money of those times, equal to
fourteen pounds eight shillings of that of the present; the other is
six pounds eight shillings, equal to nineteen pounds four shillings of
our present money. No price can be found in the end of the
fifteenth, or beginning of the sixteenth century, which approaches
to the extravagance of these. The price of corn, though at all times
liable to variation, varies most in those turbulent and disorderly
societies, in which the interruption of all commerce and communication
hinders the plenty of one part of the country from relieving the
scarcity of another. In the disorderly state of England under the
Plantagenets, who governed it from about the middle of the twelfth
till towards the end of the fifteenth century, one district might be
in plenty, while another at no great distance, by having its crop
destroyed either by some accident of the seasons, or by the
incursion of some neighbouring baron, might be suffering all the
horrors of a famine; and yet if the lands of some hostile lord were
interposed between them, the one might not be able to give the least
assistance to the other. Under the vigorous administration of the
Tudors, who governed England during the latter part of the fifteenth
and through the whole of the sixteenth century, no baron was
powerful enough to dare to disturb the public security.

    The reader will find at the end of this chapter all the prices
of wheat which have been collected by Fleetwood from 1202 to 1597,
both inclusive, reduced to the money of the present times, and
digested according to the order of time, into seven divisions of
twelve years each. At the end of each division, too, he will find
the average price of the twelve years of which it consists. In that
long period of time, Fleetwood has been able to collect the prices
of no more than eighty years, so that four years are wanting to make
out the last twelve years. I have added, therefore, 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 will see that
from the beginning of the thirteenth till after the middle of the
sixteenth century the average price of each twelve years grows
gradually lower and lower; and that towards the end of the sixteenth
century it begins to rise again. The prices, indeed, which Fleetwood
has been able to collect, seem to have been those chiefly which were
remarkable for extraordinary dearness or cheapness; and I do not
pretend that any very certain conclusion can be drawn from them. So
far, however, as they prove anything at all, they confirm the
account which I have been endeavouring to give. Fleetwood himself,
however, seems, with most other writers, to have believed that
during all this period the value of silver, in consequence of its
increasing abundance, was continually diminishing. The prices of
corn which he himself has collected 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. Bishop
Fleetwood and Mr. Dupre de St. Maur are the two authors who seem to
have collected, with the greatest diligence and fidelity, the prices
of things in ancient times. It is somewhat curious that, though
their opinions are so very different, their facts, so far as they
relate to the price of corn at least, should coincide so very exactly.

    It is not, however, so much from the low price of corn as from
that of some other parts of the rude produce of land that the most
judicious writers have inferred the great value of silver in those
very ancient times. Corn, it has been said, being a sort of
manufacture, was, in those rude ages, much dearer in proportion than
the greater part of other commodities; it is meant, I suppose, than
the greater part of unmanufactured commodities, such as cattle,
poultry, game of all kinds, etc. That in those times of poverty and
barbarism these were proportionably much cheaper than corn is
undoubtedly true. But this cheapness was not the effect of the high
value of silver, but of the low value of those commodities. It was not
because silver would in such times purchase or represent a greater
quantity of labour, but because such commodities would purchase or
represent a much smaller quantity than in times of more opulence and
improvement. Silver must certainly be cheaper in Spanish America
than in Europe; in the country where it is produced than in the
country to which it is brought, at the expense of a long carriage both
by land and by sea, of a freight and an insurance. One-and-twenty
pence halfpenny sterling, however, we are told by Ulloa, was, not many
years ago, at Buenos Ayres, the price of an ox chosen from a herd of
three or four hundred. Sixteen shillings sterling, we are told by
Mr. Byron was the price of a good horse in the capital of Chili. In
a country naturally fertile, but of which the far greater part is
altogether uncultivated, cattle, poultry, game of all kinds, etc.,
as they can be acquired with a very small quantity of labour, so
they will purchase or command but a very small quantity. The low money
price for which they may be sold is no proof that the real value of
silver is there very high, but that the real value of those
commodities is very low.

    Labour, it must always be remembered, and not any particular
commodity or set of commodities, is the real measure of the value both
of silver and of all other commodities.

    But in countries almost waste, or but thinly inhabited, cattle,
poultry, game of all kinds, etc., as they are the spontaneous
productions of nature, so she frequently produces them in much greater
quantities than the consumption of the inhabitants requires. In such a
state of things the supply commonly exceeds the demand. In different
states of society, in different stages of improvement, therefore, such
commodities will represent, or be equivalent to, very different
quantities of labour.

    In every state of society, in every stage of improvement, corn
is the production of human industry. But the average produce of
every sort of industry is always suited, more or less exactly, to
the average consumption; the average supply to the average demand.
In every different stage of improvement, besides, the raising of equal
quantities of corn in the same soil and climate will, at an average,
require nearly equal quantities of labour; or what comes to the same
thing, the price of nearly equal quantities; the continual increase of
the productive powers of labour in an improving state of cultivation
being more or less counterbalanced by the continually increasing price
of cattle, the principal instruments of agriculture. Upon all these
accounts, therefore, we may rest assured that equal quantities of corn
will, in every state of society, in every stage of improvement, more
nearly represent, or be equivalent to, equal quantities of labour than
equal quantities of any other part of the rude produce of land.
Corn, accordingly, it has already been observed, is, in all the
different stages of wealth and improvement, a more accurate measure of
value than any other commodity or set of commodities. In all those
different stages, therefore, we can judge better of the real value
of silver by comparing it with corn than by comparing it with any
other commodity or set of commodities.

    Corn, besides, or whatever else is the common and favourite
vegetable food of the people, constitutes, in every civilised country,
the principal part of the subsistence of the labourer. In
consequence of the extension of agriculture, the land of every country
produces a much greater quantity of vegetable than of animal food, and
the labourer everywhere lives chiefly upon the wholesome food that
is cheapest and most abundant. Butcher's meat, except in the most
thriving countries, or where labour is most highly rewarded, makes but
an insignificant part of his subsistence; poultry makes a still
smaller part of it, and game no part of it. In France, and even in
Scotland, where labour is somewhat better rewarded than in France, the
labouring poor seldom eat butcher's meat, except upon holidays, and
other extraordinary occasions. The money price of labour, therefore,
depends much more upon the average money price of corn, the
subsistence 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
silver, therefore, the real quantity of labour which they can purchase
or command, depends much more upon the quantity of corn which they can
purchase or command than upon that of butcher's meat, or any other
part of the rude produce of land.

    Such slight observations, however, upon the prices either of
corn or of other commodities, would not probably have misled so many
intelligent authors had they not been influenced, at the same time, by
the popular notion, that as the quantity of silver naturally increases
in every country with the increase of so its value diminishes as its
quantity increases. This notion, however, seems to be altogether
groundless.

    The quantity of the precious metals may increase in any country
from two different causes; either, first, from the increased abundance
of the mines which supply it; or, secondly, from the increased
wealth of the people, from the increased produce of their annual
labour. The first of these causes is no doubt necessarily connected
with the diminution of the value of the precious metals, but the
second is not.

    When more abundant mines are discovered, a greater quantity of the
precious metals is brought to market, and the quantity of the
necessaries and conveniencies of life for which they must be exchanged
being the same as before, equal quantities of the metals must be
exchanged for smaller quantities of commodities. So far, therefore, as
the increase of the quantity of the precious metals in any country
arises from the increased abundance of the mines, it is necessarily
connected with some diminution of their value.

    When, on the contrary, the wealth of any country increases, when
the annual produce of its labour becomes gradually greater and
greater, a greater quantity of coin becomes necessary in order to
circulate a greater quantity of commodities; and the people, as they
can afford it, as they have more commodities to give for it, will
naturally purchase a greater and a greater quantity of plate. The
quantity of their coin will increase from necessity; the quantity of
their plate from vanity and ostentation, or from the same reason
that the quantity of fine statues, pictures, and of every other luxury
and curiosity, is likely to increase among them. But as statuaries and
painters are not likely to be worse rewarded in times of wealth and
prosperity than in times of poverty and depression, so gold and silver
are not likely to be worse paid for.

    The price of gold and silver, when the accidental discovery of
more abundant mines does not keep it down, as it naturally rises
with the wealth of every country, so, whatever be the state of the
mines, it is at all times naturally higher in a rich than in a poor
country. Gold and silver, like all other commodities, naturally seek
the market where the best price is given for them, and the best
price is commonly given for every thing in the country which can
best afford it. Labour, it must be remembered, is the ultimate price
which is paid for everything, and in countries where labour is equally
well regarded, the money price of labour will be in proportion to that
of the subsistence of the labourer. But gold and silver will naturally
exchange for a greater quantity of subsistence in a rich than in a
poor country, in a country which abounds with subsistence than in
one which is but indifferently supplied with it. If the two
countries are at a great distance, the difference may be very great;
because though the metals naturally fly from the worse to the better
market, yet it may be difficult to transport them in such quantities
as to bring their price nearly to a level in both. If the countries
are near, the difference will be smaller, and may sometimes be
scarce perceptible; because in this case the transportation will be
easy. China is a much richer country than any part of Europe, and
the difference between the price of subsistence in China and in Europe
is very great. Rice in China is much cheaper than wheat is anywhere in
Europe. England is a much richer country than Scotland; but the
difference between the money-price of corn in those two countries is
much smaller, and is but just perceptible. In proportion to the
quantity or measure, Scotch corn generally appears to be a good deal
cheaper than English; but in proportion to its quality, it is
certainly somewhat dearer. Scotland receives almost every year very
large supplies from England, and every commodity must commonly be
somewhat dearer in the country to which it is brought than in that
from which it comes. English corn, therefore, must be dearer in
Scotland than in England, and yet in proportion to its quality, or
to the quantity and goodness of the flour or meal which can be made
from it, it cannot commonly be sold higher there than the Scotch
corn which comes to market in competition with it.

    The difference between the money price of labour in China and in
Europe is still greater than that between the money price of
subsistence; because the real recompense of labour is higher in Europe
than in China, the greater part of Europe being in an improving state,
while China seems to be standing still. The money price of labour is
lower in Scotland than in England because the real recompense of
labour is much lower; Scotland, though advancing to greater wealth,
advancing much more slowly than England. The frequency of emigration
from Scotland, and the rarity of it from England, sufficiently prove
that the demand for labour is very different in the two countries. The
proportion between the real recompense of labour in different
countries, it must be remembered, is naturally regulated not by
their actual wealth or poverty, but by their advancing, stationary, or
declining condition.

    Gold and silver, as they are naturally of the greatest value among
the richest, so they are naturally of the least value among the
poorest nations. Among savages, the poorest of all nations, they are
of scarce any value.

    In great towns corn is always dearer than in remote parts of the
country. This, however, is the effect, not of the real cheapness of
silver, but of the real dearness of corn. It does not cost less labour
to bring silver to the great town than to the remote parts of the
country; but it costs a great deal more to bring corn.

    In some very rich and commercial countries, such as Holland and
the territory of Genoa, corn is dear for the same reason that it is
dear in great towns. They do not produce enough to maintain their
inhabitants. They are rich in the industry and skill of their
artificers and manufacturers; in every sort of machinery which can
facilitate and abridge labour; in shipping, and in all the other
instruments and means of carriage and commerce: but they are poor in
corn, which, as it must be brought to them from distant countries,
must, by an addition to its price, pay for the carriage from those
countries. It does not cost less labour to bring silver to Amsterdam
than to Dantzic; but it costs a great deal more to bring corn. The
real cost of silver must be nearly the same in both places; but that
of corn must be very different. Diminish the real opulence either of
Holland or of the territory of Genoa, while the number of their
inhabitants remains the same: diminish their power of supplying
themselves from distant countries; and the price of corn, instead of
sinking with that diminution in the quantity of their silver, which
must necessarily accompany this declension either as its cause or as
its effect, will rise to the price of a famine. When we are in want of
necessaries we must part with all superfluities, of which the value,
as it rises in times of opulence and prosperity, so it sinks in
times of poverty and distress. It is otherwise with necessaries. Their
real price, the quantity of labour which they can purchase or command,
rises in times of poverty and distress, and sinks in times of opulence
and prosperity, which are always times of great abundance; for they
could not otherwise be times of opulence and prosperity. Corn is a
necessary, silver is only a superfluity.

    Whatever, therefore, may have been the increase in the quantity of
the precious metals, which, during the period between the middle of
the fourteenth and that of the sixteenth century, arose from the
increase of wealth and improvement, it could have no tendency to
diminish their value either in Great Britain or in any other part of
Europe. If those who have collected the prices of things in ancient
times, therefore, had, during this period, no reason to infer the
diminution of the value of silver, from any observations which they
had made upon the prices either of corn or of other commodities,
they had still less reason to infer it from any supposed increase of
wealth and improvement.

                        SECOND PERIOD

    But how various soever may have been the opinions of the learned
concerning the progress of the value of silver during this first
period, they are unanimous concerning it during the second.

    From about 1570 to about 1640, during a period of about seventy
years, the variation in the proportion between the value of silver and
that of corn held a quite opposite course. Silver sunk in its real
value, or would exchange for a smaller quantity of labour than before;
and corn rose in its nominal price, and instead of being commonly sold
for about two ounces of silver the quarter, or about ten shillings
of our present money, came to be sold for six and eight ounces of
silver the quarter, or about thirty and forty shillings of our present
money.

    The discovery of the abundant mines of America seems to have
been the sole cause of this diminution in the value of silver in
proportion to that of corn. It is accounted for accordingly in the
same manner by everybody; and there never has been any dispute
either about the fact or about the cause of it. The greater part of
Europe was, during this period, advancing in industry and improvement,
and the demand for silver must consequently have been increasing.
But the increase of the supply had, it seems, so far exceeded that
of the demand, that the value of that metal sunk considerably. The
discovery of the mines of America, it is to be observed, does not seem
to have had any very sensible effect upon the prices of things in
England till after 1570; though even the mines of Potosi had been
discovered more than twenty years before.

    From 1595 to 1620, both inclusive, the average price of the
quarter of nine bushels of the best wheat at Windsor market appears,
from the accounts of Eton College, to have been L2 1s. 6 3/4d. From
which sum, neglecting the fraction, and deducting a ninth, or 4s. 7
1\3d., the price of the quarter of eight bushels comes out to have
been L1 16s. 10 2/3d. And from this sum, neglecting likewise the
fraction, and deducting a ninth, or 4s. 1d., for the difference
between the price of the best wheat and that of the middle wheat,
the price of the middle wheat comes out to have been about L1 12s.
9d., or about six ounces and one-third of an ounce of silver.

    From 1621 to 1636, both inclusive, the average price of the same
measure of the best wheat at the same market appears, from the same
accounts, to have been L2 10s.; from which making the like
deductions as in the foregoing case, the average price of the
quarter of eight bushels of middle wheat comes out to have been L1
19s. 6d., or about seven ounces and two-thirds of an ounce of silver.

                        THIRD PERIOD

    Between 1630 and 1640, or about 1636, the effect of the
discovery of the mines of America in reducing the value of silver
appears to have been completed, and the value of that metal seems
never to have sunk lower in proportion to that of corn than it was
about that time. It seems to have risen somewhat in the course of
the present century, and it had probably begun to do so even some time
before the end of the last.

    From 1637 to 1700, both inclusive, being the sixty-four last years
of the last century, the average price of the quarter of nine
bushels of the best wheat at Windsor market appears, from the same
accounts, to have been L2 11s. O 1\3d., which is only 1s O 1\3d.
dearer than it had been during the sixteen years before. But in the
course of these sixty-four years there happened two events which
must have produced a much greater scarcity of corn than what the
course of the seasons would otherwise have occasioned, and which,
therefore, without supposing any further reduction in the value of
silver, will much more than account for this very small enhancement of
price.

    The first of these events was the civil war, which, by
discouraging tillage and interrupting commerce, must have raised the
price of corn much above what the course of the seasons would
otherwise have occasioned. It must have had this effect more or less
at all the different markets in the kingdom, but particularly at those
in the neighbourhood of London, which require to be supplied from
the greatest distance. In 1648, accordingly, the price of the best
wheat at Windsor market appears, from the same accounts, to have
been L4 5s., and in 1649 to have been L4 the quarter of nine
bushels. The excess of those two years above L2 10s. (the average
price of the sixteen years preceding 1637) is L3 5s.; which divided
among the sixty-four last years of the last century will alone very
nearly account for that small enhancement of price which seems to have
taken place in them. These, however, though the highest, are by no
means the only high prices which seem to have been occasioned by the
civil wars.

    The second 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 course of years, have occasioned a
greater abundance, and consequently a greater cheapness of corn in the
home-market than what would otherwise have taken place there. How
far the bounty could produce this effect at any time, I shall
examine hereafter; I shall only observe at present that, between
1688 and 1700, it had not time to produce any such effect. During this
short period its only effect must have been, by encouraging the
exportation of the surplus produce of every year, and thereby
hindering the abundance of one year from compensating the scarcity
of another, to raise the price in the home-market. The scarcity
which prevailed in England from 1693 to 1699, both inclusive, though
no doubt principally owing to the badness of the seasons, and,
therefore, extending through a considerable part of Europe, must
have been somewhat enhanced by the bounty. In 1699, accordingly, the
further exportation of corn was prohibited for nine months.

    There was a third event which occurred in the course of the same
period, and which, though it could not occasion any scarcity of
corn, nor, perhaps, any augmentation in the real quantity of silver
which was usually paid for it, must necessarily have occasioned some
augmentation in the nominal sum. This event was the great debasement
of the silver coin, by clipping and wearing. This evil had begun in
the reign of Charles II and had gone on continually increasing till
1695; at which time, as we may learn from Mr. Lowndes, the current
silver coin was, at an average, near five-and-twenty per cent below
its standard value. But the nominal sum which constitutes the market
price of every commodity is necessarily regulated, not so much by
the quantity of silver, which, according to the standard, ought to
be contained in it, as by that which, it is found by experience,
actually is contained in it. This nominal sum, therefore, is
necessarily higher when the coin is much debased by clipping and
wearing than when near to its standard value.

    In the course of the present century, the silver coin has not at
any time been more below its standard weight than it is at present.
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
recoinage, the gold coin was a good deal defaced too, it was less so
than the silver. In 1695, on the contrary, the value of the silver
coin was not kept up by the gold coin; a guinea then commonly
exchanging for thirty shillings of the worn and clipt silver. Before
the late recoinage of the gold, the price of silver bullion was seldom
higher than five shillings and sevenpence an ounce, which is but
fivepence above the mint price. But in 1695, the common price of
silver bullion was six shillings and fivepence an ounce, which is
fifteenpence above the mint price. Even before the late recoinage of
the gold, therefore, the coin, gold and silver together, when compared
with silver bullion, was not supposed to be more than eight per cent
below its standard value. In 1695, on the contrary, it had been
supposed to be near five-and-twenty per cent below that value. But
in the beginning of the present century, that is, immediately after
the great recoinage in King William's time. the greater part of the
current silver coin must have been still nearer to its standard weight
than it is at present. In the course of the present century, too,
there has been no great public calamity, such as the civil war,
which could either discourage tillage, or interrupt the interior
commerce of the country. And though the bounty, which has taken
place through the greater part of this century, must always raise
the price of corn somewhat higher than it otherwise would be in the
actual state of tillage; yet as, in the course of this century, the
bounty has had full time to produce all the good effects commonly
imputed to it, to encourage tillage, and thereby to increase the
quantity of corn in the home market, it may, upon the principles of
a system which I shall explain and examine hereafter, be supposed to
have done something to lower the price of that commodity the one
way, as well as to raise it the other. It is by many people supposed
to have done more. In the sixty-four first years of the present
century accordingly the average price of the quarter of nine bushels
of the best wheat at Windsor market appears, by the accounts of Eton
College, to have been L2 os. 6 1/2d., which is about ten shillings and
sixpence, or more than five-and-twenty per cent, cheaper than it had
been during the sixty-four last years of the last century; and about
9s. 6d. cheaper than it had been during the sixteen years preceding
1636, when the discovery of the abundant mines of America may be
supposed to have produced its full effect; and about one shilling
cheaper than it had been in the twenty-six years preceding 1620,
before that discovery can well be supposed to have produced its full
effect. According to this account, the average price of middle
wheat, during these sixty-four first years of the present century,
comes out to have been about thirty-two shillings the quarter of eight
bushels.

    The value of silver, therefore, seems to have risen somewhat in
proportion to that of corn during the course of the present century,
and it had probably begun to do so even some time before the end of
the last.

    In 1687, the price of the quarter of nine bushels of the best
wheat at Windsor market was L1 5s. 2d. the lowest price at which it
had ever been from 1595.

    In 1688, Mr. Gregory King, a man famous for his knowledge in
matters of this kind, estimated the average price of wheat in years of
moderate plenty to be to the grower 3s. 6d. the bushel, or
eight-and-twenty shillings the quarter. The grower's price I
understand to be the same with what is sometimes called the contract
price, or the price at which a farmer contracts for a certain number
of years to deliver a certain quantity of corn to a dealer. As a
contract of this kind saves the farmer the expense and trouble of
marketing, the contract price is generally lower than what is supposed
to be the average market price. Mr. King had judged eight-and-twenty
shillings the quarter to be at that time the ordinary contract price
in years of moderate plenty. Before the scarcity occasioned by the
late extraordinary course of bad seasons, it was, I have been assured,
the ordinary contract price in all common years.

    In 1688 was granted the Parliamentary bounty upon the
exportation of corn. The country gentlemen, who then composed a
still greater proportion of the legislature than they do at present,
had felt that the money price of corn was falling. The bounty was an
expedient to raise it artificially to the high price at which it had
frequently been sold in the times of Charles I and III. It was to take
place, therefore, till wheat was so high as forty-eight shillings
the quarter, that is, twenty shillings, or five-sevenths dearer than
Mr. King had in that very year estimated the grower's price to be in
times of moderate plenty. If his calculations deserve any part of
the reputation which they have obtained very universally,
eight-and-forty shillings the quarter was a price which, without
some such expedient as the bounty, could not at that time be expected,
except in years of extraordinary scarcity. But the government of
King William was not then fully settled. It was in no condition to
refuse anything to the country gentlemen, from whom it was at that
very time soliciting the first establishment of the annual land-tax.

    The value of silver, therefore, in proportion to that of corn, had
probably risen somewhat before the end of the last century; and it
seems to have continued to do so during the course of the greater part
of the present; though the necessary operation of the bounty must have
hindered that rise from being so sensible as it otherwise would have
been in the actual state of tillage.

    In plentiful years the bounty, by occasioning an extraordinary
exportation, necessarily raises the price of corn above what it
otherwise would be in those years. To encourage tillage, by keeping up
the price of corn even in the most plentiful years, was the avowed end
of the institution.

    In years of great scarcity, indeed, the bounty has generally
been suspended. It must, however, have had some effect even upon the
prices of many of those years. By the extraordinary exportation
which it occasions in years of plenty, it must frequently hinder the
plenty of one year from compensating the scarcity of another.

    Both in years of plenty and in years of scarcity, therefore, the
bounty raises the price of corn above what it naturally would be in
the actual state of tillage. If, during the sixty-four first years
of the present century, therefore, the average price has been lower
than during the sixty-four last years of the last century, it must, in
the same state of tillage, have been much more so, had it not been for
this operation of the bounty.

    But without the bounty, it may be said, the state of tillage would
not have been the same. What may have been the effects of this
institution upon the agriculture of the country, I shall endeavour
to explain hereafter, when I come to treat particularly of bounties. I
shall only observe at present that this rise in the value of silver,
in proportion to that of corn, has not been peculiar to England. It
has been observed to have taken place in France, during the same
period, and nearly in the same proportion too, by three very faithful,
diligent, and laborious collectors of the prices of corn, Mr. Dupre de
St. Maur, Mr. Messance, and the author of the Essay on the police of
grain. But in France, till 1764, the exportation of grain was by law
prohibited; and it is somewhat difficult to suppose that nearly the
same diminution of price which took place in one country,
notwithstanding this prohibition, should in another be owing to the
extraordinary encouragement given to exportation.

    It would be more proper, perhaps, to consider this variation in
the average money price of corn as the effect rather of some gradual
rise in the real value of silver in the European market than of any
fall in the real average value of corn. Corn, it has already been
observed, is at distant periods of time a more accurate measure of
value than either silver, or perhaps any other commodity. When,
after the discovery of the abundant mines of America, corn rose to
three and four times its former money price, this change was
universally ascribed, not to any rise in the real value of corn, but
to a fall in the real value of silver. If during the sixty-four
first years of the present century, therefore, the average money price
of corn has fallen somewhat below what it had been during the
greater part of the last century, we should in the same manner
impute this change, not to any fall in the real value of corn, but
to some rise in the real value of silver in the European market.

    The high price of corn during these ten or twelve years past,
indeed, has occasioned a suspicion that the real value of silver still
continues to fall in the European market. This high price of corn,
however, seems evidently to have been the effect of the
extraordinary unfavourableness of the seasons, and ought therefore
to be regarded, not as a permanent, but as a transitory and occasional
event. The seasons for these ten or twelve years past have been
unfavourable through the greater part of Europe; and the disorders
of Poland have very much increased the scarcity in all those countries
which, in dear years, used to be supplied from that market. So long
a course of bad seasons, though not a very common event, is by no
means a singular one; and whoever has inquired much into the history
of the prices of corn in former times will be at no loss to
recollect several other examples of the same kind. Ten years of
extraordinary scarcity, besides, are not more wonderful than ten years
of extraordinary plenty. The low price of corn from 1741 to 1750, both
inclusive, may very well be set in opposition to its high price during
these last eight or ten years. From 1741 to 1750, the average price of
the quarter of nine bushels of the best wheat at Windsor market, it
appears from the accounts of Eton College, was only L1 13s. 9 1/2d.,
which is nearly 6s. 3d. below the average price of the sixty-four
first years of the present century. The average price of the quarter
of eight bushels of middle wheat comes out, according to this account,
to have been, during these ten years, only 51 6s. 8d.

    Between 1741 and 1750, however, the bounty must have hindered
the price of corn from falling so low in the home market as it
naturally would have done. During these ten years the quantity of
all sorts of grain exported, it appears from the custom-house books,
amounted to no less than eight millions twenty-nine thousand one
hundred and fifty-six quarters one bushel. The bounty paid for this
amounted to L1,514,962 17s. 4 1/2d. In 1749 accordingly, Mr. Pelham,
at that time Prime Minister, observed to the House of Commons that for
the three years preceding a very extraordinary sum had been paid as
bounty for the exportation of corn. He had good reason to make this
observation, and in the following year he might have had still better.
In that single year the bounty paid amounted to no less than
L324,176 10s. 6d. It is unnecessary to observe how much this forced
exportation must have raised the price of corn above what it otherwise
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 those ten years separated from the
rest. He will find there, too, the particular account of the preceding
ten years, of which the average is likewise below, though not so
much below, the general average of the sixty-four first years of the
century. The year 1740, however, was a year of extraordinary scarcity.
These twenty years preceding 1750 may very well be set in opposition
to the twenty preceding 1770. As the former were a good deal below the
general average of the century, notwithstanding the intervention of
one or two dear years; so the latter have been a good deal above it,
notwithstanding the intervention of one or two cheap ones, of 1759,
for example. If the former have not been as much below the general
average as the latter have been above it, we ought probably to
impute it to the bounty. The change has evidently been too sudden to
be ascribed to any change in the value of silver, which is always slow
and gradual. The suddenness of the effect can be accounted for only by
a cause which can operate suddenly, the accidental variation of the
seasons.

    The money price of labour in Great Britain has, indeed, risen
during the course of the present century. This, however, seems to be
the effect, not so much of any diminution in the value of silver in
the European market, as of an increase in the demand for labour in
Great Britain, arising from the great, and almost universal prosperity
of the country. In France, a country not altogether so prosperous, the
money price of labour has, since the middle of the last century,
been observed to sink gradually with the average money price of
corn. Both in the last century and in the present the day-wages of
common labour are there said to have been pretty uniformly about the
twentieth part of the average price of the septier of wheat, a measure
which contains a little more than four Winchester bushels. In Great
Britain the real recompense of labour, it has already been shown,
the real quantities of the necessaries and conveniencies of life which
are given to the labourer, has increased considerably during the
course of the present century. The rise in its money price seems to
have been the effect, not of any diminution of the value of silver
in the general market of Europe, but of a rise in the real price of
labour in the particular market of Great Britain, owing to the
peculiarly happy circumstances of the country.

    For some time after the first discovery of America, silver would
continue to sell at its former, or not much below its former price.
The profits of mining would for some time be very great, and much
above their natural rate. Those who imported that metal into Europe,
however, would soon find that the whole annual importation could not
be disposed of at this high price. Silver would gradually exchange for
a smaller and a smaller quantity of goods. Its price would sink
gradually lower and lower till it fell to its natural price, or to
what was just sufficient to pay, according to their natural rates, the
wages of the labour, the profits of the stock, and the rent of the
land, which must be paid in order to bring it from the mine to the
market. In the greater part of the silver mines of Peru, the tax of
the King of Spain, amounting to a tenth of the gross produce, eats up,
it has already been observed, the whole rent of the land. This tax was
originally a half; it soon afterwards fell to a third, then to a
fifth, and at last to a tenth, at which rate it still continues. In
the greater part of the silver mines of Peru this, it seems, is all
that remains after replacing the stock of the undertaker of the
work, together with its ordinary profits; and it seems to be
universally acknowledged that these profits, which were once very
high, are now as low as they can well be, consistently with carrying
on their works.

    The tax of the King of Spain was reduced to a fifth part of the
registered silver in 1504, one-and-forty years before 1545, the date
of the discovery of the mines of Potosi. In the course of ninety
years, or before 1636, these mines, the most fertile in all America,
had time sufficient to produce their full effect, or to reduce the
value of silver in the European market as low as it could well fall,
while it continued to pay this tax to the King of Spain. Ninety
years is time sufficient to reduce any commodity, of which there is no
monopoly, to its natural price, or to the lowest price at which, while
it pays a particular tax, it can continue to be sold for any
considerable time together.

    The price of silver in the European market might perhaps have
fallen still lower, and it might have become necessary either to
reduce the tax upon it, not only to one tenth, as in 1736, but to
one twentieth, in the same manner as that upon gold, or to give up
working the greater part of the American mines which are now
wrought. The gradual increase of the demand for silver, or the gradual
enlargement of the market for the produce of the silver mines of
America, is probably the cause which has prevented this from
happening, and which has not only kept up the value of silver in the
European market, but has perhaps even raised it somewhat higher than
it was about the middle of the last century.

    Since the first discovery of America, the market for the produce
of its silver mines has been growing gradually more and more
extensive.

    First, the market of Europe has become gradually more and more
extensive. Since the discovery of America, the greater part of
Europe has been much improved. England, Holland, France, and
Germany; even Sweden, Denmark, and Russia, have all advanced
considerably both in agriculture and in manufactures. Italy seems
not to have gone backwards. The fall of Italy preceded the conquest of
Peru. Since that time it seems rather to have recovered a little.
Spain and Portugal, indeed, are supposed to have gone backwards.
Portugal, however, is but a very small part of Europe, and the
declension of Spain is not, perhaps, so great as is commonly imagined.
In the beginning of the sixteenth century, Spain was a very poor
country, even in comparison with France, which has been so much
improved since that time. It was the well known remark of the
Emperor Charles V, who had travelled so frequently through both
countries, that everything abounded in France, but that everything was
wanting in Spain. The increasing produce of the agriculture and
manufactures of Europe must necessarily have required a gradual
increase in the quantity of silver coin to circulate it; and the
increasing number of wealthy individuals must have required the like
increase in the quantity of their plate and other ornaments of silver.

    Secondly, America is itself a new market for the produce of its
own silver mines; and as its advances in agriculture, industry, and
population are much more rapid than those of the most thriving
countries in Europe, its demand must increase much more rapidly. The
English colonies are altogether a new market, which, partly for coin
and partly for plate, requires a continually augmenting supply of
silver through a great continent where there never was any demand
before. The greater part, too, of the Spanish and Portuguese
colonies are altogether new markets. New Granada, the Yucatan,
Paraguay, and the Brazils were, before discovered by the Europeans,
inhabited by savage nations who had neither arts nor agriculture. A
considerable degree of both has now been introduced into all of
them. Even Mexico and Peru, though they cannot be considered as
altogether new markets, are certainly much more extensive ones than
they ever were before. After all the wonderful tales which have been
published concerning the splendid state of those countries in
ancient times, whoever reads, with any degree of sober judgment, the
history of their first discovery and conquest, will evidently
discern that, in arts, agriculture, and commerce, their inhabitants
were much more ignorant than the Tartars of the Ukraine are at
present. Even the Peruvians, the more civilised nation of the two,
though they made use of gold and silver as ornaments, had no coined
money of any kind. Their whole commerce was carried on by barter,
and there was accordingly scarce any division of labour among them.
Those who cultivated the ground were obliged to build their own
houses, to make their own household furniture, their own clothes,
shoes, and instruments of agriculture. The few artificers among them
are said to have been all maintained by the sovereign, the nobles, and
the priests, and were probably their servants or slaves. All the
ancient arts of Mexico and Peru have never furnished one single
manufacture to Europe. The Spanish armies, though they scarce ever
exceeded five hundred men, and frequently did not amount to half
that number, found almost everywhere great difficulty in procuring
subsistence. The famines which they are said to have occasioned almost
wherever they went, in countries, too, which at the same time are
represented as very populous and well cultivated, sufficiently
demonstrate that the story of this populousness and high cultivation
is in a great measure fabulous. The Spanish colonies are under a
government in many respects less favourable to agriculture,
improvement, and population than that of the English colonies. They
seem, however, to be advancing in all these much more rapidly than any
country in Europe. In a fertile soil and happy climate, the great
abundance and cheapness of land, a circumstance common to all new
colonies, is, it seems, so great an advantage as to compensate many
defects in civil government. Frezier, who visited Peru in 1713,
represents Lima as containing between twenty-five and twenty-eight
thousand inhabitants. Ulloa, who resided in the same country between
1740 and 1746, represents it as containing more than fifty thousand.
The difference in their accounts of the populousness of several
other principal towns in Chili and Peru is nearly the same; and as
there seems to be no reason to doubt of the good information of
either, it marks an increase which is scarce inferior to that of the
English colonies. America, therefore, is a new market for the
produce of its own silver mines, of which the demand must increase
much more rapidly than that of the most thriving country in Europe.

    Thirdly, the East Indies is another market for the produce of
the silver mines of America, and a market which, from the time of
the first discovery of those mines, has been continually taking off
a greater and a greater quantity of silver. Since that time, the
direct trade between America and the East Indies, which is carried
on by means of the Acapulco ships, has been continually augmenting,
and the indirect intercourse by the way of Europe has been
augmenting in a still greater proportion. During the sixteenth
century, the Portuguese were the only European nation who carried on
any regular trade to the East Indies. In the last years of that
century the Dutch begun to encroach upon this monopoly, and in a few
years expelled them from their principal settlements in India.
During the greater part of the last century those two nations
divided the most considerable part of the East India trade between
them; the trade of the Dutch continually augmenting in a still greater
proportion than that of the Portuguese declined. The English and
French carried on some trade with India in the last century, but it
has been greatly augmented in the course of the present. The East
India trade of the Swedes and Danes began in the course of the present
century. Even the Muscovites now trade regularly with China by a
sort of caravans which go overland through Siberia and Tartary to
Pekin. The East India trade of all these nations, if we except that of
the French, which the last war had well nigh annihilated, had been
almost continually augmenting. The increasing consumption of East
India goods in Europe is, it seems, so great as to afford a gradual
increase of employment to them all. Tea, for example, was a drug
very little used in Europe before the middle of the last century. At
present the value of the tea annually imported by the English East
India Company, for the use of their own countrymen, amounts to more
than a million and a half a year; and even this is not enough; a great
deal more being constantly smuggled into the country from the ports of
Holland, from Gottenburgh in Sweden, and from the coast of France too,
as long as the French East India Company was in prosperity. The
consumption of the porcelain of China, of the spiceries of the
Moluccas, of the piece goods of Bengal, and of innumerable other
articles, has increased very nearly in a like proportion. The
tonnage accordingly of all the European shipping employed in the
East India trade, at any one time during the last century, was not,
perhaps, much greater than that of the English East India Company
before the late reduction of their shipping.

    But in the East Indies, particularly in China and Indostan, the
value of the precious metals, when the Europeans first began to
trade to those countries, was much higher than in Europe; and it still
continues to be so. In rice countries, which generally yield two,
sometimes three crops in the year, each of them more plentiful than
any common crop of corn, the abundance of food must be much greater
than in any corn country of equal extent. Such countries are
accordingly much more populous. In them, too, the rich, having a
greater superabundance of food to dispose of beyond what they
themselves can consume, have the means of purchasing a much greater
quantity of the labour of other people. The retinue of a grandee in
China or Indostan accordingly is, by all accounts, much more
numerous and splendid than that of the richest subjects in Europe. The
same superabundance of food, of which they have the disposal,
enables them to give a greater quantity of it for all those singular
and rare productions which nature furnishes but in very small
quantities; such as the precious metals and the precious stones, the
great objects of the competition of the rich. Though the mines,
therefore, which supplied the Indian market had been as abundant as
those which supplied the European, such commodities would naturally
exchange for a greater quantity of food in India than in Europe. But
the mines which supplied the Indian market with the precious metals
seem to have been a good deal less abundant, and those which
supplied it with the precious stones a good deal more so, than the
mines which supplied the European. The precious metals, therefore,
would naturally exchange in India for somewhat a greater quantity of
the precious stones, and for a much greater quantity of food than in
Europe. The money price of diamonds, the greatest of all
superfluities, would be somewhat lower, and that of food, the first of
all necessaries, a great deal lower in the one country than in the
other. But the real price of labour, the real quantity of the
necessaries of life which is given to the labourer, it has already
been observed, is lower both in China and Indostan, the two great
markets of India, than it is through the greater part of Europe. The
wages of the labourer will there purchase a smaller 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 small quantity of food which it will
purchase, and of the low price of that food. But in countries of equal
art and industry, the money price of the greater part of
manufactures will be in proportion to the money price of labour; and
in manufacturing art and industry, China and Indostan, though
inferior, seem 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 those great empires than it is anywhere
in Europe. Through the greater part of Europe, too, the expense of
land-carriage increases very much both the real and nominal price of
most manufactures. It costs more labour, and therefore more money,
to bring first the materials, and afterwards the complete
manufacture to market. In China and Indostan the extent and variety of
inland navigation save the greater part of this labour, and
consequently of this money, and thereby reduce still lower both the
real and the nominal price of the greater part of their
manufactures. Upon all those accounts the precious metals axe a
commodity which it always has been, and still continues to be,
extremely advantageous to carry from Europe to India. There is
scarce any commodity which brings a better price there; or which, in
proportion to the quantity of labour and commodities which it costs in
Europe, will purchase or command a greater quantity of labour and
commodities in India. It is more advantageous, too, to carry silver
thither than gold; because in China, and the greater part of the other
markets of India, the proportion between fine silver and fine gold
is but as ten, or at most as twelve, to one; whereas in Europe it is
as fourteen or fifteen to one. In China, and the greater part of the
other markets of India, ten, or at most twelve, ounces of silver
will purchase an ounce of gold; in Europe it requires from fourteen to
fifteen ounces. In the cargoes, therefore, of the greater part of
European ships which sail to India, silver has generally been one of
the most valuable articles. It is the most valuable article in the
Acapulco ships which sail to Manilla. The silver of the new
continent seems in this manner to be one of the principal
commodities by which the commerce between the two extremities of the
old one is carried on, and it is by means of it, in a great measure,
that those distant parts of the world are connected with one another.

    In order to supply so very widely extended a market, the
quantity of silver annually brought from the mines must not only be
sufficient to support that continual increase both of coin and of
plate which is required in all thriving countries; but to repair
that continual waste and consumption of silver which takes place in
all countries where that metal is used.

    The continual consumption of the precious metals in coin by
wearing, and in plate both by wearing and cleaning, is very
sensible, and in commodities of which the use is so very widely
extended, would alone require a very great annual supply. The
consumption of those metals in some particular manufactures, though it
may not perhaps be greater upon the whole than this gradual
consumption, is, however, much more sensible, as it is much more
rapid. In the manufactures of Birmingham alone the quantity of gold
and silver annually employed in gilding and plating, and thereby
disqualified from ever afterwards appearing in the shape of those
metals, is said to amount to more than fifty thousand pounds sterling.
We may from thence form some notion how great must be the annual
consumption in all the different parts of the world either in
manufactures of the same kind with those of Birmingham, or in laces,
embroideries, gold and silver stuffs, the gilding of books, furniture,
etc. A considerable quantity, too, must be annually lost in
transporting those metals from one place to another both by sea and by
land. In the greater part of the governments of Asia, besides, the
almost universal custom of concealing treasures in the bowels of the
earth, of which the knowledge frequently dies with the person who
makes the concealment, must occasion the loss of a still greater
quantity.

    The quantity of gold and silver imported at both Cadiz and
Lisbon (including not only what comes under register, but what may
be supposed to be smuggled) amounts, according to the best accounts,
to about six millions sterling a year.

    According to Mr. Meggens the annual importation of the precious
metals into Spain, at an average of six years, viz., from 1748 to
1753, both inclusive; and into Portugal, at an average of seven years,
viz., from 1747 to 1753, both inclusive, amounted in silver to
1,101,107 pounds weight; and in gold to 29,940 pounds weight. The
silver, at sixty-two shillings the pound Troy, amounts to L3,413,431
10s. sterling. The gold, at forty-four guineas and a half the pound
Troy, amounts to L2,333,446 14s. sterling. Both together amount to
L5,746,878 4s. sterling. The account of what was imported under
register he assures us is exact. He gives us the detail of the
particular places from which the gold and silver were brought, and
of the particular quantity of each metal, which, according to the
register, each of them afforded. He makes an allowance, too, for the
quantity of each metal which he supposes may have been smuggled. The
great experience of this judicious merchant renders his opinion of
considerable weight.

    According to the eloquent and, sometimes, well-informed author
of the Philosophical and Political History of the Establishment of the
Europeans in the two Indies, the annual importation of registered gold
and silver into Spain, at an average of eleven years, viz., from
1754 to 1764, both inclusive, amounted to 13,984,185 3/4 piastres of
ten reals. On account of what may have been smuggled, however, the
whole annual importation, he supposes, may have amounted to
seventeen millions of piastres, which, at 4s. 6d. the piastre, is
equal to L3,825,000 sterling. He gives the detail, too, of the
particular places from which the gold and silver were brought, and
of the particular quantities of each metal which, according to the
register, 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 Lisbon by the amount of the tax paid to the King of Portugal,
which it seems is one-fifth of the standard metal, we might value it
at eighteen millions of cruzadoes, or forty-five millions of French
livres, equal to about two millions sterling. On account of what may
have been smuggled, however, we may safely, he says, add to the sum an
eighth more, or L250,000 sterling, so that the whole will amount to
L2,250,000 sterling. According to this account, therefore, the whole
annual importation of the precious metals into both Spain and Portugal
amounts to about L6,075,000 sterling.

    Several other very well authenticated, though manuscript,
accounts, I have been assured, agree in making this whole annual
importation amount at an average to about six millions sterling;
sometimes a little more, sometimes a little less.

    The annual importation of the precious metals into Cadiz and
Lisbon, indeed, is not equal to the whole annual produce of the
mines of America. Some part is sent annually by the Acapulco ships
to Manilla; some part is employed in the contraband trade which the
Spanish colonies carry on with those of other European nations; and
some part, no doubt remains in the country. The mines of America,
besides, are by no means the only gold and silver mines in the
world. They are, however, by far the most abundant. The produce of all
the other mines which are known is insignificant, it is
acknowledged, in comparison with theirs; and the far greater part of
their produce, it is likewise acknowledged, is annually imported
into Cadiz and Lisbon. But the consumption of Birmingham alone, at the
rate of fifty thousand pounds a year, is equal to the
hundred-and-twentieth part of this annual importation at the rate of
six millions a year. The whole annual consumption of gold and
silver, therefore, in all the different countries of the world where
those metals are used, may perhaps be nearly equal to the whole annual
produce. The remainder may be no more than sufficient to supply the
increasing demand of all thriving countries. It may even have fallen
so far short of time demand as somewhat to raise the price of those
metals in the European market.

    The quantity of brass and iron annually brought from the mine to
the market is out of all proportion greater than that of gold and
silver. We do not, however, upon this account, imagine that those
coarse metals are likely to multiply beyond the demand, or to become
gradually cheaper and cheaper. Why should we imagine that the precious
metals are likely to do so? The coarse metals, indeed, though
harder, are put to much harder uses, and, as they are of less value,
less care is employed in their preservation. The precious metals,
however, are not necessarily immortal any more than they, but are
liable, too, to be lost, wasted, and consumed in a great variety of
ways.

    The price of all metals, though liable to slow and gradual
variations, varies less from year to year than that of almost any
other part of the rude produce of land; and the price of the
precious metals is even less liable to sudden variations than that
of the coarse ones. The durableness of metals is the foundation of
this extraordinary steadiness of price. The corn which was brought
to market last year will be all or almost all consumed long before the
end of this year. But some part of the iron which was brought from the
mine two or three hundred years ago may be still in use, and perhaps
some part of the gold which was brought from it two or three
thousand years ago. The different masses of corn which in different
years must supply the consumption of the world will always be nearly
in proportion to the respective produce of those different years.
But the proportion between the different masses of iron which may be
in use in two different years will be very little affected by any
accidental difference in the produce of the iron mines of those two
years; and the proportion between the masses of gold will be still
less affected by any such difference in the produce of the gold mines.
Though the produce of the greater part of metallic mines, therefore,
varies, perhaps, still more from year to year than that of the greater
part of corn fields, those variations have not the same effect upon
the price of the one species of commodities as upon that of the other.

    VARIATIONS IN THE PROPORTION BETWEEN THE RESPECTIVE VALUES

                     OF GOLD AND SILVER

    Before the discovery of the mines of America, the value of fine
gold to fine silver 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 supposed to be worth from ten to twelve
ounces of fine silver. About the middle of the last century it came to
be regulated, between the proportions of one to fourteen and one to
fifteen; that is, an ounce of fine gold came to be supposed to be
worth between fourteen and fifteen ounces of fine silver. Gold rose in
its nominal value, or in the quantity of silver which was given for
it. Both metals sunk in their real value, or in the quantity of labour
which they could purchase; but silver sunk more than gold. Though both
the gold and silver mines of America exceeded in fertility all those
which had ever been known before, the fertility of the silver mines
had, it seems, been proportionably still greater than that of the gold
ones.

    The great quantities of silver carried annually from Europe to
India have, in some of the English settlements, gradually reduced
the value of that metal in proportion to gold. In the mint of Calcutta
an ounce of fine gold is supposed to be worth fifteen ounces of fine
silver, in the same 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 silver still continues as one to
ten, or one to twelve. In Japan it is said to be as one to eight.

    The proportion between the quantities of gold and silver
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 ounces of silver. The great
quantity of silver sent annually to the East Indies reduces, he
supposes, the quantities of those 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 seems to think, must
necessarily be the same as that between their quantities, and would
therefore be as one to twenty-two, were it not for this greater
exportation of silver.

    But the ordinary proportion between the respective values of two
commodities is not necessarily the same as that between the quantities
of them which are commonly in the market. The price of an ox, reckoned
at ten guineas, is about threescore times the price of a lamb,
reckoned at 3s. 6d. It would be absurd, however, to infer from
thence that there are commonly in the market threescore lambs for
one ox: and it would be just as absurd to infer, because an ounce of
gold will commonly purchase from fourteen to fifteen ounces of silver,
that there are commonly in the market only fourteen or fifteen
ounces of silver for one ounce of gold.

    The quantity of silver commonly in the market, it is probable 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 silver. The
whole quantity of a cheap commodity 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 meat; the whole quantity of butcher's meat, than the whole
quantity of poultry; and the whole quantity of wild fowl. There are so
many more purchasers for the cheap than for the dear commodity that
not only a greater quantity of it, but a greater value, can commonly
be disposed of. The whole quantity, therefore, of the cheap
commodity must commonly be greater in proportion to the whole quantity
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, silver is a cheap and gold a
dear commodity. We ought naturally to expect, therefore, that there
should always be in the market not only a greater quantity, but a
greater value of silver than of gold. Let any man who has a little
of both compare his own silver 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, besides, have a
good deal of silver who have no gold plate, which, even with those who
have it, is generally confined to watchcases, snuff-boxes, and such
like trinkets, of which the whole amount is seldom of great value.
In the British coin, indeed, the value of the gold preponderates
greatly, but it is not so in that of all countries. In the coin of
some 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 somewhat, as it appears by the accounts
of the mint. In the coin of many countries the silver preponderates.
In France, the largest sums are commonly paid in that metal, and it is
there difficult to get more gold than what is necessary to carry about
in your pocket. The superior value, however, of the silver plate above
that of the gold, which takes place in all countries, will much more
than compensate the preponderancy of the gold coin above the silver,
which takes place only in some countries.

    Though, in one sense of the word, silver always has been, and
probably always will be, much cheaper than gold; yet in another
sense gold may, perhaps, in the present state of the Spanish market,
be said to be somewhat cheaper than silver. A commodity may be said to
be dear or cheap, not only according to the absolute greatness or
smallness of its usual price, but according as that price is more or
less above the lowest for which it is possible to bring it to market
for any considerable time together. This lowest price is that which
barely replaces, with a moderate profit, the stock which must 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 resolves itself altogether into wages and profit. But,
in the present state of the Spanish market, gold is certainly somewhat
nearer to this lowest price than silver. The tax of the King of
Spain upon gold is only one-twentieth part of the standard metal, or
five per cent; whereas his tax upon silver amounts to one-tenth part
of it, or to ten per cent. In these taxes too, it has already been
observed, consists the whole rent of the greater part of the gold
and silver mines of Spanish America; and that upon gold is still worse
paid than that upon silver. The profits of the undertakers of gold
mines too, as they more rarely make a fortune, must, in general, be
still more moderate than those of the undertakers of silver mines. The
price of Spanish gold, therefore, as it affords both less rent and
less profit, must, in the Spanish market, be somewhat nearer to the
lowest price for which it is possible to bring it thither than the
price of Spanish silver. When all expenses are computed, the whole
quantity of the one metal, it would seem, cannot, in the Spanish
market, be disposed of so advantageously as the whole quantity of
the other. The tax, indeed, of the King of Portugal upon the gold of
the Brazils is the same with the ancient tax of the King of Spain upon
the silver of Mexico and Peru; or one-fifth part of the standard
metal. It may, therefore, be uncertain whether to the general market
of Europe the whole mass of American gold comes at a price nearer to
the lowest for which it is possible to bring it thither than the whole
mass of American silver.

    The price of diamonds and other precious stones may, perhaps, be
still nearer to the lowest price at which it is possible 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 imposed upon one of the most proper subjects of taxation, a
mere luxury and superfluity, but which affords so very important a
revenue as the tax upon silver, will ever be given up as long as it is
possible to pay it; yet the same impossibility of paying it, which
in 1736 made it necessary to reduce it from one-fifth to one-tenth,
may in time make it necessary to reduce it still further; in the
same manner as it made it necessary to reduce the tax upon gold to
one-twentieth. That the silver mines of Spanish America, like all
other mines, become gradually more expensive in the working, on
account of the greater depths at which it is necessary to carry on the
works, and of the greater expense of drawing out the water and of
supplying them with fresh air at those depths, is acknowledged by
everybody who has inquired into the state of those mines.

    These causes, which are equivalent to a growing scarcity of silver
(for a commodity may be said to grow scarcer when it becomes more
difficult and expensive to collect a certain quantity of it) must,
in time, produce one or other of the three following events. The
increase of the expense must either, first, be compensated
altogether by a proportionable increase in the price of the metal; or,
secondly, it must be compensated altogether by a proportionable
diminution of the tax upon silver; or, thirdly, it must be compensated
partly by the one, and partly by the other of those two expedients.
This third event is very possible. As gold rose in its price in
proportion to silver, notwithstanding a great diminution of the tax
upon gold, so silver might rise in its price in proportion to labour
and commodities, notwithstanding an equal diminution of the tax upon
silver.

    Such successive reductions of the tax, however, though they may
not prevent altogether, must certainly retard, more or less, the
rise of the value of silver in the European market. In consequence
of such reductions many mines may be wrought which could not be
wrought before, because they could not afford to pay the old tax;
and the quantity of silver annually brought to market must always be
somewhat greater, and, therefore, the value of any given quantity
somewhat less, than it otherwise would have been. In consequence of
the reduction in 1736, the value of silver in the European market,
though it may not at this day be lower than before that reduction, is,
probably, at least ten per cent lower than it would have been had
the Court of Spain continued to exact the old tax.

    That, notwithstanding this reduction, the value of silver has,
during the course of the present century, begun to rise somewhat in
the European market, the facts and arguments which have been alleged
above dispose me to believe, or more properly to suspect and
conjecture; for the best opinion which I can form upon this subject
scarce, perhaps, deserves the name of belief. The rise, indeed,
supposing there has been any, has hitherto been so very small that
after all that has been said it may, perhaps, appear to many people
uncertain, not only whether this event has actually taken place; but
whether the contrary may not have taken place, or whether the value of
the silver may not still continue to fall in the European market.

    It must be observed, however, that whatever may be the supposed
annual importation of gold and silver, there must be a certain
period at which the annual consumption of those metals will be equal
to that annual importation. Their consumption must increase as their
mass increases, or rather in a much greater proportion. As their
mass increases, their value diminishes. They are more used and less
cared for, and their consumption consequently increases in a greater
proportion than their mass. After a certain period, therefore, the
annual consumption of those metals must, in this manner, become
equal to their annual importation, provided that importation is not
continually increasing; which, in the present times, is not supposed
to be the case.

    If, when the annual consumption has become equal to the annual
importation, the annual importation should gradually diminish, the
annual consumption may, for some time, exceed the annual
importation. The mass of those metals may gradually and insensibly
diminish, and their value gradually and insensibly rise, till the
annual importation become again stationary, the annual consumption
will gradually and insensibly accommodate itself to what that annual
importation can maintain.

    GROUNDS OF THE SUSPICION THAT THE VALUE OF SILVER STILL

                   CONTINUES TO DECREASE

    The increase of the wealth of Europe, and the popular notion that,
as the quantity of the precious metals naturally increases with the
increase of wealth so their value diminishes as their quantity
increases, may, perhaps, dispose many people to believe that their
value still continues to fall in the European market; and the still
gradually increasing price of many parts of the rude produce of land
may confirm them still further in this opinion.

    That that increase in the quantity of the precious metals, which
arises in any country from the increase of wealth, has no tendency
to diminish their value, I have endeavoured to show already. Gold
and silver naturally resort to a rich country, for the same reason
that all sorts of luxuries and curiosities resort to it; not because
they are cheaper there than in poorer countries, but because they
are dearer, or because a better price is given for them. It is the
superiority of price which attracts them, and as soon as that
superiority ceases, they necessarily cease to go thither.

    If you except corn and such other vegetables as are raised
altogether by human industry, that all other sorts of rude produce,
cattle, poultry, game of all kinds, the useful fossils and minerals of
the earth, etc., naturally grow dearer as the society advances in
wealth and improvement, I have endeavoured to show already. Though
such commodities, therefore, come to exchange for a greater quantity
of silver than before, it will not from thence follow that silver
has become really cheaper, or will purchase less labour than before,
but that such commodities have become really dearer, or will
purchase more labour than before. It is not their nominal price
only, but their real price which rises in the progress of improvement.
The rise of their nominal price is the effect, not of any
degradation of the value of silver, but of the rise in their real
price.

    DIFFERENT EFFECTS OF THE PROGRESS OF IMPROVEMENT UPON THREE

                DIFFERENT SORTS OF RUDE PRODUCE

    These different sorts of rude produce may be divided into three
classes. The first comprehends those which it is scarce in the power
of human industry to multiply at all. The second, those which it can
multiply in proportion to the demand. The third, those in which the
efficacy of industry is either limited or uncertain. In the progress
of wealth and improvement, the real price of the first may rise to any
degree of extravagance, and seems not to be limited by any certain
boundary. That of the second, though it may rise greatly, has,
however, a certain boundary beyond which it cannot well pass for any
considerable time together. That of the third, though its natural
tendency is to rise in the progress of improvement, yet in the same
degree of improvement it may sometimes happen even to fall,
sometimes to continue the same, and sometimes to rise more or less,
according as different accidents render the efforts of human industry,
in multiplying this sort of rude produce, more or less successful.

                         FIRST SORT

    The first sort of rude produce of which the price rises in the
progress of improvement is that which it is scarce in the power of
human industry to multiply at all. It consists in those things which
nature produces only in certain quantities, and which, being of a very
perishable nature, it is impossible to accumulate together the produce
of many different seasons. Such are the greater part of rare and
singular birds and fishes, many different sorts of game, almost all
wild-fowl, all birds of passage in particular, as well as many other
things. When wealth and the luxury which accompanies it increase,
the demand for these is likely to increase with them, and no effort of
human industry may be able to increase the supply much beyond what
it was before this increase of the demand. The quantity of such
commodities, therefore, remaining the same, or nearly the same,
while the competition to purchase them is continually increasing,
their price may rise to any degree of extravagance, and seems not to
be limited by any certain boundary. If woodcocks should become so
fashionable as to sell for twenty guineas apiece, no effort of human
industry could increase the number of those brought to market much
beyond what it is at present. The high price paid by the Romans, in
the time of their greatest grandeur, for rare birds and fishes, may in
this manner easily be accounted for. These prices were not the effects
of the low value of silver in those times, but of the high value of
such rarities and curiosities as human industry could not multiply
at pleasure. The real value of silver was higher at Rome, for some
time before and after the fall of the republic, than it is through the
greater part of Europe at present. Three sestertii, equal to about
sixpence sterling, was the price which the republic paid for the
modius or peck of the tithe wheat of Sicily. This price, however,
was probably below the average market price, the obligation to deliver
their wheat at this rate being considered as a tax upon the Sicilian
farmers. When the Romans, therefore, had occasion to order more corn
than the tithe of wheat amounted to, they were bound by capitulation
to pay for the surplus at the rate of four sestertii, or eightpence
sterling, the peck; and this had probably been reckoned the moderate
and reasonable, that is, the ordinary or average contract price of
those times; it is equal to about one-and-twenty shillings the
quarter. Eight-and-twenty shillings the quarter was, before the late
years of scarcity, the ordinary contract price of English wheat, which
in quality is inferior to the Sicilian, and generally sells for a
lower price in the European market. The value of silver, therefore, in
those ancient times, must have been to its value in the present as
three to four inversely; that is, three ounces of silver would then
have purchased the same quantity of labour and commodities which
four ounces will do at present. When we read in Pliny, therefore, that
Seius bought a white nightingale, as a present for the Empress
Agrippina, at a price of six thousand sestertii, equal to about
fifty pounds of our present money; and that Asinius Celer purchased
a surmullet at the price of eight thousand sestertii, equal to about
sixty-six pounds thirteen shillings and fourpence of our present
money, the extravagance of those prices, how much soever it may
surprise us, is apt, notwithstanding, to appear to us about
one-third less than it really was. Their real price, the quantity of
labour and subsistence which was given away for them, was about
one-third more than their nominal price is apt to express to us in the
present times. Seius gave for the nightingale the command of a
quantity of labour and subsistence equal to what L66 13s. 4d. would
purchase in the present times; and Asinius Celer gave for the
surmullet the command of a quantity equal to what L88 9 1/2d. would
purchase. What occasioned the extravagance of those high prices was,
not so much the abundance of silver as the abundance of labour and
subsistence of which those Romans had the disposal beyond what was
necessary for their own use. The quantity of silver of which they
had the disposal was a good deal less than what the command of the
same quantity of labour and subsistence would have procured to them in
the present times.

                        SECOND SORT

    The second sort of rude procedure of which the price rises in
the progress of improvement is that which human industry can
multiply in proportion to the demand. It consists in those useful
plants and animals which, in uncultivated countries, nature produces
with such profuse abundance that they are of little or no value, and
which, as cultivation advances are therefore forced to give place to
some more profitable produce. During a long period in the progress
of improvement, the quantity of these is continually diminishing,
while at the same time the demand for them is continually
increasing. Their real value, therefore, the real quantity of labour
which they will purchase or command, gradually rises, till at last
it gets so high as to render them as profitable a produce as
anything else which human industry can raise upon the most fertile and
best cultivated land. When it has got so high it cannot well go
higher. If it did, more land and more industry would soon be
employed to increase their quantity.

    When the price of cattle, for example, rises so high that it is as
profitable to cultivate land in order to raise food for them as in
order to raise food for man, it cannot well go higher. If it did, more
corn land would soon be turned into pasture. The extension of tillage,
by diminishing the quantity of wild pasture, diminishes the quantity
of butcher's meat which the country naturally produces without
labour or cultivation, and by increasing the number of those who
have either corn, or, what comes to the same thing, the price of corn,
to give in exchange for it, increases the demand. The price of
butcher's meat, therefore, and consequently of cattle, must
gradually rise till it gets so high that it becomes as profitable to
employ the most fertile and best cultivated lands in raising food
for them as in raising corn. But it must always be late in the
progress of improvement before tillage can be so far extended as to
raise the price of cattle to this height; and till it has got to
this height, if the country is advancing at all, their price must be
continually rising. There are, perhaps, some parts of Europe in
which the price of cattle 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 applied to no other
purpose but the feeding of cattle is so great in proportion to what
can be applied to other purposes, it is scarce possible, perhaps, that
their price could ever have risen so high as to render it profitable
to cultivate land for the sake of feeding them. In England, the
price of cattle, it has already been observed, seems, in the
neighbourhood of London, to have got to this height about the
beginning of the last century; but it was much later probably before
it got to it through the greater part of the remoter counties; in some
of which, perhaps, it may scarce yet have got to it. Of all the
different substances, however, which compose this second sort of
rude produce, cattle is, perhaps, that of which the price, in the
progress of improvement, first rises to this height.

    Till the price of cattle, indeed, has got to this height, it seems
scarce possible that the greater part, even of those lands which are
capable of the highest cultivation, can be completely cultivated. In
all farms too distant from any town to carry manure from it, that
is, in the far greater part of those of every extensive country, the
quantity of well-cultivated land must be in proportion to the quantity
of manure which the farm itself produces; and this again must be in
proportion to the stock of cattle which are maintained upon it. The
land is manured either by pasturing the cattle upon it, or by
feeding them in the stable, and from thence carrying out their dung to
it. But unless the price of the cattle be sufficient to pay both the
rent and profit of cultivated land, the farmer cannot afford to
pasture them upon it; and he can still less afford to feed them in the
stable. It is with the produce of improved and cultivated land only
that cattle can be fed in the stable; because to collect the scanty
and scattered produce of waste and unimproved lands would require
too much labour and be too expensive. If the price of cattle,
therefore, is not sufficient to pay for the produce of improved and
cultivated land, when they are allowed to pasture it, that price
will be still less sufficient to pay for that produce when it must
be collected with a good deal of additional labour, and brought into
the stable to them. In these circumstances, therefore, no more
cattle can, with profit, be fed in the stable than what are
necessary for tillage. But these can never afford manure enough for
keeping constantly in good condition all the lands which they are
capable of cultivating. What they afford being insufficient for the
whole farm will naturally be reserved for the lands to which it can be
most advantageously or conveniently applied; the most fertile, or
those, perhaps, in the neighbourhood of the farmyard. These,
therefore, will be kept constantly in good condition and fit for
tillage. The rest will, the greater part of them, be allowed to lie
waste, producing scarce anything but some miserable pasture, just
sufficient to keep alive a few straggling, half-starved cattle; the
farm, though much understocked in proportion to what would be
necessary for its complete cultivation, being very frequently
overstocked in proportion to its actual produce. A portion of this
waste land, however, after having been pastured in this wretched
manner for six or seven years together, may be ploughed up, when it
will yield, perhaps, a poor crop or two of bad oats, or of some
other coarse grain, and then, being entirely exhausted, it must be
rested and pastured again as before and another portion ploughed up to
be in the same manner exhausted and rested again in its turn. Such
accordingly was the general system of management all over the low
country of Scotland before the union. The lands which were kept
constantly well manured and in good condition seldom exceeded a
third or a fourth part of the whole farm, and sometimes did not amount
to a fifth or a sixth part of it. The rest were never manured, but a
certain portion of them was in its turn, notwithstanding, regularly
cultivated and exhausted. Under this system of management, it is
evident, even that part of the land of Scotland which is capable of
good cultivation could produce but little in comparison of what it may
be capable of producing. But how disadvantageous soever this system
may appear, yet before the union the low price of cattle seems to have
rendered it almost unavoidable. If, notwithstanding a great rise in
their price, it still continues to prevail through a considerable part
of the country, it is owing, in many places, no doubt, to ignorance
and attachment to old customs, but in most places to the unavoidable
obstructions which the natural course of things opposes to the
immediate or speedy establishment of a better system: first, to the
poverty of the tenants, to their not having yet had time to acquire
a stock of cattle sufficient to cultivate their lands more completely,
the same rise of price which would render it advantageous for them
to maintain a greater stock rendering it more difficult for them to
acquire it; and, secondly, to their not having yet had time to put
their lands in condition to maintain this greater stock properly,
supposing they were capable of acquiring it. The increase of stock and
the improvement of land are two events which must go hand in hand, and
of which the one can nowhere much outrun the other. Without some
increase of stock there can be scarce any improvement of land, but
there can be no considerable increase of stock but in consequence of a
considerable improvement of land; because otherwise the land could not
maintain it. These natural obstructions to the establishment of a
better system cannot be removed but by a long course of frugality
and industry; and half a century or a century more, perhaps, must pass
away before the old system, which is wearing out gradually, can be
completely abolished through all the different parts of the country.
Of all the commercial advantages, however, which Scotland has
derived from the union with England, this rise in the price of
cattle is, perhaps, the greatest. It has not only raised the value
of all highland estates, but it has, perhaps, been the principal cause
of the improvement of the low country.

    In all new colonies the great quantity of waste land, which can
for many years be applied to no other purpose but the feeding of
cattle, soon renders them extremely abundant, and in everything
great cheapness is the necessary consequence of great abundance.
Though all the cattle of the European colonies in America were
originally carried from Europe, they soon multiplied so much there,
and became of so little value that even horses were allowed to run
wild in the woods without any owner thinking it worth while to claim
them. It must be a long time, after the first establishment of such
colonies, before it can become profitable to feed cattle upon the
produce of cultivated land. The same causes, therefore, the want of
manure, and the disproportion between the stock employed in
cultivation, and the land which it is destined to cultivate, are
likely to introduce there a system of husbandry not unlike that
which still continues to take place in so many parts of Scotland.
Mr. Kalm, the Swedish traveller, when he gives an account of the
husbandry of some of the English colonies in North America, as he
found it in 1749, observes, accordingly, that he can with difficulty
discover there the character of the English nation, so well skilled in
all the different branches of agriculture. They make scarce any manure
for their corn fields, he says; but when one piece of ground has
been exhausted by continual cropping, they clear and cultivate another
piece of fresh land; and when that is exhausted, proceed to the third.
Their cattle are allowed to wander through the woods and other
uncultivated grounds, where they are half-starved; having long ago
extirpated almost all the annual grasses by cropping them too early in
the spring, before they had time to form their flowers, or to shed
their seeds. The annual grasses were, it seems, the best natural
grasses in that part of North America; and when the Europeans first
settled there, they used to grow very thick, and to rise three or four
feet high. A piece of ground which, when he wrote, could not
maintain one cow, would in former times, he was assured, have
maintained four, each of which would have given four times the
quantity of milk which that one was capable of giving. The poorness of
the pasture had, in his opinion, occasioned the degradation of their
cattle, which degenerated sensibly from one generation to another.
They were probably not unlike that stunted breed which was common
all over Scotland thirty or forty years ago, and which is now so
much mended through the greater part of the low country, not so much
by a change of the breed, though that expedient has been employed in
some places, as by a more plentiful method of feeding them.

    Though it is late, therefore, in the progress of improvement
before cattle can bring such a price as to render it profitable to
cultivate land for the sake of feeding them; yet of all the
different parts which compose this second sort of rude produce, they
are perhaps the first which bring this price; because till they
bring it, it seems impossible that improvement can be brought near
even to that degree of perfection to which it has arrived in many
parts of Europe.

    As cattle are among the first, so perhaps venison is among the
last parts of this sort of rude produce which bring this price. The
price of venison in Great Britain, how extravagant soever it may
appear, is not near sufficient to compensate the expense of a deer
park, as is well known to all those who have had any experience in the
feeding of deer. If it was otherwise, the feeding of deer would soon
become an article of common farming, in the same manner as the feeding
of those small birds called Turdi was among the ancient Romans.
Varro and Columella assure us that it was a most profitable article.
The fattening of ortolans, birds of passage which arrive lean in the
country, is said to be so in some parts of France. If venison
continues in fashion, and the wealth and luxury of Great Britain
increase as they have done for some time past, its price may very
probably rise still higher than it is at present.

    Between that period in the progress of improvement which brings to
its height the price of so necessary an article as cattle, and that
which brings to it the price of such a superfluity as venison, there
is a very long interval, in the course of which many other sorts of
rude produce gradually arrive at their highest price, some sooner
and some later, according to different circumstances.

    Thus in every farm the offals of the barn and stables will
maintain a certain number of poultry. These, as they are fed with what
would otherwise be lost, are a mere save-all; and as they cost the
farmer scarce anything, so he can afford to sell them for very little.
Almost all that he gets is pure gain, and their price can scarce be so
low as to discourage him from feeding this number. But in countries
ill cultivated, and therefore but thinly inhabited, the poultry, which
are thus raised without expense, are often fully sufficient to
supply the whole demand. In this state of things, therefore, they
are often as cheap as butcher's meat, or any other sort of animal
food. But the whole quantity of poultry, which the farm in this manner
produces without expense, must always be much smaller than the 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 what is common. As wealth and luxury increase,
therefore, in consequence of improvement and cultivation, the price of
poultry gradually rises above that of butcher's meat, till at last
it gets so high that it becomes profitable to cultivate land for the
sake of feeding them. When it has got to this height it cannot well go
higher. If it did, more land would soon be turned to this purpose.
In several provinces of France, the feeding of poultry is considered
as a very important article in rural economy, and sufficiently
profitable to encourage the farmer to raise a considerable quantity of
Indian corn and buck-wheat for this purpose. A middling farmer will
there sometimes have four hundred fowls in his yard. The feeding of
poultry seems scarce yet to be generally considered as a matter of
so much importance in England. They are certainly, however, dearer
in England than in France, as England receives considerable supplies
from France. In the progress of improvement, the period at which every
particular sort of animal food is dearest must naturally be that which
immediately precedes the general practice of cultivating land for
the sake of raising it. For some time before this practice becomes
general, the scarcity must necessarily raise the price. After it has
become general, new methods of feeding are commonly fallen upon, which
enable the farmer to raise upon the same quantity of ground a much
greater quantity of that particular sort of animal food. The plenty
not only obliges him to sell cheaper, but in consequence of these
improvements he can afford to sell 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 introduction of clover, turnips,
carrots, cabbage, etc., has contributed to sink the common price of
butcher's meat in the London market somewhat below what it was about
the beginning of the last century.

    The hog, that finds his food among ordure and greedily devours
many things rejected by every other useful animal, is, like poultry,
originally kept as a save-all. As long as the number of such
animals, which can thus be reared at little or no expense, is fully
sufficient to supply the demand, this sort of butcher's meat comes
to market at a much lower price than any other. But when the demand
rises beyond what this quantity can supply, when it becomes
necessary to raise food on purpose for feeding and fattening hogs,
in the same manner as for feeding and fattening other cattle, the
price necessarily rises, and becomes proportionably higher or lower
than that of other butcher's meat, according as the nature of the
country, and the state of its agriculture, happen to render the
feeding of hogs more or less expensive than that of other cattle. In
France, according to Mr. Buffon, the price of pork is nearly equal
to that of beef. In most parts of Great Britain it is at present
somewhat higher.

    The great rise in the price of both hogs and poultry has in
Great Britain been frequently imputed to the diminution of the
number of cottagers and other small occupiers of land; an event
which has in every part of Europe been the immediate forerunner of
improvement and better cultivation, but which at the same time may
have contributed to raise the price of those articles both somewhat
sooner and somewhat faster than it would otherwise have risen. As
the poorest family can often maintain a cat or a dog without any
expense, so the poorest occupiers of land can commonly maintain a
few poultry, or a sow and a few pigs, at very little. The little
offals of their own table, their whey, skimmed milk, and buttermilk,
supply those animals with a part of their food, and they find the rest
in the neighbouring fields without doing any sensible damage to
anybody. By diminishing the number of those small occupiers,
therefore, the quantity of this sort of provisions, which is thus
produced at little or no expense, must certainly have been a good deal
diminished, and their price must consequently have been raised both
sooner and faster than it would otherwise have risen. Sooner or later,
however, in the progress of improvement, it must at any rate have
risen to the utmost height to which it is capable of rising; or to the
price which pays the labour and expense of cultivating the land
which furnishes them with food as well as these are paid upon the
greater part of other cultivated land.

    The business of the dairy, like the feeding of hogs and poultry,
is originally carried on as a save-all. The cattle necessarily kept
upon the farm produce more milk than either the rearing of their own
young or the consumption of the farmer's family requires; and they
produce most at one particular season. But of all the productions of
land, milk is perhaps the most perishable. In the warm season, when it
is most abundant, it will scarce keep four-and-twenty hours. The
farmer, by making it into fresh butter, stores a small part of it
for a week: by making it into salt butter, for a year: and by making
it into cheese, he stores a much greater part of it for several years.
Part of all these is reserved for the use of his own family. The
rest goes to market, in order to find the best price which is to be
had, and which can scarce be so low as to discourage him from
sending thither whatever is over and above the use of his own
family. If it is very low, indeed, he will be likely to manage his
dairy in a very slovenly and dirty manner, and will scarce perhaps
think it worth while to have a particular room or building on
purpose for it, but will suffer the business to be carried on amidst
the smoke, filth, and nastiness of his own kitchen; as was the case of
almost all the farmers' dairies in Scotland thirty or forty years ago,
and as is the case of many of them still. The same causes which
gradually raise the price of butcher's meat, the increase of the
demand, and, in consequence of the improvement of the country, the
diminution of the quantity which can be fed at little or no expense,
raise, in the same manner, that of the produce of the dairy, of
which the price naturally connects with that of butcher's meat, or
with the expense of feeding cattle. The increase of price pays for
more labour, care, and cleanliness. The dairy becomes more worthy of
the farmer's attention, and the quality of its produce gradually
improves. The price at last gets so high that it becomes worth while
to employ some of the most fertile and best cultivated lands in
feeding cattle merely for the purpose of the dairy; and when it has
got to this height, it cannot well go higher. If it did, more land
would soon be turned to this purpose. It seems to have got to this
height through the greater part of England, where much good land is
commonly employed in this manner. If you except the neighbourhood of a
few considerable towns, it seems not yet to have got to this height
anywhere in Scotland, where common farmers seldom employ much good
land in raising food for cattle merely for the purpose of the dairy.
The price of the produce, though it has risen very considerably within
these few years, is probably still too low to admit of it. The
inferiority of the quality, indeed, compared with that of the
produce of English dairies, is fully equal to that of the price. But
this inferiority of quality is, perhaps, rather the effect of this
lowness of price than the cause of it. Though the quality was much
better, the greater part of what is brought to market could not, I
apprehend, in the present circumstances of the country, be disposed of
at a much better price; and the present price, it is probable would
not pay the expense of the land and labour necessary for producing a
much better quality. Though the greater part of England,
notwithstanding the superiority of price, the dairy is not reckoned
a more profitable employment of land than the raising of corn, or
the fattening of cattle, the two great objects of agriculture. Through
the greater part of Scotland, therefore, it cannot yet be even so
profitable.

    The lands of no country, it is evident, can ever be completely
cultivated and improved till once the price of every produce, which
human industry is obliged to raise upon them, has got so high as to
pay for the expense of complete improvement and cultivation. In
order to do this, the price of each particular produce must be
sufficient, first, 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, secondly, to pay the labour and expense of the farmer as well
as they are commonly paid upon good corn land; or, in other words,
to replace with the ordinary profits the stock which he employs
about it. This rise in the price of each particular produce must
evidently be previous to the improvement and cultivation of the land
which is destined for raising it. Gain is the end of all
improvement, and nothing could deserve that name of which loss was
to be the necessary consequence. But loss must be the necessary
consequence of improving land for the sake of a produce of which the
price could never bring back the expense. If the complete
improvement and cultivation of the country be, as it most certainly
is, the greatest of all public advantages, this rise in the price of
all those different sorts of rude produce, instead of being considered
as a public calamity, ought to be regarded as the necessary forerunner
and attendant of the greatest of all public advantages.

    This rise, too, in the nominal or money-price of all those
different sorts of rude produce has been the effect, not of any
degradation in the value of silver, but of a rise in their real price.
They have become worth, not only a greater quantity of silver, but a
greater quantity of labour and subsistence than before. As it costs
a greater quantity of labour and subsistence to bring them to
market, so when they are brought thither, they represent or are
equivalent to a greater quantity.

                         THIRD SORT

    The third and last sort of rude produce, of which the price
naturally rises in the progress of improvement, is that in which the
efficacy of human industry, in augmenting the quantity, is either
limited or uncertain. Though the real price of this sort of rude
produce, therefore, naturally tends to rise in the progress of
improvement, yet, according as different accidents happen to render
the efforts of human industry more or less successful in augmenting
the quantity, it may happen sometimes even to fall, sometimes to
continue the same in very different periods of improvement, and
sometimes to rise more or less in the same period.

    There are some sorts of rude produce which nature has rendered a
kind of appendages to other sorts; so that the quantity of the one
which any country can afford, is necessarily limited by that of the
other. The quantity of wool or of raw hides, for example, which any
country can afford is necessarily limited by the number of great and
small cattle that are kept in it. The state of its improvement, and
the nature of its agriculture, again necessarily determine this
number.

    The same causes which, in the progress of improvement, gradually
raise the price of butcher's meat, should have the same effect, it may
be thought, upon the prices of wool and raw hides, and raise them,
too, nearly in the same proportion. It probably would be so if, in the
rude beginnings of improvement, the market for the latter
commodities was confined within as narrow bounds as that for the
former. But the extent of their respective markets is commonly
extremely different.

    The market for butcher's meat is almost everywhere confined to the
country which produces it. Ireland, and some part of British America
indeed, carry on a considerable trade in salt provisions; but they
are, I believe, the only countries in the commercial world which do
so, or which export to other countries any considerable part of
their butcher's meat.

    The market for wool and raw hides, on the contrary, is in the rude
beginnings of improvement very seldom confined to the country which
produces them. They can easily be transported to distant countries,
wool without any preparation, and raw hides with very little: and as
they are the materials of many manufactures, the industry of other
countries may occasion a demand for them, though that of the country
which produces them might not occasion any.

    In countries ill cultivated, and therefore but thinly inhabited,
the price of the wool and the hide bears always a much greater
proportion to that of the whole beast than in countries where,
improvement and population being further advanced, there is more
demand for butcher's meat. Mr. Hume observes that in the Saxon times
the fleece was estimated at two-fifths of the value of the whole
sheep, and that this was much above the proportion of its present
estimation. In some provinces of Spain, I have been assured, the sheep
is frequently killed merely for the sake of the fleece and the tallow.
The carcase is often left to rot upon the ground, or to be devoured by
beasts and birds of prey. If this sometimes happens even in Spain,
it happens almost constantly in Chili, at Buenos Ayres, and in many
other parts of Spanish America, where the horned cattle are almost
constantly killed merely for the sake of the hide and the tallow.
This, too, used to happen almost constantly in Hispaniola, while it
was infested by the Buccaneers, and before the settlement,
improvement, and populousness of the French plantations (which now
extend round the coast of almost the whole western half of the island)
had given some value to the cattle of the Spaniards, who still
continue to possess, not only the eastern part of the coast, but the
whole inland and mountainous part of the country.

    Though in the progress of improvement and population the price
of the whole beast necessarily rises, yet the price of the carcase
is likely to be much more affected by this rise than that of the
wool and the hide. The market for the carcase, being in the rude state
of society confined always to the country which produces it, must
necessarily be extended in proportion to the improvement and
population of that country. But the market for the wool and the
hides even of a barbarous country often extending to the whole
commercial world, it can very seldom be enlarged in the same
proportion. The state of the whole commercial world can seldom be much
affected by the improvement of any particular country; and the
market for such commodities may remain the same or very nearly the
same after such improvements as before. It should, however, in the
natural course of things rather upon the whole be somewhat extended in
consequence of them. If the manufactures, especially, of which those
commodities are the materials should ever come to flourish in the
country, the market, though it might not be much enlarged, would at
least be brought much nearer to the place of growth than before; and
the price of those materials might at least be increased by what had
usually been the expense of transporting them to distant countries.
Though it might not rise therefore in the same proportion as that of
butcher's meat, it ought naturally to rise somewhat, and it ought
certainly not to fall.

    In England, however, notwithstanding the flourishing state of
its woollen manufacture, the price of English wool has fallen very
considerably since the time of Edward III. There are many authentic
records which demonstrate that during the reign of that prince
(towards the middle of the fourteenth century, or about 1339) what was
reckoned the moderate and reasonable price of the tod, or twenty-eight
pounds of English wool, was not less than ten shillings of the money
of those times, containing at the rate of twentypence the ounce, six
ounces of silver Tower weight, equal to about thirty shillings of
our present money. In the present times, one-and-twenty shillings
the tod may be reckoned a good price for very good English wool. The
money-price of wool, therefore, in the time of Edward III, was to
its money-price in the present times as ten to seven. The
superiority of its real price was still greater. At the rate of six
shillings and eightpence the quarter, ten shillings was in those
ancient times the price of twelve bushels of wheat. At the rate of
twenty-eight shillings the quarter, one-and-twenty shillings is in the
present times the price of six bushels only. The proportion between
the real prices of ancient and modern times, therefore, is as twelve
to six, or as two to one. In those ancient times a tod of wool would
have purchased twice the quantity of subsistence which it will
purchase at present; and consequently twice the quantity of labour, if
the real recompense of labour had been the same in both periods.

    This degradation both in the real and nominal value of wool
could never have happened in consequence of the natural course of
things. It has accordingly been the effect of violence and artifice:
first, of the absolute prohibition of exporting wool from England;
secondly, of the permission of importing it from Spain duty free;
thirdly, of the prohibition of exporting it from Ireland to any
other country but England. In consequence of these regulations the
market for English wool, instead of being somewhat extended in
consequence of the improvement of England, has been confined to the
home market, where the wool of several other countries is allowed to
come into competition with it, and where that of Ireland is forced
into competition with it. As the woollen manufactures, too, of Ireland
are fully as much discouraged as is consistent with justice and fair
dealing, the Irish can work up but a small part of their own wool at
home, and are, therefore, obliged to send a greater proportion of it
to Great Britain, the only market they are allowed.

    I have not been able to find any such authentic records concerning
the price of raw hides in ancient times. Wool was commonly paid as a
subsidy to the king, and its valuation in that subsidy ascertains,
at least in some degree, what was its ordinary price. But this seems
not to have been the case with raw hides. Fleetwood, however, from
an account in 1425, between the prior of Burcester Oxford and one of
his canons, gives us their price, at least as it was stated upon
that particular occasion, viz., five ox hides at twelve shillings;
five cow hides at seven shillings and threepence; thirty-six sheep
skins of two years old at nine shillings; sixteen calves skins at
two shillings. In 1425, twelve shillings contained about the same
quantity of silver as four-and-twenty shillings of our present
money. An ox hide, therefore, was in this account valued at the same
quantity of silver as 4s. four-fifths of our present money. Its
nominal price was a good deal lower than at present. But at the rate
of six shillings and eightpence the quarter, twelve shillings would in
those times have purchased fourteen bushels and four-fifths of a
bushel of wheat, which, at three and sixpence the bushel, would in the
present times cost 51s. 4d. An ox hide, therefore, would in those
times have purchased as much corn as ten shillings and threepence
would purchase at present. Its real value was equal to ten shillings
and threepence of our present money. In those ancient times, when
the cattle were half starved during the greater part of the winter, we
cannot suppose that they were of a very large size. An ox hide which
weighs four stone of sixteen pounds avoirdupois is not in the
present times reckoned a bad one; and in those ancient times would
probably have been reckoned a very good one. But at half-a-crown the
stone, which at this moment (February 1773) I understand to be the
common price, such a hide would at present cost only ten shillings.
Though its nominal price, therefore, is higher in the present than
it was in those ancient times, its real price, the real quantity of
subsistence which it will purchase or command, is rather somewhat
lower. The price of cow hides, as stated in the above account, is
nearly in the common proportion to that of ox hides. That of sheep
skins is a good deal above it. They had probably been sold with the
wool. That of calves skins, 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 stock, are generally
killed very young; as was the case in Scotland twenty or thirty
years ago. It saves the milk, which their price would not pay for.
Their skins, therefore, are commonly good for little.

    The price of raw hides is a good deal lower at present than it was
a few years ago, owing probably to the taking off the duty upon
sealskins, and to the allowing, for a limited time, the importation of
raw hides from Ireland and from the plantations duty free, which was
done in 1769. Take the whole of the present century at an average,
their real price has probably been somewhat higher than it was in
those ancient times. The nature of the commodity renders it not
quite so proper for being transported to distant markets as wool. It
suffers more by keeping. A salted hide is reckoned inferior to a fresh
one, and sells for a lower price. This circumstance must necessarily
have some tendency to sink the price of raw hides produced in a
country which does not manufacture them, but is obliged to export
them; and comparatively to raise that of those produced in a country
which does manufacture them. It must have some tendency to sink
their price in a barbarous, and to raise it in an improved and
manufacturing country. It must have had some tendency, therefore, to
sink it in ancient and to raise it in modern times. Our tanners,
besides, have not been quite so successful as our clothiers in
convincing the wisdom of the nation that the safety of the
commonwealth depends upon the prosperity of their particular
manufacture. They have accordingly been much less favoured. The
exportation of raw hides has, indeed, been prohibited, and declared
a nuisance; but their importation from foreign countries has been
subjected to a duty; and though this duty has been taken off from
those 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 sale of its surplus hides, or of those which are
not manufactured at home. The hides of common cattle have but within
these few years been put among the enumerated commodities which the
plantations can send nowhere but to the mother country; neither has
the commerce of Ireland been in this case oppressed hitherto in
order to support the manufactures of Great Britain.

    Whatever regulations tend to sink the price either of wool or of
raw hides below what it naturally would be must, in an improved and
cultivated country, have some tendency to raise the price of butcher's
meat. The price both of the great and small cattle, which are fed on
improved and cultivated land, must be sufficient to pay the rent which
the landlord and the profit which the farmer has reason to expect from
improved and cultivated land. If it is not, they will soon cease to
feed them. Whatever part of this price, therefore, is not paid by
the wool and the hide must be paid by the carcase. The less there is
paid for the one, the more must be paid for the other. In what
manner this price is to be divided upon the different parts of the
beast is indifferent to the landlords and farmers, provided it is
all paid to them. In an improved and cultivated country, therefore,
their interest as landlords and farmers cannot be much affected by
such regulations, though their interest as consumers may, by the
rise in the price of provisions. It would be quite otherwise, however,
in an unimproved and uncultivated country, where the greater part of
the lands could be applied to no other purpose but the feeding of
cattle, and where the wool and the hide made the principal part of the
value of those cattle. Their interest as landlords and farmers would
in this case be very deeply affected by such regulations, and their
interest as consumers very little. The fall in the price of wool and
the hide would not in this case raise the price of the carcase,
because the greater part of the lands of the country being
applicable to no other purpose but the feeding of cattle, the same
number would still continue to be fed. The same quantity of
butcher's meat would still come to market. The demand for it would
be no greater than before. Its price, therefore, would be the same
as before. The whole price of cattle would fall, and along with it
both the rent and the profit of all those 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,
which is commonly, but very falsely, ascribed to Edward III, would, in
the then circumstances of the country, have been the most
destructive regulation which could well have been thought of. It would
not only have reduced the actual value of the greater part of the
lands of the kingdom, but by reducing the price of the most
important species of small cattle it would have retarded very much its
subsequent improvement.

    The wool of Scotland fell very considerably in its price in
consequence of the union with England, by which it was excluded 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 southern
counties of Scotland, which are chiefly a sheep country, would have
been very deeply affected by this event, had not the rise in the price
of butcher's meat fully compensated the fall in the price of wool.

    As the efficacy of human industry, in increasing the quantity
either of wool or of raw hides, is limited, so far as it depends
upon the produce of the country where it is exerted; so it is
uncertain so far as it depends upon the produce of other countries. It
so far depends, not so much upon the quantity which they produce, as
upon that which they do not manufacture; and upon the restraints which
they may or may not think proper to impose upon the exportation of
this sort of rude produce. These circumstances, as they are altogether
independent of domestic industry, so they necessarily render the
efficacy of its efforts more or less uncertain. In multiplying this
sort of rude produce, therefore, the efficacy of human industry is not
only limited, but uncertain.

    In multiplying another very important sort of rude produce, the
quantity of fish that is brought to market, it is likewise both
limited and uncertain. It is limited by the local situation of the
country, by the proximity or distance of its different provinces
from the sea, by the number of its lakes and rivers, and by what may
be called the fertility or barrenness of those seas, lakes, and
rivers, as to this sort of rude produce. As population increases, as
the annual produce of the land and labour of the country grows greater
and greater, there come to be more buyers of fish, and those buyers,
too, have a greater quantity and variety of other goods, or, what is
the same thing, the price of a greater quantity and variety of other
goods to buy with. But it will generally be impossible to supply the
great and extended market without employing a quantity of labour
greater than in proportion to what had been requisite for supplying
the narrow and confined one. A market which, from requiring only one
thousand, comes to require annually ten thousand tons of fish, can
seldom be supplied without employing more than ten times the
quantity of labour which had before been sufficient to supply it.
The fish must generally be fought for at a greater distance, larger
vessels must be employed, and more expensive machinery of every kind
made use of. The real price of this commodity, therefore, naturally
rises in the progress of improvement. It has accordingly done so, I
believe, more or less in every country.

    Though the success of a particular day's fishing may be a very
uncertain matter, yet, the local situation of the country being
supposed, the general efficacy of industry in bringing a certain
quantity of fish to market, taking the course of a year, or of several
years together, it may perhaps be thought is certain enough; and it no
doubt is so. As it depends more, however, upon the local situation
of the country than upon the state of its wealth and industry; as upon
this account it may in different countries be the same in very
different periods of improvement, and very different in the same
period; its connection with the state of improvement is uncertain, and
it is of this sort of uncertainty that I am here speaking.

    In increasing the quantity of the different minerals and metals
which are drawn from the bowels of the earth, that of the more
precious ones particularly, the efficacy of human industry seems not
to be limited, but to be altogether uncertain.

    The quantity of the precious metals which is to be found in any
country is not limited by anything in its local situation, such as the
fertility or barrenness of its own mines. Those metals frequently
abound in countries which possess no mines. Their quantity in every
particular country seems to depend upon two different circumstances;
first, upon its power of purchasing, upon the state of its industry,
upon the annual produce of its land and labour, in consequence of
which it can afford to employ a greater or a smaller quantity of
labour and subsistence in bringing or purchasing such superfluities as
gold and silver, either from its own mines or from those of other
countries; and, secondly, upon the fertility or barrenness of the
mines which may happen at any particular time to supply the commercial
world with those metals. The quantity of those metals in the countries
most remote from the mines must be more or less affected by this
fertility or barrenness, on account of the easy and cheap
transportation of those metals, of their small bulk and great value.
Their quantity in China and Indostan must have been more or less
affected by the abundance of the mines of America.

    So far as their quantity in any particular country depends upon
the former of those two circumstances (the power of purchasing), their
real price, like that of all other luxuries and superfluities, is
likely to rise with the wealth and improvement of the country, and
to fall with its poverty and depression. Countries which have a
great quantity of labour and subsistence to spare can afford to
purchase any particular quantity of those metals at the expense of a
greater quantity of labour and subsistence than countries which have
less to spare.

    So far as their quantity in any particular country depends upon
the latter of those two circumstances (the fertility or barrenness
of the mines which happen to supply the commercial world), their
real price, the real quantity of labour and subsistence which they
will purchase or exchange for, will, no doubt, sink more or less in
proportion to the fertility, and rise in proportion to the
barrenness of those mines.

    The fertility or barrenness of the mines, however, which may
happen at any particular time to supply the commercial world, is a
circumstance which, it is evident, may have no sort of connection with
the state of industry in a particular country. It seems even to have
no very necessary connection with that of the world in general. As
arts and commerce, indeed, gradually spread themselves over a
greater and a greater part of the earth, the search for new mines,
being extended over a wider surface, may have somewhat a better chance
for being successful than when confined within narrower bounds. The
discovery of new mines, however, as the old ones come to be
gradually exhausted, is a matter of the greatest uncertainty, and such
as no human skill or industry can ensure. All indications, it is
acknowledged, are doubtful, and the actual discovery and successful
working of a new mine can alone ascertain the reality of its value, or
even of its existence. In this search there seem to be no certain
limits either to the possible success or to the possible
disappointment of human industry. In the course of a century or two,
it is possible that new mines may be discovered more fertile than
any that have ever yet been known; and it is just equally possible the
most fertile mine then known may be more barren than any that was
wrought before the discovery of the mines of America. Whether the
one or the other of those two events may happen to take place is of
very little importance to the real wealth and prosperity of the world,
to the real value of the annual produce of the land and labour of
mankind. Its nominal value, the quantity of gold and silver by which
this annual produce could be expressed or represented, would, no
doubt, be very different; but its real value, the real quantity of
labour which it could purchase or command, would be precisely the
same. A shilling might in the one case represent no more labour than a
penny does at present; and a penny in the other might represent as
much as a shilling does now. But in the one case he who had a shilling
in his pocket would be no richer than he who has a penny at present;
and in the other he who had a penny would be just as rich as he who
has a shilling now. The cheapness and abundance of gold and silver
plate would be the sole advantage which the world could derive from
the one event, and the dearness and scarcity of those trifling
superfluities the only inconveniency it could suffer from the other.

    CONCLUSION OF THE DIGRESSION CONCERNING THE VARIATIONS IN

                   THE VALUE OF SILVER

    The greater part of the writers who have collected the money
prices of things in ancient times seem to have considered the low
money-price of corn, and of goods in general, or, in other words,
the high value of gold and silver, as a proof, not only of the
scarcity of those metals, but of the poverty and barbarism of the
country at the time when it took place. This notion is connected
with the system of political economy which represents national
wealth as consisting in the abundance, and national poverty in the
scarcity of gold and silver; a system which I shall endeavour to
explain and examine at great length in the fourth book of this
inquiry. I shall only observe at present that the high value of the
precious metals can be no proof of the poverty or barbarism of any
particular country at the time when it took place. It is a proof
only of the barrenness of the mines which happened at that time to
supply the commercial world. A poor country, as it cannot afford to
buy more, so it can as little afford to pay dearer for gold and silver
than a rich one; and the value of those 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 increased greatly since the discovery of the mines
of America, so the value of gold and silver has gradually
diminished. This diminution of their value, however, has not been
owing to the increase of the real wealth of Europe, of the annual
produce of its land and labour, but to the accidental discovery of
more abundant mines than any that were known before. The increase of
the quantity of gold and silver in Europe, and the increase of its
manufactures and agriculture, are two events which, though they have
happened nearly about the same time, yet have arisen from very
different causes, and have scarce any natural connection with one
another. The one has arisen from a mere accident, in which neither
prudence nor policy either had or could have any share. The other from
the fall of the feudal system, and from the establishment of a
government which afforded to industry the only encouragement which
it requires, some tolerable security that it shall enjoy the fruits of
its own labour. Poland, where the feudal system still continues to
take place, is at this day as beggarly a country as it was before
the discovery of America. The money price of corn, however, has risen;
the real value of the precious metals has fallen in Poland, in the
same manner as in other parts of Europe. Their quantity, therefore,
must have increased there as in other places, and nearly in the same
proportion to the annual produce of its land and labour. This increase
of the quantity of those metals, however, has not, it seems, increased
that annual produce, has neither improved the manufactures and
agriculture of the country, nor mended the circumstances of its
inhabitants. Spain and Portugal, the countries which possess the
mines, are, after Poland, perhaps, the two most beggarly countries
in Europe. The value of the precious metals, however, must be lower in
Spain and Portugal than in any other part of Europe; as they come from
those countries to all other parts of Europe, loaded, not only with
a freight and an insurance, but with the expense of smuggling, their
exportation being either prohibited, or subjected to a duty. In
proportion to the annual produce of the land and labour, therefore,
their quantity must be greater in those countries than in any other
part of Europe. Those countries, however, are poorer than the
greater part of Europe. Though the feudal system has been abolished in
Spain and Portugal, it has not been succeeded by a much better.

    As the low value of gold and silver, therefore, is no proof of the
wealth and flourishing state of the country where it takes place; so
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
barbarism.

    But though the low money price either of goods in general, or of
corn in particular, be no proof of the poverty or barbarism of the
times, the low money price of some particular sorts of goods, such
as cattle, poultry, game of all kinds, etc., in proportion to that
of corn, is a most decisive one. It clearly demonstrates, first, their
great abundance in proportion to that of corn, and consequently the
great extent of the land which they occupied in proportion to what was
occupied by corn; and, secondly, the low value of this land in
proportion to that of corn land, and consequently the uncultivated and
unimproved state of the far greater part of the lands of the
country. It clearly demonstrates that the stock and population of
the country did not bear the same proportion to the extent of its
territory which they commonly do in civilised countries, and that
society 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 supply the commercial world with gold and silver were
fertile or barren, not that the country was rich or poor. But from the
high or low money price of some sorts of goods in proportion to that
of others, we can infer, with a degree of probability that
approaches almost to 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 less barbarous state, or in a more or less
civilised one.

    Any rise in the money price of goods which proceeded altogether
from the degradation of the value of silver would affect all sorts
of goods equally, and raise their price universally a third, or a
fourth, or a fifth part higher, according as silver happened to lose a
third, or a fourth, or a fifth part of its former value. But the
rise in the price of provisions, which has been the subject of so much
reasoning and conversation, does not affect all sorts of provisions
equally. Taking the course of the present century at an average, the
price of corn, it is acknowledged, even by those who account for
this rise by the degradation of the value of silver, has risen much
less than that of some other sorts of provisions. The rise in the
price of those other sorts of provisions, therefore, cannot be owing
altogether to the degradation of the value of silver. Some other
causes must be taken into the account, and those which have been above
assigned will, perhaps, without having recourse to the supposed
degradation of the value of silver, sufficiently explain this rise
in those particular sorts of provisions of which the price has
actually risen in proportion to that of corn.

    As to the price of corn itself, it has, during the sixty-four
first years of the present century, and before the late
extraordinary course of bad seasons, been somewhat lower than it was
during the sixty-four last years of the preceding century. This fact
is attested, not only by the accounts of Windsor market, but by the
public fiars of all the different counties of Scotland, and by the
accounts of several different markets in France, which have been
collected with great diligence and fidelity by Mr. Messance and by Mr.
Dupre de St. Maur. The evidence is more complete than could well
have been expected in a matter which is naturally so very difficult to
be ascertained.

    As to the high price of corn during these last ten or twelve
years, it can be sufficiently accounted for from the badness of the
seasons, without supposing any degradation in the value of silver. The
opinion, therefore, that silver is continually sinking in its value,
seems not to be founded upon any good observations, either upon the
prices of corn, or upon those of other provisions.

    The same quantity of silver, it may, perhaps, be said, will in the
present times, even according to the account which has been here
given, purchase a much smaller quantity of several sorts of provisions
than it would have done during some part of the last century; and to
ascertain whether this change be owing to a rise in the value of those
goods, or to a fall in the value of silver, is only to establish a
vain and useless distinction, which can be of no sort of service to
the man who has only a certain quantity of silver to go to market
with, or a certain fixed revenue in money. I certainly do not
pretend that the knowledge of this distinction will enable him to
buy cheaper. It may not, however, upon that account be altogether
useless.

    It may be of some use to the public by affording an easy proof
of the prosperous condition of the country. If the rise in the price
of some sorts of provisions be owing altogether to a fall in the value
of silver, it is owing to a circumstance from which nothing can be
inferred but the fertility of the American mines. The real wealth of
the country, the annual produce of its land and labour, may,
notwithstanding this circumstance, be either gradually declining, as
in Portugal and Poland; or gradually advancing, as in most other parts
of Europe. But if this rise in the price of some sorts of provisions
be owing to a rise in the real value of the land which produces
them, to its increased fertility, or, in consequence of more
extended improvement and good cultivation, to its having been rendered
fit for producing corn; it is owing to a circumstance which
indicates in the clearest manner the prosperous and advancing state of
the country. The land constitutes by far the greatest, the most
important, and the most durable part of the wealth of every
extensive country. It may surely be of some use, or, at least, it
may give some satisfaction to the public, to have so decisive a
proof of the increasing value of by far the greatest, the most
important, and the most durable part of its wealth.

    It may, too, be of some use to the public in regulating the
pecuniary reward of some of its inferior servants. If this rise in the
price of some sorts of provisions be owing to a fall in the value of
silver, their pecuniary reward, provided it was not too large
before, ought certainly to be augmented in proportion to the extent of
this fall. If it is not augmented, their real recompense will
evidently be so much diminished. But if this rise of price is owing to
the increased value, in consequence of the improved fertility of the
land which produces such provisions, it becomes a much nicer matter to
judge either in what proportion any pecuniary reward ought to be
augmented, or whether it ought to be augmented at all. The extension
of improvement and cultivation, as it necessarily raises more or less,
in proportion to the price of corn, that of every sort of animal food,
so it as necessarily lowers that of, I believe, every sort of
vegetable food. It raises the price of animal food; because a great
part of the land which produces it, being rendered fit for producing
corn, must afford to the landlord and farmer the rent and profit of
corn-land. It lowers the price of vegetable food; because, by
increasing the fertility of the land, it increases its abundance.
The improvements of agriculture, too, introduce many sorts of
vegetable food, which, requiring less land and not more labour than
corn, come much cheaper to market. Such are potatoes and maize, or
what is called Indian corn, the two most important improvements
which the agriculture of Europe, perhaps, which Europe itself has
received from the great extension of its commerce and navigation. Many
sorts of vegetable food, besides, which in the rude state of
agriculture are confined to the kitchen-garden, and raised only by the
spade, come in its improved state to be introduced into common fields,
and to be raised by the plough: such as turnips, carrots, cabbages,
etc. If in the progress of improvement, therefore, the real price of
one species of food necessarily rises, that of another as
necessarily falls, and it becomes a matter of more nicety to judge how
far the rise in the one may be compensated by the fall in the other.
When the real price of butcher's meat has once got to its height
(which, with regard to every sort, except, perhaps, that of hogs'
flesh, it seems to have done through a great part of England more than
a century ago), any rise which can afterwards happen in that of any
other sort of animal food cannot much affect the circumstances of
the inferior ranks of people. The circumstances of the poor through
a great part of England cannot surely be so much distressed by any
rise in the price of poultry, fish, wild-fowl, or venison, as they
must be relieved by the fall in that of potatoes.

    In the present season of scarcity the high price of corn no
doubt distresses the poor. But in times of moderate plenty, when
corn is at its ordinary or average price, the natural rise in the
price of any other sort of rude produce cannot much affect them.
They suffer more, perhaps, by the artificial rise which has been
occasioned by taxes in the price of some manufactured commodities;
as of salt, soap, leather, candles, malt, beer, and ale, etc.

       EFFECTS OF THE PROGRESS OF IMPROVEMENT UPON THE REAL

                     PRICE OF MANUFACTURES

    It is the natural effect of improvement, however, to diminish
gradually the real price of almost all manufactures. That of the
manufacturing workmanship diminishes, perhaps, in all of them
without exception. In consequence of better machinery, of greater
dexterity, and of a more proper division and distribution of work, all
of which are the natural effects of improvement, a much smaller
quantity of labour becomes requisite for executing any particular
piece of work, and though, in consequence of the flourishing
circumstances of the society, the real price of labour should rise
very considerably, yet the great diminution of the quantity will
generally much more than compensate the greatest rise which can happen
in the price.

    There are, indeed, a few manufactures in which the necessary
rise in the real price of the rude materials will more than compensate
all the advantages which improvement can introduce into the
execution of the work. In carpenters' and joiners' work, and in the
coarser sort of cabinet work, the necessary rise in the real price
of barren timber, in consequence of the improvement of land, will more
than compensate all the advantages which can be derived from the
best machinery, the greatest dexterity, and the most proper division
and distribution of work.

    But in all cases in which the real price of the rude materials
either does not rise at all, or does not rise very much, that of the
manufactured commodity sinks very considerably.

    This diminution of price has, in the course of the present and
preceding century, been most remarkable in those manufactures of which
the materials are the coarser metals. A better movement of a watch,
that about the middle of the last century could have been bought for
twenty pounds, may now perhaps be had for twenty shillings. In the
work of cutiers and locksmiths, in all the toys which are made of
the coarser metals, and in all those goods which are commonly known by
the name of Birmingham and Sheffield ware, there has been, during
the same period, a very great reduction of price, though not
altogether so great as in watch-work. It has, however, been sufficient
to astonish the workmen of every other part of Europe, who in many
cases acknowledge that they can produce no work of equal goodness
for double, or even for triple the price. There are perhaps no
manufactures in which the division of labour can be carried further,
or in which the machinery employed admits of a greater variety of
improvements, than those of which the materials are the coarser
metals.

    In the clothing manufacture there has, during the same period,
been no such sensible reduction of price. The price of superfine
cloth, I have been assured, on the contrary, has, within these
five-and-twenty or thirty years, risen somewhat in proportion to its
quality; owing, it was said, to a considerable rise in the price of
the material, which consists altogether of Spanish wool. That of the
Yorkshire cloth, which is made altogether of English wool, is said
indeed, during the course of the present century, to have fallen a
good deal in proportion to its quality. Quality, however, is so very
disputable a matter that I look upon all information of this kind as
somewhat uncertain. In the clothing manufacture, the division of
labour is nearly the same now as it was a century ago, and the
machinery employed is not very different. There may, however, have
been some small improvements in both, which may have occasioned some
reduction of price.

    But the reduction will appear much more sensible and undeniable if
we compare the price of this manufacture in the present times with
what it was in a much remoter period, towards the end of the fifteenth
century, when the labour was probably much less subdivided, and the
machinery employed much more imperfect, than it is at present.

    In 1487, being the 4th of Henry VII, it was enacted that
"whosoever shall sell by retail a broad yard of the finest scarlet
grained, or of other grained cloth of the finest making, above sixteen
shillings, shall forfeit forty shillings for every yard so sold."
Sixteen shillings, therefore, containing about the same quantity of
silver as four-and-twenty shillings of our present money, was, at that
time, reckoned not an unreasonable price for a yard of the finest
cloth; and as this is a sumptuary law, such cloth, it is probable, had
usually been sold somewhat dearer. A guinea may be reckoned the
highest price in the present times. Even though the quality of the
cloths, therefore, should be supposed equal, and that of the present
times is most probably much superior, yet, even upon this supposition,
the money price of the finest cloth appears to have been
considerably reduced since the end of the fifteenth century. But its
real price has been much more reduced. Six shillings and eightpence
was then, and long afterwards, reckoned the average price of a quarter
of wheat. Sixteen shillings, therefore, was the price of two
quarters and more than three bushels of wheat. Valuing a quarter of
wheat in the present times at eight-and-twenty shillings, the real
price of a yard of fine cloth must, in those times, have been equal to
at least three pounds six shillings and sixpence of our present money.
The man who bought it must have parted with the command of a
quantity of labour and subsistence equal to what that sum would
purchase in the present times.

    The reduction in the real price of the coarse manufacture,
though considerable, has not been so great as in that of the fine.

    In 1643, being the 3rd of Edward IV, it was enacted that "no
servant in husbandry, nor common labourer, nor servant to any
artificer inhabiting out of a city or burgh shall use or wear in their
clothing any cloth above two shillings the broad yard." In the 3rd
of Edward IV, two shillings contained very nearly the same quantity of
silver as four of our present money. But the Yorkshire cloth which
is now sold at four shillings the yard is probably much superior to
any that was then made for the wearing of the very poorest order of
common servants. Even the money price of their clothing, therefore,
may, in proportion to the quality, be somewhat cheaper in the
present than it was in those ancient times. The real price is
certainly a good deal cheaper. Tenpence was then reckoned what is
called the moderate and reasonable price of a bushel of wheat. Two
shillings, therefore, was the price of two bushels and near two
pecks of wheat, which in the present times, at three shillings and
sixpence the bushel, would be worth eight shillings and ninepence. For
a yard of this cloth the poor servant must have parted with the
power of purchasing a quantity of subsistence equal to what eight
shillings and ninepence would purchase in the present times. This is a
sumptuary law too, restraining the luxury and extravagance of the
poor. Their clothing, therefore, had commonly been much more
expensive.

    The same order of people are, by the same law, prohibited from
wearing hose, of which the price should exceed fourteenpence the pair,
equal to about eight-and-twentypence of our present money. But
fourteenpence was in those times the price of a bushel and near two
pecks of wheat, which, in the present times, at three and sixpence the
bushel, would cost five shillings and threepence. We should in the
present times consider this as a very high price for a pair of
stockings, to a servant of the poorest and lowest order. He must,
however, in those times have paid what was really equivalent to this
price for them.

    In the time of Edward IV the art of knitting stockings was
probably not known in any part of Europe. Their hose were made of
common cloth, which may have been one of the causes of their dearness.
The first person that wore stockings in England is said to have been
Queen Elizabeth. She received them as a present from the Spanish
ambassador.

    Both in the coarse and in the fine woollen manufacture, the
machinery employed was much more imperfect in those ancient than it is
in the present times. It has since received three very capital
improvements, besides, probably, many smaller ones of which it may
be difficult to ascertain either the number or the importance. The
three capital improvements are: first, the exchange of the rock and
spindle for the spinning-wheel, which, with the same quantity of
labour, will perform more than double the quantity of work.
Secondly, the use of several very ingenious machines which
facilitate and abridge in a still greater proportion the winding of
the worsted and woollen yarn, or the proper arrangement of the warp
and woof before they are put into the loom; an operation which,
previous to the invention of those machines, must have been
extremely tedious and troublesome. Thirdly, the employment of the
fulling mill for thickening the cloth, instead of treading it in
water. Neither wind nor water mills of any kind were known in
England so early as the beginning of the sixteenth century, nor, so
far as I know, in any other part of Europe north of the Alps. They had
been introduced into Italy some time before.

    The consideration of these circumstances may, perhaps, in some
measure explain to us why the real price both of the coarse and of the
fine manufacture was so much higher in those ancient than it is in the
present times. It cost a greater quantity of labour to bring the goods
to market. When they were brought thither, therefore, they must have
purchased or exchanged for the price of a greater quantity.

    The coarse manufacture probably was, in those ancient times,
carried on in England, in the same manner as it always has been in
countries where arts and manufactures are in their infancy. It was
probably a household manufacture, in which every different part of the
work was occasionally performed by all the different members of almost
every private family; but so as to be their work only when they had
nothing else to do, and not to be the principal business from which
any of them derived the greater part of their subsistence. The work
which is performed in this manner, it has already been observed, comes
always much cheaper to market than that which is the principal or sole
fund of the workman's subsistence. The fine manufacture, on the
other hand, was not in those times carried on in England, but in the
rich and commercial country of Flanders; and it was probably conducted
then, in the same manner as now, by people who derived the whole, or
the principal part of their subsistence from it. It was, besides, a
foreign manufacture, and must have paid some duty, the ancient
custom of tonnage and poundage at least, to the king. This duty,
indeed, would not probably be very great. It was not then the policy
of Europe to restrain, by high duties, the importation of foreign
manufactures, but rather to encourage it, in order that merchants
might be enabled to supply, at as easy a rate as possible, the great
men with the conveniences and luxuries which they wanted, and which
the industry of their own country could not afford them.

    The consideration of these circumstances may perhaps in some
measure explain to us why, in those ancient times, the real price of
the coarse manufacture was, in proportion to that of the fine, so much
lower than in the present times.

                  CONCLUSION OF THE CHAPTER

    I shall conclude this very long chapter with observing that
every improvement in the circumstances of the society tends either
directly or indirectly to raise the real rent of land, to increase the
real wealth of the landlord, his power of purchasing the labour, or
the produce of the labour of other people.

    The extension of improvement and cultivation tends to raise it
directly. The landlord's share of the produce necessarily increases
with the increase of the produce.

    That rise in the real price of those parts of the rude produce
of land, which is first the effect of extended improvement and
cultivation, and afterwards the cause of their being still further
extended, the rise in the price of cattle, for example, tends too to
raise the rent of land directly, and in a still greater proportion.
The real value of the landlord's share, his real command of the labour
of other people, not only rises with the real value of the produce,
but the proportion of his share to the whole produce rises with it.
That produce, after the rise in its real price, requires no more
labour to collect it than before. A smaller proportion of it will,
therefore, be sufficient to replace, with the ordinary profit, the
stock which employs that labour. A greater proportion of it must,
consequently, belong to the landlord.

    All those improvements in the productive powers of labour, which
tend directly to reduce the real price of manufactures, tend
indirectly to raise the real rent of land. The landlord exchanges that
part of his rude produce, which is over and above his own consumption,
or what comes to the same thing, the price of that part of it, for
manufactured produce. Whatever reduces the real price of the latter,
raises that of the former. An equal quantity of the former becomes
thereby equivalent to a greater quantity of the latter; and the
landlord is enabled to purchase a greater quantity of the
conveniences, ornaments, or luxuries, which he has occasion for.

    Every increase in the real wealth of the society, every increase
in the quantity of useful labour employed within it, tends
indirectly to raise 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 cultivation, the produce increases with the
increase of the stock which is thus employed in raising it, and the
rent increases with the produce.

    The contrary circumstances, the neglect of cultivation and
improvement, the fall in the real price of any part of the rude
produce of land, the rise in the real price of manufactures from the
decay of manufacturing art and industry, the declension of the real
wealth of the society, all tend, on the other hand, to lower the
real rent of land, to reduce the real wealth of the landlord, to
diminish his power of purchasing 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 same thing, the whole price of that
annual produce, naturally divides itself, it has already been
observed, into three parts; the rent of land, the wages of labour, and
the profits of stock; and constitutes a revenue to three different
orders of people; to those who live by rent, to those who live by
wages, and to those who live by profit. These are the three great,
original, and constituent orders of every civilised society, from
whose revenue that of every other order is ultimately derived.

    The interest of the first of those three great orders, it
appears from what has been just now said, is strictly and
inseparably connected with the general interest of the society.
Whatever either promotes or obstructs the one, necessarily promotes or
obstructs the other. When the public deliberates concerning any
regulation of commerce or police, the proprietors of land never can
mislead it, with a view to promote the interest of their own
particular order; at least, if they have any tolerable knowledge of
that interest. They are, indeed, too often defective in this tolerable
knowledge. They are the only one of the three orders whose revenue
costs them neither labour nor care, but comes to them, as it were,
of its own accord, and independent of any plan or project of their
own. That indolence, which is the natural effect of the ease and
security of their situation, renders them too often, not only
ignorant, but incapable of that application of mind which is necessary
in order to foresee and understand the consequences of any public
regulation.

    The interest of the second order, that of those who live by wages,
is as strictly connected with the interest of the society as that of
the first. The wages of the labourer, it has already been shown, are
never so high as when the demand for labour is continually rising,
or when the quantity employed is every year increasing considerably.
When this real wealth of the society becomes stationary, his wages are
soon reduced to what is barely enough to enable him to bring up a
family, or to continue the race of labourers. When the society
declines, they fall even below this. The order of proprietors may,
perhaps, gain more by the prosperity of the society than that of
labourers: but there is no order that suffers so cruelly from its
decline. But though the interest of the labourer is strictly connected
with that of the society, he is incapable either of comprehending that
interest or of understanding its connection with his own. His
condition leaves him no time to receive the necessary information, and
his education and habits are commonly such as to render him unfit to
judge even though he was fully informed. In the public
deliberations, therefore, his voice is little heard and less regarded,
except upon some particular occasions, when his clamour is animated,
set on and supported by his employers, not for his, but their own
particular purposes.

    His employers constitute the third order, that of those who live
by profit. It is the stock that is employed for the sake of profit
which puts into motion the greater part of the useful labour of
every society. The plans and projects of the employers of stock
regulate and direct all the most important operations of labour, and
profit is the end proposed by all those plans and projects. But the
rate of profit does not, like rent and wages, rise with the prosperity
and fall with the declension of the society. On the contrary, it is
naturally low in rich and high in poor countries, and it is always
highest in the countries which are going fastest to ruin. The interest
of this third order, therefore, has not the same connection with the
general interest of the society as that of the other two. Merchants
and master manufacturers are, in this order, the two classes of people
who commonly employ the largest capitals, and who by their wealth draw
to themselves the greatest share of the public consideration. As
during their whole lives they are engaged in plans and projects,
they have frequently more acuteness of understanding than the
greater part of country gentlemen. As their thoughts, however, are
commonly exercised rather about the interest of their own particular
branch of business, than about that of the society, their judgment,
even when given with the greatest candour (which it has not been
upon every occasion) is much more to be depended upon with regard to
the former of those two objects than with regard to the latter.
Their superiority over the country gentleman is not so much in their
knowledge of the public interest, as in their having a better
knowledge of their own interest than he has of his. It is by this
superior knowledge of their own interest that they have frequently
imposed upon his generosity, and persuaded him to give up both his own
interest and that of the public, from a very simple but honest
conviction that their interest, and not his, was the interest of the
public. The interest of the dealers, however, in any particular branch
of trade or manufactures, is always in some respects different from,
and even opposite to, that of the public. To widen the market and to
narrow the competition, is always the interest of the dealers. To
widen the market may frequently be agreeable enough to the interest of
the public; but to narrow the competition must always be against it,
and can serve only to enable the dealers, by raising their profits
above what they naturally would be, to levy, for their own benefit, an
absurd tax upon the rest of their fellow-citizens. The proposal of any
new law or regulation of commerce which comes from this order ought
always to be listened to with great precaution, and ought never to
be adopted till after having been long and carefully examined, not
only with the most scrupulous, but with the most suspicious attention.
It comes from an order of men whose interest is never exactly the same
with that of the public, who have generally an interest to deceive and
even to oppress the public, and who accordingly have, upon many
occasions, both deceived and oppressed it.

               TABLES REFERRED TO IN CHAPTER 11, PART 3

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1202      -   12     -        -     -     -        1    16     -

1205      -   12     -        -    13     5        2     -     3

          -   13     4

          -   15     -

1223      -   12     -        -     -     -        1    16     -
1237      -    3     4        -     -     -        -    10     -
1243      -    2     -        -     -     -        -     6     -
1244      -    2     -        -     -     -        -     6     -
1246      -   16     -        -     -     -        2     8     -
1247      -   13     4        -     -     -        2     -     -
1257      1    4     -        -     -     -        3    12     -

1258      1    -     -        -    17     -        2    11     -

          -   15     -

          -   16     -

1270      4   16     -        5    12     -       16    16     -

          6    8     -

1286      -    2     8        -     9     4        1     8     -

          -   16     -

                                                 ---------------

                                        Total    L35     9     3

                                                 ---------------

                                Average Price     L2    19     1 1/4

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1287      -    3     4        -     -     -        -    10     -

1288      -    -     8        -     3     - 1/4    -     9     - 3/4

          -    1     -

          -    1     4

          -    1     6

          -    1     8

          -    2     -

          -    3     4

          -    9     4

1289      -   12     -        -    10     1 3/4    1    10     4 1/2

          -    6     -

          -    2     -

          -   10     8

          1    -     -

1290      -   16     -        -     -     -        2     8     -
1294      -   16     -        -     -     -        2     8     -
1302      -    4     -        -     -     -        -    12     -
1309      -    7     2        -     -     -        1     1     6
1315      1    -     -        -     -     -        3     -     -

1316      1    -     -        1    10     6        4    11     6

          1   10     -

          1   12     -

          2    -     -

1317      2    4     -        1    19     6        5    18     6

          -   14     -

          2   13     -

          4    -     -

          -    6     8

1336      -    2     -        -     -     -        -     6     -
1338      -    3     4        -     -     -        -    10     -

                                                 ---------------

                                        Total    L23     4    11 1/4

                                                 ---------------

                                Average Price     L1    18     8

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1339      -    9     -        -     -     -        1     7     -
1349      -    2     -        -     -     -        -     5     2
1359      1    6     8        -     -     -        3     2     2
1361      -    2     -        -     -     -        -     4     8
1363      -   15     -        -     -     -        1    15     -

1369      1    -     -        1     2     -        2     9     4

          1    4     -

1379      -    4     -        -     -     -        -     9     4
1387      -    2     -        -     -     -        -     4     8

1390      -   13     4        -    14     5        1    13     7

          -   14     -

          -   16     -

1401      -   16     -        -     -     -        1    17     4

1407      -    4     4 3/4    -     3    10        -     8    11

          -    3     4

1416      -   16     -        -     -     -        1    12     -

                                                 ---------------

                                        Total    L15     9     4

                                                 ---------------

                                Average Price     L1     5     9 1/3

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1423      -    8     -        -     -     -        -    16     -
1425      -    4     -        -     -     -        -     8     -
1434      1    6     8        -     -     -        2    13     4
1435      -    5     4        -     -     -        -    10     8

1439      1    -     -        1     3     4        2     6     8

          1    6     8

1440      1    4     -        -     -     -        2     8     -

1444      -    4     4        -     4     2        -     8     4

          -    4     -

1445      -    4     6        -     -     -        -     9     -
1447      -    8     -        -     -     -        -    16     -
1448      -    6     8        -     -     -        -    13     4
1449      -    5     -        -     -     -        -    10     -
1452      -    8     -        -     -     -        -    16     -

                                                 ---------------

                                        Total    L12    15     4

                                                 ---------------

                                Average Price     L1     1     3 1/2

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1453      -    5     4        -     -     -        -    10     8
1455      -    1     2        -     -     -        -     2     4
1457      -    7     8        -     -     -        -    15     4
1459      -    5     -        -     -     -        -    10     -
1460      -    8     -        -     -     -        -    16     -

1463      -    2     -        -     1    10        -     3     8

          -    1     8

1464      -    6     8        -     -     -        -    10     -
1486      1    4     -        -     -     -        1    17     -
1491      -   14     8        -     -     -        1     2     -
1494      -    4     -        -     -     -        -     6     -
1495      -    3     4        -     -     -        -     5     -
1497      1    -     -        -     -     -        1    11     -

                                                  --------------

                                        Total     L8     9     -

                                                  --------------

                                Average Price      -    14     1

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1499      -    4     -        -     -     -        -     6     -
1504      -    5     8        -     -     -        -     8     6
1521      1    -     -        -     -     -        1    10     -
1551      -    8     -        -     -     -        -     2     -
1553      -    8     -        -     -     -        -     8     -
1554      -    8     -        -     -     -        -     8     -
1555      -    8     -        -     -     -        -     8     -
1556      -    8     -        -     -     -        -     8     -

1557      -    4     -        -    17     8 1/2    -    17     8 1/2

          -    5     -

          -    8     -

          2   13     4

1558      -    8     -        -     -     -        -     8     -
1559      -    8     -        -     -     -        -     8     -
1560      -    8     -        -     -     -        -     8     -

                                                  --------------

                                        Total     L6     0     2 1/2

                                                  --------------

                                Average Price      -    10     - 5/12

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1561      -    8     -        -     -     -        -     8     -
1562      -    8     -        -     -     -        -     8     -

1574      2   16     -        2     -     -        2     -     -

          1    4     -

1587      3    4     -        -     -     -        3     4     -
1594      2   16     -        -     -     -        2    16     -
1595      2   13     -        -     -     -        2    13     -
1596      4    -     -        -     -     -        4     -     -

1597      5    4     -        4    12     -        4    12     -

          4    -     -

1598      2   16     8        -     -     -        2    16     8
1599      1   19     2        -     -     -        1    19     2
1600      1   17     8        -     -     -        1    17     8
1601      1   14    10        -     -     -        1    14    10

                                                 ---------------

                                        Total    L28     9     4

                                                 ---------------

                                Average Price     L2     7     5 1/3

   Prices of the Quarter of nine Bushels of the best or highest

  priced Wheat at Windsor Market, on Lady-day and Michaelmas, from

   1595 to 1764, both inclusive; the Price of each Year being the

     medium between the highest Prices of those Two Market Days.

   Years                            Years

                L.    s.    d.                   L.    s.    d.

    1595   -    2     0     0        1621   -    1    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

    1599   -    1    19     2        1625   -    2    12     0

    1600   -    1    17     8        1626   -    2     9     4

    1601   -    1    14    10        1627   -    1    16     0

    1602   -    1     9     4        1628   -    1     8     0

    1603   -    1    15     4        1629   -    2     2     0

    1604   -    1    10     8        1630   -    2    15     8

    1605   -    1    15    10        1631   -    3     8     0

    1606   -    1    13     0        1632   -    2    13     4

    1607   -    1    16     8        1633   -    2    18     0

    1608   -    2    16     8        1634   -    2    16     0

    1609   -    2    10     0        1635   -    2    16     0

    1610   -    1    15    10        1636   -    2    16     8

    1611   -    1    18     8                   --------------

    1612   -    2     2     4               16) 40     0     0

    1613   -    2     8     8                   --------------

    1614   -    2     1     8 1/2               L2    10     0

    1615   -    1    18     8

    1616   -    2     0     4

    1617   -    2     8     8

    1618   -    2     6     8

    1619   -    1    15     4

    1620   -    1    10     4

               --------------

           26) 54     0     6 1/2

               --------------

               L2     1     6 9/12

                  Wheat per                        Wheat per

   Years           quarter          Years           quarter

                L.    s.    d.                   L.    s.    d.

    1637   -    2    13     0     Brought over  79    14    10

    1638   -    2    17     4        1671   -    2     2     0

    1639   -    2     4    10        1672   -    2     1     0

    1640   -    2     4     8        1673   -    2     6     8

    1641   -    2     8     0        1674   -    3     8     8

    1642   -    0     0     0*       1675   -    3     4     8

    1643   -    0     0     0        1676   -    1    18     0

    1644   -    0     0     0        1677   -    2     2     0

    1645   -    0     0     0        1678   -    2    19     0

    1646   -    2     8     0        1679   -    3     0     0

    1647   -    3    13     8        1680   -    2     5     0

    1648   -    4     5     0        1681   -    2     6     8

    1649   -    4     0     0        1682   -    2     4     0

    1650   -    3    16     8        1683   -    2     0     0

    1651   -    3    13     4        1684   -    2     4     0

    1652   -    2     9     6        1685   -    2     6     8

    1653   -    1    15     6        1686   -    1    14     0

    1654   -    1     6     0        1687   -    1     5     2

    1655   -    1    13     4        1688   -    2     6     0

    1656   -    2     3     0        1689   -    1    10     0

    1657   -    2     6     8        1690   -    1    14     8

    1658   -    3     5     0        1691   -    1    14     0

    1659   -    3     6     0        1692   -    2     6     8

    1660   -    2    16     6        1693   -    3     7     8

    1661   -    3    10     0        1694   -    3     4     0

    1662   -    3    14     0        1695   -    2    13     0

    1663   -    2    17     0        1696   -    3    11     0

    1664   -    2     0     6        1697   -    3     0     0

    1665   -    2     9     4        1698   -    3     8     4

    1666   -    1    16     0        1699   -    3     4     0

    1667   -    1    16     0        1700   -    2     0     0

    1668   -    2     0     0                  ---------------

    1669   -    2     4     4             60)  153     1     8

    1670   -    2     1     8                  ---------------

               --------------                   L2    11     0 1/3

  Carry over  L79    14    10

  *Wanting in the account. The year 1646 supplied by Bishop Fleetwood.

                  Wheat per                        Wheat per

   Years           quarter          Years           quarter

                L.    s.    d.                   L.    s.    d.

    1701   -    1    17     8     Brought over  69     8     8

    1702   -    1     9     6        1734   -    1    18    10

    1703   -    1    16     0        1735   -    2     3     0

    1704   -    2     6     6        1736   -    2     0     4

    1705   -    1    10     0        1737   -    1    18     0

    1706   -    1     6     0        1738   -    1    15     6

    1707   -    1     8     6        1739   -    1    18     6

    1708   -    2     1     6        1740   -    2    10     8

    1709   -    3    18     6        1741   -    2     6     8

    1710   -    3    18     0        1742   -    1    14     0

    1711   -    2    14     0        1743   -    1     4    10

    1712   -    2     6     4        1744   -    1     4    10

    1713   -    2    11     0        1745   -    1     7     6

    1714   -    2    10     4        1746   -    1    19     0

    1715   -    2     3     0        1747   -    1    14    10

    1716   -    2     8     0        1748   -    1    17     0

    1717   -    2     5     8        1749   -    1    17     0

    1718   -    1    18    10        1750   -    1    12     6

    1719   -    1    15     0        1751   -    1    18     6

    1720   -    1    17     0        1752   -    2     1    10

    1721   -    1    17     6        1753   -    2     4     8

    1722   -    1    16     0        1754   -    1    14     8

    1723   -    1    14     8        1755   -    1    13    10

    1724   -    1    17     0        1756   -    2     5     3

    1725   -    2     8     6        1757   -    3     0     0

    1726   -    2     6     0        1758   -    2    10     0

    1727   -    2     2     0        1759   -    1    19    10

    1728   -    2    14     6        1760   -    1    16     6

    1729   -    2     6    10        1761   -    1    10     3

    1730   -    1    16     6        1762   -    1    19     0

    1731   -    1    12    10        1763   -    2     0     9

    1732   -    1     6     8        1764   -    2     6     9

    1733   -    1     8     4                  ---------------

               --------------             64)  129    13     6

  Carry over  L69     8     8                  ---------------

                                                L2     0     6 9/32

   Years                            Years

                L.    s.    d.                   L.    s.    d.

    1731   -    1    12    10        1741   -    2     6     8

    1732   -    1     6     8        1742   -    1    14     0

    1733   -    1     8     4        1743   -    1     4    10

    1734   -    1    18    10        1744   -    1     4    10

    1735   -    2     3     0        1745   -    1     7     6

    1736   -    2     0     4        1746   -    1    19     0

    1737   -    1    18     0        1747   -    1    14    10

    1738   -    1    15     6        1748   -    1    17     0

    1739   -    1    18     6        1749   -    1    17     0

    1740   -    2    10     8        1750   -    1    12     6

               --------------                   --------------

          10)  18    12     8              10)  16    18     2

               --------------                  ---------------

               L1    17     3 1/5               L1    13     9 4/5

                         BOOK TWO

      OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK

                       INTRODUCTION

    IN that rude state of society in which there is no division of
labour, in which exchanges are seldom made, and in which every man
provides everything for himself, it is not necessary that any stock
should be accumulated or stored up beforehand in order to carry on the
business of the society. Every man endeavours to supply by his own
industry his own occasional wants as they occur. When he is hungry, he
goes to the forest to hunt; when his coat is worn out, he clothes
himself with the skin of the first large animal he kills: and when his
hut begins to go to ruin, he repairs it, as well as he can, with the
trees and the turf that are nearest it.

    But when the division of labour has once been thoroughly
introduced, the produce of a man's own labour can supply but a very
small part of his occasional wants. The far greater part of them are
supplied by the produce of other men's labour, which he purchases with
the produce, or, what is the same thing, with the price of the produce
of his own. But this purchase cannot be made till such time as the
produce of his own labour has not only been completed, but sold. A
stock of goods of different kinds, therefore, must be stored up
somewhere sufficient to maintain him, and to supply him with the
materials and tools of his work till such time, at least, as both
these events can be brought about. A weaver cannot apply himself
entirely to his peculiar business, unless there is beforehand stored
up somewhere, either in his own possession or in that of some other
person, a stock sufficient to maintain him, and to supply him with the
materials and tools of his work, till he has not only completed, but
sold his web. This accumulation must, evidently, be previous to his
applying his industry for so long a time to such a peculiar business.

    As the accumulation of stock must, in the nature of things, be
previous to the division of labour, so labour can be more and more
subdivided in proportion only as stock is previously more and more
accumulated. The quantity of materials which the same number of people
can work up, increases in a great proportion as labour comes to be
more and more subdivided; and as the operations of each workman are
gradually reduced to a greater degree of simplicity, a variety of
new machines come to be invented for facilitating and abridging
those operations. As the division of labour advances, therefore, in
order to give constant employment to an equal number of workmen, an
equal stock of provisions, and a greater stock of materials and
tools than what would have been necessary in a ruder state of
things, must be accumulated beforehand. But the number of workmen in
every branch of business generally increases with the division of
labour in that branch, or rather it is the increase of their number
which enables them to class and subdivide themselves in this manner.

    As the accumulation of stock is previously necessary for
carrying on this great improvement in the productive powers of labour,
so that accumulation naturally leads to this improvement. The person
who employs his stock in maintaining labour, necessarily wishes to
employ it in such a manner as to produce as great a quantity of work
as possible. He endeavours, therefore, both to make among his
workmen the most proper distribution of employment, and to furnish
them with the best machines which he can either invent or afford to
purchase. His abilities in both these respects are generally in
proportion to the extent of his stock, or to the number of people whom
it can employ. The quantity of industry, therefore, not only increases
in every country with the increase of the stock which employs it, but,
in consequence of that increase, the same quantity of industry
produces a much greater quantity of work.

    Such are in general the effects of the increase of stock upon
industry and its productive powers.

    In the following book I have endeavoured to explain the nature
of stock, the effects of its accumulation into capitals of different
kinds, and the effects of the different employments of those capitals.
This book is divided into five chapters. In the first chapter, I
have endeavoured to show what are the different parts or branches into
which the stock, either of an individual, or of a great society,
naturally divides itself. In the second, I have endeavoured to explain
the nature and operation of money considered as a particular branch of
the general stock of the society. The stock which is accumulated
into a capital, may either be employed by the person to whom it
belongs, or it may be lent to some other person. In the third and
fourth chapters, I have endeavoured to examine the manner in which
it operates in both these situations. The fifth and last chapter
treats of the different effects which the different employments of
capital immediately produce upon the quantity both of national
industry, and of the annual produce of land and labour.

                            CHAPTER I

                    Of the Division of Stock

    WHEN the stock which a man possesses is no more than sufficient to
maintain him for a few days or a few weeks, he seldom thinks of
deriving any revenue from it. He consumes it as sparingly as he can,
and endeavours by his labour to acquire something which may supply its
place before it be consumed altogether. His revenue is, in this
case, derived from his labour only. This is the state of the greater
part of the labouring poor in all countries.

    But when he possesses stock sufficient to maintain him for
months or years, he naturally endeavours to derive a revenue from
the greater part of it; reserving only so much for his immediate
consumption as may maintain him till this revenue begins to come in.
His whole stock, therefore, is distinguished into two parts. That part
which, he expects, is to afford him this revenue, is called his
capital. The other is that which supplies his immediate consumption;
and which consists either, first, in that portion of his whole stock
which was originally reserved for this purpose; or, secondly, in his
revenue, from whatever source derived, as it gradually comes in; or,
thirdly, in such things as had been purchased by either of these in
former years, and which are not yet entirely consumed; such as a stock
of clothes, household furniture, and the like. In one, or other, or
all of these three articles, consists the stock which men commonly
reserve for their own immediate consumption.

    There are two different ways in which a capital may be employed so
as to yield a revenue or profit to its employer.

    First, it may be employed in raising, manufacturing, or purchasing
goods, and selling them again with a profit. The capital employed in
this manner yields no revenue or profit to its employer, while it
either remains in his possession, or continues in the same shape.
The goods of the merchant yield him no revenue or profit till he sells
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 shape, and returning to him in another, and it is only by means of
such circulation, or successive 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
purchase of useful machines and instruments of trade, or in suchlike
things as yield a revenue or profit without changing masters, or
circulating any further. Such capitals, therefore, may very properly
be called fixed capitals.

    Different occupations require very different proportions between
the fixed and circulating capitals employed in them.

    The capital of a merchant, for example, is altogether a
circulating capital. He has occasion for no machines or instruments of
trade, unless his shop, or warehouse, be considered as such.

    Some part of the capital of every master artificer or manufacturer
must be fixed in the instruments of his trade. This part, however,
is very small in some, and very great in others. A master tailor
requires no other instruments of trade but a parcel of needles.
Those of the master shoemaker are a little, though but a very
little, more expensive. Those of the weaver rise a good deal above
those of the shoemaker. The far greater part of the capital of all
such master 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 slitt-mill, are instruments of trade which cannot be
erected without a very great expense. In coal-works and mines of every
kind, the machinery necessary both for drawing out the water and for
other purposes is frequently still more expensive.

    That part of the capital of the farmer which is employed in the
instruments of agriculture is a fixed, that which is employed in the
wages and maintenance of his labouring servants, is a circulating
capital. He makes a profit of the one by keeping it in his own
possession, and of the other by parting with it. The price or value of
his labouring cattle is a fixed capital in the same manner as that
of the instruments of husbandry. Their maintenance is a circulating
capital in the same manner as that of the labouring servants. The
farmer makes his profit by keeping the labouring cattle, and by
parting with their maintenance. Both the price and the maintenance
of the cattle which are brought in and fattened, not for labour, but
for sale, are a circulating capital. The farmer makes his profit by
parting with them. A flock of sheep or a herd of cattle that, in a
breeding country, is bought in, neither for labour, nor for sale,
but in order to make a profit by their wool, by their milk, and by
their increase, 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 increase. The whole value of the seed, too, is
properly a fixed capital. Though it goes backwards and forwards
between the ground and the granary, it never changes masters, and
therefore does not properly circulate. The farmer makes his profit,
not by its sale, but by its increase.

    The general stock of any country or society is the same with
that of all its inhabitants or members, and therefore naturally
divides itself into the same three portions, each of which has a
distinct function or office.

    The first is that portion which is reserved for immediate
consumption, and of which the characteristic is, that it affords no
revenue or profit. It consists in the stock of food, clothes,
household furniture, etc., which have been purchased by their proper
consumers, but which are not yet entirely consumed. The whole stock of
mere dwelling-houses too, subsisting at any one time in the country,
make a part of this first portion. The stock that is laid out in a
house, if it is to be the dwellinghouse of the proprietor, ceases from
that moment to serve in the function of a capital, or to afford any
revenue to its owner. A dwellinghouse, as such, contributes nothing to
the revenue of its inhabitant; and though it is, no doubt, extremely
useful to him, it is as his clothes and household furniture are useful
to him, which, however, makes a part of his expense, and not of his
revenue. If it is to be let to a tenant for rent, as the house
itself can produce nothing, the tenant must always pay the rent out of
some other revenue which he derives either from labour, or stock, or
land. Though a house, therefore, may yield a revenue to its
proprietor, and thereby serve in the function of a capital to him,
it cannot yield any to the public, nor serve in the function of a
capital to it, and the revenue of the whole body of the people can
never be in the smallest degree increased by it. Clothes, and
household furniture, in the same manner, sometimes yield a revenue,
and thereby serve in the function of a capital to particular
persons. In countries where masquerades are common, it is a trade to
let out masquerade dresses for a night. Upholsterers frequently let
furniture by the month or by the year. Undertakers let the furniture
of funerals by the day and by the week. Many people let furnished
houses, and get a rent, not only for the use of the house, but for
that of the furniture. The revenue, however, which is derived from
such things must always be ultimately drawn from some other source
of revenue. Of all parts of the stock, either of an individual, or
of a society, reserved for immediate consumption, what is laid out
in houses is most slowly consumed. A stock of clothes may last several
years: a stock of furniture half a century or a century: but a stock
of houses, well built and properly taken care of, may last many
centuries. Though the period of their total consumption, however, is
more distant, they are still as really a stock reserved for
immediate consumption as either clothes or household furniture.

    The second of the three portions into which the general stock of
the society divides itself, is the fixed capital, of which the
characteristic is, that it affords a revenue or profit without
circulating or changing masters. It consists chiefly of the four
following articles:

    First, of all useful machines and instruments of trade which
facilitate and abridge labour:

    Secondly, of all those profitable buildings which are the means of
procuring a revenue, not only to their proprietor who lets them for
a rent, but to the person who possesses them and pays that rent for
them; such as shops, warehouses, workhouses, farmhouses, with all
their necessary buildings; stables, granaries, etc. These are very
different from mere dwelling houses. They are a sort of instruments of
trade, and may be considered in the same light:

    Thirdly, of the improvements of land, of what has been
profitably laid out in clearing, draining, enclosing, manuring, and
reducing it into the condition most proper for tillage and culture. An
improved farm may very justly be regarded in the same light as those
useful machines which facilitate and abridge labour, and by means of
which an equal circulating capital can afford a much greater revenue
to its employer. An improved farm is equally advantageous and more
durable than any of those machines, frequently requiring no other
repairs than the most profitable application of the farmer's capital
employed in cultivating it:

    Fourthly, of the acquired and useful abilities of all the
inhabitants or members of the society. The acquisition of such
talents, by the maintenance of the acquirer during his education,
study, or apprenticeship, always costs a real expense, which is a
capital fixed and realized, as it were, in his person. Those
talents, as they make a part of his fortune, so do they likewise of
that of the society to which he belongs. The improved dexterity of a
workman may be considered in the same light as a machine or instrument
of trade which facilitates and abridges labour, and which, though it
costs a certain expense, repays that expense with a profit.

    The third and last of the three portions into which the general
stock of the society naturally divides itself, is the circulating
capital; of which the characteristic is, that it affords a revenue
only by circulating or changing masters. It is composed likewise of
four parts:

    First, of the money by means of which all the other three are
circulated and distributed to their proper consumers:

    Secondly, of the stock of provisions which are in the possession
of the butcher, the grazier, the farmer, the corn-merchant, the
brewer, etc., and from the sale of which they expect to derive a
profit:

    Thirdly, of the materials, whether altogether rude, or more or
less manufactured, of clothes, furniture, and building, which are
not yet made up into any of those three shapes, but which remain in
the hands of the growers, the manufacturers, the mercers and
drapers, the timber merchants, the carpenters and joiners, the
brickmakers, etc.

    Fourthly, and lastly, of the work which is made up and
completed, but which is still in the hands of the merchant or
manufacturer, and not yet disposed of or distributed to the proper
consumers; such as the finished work which we frequently find
ready-made in the shops of the smith, the cabinet-maker, the
goldsmith, the jeweller, the china-merchant, etc. The circulating
capital consists in this manner, of the provisions, materials, and
finished work of all kinds that are in the hands of their respective
dealers, and of the money that is necessary for circulating and
distributing them to those who are finally to use or to consume them.

    Of these four parts, three- provisions, materials, and finished
work- are, either annually, or in a longer or shorter period,
regularly withdrawn from it, and placed either in the fixed capital or
in the stock reserved for immediate consumption.

    Every fixed capital is both originally derived from, and
requires to be continually supported by a circulating capital. All
useful machines and instruments of trade are originally derived from a
circulating capital, which furnishes the materials of which they are
made, and the maintenance of the workmen who make them. They
require, too, a capital of the same kind to keep them in constant
repair.

    No fixed capital can yield any revenue but by means of a
circulating capital. The most useful machines and instruments of trade
will produce nothing without the circulating capital which affords the
materials they are employed upon, and the maintenance of the workmen
who employ them. Land, however improved, will yield no revenue without
a circulating capital, which maintains the labourers who cultivate and
collect its produce.

    To maintain and augment the stock which may be reserved for
immediate consumption is the sole end and purpose both of the fixed
and circulating capitals. It is this stock which feeds, clothes, and
lodges the people. Their riches or poverty depends upon the abundant
or sparing supplies which those two capitals can afford to the stock
reserved for immediate consumption.

    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 stock of the society; it must in its turn require
continual supplies, without which it would soon cease to exist.
These supplies are principally drawn from three sources, the produce
of land, of mines, and of fisheries. These afford continual supplies
of provisions and materials, of which part is afterwards wrought up
into finished work, and by which are replaced the provisions,
materials, and finished work continually withdrawn from the
circulating capital. From mines, too, is drawn what is necessary for
maintaining and augmenting that part of it which consists in money.
For though, in the ordinary course of business, this part is not, like
the other three, necessarily withdrawn from it, in order to be
placed in the other two branches of the general stock of the
society, it must, however, like all other things, be wasted and worn
out at last, and sometimes, too, be either lost or sent abroad, and
must, therefore, require continual, though, no doubt, much smaller
supplies.

    Land, mines, and fisheries, require all both a fixed and a
circulating capital to cultivate them; and their produce replaces with
a profit, not only those capitals, but all the others in the
society. Thus the farmer annually replaces to the manufacturer the
provisions which he had consumed and the materials which be had
wrought up the year before; and the manufacturer replaces to the
farmer the finished work which he had wasted and worn out in the
same time. This is the real exchange that is annually made between
those two orders of people, though it seldom happens that the rude
produce of the one and the manufactured produce of the other, are
directly bartered for one another; because it seldom happens that
the farmer sells his corn and his cattle, his flax and his wool, to
the very same person of whom he chooses to purchase the clothes,
furniture, and instruments of trade which he wants. He sells,
therefore, his rude produce for money, with which he can purchase,
wherever it is to be had, the manufactured produce he has occasion
for. Land even replaces, in part at least, the capitals with which
fisheries and mines are cultivated. It is the produce of land which
draws the fish from the waters; and it is the produce of the surface
of the earth which extracts the minerals from its bowels.

    The produce of land, mines, and fisheries, when their natural
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 security, every man of
common understanding will endeavour to employ whatever stock he can
command in procuring either present enjoyment or future profit. If
it is employed in procuring present enjoyment, it is a stock
reserved for immediate consumption. If it is employed in procuring
future profit, it must procure this profit either staying with him, or
by going from him. In the one case it is fixed, in the other it is a
circulating capital. A man must be perfectly crazy who, where there is
tolerable security, does not employ all the stock which he commands,
whether be his own or borrowed of other people, in some one or other
of those three ways.

    In those unfortunate countries, indeed, where men are
continually afraid of the violence of their superiors, they frequently
bury and conceal a great part of their stock, in order to have it
always at hand to carry with them to some place of safety, in case
of their being threatened with any of those disasters to which they
consider themselves as at all times exposed. This is said to be a
common practice in Turkey, in Indostan, and, I believe, in most
other governments of Asia. It seems to have been a common practice
among our ancestors during the violence of the feudal government.
Treasure-trove was in those times considered as no contemptible part
of the revenue of the greatest sovereigns in Europe. It consisted in
such treasure as was found concealed in the earth, and to which no
particular person could prove any right. This was regarded in those
times as so important an object, that it was always considered as
belonging to the sovereign, and neither to the finder nor to the
proprietor of the land, unless the right to it had been conveyed to
the latter by an express clause in his charter. It was put upon the
same footing with gold and silver mines, which, without a special
clause in the charter, were never supposed to be comprehended in the
general grant of the lands, though mines of lead, copper, tin, and
coal were as things of smaller consequence.

                            CHAPTER II

      Of Money considered as a particular Branch of the general

       Stock of the Society, or of the Expense of maintaining

                        the National Capital

    IT has been shown in the first book, that the price of the greater
part of commodities resolves itself into three parts, of which one
pays the wages of the labour, another the profits of the stock, and
a third the rent of the land which had been employed in producing
and bringing them to market: that there are, indeed, some
commodities of which the price is made up of two of those parts
only, the wages of labour, and the profits of stock: and a very few in
which it consists altogether in one, the wages of labour: but that the
price of every commodity necessarily resolves itself into some one, or
other, or all of these three parts; every part of it which goes
neither to rent nor to wages, being necessarily profit to somebody.

    Since this is the case, it has been observed, with regard to every
particular commodity, taken separately, it must be so with regard to
all the commodities which compose the whole annual produce of the land
and labour of every country, taken complexly. The whole price or
exchangeable value of that annual produce must resolve itself into the
same three parts, and be parcelled out among the different inhabitants
of the country, either as the wages of their labour, the profits of
their stock, 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 constitutes a
revenue to its different inhabitants, yet as in the rent of a
private estate we distinguish between the gross rent and the net rent,
so may we likewise in the revenue of all the inhabitants of a great
country.

    The gross rent of a private estate comprehends whatever is paid by
the farmer; the net rent, what remains free to the landlord, after
deducting the expense of management, of repairs, and all other
necessary charges; or what, without hurting his estate, he can
afford to place in his stock reserved for immediate consumption, or to
spend upon his table, equipage, the ornaments of his house and
furniture, his private enjoyments and amusements. His real wealth is
in proportion, not to his gross, but to his net rent.

    The gross revenue of all the inhabitants of a great country
comprehends the whole annual produce of their land and labour; the net
revenue, what remains free to them after deducting the expense of
maintaining- first, their fixed, and, secondly, their circulating
capital; or what, without encroaching upon their capital, they can
place in their stock reserved for immediate consumption, or spend upon
their subsistence, conveniencies, and amusements. Their real wealth,
too, is in proportion, not to their gross, but to their net revenue.

    The whole expense of maintaining the fixed capital must
evidently be excluded from the net revenue of the society. Neither the
materials necessary for supporting their useful machines and
instruments of trade, their profitable buildings, etc., nor the
produce of the labour necessary for fashioning those 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 so employed may
place the whole value of their wages in their stock reserved for
immediate consumption. But in other sorts of labour, both the price
and the produce go to this stock, the price to that of the workmen,
the produce to that of other people, whose subsistence,
conveniences, and amusements, are augmented by the labour of those
workmen.

    The intention of the fixed capital is to increase the productive
powers of labour, or to enable the same number of labourers to perform
a much greater quantity of work. In a farm where all the necessary
buildings, fences, drains, communications, etc., are in the most
perfect good order, the same number of labourers and labouring
cattle will raise a much greater produce than in one of equal extent
and equally good ground, but not furnished with equal conveniencies.
In manufactures the same number of hands, assisted with the best
machinery, will work up a much greater quantity of goods than with
more imperfect instruments of trade. The expense which is properly
laid out upon a fixed capital of any kind, is always repaid with great
profit, and increases the annual produce by a much greater value
than that of the support which such improvements require. This
support, however, still 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 immediately employed to augment
the food, clothing and lodging, the subsistence and conveniencies of
the society, are thus diverted to another employment, highly
advantageous indeed, but still different from this one. It is upon
this account that all such improvements in mechanics, as enable the
same number of workmen to perform an equal quantity of work, with
cheaper and simpler machinery than had been usual before, are always
regarded as advantageous to every society. A certain quantity of
materials, and the labour of a certain number of workmen, which had
before been employed in supporting a more complex and expensive
machinery, can afterwards be applied to augment the quantity of work
which that or any other machinery is useful only for performing. The
undertaker of some great manufactory who employs a thousand a year
in the maintenance of his machinery, if he can reduce this expense
to five hundred will naturally employ the other five hundred in
purchasing 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 useful only for performing, will naturally
be augmented, and with it all the advantage and conveniency which
the society can derive from that work.

    The expense of maintaining the fixed capital in a great country
may very properly be compared to that of repairs in a private
estate. The expense of repairs may frequently be necessary for
supporting the produce of the estate, and consequently both the
gross and the net rent of the landlord. When by a more proper
direction, however, it can be diminished without occasioning any
diminution of produce, the gross rent remains at least the same as
before, and the net rent is necessarily augmented.

    But though the whole expense of maintaining the fixed capital is
thus necessarily excluded from the net revenue of the society, it is
not the same case with that of maintaining the circulating capital. Of
the four parts of which this latter capital is composed- money,
provisions, materials, and finished work- the three last, it has
already been observed, are regularly withdrawn from it, and placed
either in the fixed capital of the society, or in their stock reserved
for immediate consumption. Whatever portion of those consumable
goods is employed in maintaining the former, goes all to the latter,
and makes a part of the net revenue of the society. The maintenance of
those three parts of the circulating capital, therefore, withdraws
no portion of the annual produce from the net revenue of the
society, besides what is necessary for maintaining the fixed capital.

    The circulating capital of a society is in this respect
different from that of an individual. That of an individual is totally
excluded from making any part of his net revenue, which must consist
altogether in his profits. But though the circulating capital of every
individual makes a part of that of the society to which he belongs, it
is not upon that account totally excluded from making a part
likewise of their net revenue. Though the whole goods in a
merchant's shop must by no means be placed in his own stock reserved
for immediate consumption, they may in that of other people, who, from
a revenue derived from other funds, may regularly replace their
value to him, together with its profits, without occasioning any
diminution either of his capital or of theirs.

    Money, therefore, is the only part of the circulating capital of a
society, of which the maintenance can occasion any diminution in their
net revenue.

    The fixed capital, and that part of the circulating capital
which consists in money, so far as they affect the revenue of the
society, bear a very great resemblance to one another.

    First, as those machines and instruments of trade, etc., require a
certain expense, first to erect them, and afterwards to support
them, both which expenses, though they make a part of the gross, are
deductions from the net revenue of the society; so the stock of
money which circulates in any country must require a certain
expense, first to collect it, and afterwards to support it, both which
expenses, though they make a part of the gross, are, in the same
manner, deductions from the net revenue of the society. A certain
quantity of very valuable materials, gold and silver, and of very
curious labour, instead of augmenting the stock reserved for immediate
consumption, the subsistence, conveniencies, and amusements of
individuals, is employed in supporting that great but expensive
instrument of commerce, by means of which every individual in the
society has his subsistence, conveniencies, and amusements regularly
distributed to him in their proper proportions.

    Secondly, as the machines and instruments of a trade, etc.,
which compose the fixed capital either of an individual or of a
society, make no part either of the gross or of the net revenue of
either; so money, by means of which the whole revenue of the society
is regularly distributed among all its different members, makes itself
no part of that revenue. The great wheel of circulation is
altogether different from the goods which are circulated by means of
it. The revenue of the society consists altogether in those goods, and
not in the wheel which circulates them. In computing either the
gross or the net revenue of any society, we must always, from their
whole annual circulation of money and goods, deduct the whole value of
the money, of which not a single farthing can ever make any part of
either.

    It is the ambiguity of language only which can make this
proposition appear either doubtful or paradoxical. When properly
explained and understood, it is almost self-evident.

    When we talk of any particular sum of money, we sometimes mean
nothing but the metal pieces of which it is composed; and sometimes we
include in our meaning some obscure reference to the goods which can
be had in exchange for it, or to the power of purchasing which the
possession of it conveys. Thus when we say that the circulating
money of England has been computed at eighteen millions, we mean
only to express the amount of the metal pieces, which some writers
have computed, or rather have supposed to circulate in that country.
But when we say that a man is worth fifty or a hundred pounds a
year, we mean commonly to express not only the amount of the metal
pieces which are annually paid to him, but the value of the goods
which he can annually purchase or consume. We mean commonly to
ascertain what is or ought to be his way of living, or the quantity
and quality of the necessaries and conveniencies of life in which he
can with propriety indulge himself.

    When, by any particular sum of money, we mean not only to
express the amount of the metal pieces of which it is composed, but to
include in its signification some obscure reference to the goods which
can be had in exchange for them, the wealth or revenue which it in
this case denotes, is equal only to one of the two values which are
thus intimated somewhat ambiguously by the same 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 pension of a particular person,
he can in the course of the week purchase with it a certain quantity
of subsistence, conveniencies, and amusements. In proportion as this
quantity is great or small, so are his real riches, his real weekly
revenue. His weekly revenue is certainly not equal both to the guinea,
and to what can be purchased with it, but only to one or other of
those two equal values; and to the latter more properly than to the
former, to the guinea's worth rather than to the guinea.

    If the pension of such a person was paid to him, not in gold,
but in a weekly bill for a guinea, his revenue surely would not so
properly consist in the piece of paper, as in what he could get for
it. A guinea may be considered as a bill for a certain quantity of
necessaries and conveniencies upon all the tradesmen in the
neighbourhood. The revenue of the person to whom it is paid, does
not so properly consist 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 most useless piece of paper.

    Though the weekly or yearly revenue of all the different
inhabitants of any country, in the same manner, may be, and in reality
frequently is paid to them in money, their real riches, however, the
real weekly or yearly revenue of all of them taken together, must
always be great or small in proportion to the quantity of consumable
goods which they can all of them purchase with this money. The whole
revenue of all of them taken together is evidently not equal to both
the money and the consumable goods; but only to one or other of
those two values, and to the latter more properly than to the former.

    Though we frequently, therefore, express a person's revenue by the
metal pieces which are annually paid to him, it is because the
amount of those pieces regulates the extent of his power of
purchasing, or the value of the goods which he can annually afford
to consume. We still consider his revenue as consisting in this
power of purchasing or consuming, and not in the pieces which convey
it.

    But if this is sufficiently evident even with regard to an
individual, it is still more so with regard to a society. The amount
of the metal pieces which are annually paid to an individual, is often
precisely equal to his revenue, and is upon that account the
shortest and best expression of its value. But the amount of the metal
pieces which circulate in a society can never be equal to the
revenue of all its members. As the same guinea which pays the weekly
pension of one man to-day, may pay that of another to-morrow, and that
of a third the day thereafter, the amount of the metal pieces which
annually circulate in any country must always be of much less value
than the whole money pensions annually paid with them. But the power
of purchasing, or the goods which can successively be bought with
the whole of those money pensions as they are successively paid,
must always be precisely of the same value with those pensions; as
must likewise be the revenue of the different persons to whom they are
paid. That revenue, therefore, cannot consist in those metal pieces,
of which the amount is so much inferior to its value, but in the power
of purchasing, in the goods which can successively be bought with them
as they circulate from hand to hand.

    Money, therefore, the great wheel of circulation, the great
instrument of commerce, like all other instruments of trade, though it
makes a part and a very valuable part of the capital, makes no part of
the revenue of the society to which it belongs; and though the metal
pieces of which it is composed, in the course of their annual
circulation, distribute to every man the revenue which properly
belongs to him, they make themselves no part of that revenue.

    Thirdly, and lastly, the machines and instruments of trade,
etc., which compose the fixed capital, bear this further resemblance
to that part of the circulating capital which consists in money;
that as every saving in the expense of erecting and supporting those
machines, which does not diminish the productive powers of labour,
is an improvement of the net revenue of the society, so every saving
in the expense of collecting and supporting that part of the
circulating capital which consists in money, is an improvement of
exactly the same kind.

    It is sufficiently obvious, and it has partly, too, been explained
already, in what manner every saving in the expense of supporting
the fixed capital is an improvement of the net revenue of the society.
The whole capital of the undertaker of every work is necessarily
divided between his fixed and his circulating capital. While his whole
capital remains the same, the smaller the one part, the greater must
necessarily be the other. It is the circulating capital which
furnishes the materials and wages of labour, and puts industry into
motion. Every saving, therefore, in the expense of maintaining the
fixed capital, which does not diminish the productive powers of
labour, must increase the fund which puts industry into motion, and
consequently the annual produce of land and labour, the real revenue
of every society.

    The substitution of paper in the room of gold and silver money,
replaces a very expensive instrument of commerce with one much less
costly, and sometimes equally convenient. Circulation comes to be
carried on by a new wheel, which it costs less both to erect and to
maintain than the old one. But in what manner this operation is
performed, and in what manner it tends to increase either the gross or
the net revenue of the society, is not altogether so obvious, and
may therefore require some further explication.

    There are several different sorts of paper money; but the
circulating notes of banks and bankers are the species which is best
known, and which seems best adapted for this purpose.

    When the people of any particular country have such confidence
in the fortune, probity, and prudence of a particular banker, as to
believe that he is always ready to pay upon demand such of his
promissory notes as are likely to be at any time presented to him;
those notes come to have the same currency as gold and silver money,
from the confidence that such money can at any time be had for them.

    A particular banker lends among his customers his own promissory
notes, to the extent, we shall suppose, of a hundred thousand
pounds. As those notes serve all the purposes of money, his debtors
pay him the same interest as if he had lent them so much money. This
interest is the source of his gain. Though some of those 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 thousand
pounds, twenty thousand pounds in gold and silver may frequently be
a sufficient provision for answering occasional demands. By this
operation, therefore, twenty thousand pounds in gold and silver
perform all the functions which a hundred thousand could otherwise
have performed. The same exchanges may be made, the same quantity of
consumable goods may be circulated and distributed to their proper
consumers, by means of his promissory notes, to the value of a hundred
thousand pounds, as by an equal value of gold and silver money. Eighty
thousand pounds of gold and silver, therefore, can, in this manner, be
spared from the circulation of the country; and if different
operations of the same kind should, at the same time, be carried on by
many different banks and bankers, the whole circulation may thus be
conducted with a fifth part only of the gold and silver which would
otherwise have been requisite.

    Let us suppose, for example, that the whole circulating money of
some particular country amounted, at a particular time, to one million
sterling, that sum being then sufficient for circulating the whole
annual produce of their land and labour. Let us suppose, too, that
some time thereafter, different banks and bankers issued promissory
notes, payable to the bearer, to the extent of one million,
reserving in their different coffers two hundred thousand pounds for
answering occasional demands. There would remain, therefore, in
circulation, eight hundred thousand pounds in gold and silver, and a
million of bank notes, or eighteen hundred thousand pounds of paper
and money together. But the annual produce of the land and labour of
the country had before required only one million to circulate and
distribute it to its proper consumers, and that annual produce
cannot be immediately augmented by those operations of banking. One
million, therefore, will be sufficient to circulate it after them. The
goods to be bought and sold being precisely the same as before, the
same quantity of money will be sufficient for buying and selling them.
The channel of circulation, if I may be allowed such an expression,
will remain precisely the same as before. One million we have supposed
sufficient to fill that channel. Whatever, therefore, is poured into
it beyond this sum cannot run in it, but must overflow. One million
eight hundred thousand pounds are poured into it. Eight hundred
thousand pounds, therefore, must overflow, that sum being over and
above what can be employed in the circulation of the country. But
though this sum cannot be employed at home, it is too valuable to be
allowed to lie idle. It will, therefore, be sent abroad, in order to
seek that profitable employment which it cannot find at home. But
the paper cannot go abroad; because at a distance from the banks which
issue 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 silver,
therefore, to the amount of eight hundred thousand pounds will be sent
abroad, and the channel of home circulation will remain filled with
a million of paper, instead of the million of those metals which
filled it before.

    But though so great a quantity of gold and silver is thus sent
abroad, we must not imagine that it is sent abroad for nothing, or
that its proprietors make a present of it to foreign nations. They
will exchange it for foreign goods of some kind or another, in order
to supply the consumption either of some other foreign country or of
their own.

    If they employ it in purchasing goods in one foreign country in
order to supply the consumption of another, or in what is called the
carrying trade, whatever profit they make will be an addition to the
net revenue of their own country. It is like a new fund, created for
carrying on a new trade; domestic business being now transacted by
paper, and the gold and silver being converted into a fund for this
new trade.

    If they employ it in purchasing foreign goods for home
consumption, they may either, first, purchase such goods as are likely
to be consumed by idle people who produce nothing, such as foreign
wines, foreign silks, etc.; or, secondly, they may purchase an
additional stock of materials, tools, and provisions, in order to
maintain and employ an additional number of industrious people, who
reproduce, with a profit, the value of their annual consumption.

    So far as it is employed in the first way, it promotes
prodigality, increases expense and consumption without increasing
production, or establishing any permanent fund for supporting that
expense, and is in every respect hurtful to the society.

    So far as it is employed in the second way, it promotes
industry; and though it increases the consumption of the society, it
provides a permanent fund for supporting that consumption, the
people who consume reproducing, with a profit, the whole value of
their annual consumption. The gross revenue of the society, the annual
produce of their land and labour, is increased by the whole value
which the labour of those workmen adds to the materials upon which
they are employed; and their net revenue by what remains of this
value, after deducting what is necessary for supporting the tools
and instruments of their trade.

    That the greater part of the gold and silver which, being forced
abroad by those operations of banking, is employed in purchasing
foreign goods for home consumption, is and must be employed in
purchasing those of this second kind, seems not only probable but
almost unavoidable. Though some particular men may sometimes
increase their expense very considerably though their revenue does not
increase at all, we may be assured that no class or order of men
ever does so; because, though the principles of common prudence do not
always govern the conduct of every individual, they always influence
that of the majority of every class or order. But the revenue of
idle people, considered as a class or order, cannot, in the smallest
degree, be increased by those operations of banking. Their expense
in general, therefore, cannot be much increased by them, though that
of a few individuals among them may, and in reality sometimes is.
The demand of idle people, therefore, for foreign goods being the
same, or very nearly the same, as before, a very small part of the
money, which being forced abroad by those operations of banking, is
employed in purchasing foreign goods for home consumption, is likely
to be employed in purchasing those for their use. The greater part
of it will naturally be destined for the employment of industry, and
not for the maintenance of idleness.

    When we compute the quantity of industry which the circulating
capital of any society can employ, we must always have regard to those
parts of it only which consist in provisions, materials, and
finished work: the other, which consists in money, and which serves
only to circulate those three, must always be deducted. In order to
put industry into motion, three things are requisite; materials to
work upon, tools to work with, and the wages or recompense for the
sake 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, consists, not in money, but in the money's worth; not in
the metal pieces, but in what can be got for them.

    The quantity of industry which any capital can employ must,
evidently, be equal to the number of workmen whom it can supply with
materials, tools, and a maintenance suitable to the nature of the
work. Money may be requisite for purchasing the materials and tools of
the work, as well as the maintenance of the workmen. But the
quantity of industry which the whole capital can employ is certainly
not equal both to the money which purchases, and to the materials,
tools, and maintenance, which are purchased with it; but only to one
or other of those two values, and to the latter more properly than
to the former.

    When paper is substituted in the room of gold and silver money,
the quantity of the materials, tools, and maintenance, which the whole
circulating capital can supply, may be increased by the whole value of
gold and silver which used to be employed in purchasing them. The
whole value of the great wheel of circulation and distribution is
added to the goods which are circulated and distributed by means of
it. The operation, in some measure, resembles that of the undertaker
of some great work, who, in consequence of some improvement in
mechanics, takes down his old machinery, and adds the difference
between its price and that of the new to his circulating capital, to
the fund from which he furnishes materials and wages to his workmen.

    What is the proportion which the circulating money of any
country bears to the whole value of the annual produce circulated by
means of it, it is, perhaps, impossible to determine. 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 small soever
the proportion which the circulating money may bear to the whole value
of the annual produce, as but a part, and frequently but a small part,
of that produce, is ever destined for the maintenance of industry,
it must always bear a very considerable proportion to that part. When,
therefore, by the substitution of paper, the gold and silver necessary
for circulation is reduced to, perhaps, 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 destined for the
maintenance of industry, it must make a very considerable addition
to the quantity of that industry, and, consequently, to the value of
the annual produce of land and labour.

    An operation of this kind has, within these five-and-twenty or
thirty years, been performed in Scotland, by the erection of new
banking companies in almost every considerable town, and even in
some country villages. The effects of it have been precisely those
above described. The business of the country is almost entirely
carried on by means of the paper of those different banking companies,
with which purchases and payments of kinds are commonly made. Silver
very seldom appears except in the change of a twenty shillings bank
note, and gold still seldomer. But though the conduct of all those
different companies has not been unexceptionable, and has
accordingly required an act of Parliament to regulate it, the country,
notwithstanding, has evidently derived great benefit from their trade.
I have heard it asserted, that the trade of the city of Glasgow
doubled in about fifteen years after the first erection of the banks
there; and that the trade of Scotland has more than quadrupled since
the first erection of the two public banks at Edinburgh, of which
the one, called the Bank of Scotland, was established by act of
Parliament in 1695; the other, called the Royal Bank, by royal charter
in 1727. Whether the trade, either of Scotland in general, or the city
of Glasgow in particular, has really increased in so great a
proportion, during so short a period, I do not pretend to know. If
either of them has increased in this proportion, it seems to be an
effect too great to be accounted for by the sole operation of this
cause. That the trade and industry of Scotland, however, have
increased very considerably during this period, and that the banks
have contributed a good deal to this increase, cannot be doubted.

    The value of the silver money which circulated in Scotland
before the union, in 1707, and which, immediately after it, was
brought into the Bank of Scotland in order to be recoined, amounted to
L411,117 10s. 9d. sterling. No account has been got of the gold
coin; but it appears from the ancient accounts of the mint of
Scotland, that the value of the gold annually coined somewhat exceeded
that of the silver. There were a good many people, too, upon this
occasion, who, from a diffidence of repayment, did not bring their
silver into the Bank of Scotland: and there was, besides, some English
coin which was not called in. The whole value of the gold and
silver, therefore, which circulated in Scotland before the union,
cannot be estimated at less than a million sterling. It seems to
have constituted almost the whole circulation of that country; for
though the circulation of the Bank of Scotland, which had then no
rival, was considerable, it seems to have made but a very small part
of the whole. In the present times the whole circulation of Scotland
cannot be estimated at less than two millions, of which that part
which consists in gold and silver most probably does not amount to
half a million. But though the circulating gold and silver of Scotland
have suffered so great a diminution during this period, its real
riches and prosperity do not appear to have suffered any. Its
agriculture, manufactures, and trade, on the contrary, the annual
produce of its land and labour, have evidently been augmented.

    It is chiefly by discounting bills of exchange, that is, by
advancing money upon them before they are due, that the greater part
of banks and bankers issue their promissory notes. They deduct always,
upon whatever sum they advance, the legal interest till the bill shall
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 interest. The banker who advances to the merchant
whose bill he discounts, not gold and silver, but his own promissory
notes, has the advantage of being able to discount to a greater
amount, by the whole value of his promissory notes, which he finds
by experience are commonly in circulation. He is thereby enabled to
make his clear gain of interest on so much a larger sum.

    The commerce of Scotland, which at present is not very great,
was still more inconsiderable when the two first banking companies
were established, and those companies would have had but little
trade had they confined their business to the discounting of bills
of exchange. They invented, therefore, another method of issuing their
promissory notes; by granting what they called cash accounts, that
is by giving credit to the extent of a certain sum (two or three
thousand pounds, for example) to any individual who could procure
two persons of undoubted credit and good landed estate to become
surety for him, that whatever money should be advanced to him,
within the sum for which the credit had been given, should be repaid
upon demand, together with the legal interest. Credits of this kind
are, I believe, commonly granted by banks and bankers in all different
parts of the world. But the easy terms upon which the Scotch banking
companies accept of repayment are, so far as I know, peculiar to them,
and have, perhaps, been the principal cause, both of the great trade
of those companies and of the benefit which the country has received
from it.

    Whoever has a credit of this kind with one of those companies, and
borrows a thousand pounds upon it, for example, may repay this sum
piecemeal, by twenty and thirty pounds at a time, the company
discounting a proportionable part of the interest of the great sum
from the day on which each of those small sums is paid in till the
whole be in this manner repaid. All merchants, therefore, and almost
all men of business, find it convenient to keep such cash accounts
with them, and are thereby interested to promote the trade of those
companies, by readily receiving their notes in all payments, and by
encouraging all those with whom they have any influence to do the
same. The banks, when their customers apply to them for money,
generally advance it to them in their own promissory notes. These
the merchants pay away to the manufacturers for goods, the
manufacturers to the farmers for materials and provisions, the farmers
to their landlords for rent, the landlords repay them to the merchants
for the conveniencies and luxuries with which they supply them, and
the merchants again return them to the banks in order to balance their
cash accounts, or to replace what they may have borrowed of them;
and thus almost the whole money business of the country is
transacted by means of them. Hence the great trade of those companies.

    By means of those cash accounts every merchant can, without
imprudence, carry on a greater trade than he otherwise could do. If
there are two merchants, one in London and the other in Edinburgh, who
employ equal stocks in the same branch of trade, the Edinburgh
merchant can, without imprudence, carry on a greater trade and give
employment to a greater number of people than the London merchant. The
London merchant must always keep by him a considerable sum of money,
either in his own coffers, or in those of his banker, who gives him no
interest for it, in order to answer the demands continually coming
upon him for payment of the goods which he purchases upon credit.
Let the ordinary amount of this sum be supposed five hundred pounds.
The value of the goods in his warehouse must always be less by five
hundred pounds than it would have been had he not been obliged to keep
such a sum unemployed. Let us suppose that he generally disposes of
his whole stock upon hand, or of goods to the value of his whole stock
upon hand, once in the year. By being obliged to keep so great a sum
unemployed, he must sell in a year five hundred pounds' worth less
goods than he might otherwise have done. His annual profits must be
less by all that he could have made by the sale of five hundred pounds
worth more goods; and the number of people employed in preparing his
goods for the market must be less by all those that five hundred
pounds more stock could have employed. The merchant in Edinburgh, on
the other hand, keeps no money unemployed for answering such
occasional demands. When they actually come upon him, he satisfies
them from his cash account with the bank, and gradually replaces the
sum borrowed with the money or paper which comes in from the
occasional sales of his goods. With the same stock, therefore, he can,
without imprudence, have at all times in his warehouse a larger
quantity of goods than the London merchant; and can thereby both
make a greater profit himself, and give constant employment to a
greater number of industrious people who prepare those goods for the
market. Hence the great benefit which the country has derived from
this trade.

    The facility of discounting bills of exchange it may be thought
indeed, gives the English merchants a conveniency equivalent to the
cash accounts of the Scotch merchants. But the Scotch merchants, it
must be remembered, can discount their bills of exchange as easily
as the English merchants; and have, besides, the additional
conveniency of their cash accounts.

    The whole paper money of every kind which can easily circulate
in any country never can exceed the value of the gold and silver, of
which it supplies the place, or which (the commerce being supposed the
same) would circulate there, if there was no paper money. If twenty
shilling notes, for example, are the lowest paper money current in
Scotland, the whole of that currency which can easily circulate
there cannot exceed the sum of gold and silver which would be
necessary for transacting the annual exchanges of twenty shillings
value and upwards usually transacted within that country. Should the
circulating paper at any time exceed that sum, as the excess could
neither be sent abroad nor be employed in the circulation of the
country, it must immediately return upon the banks to be exchanged for
gold and silver. Many people would immediately perceive that they
had more of this paper than was necessary for transacting their
business at home, and as they could not send it abroad, they would
immediately demand payment of it from the banks. When this superfluous
paper was converted into gold and silver, they could easily find a use
for it by sending it abroad; but they could find none while it
remained in the shape of paper. There would immediately, therefore, be
a run upon the banks to the whole extent of this superfluous paper,
and, if they showed any difficulty or backwardness in payment, to a
much greater extent; the alarm which this would occasion necessarily
increasing the run.

    Over and above the expenses which are common to every branch of
trade; such as the expense of house-rent, the wages of servants,
clerks, accountants, etc.; the expenses peculiar to a bank consist
chiefly in two articles: first, in the expense of keeping at all times
in its coffers, for answering the occasional demands of the holders of
its notes, a large sum of money, of which it loses the interest;
and, secondly, in the expense of replenishing those coffers as fast as
they are emptied by answering such occasional demands.

    A banking company, which issues more paper than can be employed in
the circulation of the country, and of which the excess is continually
returning upon them for payment, ought to increase the quantity of
gold and silver, which they keep at all times in their coffers, not
only in proportion to this excessive increase of their circulation,
but in a much greater proportion; their notes returning upon them much
faster than in proportion to the excess of their quantity. Such a
company, therefore, ought to increase the first article of their
expense, not only in proportion to this forced increase of their
business, but in a much greater proportion.

    The coffers of such a company too, though they ought to be
filled much fuller, yet must empty themselves much faster than if
their business was confined within more reasonable bounds, and must
require, not only a more violent, but a more constant and
uninterrupted exertion of expense in order to replenish them. The coin
too, which is thus continually drawn in such large quantities from
their coffers, cannot be employed in the circulation of the country.
It comes in place of a paper which is over and above what can be
employed 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 must, in one shape or another, be sent abroad, in order to
find that profitable employment which it cannot find at home; and this
continual exportation of gold and silver, by enhancing the difficulty,
must necessarily enhance still further the expense of the bank, in
finding new gold and silver in order to replenish those coffers, which
empty themselves so very rapidly. Such a company, therefore, must,
in proportion to this forced increase of their business, increase
the second article of their expense still more than the first.

    Let us suppose that all the paper of a particular bank, which
the circulation of the country can easily absorb and employ, amounts
exactly to forty thousand pounds; and that for answering occasional
demands, this bank is obliged to keep at all times in its coffers
ten thousand pounds in gold and silver. Should this bank attempt to
circulate forty-four thousand pounds, the four thousand pounds which
are over and above what the circulation can easily absorb and
employ, will return upon it almost as fast as they are issued. For
answering occasional demands, therefore, this bank ought to keep at
all times in its coffers, not eleven thousand pounds only, but
fourteen thousand pounds. It will thus gain nothing by the interest of
the four thousand pounds' excessive circulation; and it will lose
the whole expense of continually collecting four thousand pounds in
gold and silver, which will be continually going out of its coffers as
fast as they are brought into them.

    Had every particular banking company always understood and
attended to its own particular interest, the circulation never could
have been overstocked with paper money. But every particular banking
company has not always understood or attended to its own particular
interest, and the circulation has frequently been overstocked with
paper money.

    By issuing too great a quantity of paper, of which the excess
was continually returning, in order to be exchanged for gold and
silver, the Bank of England was for many years together obliged to
coin gold to the extent of between eight hundred thousand pounds and a
million a year; or at an average, about eight hundred and fifty
thousand pounds. For this great coinage the bank (in consequence of
the worn and degraded state into which the gold coin had fallen a
few years ago) was frequently obliged to purchase gold bullion at
the high price of four pounds an ounce, which it soon after issued
in coin at 53 17s. 10 1/2d. an ounce, losing in this manner between
two and a half and three per cent upon the coinage of so very large
a sum. Though the bank therefore paid no seignorage, though the
government was properly at the expense of the coinage, this liberality
of government did not prevent altogether the expense of the bank.

    The Scotch banks, in consequence of an excess of the same kind,
were all obliged to employ constantly agents at London to collect
money for them, at an expense which was seldom below one and a half or
two per cent. This money was sent down by the waggon, and insured by
the carriers at an additional expense of three quarters per cent or
fifteen shillings on the hundred pounds. Those agents were not
always able to replenish the coffers of their employers so fast as
they were emptied. In this case the resource of the banks was to
draw upon their correspondents in London bills of exchange to the
extent of the sum which they wanted. When those correspondents
afterwards drew upon them for the payment of this sum, together with
the interest and a commission, sonic of those banks, from the distress
into which their excessive circulation had thrown them, had
sometimes no other means of satisfying this draught but by drawing a
second set of bills either upon the same, or upon some other
correspondents in London; and the same sum, or rather bills for the
same sum, would in this manner make sometimes more than two or three
journeys, the debtor, bank, paying always the interest and
commission upon the whole accumulated sum. Even those Scotch banks
which never distinguished themselves by their extreme imprudence, were
sometimes obliged to employ this ruinous resource.

    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 likewise over and above what could be employed in
that circulation, was sometimes sent abroad in the shape of coin,
sometimes melted down and sent abroad in the shape of bullion, and
sometimes melted down and sold to the Bank of England at the high
price of four pounds an ounce. It was the newest, the heaviest, and
the best pieces only which were carefully picked out of the whole
coin, and either sent abroad or melted down. At home, and while they
remained in the shape of coin, those 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,
notwithstanding their great annual coinage, found to their
astonishment that there was every year the same scarcity of coin as
there had been the year before; and that notwithstanding the great
quantity of good and new coin which was every year issued from the
bank, the state of the coin, instead of growing better and better,
became every year worse and worse. Every year they found themselves
under the necessity of coining nearly the same quantity of gold as
they had coined the year before, and from the continual rise in the
price of gold bullion, in consequence of the continual wearing and
clipping of the coin, the expense of this great annual coinage
became every year greater and greater. The Bank of England, it is to
be observed, by supplying its own coffers with coin, is indirectly
obliged to supply the whole kingdom, into which coin is continually
flowing from those coffers in a great variety of ways. Whatever coin
therefore was wanted to support this excessive circulation both of
Scotch and English paper money, whatever vacuities this excessive
circulation occasioned in the necessary coin of the kingdom, the
Bank of England was obliged to supply 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 almost
all the Scotch banks.

    The overtrading of some bold projectors in both parts of the
United Kingdom was the original cause of this excessive 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 considerable part of that capital; but that part of it
only which he would otherwise be obliged to keep by him unemployed,
and in ready money for answering occasional demands. If the paper
money which the bank advances never exceeds this value, it can never
exceed the value of the gold and silver which would necessarily
circulate in the country if there was no paper money; it can never
exceed the quantity which the circulation of the country can easily
absorb and employ.

    When a bank discounts to a merchant a real bill of exchange
drawn by a real creditor upon a real debtor, and which, as soon as
it becomes due, is really paid by that debtor, it only advances to him
a part of the value which he would otherwise be obliged to keep by him
unemployed and in ready money for answering occasional demands. The
payment of the bill, when it becomes due, replaces to the bank the
value of what it had advanced, together with the interest. The coffers
of the bank, so far as its dealings are confined to such customers,
resemble a water pond, from which, though a stream is continually
running out, yet another is continually running in, fully equal to
that which runs out; so that, without any further care or attention,
the pond keeps always equally, or very near equally full. Little or no
expense can ever be necessary for replenishing the coffers of such a
bank.

    A merchant, without overtrading, may frequently have occasion
for a sum of ready money, even when he has no bills to discount.
When a bank, besides discounting his bills, advances him likewise upon
such occasions such sums upon his cash account, and accepts of a
piecemeal repayment as the money comes in from the occasional sale
of his goods, upon the easy terms of the banking companies of
Scotland; it dispenses him entirely from the necessity of keeping
any part of his stock by him unemployed and in ready money for
answering occasional demands. When such demands actually come upon
him, he can answer them sufficiently from his cash account. The
bank, however, in dealing with such customers, ought to observe with
great attention, whether in the course of some short period (of
four, five, six, or eight months for example) the sum of the
repayments which it commonly receives from them is, or is not, fully
equal to that of the advances which it commonly makes to them. If,
within the course of such short periods, the sum of the repayments
from certain customers is, upon most occasions, fully equal to that of
the advances, it may safely continue to deal with such customers.
Though the stream which is in this case continually running out from
its coffers may be very large, that which is continually running
into them must be at least equally large; so that without any
further care or attention those coffers are likely to be always
equally or very near equally full; and scarce ever to require any
extraordinary expense to replenish them. If, on the contrary, the
sum of the repayments from certain other customers falls commonly very
much short of the advances which it makes to them, it cannot with
any safety continue to deal with such customers, at least if they
continue to deal with it in this manner. The stream which is in this
case continually running out from its coffers is necessarily much
larger than that which is continually running in; so that, unless they
are replenished by some great and continual effort of expense, those
coffers must soon be exhausted altogether.

    The banking companies of Scotland, accordingly, were for a long
time very careful to require frequent and regular repayments from
all their customers, and did not care to deal with any person,
whatever might be his fortune or credit, who did not make, what they
called, frequent and regular operations with them. By this
attention, besides saving almost entirely the extraordinary expense of
replenishing their coffers, they gained two other very considerable
advantages.

    First, by this attention they were enabled to make some
tolerable judgment concerning the thriving or declining
circumstances of their debtors, without being obliged to look out
for any other evidence besides what their own books afforded them; men
being for the most part either regular or irregular in their
repayments, according as their circumstances 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 himself or his agents,
observe and inquire both constantly and carefully into the conduct and
situation of each of them. But a banking company, 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 concerning the conduct and circumstances of the
greater part of its debtors beyond what its own books afford it. In
requiring frequent and regular repayments from all their customers,
the banking companies of Scotland had probably this advantage in view.

    Secondly, by this attention they secured themselves from the
possibility of issuing more paper money than what the circulation of
the country could easily absorb and employ. When they observed that
within moderate periods of time the repayments of a particular
customer were upon most occasions fully equal to the advances which
they had made to him, they might be assured that the paper money which
they had advanced to him had not at any time exceeded the quantity
of gold and silver which he would otherwise have been obliged to
keep by him for answering occasional demands; and that,
consequently, the paper money, which they had circulated by his means,
had not at any time exceeded the quantity of gold and silver which
would have circulated in the country had there been no paper money.
The frequency, regularity, and amount of his repayments would
sufficiently demonstrate that the amount of their advances had at no
time exceeded that part of his capital which he would otherwise have
been obliged to keep by him unemployed and in ready money for
answering occasional demands; that is, for the purpose of keeping
the rest of his capital in constant employment. It is this part of his
capital only which, within moderate periods of time, is continually
returning to every dealer in the shape of money, whether paper or
coin, and continually going from him in the same shape. If the
advances of the bank had commonly exceeded this part of his capital,
the ordinary amount of his repayments could not, within moderate
periods of time, have equalled the ordinary amount of its advances.
The stream which, by means of his dealings, was continually running
into the coffers of the bank, could not have been equal to the
stream which, by means of the same dealings, was continually running
out. The advances of the bank paper, by exceeding the quantity of gold
and silver which, had there been no such advances, he would have
been obliged to keep by him for answering occasional demands, might
soon come to exceed the whole quantity of gold and silver which (the
commerce being supposed the same) would have circulated in the country
had there been no paper money; and consequently to exceed the quantity
which the circulation of the country could easily absorb and employ;
and the excess of this paper money would immediately have returned
upon the bank in order to be exchanged for gold and silver. This
second advantage, though equally real, was not perhaps so well
understood by all the different banking companies of Scotland as the
first.

    When, partly by the conveniency of discounting bills, and partly
by that of cash accounts, the creditable traders of any country can be
dispensed from the necessity of keeping any part of their stock by
them unemployed and in ready money for answering occasional demands,
they can reasonably expect no farther assistance from banks and
bankers, who, when they have gone thus far, cannot, consistently
with their own interest and safety, go farther. A bank cannot,
consistently with its own interest, advance to a trader the whole or
even the greater part of the circulating capital with which he trades;
because, though that capital is continually returning to him in the
shape of money, and going from him in the same shape, yet the whole of
the returns is too distant from the whole of the outgoings, and the
sum of his repayments could not equal the sum of its advances within
such moderate periods of time as suit the conveniency of a bank. Still
less, could a bank afford to advance him any considerable part of
his fixed capital; of the capital which the undertaker of an iron
forge, for example, employs in erecting his forge and
smelting-house, his workhouses and warehouses, the dwelling-houses
of his workmen, etc.; of the capital which the undertaker of a mine
employs in sinking his shafts, in erecting engines for drawing out the
water, in making roads and waggon-ways, etc.; of the capital which the
person who undertakes to improve land employs in clearing, draining,
enclosing, manuring, and ploughing waste and uncultivated fields, in
building farm-houses, with all their necessary appendages of
stables, granaries, etc. The returns of the fixed capital are in
almost all cases much slower than those of the circulating capital;
and such expenses, even when laid out with the greatest prudence and
judgment, very seldom return to the undertaker till after a period
of many years, a period by far too distant to suit the conveniency
of a bank. Traders and other undertakers may, no doubt, with great
propriety, carry on a very considerable part of their projects with
borrowed money. In justice to their creditors, however, their own
capital ought, in this case, to be sufficient to ensure, if I may
say so, the capital of those creditors; or to render it extremely
improbable that those creditors should incur any loss, even though the
success of the project should fall very much short of the
expectation of the projectors. Even with this precaution too, the
money which is borrowed, and which it is meant should not be repaid
till after a period of several years, ought not to be borrowed of a
bank, but ought to be borrowed upon bond or mortgage of such private
people as propose to live upon the interest of their money without
taking the trouble themselves to employ the capital, and who are
upon that account willing to lend that capital to such people of
good credit as are likely to keep it for several years. A bank,
indeed, which lends its money without the expense of stamped paper, or
of attorneys' fees for drawing bonds and mortgages, and which
accepts of repayment upon the easy terms of the banking companies of
Scotland, would, no doubt, be a very convenient creditor to such
traders and undertakers. But such traders and undertakers would,
surely, be most inconvenient debtors to such a bank.

    It is now more than five-and-twenty years since the paper money
issued by the different banking companies of Scotland was fully equal,
or rather was somewhat more than fully equal, to what the
circulation of the country could easily absorb and employ. Those
companies, therefore, had so long ago given all the assistance to
the traders and other undertakers of Scotland which it is possible for
banks and bankers, consistently with their own interest, to give. They
had even done somewhat more. They had overtraded a little, and had
brought upon themselves that loss, or at least that diminution of
profit, which in this particular business never fails to attend the
smallest degree of overtrading. Those traders and other undertakers,
having got so much assistance from banks and bankers, wished to get
still more. The banks, they seem to have thought, could extend their
credits to whatever sum might be wanted, without incurring any other
expense besides that of a few reams of paper. They complained of the
contracted views and dastardly spirit of the directors of those banks,
which did not, they said, extend their credits in proportion to the
extension of the trade of the country; meaning, no doubt, by the
extension of that trade the extension of their own projects beyond
what they could carry on, either with their own capital, or with
what they had credit to borrow of private people in the usual way of
bond or mortgage. The banks, they seem to have thought, were in honour
bound to supply the deficiency, and to provide them with all the
capital which they wanted to trade with. The banks, however, were of a
different opinion, and upon their refusing to extend their credits,
some of those traders had recourse to an expedient which, for a
time, served their purpose, though at a much greater expense, yet as
effectually as the utmost extension of bank credits could have done.
This expedient was no other than the well-known shift of drawing and
redrawing; the shift to which unfortunate traders have sometimes
recourse when they are upon the brink of bankruptcy. The practice of
raising money in this manner had been long known in England, and
during the course of the late war, when the high profits of trade
afforded a great temptation to overtrading, is said to have 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 soon carried on to a much
greater extent than it ever had been in England.

    The practice of drawing and redrawing is so well known to all
men of business that it may perhaps be thought unnecessary to give
an account of it. But as this book may come into the hands of many
people who are not men of business, and as the effects of this
practice upon the banking trade are not perhaps generally understood
even by men of business themselves, I shall endeavour to explain it as
distinctly as I can.

    The customs of merchants, which were established when the
barbarous laws of Europe did not enforce the performance of their
contracts, and which during the course of the two last centuries
have been adopted into the laws of all European nations, have given
such extraordinary privileges to bills of exchange that money is
more readily advanced upon them than upon any other species of
obligation, especially when they are made payable within so short a
period as two or three months after their date. If, when the bill
becomes due, the acceptor does not pay it as soon as it is
presented, he becomes from that moment a bankrupt. The bill is
protested, and returns upon the drawer, who, if he does not
immediately pay it, becomes likewise a bankrupt. If, before it came to
the person who presents it to the acceptor for payment, it had
passed through the hands of several other persons, who had
successively advanced to one another the contents of it either in
money or goods, and who to express that each of them had in his turn
received those contents, had all of them in their order endorsed, that
is, written their names upon the back of the bill; each endorser
becomes in his turn liable to the owner of the bill for those
contents, and, if he fails to pay, he becomes too from that moment a
bankrupt. Though the drawer, acceptor, and endorsers of the bill
should, all of them, be persons of doubtful credit; yet still the
shortness of the date gives some security to the owner of the bill.
Though all of them may be very likely to become bankrupts, it is a
chance if they all become so in so short a time. The house is crazy,
says a weary traveller to himself, and will not stand very long; but
it is a chance if it falls to-night, and I will venture, therefore, to
sleep in it to-night.

    The trader A in Edinburgh, we shall suppose, draws a bill upon B
in London, payable two months after date. In reality B in London
owes nothing to A in Edinburgh; but he agrees to accept of A's bill,
upon condition that before the term of payment he shall redraw upon
A in Edinburgh for the same sum, together with the interest and a
commission, another bill, payable likewise two months after date. B
accordingly, before the expiration of the first two months, redraws
this bill upon A in Edinburgh; who again, before the expiration of the
second two months, draws a second bill upon B in London, payable
likewise two months after date; and before the expiration of the third
two months, B in London redraws upon A in Edinburgh another bill,
payable also two months after date. This practice has sometimes gone
on, not only for several months, but for several years together, the
bill always returning upon A in Edinburgh, with the accumulated
interest and commission of all the former bills. The interest was five
per cent in the year, and the commission was never less than one
half per cent on each draft. This commission being repeated more
than six times in the year, whatever money A might raise by this
expedient must necessarily have, cost him something more than eight
per cent in the year, and sometimes a great deal more; when either the
price of the commission happened to rise, or when he was obliged to
pay compound interest upon the interest and commission of former
bills. This practice was called raising money by circulation.

    In a country where the ordinary profits of stock in the greater
part of mercantile projects are supposed to run between six and ten
per cent, it must have been a very fortunate speculation of which
the returns could not only repay the enormous expense at which the
money was thus borrowed for carrying it on; but afford, besides, a
good surplus profit to the projector. Many vast and extensive
projects, however, were undertaken, and for several years carried on
without any other fund to support them besides what was raised at this
enormous expense. The projectors, no doubt, had in their golden dreams
the most distinct vision of this great profit. Upon their awaking,
however, either at the end of their projects, or when they were no
longer able to carry them on, they very seldom, I believe, had the
good fortune to find it.

    The bills A in Edinburgh drew upon B in London, he regularly
discounted two months before they were due with some bank or banker in
Edinburgh; and the bills which B in London redrew upon A in Edinburgh,
he as regularly discounted either with the Bank of England, or with
some other bankers in London. Whatever was advanced upon such
circulating bills, was, in Edinburgh, advanced in the paper of the
Scotch banks, and in London, when they were discounted at the Bank
of England, in the paper of that bank. Though the bills upon which
this paper had been advanced were all of them repaid in their turn
as soon as they became due; yet the value which had been really
advanced upon the first bill, was never really returned to the banks
which advanced it; because, before each bill became due, another
bill was always drawn to somewhat a greater amount than the bill which
was soon to be paid; and the discounting of this other bill was
essentially necessary towards the payment of that which was soon to be
due. This payment, therefore, was altogether fictitious. The stream,
which, by means of those circulating bills of exchange, had once
been made to run out from the coffers of the banks, was never replaced
by any stream which really run into them.

    The paper which was issued upon those circulating bills of
exchange, amounted, upon many occasions, to the whole fund destined
for carrying on some vast and extensive project of agriculture,
commerce, or manufactures; and not merely to that part of it which,
had there been no paper money, the projector would have been obliged
to keep by him, unemployed and in ready money for answering occasional
demands. The greater part of this paper was, consequently, over and
above the value of the gold and silver which would have circulated
in the country, had there been no paper money. It was over and
above, therefore, what the circulation of the country could easily
absorb and employ, and upon that account, immediately returned upon
the banks in order to be exchanged for gold and silver, which they
were to find as they could. It was a capital which those projectors
had very artfully contrived to draw from those banks, not only without
their knowledge or deliberate consent, but for some time, perhaps,
without their having the most distant suspicion that they had really
advanced it.

    When two people, who are continually drawing and redrawing upon
one another, discount their bills always with the same banker, he must
immediately discover what they are about, and see clearly that they
are trading, not with any capital of their own, but with the capital
which he advances to them. But this discovery is not altogether so
easy when they discount their bills sometimes with one banker, and
sometimes with another, and when the same two persons do not
constantly draw and redraw upon one another, but occasionally run
the round of a great circle of projectors, who find it for their
interest to assist one another in this method of raising money, and to
render it, upon that account, as difficult as possible to
distinguish between a real and fictitious bill of exchange; between
a bill drawn by a real creditor upon a real debtor, and a bill for
which there was properly no real creditor but the bank which
discounted it, nor any real debtor but the projector who made use of
the money. When a banker had even made this discovery, he might
sometimes make it too late, and might find that he had already
discounted the bills of those projectors to so great an extent that,
by refusing to discount any more, he would necessarily make them all
bankrupts, and thus, by ruining them, might perhaps ruin himself.
For his own interest and safety, therefore, he might find it
necessary, in this very perilous situation, to go on for some time,
endeavouring, however, to withdraw gradually, and upon that account
making every day greater and greater difficulties about discounting,
in order to force those projectors by degrees to have recourse, either
to other bankers, or to other methods of raising money; so that he
himself might, as soon as possible, get out of the circle. The
difficulties, accordingly, which the Bank of England, which the
principal bankers in London, and which even the more prudent Scotch
banks began, after a certain time, and when all of them had already
gone too far, to make about discounting, not only alarmed, but enraged
in the highest degree those projectors. Their own distress, of which
this prudent and necessary reserve of the banks was, no doubt, the
immediate occasion, they called the distress of the country; and
this distress of the country, they said, was altogether owing to the
ignorance, pusillanimity, and bad conduct of the banks, which did
not give a sufficiently liberal aid to the spirited undertakings of
those who exerted themselves in order to beautify, improve, and enrich
the country. It was the duty of the banks, they seemed to think, to
lend for as long a time, and to as great an extent as they might
wish to borrow. The banks, however, by refusing in this manner to give
more credit to those to whom they had already given a great deal too
much, took the only method by which it was now possible to save either
their own credit or the public credit of the country.

    In the midst of this clamour and distress, a new bank was
established in Scotland for the express purpose of relieving the
distress of the country. The design was generous; but the execution
was imprudent, and the nature and causes of the distress which it
meant to relieve were not, perhaps, well understood. This bank was
more liberal than any other had ever been, both in granting cash
accounts, and in discounting bills of exchange. With regard to the
latter, it seems to have made scarce any distinction between real
and circulating bills, but to have discounted all equally. It was
the avowed principle of this bank to advance, upon any reasonable
security, the whole capital which was to be employed in those
improvements of which the returns are the most slow and distant,
such as the improvements of land. To promote such improvements was
even said to be the chief of the public-spirited purposes for which it
was instituted. By its liberality in granting cash accounts, and in
discounting bills of exchange, it, no doubt, issued great quantities
of its bank notes. But those bank notes being, the greater part of
them, over and above what the circulation of the country could
easily absorb and employ, returned upon it, in order to be exchanged
for gold and silver as fast as they were issued. Its coffers were
never well filled. The capital which had been subscribed to this
bank at two different subscriptions, amounted to one hundred and sixty
thousand pounds, of which eighty per cent only was paid up. This sum
ought to have been paid in at several different instalments. A great
part of the proprietors, when they paid in their first instalment,
opened a cash account with the bank; and the directors, thinking
themselves obliged to treat their own proprietors with the same
liberality with which they treated all other men, allowed many of them
to borrow upon this cash account what they paid in upon all their
subsequent instalments. Such payments, therefore, only put into one
coffer what had the moment before been taken out of another. But had
the coffers of this bank been filled ever so well, its excessive
circulation must have emptied them faster than they could have been
replenished by any other expedient but the ruinous one of drawing upon
London, and when the bill became due, paying it, together with
interest and commission, by another draft upon the same place. Its
coffers having been filled so very ill, it is said to have been driven
to this resource within a very few months after it began to do
business. The estates of the proprietors of this bank were worth
several millions, and by their subscription to the original bond or
contract of the bank, were really pledged for answering all its
engagements. By means of the great credit which so great a pledge
necessarily gave it, it was, notwithstanding its too liberal
conduct, enabled to carry on business for more than two years. When it
was obliged to stop, it had in the circulation about two hundred
thousand pounds in bank notes. In order to support the circulation
of those notes which were continually returning upon it as fast they
were issued, it had been constantly in the practice of drawing bills
of exchange upon London, of which the number and value were
continually increasing, and, when it stopped, amounted to upwards of
six hundred thousand pounds. This bank, therefore, had, in little more
than the course of two years, advanced to different people upwards
of eight hundred thousand pounds at five per cent. Upon the two
hundred thousand pounds which it circulated in bank notes, this five
per cent might, perhaps, be considered as clear gain, without any
other deduction besides the expense of management. But upon upwards of
six hundred thousand pounds, for which it was continually drawing
bills of exchange upon London, it was paying, in the way of interest
and commission, upwards of eight per cent, and was consequently losing
more than three per cent upon more than three-fourths of all its
dealings.

    The operations of this bank seem to have produced effects quite
opposite to those which were intended by the particular persons who
planned and directed it. They seem to have intended to support the
spirited undertakings, for as such they considered them, which were at
that time carrying on in different parts of the country; and at the
same time, by drawing the whole banking business to themselves, to
supplant all the other Scotch banks, particularly those established in
Edinburgh, whose backwardness in discounting bills of exchange had
given some offence. This bank, no doubt, gave some temporary relief to
those projectors, and enabled them to carry on their projects for
about two years longer than they could otherwise have done. But it
thereby only enabled them to get so much deeper into debt, so that,
when ruin came, it fell so much the heavier both upon them and upon
their creditors. The operations of this bank, therefore, instead of
relieving, in reality aggravated in the long-run the distress which
those projectors had brought both upon themselves and upon their
country. It would have been much better for themselves, their
creditors, and their country, had the greater part of them been
obliged to stop two years sooner than they actually did. The temporary
relief, however, which this bank afforded to those projectors,
proved a real and permanent relief to the other Scotch banks. All
the dealers in circulating bills of exchange, which those other
banks had become so backward in discounting, had recourse to this
new bank, where they were received with open arms. Those other
banks, therefore, were enabled to get very easily out of that fatal
circle, from which they could not otherwise have disengaged themselves
without incurring a considerable loss, and perhaps too even some
degree of discredit.

    In the long-run, therefore, the operations of this bank
increased the real distress of the country which it meant to
relieve; and effectually relieved from a very great distress those
rivals whom it meant to supplant.

    At the first setting out of this bank, it was the opinion of
some people that how fast soever its coffers might be emptied, it
might easily replenish them by raising money upon the securities of
those to whom it had advanced its paper. Experience, I believe, soon
convinced them that this method of raising money was by much too
slow to answer their purpose; and that coffers which originally were
so ill filled, and which emptied themselves so very fast, could be
replenished by no other expedient but the ruinous one of drawing bills
upon London, and when they became due, paying them by other drafts
upon the same place with accumulated interest and commission. But
though they had been able by this method to raise money as fast as
they wanted it, yet, instead of making a profit, they must have
suffered a loss by every such operation; so that in the long-run
they must have ruined themselves as a mercantile company, though,
perhaps, not so soon as by the more expensive practice of drawing
and redrawing. They could still have made nothing by the interest of
the paper, which, being over and above what the circulation of the
country could absorb and employ, returned upon them, in order to be
exchanged for gold and silver, as fast as they issued it; and for
the payment of which they were themselves continually obliged to
borrow money. On the contrary, the whole expense of this borrowing, of
employing agents to look out for people who had money to lend, of
negotiating with those people, and of drawing the proper bond or
assignment, must have fallen upon them, and have been so much clear
loss upon the balance of their accounts. The project of replenishing
their coffers in this manner may be compared to that of a man who
had a water-pond from which a stream was continually running out,
and into which no stream was continually running, but who proposed
to keep it always equally full by employing a number of people to go
continually with buckets to a well at some miles distance in order
to bring water to replenish it.

    But though this operation had proved not only practicable but
profitable to the bank as a mercantile company, yet the country
could have derived no benefit from it; but, on the contrary, must have
suffered a very considerable loss by it. This operation could not
augment in the smallest degree the quantity of money to be lent. It
could only have erected this bank into a sort of general loan office
for the whole country. Those who wanted to borrow must have applied to
this bank instead of applying to the private persons who had lent it
their money. But a bank which lends money perhaps to five hundred
different people, the greater part of whom its directors can know very
little about, is not likely to be more judicious in the choice of
its debtors than a private person who lends out his money among a
few people whom he knows, and in whose sober and frugal conduct he
thinks he has good reason to confide. The debtors of such a bank as
that whose conduct I have been giving some account of were likely, the
greater part of them, to be chimerical projectors, the drawers and
re-drawers of circulating bills of exchange, who would employ the
money in extravagant undertakings, which, with all the assistance that
could be given them, they would probably never be able to complete,
and which, if they should be completed, would never repay the
expense which they had really cost, would never afford a fund
capable of maintaining a quantity of labour equal to that which had
been employed about them. The sober and frugal debtors of private
persons, on the contrary, would be more likely to employ the money
borrowed in sober undertakings which were proportioned to their
capitals, and which, though they might have less of the grand and
the marvellous, would have more of the solid 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 success of this operation, therefore, without increasing
in the smallest degree the capital of the country, would only have
transferred a great part of it from prudent and profitable to
imprudent and unprofitable undertakings.

    That the industry of Scotland languished for want of money to
employ it was the opinion of the famous Mr. Law. By establishing a
bank of a particular kind, which he seems to have imagined might issue
paper to the amount of the whole value of all the lands in the
country, he proposed to remedy this want of money. The Parliament of
Scotland, when he first proposed his project, did not think proper
to adopt it. It was afterwards adopted, with some variations, by the
Duke of Orleans, at that time Regent of France. The idea of the
possibility of multiplying paper to almost any extent was the real
foundation of what is called the Mississippi scheme, the most
extravagant project both of banking and stock-jobbing that, perhaps,
the world ever saw. The different operations of this scheme are
explained so fully, so clearly, and with so much order and
distinctness, by Mr. du Verney, in his Examination of the Political
Reflections upon Commerce and Finances of Mr. du Tot, that I shall not
give any account of them. The principles upon which it was founded are
explained by Mr. Law himself, in a discourse concerning money and
trade, which he published in Scotland when he first proposed his
project. The splendid but visionary ideas which are set forth in
that and some other works upon the same principles still continue to
make an impression upon many people, and have, perhaps, in part,
contributed to that excess of banking which has of late been
complained of both in Scotland and in other places.

    The Bank of England is the greatest bank of circulation in Europe.
It was incorporated, in pursuance of an act of Parliament, by a
charter under the Great Seal, dated the 27th of July, 1694. It at that
time advanced to government the sum of one million two hundred
thousand pounds, for an annuity of one hundred thousand pounds; or for
L96,000 a year interest, at the rate of eight per cent, and L4000 a
year for the expense of management. The credit of the new
government, established by the Revolution, we may believe, must have
been very low, when it was obliged to borrow at so high an interest.

    In 1697 the bank was allowed to enlarge its capital stock by an
engraftment of L1,001,171 10s. Its whole capital stock therefore,
amounted at this time to L2,201,171 10s. This engraftment is said to
have been for the support of public credit. In 1696, tallies had
been at forty, and fifty, and sixty per cent discount, and bank
notes at twenty per cent. During the great recoinage of the silver,
which was going on at this time, the bank had thought proper to
discontinue the payment of its notes, which necessarily occasioned
their discredit.

    In pursuance of the 7th Anne, c. 7, the bank advanced and paid
into the exchequer the sum of L400,000; making in all the sum of
L1,600,000 which it had advanced upon its original annuity of
L96,000 interest and L4000 for expense of management. In 1708,
therefore, the credit of government was as good as that of private
persons, since it could borrow at six per cent interest the common
legal and market rate of those times. In pursuance of the same act,
the bank cancelled exchequer bills to the amount of L1,775,027 17s. 10
1/2d. at six per cent interest, and was at the same time allowed to
take in subscriptions for doubling its capital. In 1708, therefore,
the capital of the bank amounted to L4,402,343; and it had advanced to
government the sum of L3,375,027 17s. 10 1/2d.

    By a call of fifteen per cent in 1709, there was paid in and
made stock L656,204 Is. 9d.; and by another of ten per cent in 1710,
L501,448 12s. 11d. In consequence of those two calls, therefore, the
bank capital amounted to L5,559,995 14s. 8d.

    In pursuance of the 3rd George I, c. 8, the bank delivered up
two millions of exchequer bills to be cancelled. It had at this
time, therefore, advanced to government 17s. 10d. In pursuance of
the 8th George 1, c. 21, the bank purchased of the South Sea Company
stock to the amount of 14,000,000; and in 1722, in consequence of
the subscriptions which it had taken in for enabling it to make this
purchase, its capital stock was increased by L3,400,000. At this time,
therefore, the bank had advanced to the public L9,375,027 17s. 10
1/2d.; and its capital stock amounted only to L8,959,995 14s. 8d. It
was upon this occasion that the sum which the bank had advanced to the
public, and for which it received interest, began first to exceed
its capital stock, or the sum for which it paid a dividend to the
proprietors of bank stock; 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 same kind ever since. In
1746, the bank had, upon different occasions, advanced to the public
L11,686,800 and its divided capital had been raised by different calls
and subscriptions to L10,780,000. The state of those two sums has
continued to be the same ever since. In pursuance of the 4th of George
III, c. 25, the bank agreed to pay to government for the renewal of
its charter L110,000 without interest or repayment. This sum,
therefore, did not increase either of those two other sums.

    The dividend of the bank has varied according to the variations in
the rate of the interest which it has, at different times, received
for the money it had advanced to the public, as well as according to
other circumstances. This rate of interest has gradually been
reduced from eight to three per cent. For some years past the bank
dividend has been at five and a half per cent.

    The stability of the Bank of England is equal to that of the
British government. All that it has advanced to the public must be
lost before its creditors can sustain any loss. No other banking
company in England can be established by act of Parliament, or can
consist of more than six members. It acts, not only as an ordinary
bank, but as a great engine of state. It receives and pays the greater
part of the annuities which are due to the creditors of the public, it
circulates exchequer bills, and it advances to government the annual
amount of the land and malt taxes, which are frequently not paid up
till some years thereafter. In those different operations, its duty to
the public may sometimes have obliged it, without any fault of its
directors, to overstock the circulation with paper money. It
likewise discounts merchants' bills, and has, upon several different
occasions, supported the credit of the principal houses, not only of
England, but of Hamburg and Holland. Upon one occasion, in 1763, it is
said to have advanced for this purpose, in one week, about L1,600,000,
a great part of it in bullion. I do not, however, pretend to warrant
either the greatness of the sum, or the shortness of the time. Upon
other occasions, this great company has been reduced to the
necessity of paying in sixpences.

    It is not by augmenting the capital of the country, but by
rendering a greater part of that capital active and productive than
would otherwise be so, that the most judicious operations of banking
can increase the industry of the country. That part of his capital
which a dealer is obliged to keep by him unemployed, and in ready
money, for answering occasional demands, is so much dead stock, which,
so long as it remains in this situation, produces nothing either to
him or to his country. The judicious operations of banking enable
him to convert this dead stock into active and productive stock;
into materials to work upon, into tools to work with, and into
provisions and subsistence to work for; into stock which produces
something both to himself and to his country. The gold and silver
money which circulates in any country, and by means of which the
produce of its land and labour is annually circulated and
distributed to the proper consumers, is, in the same manner as the
ready money of the dealer, all dead stock. It is a very valuable
part of the capital of the country, which produces nothing to the
country. The judicious operations of banking, by substituting paper in
the room of a great part of this gold and silver, enables the
country to convert a great part of this dead stock into active and
productive stock; into stock which produces something to the
country. The gold and silver money which circulates in any country may
very properly be compared to a highway, which, while it circulates and
carries to market all the grass and corn of the country, produces
itself not a single pile of either. The judicious operations of
banking, by providing, if I may be allowed so violent a metaphor, a
sort of waggon-way through the air, enable the country to convert,
as it were, a great part of its highways into good pastures and
corn-fields, and thereby to increase very considerably the annual
produce of its land and labour. The commerce and industry of the
country, however, it must be acknowledged, though they may be somewhat
augmented, cannot be altogether so secure when they are thus, as it
were, suspended upon the Daedalian wings of paper money as when they
travel about upon the solid ground of gold and silver. Over and
above the accidents to which they are exposed from the
unskillfulness of the conductors of this paper money, they are
liable to several others, from which no prudence or skill of those
conductors can guard them.

    An unsuccessful war, for example, in which the enemy got
possession of the capital, and consequently of that treasure which
supported the credit of the paper money, would occasion a much greater
confusion in a country where the whole circulation was carried on by
paper, than in one where the greater part of it was carried on by gold
and silver. The usual instrument of commerce having lost its value, no
exchanges could be made but either by barter or upon credit. All taxes
having been usually paid in paper money, the prince would not have
wherewithal either to pay his troops, or to furnish his magazines; and
the state of the country would be much more irretrievable than if
the greater part of its circulation had consisted in gold and
silver. A prince, anxious to maintain his dominions at all times in
the state in which he can most easily defend them, ought, upon this
account, to guard, not only against that excessive multiplication of
paper money which ruins the very banks which issue it; but even
against that multiplication of it which enables them to fill the
greater part of the circulation of the country with it.

    The circulation of every country may be considered as divided into
two different branches: the circulation of the dealers with one
another, and the circulation between the dealers and the consumers.
Though the same pieces of money, whether paper or metal, may be
employed sometimes in the one circulation and sometimes in the
other, yet as both are constantly going on at the same time, each
requires a certain stock of money of one kind or another to carry it
on. The value of the goods circulated between the different dealers,
never can exceed the value of those circulated between the dealers and
the consumers; whatever is bought by the dealers, being ultimately
destined to be sold to the consumers. The circulation between the
dealers, as it is carried on by wholesale, requires generally a pretty
large sum for every particular transaction. That between the dealers
and the consumers, on the contrary, as it is generally carried on by
retail, frequently requires but very small ones, a shilling, or even a
halfpenny, being often sufficient. But small sums circulate much
faster than large ones. A shilling changes masters more frequently
than a guinea, and a halfpenny more frequently than a shilling. Though
the annual purchases of all the consumers, therefore, are at least
equal in value to those of all the dealers, they can generally be
transacted with a much smaller quantity of money; the same pieces,
by a more rapid circulation, serving as the instrument of many more
purchases of the one kind than of the other.

    Paper money may be so regulated as either to confine itself very
much to the circulation between the different dealers, or to extend
itself likewise to a great part of that between the dealers and the
consumers. Where no bank notes are circulated under ten pounds
value, as in London, paper money confines itself very much to the
circulation between the dealers. When a ten pound bank note comes into
the hands of a consumer, he is generally obliged to change it at the
first shop where he has occasion to purchase five shillings' worth
of goods, so that it often returns into the hands of a dealer before
the consumer has spent the fortieth part of the money. Where bank
notes are issued for so small sums as twenty shillings, as in
Scotland, paper money extends itself to a considerable part of the
circulation between dealers and consumers. Before the Act of
Parliament, which put a stop to the circulation of ten and five
shilling notes, it filled a still greater part of that circulation. In
the currencies of North America, paper was commonly issued for so
small a sum as a shilling, and filled almost the whole of that
circulation. In some paper currencies of Yorkshire, it was issued even
for so small a sum as a sixpence.

    Where the issuing of bank notes for such very small sums is
allowed and commonly practised, many mean people are both enabled
and encouraged to become bankers. A person whose promissory note for
five pounds, or even for twenty shillings, would be rejected by
everybody, will get it to be received without scruple when it is
issued for so small a sum as a sixpence. But the frequent bankruptcies
to which such beggarly bankers must be liable may occasion a very
considerable inconveniency, and sometimes even a very great calamity
to many poor people who had received their notes in payment.

    It were better, perhaps, that no bank notes were issued in any
part of the kingdom for a smaller sum than five pounds. Paper money
would then, probably, confine itself, in every part of the kingdom, to
the circulation between the different dealers, as much as it does at
present in London, where no bank notes are issued under ten pounds'
value; five pounds being, in most parts of the kingdom, a sum which,
though it will purchase, little more than half the quantity of
goods, is as much considered, and is as seldom spent all at once, as
ten pounds are amidst the profuse expense of London.

    Where paper money, it is to be observed, is pretty much confined
to the circulation between dealers and dealers, as at London, there is
always plenty of gold and silver. Where it extends itself to a
considerable part of the circulation between dealers and consumers, as
in Scotland, and still more in North America, it banishes gold and
silver almost entirely from the country; almost all the ordinary
transactions of its interior commerce being thus carried on by
paper. The suppression of ten and five shilling bank notes somewhat
relieved the scarcity of gold and silver in Scotland; and the
suppression of twenty shilling notes would probably relieve it still
more. Those metals are said to have become more abundant in America
since the suppression of some of their paper currencies. They are
said, likewise, to have been more abundant before the institution of
those currencies.

    Though paper money should be pretty much confined to the
circulation between dealers and dealers, yet banks and bankers might
still be able to give nearly the same assistance to the industry and
commerce of the country as they had done when paper money filled
almost the whole circulation. The ready money which a dealer is
obliged to keep by him, for answering occasional demands, is
destined altogether for the circulation between himself and other
dealers of whom he buys goods. He has no occasion to keep any by him
for the circulation between himself and the consumers, who are his
customers, and who bring ready money to him, instead of taking any
from him. Though no paper money, therefore, was allowed to be issued
but for such sums as would confine it pretty much to the circulation
between dealers and dealers, yet, partly by discounting real bills
of exchange, and partly by lending upon cash accounts, banks and
bankers might still be able to relieve the greater part of those
dealers from the necessity of keeping any considerable part of their
stock by them, unemployed and in ready money, for answering occasional
demands. They might still be able to give the utmost assistance
which banks and bankers can, with propriety, give to traders of
every kind.

    To restrain private people, it may be said, from receiving in
payment the promissory notes of a banker, for any sum whether great or
small, when they themselves are willing to receive them, or to
restrain a banker from issuing such notes, when all his neighbours are
willing to accept of them, is a manifest violation of that natural
liberty which it is the proper business of law not to infringe, but to
support. Such regulations may, no doubt, be considered as in some
respects a violation of natural liberty. But those exertions of the
natural liberty of a few individuals, which might endanger the
security of the whole society, are, and ought to be, restrained by the
laws of all governments, of the most free as well as of the most
despotical. The obligation of building party walls, in order to
prevent the communication of fire, is a violation of natural liberty
exactly of the same kind with the regulations of the banking trade
which are here proposed.

    A paper money consisting in bank notes, issued by people of
undoubted credit, payable upon demand without any condition, and in
fact always readily paid as soon as presented, is, in every respect,
equal in value to gold and silver money; since gold and silver money
can at any time be had for it. Whatever is either bought or sold for
such paper must necessarily be bought or sold as cheap as it could
have been for gold and silver.

    The increase of paper money, it has been said, by augmenting the
quantity, and consequently diminishing the value of the whole
currency, necessarily augments the money price of commodities. But
as the quantity of gold and silver, which is taken from the
currency, is always equal to the quantity of paper which is added to
it, paper money does not necessarily increase the quantity of the
whole currency. From the beginning of the last century to the
present time, provisions never were cheaper in Scotland than in
1759, though, from the circulation of ten and five shilling bank
notes, there was then more paper money in the country than at present.
The proportion between the price of provisions in Scotland and that in
England is the same now as before the great multiplication of
banking companies in Scotland. Corn is, upon most occasions, fully
as cheap in England as in France; though there is a great deal of
paper money in England, and scarce any in France. In 1751 and in 1752,
when Mr. Hume published his Political Discourses, and soon after the
great multiplication of paper money in Scotland, there was a very
sensible rise in the price of provisions, owing, probably, to the
badness of the seasons, and not to the multiplication of paper money.

    It would be otherwise, indeed, with a paper money consisting in
promissory notes, of which the immediate payment depended, in any
respect, either upon the good will of those who issued 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 certain number of years, and which in the meantime bore no
interest. Such a paper money would, no doubt, fall more or less
below the value of gold and silver, according as the difficulty or
uncertainty of obtaining immediate payment was supposed to be
greater or less; or according to the greater or less distance of
time at which payment was exigible.

    Some years ago the different banking companies of Scotland were in
the practice of inserting into their bank notes, what they called an
Optional Clause, by which they promised payment to the bearer,
either as soon as the note should be presented, or, in the option of
the directors, six months after such presentment, together with the
legal interest for the said six months. The directors of some of those
banks sometimes took advantage of this optional clause, and
sometimes threatened those who demanded gold and silver in exchange
for a considerable number of their notes that they Would take
advantage of it, unless such demanders would content themselves with a
part of what they demanded. The promissory notes of those banking
companies constituted at that time the far greater part of the
currency of Scotland, which this uncertainty of payment necessarily
degraded below the value of gold and silver money. During the
continuance of this abuse (which prevailed chiefly in 1762, 1763,
and 1764), while the exchange between London and Carlisle was at
par, that between London and Dumfries would sometimes be four per cent
against Dumfries, though this town is not thirty miles distant from
Carlisle. But at Carlisle, bills were paid in gold and silver; whereas
at Dumfries they were paid in Scotch bank notes, and the uncertainty
of getting those bank notes exchanged for gold and silver coin had
thus degraded them four per cent below the value of that coin. The
same Act of Parliament which suppressed ten and five shilling bank
notes suppressed likewise this optional clause, and thereby restored
the exchange between England and Scotland to its natural rate, or to
what the course of trade and remittances might happen to make it.

    In the paper currencies of Yorkshire, the payment of so small a
sum as a sixpence sometimes depended upon the condition that the
holder of the note should bring the change of a guinea to the person
who issued it; a condition which the holders of such notes might
frequently find it very difficult to fulfil, and which must have
degraded this currency below the value of gold and silver money. An
Act of Parliament accordingly declared all such clauses unlawful,
and suppressed, in the same manner as in Scotland, all promissory
notes, payable to the bearer, under twenty shillings value.

    The paper currencies of North America consisted, not in bank notes
payable to the bearer on demand, but in government paper, of which the
payment was not exigible till several years after it was issued; and
though the colony governments paid no interest to the holders of
this paper, they declared it to be, and in fact rendered it, a legal
tender of payment for the full value for which it was issued. But
allowing the colony security to be perfectly good, a hundred pounds
payable fifteen years hence, for example, in a country where
interest at six per cent, is worth little 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 act of such violent injustice as has scarce, 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 honest and downright Doctor Douglas
assures us it was, a scheme of fraudulent debtors to cheat their
creditors. The government of Pennsylvania, indeed, pretended, upon
their first emission of paper money, in 1722, to render their paper of
equal value with gold and silver by enacting penalties against all
those who made any difference in the price of their goods when they
sold them for a colony paper, and when they sold them for gold and
silver; a regulation equally tyrannical, but much less effectual
than that which it was meant to support. A positive law may render a
shilling a legal tender for guinea, because it may direct the courts
of justice to discharge the debtor who has made that tender. But no
positive law can oblige a person who sells goods, and who is at
liberty to sell or not to sell as he pleases, to accept of a
shilling as equivalent to a guinea in the price of them.
Notwithstanding any regulation of this kind, it appeared by the course
of exchange with Great Britain, that a hundred pounds sterling was
occasionally considered as equivalent, in some of the colonies, to a
hundred and thirty pounds, and in others to so great a sum as eleven
hundred pounds currency; this difference in the value arising from the
difference in the quantity of paper emitted in the different colonies,
and in the distance and probability of the term of its final discharge
and redemption.

    No law, therefore, could be more equitable than the Act of
Parliament, so unjustly complained of in the colonies, which
declared that no paper currency to be emitted there in time coming
should be a legal tender of payment.

    Pennsylvania was always more moderate in its emissions of paper
money than any other of our colonies. Its paper currency, accordingly,
is said never to have sunk below the value of the gold and silver
which was current in the colony before the first emission of its paper
money. Before that emission, the colony had raised the denomination of
its coin, and had, by act of assembly, ordered five shillings sterling
to pass in the colony for six and threepence, and afterwards for six
and eightpence. A pound colony currency, therefore, even when that
currency was gold and silver, was more than thirty per cent below
the value of a pound sterling, and when that currency was turned
into paper it was seldom much more than thirty per cent below that
value. The pretence for raising the denomination of the coin, was to
prevent the exportation of gold and silver, by making equal quantities
of those metals pass for greater sums in the colony than they did in
the mother country. It was found, however, that the price of all goods
from the mother country rose exactly in proportion as they raised
the denomination of their coin, so that their gold and silver were
exported as fast as ever.

    The paper of each colony being received in the payment of the
provincial taxes, for the full value for which it had been issued,
it necessarily derived from this use some additional value over and
above what it would have had from the real or supposed distance of the
term of its final discharge and redemption. This additional value
was greater or less, according as the quantity of paper issued was
more or less above what could be employed in the payment of the
taxes of the particular colony which issued it. It was in all the
colonies very much above what could be employed in this manner.

    A prince who should enact that a certain proportion of his taxes
should be paid in a paper money of a certain kind might thereby give a
certain value to this paper money, even though the term of its final
discharge and redemption should depend altogether upon the will of the
prince. If the bank which issued this paper was careful to keep the
quantity of it always somewhat below what could easily be employed
in this manner, the demand for it might be such as to make it even
bear a premium, or sell for somewhat more in the market than the
quantity of gold or silver currency for which it was issued. Some
people account in this manner for what is called the Agio of the
bank of Amsterdam, or for the superiority of bank money over current
money; though this bank 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 must be paid in bank money, that is, by a transfer in
the books of the bank; and the directors of the bank, they allege, are
careful to keep the whole quantity of bank money always below what
this use occasions a demand for. It is upon this account, they say,
that bank money sells for a premium, or bears an agio of four or
five per cent above the same nominal sum of the gold and silver
currency of the country. This account of the bank of Amsterdam,
however, it will appear hereafter, is in a great measure chimerical.

    A paper currency which falls below the value of gold and silver
coin does not thereby sink the value of those metals, or occasion
equal quantities of them to exchange for a smaller quantity of goods
of any other kind. The proportion between the value of gold and silver
and that of goods of any other kind depends in all cases not upon
the nature or quantity of any particular paper money, which may be
current in any particular country, but upon the richness or poverty of
the mines, which happen at any particular time to supply the great
market of the commercial world with those metals. It depends upon
the proportion between the quantity of labour which is necessary in
order to bring a certain quantity of gold and silver to market, and
that which is necessary in order to bring thither a certain quantity
of any other sort of goods.

    If bankers are restrained from issuing any circulating bank notes,
or notes payable to the bearer, for less than a certain sum, and if
they are subjected to the obligation of an immediate and unconditional
payment of such bank notes as soon as presented, their trade may, with
safety to the public, be rendered in all other respects perfectly
free. The late multiplication of banking companies in both parts of
the United Kingdom, an event by which many people have been much
alarmed, instead of diminishing, increases the security of the public.
It obliges all of them to be more circumspect in their conduct, and,
by not extending their currency beyond its due proportion to their
cash, to guard themselves against those malicious runs which the
rivalship of so many competitors is always ready to bring upon them.
It restrains the circulation of each particular company within a
narrower circle, and reduces their circulating notes to a smaller
number. By dividing the whole circulation into a greater number of
parts, the failure of any one company, an accident which, in the
course of things, must sometimes happen, becomes of less consequence
to the public. This free competition, too, obliges all bankers to be
more liberal in their dealings with their customers, lest their rivals
should carry them away. In general, if any branch of trade, or any
division of labour, be advantageous to the public, the freer and
more general the competition, it will always be the more so.

                            CHAPTER III

                  Of the Accumulation of Capital,

              or of Productive and Unproductive Labour

    THERE is one sort of labour which adds to the value of the
subject upon which it is bestowed: there is another which has no such
effect. The former, as it produces a value, may be called productive;
the latter, unproductive 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 master's profit. The labour
of a menial servant, on the contrary, adds to the value of nothing.
Though the manufacturer has his wages advanced to him by his master,
he, in reality, costs him no expense, the value of those wages being
generally restored, together with a profit, in the improved value of
the subject upon which his labour is bestowed. But the maintenance of
a menial servant never is restored. A man grows rich by employing a
multitude of manufacturers: he grows poor by maintaining a multitude
of menial servants. The labour of the latter, however, has its value,
and deserves its reward as well as that of the former. But the labour
of the manufacturer fixes and realizes itself in some particular
subject or vendible commodity, which lasts for some time at least
after that labour is past. It is, as it were, a certain quantity of
labour stocked and stored up to be employed, if necessary, upon some
other occasion. That subject, or what is the same thing, the price of
that subject, can afterwards, if necessary, put into motion a
quantity of labour equal to that which had originally produced it.
The labour of the menial servant, on the contrary, does not fix or
realize itself in any particular subject or vendible commodity. His
services generally perish in the very instant of their performance,
and seldom leave any trace or value behind them for which an equal
quantity of service could afterwards be procured.

    The labour of some of the most respectable orders in the society
is, like that of menial servants, unproductive of any value, and
does not fix or realize itself in any permanent subject; or vendible
commodity, which endures after that labour is past, and for which an
equal quantity of labour could afterwards be procured. The
sovereign, for example, with all the officers both of justice and
war who serve under him, the whole army and navy, are unproductive
labourers. They are the servants of the public, and are maintained
by a part of the annual produce of the industry of other people.
Their service, how honourable, how useful, or how necessary soever,
produces nothing for which an equal quantity of service can
afterwards be procured. The protection, security, and defence of the
commonwealth, the effect of their labour this year will not purchase
its protection, security, and defence for the year to come. In the
same class must be ranked, some both of the gravest and most
important, and some of the most frivolous professions: churchmen,
lawyers, physicians, men of letters of all kinds; players, buffoons,
musicians, opera-singers, opera-dancers, etc. The labour of the
meanest of these has a certain value, regulated by the very same
principles which regulate that of every other sort of labour; and
that of the n oblest and most useful, 50 produces nothing which could
afterwards purchase or procure an equal quantity of labour. Like the
declamation of the actor, the harangue of the orator, or the tune of
the musician, the work of all of them perishes in the very instant of
its production.

    Both productive and unproductive labourers, and those 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 soever,
can never be infinite, but must have certain limits. According,
therefore, as a smaller or greater proportion of it is in any one
year employed in maintaining unproductive hands, the more in the one
case and the less in the other will remain for the productive, and
the next year's produce will be greater or smaller accordingly; the
whole annual produce, if we except the spontaneous productions of
the earth, being the effect of productive labour.

    Though the whole annual produce of the land and labour of every
country is, no doubt, ultimately destined for supplying the
consumption of its inhabitants, and for procuring a revenue to them,
yet when it first comes either from the ground, or from the hands of
the productive labourers, it naturally divides itself into two
parts. One of them, and frequently the largest, is, in the first
place, destined for replacing a capital, or for renewing the
provisions, materials, and finished work, which had been withdrawn
from a capital; the other for constituting a revenue either to the
owner of this capital, as the profit of his stock, or to some other
person, as the rent of his land. Thus, of the produce of land, one
part replaces the capital of the farmer; the other pays his profit and
the rent of the landlord; and thus constitutes a revenue both to the
owner of this capital, as the profits of his stock; and to some
other person, as the rent of his land. Of the produce of a great
manufactory, in the same manner, one part, and that always the
largest, replaces the capital of the undertaker of the work; the other
pays his profit, and thus constitutes 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 capital never is immediately employed to
maintain any but productive hands. It pays the wages of productive
labour only. That which is immediately destined for constituting a
revenue, either as profit or as rent, may maintain indifferently
either productive or unproductive hands.

    Whatever part of his stock a man employs as a capital, he always
expects is to be replaced to him with a profit. He employs it,
therefore, in maintaining productive bands only; and after having
served in the function of a capital to him, it constitutes a revenue
to them. Whenever he employs any part of it in maintaining
unproductive hands of any kind, that part is, from that moment,
withdrawn from his capital, and placed in his stock reserved for
immediate consumption.

    Unproductive labourers, and those who do not labour at all, are
all maintained by revenue; either, first, by that part of the annual
produce which is originally destined for constituting a revenue to
some particular persons, either as the rent of land or as the
profits of stock; or, secondly, by that part which, though
originally destined for replacing a capital and for maintaining
productive labourers only, yet when it comes into their hands
whatever part of it is over and above their necessary subsistence may
be employed in maintaining indifferently either productive or
unproductive hands. Thus, not only the great landlord or the rich
merchant, but even the common workman, if his wages are
considerable, may maintain a menial servant; or he may sometimes go to
a play or a puppetshow, and so contribute his share towards
maintaining one set of unproductive labourers; or he may pay some
taxes, and thus help to maintain another set, more honourable and
useful indeed, but equally unproductive. No part of the annual
produce, however, which had been originally destined to replace a
capital, is ever directed towards maintaining unproductive hands
till after it has put into motion its full complement of productive
labour, or all that it could put into motion in the way in which it
was employed. The workman must have earned his wages by work done
before he can employ any part of them in this manner. That part,
too, is generally but a small one. It is his spare revenue only, of
which productive labourers have seldom a great deal. They generally
have some, however; and in the payment of taxes the greatness of
their number may compensate, in some measure, the smallness of their
contribution. The rent of land and the profits of stock are
everywhere, therefore, the principal sources from which unproductive
hands derive their subsistence. These are the two sorts of revenue
of which the owners have generally most to spare. They might both
maintain indifferently either productive or unproductive hands. They
seem, however, to have some predilection for the latter. The expense
of a great lord feeds generally more idle than industrious people.
The rich merchant, though with his capital he maintains industrious
people only, yet by his expense, that is, by the employment of his
revenue, he feeds commonly the very same sort as the great lord.

    The proportion, therefore, between the productive and unproductive
hands, depends very much in every country upon the proportion
between that part of the annual produce, which, as soon as it comes
either from the ground or from the hands of the productive
labourers, is destined for replacing a capital, and that which is
destined for constituting a revenue, either as rent or as profit. This
proportion is very different in rich from what it is in poor
countries.

    Thus, at present, in the opulent countries of Europe, a very
large, frequently the largest portion of the produce of the land is
destined for replacing the capital of the rich and independent farmer;
the other for paying his profits and the rent of the landlord. But
anciently, during the prevalency of the feudal government, a very
small portion of the produce was sufficient to replace the capital
employed in cultivation. It consisted commonly in a few wretched
cattle, maintained altogether by the spontaneous produce of
uncultivated land, and which might, therefore, be considered as a part
of that spontaneous produce. It generally, too, belonged to the
landlord, and was by him advanced to the occupiers of the land. All
the rest of the produce properly belonged to him too, either as rent
for his land, or as profit upon this paltry capital. The occupiers
of land were generally bondmen, whose persons and effects were equally
his property. Those 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 produce of the land.
Their lord could at all times command their labour in peace and
their service in war. Though they lived at a distance from his
house, they were equally dependent upon him as his retainers who lived
in it. But the whole produce of the land undoubtedly belongs to him
who can dispose of the labour and service of all those whom it
maintains. In the present state of Europe, the share of the landlord
seldom exceeds a third, sometimes not a fourth part of the whole
produce of the land. The rent of land, however, in all the improved
parts of the country, has been tripled and quadrupled since those
ancient times; and this third or fourth part of the annual produce is,
it seems, three or four times greater than the whole had been
before. In the progress of improvement, rent, though it increases in
proportion to the extent, diminishes in proportion to the produce of
the land.

    In the opulent countries of Europe, great capitals are at
present employed in trade and manufactures. In the ancient state,
the little trade that was stirring, and the few homely and coarse
manufactures that were carried on, required but very small capitals.
These, however, must have yielded very large profits. The rate of
interest was nowhere less than ten per cent, and their profits must
have been sufficient to afford this great interest. At present the
rate of interest, in the improved parts of Europe, is nowhere higher
than six per cent, and in some of the most improved it is so low as
four, three, and two per cent. Though that part of the revenue of
the inhabitants which is derived from the profits of stock is always
much greater in rich than in poor countries, it is because the stock
is much greater: in proportion to the stock the profits are
generally much less.

    That part of the annual produce, therefore, which, as soon as it
comes either from the ground or from the hands of the productive
labourers, is destined for replacing a capital, is not only much
greater in rich than in poor countries, but bears a much greater
proportion to that which is immediately destined for constituting a
revenue either as rent or as profit. The funds destined for the
maintenance of productive labour are not only much greater in the
former than in the latter, but bear a much greater proportion to those
which, though they may be employed to maintain either productive or
unproductive hands, have generally a predilection for the latter.

    The proportion between those different funds necessarily
determines in every country the general character of the inhabitants
as to industry or idleness. We are more industrious than our
forefathers; because in the present times the funds destined for the
maintenance of industry are much greater in proportion to those
which are likely to be employed in the maintenance of idleness than
they were two or three centuries ago. Our ancestors were idle for want
of a sufficient encouragement to industry. It is better, says the
proverb, to play for nothing than to work for nothing. In mercantile
and manufacturing towns, where the inferior ranks of people are
chiefly maintained by the employment of capital, they are in general
industrious, sober, and thriving; as in many English, and in most
Dutch towns. In those towns which are principally supported by the
constant or occasional residence of a court, and in which the inferior
ranks of people are chiefly maintained by the spending of revenue,
they are in general idle, dissolute, and poor; as at Rome, Versailles,
Compiegne, and Fontainebleu. If you except Rouen and Bordeaux, there
is little trade or industry in any of the parliament towns of
France; and the inferior ranks of people, being elderly maintained
by the expense of the members of the courts of justice, and of those
who come to plead before them, are in general idle and poor. The great
trade of Rouen and Bordeaux seems to be altogether the effect of their
situation. Rouen is necessarily the entrepot of almost all the goods
which are brought either from foreign countries, or from the
maritime provinces of France, for the consumption of the great city of
Paris. Bordeaux is in the same 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 richest wine countries in the world, and which
seems to produce the wine fittest for exportation, or best suited to
the taste of foreign nations. Such advantageous situations necessarily
attract a great capital by the great employment which they afford
it; and the employment of this capital is the cause of the industry of
those two cities. In the other parliament towns of France, very little
more capital seems to be employed than what is necessary for supplying
their own consumption; that is, little more than the smallest
capital which can be employed in them. The same thing may be said of
Paris, Madrid, and Vienna. Of those three cities, Paris is by far
the most industrious; but Paris itself is the principal market of
all the manufactures established at Paris, and its own consumption
is the principal object of all the trade which it carries on.
London, Lisbon, and Copenhagen, are, perhaps, the only three cities in
Europe which are both the constant residence of a court, and can at
the same time be considered as trading cities, or as cities which
trade not only for their own consumption, but for that of other cities
and countries. The situation of all the three is extremely
advantageous, and naturally fits them to be the entrepots of a great
part of the goods destined for the consumption of distant places. In a
city where a great revenue is spent, to employ with advantage a
capital for any other purpose than for supplying the consumption of
that city is probably more difficult than in one in which the inferior
ranks of people have no other maintenance but what they derive from
the employment of such a capital. The idleness of the greater part
of the people who are maintained by the expense of revenue corrupts,
it is probable, the industry of those who ought to be maintained by
the employment of capital, and renders it less advantageous to
employ a capital there than in other places. There was little trade or
industry in Edinburgh before the union. When the Scotch Parliament was
no longer to be assembled in it, when it ceased to be the necessary
residence of the principal nobility and gentry of Scotland, it
became a city of some trade and industry. It still continues, however,
to be the residence of the principal courts of justice in Scotland, of
the Boards of Customs and Excise, etc. A considerable revenue,
therefore, still continues to be spent in it. In trade and industry it
is much inferior to Glasgow, of which the inhabitants are chiefly
maintained by the employment of capital. The inhabitants of a large
village, it has sometimes been observed, after having made
considerable progress in manufactures, have become idle and poor in
consequence of a great lord having taken up his residence in their
neighbourhood.

    The proportion between capital and revenue, therefore, seems
everywhere to regulate the proportion between industry and idleness.
Wherever capital predominates, industry prevails: wherever revenue,
idleness. Every increase or diminution of capital, therefore,
naturally tends to increase or diminish the real quantity of industry,
the number of productive hands, and consequently 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 increased by parsimony, and diminished by prodigality
and misconduct.

    Whatever a person saves from his revenue he adds to his capital,
and either employs it himself in maintaining an additional number of
productive hands, or enables some other person to do so, by lending it
to him for an interest, that is, for a share of the profits. As the
capital of an individual can be increased only by what he saves from
his annual revenue or his annual gains, so the capital of a society,
which is the same with that of all the individuals who compose it, can
be increased only in the same manner.

    Parsimony, and not industry, is the immediate cause of the
increase of capital. Industry, indeed, provides the subject which
parsimony accumulates. But whatever industry might acquire, if
parsimony did not save and store up, the capital would never be the
greater.

    Parsimony, by increasing the fund which is destined for the
maintenance of productive hands, tends to increase the number of those
hands whose labour adds to the value of the subject upon which it is
bestowed. It tends, therefore, to increase the exchangeable value of
the annual produce of the land and labour of the country. It puts into
motion an additional quantity of industry, which gives an additional
value to the annual produce.

    What is annually saved is as regularly consumed as what is
annually spent, and nearly in the same time too; but it is consumed by
a different set of people. That portion of his revenue which a rich
man annually spends is in most cases consumed by idle guests and
menial servants, who leave nothing behind them in return for their
consumption. That portion which he annually saves, as for the sake
of the profit it is immediately employed as a capital, is consumed
in the same manner, and nearly in the same time too, but by a
different set of people, by labourers, manufacturers, and
artificers, who reproduce with a profit the value of their annual
consumption. His revenue, we shall suppose, is paid him in money.
Had he spent the whole, the food, clothing, and lodging, which the
whole could have purchased, would have been distributed among the
former set of people. By saving a part of it, as that part is for
the sake of the profit immediately employed as a capital either by
himself or by some other person, the food, clothing, and lodging,
which may be purchased with it, are necessarily reserved for the
latter. The consumption is the same, but the consumers are different.

    By what a frugal man annually saves, he not only affords
maintenance to an additional number of productive hands, for that or
the ensuing year, but, like the founder of a public workhouse, he
establishes as it were a perpetual fund for the maintenance of an
equal number in all times to come. The perpetual allotment and
destination of this fund, indeed, is not always guarded by any
positive law, by any trust-right or deed of mortmain. It is always
guarded, however, by a very powerful principle, the plain and
evident interest of every individual to whom any share of it shall
ever belong. No part of it can ever afterwards be employed to maintain
any but productive hands without an evident loss to the person who
thus perverts it from its proper destination.

    The prodigal perverts it in this manner. By not confining his
expense within his income, he encroaches upon his capital. Like him
who perverts the revenues of some pious foundation to profane
purposes, he pays the wages of idleness with those funds which the
frugality of his forefathers had, as it were, consecrated to the
maintenance of industry. By diminishing the funds destined for the
employment of productive labour, he necessarily diminishes, so far
as it depends upon him, the quantity of that labour which adds a value
to the subject upon which it is bestowed, and, consequently, 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 some
was not compensated by the frugality of others, the conduct of every
prodigal, by feeding the idle with the bread of the industrious, tends
not only to beggar himself, but to impoverish his country.

    Though the expense of the prodigal should be altogether in
home-made, and no part of it in foreign commodities, its effect upon
the productive funds of the society would still be the same. Every
year there would still be a certain quantity of food and clothing,
which ought to have maintained productive, employed in maintaining
unproductive hands. Every year, therefore, there would still be some
diminution in what would otherwise have been the value of the annual
produce of the land and labour of the country.

    This expense, it may be said indeed, not being in foreign goods,
and not occasioning any exportation of gold and silver, the same
quantity of money would remain in the country as before. But if the
quantity of food and clothing, which were thus consumed by
unproductive, had been distributed among productive hands, they
would have reproduced, together with a profit, the full value of their
consumption. The same quantity of money would in this case equally
have remained in the country, and there would besides have been a
reproduction of an equal value of consumable goods. There would have
been two values instead of one.

    The same quantity of money, besides, cannot long remain in any
country in which the value of the annual produce diminishes. The
sole use of money is to circulate consumable goods. By means of it,
provisions, materials, and finished work, are bought and sold, and
distributed to their proper consumers. The quantity of money,
therefore, which can be annually employed in any country must be
determined by the value of the consumable goods annually circulated
within it. These must consist either in the immediate produce of the
land and labour of the country itself, or in something which had been,
purchased with some part of that produce. Their value, therefore, must
diminish as the value of that produce diminishes, 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 annually
thrown out of domestic circulation will not be allowed to lie idle.
The interest of whoever possesses it requires that it should be
employed. But having no employment at home, it will, in spite of all
laws and prohibitions, be sent abroad, and employed in purchasing
consumable goods which may be of some use at home. Its annual
exportation will in this manner continue for some time to add
something to the annual consumption of the country beyond the value of
its own annual produce. What in the days of its prosperity had been
saved from that annual produce, and employed in purchasing gold and
silver, will contribute for some little time to support its
consumption in adversity. The exportation of gold and silver is, in
this case, not the cause, but the effect of its declension, and may
even, for some little time, alleviate the misery of that declension.

    The quantity of money, on the contrary, must in every country
naturally increase as the value of the annual produce increases. The
value of the consumable goods annually circulated within the society
being greater will require a greater quantity of money to circulate
them. A part of the increased produce, therefore, will naturally be
employed in purchasing, wherever it is to be had, the additional
quantity of gold and silver necessary for circulating the rest. The
increase of those metals will in this case be the effect, not the
cause, of the public prosperity. Gold and silver are purchased
everywhere in the same manner. The food, clothing, and lodging, the
revenue and maintenance of all those whose labour or stock is employed
in bringing them from the mine to the market, is the price paid for
them in Peru as well as in England. The country which has this price
to pay will never be long without the quantity of those metals which
it has occasion for; and no country will ever long retain a quantity
which it has no occasion for.

    Whatever, therefore, we may imagine the real wealth and revenue of
a country to consist in, whether in the value of the annual produce of
its land and labour, as plain reason seems to dictate; or in the
quantity of the precious metals which circulate within it, as vulgar
prejudices suppose; in either view of the matter, every prodigal
appears to be a public enemy, and every frugal man a public
benefactor.

    The effects of misconduct are often the same as those of
prodigality. Every injudicious and unsuccessful project in
agriculture, mines, fisheries, trade, or manufactures, tends in the
same manner to diminish the funds destined for the maintenance of
productive labour. In every such project, though the capital is
consumed by productive hands only, yet, as by the injudicious manner
in which they are employed they do not reproduce the full value of
their consumption, there must always be some diminution in what
would otherwise have been the productive funds of the society.

    It can seldom happen, indeed, that the circumstances of a great
nation can be much affected either by the prodigality or misconduct of
individuals; the profusion or imprudence of some being always more
than compensated by the frugality and good conduct of others.

    With regard to profusion, the principle which prompts to expense
is the passion for present enjoyment; which, though sometimes
violent and very difficult to be restrained, is in general only
momentary and occasional. But the principle which prompts to save is
the desire of bettering our condition, a desire which, though
generally calm and dispassionate, comes with us from the womb, and
never leaves us till we go into the grave. In the whole interval which
separates those two moments, there is scarce perhaps a single
instant in which any man is so perfectly and completely satisfied with
his situation as to be without any wish of alteration or improvement
of any kind. An augmentation of fortune is the means by which the
greater part of men propose and wish to better their condition. It
is the means the most vulgar and the most obvious; and the most likely
way of augmenting their fortune is to save and accumulate some part of
what they acquire, either regularly and annually, or upon some
extraordinary occasions. Though the principle of expense, therefore,
prevails in almost all men upon some occasions, and in some men upon
almost all occasions, yet in the greater part of men, taking the whole
course of their life at an average, the principle of frugality seems
not only to predominate, but to predominate very greatly.

    With regard to misconduct, the number of prudent and successful
undertakings is everywhere much greater than that of injudicious and
unsuccessful ones. After all our complaints of the frequency of
bankruptcies, the unhappy men who fall into this misfortune make but a
very small part of the whole number engaged in trade, and all other
sorts of business; not much more perhaps than one in a thousand.
Bankruptcy is perhaps the greatest and most humiliating calamity which
can befall an innocent man. The greater part of men, therefore, are
sufficiently careful to avoid it. Some, indeed, do not avoid it; as
some do not avoid the gallows.

    Great nations are never impoverished by private, though they
sometimes are by public prodigality and misconduct. The whole, or
almost the whole public revenue, is in most countries employed in
maintaining unproductive hands. Such are the people who compose a
numerous and splendid court, a great ecclesiastical establishment,
great fleets and armies, who in time of peace produce nothing, and
in time of war acquire nothing which can compensate the expense of
maintaining them, even while the war lasts. Such people, as they
themselves produce nothing, are all maintained by the produce of other
men's labour. When multiplied, therefore, to an unnecessary number,
they may in a particular year consume so great a share of this
produce, as not to leave a sufficiency for maintaining the
productive labourers, who should reproduce it next year. The next
year's produce, therefore, will be less than that of the foregoing,
and if the same disorder should continue, that of the third year
will be still less than that of the second. Those unproductive
hands, who should be maintained by a part only of the spare revenue of
the people, may consume so great a share of their whole revenue, and
thereby oblige so great a number to encroach upon their capitals, upon
the funds destined for the maintenance of productive labour, that
all the frugality and good conduct of individuals may not be able to
compensate the waste and degradation of produce occasioned by this
violent and forced encroachment.

    This frugality and good conduct, however, is upon most
occasions, it appears from experience, sufficient to compensate, not
only the private prodigality and misconduct of individuals, but the
public extravagance of government. The uniform, constant, and
uninterrupted effort of every man to better his condition, the
principle from which public and national, as well as private
opulence is originally derived, is frequently powerful enough to
maintain the natural progress of things towards improvement, in
spite both of the extravagance of government and of the greatest
errors of administration. Like the unknown principle of animal life,
it frequently restores health and vigour to the constitution, in
spite, not only of the disease, but of the absurd prescriptions of the
doctor.

    The annual produce of the land and labour of any nation can be
increased in its value by no other means but by increasing either
the number of its productive labourers, or the productive powers of
those labourers who had before been employed. The number of its
productive labourers, it is evident, can never be much increased,
but in consequence of an increase of capital, or of the funds destined
for maintaining them. The productive powers of the same number of
labourers cannot be increased, but in consequence either of some
addition and improvement to those machines and instruments which
facilitate and abridge labour; or of a more proper division and
distribution of employment. In either case an additional capital is
almost always required. It is by means of an additional capital only
that the undertaker of any work can either provide his workmen with
better machinery or make a more proper distribution of employment
among them. When the work to be done consists of a number of parts, to
keep every man constantly employed in one way requires a much
greater capital than where every man is occasionally employed in every
different part of the work. When we compare, therefore, the state of a
nation at two different 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 manufactures
more numerous and more flourishing, and its trade more extensive, we
may be assured that its capital must have increased during the
interval between those two periods, and that more must have been added
to it by the good conduct of some than had been taken from it either
by the private misconduct of others or by the public extravagance of
government. But we shall find this to have been the case of almost all
nations, in all tolerably quiet and peaceable times, even of those who
have not enjoyed the most prudent and parsimonious governments. To
form a right judgment of it, indeed, we must compare the state of
the country at periods somewhat distant from one another. The progress
is frequently so gradual that, at near periods, the improvement is not
only not sensible, but from the declension either of certain
branches of industry, or of certain districts of the country, things
which sometimes happen though the country in general be in great
prosperity, there frequently arises a suspicion that the riches and
industry of the whole 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 restoration of Charles II. Though, at present, few people,
I believe, doubt of this, yet during this period, five years have
seldom passed away in which some book or pamphlet has not been
published, written, too, with such abilities as to gain some authority
with the public, and pretending to demonstrate that the wealth of
the nation was fast declining, that the country was depopulated,
agriculture neglected, manufactures decaying, and trade undone. Nor
have these publications been all party pamphlets, the wretched
offspring of falsehood 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 reason but because they believed it.

    The annual produce of the land and labour of England, again, was
certainly much greater at the Restoration, than we can suppose it to
have been about an hundred years before, at the accession of
Elizabeth. At this period, too, we have all reason to believe, the
country was much more advanced in improvement than it had been about a
century before, towards the close of the dissensions between the
houses of York and Lancaster. Even then it was, probably, in a
better condition than it had been at the Norman Conquest, and at the
Norman Conquest than during the confusion of the Saxon Heptarchy. Even
at this early period, it was certainly a more improved country than at
the invasion of Julius Caesar, when its inhabitants were nearly in the
same state with the savages in North America.

    In each of those periods, however, there was not only much private
and public profusion, many expensive and unnecessary wars, great
perversion of the annual produce from maintaining productive to
maintain unproductive hands; but sometimes, in the confusion of
civil discord, such absolute waste and destruction of stock, as
might be supposed, not only to retard, as it certainly did, the
natural accumulation of riches, but to have left the country, at the
end of the period, poorer than at the beginning. Thus, in the happiest
and most fortunate period of them all, that which has passed since the
Restoration, how many disorders and misfortunes have occurred,
which, could they have been foreseen, not only the impoverishment, but
the total ruin of the country would have been expected from them?
The fire and the plague of London, the two Dutch wars, the disorders
of the Revolution, the war in Ireland, the four expensive French
wars of 1688, 1702, 1742, and 1756, together with the two rebellions
of 1715 and 1745. In the course of the four French wars, the nation
has contracted more than a hundred and forty-five millions of debt,
over and above all the other extraordinary annual expense which they
occasioned, so that the whole cannot be computed at less than two
hundred millions. So great a share of the annual produce of the land
and labour of the country has, since the Revolution, been employed
upon different occasions in maintaining an extraordinary number of
unproductive hands. But had not those wars given this particular
direction to so large a capital, the greater part of it would
naturally have been employed in maintaining productive hands, whose
labour would have replaced, 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 considerably increased by it every year,
and every year's increase would have augmented still more that of
the following year. More houses would have been built, more lands
would have been improved, and those which had been improved before
would have been better cultivated, more manufactures would have been
established. and those which had been established before would have
been more extended; and to what height the real wealth and revenue
of the country might, by this time, have been raised, it is not
perhaps very easy even to imagine.

    But though the profusion of government must, undoubtedly, have
retarded the natural progress of England towards wealth and
improvement, it has not been able to stop it. The annual produce of
its land and labour is, undoubtedly, much greater at present than it
was either at the Restoration or at the Revolution. The capital,
therefore, annually employed in cultivating this land, and in
maintaining this labour, must likewise be much greater. In the midst
of all the exactions of government, this capital has been silently and
gradually accumulated by the private frugality and good conduct of
individuals, by their universal, continual, and uninterrupted effort
to better their own condition. It is this effort, protected by law and
allowed by liberty to exert itself in the manner that is most
advantageous, which has maintained the progress of England towards
opulence and improvement in almost all former times, and which, it
is to be hoped, will do so in all future times. England, however, as
it has never been blessed with a very parsimonious government, so
parsimony has at no time been the characteristical virtue of its
inhabitants. It is the highest impertinence and presumption,
therefore, in kings and ministers, to pretend to watch over the
economy of private people, and to restrain their expense, either by
sumptuary laws, or by prohibiting the importation of foreign luxuries.
They are themselves always, and without any exception, the greatest
spendthrifts in the society. Let them look well after their own
expense, and they may safely trust private people with theirs. If
their own extravagance does not ruin the state, that of their subjects
never will.

    As frugality increases and prodigality diminishes the public
capital, so the conduct of those whose expense just equals their
revenue, without either accumulating or encroaching, neither increases
nor diminishes it. Some modes of expense, however, seem to
contribute more to the growth of public opulence than others.

    The revenue of an individual may be spent either in things which
are consumed immediately, and in which one day's expense can neither
alleviate nor support that of another, or it may be spent in things
more durable, which can therefore be accumulated, and in which every
day's expense may, as he chooses, either alleviate or support and
heighten the effect of that of the following day. A man of fortune,
for example, may either spend his revenue in a profuse and sumptuous
table, and in maintaining a great number of menial servants, and a
multitude of dogs and horses; or contenting himself with a frugal
table and few attendants, he may lay out the greater part of it in
adorning his house or his country villa, in useful or ornamental
buildings, in useful or ornamental furniture, in collecting books,
statues, pictures; or in things more frivolous, jewels, baubles,
ingenious trinkets of different kinds; or, what is most trifling of
all, in amassing a great wardrobe of fine clothes, like the
favourite and minister of a great prince who died a few years ago.
Were two men of equal fortune to spend their revenue, the one
chiefly in the one way, the other in the other, the magnificence of
the person whose expense had been chiefly in durable commodities,
would be continually increasing, every day's expense contributing
something to support and heighten the effect of that of the
following day: that of the other, on the contrary, would be no greater
at the end of the period than at the beginning. The former, too,
would, at the end of the period, be the richer man of the two. He
would have a stock of goods of some kind or other, which, though it
might not be worth all that it cost, would always be worth
something. No trace or vestige of the expense of the latter would
remain, and the effects of ten or twenty years profusion would be as
completely annihilated as if they had never existed.

    As the one mode of expense is more favourable than the other to
the opulence of an individual, so is it likewise to that of a
nation. The houses, the furniture, the clothing of the rich, in a
little time, become useful to the inferior and middling ranks of
people. They are able to purchase them when their superiors grow weary
of them, and the general accommodation of the whole people is thus
gradually improved, when this mode of expense becomes universal
among men of fortune. In countries which have long been rich, you will
frequently find the inferior ranks of people in possession both of
houses and furniture perfectly good and entire, but of which neither
the one could have been built, nor the other have been made for
their use. What was formerly a seat of the family of Seymour is now an
inn upon the Bath road. The marriage-bed of James the First of Great
Britain, which his queen brought with her from Denmark as a present
fit for a sovereign to make to a sovereign, was, a few years ago,
the ornament of an alehouse at Dunfermline. In some ancient cities,
which either have been long stationary, or have gone somewhat to
decay, you will sometimes scarce find a single house which could
have been built for its present inhabitants. If you go into those
houses too, you will frequently find many excellent, though antiquated
pieces of furniture, which are still very fit for use, and which could
as little have been made for them. Noble palaces, magnificent
villas, great collections of books, statues, pictures and other
curiosities, are frequently both an ornament and an honour, not only
to the neighbourhood, but to the whole country to which they belong.
Versailles is an ornament and an honour to France, Stowe and Wilton to
England. Italy still continues to command some sort of veneration by
the number of monuments of this kind which it possesses, though the
wealth which produced them has decayed, and though the genius which
planned them seems to be extinguished, perhaps from not having the
same employment.

    The expense too, which is laid out in durable commodities, is
favourable, not only to accumulation, but to frugality. If a person
should at any time exceed in it, he can easily reform without exposing
himself to the censure of the public. To reduce very much the number
of his servants, to reform his table from great profusion to great
frugality, to lay down his equipage after he has once set it up, are
changes which cannot escape the observation of his neighbours, and
which are supposed to imply some acknowledgment of preceding bad
conduct. Few, therefore, of those who have once been so unfortunate as
to launch out too far into this sort of expense, have afterwards the
courage to reform, till ruin and bankruptcy oblige them. But if a
person has, at any time, been at too great an expense in building,
in furniture, in books or pictures, no imprudence can be inferred from
his changing his conduct. These are things in which further expense is
frequently rendered unnecessary by former expense; and when a person
stops short, he appears to do so, not because he has exceeded his
fortune, but because he has satisfied his fancy.

    The expense, besides, that is laid out in durable commodities
gives maintenance, commonly, to a greater number of people than that
which is employed in the most profuse hospitality. Of two or three
hundredweight of provisions, which may sometimes be served up at a
great festival, one half, perhaps, is thrown to the dunghill, and
there is always a great deal wasted and abused. But if the expense
of this entertainment had been employed in setting to work masons,
carpenters, upholsterers, mechanics, etc., a quantity of provisions,
of equal value, would have been distributed among a still greater
number of people who would have bought them in pennyworths and pound
weights, and not have lost or thrown away a single ounce of them. In
the one way, besides, this expense maintains productive, in the
other unproductive hands. In the one way, therefore, it increases,
in the other, it does not increase, the exchangeable value of the
annual produce of the land and labour of the country.

    I would not, however, by all this be understood to mean that the
one species of expense always betokens a more liberal or generous
spirit than the other. When a man of fortune spends his revenue
chiefly in hospitality, he shares the greater part of it with his
friends and companions; but when he employs it in purchasing such
durable commodities, he often spends the whole upon his own person,
and gives nothing to anybody without an equivalent. The latter species
of expense, therefore, especially when directed towards frivolous
objects, the little ornaments of dress and furniture, jewels,
trinkets, gewgaws, frequently indicates, not only a trifling, but a
base and selfish disposition. All that I mean is, that the one sort of
expense, as it always occasions some accumulation of valuable
commodities, as it is more favourable to private frugality, and,
consequently, to the increase of the public capital, and as it
maintains productive, rather than unproductive hands, conduces more
than the other to the growth of public opulence.

                            CHAPTER IV

                    Of Stock Lent at Interest

    THE stock which is lent at interest is always considered as a
capital by the lender. He expects that in due time it is to be
restored to him, and that in the meantime the borrower is to pay him a
certain annual rent for the use of it. The borrower may use it
either as a capital, or as a stock reserved for immediate consumption.
If he uses it as a capital, he employs it in the maintenance of
productive labourers, who reproduce the value with a profit. He can,
in this case, both restore the capital and pay the interest without
alienating or encroaching upon any other source of revenue. If he uses
it as a stock reserved for immediate consumption, he acts the part
of a prodigal, and dissipates in the maintenance of the idle what
was destined for the support of the industrious. He can, in this case,
neither restore the capital nor pay the interest without either
alienating or encroaching upon some other source of revenue, such as
the property or the rent of land.

    The stock which is lent at interest is, no doubt, occasionally
employed in both these ways, but in the former much more frequently
than in the latter. The man who borrows in order to spend will soon be
ruined, and he who lends to him will generally have occasion to repent
of his folly. To borrow or to lend for such a purpose, therefore, is
in all cases, where gross usury is out of the question, contrary to
the interest of both parties; and though it no doubt happens sometimes
that people do both the one and the other; yet, from the regard that
all men have for their own interest, we may be assured that it
cannot happen so very frequently as we are sometimes apt to imagine.
Ask any rich man of common prudence to which of the two sorts of
people he has lent the greater part of his stock, to those who, he
thinks, will employ it profitably, or to those who will spend it idly,
and he will laugh at you for proposing the question. Even among
borrowers, therefore, not the people in the world most famous for
frugality, the number of the frugal and industrious surpasses
considerably that of the prodigal and idle.

    The only people to whom stock is commonly lent, without their
being expected to make any very profitable use of it, are country
gentlemen who borrow upon mortgage. Even they scarce ever borrow
merely to spend. What they borrow, one may say, is commonly spent
before they borrow it. They have generally consumed so great a
quantity of goods, advanced to them upon credit by shopkeepers and
tradesmen, that they find it necessary to borrow at interest in
order to pay the debt. The capital borrowed replaces the capitals of
those shopkeepers and tradesmen, which the country gentlemen could not
have replaced from the rents of their estates. It is not properly
borrowed in order to be spent, but in order to replace a capital which
had been spent before.

    Almost all loans at interest are made in money, either of paper,
or of gold and silver. But what the borrower really wants, and what
the lender really supplies him with, is not the money, but the money's
worth, or the goods which it can purchase. If he wants it as a stock
for immediate consumption, it is those goods only which he can place
in that stock. If he wants it as a capital for employing industry,
it is from those goods only that the industrious can be furnished with
the tools, materials, and maintenance necessary for carrying on
their work. By means of the loan, the lender, as it were, assigns 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
pleases.

    The quantity of stock, therefore, or, as it is commonly expressed,
of money which can be lent at interest in any country, is not
regulated by the value of the money, whether paper or coin, which
serves as the instrument of the different loans made in that
country, but by the value of that part of the annual produce which, as
soon as it comes either from the ground, or from the hands of the
productive labourers, is destined not only for replacing a capital,
but such a capital as the owner does not care to be at the trouble
of employing himself. As such capitals are commonly lent out and
paid back in money, they constitute what is called the monied
interest. It is distinct, not only from the landed, but from the
trading and manufacturing interests, as in these last the owners
themselves employ their own capitals. Even in the monied interest,
however, the money is, as it were, but the deed of assignment, which
conveys from one hand to another those capitals which the owners do
not care to employ themselves. Those capitals may be greater in almost
any proportion than the amount of the money which serves as the
instrument of their conveyance; the same pieces of money
successively serving for many different loans, as well as for many
different purchases. A, for example, lends to W a thousand pounds,
with which W immediately purchases of B a thousand pounds' worth of
goods. B having no occasion for the money himself, lends the identical
pieces to X, with which X immediately purchases of C another
thousand pounds' worth of goods. C in the same manner, and for the
same reason, lends them to Y, who again purchases goods with them of
D. In this manner the same pieces, either of coin or paper, may in the
course of a few days, serve as the instrument of three different
loans, and of three different purchases, each of which is, in value,
equal to the whole amount of those pieces. What the three monied men
A, B, and C assign to the three borrowers, W, X, Y, is the power of
making those purchases. In this power consist both the value and the
use of the loans. The stock lent by the three monied men is equal to
the value of the goods which can be purchased with it, and is three
times greater than that of the money with which the purchases are
made. Those loans however, may be all perfectly well secured, the
goods purchased by the different debtors being so employed as, in
due time, to bring back, with a profit, an equal value either of
coin or of paper. And as the same pieces of money can thus serve as
the instrument of different loans to three, or for the same reason, to
thirty times their value, so they may likewise successively serve as
the instrument of repayment.

    A capital lent at interest may, in this manner, be considered as
an assignment from the lender to the borrowers of a certain
considerable portion of the annual produce; upon condition that the
borrower in return shall, during the continuance of the loan, annually
assign to the lender a smaller portion, called the interest; and at
the end of it a portion equally considerable with that which had
originally been assigned to him, called the repayment. Though money,
either coin or paper, serves generally as the deed of assignment
both to the smaller and to the more considerable portion, it is itself
altogether different from what is assigned by it.

    In proportion as that share of the annual produce which, as soon
as it comes either from the ground, or from the hands of the
productive labourers, is destined for replacing a capital, increases
in any country, what is called the monied interest naturally increases
with it. The increase of those particular capitals from which the
owners wish to derive a revenue, without being at the trouble of
employing them themselves, naturally accompanies the general
increase of capitals; or, in other words, as stock increases, the
quantity of stock to be lent at interest grows gradually greater and
greater.

    As the quantity of stock to be lent at interest increases, the
interest, or the price which must be paid for the use of that stock,
necessarily diminishes, not only from those general causes which
make the market price of things commonly diminish as their quantity
increases, but from other causes which are peculiar to this particular
case. As capitals increase in any country, the profits which can be
made by employing them necessarily diminish. It becomes gradually more
and more difficult to find within the country a profitable method of
employing any new capital. There arises in consequence a competition
between different capitals, the owner of one endeavouring to get
possession of that employment which is occupied by another. But upon
most occasions he can hope to jostle that other out of this employment
by no other means but by dealing upon more reasonable terms. He must
not only sell what he deals in somewhat cheaper, but in order to get
it to sell, he must sometimes, too, buy it dearer. The demand for
productive labour, by the increase of the funds which are destined for
maintaining it, grows every day greater and greater. Labourers
easily find employment, but the owners of capitals find it difficult
to get labourers to employ. Their competition raises the wages of
labour and sinks the profits of stock. But when the profits which
can be made by the use of a capital are in this manner diminished,
as it were, at both ends, the price which can be paid for the use of
it, that is, the rate of interest, must necessarily be diminished with
them.

    Mr. Locke, Mr. Law, and Mr. Montesquieu, as well as many other
writers, seem to have imagined that the increase of the quantity of
gold and silver, in consequence of the discovery of the Spanish West
Indies, was the real cause of the lowering of the rate of interest
through the greater part of Europe. Those metals, they say, having
become of less value themselves, the use of any particular portion
of them necessarily became of less value too, and consequently the
price which could be paid for it. This notion, which at first sight
seems plausible, has been so fully exposed by Mr. Hume that it is,
perhaps, unnecessary to say anything more about it. The following very
short and plain argument, however, may serve to explain more
distinctly the fallacy which seems to have misled those gentlemen.

    Before the discovery of the Spanish West Indies, ten per cent
seems to have been the common rate of interest through the greater
part of Europe. It has since that time in different countries sunk
to six, five, four, and three per cent. Let us suppose that in every
particular country the value of silver has sunk precisely in the
same proportion as the rate of interest; and that in those
countries, for example, where interest has been reduced from ten to
five per cent, the same quantity of silver can now purchase just
half the quantity of goods which it could have purchased before.
This supposition will not, I believe, be found anywhere agreeable to
the truth, but it is the most favourable to the opinion which we are
going to examine; and even upon this supposition it is utterly
impossible that the lowering of the value of silver could have the
smallest tendency to lower the rate of interest. If a hundred pounds
are in those countries now of no more value than fifty pounds were
then, ten pounds must now be of no more value than five pounds were
then. Whatever were the causes which lowered the value of the capital,
the same must necessarily have lowered that of the interest, and
exactly in the same proportion. The proportion between the value of
the capital and that of the interest must have remained the same,
though the rate had been altered. By altering the rate, on the
contrary, the proportion between those two values is necessarily
altered. If a hundred pounds now are worth no more than fifty were
then, five pounds now can be worth no more than two pounds ten
shillings were then. By reducing the rate of interest, therefore, from
ten to five per cent, we give for the use of a capital, which is
supposed to be equal to one half of its former value, an interest
which is equal to one fourth only of the value of the former interest.

    Any increase in the quantity of silver, while that of the
commodities circulated by means of it remained the same, could have no
other effect than to diminish the value of that metal. The nominal
value of all sorts of goods would be greater, but their real value
would be precisely the same as before. They would be exchanged for a
greater number of pieces of silver; but the quantity of labour which
they could command, the number of people whom they could maintain
and employ, would be precisely the same. The capital of the country
would be the same, though a greater number of pieces might be
requisite for conveying any equal portion of it from one hand to
another. The deeds of assignment, like the conveyances of a verbose
attorney, would be more cumbersome, but the thing assigned would be
precisely the same as before, and could produce only the same effects.
The funds for maintaining productive labour being the same, the demand
for it would be the same. Its price or wages, therefore, though
nominally greater, would really be the same. They would be paid in a
greater number of pieces of silver; but they would purchase only the
same quantity of goods. The profits of stock would be the same both
nominally and really. The wages of labour are commonly computed by the
quantity of silver which is paid to the labourer. When that is
increased, therefore, his wages appear to be increased, though they
may sometimes be no greater than before. But the profits of stock
are not computed by the number of pieces of silver with which they are
paid, but by the proportion which those pieces bear to the whole
capital employed. Thus in a particular country five shillings a week
are said to be the common wages of labour, and ten per cent the common
profits of stock. But the whole capital of the country being the
same as before, the competition between the different capitals of
individuals into which it was divided would likewise be the same. They
would all trade with the same advantages and disadvantages. The common
proportion between capital and profit, therefore, would be the same,
and consequently the common interest of money; what can commonly be
given for the use of money being necessarily regulated by what can
commonly be made by the use of it.

    Any increase in the quantity of commodities annually circulated
within the country, while that of the money which circulated them
remained the same, would, on the contrary, produce many other
important effects, besides that of raising the value of the money. The
capital of the country, though it might nominally be the same, would
really be augmented. It might continue to be expressed by the same
quantity of money, but it would command a greater quantity of
labour. The quantity of productive labour which it could maintain
and employ would be increased, and consequently the demand for that
labour. Its wages would naturally rise with the demand, and yet
might appear to sink. They might be paid with a smaller quantity of
money, but that smaller quantity might purchase a greater quantity
of goods than a greater had done before. The profits of stock would be
diminished both really and in appearance. The whole capital of the
country being augmented, the competition between the different
capitals of which it was composed would naturally be augmented along
with it. The owners of those particular capitals would be obliged to
content themselves with a smaller proportion of the produce of that
labour which their respective capitals employed. The interest of
money, keeping pace always with the profits of stock, might, in this
manner, be greatly diminished, though the value of money, or the
quantity of goods which any particular sum could purchase, was greatly
augmented.

    In some countries the interest of money has been prohibited by
law. But as something can everywhere be made by the use of money,
something ought everywhere to be paid for the use of it. This
regulation, instead of preventing, has been found from experience to
increase the evil of usury; the debtor being obliged to pay, not
only for the use of the money, but for the risk which his creditor
runs by accepting a compensation for that use. He is obliged, if one
may say so, to insure his creditor from the penalties of usury.

    In countries where interest is permitted, the law, in order to
prevent the extortion of usury, generally fixes the highest rate which
can be taken without incurring a penalty. This rate ought always to be
somewhat above the lowest market price, or the price which is commonly
paid for the use of money by those who can give the most undoubted
security. If this legal rate should be fixed below the lowest market
rate, the effects of this fixation must be nearly the same as those of
a total prohibition of interest. The creditor will not lend his
money for less than the use of it is worth, and the debtor must pay
him for the risk which he runs by accepting the full value of that
use. If it is fixed precisely at the lowest market price, it ruins
with honest people, who respect the laws of their country, the
credit of all those who cannot give the very best security, and
obliges them to have recourse to exorbitant usurers. In a country,
such as Great Britain, where money is lent to government at three
per cent and to private people upon a good security at four and four
and a half, the present legal rate, five per cent, is perhaps as
proper as any.

    The legal rate, it is to be observed, though it ought to be
somewhat above, ought not to be much above the lowest market rate.
If the legal rate of interest in Great Britain, for example, was fixed
so high as eight or ten per cent, the greater part of the money
which was to be lent would be lent to prodigals and projectors, who
alone would be willing to give this high interest. Sober people, who
will give for the use of money no more than a part of what they are
likely to make by the use of it, would not venture into the
competition. A great part of the capital of the country would thus
be kept out of the hands which were most likely to make a profitable
and advantageous use of it, and thrown into those which were most
likely to waste and destroy it. Where the legal rate of interest, on
the contrary, is fixed but a very little above the lowest market rate,
sober people are universally preferred, as borrowers, to prodigals and
projectors. The person who lends money gets nearly as much interest
from the former as he dares to take from the latter, and his money
is much safer in the hands of the one set of people than in those of
the other. A great part of the capital of the country is thus thrown
into the hands in which it is most likely to be employed with
advantage.

    No law can reduce the common rate of interest below the lowest
ordinary market rate at the time when that law is made.
Notwithstanding the edict of 1766, by which the French king
attempted to reduce the rate of interest from five to four per cent,
money continued to be lent in France at five per cent, the law being
evaded in several different ways.

    The ordinary market price of land, it is to be observed, depends
everywhere upon the ordinary market rate of interest. The person who
has a capital from which he wishes to derive a revenue, without taking
the trouble to employ it himself, deliberates whether he should buy
land with it or lend it out at interest. The superior security of
land, together with some other advantages which almost everywhere
attend upon this species of property, will generally dispose him to
content himself with a smaller revenue from land than what he might
have by lending out his money at interest. These advantages are
sufficient to compensate a certain difference of revenue; but they
will compensate a certain difference only; and if the rent of land
should fall short of the interest of money by a greater difference,
nobody would buy land, which would soon reduce its ordinary price.
On the contrary, if the advantages should much more than compensate
the difference, everybody would buy land, which again would soon raise
its ordinary price. When interest was at ten per cent, land was
commonly sold for ten and twelve years' purchase. As interest sunk
to six, five, and four per cent, the price of land rose to twenty,
five-and-twenty, and thirty years' purchase. The market rate of
interest is higher in France than in England; and the common price
of land is lower. In England it commonly sells at thirty, in France at
twenty years' purchase.

                            CHAPTER V

              Of the Different Employment of Capitals

    THOUGH all capitals are destined for the maintenance of productive
labour only, yet the quantity of that labour which equal capitals
are capable of putting into motion varies extremely according to the
diversity of their employment; as does likewise 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: either, first,
in procuring the rude produce annually required for the use and
consumption of the society; or, secondly, in manufacturing and
preparing that rude produce for immediate use and consumption; or,
thirdly, in transporting either the rude or manufactured produce
from the places where they abound to those where they are wanted;
or, lastly, in dividing particular portions of either into such
small parcels as suit the occasional demands of those who want them.
In the first way are employed the capitals of all those who
undertake the improvement or cultivation of lands, mines, or
fisheries; in the second, those of all master manufacturers; in the
third, those of all wholesale merchants; and in the fourth, those of
all retailers. It is difficult to conceive that a capital should be
employed in any way which may not be classed under some one or other
of those four.

    Each of these four methods of employing a capital is essentially
necessary either to the existence or extension of the other three,
or to the general conveniency of the society.

    Unless a capital was employed in furnishing rude produce to a
certain degree of abundance, neither manufactures nor trade of any
kind could exist.

    Unless a capital was employed in manufacturing that part of the
rude produce which requires a good deal of preparation before it can
be fit for use and consumption, it either would never be produced,
because there could be no demand for it; or if it was produced
spontaneously, it would be of no value in exchange, and could add
nothing to the wealth of the society.

    Unless a capital was employed in transporting either the rude or
manufactured produce from the places where it abounds to those where
it is wanted, no more of either could be produced than was necessary
for the consumption of the neighbourhood. The capital of the
merchant exchanges the surplus produce of one place for that of
another, and thus encourages the industry and increases the enjoyments
of both.

    Unless a capital was employed in breaking and dividing certain
portions either of the rude or manufactured produce into such small
parcels as suit the occasional demands of those who want them, every
man would be obliged to purchase a greater quantity of the goods he
wanted than his immediate occasions required. If there was no such
trade as a butcher, for example, every man would be obliged to
purchase a whole ox or a whole sheep at a time. This would generally
be inconvenient to the rich, and much more so to the poor. If a poor
workman was obliged to purchase a month's or six months' provisions at
a time, a great part of the stock which he employs as a capital in the
instruments of his trade, or in the furniture of his shop, and which
yields him a revenue. he would be forced to place in that part of
his stock which is reserved for immediate consumption, and which
yields him no revenue. Nothing can be more convenient for such a
person than to be able to purchase his subsistence from day to day, or
even from hour to hour, as he wants it. He is thereby enabled to
employ almost his whole stock as a capital. He is thus enabled to
furnish work to a greater value, and the profit, which he makes by
it in this way, much more than compensates the additional price
which the profit of the retailer imposes upon the goods. The
prejudices of some political writers against shopkeepers and tradesmen
are altogether without foundation. So far is it from being necessary
either to tax them or to restrict their numbers that they can never be
multiplied so as to hurt the public, though they may so as to hurt one
another. The quantity of grocery goods, for example, which can be sold
in a particular town is limited by the demand of that town and its
neighbourhood. The capital, therefore, which can be employed in the
grocery trade cannot exceed what is sufficient to purchase that
quantity. If this capital is divided between two different grocers,
their competition will tend to make both of them sell cheaper than
if it were in the hands of one only; and if it were divided among
twenty, their competition would be just so much the greater, and the
chance of their combining together, in order to raise the price,
just so much the less. Their competition might perhaps ruin some of
themselves; but to take care of this is the business of the parties
concerned, and it may safely be trusted to their discretion. It can
never hurt either the consumer or the producer; on the contrary, it
must tend to make the retailers both sell cheaper and buy dearer
than if the whole trade was monopolized by one or two persons. Some of
them, perhaps, may sometimes decoy a weak customer to buy what he
has no occasion for. This evil, however, is of too little importance
to deserve the public attention, nor would it necessarily be prevented
by restricting their numbers. It is not the multitude of ale-houses,
to give the most suspicious example, that occasions a general
disposition to drunkenness among the common people; but that
disposition arising from other causes necessarily gives employment
to a multitude of ale-houses.

    The persons whose capitals are employed in any of those four
ways are themselves productive labourers. Their labour, when
properly directed, fixes and realizes itself in the subject or
vendible commodity upon which it is bestowed, and generally adds to
its price the value at least of their own maintenance and consumption.
The profits of the farmer, of the manufacturer, of the merchant, and
retailer, are all drawn from the price of the goods which the two
first produce, and the two last buy and sell. Equal capitals, however,
employed in each of those four different ways, will immediately put
into motion very different quantities of productive labour, and
augment, too, in very different proportions the value of the annual
produce of the land and labour of the society to which they belong.

    The capital of the retailer replaces, together with its profits,
that of the merchant of whom he purchases goods, and thereby enables
him to continue his business. The retailer himself is the only
productive labourer whom it immediately employs. In his profits
consists the whole value which its employment adds to the annual
produce of the land and labour of the society.

    The capital of the wholesale merchant replaces, together with
their profits, the capitals of the farmers and manufacturers of whom
he purchases the rude and manufactured produce which he deals in,
and thereby enables them to continue their respective trades. It is by
this service chiefly that he contributes indirectly to support the
productive labour of the society, and to increase the value of its
annual produce. His capital employs, too, the sailors and carriers who
transport his goods from one place to another, and it augments the
price of those goods by the value, not only of his profits, but of
their wages. This is all the productive labour which it immediately
puts into motion, and all the value which it immediately adds to the
annual produce. Its operation in both these respects is a good deal
superior to that of the capital of the retailer.

    Part of the capital of the master manufacturer is employed as a
fixed capital in the instruments of his trade, and replaces,
together with its profits, that of some other artificer of whom he
purchases them. Part of his circulating capital is employed in
purchasing materials, and replaces, with their profits, the capitals
of the farmers and miners of whom he purchases them. But a great
part of it is always, either annually, or in a much shorter period,
distributed among the different workmen whom he employs. It augments
the value of those materials by their wages, and by their matters'
profits upon the whole stock of wages, materials, and instruments of
trade employed in the business. It puts immediately into motion,
therefore, a much greater quantity of productive labour, and adds a
much greater value to the annual produce of the land and labour of the
society than an equal capital in the hands of any wholesale merchant.

    No equal capital puts into motion a greater quantity of productive
labour than that of the farmer. Not only his labouring servants, but
his labouring cattle, are productive labourers. In agriculture, too,
nature labours along with man; and though her labour costs no expense,
its produce has its value, as well as that of the most expensive
workmen. The most important operations of agriculture seem intended
not so much to increase, though they do that too, as to direct the
fertility of nature towards the production of the plants most
profitable to man. A field overgrown with briars and brambles may
frequently produce as great a quantity of vegetables as the best
cultivated vineyard or corn field. Planting and tillage frequently
regulate more than they animate the active fertility of nature; and
after all their labour, a great part of the work always remains to
be done by her. The labourers and labouring cattle, therefore,
employed in agriculture, not only occasion, like the workmen in
manufactures, the reproduction of a value equal to their own
consumption, or to the capital which employs them, together with its
owners' profits; but of a much greater value. Over and above the
capital of the farmer and all its profits, they regularly occasion the
reproduction of the rent of the landlord. This rent may be
considered as the produce of those powers of nature, the use of
which the landlord lends to the farmer. It is greater or smaller
according to the supposed extent of those powers, or in other words,
according to the supposed natural or improved fertility of the land.
It is the work of nature which remains after deducting or compensating
everything which can be regarded as the work of man. It is seldom less
than a fourth, and frequently more than a third of the whole
produce. No equal quantity of productive labour employed in
manufactures can ever occasion so great a reproduction. In them nature
does nothing; man does all; and the reproduction must always be in
proportion to the strength of the agents that occasion it. The capital
employed in agriculture, therefore, not only puts into motion a
greater quantity of productive labour than any equal capital
employed in manufactures, but in proportion, too, to the quantity of
productive 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 most advantageous to the
society.

    The capitals employed in the agriculture and in the retail trade
of any society must always reside within that society. Their
employment is confined almost to a precise spot, to the farm and to
the shop of the retailer. They must generally, too, though there are
some exceptions to this, belong to resident members of the society.

    The capital of a wholesale merchant, on the contrary, seems to
have no fixed or necessary residence anywhere, but may wander about
from place to place, according as it can either buy cheap or sell
dear.

    The capital of the manufacturer must no doubt reside where the
manufacture is carried on; but where this shall be is not always
necessarily determined. It may frequently be at a great distance
both from the place where the materials grow, and from that where
the complete manufacture is consumed. Lyons is very distant both
from the places which afford the materials of its manufactures, and
from those which consume them. The people of fashion in Sicily are
clothed in silks made in other countries, from the materials which
their own produces. Part of the wool of Spain is manufactured in Great
Britain, and some part of that cloth is afterwards sent back to Spain.

    Whether the merchant whose capital exports the surplus produce
of any society be a native or a foreigner is of very little
importance. If he is a foreigner, the number of their productive
labourers is necessarily less than if he had been a native by one
man only, and the value of their annual produce by the profits of that
one man. The sailors or carriers whom he employs may still belong
indifferently either to his country or to their country, or to some
third country, in the same manner as if he had been a native. The
capital of a foreigner gives a value to their surplus produce
equally with that of a native by exchanging it for something for which
there is a demand at home. It as effectually replaces the capital of
the person who produces that surplus, and as effectually enables him
to continue his business; the service by which the capital of a
wholesale merchant chiefly contributes to support the productive
labour, and to augment the value of the annual produce of the
society to which he belongs.

    It is of more consequence that the capital of the manufacturer
should reside within the country. It necessarily puts into motion a
greater quantity of productive labour, and adds a greater value to the
annual produce of the land and labour of the society. It may, however,
be very useful to the country, though it should not reside within
it. The capitals of the British manufacturers who work up the flax and
hemp annually imported from the coasts of the Baltic are surely very
useful to the countries which produce them. Those materials are a part
of the surplus produce of those countries which, unless it was
annually exchanged for something which is in demand there, would be of
no value, and would soon cease to be produced. The merchants who
export it replace the capitals of the people who produce it, and
thereby encourage them to continue the production; and the British
manufacturers replace the capitals of those merchants.

    A particular country, in the same manner as a particular person,
may frequently not have capital sufficient both to improve and
cultivate all its lands, to manufacture and prepare their whole rude
produce for immediate use and consumption, and to transport the
surplus part either of the rude or manufactured produce to those
distant markets where it can be exchanged for something for which
there is a demand at home. The inhabitants of many different parts
of Great Britain have not capital sufficient to improve and
cultivate all their lands. The wool of the southern counties of
Scotland is, a great part of it, after a long land carriage through
very bad roads, manufactured in Yorkshire, for want of capital to
manufacture it at home. There are many little manufacturing towns in
Great Britain, of which the inhabitants have not capital sufficient to
transport the produce of their own industry to those distant markets
where there is demand and consumption for it. If there are any
merchants among them, they are properly only the agents of wealthier
merchants who reside in some of the greater commercial cities.

    When the capital of any country is not sufficient for all those
three purposes, in proportion as a greater share of it is employed
in agriculture, the greater will be the quantity of productive
labour which it puts into motion within the country; as will
likewise be the value which its employment adds to the annual
produce of the land and labour of the society. After agriculture,
the capital employed in manufactures puts into motion the greatest
quantity of productive labour, and adds the greatest value to the
annual produce. That which is employed in the trade of exportation has
the least effect of any of the three.

    The country, indeed, which has not capital sufficient for all
those three purposes has not arrived at that degree of opulence for
which it seems naturally destined. To attempt, however, prematurely
and with an insufficient capital to do all the three is certainly
not the shortest way for a society, no more than it would be for an
individual, to acquire a sufficient one. The capital of all the
individuals of a nation has its limits in the same manner as that of a
single individual, and is capable of executing only certain
purposes. The capital of all the individuals of a nation is
increased in the same manner as that of a single individual by their
continually accumulating and adding to it whatever they save out of
their revenue. It is likely to increase the fastest, therefore, when
it is employed in the way that affords the greatest revenue to all the
inhabitants of the country, as they will thus be enabled to make the
greatest savings. But the revenue of all the inhabitants of the
country is necessarily in proportion to the value of the annual
produce of their land and labour.

    It has been the principal cause of the rapid progress of our
American colonies towards wealth and greatness that almost their whole
capitals have hitherto been employed in agriculture. They have no
manufactures, those household and courser manufactures excepted
which necessarily accompany the progress of agriculture, and which are
the work of the women and children in every private family. The
greater part both of the exportation and coasting trade of America
is carried on by the capitals of merchants who reside in Great
Britain. Even the stores and warehouses from which goods are
retailed in some provinces, particularly in Virginia and Maryland,
belong many of them to merchants who reside in the mother country, and
afford one of the few instances of the retail trade of a society being
carried on by the capitals of those who are not resident members of
it. Were the Americans, either by combination or by any other sort
of violence, to stop the importation of European manufactures, and, by
thus giving a monopoly to such of their own countrymen as could
manufacture the like goods, divert any considerable part of their
capital into this employment, they would retard instead of
accelerating the further increase in the value of their annual
produce, and would obstruct instead of promoting the progress of their
country towards real wealth and greatness. This would be still more
the case were they to attempt, in the same manner, to monopolize to
themselves their whole exportation trade.

    The course of human prosperity, indeed, seems scarce ever to
have been of so long continuance as to enable any great country to
acquire capital sufficient for all those three purposes; unless
perhaps, we give credit to the wonderful accounts of the wealth and
cultivation of China, of those of ancient Egypt, and of the ancient
state of Indostan. Even those three countries, the wealthiest,
according to all accounts, that ever were in the world, are chiefly
renowned for their superiority in agriculture and manufactures. They
do not appear to have been eminent for foreign trade. The ancient
Egyptians had a superstitious antipathy to the sea; a superstition
nearly of the same kind prevails among the Indians; and the Chinese
have never excelled in foreign commerce. The greater part of the
surplus produce of all those three countries seems to have been always
exported by foreigners, who gave in exchange for it something else for
which they found a demand there, frequently gold and silver.

    It is thus that the same capital will in any country put into
motion a greater or smaller quantity of productive labour, and add a
greater or smaller value to the annual produce of its land and labour,
according to the different proportions in which it is employed in
agriculture, manufactures, and wholesale trade. The difference, too,
is very great, according to the different sorts of wholesale trade
in which any part of it is employed.

    All wholesale trade, all buying in order to sell again by
wholesale, may be reduced to three different sorts. The home trade,
the foreign trade of consumption, and the carrying trade. The home
trade is employed in purchasing in one part of the same country, and
selling in another, the produce of the industry of that country. It
comprehends both the inland and the coasting trade. The foreign
trade of consumption is employed in purchasing foreign goods for
home consumption. The carrying trade is employed in transacting the
commerce of foreign countries, or in carrying the surplus produce of
one to another.

    The capital which is employed in purchasing in one part of the
country in order to sell in another the produce of the industry of
that country, generally replaces by every such operation two
distinct capitals that had both been employed in the agriculture or
manufactures of that country, and thereby enables them to continue
that employment. When it sends out from the residence of the
merchant a certain value of commodities, it generally brings back in
return at least an equal value of other commodities. When both are the
produce of domestic industry, it necessarily replaces by every such
operation two distinct capitals which had both been employed in
supporting productive labour, and thereby enables them to continue
that support. The capital which sends Scotch manufactures to London,
and brings back English corn and manufactures to Edinburgh,
necessarily replaces by every such operation, two British capitals
which had both been employed in the agriculture or manufactures of
Great Britain.

    The capital employed in purchasing foreign goods for home
consumption, when this purchase is made with the produce of domestic
industry, replaces too, by every such operation, two distinct
capitals; but one of them only is employed in supporting domestic
industry. The capital which sends British goods to Portugal, and
brings back Portuguese goods to Great Britain, replaces by every
such operation only one British capital. The other is a Portuguese
one. Though the returns, therefore, of the foreign trade of
consumption should be as quick as those of the home trade, the capital
employed in it will give but one half the encouragement to the
industry or productive labour of the country.

    But the returns of the foreign trade of consumption are very
seldom so quick as those of the home trade. The returns of the home
trade generally come in before the end of the year, and sometimes
three or four times in the year. The returns of the foreign trade of
consumption seldom come in before the end of the year, and sometimes
not till after two or three years. A capital, therefore, employed in
the home trade will sometimes make twelve operations, or be sent out
and returned twelve times, before a capital employed in the foreign
trade of consumption has made one. If the capitals are equal,
therefore, the one will give four-and-twenty times more
encouragement and support to the industry of the country than the
other.

    The foreign goods for home consumption may sometimes be purchased,
not with the produce of domestic industry, but with some other foreign
goods. These last, however, must have been purchased either
immediately with the produce of domestic industry, or with something
else that had been purchased with it; for, the case of war and
conquest excepted, foreign goods can ever be acquired but in
exchange for something that had been produced at home, either
immediately, or after two or more different exchanges. The effects,
therefore, of a capital employed in such a roundabout foreign trade of
consumption, are, in every respect, the same as those of one
employed in the most direct trade of the same kind, except that the
final returns are likely to be still more distant, as they must depend
upon the returns of two or three distinct foreign trades. If the
flax and hemp of Riga are purchased with the tobacco of Virginia,
which had been purchased with British manufactures, the merchant
must wait for the returns of two distinct foreign trades before he can
employ the same capital in re-purchasing a like quantity of British
manufactures. If the tobacco of Virginia had been purchased, not
with British manufactures, but with the sugar and rum of Jamaica which
had been purchased with those manufactures, he must wait for the
returns of three. If those two or three distinct foreign trades should
happen to be carried on by two or three distinct merchants, of whom
the second buys the goods imported by the first, and the third buys
those imported by the second, in order to export them again, each
merchant indeed will in this case receive the returns of his own
capital more quickly; but the final returns of the whole capital
employed in the trade will be just as slow as ever. Whether the
whole capital employed in such a round-about trade belong to one
merchant or to three can make no difference with regard to the
country, though it may with regard to the particular merchants.
Three times a greater capital must in both cases be employed in
order to exchange a certain value of British manufactures for a
certain quantity of flax and hemp than would have been necessary had
the manufactures and the flax and hemp been directly exchanged for one
another. The whole capital employed, therefore, in such a
round-about foreign trade of consumption will generally give less
encouragement and support to the productive labour of the country than
an equal capital employed in a more direct trade of the same kind.

    Whatever be the foreign commodity with which the foreign goods for
home consumption are purchased, it can occasion no essential
difference either in the nature of the trade, or in the
encouragement and support which it can give to the productive labour
of the country from which it is carried on. If they are purchased with
the gold of Brazil, for example, or with the silver of Peru, this gold
and silver, like the tobacco of Virginia, must have been purchased
with something that either was the produce of the industry of the
country, or that had been purchased with something else that was so.
So far, therefore, as the productive labour of the country is
concerned, the foreign trade of consumption which is carried on by
means of gold and silver has all the advantages and all the
inconveniences of any other equally round-about foreign trade of
consumption, and will replace just as fast or just as slow the capital
which is immediately employed in supporting that productive labour. It
seems even to have one advantage over any other equally roundabout
foreign trade. The transportation of those metals from one place to
another, on account of their small bulk and great value, is less
expensive than that of almost any other foreign goods of equal
value. Their freight is much less, and their insurance not greater;
and no goods, besides, are less liable to suffer by the carriage. An
equal quantity of foreign goods, therefore, may frequently be
purchased with a smaller quantity of the produce of domestic industry,
by the intervention of gold and silver, than by that of any other
foreign goods. The demand of the country may frequently, in this
manner, be supplied more completely and at a smaller expense than in
any other. Whether, by the continual exportation of those metals, a
trade of this kind is likely to impoverish the country from which it
is carried on, in any other way, I shall have occasion to examine at
great length hereafter.

    That part of the capital of any country which is employed in the
carrying trade is altogether withdrawn from supporting the
productive labour of that particular country, to support that of
some foreign countries. Though it may replace by every operation two
distinct capitals, yet neither of them belongs to that particular
country. The capital of the Dutch merchant, which carries the corn
of Poland to Portugal, and brings back the fruits and wines of
Portugal to Poland, replaces by every such operation two capitals,
neither of which had been employed in supporting the productive labour
of Holland; but one of them in supporting that of Poland, and the
other that of Portugal. The profits only return regularly to
Holland, and constitute the whole addition which this trade
necessarily makes to the annual produce of the land and labour of that
country. When, indeed, the carrying trade of any particular country is
carried on with the ships and sailors of that country, that part of
the capital employed in it which pays the freight is distributed
among, and puts into motion, a certain number of productive
labourers of that country. Almost all nations that have had any
considerable share of the carrying trade have, in fact, carried it
on in this manner. The trade itself has probably derived its name from
it, the people of such countries being the carriers to other
countries. It does not, however, seem essential to the nature of the
trade that it should be so. A Dutch merchant may, for example,
employ his capital in transacting the commerce of Poland and Portugal,
by carrying part of the surplus produce of the one to the other, not
in Dutch, but in British bottoms. It may be presumed that he
actually does so upon some particular occasions. It is upon this
account, however, that the carrying trade has been supposed peculiarly
advantageous to such a country as Great Britain, of which the
defence and security depend upon the number of its sailors and
shipping. But the same capital may employ as many sailors and
shipping, either in the foreign trade of consumption, or even in the
home trade, when carried on by coasting vessels, as it could in the
carrying trade. The number of sailors and shipping which 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 distance of the ports between which they
are to be carried; chiefly upon the former of those two circumstances.
The coal trade from Newcastle to London, for example, employs more
shipping than all the carrying trade of England, though the ports
are at no great distance. To force, therefore, by extraordinary
encouragements, a larger share of the capital of any country into
the carrying trade than what would naturally go to it will not
always necessarily increase the shipping of that country.

    The capital, therefore, employed in the home trade of any
country will generally give encouragement and support to a greater
quantity of productive labour in that country, and increase the
value of its annual produce more than an equal capital employed in the
foreign trade of consumption: and the capital employed in this
latter trade has in both these respects a still greater advantage over
an equal capital employed in the carrying trade. The riches, and so
far as power depends upon riches, the power of every country must
always be in proportion to the value of its annual produce, the fund
from which all taxes must ultimately be paid. But the great object
of the political economy of every country is to increase the riches
and power of that country. It ought, therefore, to give no
preference nor superior encouragement to the foreign trade of
consumption 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 those two channels a greater share of the capital of
the country than what would naturally flow into them of its own
accord.

    When the produce of any particular branch of industry exceeds what
the demand of the country requires, the surplus must be sent abroad
and exchanged for something for which there is a demand at home.
Without such exportation a part of the productive labour of the
country must cease, and the value of its annual produce diminish.
The land and labour of Great Britain produce generally more corn,
woollens, and hardware than the demand of the home market requires.
The surplus part of them, therefore, must be sent abroad, and
exchanged for something for which there is a demand at home. It is
only by means of such exportation that this surplus can acquire a
value sufficient to compensate the labour and expense of producing it.
The neighbourhood of the sea-coast, and the banks of all navigable
rivers, are advantageous situations for industry, only because they
facilitate the exportation and exchange of such surplus produce for
something else which is more in demand there.

    When the foreign goods which are thus purchased with the surplus
produce of domestic industry exceed the demand of the home market, the
surplus part of them must be sent abroad again and exchanged for
something more in demand at home. About ninety-six thousand
hogsheads of tobacco are annually purchased in Virginia and Maryland
with a part of the surplus produce of British industry. But the demand
of Great Britain does not require, perhaps, more than fourteen
thousand. If the remaining eighty-two thousand, therefore, could not
be sent abroad and exchanged for something more in demand at home, the
importation of them must cease immediately, and with it the productive
labour of all those inhabitants of Great Britain, who are at present
employed in preparing the goods with which these eighty-two thousand
hogsheads are annually purchased. Those goods, which are part of the
produce of the land and labour of Great Britain, having no market at
home, and being deprived of that which they had abroad, must cease
to be produced. The most round-about foreign trade of consumption,
therefore may, upon some occasions, be as necessary for supporting the
productive labour of the country, and the value of its annual produce,
as the most direct.

    When the capital stock of any country is increased to such a
degree that it cannot be all employed in supplying the consumption and
supporting the productive labour of that particular country, the
surplus part of it naturally disgorges itself into the carrying trade,
and is employed in performing the same offices to other countries. The
carrying trade is the natural effect and symptom of great national
wealth; but it does not seem to be the natural cause of it. Those
statesmen who have been disposed to favour it with particular
encouragements seem to have mistaken the effect and symptom for the
cause. Holland, in proportion to the extent of the land and the number
of its inhabitants, by far the richest country in Europe, has,
accordingly, the greatest share of the carrying trade of Europe.
England, perhaps the second richest country of Europe, is likewise
supposed to have a considerable share of it; though what commonly
passes for the carrying trade of England will frequently, perhaps,
be found to be no more than a round-about foreign trade of
consumption. Such are, in a great measure, the trades which carry
the goods of the East and West Indies, and of America, to different
European markets. Those goods are generally purchased either
immediately with the produce of British industry, or with something
else which had been purchased with that produce, and the final returns
of those trades are generally used or consumed in Great Britain. The
trade which is carried on in British bottoms between the different
ports of the Mediterranean, and some trade of the same kind carried on
by British merchants between the different ports of India, make,
perhaps, the principal branches of what is properly the carrying trade
of Great Britain.

    The extent of the home trade and of the capital which can be
employed in it, is necessarily limited by the value of the surplus
produce of all those distant places within the country which have
occasion to exchange their respective productions with another: that
of the foreign trade of consumption, by the value of the surplus
produce of the whole country and of what can be purchased with it:
that of the carrying trade by the value of the surplus produce of
all the different countries in the world. Its possible extent,
therefore, is in a manner infinite in comparison of that of the
other two, and is capable of absorbing the greatest capitals.

    The consideration of his own private profit is the sole motive
which determines the owner of any capital to employ it either in
agriculture, in manufactures, or in some particular branch of the
wholesale or retail trade. The different quantities of productive
labour which it may put into motion, and the different values which it
may add to the annual, produce of the land and labour of the
society, according as it is employed in one or other of those
different ways, never enter into his thoughts. In countries,
therefore, where agriculture is the most profitable of all
employments, and farming and improving the most direct roads to a
splendid fortune, the capitals of individuals will naturally be
employed in the manner most advantageous to the whole society. The
profits of agriculture, however, seem to have no superiority over
those of other employments in any part of Europe. Projectors,
indeed, in every corner of it, have within these few years amused
the public with most magnificent accounts of the profits to be made by
the cultivation and improvement of land. Without entering into any
particular discussion of their calculations, a very simple observation
may satisfy us that the result of them must be false. We see every day
the most splendid fortunes that have been acquired in the course of
a single life by trade and manufacturers, frequently from a very small
capital, sometimes from no capital. A single instance of such a
fortune acquired by agriculture in the same time, and from such a
capital, has not, perhaps, occurred in Europe during the course of the
present century. In all the great countries of Europe, however, much
good land still 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 almost everywhere capable of
absorbing a much greater capital than has ever yet been employed in
it. What circumstances in the policy of Europe have given the trades
which are carried on in towns so great an advantage over that which is
carried on in the country that private persons frequently find it more
for their advantage to employ their capitals in the most distant
carrying trades of Asia and America than in the improvement and
cultivation of the most fertile fields in their own neighbourhood, I
shall endeavour to explain at full length in the two following books.

                             BOOK THREE

     OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS

                 Of the Natural Progress of Opulence

    THE great commerce of every civilised society is that carried on
between the inhabitants of the town and those of the country. It
consists in the exchange of rude for manufactured produce, either
immediately, or by the intervention of money, or of some sort of paper
which represents money. The country supplies the town with the means
of subsistence and the materials of manufacture. The town repays
this supply by sending back a part of the manufactured produce to
the inhabitants of the country. The town, in which there neither is
nor can be any reproduction of substances, may very properly be said
to gain its whole wealth and subsistence from the country. We must
not, however, upon this account, imagine that the gain of the town
is the loss of the country. The gains of both are mutual and
reciprocal, and the division of labour is in this, as in all other
cases, advantageous to all the different persons employed in the
various occupations into which it is subdivided. The inhabitants of
the country purchase of the town a greater quantity of manufactured
goods, with the produce of a much smaller quantity of their own
labour, than they must have employed had they attempted to prepare
them themselves. The town affords a market for the surplus produce
of the country, or what is over and above the maintenance of the
cultivators, and it is there that the inhabitants of the country
exchange it for something else which is in demand among them. The
greater the number and revenue of the inhabitants of the town, the
more extensive is the market which it affords to those of the country;
and the more extensive that market, it is always the more advantageous
to a great number. The corn which grows within a mile of the town
sells there for the same price with that which comes from twenty miles
distance. But the price of the latter must generally not only pay
the expense of raising and bringing it to market, but afford, 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 sell, the whole value of the carriage of the
like produce that is brought from more distant parts, and they have,
besides, the whole value of this carriage in the price of what they
buy. Compare the cultivation of the lands in the neighbourhood of
any considerable town with that of those which lie at some distance
from it, and you will easily satisfy yourself how much the country
is benefited by the commerce of the town. Among all the absurd
speculations that have been propagated concerning the balance of
trade, it has never been pretended that either the country loses by
its commerce with the town, or the town by that with the country which
maintains it.

    As subsistence is, in the nature of things, prior to conveniency
and luxury, so the industry which procures the former must necessarily
be prior to that which ministers to the latter. The cultivation and
improvement of the country, therefore, which affords subsistence,
must, necessarily, be prior to the increase of the town, which
furnishes only the means of conveniency and luxury. It is the
surplus produce of the country only, or what is over and above the
maintenance of the cultivators, that constitutes the subsistence of
the town, which can therefore increase only with the increase of
this surplus produce. The town, indeed, may not always derive its
whole subsistence from the country in its neighbourhood, or even
from the territory to which it belongs, but from very distant
countries; and this, though it forms no exception from the general
rule, has occasioned considerable variations in the progress of
opulence in different ages and nations.

    That order of things which necessity imposes in general, though
not in every particular country, is, in every particular country,
promoted by the natural inclinations of man. If human institutions had
never thwarted those natural inclinations, the towns could nowhere
have increased beyond what the improvement and cultivation of the
territory in which they were situated could support; till such time,
at least, as the whole of that territory was completely cultivated and
improved. Upon equal, or nearly equal profits, most men will choose to
employ their capitals rather in the improvement and cultivation of
land than either in manufactures or in foreign trade. The man who
employs his capital in land has it more under his view and command,
and his fortune is much less 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 injustice, by giving great credits in distant countries to men
with whose character and situation he can seldom be thoroughly
acquainted. The capital of the landlord, on the contrary, which is
fixed in the improvement of his land, seems to be as well secured as
the nature of human affairs can admit of. The beauty of the country
besides, the pleasures of a country life, the tranquillity of mind
which it promises, and wherever the injustice of human laws does not
disturb it, the independency which it really affords, have charms that
more or less attract everybody; and as to cultivate the ground was the
original destination of man, so in every stage of his existence he
seems to retain a predilection for this primitive employment.

    Without the assistance of some artificers, indeed, the cultivation
of land cannot be carried on but with great inconveniency and
continual interruption. Smiths, carpenters, wheelwrights, and
ploughwrights, masons, and bricklayers, tanners, shoemakers, and
tailors are people whose service the farmer has frequent occasion for.
Such artificers, too, stand occasionally in need of the assistance
of one another; and as their residence is not, like that of the
farmer, necessarily tied down to a precise spot, they naturally settle
in the neighbourhood of one another, and thus form a small town or
village. The butcher, the brewer, and the baker soon join them,
together with many other artificers and retailers, necessary or useful
for supplying their occasional wants, and who contribute still further
to augment the town. The inhabitants of the town and those of the
country are mutually the servants of one another. The town is a
continual fair or market, to which the inhabitants of the country
resort in order to exchange their rude for manufactured produce. It is
this commerce which supplies the inhabitants of the town both with the
materials of their work, and the means of their subsistence. The
quantity of the finished work which they sell to the inhabitants of
the country necessarily regulates the quantity of the materials and
provisions which they buy. Neither their employment nor subsistence,
therefore, can augment but in proportion to the augmentation of the
demand from the country for finished work; and this demand can augment
only in proportion to the extension of improvement and cultivation.
Had human institutions, therefore, never disturbed the natural
course of things, the progressive wealth and increase of the towns
would, in every political society, be consequential, and in proportion
to the improvement and cultivation of the territory or country.

    In our North American colonies, where uncultivated land is still
to be had upon easy terms, no manufactures for distant sale have
ever yet been established in any of their towns. When an artificer has
acquired a little more stock than is necessary for carrying on his own
business in supplying the neighbouring country, he does not, in
North America, attempt to establish with it a manufacture for more
distant sale, but employs it in the purchase and improvement of
uncultivated land. From artificer he becomes planter, and neither
the large wages nor the easy subsistence which that country affords to
artificers can bribe him rather to work for other people than for
himself. He feels that an artificer is the servant of his customers,
from whom he derives his subsistence; but that a planter who
cultivates his own land, and derives his necessary subsistence from
the labour of his own family, is really a master, and independent of
all the world.

    In countries, on the contrary, where there is either no
uncultivated land, or none that can be had upon easy terms, every
artificer who has acquired more stock than he can employ in the
occasional jobs of the neighbourhood endeavours to prepare work for
more distant sale. The smith erects some sort of iron, the weaver some
sort of linen or woollen manufactory. Those different manufactures
come, in process of time, to be gradually subdivided, and thereby
improved and refined in a great variety of ways, which may easily be
conceived, and which it is therefore unnecessary to explain any
further.

    In seeking for employment to a capital, manufactures are, upon
equal or nearly equal profits, naturally preferred to foreign
commerce, for the same reason that agriculture is naturally
preferred to manufactures. As the capital of the landlord or farmer is
more secure than that of the manufacturer, so the capital of the
manufacturer, being at all times more within his view and command,
is more secure than that of the foreign merchant. In every period,
indeed, of every society, the surplus part both of the rude and
manufactured produce, or that for which there is no demand at home,
must be sent abroad in order to be exchanged for something for which
there is some demand at home. But whether the capital, which carries
this surplus produce abroad, be a foreign or a domestic one is of very
little importance. If the society has not acquired sufficient
capital both to cultivate all its lands, and to manufacture in the
completest manner the whole of its rude produce, there is even a
considerable advantage that rude produce should be exported by a
foreign capital, in order that the whole stock of the society may be
employed in more useful purposes. The wealth of ancient Egypt, that of
China and Indostan, sufficiently demonstrate 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 progress of our
North American and West Indian colonies would have been much less
rapid had no capital but what belonged to themselves been employed
in exporting their surplus produce.

    According to the natural course of things, therefore, the
greater part of the capital of every growing society is, first,
directed to agriculture, afterwards to manufactures, and last of all
to foreign commerce. This order of things is so very natural that in
every society that had any territory it has always, I believe, been in
some degree observed. Some of their lands must have been cultivated
before any considerable towns could be established, and some sort of
coarse industry of the manufacturing kind must have been carried on in
those towns, before they could well think of employing themselves in
foreign commerce.

    But though this natural order of things must have taken place in
some degree in every such society, it has, in all the modern states of
Europe, been, in many respects, entirely inverted. The foreign
commerce of some of their cities has introduced all their finer
manufactures, or such as were fit for distant sale; and manufactures
and foreign commerce together have given birth to the principal
improvements of agriculture. The manners and customs which the
nature of their original government introduced, and which remained
after that government was greatly altered, necessarily forced them
into this unnatural and retrograde order.

                           CHAPTER II

      Of the Discouragement of Agriculture in the ancient State

           of Europe after the Fall of the Roman Empire

    WHEN the German and Scythian nations overran the western provinces
of the Roman empire, the confusions which followed so great a
revolution lasted for several centuries. The rapine and violence which
the barbarians exercised against the ancient inhabitants interrupted
the commerce between the towns and the country. The towns were
deserted, and the country was left uncultivated, and the western
provinces of Europe, which had enjoyed a considerable degree of
opulence under the Roman empire, sunk into the lowest state of poverty
and barbarism. During the continuance of those confusions, the
chiefs and principal leaders of those nations acquired or usurped to
themselves the greater part of the lands of those countries. A great
part of them was uncultivated; but no part of them, whether cultivated
or uncultivated, was left without a proprietor. All of them were
engrossed, and the greater part by a few great proprietors.

    This original engrossing of uncultivated lands, though a great,
might have been but a transitory evil. They might soon have been
divided again, and broke into small parcels either by succession or by
alienation. The law of primogeniture hindered them from being
divided by succession: the introduction of entails prevented their
being broke into small parcels by alienation.

    When land, like movables, is considered as the means only of
subsistence and enjoyment, the natural law of succession divides it,
like them, among all the children of the family; of an of whom the
subsistence and enjoyment may be supposed equally dear to the
father. This natural law of succession accordingly took place among
the Romans, who made no more distinction between elder and younger,
between male and female, in the inheritance of lands than we do in the
distribution of movables. But when land was considered as the means,
not of subsistence merely, but of power and protection, it was thought
better that it should descend undivided to one. In those disorderly
times every great landlord was a sort of petty prince. His tenants
were his subjects. He was their judge, and in some respects their
legislator in peace, and their leader in war. He made war according to
his own discretion, frequently against his neighbours, and sometimes
against his sovereign. The security of a landed estate, therefore, the
protection which its owner could afford to those who dwelt on it,
depended upon its greatness. To divide it was to ruin it, and to
expose every part of it to be oppressed and swallowed up by the
incursions of its neighbours. The law of primogeniture, therefore,
came to take place, not immediately, indeed, but in process of time,
in the succession of landed estates, for the same reason that it has
generally taken place in that of monarchies, though not always at
their first institution. That the power, and consequently the security
of the monarchy, may not be weakened by division, it must descend
entire to one of the children. To which of them so important a
preference shall be given must be determined by some general rule,
founded not upon the doubtful distinctions of personal merit, but upon
some plain and evident difference which can admit of no dispute. Among
the children of the same family, there can be no indisputable
difference but that of sex, and that of age. The male sex is
universally preferred to the female; and when all other things are
equal, the elder everywhere takes place of the younger. Hence the
origin of the right of primogeniture, and of what is called lineal
succession.

    Laws frequently continue in force long after the circumstances
which first gave occasion to them, and which could alone render them
reasonable, are no more. In the present state of Europe, the
proprietor of a single acre of land is as perfectly secure of his
possession as the proprietor of a hundred thousand. The right of
primogeniture, however, still continues to be respected, and as of all
institutions it is the fittest to support the pride of family
distinctions, it is still likely to endure for many centuries. In
every other respect, nothing can be more contrary to the real interest
of a numerous family than a right which, in order to enrich one,
beggars all the rest of the children.

    Entails are the natural consequences of the law of
primogeniture. They were introduced to preserve a certain lineal
succession, of which the law of primogeniture first gave the idea, and
to hinder any part of the original estate from being carried out of
the proposed line either by gift, or devise, or alienation; either
by the folly, or by the misfortune of any of its successive owners.
They were altogether unknown to the Romans. Neither their
substitutions nor fideicommisses bear any resemblance to entails,
though some French lawyers have thought proper to dress the modern
institution in the language and garb of those ancient ones.

    When great landed estates were a sort of principalities, entails
might not be unreasonable. Like what are called the fundamental laws
of some monarchies, they might frequently hinder the security of
thousands from being endangered by the caprice or extravagance of
one man. But in the present state of Europe, when small as well as
great estates derive their security from the laws of their country,
nothing can be more completely absurd. They are founded upon the
most absurd of all suppositions, the supposition that every successive
generation of men have not an equal right to the earth, and to all
that it possesses; but that the property of the present generation
should be restrained and regulated according to the fancy of those who
died perhaps five hundred years ago. Entails, however, are still
respected through the greater part of Europe, in those countries
particularly in which noble birth is a necessary qualification for the
enjoyment either of civil or military honours. Entails are thought
necessary for maintaining this exclusive privilege of the nobility
to the great offices and honours of their country; and that order
having usurped one unjust advantage over the rest of their fellow
citizens, lest their poverty should render it ridiculous, it is
thought reasonable that they should have another. The common law of
England, indeed, is said to abhor perpetuities, and they are
accordingly more restricted 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 present supposed to be under strict entail.

    Great tracts of uncultivated land were, in this manner, not only
engrossed by particular families, but the possibility of their being
divided again was as much as possible precluded for ever. It seldom
happens, however, that a great proprietor is a great improver. In
the disorderly times which gave birth to those barbarous institutions,
the great proprietor was sufficiently employed in defending his own
territories, or in extending his jurisdiction and authority over those
of his neighbours. He had no leisure to attend to the cultivation
and improvement of land. When the establishment of law and order
afforded him this leisure, he often wanted the inclination, and almost
always the requisite abilities. If the expense of his house and person
either equalled or exceeded his revenue, as it did very frequently, he
had no stock to employ in this manner. If he was an economist, he
generally found it more profitable to employ his annual savings in new
purchases than in the improvement of his old estate. To improve land
with profit, like all other commercial projects, requires an exact
attention to small savings and small gains, of which a man born to a
great fortune, even though naturally frugal, is very seldom capable.
The situation of such a person naturally disposes him to attend rather
to ornament which pleases his fancy than to profit for which he has so
little occasion. The elegance of his dress, of his equipage, of his
house, and household furniture, are objects which from his infancy
he has been accustomed to have some anxiety about. The turn of mind
which this habit naturally forms follows him when he comes to think of
the improvement of land. He embellishes perhaps four or five hundred
acres in the neighbourhood of his house, at ten times the expense
which the land is worth after all his improvements; and finds that
if he was to improve his whole estate in the same manner, and he has
little taste for any other, he would be a bankrupt before he had
finished the tenth part of it. There still remain in both parts of the
United Kingdom some great estates which have continued without
interruption in the hands of the same family since the times of feudal
anarchy. Compare the present condition of those estates with the
possessions of the small proprietors in their neighbourhood, and you
will require no other argument to convince you how unfavourable such
extensive property is to improvement.

    If little improvement was to be expected from such great
proprietors, still less was to be hoped for from those who occupied
the land under them. In the ancient state of Europe, the occupiers
of land were all tenants at will. They were all or almost all
slaves; but their slavery was of a milder kind than that known among
the ancient Greeks and Romans, or even in our West Indian colonies.
They were supposed to belong more directly to the land than to their
master. They could, therefore, be sold with it, but not separately.
They could marry, provided it was with the consent of their master;
and he could not afterwards dissolve the marriage by selling the man
and wife to different persons. If he maimed or murdered any of them,
he was liable to some penalty, though generally but to a small one.
They were not, however, capable of acquiring property. Whatever they
acquired was acquired to their master, and he could take it from
them at pleasure. Whatever cultivation and improvement could be
carried on by means of such slaves was properly carried on by their
master. It was at his expense. The seed, the cattle, and the
instruments of husbandry were all his. It was for his benefit. Such
slaves could acquire nothing but their daily maintenance. It was
properly the proprietor himself, therefore, that, in this case,
occupied his own lands, and cultivated them by his own bondmen. This
species of slavery still subsists in Russia, Poland, Hungary, Bohemia,
Moravia, and other parts of Germany. It is only in the western and
southwestern provinces of Europe that it has gradually been
abolished altogether.

    But if great improvements are seldom to be expected from great
proprietors, they are least of all to be expected when they employ
slaves for their workmen. The experience of all ages and nations, I
believe, demonstrates that the work done by slaves, though it
appears to cost only their maintenance, is in the end the dearest of
any. A person who can acquire no property, can have no other
interest but to eat as much, and to labour as little as possible.
Whatever work he does beyond what is sufficient to purchase his own
maintenance can be squeezed out of him by violence only, and not by
any interest of his own. In ancient Italy, how much the cultivation of
corn degenerated, how unprofitable it became to the master when it
fell under the management of slaves, is remarked by both Pliny and
Columella. In the time of Aristotle it had not been much better in
ancient Greece. Speaking of the ideal republic described in the laws
of Plato, to maintain five thousand idle men (the number of warriors
supposed necessary for its defence) together with their women and
servants, would require, he says, a territory of boundless extent
and fertility, like the plains of Babylon.

    The pride of man makes him love to domineer, and nothing mortifies
him so much as to be obliged to condescend to persuade his
inferiors. Wherever the law allows it, and the nature of the work
can afford it, therefore, he will generally prefer the service of
slaves to that of freemen. The planting of sugar and tobacco can
afford the expense of slave-cultivation. The raising of corn, it
seems, in the present times, cannot. In the English colonies, of which
the principal produce is corn, the far greater part of the work is
done by freemen. The late resolution of the Quakers in Pennsylvania to
set at liberty all their negro slaves may satisfy us that their number
cannot be very great. Had they made any considerable part of their
property, such a resolution could never have been agreed to. In our
sugar colonies, on the contrary, the whole work is done by slaves, and
in our tobacco colonies a very great part of it. The profits of a
sugar-plantation in any of our West Indian colonies are generally much
greater than those of any other cultivation that is known either in
Europe or America; and the profits of a tobacco plantation, though
inferior to those of sugar, are superior to those of corn, as has
already been observed. Both can afford the expense of
slave-cultivation, but sugar can afford it still better than
tobacco. The number of negroes accordingly is much greater, in
proportion to that of whites, in our sugar than in our tobacco
colonies.

    To the slave cultivators of ancient times gradually succeeded a
species of farmers known at present in France by the name of metayers.
They are called in Latin, Coloni partiarii. They have been so long
in disuse in England that at present I know no English name for
them. The proprietor furnished them with the seed, cattle, and
instruments of husbandry, the whole stock, in short, necessary for
cultivating the farm. The produce was divided equally between the
proprietor and the farmer, after setting aside what was judged
necessary for keeping up the stock, which was restored to the
proprietor when the farmer either quitted, or was turned out of the
farm.

    Land occupied by such tenants is properly cultivated at the
expense of the proprietor as much as that occupied by slaves. There
is, however, one very essential difference between them. Such tenants,
being freemen, are capable of acquiring property, and having a certain
proportion of the produce of the land, they have a plain interest that
the whole produce should be as great as possible, in order that
their own proportion may be so. A slave, on the contrary, who can
acquire nothing but his maintenance, consults his own ease by making
the land produce as little as possible over and above that
maintenance. It is probable that it was partly upon account of this
advantage, and partly upon account of the encroachments which the
sovereign, always jealous of the great lords, gradually encouraged
their villains to make upon their authority, and which seem at last to
have been such as rendered this species of servitude altogether
inconvenient, that tenure in villanage gradually wore out through
the greater part of Europe. The time and manner, however, in which
so important a revolution was brought about is one of the most obscure
points in modern history. The Church of Rome claims great merit in it;
and it is certain that so early as the twelfth century, Alexander
III published a bull for the general emancipation of slaves. It seems,
however, to have been rather a pious exhortation than a law to which
exact obedience was required from the faithful. Slavery continued to
take place almost universally for several centuries afterwards, till
it was gradually abolished by the joint operation of the two interests
above mentioned, that of the proprietor on the one hand, and that of
the sovereign on the other. A villain enfranchised, and at the same
time allowed to continue in possession of the land, having no stock of
his own, could cultivate it only by means of what the landlord
advanced to him, and must, therefore, have been what the French called
a metayer.

    It could never, however, be the interest even of this last species
of cultivators to lay out, in the further improvement of the land, any
part of the little stock which they might save from their own share of
the produce, because the lord, who laid out nothing, was to get one
half of whatever it produced. 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 half must have been an effectual
bar to it. It might be the interest of a metayer to make the land
produce as much as could be brought out of it by means of the stock
furnished by the proprietor; but it could never be his interest to mix
any part of his own with it. In France, where five parts out of six of
the whole kingdom are said to be still occupied by this species of
cultivators, the proprietors complain that their metayers take every
opportunity of employing the master's cattle rather in carriage than
in cultivation; because in the one case they get the whole profits
to themselves, in the other they share them with their landlord.
This species of tenants still subsists in some parts of Scotland. They
are called steel-bow tenants. Those ancient English tenants, who are
said by Chief Baron Gilbert and Doctor Blackstone to have been
rather bailiffs of the landlord than farmers properly so called,
were probably of the same kind.

    To this species of tenancy succeeded, though by very slow degrees,
farmers properly so called, who cultivated the land with their own
stock, paying a rent certain to the landlord. When such farmers have a
lease for a term of years, they may sometimes find it for their
interest to lay out part of their capital in the further improvement
of the farm; because they may sometimes expect to recover it, with a
large profit, before the expiration of the lease. The possession
even of such farmers, however, was long extremely precarious, and
still is so in many parts of Europe. They could before the
expiration of their term be legally outed of their lease by a new
purchaser; in England, even by the fictitious action of a common
recovery. If they were turned out illegally by the violence of their
master, the action by which they obtained redress was extremely
imperfect. It did not always reinstate them in the possession of the
land, but gave them damages which never amounted to the real loss.
Even in England, the country perhaps of Europe where the yeomanry
has always been most respected, it was not till about the 14th of
Henry VII that the action of ejectment was invented, by which the
tenant recovers, not damages only but possession, and in which his
claim is not necessarily concluded by the uncertain decision of a
single assize. This action has been found so effectual a remedy
that, in the modern practice, when the landlord has occasion to sue
for the possession of the land, he seldom makes use of the actions
which properly belong to him as landlord, the Writ of Right or the
Writ of Entry, but sues in the name of his tenant by the Writ of
Ejectment. In England, therefore, the security of the tenant is
equal to that of the proprietor. In England, besides, a lease for life
of forty shillings a year value is a freehold, and entitles the lessee
to vote for a Member of Parliament; and as a great part of the
yeomanry have freeholds of this kind, the whole order becomes
respectable to their landlords on account of the political
consideration which this gives them. There is, I believe, nowhere in
Europe, except in England, any instance of the tenant building upon
the land of which he had no lease, and trusting that the honour of his
landlord would take no advantage of so important an improvement. Those
laws and customs so favourable to the yeomanry have perhaps
contributed more to the present grandeur of England than all their
boasted regulations of commerce taken together.

    The law which secures the longest leases against successors of
every kind is, so far as I know, peculiar to Great Britain. It was
introduced into Scotland so early as 1449, a law of James II. Its
beneficial influence, however, has been much obstructed by entails;
the heirs of entail being generally restrained from letting leases for
any long term of years, frequently for more than one year. A late
Act of Parliament has, in this respect, somewhat slackened their
fetters, though they are still by much too strait. In Scotland,
besides, as no leasehold gives a vote for a Member of Parliament,
the yeomanry are upon this account less respectable to their landlords
than in England.

    In other parts of Europe, after it was found convenient to
secure tenants both against heirs and purchasers, the term of their
security was still limited to a very short period; in France, for
example, to nine years from the commencement of the lease. It has in
that country, indeed, been lately extended to twenty-seven, a period
still too short to encourage the tenant to make the most important
improvements. The proprietors of land were anciently the legislators
of every part of Europe. The laws relating to land, therefore, were
all calculated for what they supposed the interest of the
proprietor. It was for his interest, they had imagined, that no
lease granted by any of his predecessors should hinder him from
enjoying, during a long term of years, the full value of his land.
Avarice and injustice are always short-sighted, and they did not
foresee how much this regulation must obstruct improvement, and
thereby hurt in the long-run the real interest of the landlord.

    The farmers too, besides paying the rent, were anciently, it was
supposed, bound to perform a great number of services to the landlord,
which were seldom either specified in the lease, or regulated by any
precise rule, but by the use and wont of the manor or barony. These
services, therefore, being almost entirely arbitrary, subjected the
tenant to many vexations. In Scotland the abolition of all services
not precisely stipulated in the lease has in the course of a few years
very much altered for the better the condition of the yeomanry of that
country.

    The public services to which the yeomanry were bound were not less
arbitrary than the private ones. To make and maintain the high
roads, a servitude which still subsists, I believe, everywhere, though
with different degrees of oppression in different countries, was not
the only one. When the king's troops, when his household or his
officers of any kind passed through any part of the country, the
yeomanry were bound to provide them with horses, carriages, and
provisions, at a price regulated by the purveyor. Great Britain is,
I believe, the only monarchy in Europe where the oppression of
purveyance has been entirely abolished. It still subsists in France
and Germany.

    The public taxes to which they were subject were as irregular
and oppressive as the services. The ancient lords, though extremely
unwilling to grant themselves any pecuniary aid to their sovereign,
easily allowed him to tallage, as they called it their tenants, and
had not knowledge enough to foresee how much this must in the end
affect their own revenue. The taille, as it still subsists in
France, may serve as an example of those ancient tallages. It is a tax
upon the supposed profits of the farmer, which they estimate by the
stock that he has upon the farm. It is his interest, therefore, to
appear to have as little as possible, and consequently to employ as
little as possible in its cultivation, and none in its improvement.
Should any stock happen to accumulate in the hands of a French farmer,
the taille is almost equal to a prohibition of its ever being employed
upon the land. This tax, besides, is supposed to dishonour whoever
is subject to it, and to degrade him below, not only the rank of a
gentleman, but that of a burgher, and whoever rents the lands of
another becomes subject to it. No gentleman, nor even any burgher
who has stock, will submit to this degradation. This tax, therefore,
not only hinders the stock which accumulates upon the land from
being employed in its improvement, but drives away an other stock from
it. The ancient tenths and fifteenths, so usual in England in former
times, seem, so far as they affected the land, to have been taxes of
the same nature with the taille.

    Under all these discouragements, little improvement could be
expected from the occupiers of land. That order of people, with all
the liberty and security which law can give, must always improve under
great disadvantages. The farmer, compared with the proprietor, is as a
merchant who trades with borrowed money compared with one who trades
with his own. The stock of both may improve, but that of the one, with
only equal good conduct, must always improve more slowly than that
of the other, on account of the large share of the profits which is
consumed by the interest of the loan. The lands cultivated by the
farmer must, in the same manner, with only equal good conduct, be
improved more slowly than those cultivated by the proprietor, on
account of the large share of the produce which is consumed in the
rent, and which, had the farmer been proprietor, he might have
employed in the further improvement of the land. The station of a
farmer besides 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 sort of
tradesmen and mechanics, and in all parts of Europe to the great
merchants and master manufacturers. It can seldom happen, therefore,
that a man of any considerable stock should quit the superior in order
to place himself in an inferior station. Even in the present state
of Europe, therefore, little stock is likely to go from any other
profession to the improvement of land in the way of farming. More does
perhaps in Great Britain than in any other country, though even
there the great stocks which are, in some places, employed in
farming have generally been acquired by farming, the trade, perhaps,
in which of all others stock is commonly acquired most slowly. After
small proprietors, however, rich and great farmers are, in every
country, the principal improvers. There are more such perhaps in
England than in any other European monarchy. In the republican
governments of Holland and of Berne in Switzerland, the farmers are
said to be not inferior to those of England.

    The ancient 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; first, by the general
prohibition of the exportation of corn without a special licence,
which seems to have been a very universal regulation; and secondly, by
the restraints which were laid upon the inland commerce, not only of
corn, but of almost every other part of the produce of the farm by the
absurd laws against engrossers, regrators, and forestallers, and by
the privileges of fairs and markets. It has already been observed in
what manner the prohibition of the exportation of corn, together
with some encouragement given to the importation of foreign corn,
obstructed the cultivation of ancient Italy, naturally the most
fertile country in Europe, and at that time the seat of the greatest
empire in the world. To what degree such restraints upon the inland
commerce of this commodity, joined to the general prohibition of
exportation, must have discouraged the cultivation of countries less
fertile and less favourably circumstanced, it is not perhaps very easy
to imagine.

                         CHAPTER III

         Of the Rise and Progress of Cities and Towns

               after the Fall of the Roman Empire

    THE inhabitants of cities and towns were, after the fall of the
Roman empire, not more favoured than those of the country. They
consisted, indeed, of a very different order of people from the
first inhabitants of the ancient republics of Greece and Italy.
These last were composed chiefly of the proprietors of lands, among
whom the public territory was originally divided, and who found it
convenient to build their houses in the neighbourhood of one
another, and to surround them with a wall, for the sake of common
defence. After the fall of the Roman empire, on the contrary, the
proprietors of land seem generally to have lived in fortified
castles on their own estates, and in the midst of their own tenants
and dependants. The towns were chiefly inhabited by tradesmen and
mechanics, who seem in those days to have been of servile, or very
nearly of servile condition. The privileges which we find granted by
ancient charters to the inhabitants of some of the principal towns
in Europe sufficiently show what they were before those grants. The
people to whom it is granted as a privilege that they might give
away their own daughters in marriage without the consent of their
lord, that upon their death their own children, and not their lord,
should succeed to their goods, and that they might dispose of their
own effects by will, must, before those grants, have been either
altogether or very nearly in the same state of villanage with the
occupiers of land in the country.

    They seem, indeed, to have been a very poor, mean set of people,
who used to travel about with their goods from place to place, and
from fair to fair, like the hawkers and pedlars of the present
times. In all the different countries of Europe then, in the same
manner as in several of the Tartar governments of Asia at present,
taxes used to be levied upon the persons and goods of travellers
when they passed through certain manors, when they went over certain
bridges, when they carried about their goods from place to place in
a fair, when they erected in it a booth or stall to sell them in.
These different taxes were known in England by the names of passage,
pontage, lastage, and stallage. Sometimes the king, sometimes a
great lord, who had, it seems, upon some occasions, authority to do
this, would grant to particular traders, to such particularly as lived
in their own demesnes, a general exemption from such taxes. Such
traders, though in other respects of servile, or very nearly of
servile condition, were upon this account called free-traders. They in
return usually paid to their protector a sort of annual poll-tax. In
those days protection was seldom granted without a valuable
consideration, and this tax might, perhaps, be considered as
compensation for what their patrons might lose by their exemption from
other taxes. At first, both those poll-taxes and those exemptions seem
to have been altogether personal, and to have affected only particular
individuals during either their lives or the pleasure of their
protectors. In the very imperfect accounts which have been published
from Domesday Book of several of the towns of England, mention is
frequently made sometimes of the tax which particular burghers paid,
each of them, either to the king or to some other great lord for
this sort of protection; and sometimes of the general amount only of
all those taxes.

    But how servile soever may have been originally the condition of
the inhabitants of the towns, it appears evidently that they arrived
at liberty and independency much earlier than the occupiers of land in
the country. That part of the king's revenue which arose from such
poll-taxes in any particular town used commonly to be let in farm
during a term of years for a rent certain, sometimes to the sheriff of
the county, and sometimes to other persons. The burghers themselves
frequently got credit enough to be admitted to farm the revenues of
this sort which arose out of their own town, they becoming jointly and
severally answerable for the whole rent. To let a farm in this
manner was quite agreeable to the usual economy of, I believe, the
sovereigns of all the different countries of Europe, who used
frequently to let whole manors to all the tenants of those manors,
they becoming jointly and severally answerable for the whole rent; but
in return being allowed to collect it in their own way, and to pay
it into the king's exchequer by the hands of their own bailiff, and
being thus altogether freed from the insolence of the king's officers-
a circumstance in those days regarded as of the greatest importance.

    At first the farm of the town was probably let to the burghers, in
the same manner as it had been to other farmers, for a term of years
only. In process of time, however, it seems to have become the general
practice to grant it to them in fee, that is for ever, reserving a
rent certain never afterwards to be augmented. The payment having thus
become perpetual, the exemptions, in return for which it was made,
naturally became perpetual too. Those exemptions, therefore, ceased to
be personal, and could not afterwards be considered as belonging to
individuals as individuals, but as burghers of a particular burgh,
which, upon this account, was called a free burgh, for the same reason
that they had been called free burghers or free traders.

    Along with this grant, the important privileges above mentioned,
that they might give away their own daughters in marriage, that
their children should succeed to them, and that they might dispose
of their own effects by will, were generally bestowed upon the
burghers of the town to whom it was given. Whether such privileges had
before been usually granted along with the freedom of trade to
particular burghers, as individuals, I know not. I reckon it not
improbable that they were, though I cannot produce any direct evidence
of it. But however this may have been, the principal attributes of
villanage and slavery being thus taken away from them, they now, at
least, became really free in our present sense of the word Freedom.

    Nor was this all. They were generally at the same time erected
into a commonalty or corporation, with the privilege of having
magistrates 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 their inhabitants under a sort of military
discipline by obliging them to watch and ward, that is, as anciently
understood, to guard and defend those walls against all attacks and
surprises by night as well as by day. In England they were generally
exempted from suit to the hundred and county courts; and all such
pleas as should arise among them, the pleas of the crown excepted,
were left to the decision of their own magistrates. In other countries
much greater and more extensive jurisdictions were frequently
granted to them.

    It might, probably, be necessary to grant to such towns as were
admitted to farm their own revenues some sort of compulsive
jurisdiction to oblige their own citizens to make payment. In those
disorderly times it might have been extremely inconvenient to have
left them to seek this sort of justice from any other tribunal. But it
must seem extraordinary that the sovereigns of all the different
countries of Europe should have exchanged in this manner for a rent
certain, never more to be augmented, that branch of the revenue
which was, perhaps, of all others the most likely to be improved by
the natural course of things, without either expense or attention of
their own: and that they should, besides, have in this manner
voluntarily erected a sort of independent republics in the heart of
their own dominions.

    In order to understand this, it must be remembered that in those
days the sovereign of perhaps no country in Europe was able to
protect, through the whole extent of his dominions, the weaker part of
his subjects from the oppression of the great lords. Those whom the
law could not protect, and who were not strong enough to defend
themselves, were obliged either to have recourse to the protection
of some great lord, and in order to obtain it to become either his
slaves or vassals; or to enter into a league of mutual defence for the
common protection of one another. The inhabitants of cities and
burghs, considered as single individuals, had no power to defend
themselves; but by entering into a league of mutual defence with their
neighbours, they were capable of making no contemptible resistance.
The lords despised the burghers, whom they considered not only as of a
different order, but as a parcel of emancipated slaves, almost of a
different species from themselves. The wealth of the burghers never
failed to provoke their envy and indignation, and they plundered
them upon every occasion without mercy or remorse. The burghers
naturally hated and feared the lords. The king hated and feared them
too; but though perhaps he might despise, he had no reason either to
hate or fear the burghers. Mutual interest, therefore, disposed them
to support the king, and the king to support them against the lords.
They were the enemies of his enemies, and it was his interest to
render them as secure and independent of those enemies as he could. By
granting them magistrates of their own, the privilege of making
bye-laws for their own government, that of building walls for their
own defence, and that of reducing all their inhabitants under a sort
of military discipline, he gave them all the means of security and
independency of the barons which it was in his power to bestow.
Without the establishment of some regular government of this kind,
without some authority to compel their inhabitants to act according to
some certain plan or system, no voluntary league of mutual defence
could either have afforded them any permanent security, or have
enabled them to give the king any considerable support. By granting
them the farm of their town in fee, he took away from those whom he
wished to have for his friends, and, if one may say so, for his
allies, all ground of jealousy and suspicion that he was ever
afterwards to oppress them, either by raising the farm rent of their
town or by granting it to some other farmer.

    The princes who lived upon the worst terms with their barons
seem accordingly to have been the most liberal in grants of this
kind to their burghs. King John of England, for example, appears to
have been a most munificent benefactor to his towns. Philip the
First of France lost all authority over his barons. Towards the end of
his reign, his son Lewis, known afterwards by the name of Lewis the
Fat, consulted, according to Father Daniel, with the bishops of the
royal demesnes concerning the most proper means of restraining the
violence of the great lords. Their advice consisted of two different
proposals. One was to erect a new order of jurisdiction, by
establishing magistrates and a town council in every considerable town
of his demesnes. The other was to form a new militia, by making the
inhabitants of those towns, under the command of their own
magistrates, march out upon proper occasions to the assistance of
the king. It is from this period, according to the French
antiquarians, that we are to date the institution of the magistrates
and councils of cities in France. It was during the unprosperous
reigns of the princes of the house of Suabia that the greater part
of the free towns of Germany received the first grants of their
privileges, and that the famous Hanseatic league first became
formidable.

    The militia of the cities seems, in those times, not to have
been inferior to that of the country, and as they could be more
readily assembled upon any sudden occasion, they frequently had the
advantage in their disputes with the neighbouring lords. In countries,
such as Italy and Switzerland, in which, on account either of their
distance from the principal seat of government, of the natural
strength of the country itself, or of some other reason, the sovereign
came to lose the whole of his authority, the cities generally became
independent republics, and conquered all the nobility in their
neighbourhood, obliging them to pull down their castles in the country
and to live, like other peaceable inhabitants, in the city. This is
the short history of the republic of Berne as well as of several other
cities in Switzerland. If you except Venice, for of that city the
history is somewhat different, it is the history of all the
considerable Italian republics, of which so great a number arose and
perished between the end of the twelfth and the beginning of the
sixteenth century.

    In countries such as France or England, where the authority of the
sovereign, though frequently very low, never was destroyed altogether,
the cities had no opportunity of becoming entirely independent. They
became, however, so considerable that the sovereign could impose no
tax upon them, besides the stated farm-rent of the town, without their
own consent. They were, therefore, called upon to send deputies to the
general assembly of the states of the kingdom, where they might join
with the clergy and the barons in granting, upon urgent occasions,
some extraordinary aid to the king. Being generally, too, more
favourable to his power, their deputies seem, sometimes, to have
been employed by him as a counterbalance in those assemblies to the
authority of the great lords. Hence the origin of the representation
of burghs in the states-general of all the great monarchies in Europe.

    Order and good government, and along with them the liberty and
security of individuals, were, in this manner, established in cities
at a time when the occupiers of land in the country were exposed to
every sort of violence. But men in this defenceless state naturally
content themselves with their necessary subsistence, because to
acquire more might only tempt the injustice of their oppressors. On
the contrary, when they are secure of enjoying the fruits of their
industry, they naturally exert it to better their condition, and to
acquire not only the necessaries, but the conveniences and
elegancies of life. That industry, therefore, which aims at
something more than necessary subsistence, was established in cities
long before it was commonly practised by the occupiers of land in
the country. If in the hands of a poor cultivator, oppressed with
the servitude of villanage, some little stock should accumulate, he
would naturally conceal it with great care from his master, to whom it
would otherwise have belonged, and take the first opportunity of
running away to a town. The law was at that time so indulgent to the
inhabitants of towns, and so desirous of diminishing the authority
of the lords over those of the country, that if he could conceal
himself there from the pursuit of his lord for a year, he was free for
ever. Whatever stock, therefore, accumulated in the hands of the
industrious part of the inhabitants of the country naturally took
refuge in cities as the only sanctuaries in which it could be secure
to the person that acquired it.

    The inhabitants of a city, it is true, must always ultimately
derive their subsistence, and the whole materials and means of their
industry, from the country. But those of a city, situated near
either the sea coast or the banks of a navigable river, are not
necessarily confined to derive them from the country in their
neighbourhood. They have a much wider range, and may draw them from
the most remote corners of the world, either in exchange for the
manufactured produce of their own industry, or by performing the
office of carriers between distant countries and exchanging the
produce of one for that of another. A city might in this manner grow
up to great wealth and splendour, while not only the country in its
neighbourhood, but all those to which it traded, were in poverty and
wretchedness. Each of those countries, perhaps, taken singly, could
afford it but a small part either of its subsistence or of its
employment, but all of them taken together could afford it both a
great subsistence and a great employment. There were, however,
within the narrow circle of the commerce of those times, some
countries that were opulent and industrious. Such was the Greek empire
as long as it subsisted, and that of the Saracens during the reigns of
the Abassides. Such too was Egypt till it was conquered by the
Turks, some part of the coast of Barbary, and all those provinces of
Spain which were under the government of the Moors.

    The cities of Italy seem to have been the first in Europe which
were raised by commerce to any considerable degree of opulence.
Italy lay in the centre of what was at that time the improved and
civilised part of the world. The Crusades too, though by the great
waste of stock and destruction of inhabitants which they occasioned
they must necessarily have retarded the progress of the greater part
of Europe, were extremely favourable to that of some Italian cities.
The great armies which marched from all parts to the conquest of the
Holy Land gave extraordinary encouragement to the shipping of
Venice, Genoa, and Pisa, sometimes in transporting them thither, and
always in supplying them with provisions. They were the
commissaries, if one may say so, of those armies; and the most
destructive frenzy that ever befell the European nations was a
source of opulence to those republics.

    The inhabitants of trading cities, by importing the improved
manufactures and expensive luxuries of richer countries, afforded some
food to the vanity of the great proprietors, who eagerly purchased
them with great quantities of the rude produce of their own lands. The
commerce of a great part of Europe in those times, accordingly,
consisted chiefly in the exchange of their own rude for the,
manufactured produce of more civilised nations. Thus the wool of
England used to be exchanged for the wines of France and the fine
cloths of Flanders, in the same manner as the corn in Poland is at
this day exchanged for the wines and brandies of France and for the
silks and velvets of France and Italy.

    A taste for the finer and more improved manufactures was in this
manner introduced by foreign commerce into countries where no such
works were carried on. But when this taste became so general as to
occasion a considerable demand, the merchants, in order to save the
expense of carriage, naturally endeavoured to establish some
manufactures of the same kind in their own country. Hence the origin
of the first manufactures for distant sale that seem to have been
established in the western provinces of Europe after the fall of the
Roman empire. No large country, it must be observed, ever did or could
subsist without some sort of manufactures being carried on in it;
and when it is said of any such country that it has no manufactures,
it must always be understood of the finer and more improved or of such
as are fit for distant sale. In every large country both the
clothing and household furniture of the far greater part of the people
are the produce of their own industry. This is even more universally
the case in those poor countries which are commonly said to have no
manufactures than in those rich ones that are said to abound in
them. In the latter, you will generally find, both in the clothes
and household furniture of the lowest rank of people, a much greater
proportion of foreign productions than in the former.

    Those manufactures which are fit for distant sale seem to have
been introduced into different countries in two different ways.

    Sometimes they have been introduced, in the manner above
mentioned, by the violent operation, if one may say so, of the
stocks of particular merchants and undertakers, who established them
in imitation of some foreign manufactures of the same kind. Such
manufactures, therefore, are the offspring of foreign commerce, and
such seem to have been the ancient manufactures of silks, velvets, and
brocades, which flourished in Lucca during the thirteenth century.
They were banished from thence by the tyranny of one of Machiavel's
heroes, Castruccio Castracani. In 1310, nine hundred families were
driven out of Lucca, of whom thirty-one retired to Venice and
offered to introduce there the silk manufacture. Their offer was
accepted; many privileges were conferred upon them, and they began the
manufacture with three hundred workmen. Such, too, seem to have been
the manufactures of fine cloths that anciently flourished in Flanders,
and which were introduced into England in the beginning of the reign
of Elizabeth; and such are the present silk manufactures of Lyons
and Spitalfields. Manufactures introduced in this manner are generally
employed upon foreign materials, being imitations of foreign
manufactures. When the Venetian manufacture was first established, the
materials were all brought from Sicily and the Levant. The more
ancient manufacture of Lucca was likewise carried on with foreign
materials. The cultivation of mulberry trees and the breeding of
silk-worms seem not to have been common in the northern parts of Italy
before the sixteenth century. Those arts were not introduced into
France till the reign of Charles IX. The manufactures of Flanders were
carried on chiefly with Spanish and English wool. Spanish wool was the
material, not of the first woollen manufacture of England, but of
the first that was fit for distant sale. More than one half the
materials of the Lyons manufacture is at this day, foreign silk;
when it was first established, the whole or very nearly the whole
was so. No part of the materials of the Spitalfields manufacture is
ever likely be the produce of England. The seat of such
manufactures, as they are generally introduced by the scheme and
project of a few individuals, is sometimes established in a maritime
city, and sometimes in an inland town, according as their interest,
judgment, or caprice happen to determine.

    At other times, manufactures for distant sale group up
naturally, and as it were of their own accord, by the gradual
refinement of those household and coarser manufactures which must at
all times be carried on even in the poorest and rudest countries. Such
manufactures are generally employed upon the materials which the
country produces, and they seem frequently to have been first
refined and improved in such inland countries as were, not indeed at a
very great, but at a considerable distance from the sea coast, and
sometimes even from all water carriage. An inland country, naturally
fertile and easily cultivated, produces a great surplus of
provisions beyond what is necessary for maintaining the cultivators,
and on account of the expense of land carriage, and inconveniency of
river navigation, it may frequently be difficult to send this
surplus abroad. Abundance, therefore, renders provisions cheap, and
encourages a great number of workmen to settle in the neighbourhood,
who find that their industry can there procure them more of the
necessaries and conveniencies of life than in other places. They
work up the materials of manufacture which the land produces, and
exchange their finished work, or what is the same thing the price of
it, for more materials and provisions. They give a new value to the
surplus part of the rude produce by saving the expense of carrying
it to the water side or to some distant market; and they furnish the
cultivators with something in exchange for it that is either useful or
agreeable to them upon easier terms than they could have obtained it
before. The cultivators get a better price for their surplus
produce, and can purchase cheaper other conveniences which they have
occasion for. They are thus both encouraged and enabled to increase
this surplus produce by a further improvement and better cultivation
of the land; and as the fertility of the land had given birth to the
manufacture, so the progress of the manufacture reacts upon the land
and increases still further its fertility. The manufacturers first
supply the neighbourhood, and afterwards, as their work improves and
refines, more distant markets. For though neither the rude produce nor
even the coarse manufacture could, without the greatest difficulty,
support the expense of a considerable land carriage, the refined and
improved manufacture easily may. In a small bulk it frequently
contains the price of a great quantity 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' weight of wool, but
sometimes of several thousand weight of corn, the maintenance of the
different working people and of their immediate employers. The corn,
which could with difficulty have been carried abroad in its own shape,
is in this manner virtually exported in that of the complete
manufacture, and may easily be sent to the remotest 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 Wolverhampton. Such manufactures are the offspring of agriculture.
In the modern history of Europe, their extension and improvement
have generally been posterior to those which were the offspring of
foreign commerce. England was noted for the manufacture of fine cloths
made of Spanish wool more than a century before any of those which now
flourish in the places above mentioned were fit for foreign sale.
The extension and improvement of these last could not take place but
in consequence of the extension and improvement of agriculture the
last and greatest effect of foreign commerce, and of the
manufactures immediately introduced by it, and which I shall now
proceed to explain.

                           CHAPTER IV

            How the Commerce of the Towns Contributed

                to the Improvement of the Country

    THE increase and riches of commercial and manufacturing towns
contributed to the improvement and cultivation of the countries to
which they belonged in three different ways.

    First, by affording a great and ready market for the rude
produce of the country, they gave encouragement to its cultivation and
further improvement. This benefit was not even confined to the
countries in which they were situated, but extended more or less to
all those with which they had any dealings. To all of them they
afforded a market for some part either of their rude or manufactured
produce, and consequently gave some encouragement to the industry
and improvement of all. Their own country, however, on account of
its neighbourhood, necessarily derived the greatest benefit from
this market. Its rude produce being charged with less carriage, the
traders could pay the growers a better price for it, and yet afford it
as cheap to the consumers as that of more distant countries.

    Secondly, the wealth acquired by the inhabitants of cities was
frequently employed in purchasing such lands as were to be sold, of
which a great part would frequently be uncultivated. Merchants are
commonly ambitious of becoming country gentlemen, and when they do,
they are generally the best of all improvers. A merchant is accustomed
to employ his money chiefly in profitable projects, whereas a mere
country gentleman is accustomed to employ it chiefly in expense. The
one often sees his money go from him and return to him again with a
profit; the other, when once he parts with it, very seldom expects
to see any more of it. Those different habits naturally affect their
temper and disposition in every sort of business. A merchant is
commonly a bold, a country gentleman a timid undertaker. The one is
not afraid to lay out at once a large capital upon the improvement
of his land when he has a probable prospect of raising the value of it
in proportion to the expense. The other, if he has any capital,
which is not always the case, seldom ventures to employ it in this
manner. If he improves at all, it is commonly not with a capital,
but with what he can save out of his annual revenue. Whoever has had
the fortune to live in a mercantile town situated in an unimproved
country must have frequently observed how much more spirited the
operations of merchants were in this way than those of mere country
gentlemen. The habits, besides, of order, economy, and attention, to
which mercantile business naturally forms a merchant, render him
much fitter to execute, with profit and success, any project of
improvement.

    Thirdly, and lastly, commerce and manufactures gradually
introduced order and good government, and with them, the liberty and
security of individuals, among the inhabitants of the country, who had
before lived almost in a continual state of war with their
neighbours and of servile dependency upon their superiors. This,
though it has been the least observed, is by far the most important of
all their effects. Mr. Hume is the only writer who, so far as I
know, has hitherto taken notice of it.

    In a country which has neither foreign commerce, nor any of the
finer manufactures, 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 cultivators, consumes the
whole in rustic hospitality at home. If this surplus produce is
sufficient to maintain a hundred or a thousand men, he can make use of
it in no other way than by maintaining a hundred or a thousand men. He
is at all times, therefore, surrounded 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, must obey
him, for the same reason that soldiers must obey the prince who pays
them. Before the extension of commerce and manufacture in Europe,
the hospitality of the rich, and the great, from the sovereign down to
the smallest baron, exceeded everything which in the present times
we can easily form a notion of. Westminster Hall was the dining-room
of William Rufus, and might frequently, perhaps, not be too large
for his company. It was reckoned a piece of magnificence in Thomas
Becket that he strewed the floor of his hall with clean hay or
rushes in the season, in order that the knights and squires who
could not get seats might not spoil their fine clothes when they sat
down on the floor to eat their dinner. The great Earl of Warwick is
said to have entertained every day at his different manors thirty
thousand people, and though the number here may have been exaggerated,
it must, however, have been very great to admit of such
exaggeration. A hospitality nearly of the same kind was exercised
not many years ago in many different parts of the highlands of
Scotland. It seems to be common in all nations to whom commerce and
manufactures are little known. "I have seen," says Doctor Pocock,
"an Arabian chief dine in the streets of a town where he had come to
sell his cattle, and invite all passengers, even common beggars, to
sit down with him and partake of his banquet."

    The occupiers of land were in every respect as dependent upon
the great proprietor as his retainers. Even such of them as were not
in a state of villanage were tenants at will, who paid a rent in no
respect equivalent to the subsistence which the land afforded them.
A crown, half a crown, a sheep, a lamb, was some years ago in the
highlands of Scotland a common rent for lands which maintained a
family. In some places it is so at this day; nor will money at present
purchase a greater quantity of commodities there than in other places.
In a country where the surplus produce of a large estate must be
consumed upon the estate itself, it will frequently be more convenient
for the proprietor that part of it be consumed at a distance from
his own house provided they who consume it are as dependent upon him
as either his retainers or his menial servants. He is thereby saved
from the embarrassment of either too large a company or too large a
family. A tenant at will, who possesses land sufficient to maintain
his family for little more than a quit-rent, is as dependent upon
the proprietor as any servant or retainer whatever and must obey him
with as little reserve. Such a proprietor, as he feeds his servants
and retainers at his own house, so he feeds his tenants at their
houses. The subsistence of both is derived from his bounty, and its
continuance depends upon his good pleasure.

    Upon the authority which the great proprietor necessarily had in
such a state of things over their tenants and retainers was founded
the power of the ancient barons. They necessarily became the judges in
peace, and the leaders in war, of all who dwelt upon their estates.
They could maintain order and execute the law within their
respective demesnes, because each of them could there turn the whole
force of all the inhabitants against the injustice of any one. No
other persons had sufficient authority to do this. The king in
particular had not. In those ancient times he was little more than the
greatest proprietor in his dominions, to whom, for the sake of
common defence against their common enemies, the other great
proprietors paid certain respects. To have enforced payment of a small
debt within the lands of a great proprietor, where all the inhabitants
were armed and accustomed to stand by one another, would have cost the
king, had he attempted it by his own authority, almost the same effort
as to extinguish a civil war. He was, therefore, obliged to abandon
the administration of justice through the greater part of the
country to those who were capable of administering it; and for the
same reason to leave the command of the country militia to those
whom that militia would obey.

    It is a mistake to imagine that those territorial jurisdictions
took their origin from the feudal law. Not only the highest
jurisdictions both civil and criminal, but the power of levying
troops, of coining money, and even that of making bye-laws for the
government of their own people, were all rights possessed allodially
by the great proprietors of land several centuries before even the
name of the feudal law was known in Europe. The authority and
jurisdiction of the Saxon lords in England appear to have been as
great before the Conquest as that of any of the Norman lords after it.
But the feudal law is not supposed to have become the common law of
England till after the Conquest. That the most extensive authority and
jurisdictions were possessed by the great lords in France allodially
long before the feudal law was introduced into that country is a
matter of fact that admits of no doubt. That authority and those
jurisdictions all necessarily flowed from the state of property and
manners just now described. Without remounting to the remote
antiquities of either the French or English monarchies, we may find in
much later times many proofs that such effects must always flow from
such causes. It is not thirty years ago since Mr. Cameron of
Lochiel, a gentleman of Lochabar in Scotland, without any legal
warrant whatever, not being what was then called a lord of regality,
nor even a tenant in chief, but a vassal of the Duke of Argyle, and
without being so much as a justice of peace, used, notwithstanding, to
exercise the highest criminal jurisdiction over his own people. He
is said to have done so with great equity, though without any of the
formalities of justice; and it is not improbable that the state of
that part of the country at that time made it necessary for him to
assume this authority in order to maintain the public peace. That
gentleman, whose rent never exceeded five hundred pounds a year,
carried, in 1745, eight hundred of his own people into the rebellion
with him.

    The introduction of the feudal law, so far from extending, may
be regarded as an attempt to moderate the authority of the great
allodial lords. It established a regular subordination, accompanied
with a long train of services and duties, from the king down to the
smallest proprietor. During the minority of the proprietor, the
rent, together with the management of his lands, fell into the hands
of his immediate superior, and, consequently, those 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 supposed to have a right of disposing of him in
marriage, provided it was in a manner not unsuitable to his rank.
But though this institution necessarily tended to strengthen the
authority of the king, and to weaken that of the great proprietors, it
could not do either sufficiently for establishing order and good
government among the inhabitants of the country, because it could
not alter sufficiently that state of property and manners from which
the disorders arose. The authority of government still continued to
be, as before, too weak in the head and too strong in the inferior
members, and the excessive strength of the inferior members was the
cause of the weakness of the head. After the institution of feudal
subordination, the king was as incapable of restraining the violence
of the great lords as before. They still continued to make war
according to their own discretion, almost continually upon one
another, and very frequently upon the king; and the open country still
continued to be a scene of violence, rapine, and disorder.

    But what all the violence of the feudal institutions could never
have effected, the silent and insensible operation of foreign commerce
and manufactures gradually brought about. These gradually furnished
the great proprietors with something for which they could exchange the
whole surplus produce of their lands, and which they could consume
themselves without sharing it either with tenants or retainers. All
for ourselves and nothing for other people, seems, in every age of the
world, to have been the vile maxim of the masters of mankind. As soon,
therefore, as they could find a method of consuming the whole value of
their rents themselves, they had no disposition to share them with any
other persons. For a pair of diamond buckles, perhaps, or for
something as frivolous and useless, they exchanged the maintenance, or
what is the same thing, the price of the maintenance of a thousand 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 share of them; whereas in
the more ancient method of expense they must have shared with at least
a thousand people. With the judges that were to determine the
preference this difference was perfectly decisive; and thus, for the
gratification of the most childish, the meanest, and the most sordid
of all vanities, they gradually bartered their whole power and
authority.

    In a country where there is no foreign commerce, nor any of the
finer manufactures, a man of ten thousand a year cannot well employ
his revenue in any other way than in maintaining, perhaps, a
thousand families, who are all of them necessarily at his command.
In the present state of Europe, a man of ten thousand a year can spend
his whole revenue, and he generally does so, without directly
maintaining twenty people, or being able to command more than ten
footmen not worth the commanding. Indirectly, perhaps, he maintains as
great or even a greater number of people than he could have done by
the ancient method of expense. For though the quantity of precious
productions for which he exchanges his whole revenue be very small,
the number of workmen employed in collecting and preparing it must
necessarily have been very great. Its great price generally arises
from the wages of their labour, and the profits of all their immediate
employers. By paying that price he indirectly pays all those wages and
profits and thus indirectly contributes to the maintenance of all
the workmen and their employers. He generally contributes, however,
but a very small proportion to that of each, to very few perhaps a
tenth, to many not a hundredth, and to some not a thousandth, nor even
a ten-thousandth part of their whole annual maintenance. Though he
contributes, therefore, to the maintenance of them all, they are all
more or less independent of him, because generally they can all be
maintained without him.

    When the great proprietors of land spend their rents in
maintaining their tenants and retainers, each of them maintains
entirely all his own tenants and all his own retainers. But when
they spend them in maintaining tradesmen and artificers, they may, all
of them taken together, perhaps, maintain as great, or, on account
of the waste which attends rustic hospitality, a greater number of
people than before. Each of them, however, taken singly, contributes
often but a very small share to the maintenance of any individual of
this greater number. Each tradesman or artificer derives his
subsistence from the employment, not of one, but of a hundred or a
thousand different customers. Though in some measure obliged to them
all, therefore, he is not absolutely dependent upon any one of them.

    The personal expense of the great proprietors having in this
manner gradually increased, it was impossible that the number of their
retainers should not as gradually diminish till they were at last
dismissed altogether. The same cause gradually led them to dismiss the
unnecessary part of their tenants. Farms were enlarged, and the
occupiers of land, notwithstanding the complaints of depopulation,
reduced to the number necessary for cultivating it, according to the
imperfect state of cultivation and improvement in those times. By
the removal of the unnecessary mouths, and by exacting from the farmer
the full value of the farm, a greater surplus, or what is the same
thing, the price of a greater surplus, was obtained for the
proprietor, which the merchants and manufacturers soon furnished him
with a method of spending upon his own person in the same manner as he
had done the rest. The same cause continuing to operate, he was
desirous to raise his rents above what his lands, in the actual
state of their improvement, could afford. His tenants could agree to
this upon one condition only, that they should be secured in their
possession for such a term of years as might give them time to recover
with profit whatever they should lay out in the further improvement of
the land. The expensive vanity of the landlord made him willing to
accept of this condition; and hence the origin of long leases.

    Even 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 such a
tenant will expose neither his life nor his fortune in the service
of the proprietor. But if he has a lease for a long term of years,
he is altogether independent; and his landlord must not expect from
him the most trifling service beyond what is either expressly
stipulated in the lease or imposed upon him by the common and known
law of the country.

    The tenants having in this manner become independent, and the
retainers being dismissed, the great proprietors were no longer
capable of interrupting the regular execution of justice or of
disturbing the peace of the country. Having sold their birthright, not
like Esau for a mess of pottage in time of hunger and necessity, but
in the wantonness of plenty, for trinkets and baubles, fitter to be
the playthings of children than the serious pursuits of men, they
became as insignificant as any substantial burgher or tradesman in a
city. A regular government was established in the country as well as
in the city, nobody having sufficient power to disturb its
operations in the one any more than in the other.

    It does not, perhaps, relate to the present subject, but I
cannot help remarking it, that very old families, such as have
possessed some considerable estate from father to son for many
successive generations are very rare in commercial countries. In
countries which have little commerce, on the contrary, such as Wales
or the highlands of Scotland, they are very common. The Arabian
histories seem to be all full of genealogies, and there is a history
written by a Tartar Khan, which has been translated into several
European languages, and which contains scarce anything else; a proof
that ancient families are very common among those nations. In
countries where a rich man can spend 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 seems is seldom so violent as to
attempt to maintain more than he can afford. But where he can spend
the greatest revenue upon his own person, he frequently has no
bounds to his expense, because he frequently has no bounds to his
vanity or to his affection for his own person. In commercial
countries, therefore, riches, in spite of the most violent regulations
of law to prevent their dissipation, very seldom remain long in the
same family. Among simple nations, on the contrary, they frequently do
without any regulations of law, for among nations of shepherds, such
as the Tartars and Arabs, the consumable nature of their property
necessarily renders all such regulations impossible.

    A revolution of the greatest importance to the public happiness
was in this manner brought about by two different orders of people who
had not the least intention to serve the public. To gratify the most
childish vanity was the sole motive of the great proprietors. The
merchants and artificers, much less ridiculous, acted merely from a
view to their own interest, and in pursuit of their own pedlar
principle of turning a penny wherever a penny was to be got. Neither
of them had either knowledge or foresight of that great revolution
which the folly of the one, and the industry of the other, was
gradually bringing about.

    It is thus that through the greater part of Europe the commerce
and manufactures of cities, instead of being the effect, have been the
cause and occasion of the improvement and cultivation of the country.

    This order, however, being contrary to the natural course of
things, is necessarily both slow and uncertain. Compare the slow
progress of those European countries of which the wealth depends
very much upon their commerce and manufactures with the rapid advances
of our North American colonies, of which the wealth is founded
altogether in agriculture. Through the greater part of Europe the
number of inhabitants is not supposed to double in less than five
hundred years. In several 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 different kinds prevent the
division of great estates, and thereby hinder the multiplication of
small proprietors. A small proprietor, however, who knows every part
of his little territory, who views it with all the affection which
property, especially small property, naturally inspires, and who
upon that account takes pleasure not only in cultivating but in
adorning it, is generally of all improvers the most industrious, the
most intelligent, and the most successful. The same regulations,
besides, keep so much land out of the market that there are always
more capitals to buy than there is land to sell, so that what is
sold always sells at a monopoly price. The rent never pays the
interest of the purchase-money, and is, besides, burdened with repairs
and other occasional charges to which the interest of money is not
liable. To purchase land is everywhere in Europe a most unprofitable
employment of a small capital. For the sake of the superior
security, indeed, a man of moderate circumstances, when he retires
from business, will sometimes choose to lay out his little capital
in land. A man of profession too, whose revenue is derived from.
another source, often loves to secure his savings in the same way. But
a young man, who, instead of applying to trade or to some
profession, should employ a capital of two or three thousand pounds in
the purchase and cultivation of a small piece of land, might indeed
expect to live very happily, and very independently, but must bid
adieu forever to all hope of either great fortune or great
illustration, which by a different employment of his stock he might
have had the same chance of acquiring with other people. Such a person
too, though he cannot aspire at being a proprietor, will often disdain
to be a farmer. The small quantity of land, therefore, which is
brought to market, and the high price of what is brought thither,
prevents a great number of capitals from being employed in its
cultivation and improvement which would otherwise have taken that
direction. In North America, on the contrary, fifty or sixty pounds is
often found a sufficient stock to begin a plantation with. The
purchase and improvement of uncultivated land is there the most
profitable employment of the smallest as well as of the greatest
capitals, and the most direct road to all the fortune and illustration
which can be acquired in that country. Such land, indeed, is in
North America to be had almost for nothing, or at a price much below
the value of the natural produce- a thing impossible in Europe, or,
indeed, in any country where all lands have long been private
property. If landed estates, however, were divided equally among all
the children upon the death of any proprietor who left a numerous
family, the estate would generally be sold. So much land would come to
market that it could no longer sell at a monopoly price. The free rent
of the land would go nearer to pay the interest of the purchase-money,
and a small capital might be employed in purchasing land as profitably
as in any other way.

    England, on account of the natural fertility of the soil, of the
great extent of the sea-coast in proportion to that of the whole
country, and of the many navigable rivers which run through it and
afford the conveniency of water carriage to some of the most inland
parts of it, is perhaps as well fitted by nature as any large
country in Europe to be the seat of foreign commerce, of
manufactures for distant sale, and of all the improvements which these
can occasion. From the beginning of the reign of Elizabeth too, the
English legislature has been peculiarly attentive to the interests
of commerce and manufactures, and in reality there is no country in
Europe, Holland itself not excepted, of which the law is, upon the
whole, more favourable to this sort of industry. Commerce and
manufactures have accordingly been continually advancing during all
this period. The cultivation and improvement of the country has, no
doubt, been gradually advancing too; but it seems to have followed
slowly, and at a distance, the more rapid progress of commerce and
manufactures. The greater part of the country must probably have
been cultivated before the reign of Elizabeth; and a very great part
of it still 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 indirectly by the protection
of commerce, but by several direct encouragements. Except in times
of scarcity, the exportation of corn is not only free, 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.
Those who cultivate the land, therefore, have a monopoly against their
countrymen for the two greatest and most important articles of land
produce, bread and butcher's meat. These encouragements, though at
bottom, perhaps, as I shall endeavour to show hereafter, altogether
illusory, sufficiently demonstrate at least the good intention of
the legislature to favour agriculture. But what is of much more
importance than all of them, the yeomanry of England are rendered as
secure, as independent, and as respectable as law can make them. No
country, therefore, in which the right of primogeniture takes place,
which pays tithes, and where perpetuities, though contrary to the
spirit of the law, are admitted in some cases, can give more
encouragement to agriculture than England. Such, however,
notwithstanding, is the state of its cultivation. What would it have
been had the law given no direct encouragement to agriculture
besides what arises indirectly from the progress of commerce, and
had left the yeomanry in the same condition as in most other countries
of Europe? It is now more than two hundred years since the beginning
of the reign of Elizabeth, a period as long as the course of human
prosperity usually endures.

    France seems to have had a considerable share of foreign
commerce near a century before England was distinguished as a
commercial country. The marine of France was considerable, according
to the notions of the times, before the expedition of Charles VIII
to Naples. The cultivation and improvement of France, however, is,
upon the whole, inferior to that of England. The law of the country
has never given the same direct encouragement to agriculture.

    The foreign commerce of Spain and Portugal to the other parts of
Europe, though chiefly carried on in foreign ships, is very
considerable. That to their colonies is carried on in their own, and
is much greater, on account of the great riches and extent of those
colonies. But it has never introduced any considerable manufactures
for distant sale into either of those countries, and the greater
part of both still remains uncultivated. The foreign commerce of
Portugal is of older standing than that of any great country in
Europe, except Italy.

    Italy is the only great country of Europe which seems to have been
cultivated and improved in every part by means of foreign commerce and
manufactures for distant sale. Before the invasion of Charles VIII,
Italy according to Guicciardin, was cultivated not less in the most
mountainous and barren parts of the country than in the plainest and
most fertile. The advantageous situation of the country, and the great
number of independent states which at that time subsisted in it,
probably contributed not a little to this general cultivation. It is
not impossible too, notwithstanding this general expression of one
of the most judicious and reserved of modern historians, that Italy
was not at that time better cultivated than England is at present.

    The capital, however, that is acquired to any country by
commerce and manufactures is all a very precarious and uncertain
possession till some part of it has been secured and realized in the
cultivation and improvement of its lands. A merchant, it has been said
very properly, is not necessarily the citizen of any particular
country. It is in a great measure indifferent to him from what place
he carries on his trade; and a very trifling disgust will make him
remove his capital, and together with it all the industry which it
supports, from one country to another. No part of it can be said to
belong to any particular country, till it has been spread as it were
over the face of that country, either in buildings or in the lasting
improvement of lands. No vestige now remains of the great wealth
said to have been possessed by the greater part of the Hans towns
except in the obscure histories of the thirteenth and fourteenth
centuries. It is even uncertain where some of them were situated or to
what towns in Europe the Latin names given to some of them belong. But
though the misfortunes of Italy in the end of the fifteenth and
beginning of the sixteenth centuries greatly diminished the commerce
and manufactures of the cities of Lombardy and Tuscany, those
countries still continue to be among the most populous and best
cultivated in Europe. The civil wars of Flanders, and the Spanish
government which succeeded them, chased away the great commerce of
Antwerp, Ghent, and Bruges. But Flanders still continues to be one
of the richest, best cultivated, and most populous provinces of
Europe. The ordinary revolutions of war and government easily dry up
the sources of that wealth which arises from commerce only. That which
arises from the more solid improvements of agriculture is much more
durable and cannot be destroyed but by those more violent
convulsions occasioned by the depredations of hostile and barbarous
nations continued for a century or two together, such as those that
happened for some time before and after the fall of the Roman empire
in the western provinces of Europe.

                          BOOK FOUR

               OF SYSTEMS OF POLITICAL ECONOMY

                         INTRODUCTION

    POLITICAL economy, considered as a branch of the science of a
statesman or legislator, proposes two distinct objects: first, to
provide a plentiful revenue or subsistence for the people, or more
properly to enable them to provide such a revenue or subsistence for
themselves; and secondly, to supply the state or commonwealth with a
revenue sufficient for the public services. It proposes to enrich both
the people and the sovereign.

    The different progress of opulence in different ages and nations
has given occasion to two different systems of political economy
with regard to enriching the people. The one may be called the
system of commerce, the other that of agriculture. I shall endeavour
to explain both as fully and distinctly as I can, and shall begin with
the system of commerce. It is the modern system, and is best
understood in our own country and in our own times.

                             CHAPTER I

      Of the Principle of the Commercial, or Mercantile System

    THAT wealth consists in money, or and silver, is a popular
notion which naturally arises from the double function of money, as
the instrument of commerce and as the measure of value. In consequence
of its being the instrument of commerce, when we have money we can
more readily obtain whatever else we have occasion for than by means
of any other commodity. The great affair, we always find, is to get
money. When that is obtained, there is no difficulty in making any
subsequent purchase. In consequence of its being the measure of value,
we estimate that of all other commodities by the quantity of money
which they will exchange for. We say 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 said to love money; and
a careless, a generous, or a profuse man, is said to be indifferent
about it. To grow rich is to get money; and wealth and money, in
short, are, in common language, considered as in every respect
synonymous.

    A rich country, in the same manner as a rich man, is supposed to
be a country abounding in money; and to heap up gold and saver in
any country is supposed to be the readiest way to enrich it. For
some time after the discovery of America, the first inquiry of the
Spaniards, when they arrived upon an unknown coast, used to be, if
there was any gold or silver to be found in the neighbourhood. By
the information which they received, they judged whether it was
worth while to make a settlement there, or if the country was worth
the conquering. Plano Carpino, a monk, sent ambassador from the King
of France to one of the sons of the famous Genghis Khan, says that the
Tartars used frequently to ask him if there was plenty of sheep and
oxen in the kingdom of France. Their inquiry had the same object
with that of the Spaniards. They wanted to know if the country was
rich enough to be worth the conquering. Among the Tartars, as among
all other nations of shepherds, who are generally ignorant of the
use of money, cattle are the instruments of commerce and the
measures of value. Wealth, therefore, according to them, consisted
in cattle, as according to the Spaniards it consisted in gold and
silver. Of the two, the Tartar notion, perhaps, was the nearest to the
truth.

    Mr. Locke remarks a distinction between money and other movable
goods. All other movable goods, he says, are of so consumable a nature
that the wealth which consists in them cannot be much depended on, and
a nation which abounds in them one year may, without any
exportation, but merely their own waste and extravagance, be in
great want of them the next. Money, on the contrary, is a steady
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
wasted and consumed. Gold and silver, therefore, are, according to
him, the most solid and substantial part of the movable wealth of a
nation, and to multiply those metals ought, he thinks, upon that
account, to be the great object of its political economy.

    Others admit that if a nation could be separated from all the
world, it would be of no consequence how much, or how little money
circulated in it. The consumable goods which were circulated by
means of this money would only be exchanged for a greater or a smaller
number of pieces; but the real wealth or poverty of the country,
they allow, would depend altogether upon the abundance or scarcity
of those consumable goods. But it is otherwise, they think, with
countries which have connections with foreign nations, and which are
obliged to carry on foreign wars, and to maintain fleets and armies in
distant countries. This, they say, cannot be done but by sending
abroad money to pay them with; and a nation cannot send much money
abroad unless it has a good deal at home. Every such nation,
therefore, must endeavour in time of peace to accumulate gold and
silver that, when occasion requires, it may have wherewithal to
carry on foreign wars.

    In consequence of these popular notions, all the different nations
of Europe have studied, though to little purpose, every possible means
of accumulating gold and silver in their respective countries. Spain
and Portugal, the proprietors of the principal mines which supply
Europe with those metals, have either prohibited their exportation
under the severest penalties, or subjected it to a considerable
duty. The like prohibition seems anciently to have made a part of
the policy of most other European nations. It is even to be found,
where we should least of all expect to find it, in some old Scotch
acts of Parliament, which forbid under heavy penalties the carrying
gold or silver forth of the kingdom. The like policy anciently took
place both in France and England.

    When those countries became commercial, the merchants found this
prohibition, upon many occasions, extremely inconvenient. They could
frequently buy more advantageously with gold and silver than with
any other commodity the foreign goods which they wanted, either to
import into their own, or to carry to some other foreign country. They
remonstrated, therefore, against this prohibition as hurtful to trade.

    They represented, first, that the exportation of gold and silver
in order to purchase foreign goods, did not always diminish the
quantity of those metals in the kingdom. That, on the contrary, it
might frequently increase that quantity; because, if the consumption
of foreign goods was not thereby increased in the country, those goods
might be re-exported to foreign countries, and, being there sold for a
large profit, might bring back much more treasure than was
originally sent out to purchase them. Mr. Mun compares this
operation of foreign trade to the seed-time and harvest of
agriculture. "If we only behold," says he, "the actions of the
husbandman in the seed-time, when he casteth away much good corn
into the ground, we shall account him rather a madman than a
husbandman. But when we consider his labours in the harvest, which
is the end of his endeavours, we shall find the worth and plentiful
increase of his action."

    They represented, secondly, that this prohibition could not hinder
the exportation of gold and silver, which, on account of the smallness
of their bulk in proportion to their value, could easily be smuggled
abroad. That this exportation 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 from foreign nations, which was necessarily paid to it in
gold and silver, and thereby increased the quantity of those metals in
the kingdom. But that when it imported to a greater value than it
exported, a contrary balance became due to foreign nations, which
was necessarily paid to them in the same manner, and thereby
diminished that quantity. That in this case to prohibit the
exportation of those metals could not prevent it, but only, by
making it more dangerous, render it more expensive. That the
exchange was thereby turned more against the country which owed the
balance than it otherwise might have been; the merchant who
purchased a bill upon the foreign country being obliged to pay the
banker who sold it, not only for the natural risk, trouble, and
expense of sending the money thither, but for the extraordinary risk
arising from the prohibition. But that the more the exchange was
against any country, the more the balance of trade became
necessarily against it; the money of that country becoming necessarily
of so much less value in comparison with that of the country to
which the balance was due. That if the exchange between England and
Holland, for example, was five per cent against England, it would
require a hundred and five ounces of silver in England to purchase a
bill for a hundred ounces of silver in Holland: that a hundred and
five ounces of silver in England, therefore, would be worth only a
hundred ounces of silver in Holland, and would purchase only a
proportionable quantity of Dutch goods; but that a hundred ounces of
silver in Holland, on the contrary, would be worth a hundred and
five ounces in England, and would purchase a proportionable quantity
of English goods: that the English goods which were sold to Holland
would be sold so much cheaper; and the Dutch goods which were sold
to England so much dearer by the difference of the exchange; that
the one would draw so much less Dutch money to England, and the
other so much more English money to Holland, as this difference
amounted to: and that the balance of trade, therefore, would
necessarily be so much more against England, and would require a
greater balance of gold and silver to be exported to Holland.

    Those arguments were partly solid and partly sophistical. They
were solid so far as they asserted that the exportation of gold and
silver in trade might frequently be advantageous to the country.
They were solid, too, in asserting that no prohibition could prevent
their exportation when private people found any advantage in exporting
them. But they were sophistical in supposing that either to preserve
or to augment the quantity of those metals required more the attention
of government than to preserve or to augment the quantity of any other
useful commodities, which the freedom of trade, without any such
attention, never fails to supply in the proper quantity. They were
sophistical too, perhaps, in asserting that the high price of exchange
necessarily increased what they called the unfavourable balance of
trade, or occasioned the exportation of a greater quantity of gold and
silver. That high price, indeed, was extremely disadvantageous to
the merchants who had any money to pay in foreign countries. They paid
so much dearer for the bills which their bankers granted them upon
those countries. But though the risk arising from the prohibition
might occasion some extraordinary expense to the bankers, it would not
necessarily carry any more money out of the country. This expense
would generally be all laid out in the country, in smuggling the money
out of it, and could seldom occasion the exportation of a single
sixpence beyond the precise sum drawn for. The high price of
exchange too would naturally dispose the merchants to endeavour to
make their exports nearly balance their imports, in order that they
might have this high exchange to pay upon as small a sum as
possible. The high price of exchange, besides, must necessarily have
operated as a tax, in raising the price of foreign goods, and
thereby diminishing their consumption. It would tend, therefore, not
to increase but to diminish what they called the unfavourable
balance of trade, and consequently the exportation of gold and silver.

    Such as they were, however, those arguments convinced the people
to whom they were addressed. They were addressed by merchants to
parliaments and to the councils of princes, to nobles and to country
gentlemen, by those who were supposed to understand trade to those who
were conscious to themselves that they knew nothing about the
matter. That foreign trade enriched the country, experience
demonstrated to the nobles and country gentlemen as well as to the
merchants; but how, or in what manner, none of them well knew. The
merchants knew perfectly in what manner it enriched themselves. It was
their business to know it. But to know in what manner it enriched
the country was no part of their business. This subject never came
into their consideration but when they had occasion to apply to
their country for some change in the laws relating to foreign trade.
It then became necessary to say something about the beneficial effects
of foreign trade, and the manner in which those effects were
obstructed by the laws as they then stood. To the judges who were to
decide the business it appeared a most satisfactory account of the
matter, when they were told that foreign trade brought money into
the country, but that the laws in question hindered it from bringing
so much as it otherwise would do. Those arguments therefore produced
the wished-for effect. The prohibition of exporting gold and silver
was in France and England confined to the coin of those respective
countries. The exportation of foreign coin and of bullion was made
free. In Holland, and in some other places, this liberty was
extended even to the coin of the country. The attention of
government was turned away from guarding against the exportation of
gold and silver to watch over the balance of trade as the only cause
which could occasion any augmentation or diminution of those metals.
From one fruitless care it was turned away to another care much more
intricate, much more embarrassing, and just equally fruitless. The
title of Mun's book, England's Treasure in Foreign Trade, became a
fundamental maxim in the political economy, not of England only, but
of all other commercial countries. The inland or home trade, the
most important of all, the trade in which an equal capital affords the
greatest revenue, and creates the greatest employment to the people of
the country, was considered as subsidiary only to foreign trade. It
neither brought money into the country, it was said, nor carried any
out of it. The country, therefore, could never become either richer or
poorer by means of it, except so far as its prosperity or decay
might indirectly influence the state of foreign trade.

    A country that has no mines of its own must undoubtedly draw its
gold and silver from foreign countries in the same manner as one
that has no vineyards of its own must draw its wines. It does not seem
necessary, however, that the attention of government should be more
turned towards the one than towards the other object. A country that
has wherewithal to buy wine will always get the wine which it has
occasion for; and a country that has wherewithal to buy gold and
silver will never be in want of those metals. They are to be bought
for a certain price like all other commodities, and as they are the
price of all other commodities, so all other commodities are the price
of those metals. We trust with perfect security that the freedom of
trade, without any attention of government, will always supply us with
the wine which we have occasion for: and we may trust with equal
security that it will always supply us with all the gold and silver
which we can afford to purchase or to employ, either in circulating
our commodities, or in other uses.

    The quantity of every commodity which human industry can either
purchase or produce naturally regulates itself in every country
according to the effectual demand, or according to the demand of those
who are willing to pay the whole rent, labour, and profits which
must be paid in order to prepare and bring it to market. But no
commodities regulate themselves more easily or more exactly
according to this effectual demand than gold and silver; because, on
account of the small bulk and great value of those metals, no
commodities can be more easily transported from one place to
another, from the places where they are cheap to those where they
are dear, from the places where they exceed to those where they fall
short of this effectual demand. If there were in England, for example,
an effectual demand for an additional quantity of gold, a
packet-boat could bring from Lisbon, or from wherever else it was to
be had, fifty tons of gold, which could be coined into more than
five millions of guineas. But if there were an effectual demand for
grain to the same value, to import it would require, at five guineas a
ton, a million of tons of shipping, or a thousand ships of a
thousand tons each. The navy of England would not be sufficient.

    When the quantity of gold and silver imported into any country
exceeds the effectual demand, no vigilance of government can prevent
their exportation. All the sanguinary laws of Spain and Portugal are
not able to keep their gold and silver at home. The continual
importations from Peru and Brazil exceed the effectual demand of those
countries, and sink the price of those metals there below that in
the neighbouring countries. If, on the contrary, in any particular
country their quantity fell short of the effectual demand, so as to
raise their price above that of the neighbouring countries, the
government would have no occasion to take any pains to import them. If
it were even to take pains to prevent their importation, it would
not be able to effectuate it. Those metals, when the Spartans had
got wherewithal to purchase them, broke through all the barriers which
the laws of Lycurgus opposed to their entrance into Lacedemon. All the
sanguinary laws of the customs are not able to prevent the importation
of the teas of the Dutch and Gottenburgh East India Companies, because
somewhat cheaper than those of the British company. A pound of tea,
however, is about a hundred times the bulk of one of the highest
prices, sixteen shillings, that is commonly paid for it in silver, and
more than two thousand times the bulk of the same price in gold, and
consequently just so many times more difficult to smuggle.

    It is partly owing to the easy transportation of gold and silver
from the places where they abound to those where they are wanted
that the price of those metals does not fluctuate continually like
that of the greater part of other commodities, which are hindered by
their bulk from shifting their situation when the market happens to be
either over or under-stocked with them. The. price of those metals,
indeed, is not altogether exempted from variation, but the changes
to which it is liable are generally slow, gradual and uniform. In
Europe, for example, it is supposed, without much foundation, perhaps,
that during the course of the present and preceding century they
have been constantly, but gradually, sinking in their value, on
account of the continual importations from the Spanish West Indies.
But to make any sudden change in the price of gold and silver, so as
to raise or lower at once, sensibly and remarkably, the money price of
all other commodities, requires such a revolution in commerce as
that occasioned by the discovery of America.

    If, notwithstanding all this, gold and silver should at any time
fall short in a country which has wherewithal to purchase them,
there are more expedients for supplying their place than that of
almost any other commodity. If the materials of manufacture are
wanted, industry must stop. If provisions are wanted, the people
must starve. But if money is wanted, barter will supply its place,
though with a good deal of inconveniency. Buying and selling upon
credit, and the different dealers compensating their credits with
one another, once a month or once a year, will supply it with less
inconveniency. A well-regulated paper money will supply it, not only
without any inconveniency, but, in some cases, with some advantages.
Upon every account, therefore, the attention of government never was
so unnecessarily employed as when directed to watch over the
preservation or increase of the quantity of money in any country.

    No complaint, however, is more common than that of a scarcity of
money. Money, like wine, must always be scarce with those who have
neither wherewithal to buy it nor credit to borrow it. Those who
have either will seldom be in want either of the money or of the
wine which they have occasion for. This complaint, however, of the
scarcity of money is not always confined to improvident
spendthrifts. It is sometimes general through a whole mercantile
town and the country in its neighbourhood. Overtrading is the common
cause of it. Sober men, whose projects have been disproportioned to
their capitals, are as likely to have neither wherewithal to buy money
nor credit to borrow it, as prodigals whose expense has been
disproportioned to their revenue. Before their projects can be brought
to bear, their stock is gone, and their credit with it. They run about
everywhere to borrow money, and everybody tells them that they have
none to lend. Even such general complaints of the scarcity of money do
not always prove that the usual number of gold and silver pieces are
not circulating in the country, but that many people want those pieces
who have nothing to give for them. When the profits of trade happen to
be greater than ordinary, overtrading becomes a general error both
among great and small dealers. They do not always send more money
abroad than usual, but they buy upon credit, both at home and
abroad, an unusual quantity of goods, which they send to some
distant market in hopes that the returns will come in before the
demand for payment. The demand comes before the returns, and they have
nothing at hand with which they can either purchase money, or give
solid security for borrowing. It is not any scarcity of gold and
silver, but the difficulty which such people find in borrowing, and
which their creditors find in getting payment, that occasions the
general complaint of the scarcity of money.

    It would be too ridiculous to go about seriously to prove that
wealth does not consist in money, or in gold and silver; but in what
money purchases, and is valuable only for purchasing. Money, no doubt,
makes always a part of the national capital; but it has already been
shown that it generally makes but a small part, and always the most
unprofitable part of it.

    It is not because wealth consists more essentially in money than
in goods that the merchant find it generally more easy to buy goods
with money than to buy money with goods; but because money is the
known and established instrument of commerce, for which everything
is readily given in exchange, but which is not always with equal
readiness to be got in exchange for everything. The greater part of
goods, besides, are more perishable than money, and he may
frequently sustain a much greater loss by keeping them. When his goods
are upon hand, too, he is more liable to such demands for money as
he may not be able to answer than when he has got their price in his
coffers. Over and above all this, his profit arises more directly from
selling than from buying, and he is upon all these 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 warehouse, may sometimes be ruined by not being able to
sell them in time, a nation or country is not liable to the same
accident. The whole capital of a merchant frequently consists in
perish, able goods destined for purchasing money. But it is but a very
small part of the annual produce of the land and labour of a country
which can ever be destined for purchasing gold and silver from their
neighbours. The far greater part is circulated and consumed among
themselves; and even of the surplus which is sent abroad, the
greater part is generally destined for the purchase of other foreign
goods. Though gold and silver, therefore, could not be had in exchange
for the goods destined to purchase them, the nation would not be
ruined. It might, indeed, suffer some loss and inconveniency, and be
forced upon some of those expedients which are necessary for supplying
the place of money. The annual produce of its land and labour,
however, would be the same, or very nearly the same, as usual, because
the same, or very nearly the same, consumable capital would be
employed in maintaining it. And though goods do not always draw
money so readily as money draws goods, in the long run they draw it
more necessarily than even it draws them. Goods can serve many other
purposes besides purchasing money, but money can serve no other
purpose besides purchasing goods. Money, therefore, necessarily runs
after goods, but goods do not always or necessarily run after money.
The man who buys does not always mean to sell again, but frequently to
use or to consume; whereas he who sells always 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 business. It is not for its own
sake that men desire money, but for the sake of what they can purchase
with it.

    Consumable commodities, it is said, are soon destroyed; whereas
gold and silver are of a more durable nature, and, were it not for
this continual exportation, might be accumulated for ages together, to
the incredible augmentation of the real wealth of the country.
Nothing, therefore, it is pretended, can be more disadvantageous to
any country than the trade which consists in the exchange of such
lasting for such perishable commodities. We do not, however, reckon
that trade disadvantageous which consists in the exchange of the
hardware of England for the wines of France; and yet hardware is a
very durable commodity, and were it not for this continual exportation
might, too, be accumulated for ages together, to the incredible
augmentation of the pots and pans of the country. But it readily
occurs that the number of such utensils is in every country
necessarily limited by the use which there is for them; that it
would be absurd to have more pots and pans than were necessary for
cooking the victuals usually consumed there; and that if the
quantity of victuals were to increase, the number of pots and pans
would readily increase along with it, a part of the increased quantity
of victuals being employed in purchasing them, or in maintaining an
additional number of workmen whose business it was to make them. It
should as readily occur that the quantity of gold and silver is in
every country limited by the use which there is for those metals; that
their use consists in circulating commodities as coin, and in
affording a species of household furniture as plate; that the quantity
of coin in every country is regulated by the value of the
commodities which are to be circulated by it: increase that value, and
immediately a part of it will be sent abroad to purchase, wherever
it is to be had, the additional quantity of coin requisite for
circulating them: that the quantity of plate is regulated by the
number and wealth of those private families who choose to indulge
themselves in that sort of magnificence: increase the number and
wealth of such families, and a part of this increased wealth will most
probably be employed in purchasing, wherever it is to be found, an
additional quantity of plate: that to attempt to increase the wealth
of any country, either by introducing or by detaining in it an
unnecessary quantity of gold and silver, is as absurd as it would be
to attempt to increase the good cheer of private families by
obliging them to keep an unnecessary number of kitchen utensils. As
the expense of purchasing those unnecessary utensils would diminish
instead of increasing either the quantity of goodness of the family
provisions, so the expense of purchasing an unnecessary quantity of
gold and silver must, in every country, as necessarily diminish the
wealth which feeds, clothes, and lodges, which maintains and employs
the people. Gold and silver, whether in the shape of coin or of plate,
are utensils, it must be remembered, as much as the furniture of the
kitchen. Increase the use for them, increase the consumable
commodities which are to be circulated, managed, and prepared by means
of them, and you will infallibly increase the quantity; but if you
attempt, by extraordinary means, to increase the quantity, you will as
infallibly diminish the use and even the quantity too, which in
those metals can never be greater than what the use requires. Were
they ever to be accumulated beyond this quantity, their transportation
is so easy, and the loss which attends their lying idle and unemployed
so great, that no law could prevent their being immediately sent out
of the country.

    It is not always necessary to accumulate gold and silver in
order to enable a country to carry on foreign wars, and to maintain
fleets and armies in distant countries. Fleets and armies are
maintained, not with gold and silver, but with consumable goods. The
nation which, from the annual produce of its domestic industry, from
the annual revenue arising out of its lands, labour, and consumable
stock, has wherewithal to purchase those consumable goods in distant
countries, can maintain foreign wars there.

    A nation may purchase the pay and provisions of an army in a
distant country three different ways: by sending abroad either, first,
some part of its accumulated gold and silver, or, secondly, some
part of the annual produce of its manufactures; or, last of all,
some part of its annual rude produce.

    The gold and silver which can properly be considered as
accumulated or stored up in any country may be distinguished into
three parts: first, the circulating money; secondly, the plate of
private families; and, last of all, the money which may have been
collected by many years' parsimony, and laid up in the treasury of the
prince.

    It can seldom happen that much can be spared from the
circulating money of the country; because in that there can seldom
be much redundancy. The value of goods annually bought and sold in any
country requires a certain quantity of money to circulate and
distribute them to their proper consumers, and can give employment
to no more. The channel of circulation necessarily draws to itself a
sum sufficient to fill it, and never admits any more. Something,
however, is generally withdrawn from this channel in the case of
foreign war. By the great number of people who are maintained
abroad, fewer are maintained at home. Fewer goods are circulated
there, and less money becomes necessary to circulate them. An
extraordinary quantity of paper money, of some sort or other, such
as exchequer notes, navy bills, and bank bills in England, is
generally issued upon such occasions, and by supplying the place of
circulating gold and silver, gives an opportunity of sending a greater
quantity of it abroad. All this, however, could afford but a poor
resource for maintaining a foreign war of great expense and several
years duration.

    The melting down the plate of private families has upon every
occasion been found a still more insignificant one. The French, in the
beginning of the last war, did not derive so much advantage from
this expedient as to compensate the loss of the fashion.

    The accumulated treasures of the prince have, in former times,
afforded a much greater and more lasting resource. In the present
times, if you except the king of Prussia, to accumulate treasure seems
to be no part of the policy of European princes.

    The funds which maintained the foreign wars of the present
century, the most expensive perhaps which history records, seem to
have had little dependency upon the exportation either of the
circulating money, or of the plate of private families, or of the
treasure of the prince. The last French war cost Great Britain upwards
of ninety millions, including not only the seventy-five millions of
new debt that was contracted, but the additional two shillings in
the pound land-tax, and what was annually borrowed of the sinking
fund. More than two-thirds of this expense were laid out in distant
countries; in Germany, Portugal, America, in the ports of the
Mediterranean, in the East and West Indies. The kings of England had
no accumulated treasure. We never heard of any extraordinary
quantity of plate being melted down. The circulating gold and silver
of the country had not been supposed to exceed eighteen millions.
Since the late recoinage of the gold, however, it is believed to
have been a good deal under-rated. Let us suppose, therefore,
according to the most exaggerated computation which I remember to have
either seen or heard of, that, gold and silver together, it amounted
to thirty millions. Had the war been carried on by means of our money,
the whole of it must, even according to this computation, have been
sent out and returned again at least twice in a period of between
six and seven years. Should this be supposed, it would afford the most
decisive argument to demonstrate how unnecessary it is for
government to watch over the preservation of money, since upon this
supposition the whole money of the country must have gone from it
and returned to it again, two different times in so short a period,
without anybody's knowing anything of the matter. The channel of
circulation, however, never appeared more empty than usual during
any part of this period. Few people wanted money who had wherewithal
to pay for it. The profits of foreign trade, indeed, were greater than
usual during the whole war; but especially towards the end of it. This
occasioned, what it always occasions, a general overtrading in all the
parts of Great Britain; and this again occasioned the usual
complaint of the scarcity of money, which always follows
overtrading. Many people wanted it, who had neither wherewithal to buy
it, nor credit to borrow it; and because the debtors found it
difficult to borrow, the creditors found it difficult to get
payment. Gold and silver, however, were generally to be had for
their value, by those who had that value to give for them.

    The enormous expense of the late war, therefore, must have been
chiefly defrayed, not by the exportation of gold and silver, but by
that of British commodities of some kind or other. When the
government, or those who acted under them, contracted with a
merchant for a remittance to some foreign country, he would
naturally endeavour to pay his foreign correspondent, upon whom he had
granted a bill, by sending abroad rather commodities than gold and
silver. If the commodities of Great Britain were not in demand in that
country, he would endeavour to send them to some other country, in
which he could purchase a bill upon that country. The transportation
of commodities, when properly suited to the market, is always attended
with a considerable profit; whereas that of gold and silver is
scarce ever attended with any. When those metals are sent abroad in
order to purchase foreign commodities, the merchant's profit arises,
not from the purchase, but from the sale of the returns. But when they
are sent abroad merely to pay a debt, he gets no returns, and
consequently no profit. He naturally, therefore, exerts his
invention to find out a way of paying his foreign debts rather by
the exportation of commodities than by that of gold and silver. The
great quantity of British goods exported during the course of the late
war, without bringing back any returns, is accordingly remarked by the
author of The Present State of the Nation.

    Besides the three sorts of gold and silver above mentioned,
there is in all great commercial countries a good deal of bullion
alternately imported and exported for the purposes of foreign trade.
This bullion, as it circulates among different commercial countries in
the same manner as the national coin circulates in every particular
country, may be considered as the money of the great mercantile
republic. The national coin receives its movement and direction from
the commodities circulated within the precincts of each particular
country: the money of the mercantile republic, from those circulated
between different countries. Both are employed in facilitating
exchanges, the one between different individuals of the same, the
other between those of different nations. Part of this money of the
great mercantile republic may have been, and probably was, employed in
carrying on the late war. In time of a general war, it is natural to
suppose that a movement and direction should be impressed upon it,
different from what it usually follows in profound peace; that it
should circulate more about the seat of the war, and be more
employed in purchasing there, and in the neighbouring countries, the
pay and provisions of the different armies. But whatever part of
this money of the mercantile republic Great Britain may have
annually employed in this manner, it must have been annually
purchased, either with British commodities, or with something else
that had been purchased with them; which still brings us back to
commodities, to the annual produce of the land and labour of the
country, as the ultimate resources which enabled us to carry on the
war. It is natural indeed to suppose that so great an annual expense
must have been defrayed from a great annual produce. The expense of
1761, for example, amounted to more than nineteen millions. No
accumulation could have supported so great an annual profusion.
There is no annual produce even of gold and silver which could have
supported it. The whole gold and silver annually imported into both
Spain and Portugal, according to the best accounts, does not
commonly much exceed six millions sterling, which, in some years,
would scarce have paid four month's expense of the late war.

    The commodities most proper for being transported to distant
countries, in order to purchase there either the pay and provisions of
an army, or some part of the money of the mercantile republic to be
employed in purchasing them, seem to be the finer and more improved
manufactures; such as contain a great value in a small bulk, and
can, therefore, be exported to a great distance at little expense. A
country whose industry produces a great annual surplus of such
manufactures, which are usually exported to foreign countries, may
carry on for many years a very expensive foreign war without either
exporting any considerable quantity of gold and silver, or even having
any such quantity to export. A considerable part of the annual surplus
of its manufactures must, indeed, in this case be exported without
bringing back any returns to the country, though it does to the
merchant; the government purchasing of the merchant his bills upon
foreign countries, in order to purchase there the pay and provisions
of an army. Some part of this surplus, however, may still continue
to bring back a return. The manufacturers, during the war, will have a
double demand upon them, and be called upon, first, to work up goods
to be sent abroad, for paying the bills drawn upon foreign countries
for the pay and provisions of the army; and, secondly, to work up such
as are necessary for purchasing the common returns that had usually
been consumed in the country. In the midst of the most destructive
foreign war, therefore, the greater part of manufactures may
frequently flourish greatly; and, on the contrary, they may decline on
the return of the peace. They may flourish amidst the ruin of their
country, and begin to decay upon the return of its prosperity. The
different state of many different branches of the British manufactures
during the late war, and for some time after the peace, may serve as
an illustration of what has been just now said.

    No foreign war of great expense or duration could conveniently
be carried on by the exportation of the rude produce of the soil.
The expense of sending such a quantity of it to a foreign country as
might purchase the pay and provisions of an army would be too great.
Few countries produce much more rude produce than what is sufficient
for the subsistence of their own inhabitants. To send abroad any great
quantity of it, therefore, would be to send abroad a part of the
necessary subsistence of the people. It is otherwise with the
exportation of manufactures. The maintenance of the people employed in
them is kept at home, and only the surplus 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 English, in those days, had
nothing wherewithal to purchase the pay and provisions of their armies
in foreign countries, but either the rude produce of the soil, of
which no considerable part could be spared from the home
consumption, or a few manufactures of the coarsest kind, of which,
as well as of the rude produce, the transportation was too
expensive. This inability did not arise from the want of money, but of
the finer and more improved manufactures. Buying and selling was
transacted by means of money in England then as well as now. The
quantity of circulating money must have borne the same proportion to
the number and value of purchases and sales usually transacted at that
time, which it does to those transacted at present; or rather it
must have borne a greater proportion, because there was then no paper,
which now occupies a great part of the employment of gold and
silver. Among nations to whom commerce and manufactures are little
known, the sovereign, upon extraordinary occasions, can seldom draw
any considerable aid from his subjects, for reasons which shall be
explained hereafter. It is in such countries, therefore, that he
generally endeavours to accumulate a treasure, as the only resource
against such emergencies. Independent of this necessity, he is in such
a situation naturally disposed to the parsimony requisite for
accumulation. In that simple state, the expense even of a sovereign is
not directed by the vanity which delights in the gaudy finery of a
court, but is employed in bounty to his tenants, and hospitality to
his retainers. But bounty and hospitality very seldom lead to
extravagance; though vanity almost always does. Every Tartar chief,
accordingly, has a treasure. The treasures of Mazepa, chief of the
Cossacs in the Ukraine, the famous ally of Charles the XII, are said
to have been very great. The French kings of the Merovingian race
all had treasures. When they divided their kingdom among their
different children, they divided their treasure too. The Saxon
princes, and the first kings after the Conquest, seem likewise to have
accumulated treasures. The first exploit of every new reign was
commonly to seize the treasure of the preceding king, as the most
essential measure for securing the succession. The sovereigns of
improved and commercial countries are not under the same necessity
of accumulating treasures, because they can generally draw from
their subjects extraordinary aids upon extraordinary occasions. They
are likewise less disposed to do so. They naturally, perhaps
necessarily, follow the mode of the times, and their expense comes
to be regulated by the same extravagant vanity which directs that of
all the other great proprietors in their dominions. The
insignificant pageantry of their court becomes every day more
brilliant, and the expense of it not only prevents accumulation, but
frequently encroaches upon the funds destined for more necessary
expenses. What Dercyllidas said of the court of Persia may be
applied to that of several European princes, that he saw there much
splendour but little strength, and many servants but few soldiers.

    The importation of gold and silver is not the principal, much less
the sole benefit which a nation derives from its foreign trade.
Between whatever places foreign trade is carried on, they all of
them derive two distinct benefits from it. It carries out that surplus
part of the produce of their land and labour for which there is no
demand among them, and brings back in return for it something else for
which there is a demand. It gives a value to their superfluities, by
exchanging them for something else, which may satisfy a part of
their wants, and increase their enjoyments. By means of it the
narrowness of the home market does not hinder the division of labour
in any particular branch of art or manufacture from being carried to
the highest perfection. By opening a more extensive market for
whatever part of the produce of their labour may exceed the home
consumption, it encourages them to improve its productive powers,
and to augment its annual produce to the utmost, and thereby to
increase the real revenue and wealth of the society. These great and
important services foreign trade is continually occupied in performing
to all the different countries between which it is carried on. They
all derive great benefit from it, though that in which the merchant
resides generally derives the greatest, as he is generally more
employed in supplying the wants, and carrying out the superfluities of
his own, than of any other particular country. To import the gold
and silver which may be wanted into the countries which have no
mines is, no doubt, a part of the business of foreign commerce. It is,
however, a most insignificant part of it. A country which carried on
foreign trade merely upon this account could scarce have occasion to
freight a ship in a century.

    It is not by the importation of gold and silver that the discovery
of America has enriched Europe. By the abundance of the American
mines, those metals have become cheaper. A service of plate can now be
purchased for about a third part of the corn, or a third part of the
labour, which it would have cost in the fifteenth century. With the
same annual expense of labour and commodities, Europe can annually
purchase about three times the quantity of plate which it could have
purchased at that time. But when a commodity comes to be sold for a
third part of what had been its usual price, not only those who
purchased it before can purchase three times their former quantity,
but it is brought down to the level of a much greater number of
purchasers, perhaps to more than ten, perhaps to more than twenty
times the former number. So that there may be in Europe at present 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 present
state of improvement, had the discovery of the American mines never
been made. So far Europe has, no doubt, gained a real conveniency,
though surely a very trifling one. The cheapness of gold and silver
renders those metals rather less fit for the purposes of money than
they were before. In order to make the same purchases, we must load
ourselves with a greater quantity of them, and carry about a
shilling in our pocket where a groat would have done before. It is
difficult to say which is most trifling, this inconveniency or the
opposite conveniency. Neither the one nor the other could have made
any very essential change in the state of Europe. The discovery of
America, however, certainly made a most essential one. By opening a
new and inexhaustible market to all the commodities of Europe, it gave
occasion to new divisions 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
produce. The productive powers of labour were improved, and its
produce increased in all the different countries of Europe, and
together with it the real revenue and wealth of the inhabitants. The
commodities of Europe were almost all new to America, and many of
those of America were new to Europe. A new set of exchanges,
therefore, began to take place which had never been thought of before,
and which should naturally have proved as advantageous to the new,
as it certainly did to the old continent. The savage injustice of
the Europeans rendered an event, which ought to have been beneficial
to all, ruinous and destructive to several of those unfortunate
countries.

    The discovery of a passage to the East Indies by the Cape of
Good Hope, which happened much about the same time, opened perhaps a
still more extensive range to foreign commerce than even that of
America, notwithstanding the greater distance. There were but two
nations in America in any respect superior to savages, and these
were destroyed almost as soon as discovered. The rest were mere
savages. But the empires of China, Indostan, Japan, as well as several
others in the East Indies, without having richer mines of gold or
silver, were in every other respect much richer, better cultivated,
and more advanced in all arts and manufactures than either Mexico or
Peru, even though we should credit, what plainly deserves no credit,
the exaggerated accounts of the Spanish writers concerning the ancient
state of those empires. But rich and civilised nations can always
exchange to a much greater value with one another than with savages
and barbarians. Europe, however, has hitherto derived much less
advantage from its commerce with the East Indies than from that with
America. The Portuguese monopolized the East India trade to themselves
for about a century, and it was only indirectly and through them
that the other nations of Europe could either send out or receive
any goods from that country. When the Dutch, in the beginning of the
last century, began to encroach upon them, they vested their whole
East India commerce in an exclusive company. The English, French,
Swedes, and Danes have all followed their example, so that no great
nation in Europe has ever yet had the benefit of a free commerce to
the East Indies. No other reason need be assigned why it has never
been so advantageous as the trade to America, which, between almost
every nation of Europe and its own colonies, is free to all its
subjects. The exclusive privileges of those East India companies,
their great riches, the great favour and protection which these have
procured them from their respective governments, have excited much
envy against them. This envy has frequently represented their trade as
altogether pernicious, on account of the great quantities of silver
which it every year exports from the countries from which it is
carried on. The parties concerned have replied that their trade, by
this continual exportation of silver, might indeed tend to
impoverish Europe in general, but not the particular country from
which it was carried on; because, 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
objection and the reply are founded in the popular notion which I have
been just now examining. It is therefore unnecessary to say anything
further about either. By the annual exportation of silver to the
East Indies, plate is probably somewhat dearer in Europe than it
otherwise might have been; and coined silver probably purchases a
larger quantity both of labour and commodities. The former of these
two effects is a very small loss, the latter a very small advantage;
both too insignificant to deserve any part of the public attention.
The trade to the East Indies, by opening a market to the commodities
of Europe, or, what comes nearly to the same thing, to the gold and
silver which is purchased with those commodities, must necessarily
tend to increase the annual production of European commodities, and
consequently the real wealth and revenue of Europe. That it has
hitherto increased them so little is probably owing to the
restraints which it everywhere labours under.

    I thought it necessary, though at the hazard of being tedious,
to examine at full length this popular notion that wealth consists
in money, or in gold and silver. Money in common language, as I have
already observed, frequently signifies wealth, and this ambiguity of
expression has rendered this popular notion so familiar to us that
even they who are convinced of its absurdity are very apt to forget
their own principles, and in the course of their reasonings to take it
for granted as a certain and undeniable truth. Some of the best
English writers upon commerce set out with observing that the wealth
of a country consists, not in its gold and silver only, but in its
lands, houses, and consumable goods of all different kinds. In the
course of their reasonings, however, the lands, houses, and consumable
goods seem to slip out of their memory, and the strain of their
argument frequently supposes that all wealth consists in gold and
silver, and that to multiply those metals is the great object of
national industry and commerce.

    The two principles being established, however, that wealth
consisted in gold and silver, and that those metals could be brought
into a country which had no mines only by the balance of trade, or
by exporting to a greater value than it imported, it necessarily
became the great object of political economy to diminish as much as
possible the importation of foreign goods for home consumption, and to
increase as much as possible the exportation of the produce of
domestic industry. Its two great engines for enriching the country,
therefore, were restraints upon importation, and encouragements to
exportation.

    The restraints upon importation were of two kinds.

    First, restraints upon the importation of such foreign goods for
home consumption as could be produced at home, from whatever country
they were imported.

    Secondly, restraints upon the importation of goods of almost all
kinds from those particular countries with which the balance of
trade was supposed to be disadvantageous.

    Those different restraints consisted sometimes in high duties, and
sometimes in absolute prohibitions.

    Exportation was encouraged sometimes by drawbacks, sometimes by
bounties, sometimes by advantageous treaties of commerce with
foreign states, and sometimes by the establishment of colonies in
distant countries.

    Drawbacks were given upon two different occasions. When the home
manufactures were subject to any duty or excise, 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
sometimes given back upon such exportation.

    Bounties were given for the encouragement either of some beginning
manufactures, or of such sorts of industry of other kinds as
supposed to deserve particular favour.

    By advantageous treaties of commerce, particular privileges were
procured in some foreign state for the goods and merchants of the
country, beyond what were granted to those other countries.

    By established establishment of colonies in distant countries, not
only particular privileges, but a monopoly was frequently procured for
the goods and merchants of the country which established them.

    The two sorts of restraints upon importation above-mentioned,
together with these four encouragements to exportation, constitute the
six principal means by which the commercial system proposes to
increase the quantity of gold and silver in any country by turning the
balance of trade in its favour. I shall consider each of them in a
particular chapter, and without taking much further notice of their
supposed tendency to bring money into the country, I shall examine
chiefly what are likely to be the effects of each of them upon the
annual produce of its industry. According as they tend either to
increase or diminish the value of this annual produce, they must
evidently tend either to increase or diminish the real wealth and
revenue of the country.

                            CHAPTER II

     Of Restraints upon the Importation from Foreign Countries

             of such Goods as can be produced at Home

    BY restraining, either by high duties or by absolute prohibitions,
the importation of such goods from foreign countries as can be
produced at home, the monopoly of the home market is more or less
secured to the domestic industry employed in producing them. Thus
the prohibition of importing either live cattle or salt provisions
from foreign countries secures to the graziers of Great Britain the
monopoly of the home market for butcher's 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 importation of foreign woollens is equally
favourable to the woollen manufacturers. The silk manufacture,
though altogether employed upon foreign materials, has lately obtained
the same advantage. The linen manufacture has not yet obtained it, but
is making great strides towards it. Many other sorts of
manufacturers have, in the same manner, obtained in Great Britain,
either altogether or very nearly, a monopoly against their countrymen.
The variety of goods of which the importation into Great Britain is
prohibited, either absolutely, or under certain circumstances, greatly
exceeds what can easily be suspected by those who are not well
acquainted with the laws of the customs.

    That this monopoly of the home market frequently gives great
encouragement to that particular species of industry which enjoys
it, and frequently turns towards that employment a greater share of
both the labour and stock of the society than would otherwise have
gone to it, cannot be doubted. But whether it tends either to increase
the general industry of the society, or to give it the most
advantageous direction, is not, perhaps, altogether so evident.

    The general industry of the society never can exceed what the
capital of the society can employ. As the number of workmen that can
be kept in employment by any particular person must bear a certain
proportion to his capital, so the number of those that can be
continually employed by all the members of a great society must bear a
certain proportion to the whole capital of that society, and never can
exceed that proportion. No regulation of commerce can increase the
quantity of industry in any society beyond what its capital can
maintain. It can only divert a part of it into a direction into
which it might not otherwise have gone; and it is by no means
certain that this artificial direction is likely to be more
advantageous to the society than that into which it would have gone of
its own accord.

    Every individual is continually exerting himself to find out the
most advantageous employment for whatever capital he can command. It
is his own advantage, indeed, and not that of the society, which he
has in view. But the study of his own advantage naturally, or rather
necessarily, leads him to prefer that employment which is most
advantageous to the society.

    First, every individual endeavours to employ his capital as near
home as he can, and consequently as much as he can in the support of
domestic industry; provided always that he can thereby obtain the
ordinary, or not a great deal less than the ordinary profits of stock.

    Thus, upon equal or nearly equal profits, every wholesale merchant
naturally prefers the home trade to the foreign trade of
consumption, and the foreign trade of consumption to the carrying
trade. In the home trade his capital is never so long out of his sight
as it frequently is in the foreign trade of consumption. He can know
better the character and situation of the persons whom he trusts,
and if he should happen to be deceived, he knows better the laws of
the country from which he must seek redress. 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 necessarily brought home,
or placed under his own immediate view and command. The capital
which an Amsterdam merchant employs in carrying corn from Konigsberg
to Lisbon, and fruit and wine from Lisbon to Konigsberg, must
generally be the one half of it at Konigsberg and the other half at
Lisbon. No part of it need ever come to Amsterdam. The natural
residence of such a merchant should either be at Konigsberg or Lisbon,
and it can only be some very particular circumstances which can make
him prefer the residence of Amsterdam. The uneasiness, however,
which he feels at being separated so far from his capital generally
determines him to bring part both of the Konigsberg goods which he
destines for the market of Lisbon, and of the Lisbon goods which he
destines for that of Konigsberg, to Amsterdam: and though this
necessarily subjects him to a double charge of loading and
unloading, as well as to the payment of some duties and customs, yet
for the sake of having some part of his capital always under his own
view and command, he willingly submits to this extraordinary charge;
and it is in this manner that every country which has any considerable
share of the carrying trade becomes always the emporium, or general
market, for the goods of all the different countries whose trade it
carries on. The merchant, in order to save a second loading and
unloading, endeavours always to sell in the home market as much of the
goods of all those different countries as he can, and thus, so far
as he can, to convert his carrying trade into a foreign trade of
consumption. A merchant, in the same manner, who is engaged in the
foreign trade of consumption, when he collects goods for foreign
markets, will always be glad, upon equal or nearly equal profits, to
sell as great a part of them at home as he can. He saves himself the
risk and trouble of exportation, when, so far as he can, he thus
converts his foreign trade of consumption into a home trade. Home is
in this manner the centre, if I may say so, round which the capitals
of the inhabitants of every country are continually circulating, and
towards which they are always tending, though by particular causes
they may sometimes be driven off and repelled from it towards more
distant employments. But a capital employed in the home trade, it
has already been shown, necessarily puts into motion a greater
quantity of domestic industry, 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 consumption: and one employed
in the foreign trade of consumption has the same 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 greatest support to domestic industry, and to give revenue and
employment to the greatest number of people of his own country.

    Secondly, every individual who employs his capital in the
support of domestic industry, necessarily endeavours so to direct that
industry that its produce may be of the greatest possible value.

    The produce of industry is what it adds to the subject or
materials upon which it is employed. In proportion as the value of
this produce is great or small, so will likewise be the profits of the
employer. But it is only for the sake of profit that any man employs a
capital in the support of industry; and he will always, therefore,
endeavour to employ it in the support of that industry of which the
produce is likely to be of the greatest value, or to exchange for
the greatest quantity either of money or of other goods.

    But the annual revenue of every society is always precisely
equal to the exchangeable value of the whole annual produce of its
industry, or rather is precisely the same thing with that exchangeable
value. As every individual, therefore, endeavours as much as he can
both to employ his capital in the support of domestic industry, and so
to direct that industry that its produce may be of the greatest value;
every individual necessarily labours to render the annual revenue of
the society as great as he can. He generally, indeed, neither
intends to promote the public interest, nor knows how much he is
promoting it. By preferring the support of domestic to that of foreign
industry, he intends only his own security; and by directing that
industry in such a manner as its produce may be of the greatest value,
he intends only his own gain, and he is in this, as in many other
cases, led by an invisible hand to promote an end which was no part of
his intention. Nor is it always the worse for the society that it
was no part of it. By pursuing his own interest he frequently promotes
that of the society more effectually than when he really intends to
promote it. I have never known much good done by those who affected to
trade for the public good. It is an affectation, indeed, not very
common among merchants, and very few words need be employed in
dissuading them from it.

    What is the species of domestic industry which his capital can
employ, and of which the produce is likely to be of the greatest
value, every individual, it is evident, can, in his local situation,
judge much better than any statesman or lawgiver can do for him. The
statesman who should attempt to direct private people in what manner
they ought to employ their capitals would not only load himself with a
most unnecessary attention, but assume an authority which could safely
be trusted, not only to no single person, but to no council or
senate whatever, and which would nowhere be so dangerous as in the
hands of a man who had folly and presumption enough to fancy himself
fit to exercise it.

    To give the monopoly of the home market to the produce of domestic
industry, in any particular art or manufacture, is in some measure
to direct private people in what manner they ought to employ their
capitals, and must, in almost all cases, be either a useless or a
hurtful regulation. If the produce of domestic can be brought there as
cheap as that of foreign industry, the regulation is evidently
useless. If it cannot, it must generally be hurtful. It is the maxim
of every prudent master of a family never to attempt to make at home
what it will cost him more to make than to buy. The tailor does not
attempt to make his own shoes, but buys them of the shoemaker. The
shoemaker does not attempt to make his own clothes, but employs a
tailor. The farmer attempts to make neither the one nor the other, but
employs those different artificers. All of them find it for their
interest to employ their whole industry in a way in which they have
some advantage over their neighbours, and to purchase with a part of
its produce, or what is the same thing, with the price of a part of
it, whatever else they have occasion for.

    What is prudence in the conduct of every private family can scarce
be folly in that of a great kingdom. If a foreign country can supply
us with a commodity cheaper than we ourselves can make it, better
buy it of them with some part of the produce of our own industry
employed in a way in which we have some advantage. The general
industry of the country, being always in proportion to the capital
which employs it, will not thereby be diminished, no more than that of
the above-mentioned artificers; but only left to find out the way in
which it can be employed with the greatest advantage. It is
certainly not employed to the greatest advantage when it is thus
directed towards an object which it can buy cheaper than it can
make. The value of its annual produce is certainly more or less
diminished when it is thus turned away from producing commodities
evidently of more value than the commodity which it is directed to
produce. According to the supposition, that commodity could be
purchased from foreign countries cheaper than it can be made at
home. It could, therefore, have been purchased with a part only of the
commodities, or, what is the same thing, with a part only of the price
of the commodities, which the industry employed by an equal capital
would have produced at home, had it been left to follow its natural
course. The industry of the country, therefore, is thus turned away
from a more to a less advantageous employment, and the exchangeable
value of its annual produce, instead of being increased, according
to the intention of the lawgiver, must necessarily be diminished by
every such regulation.

    By means of such regulations, indeed, a particular manufacture may
sometimes be acquired sooner than it could have been otherwise, and
after a certain time may be made at home as cheap or cheaper than in
the foreign country. But though the industry of the society may be
thus carried with advantage into a particular channel sooner than it
could have been otherwise, it will by no means follow that the sum
total, either of its industry, or of its revenue, can ever be
augmented by any such regulation. The industry of the society can
augment only in proportion as its capital augments, and its capital
can augment only in proportion to what can be gradually saved out of
its revenue. But the immediate effect of every such regulation is to
diminish its revenue, and what diminishes its revenue is certainly not
very likely to augment its capital faster than it would have augmented
of its own accord had both capital and industry been left to find
out their natural employments.

    Though for want of such regulations the society should never
acquire the proposed manufacture, it would not, upon that account,
necessarily be the poorer in any one period of its duration. In
every period of its duration its whole capital and industry might
still have been employed, though upon different objects, in the manner
that was most advantageous at the time. In every period its revenue
might have been the greatest which its capital could afford, and
both capital and revenue might have been augmented with the greatest
possible rapidity.

    The natural advantages which one country has over another in
producing particular commodities are sometimes so great that it is
acknowledged by all the world to be in vain to struggle with them.
By means of glasses, hotbeds, and hot walls, very good grapes can be
raised in Scotland, and very good wine too can be made of them at
about thirty times the expense for which at least equally good can
be brought from foreign countries. Would it be a reasonable law to
prohibit the importation of all foreign wines merely to encourage
the making of claret and burgundy in Scotland? But if there would be a
manifest absurdity in turning towards any employment thirty times more
of the capital and industry of the country than would be necessary
to purchase from foreign countries an equal quantity of the
commodities wanted, there must be an absurdity, though not
altogether so glaring, yet exactly of the same kind, in turning
towards any such 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 respect of no consequence.
As long as the one country has those 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 advantage only, which
one artificer has over his neighbour, who exercises another trade; and
yet they both find it more advantageous to buy of one another than
to make what does not belong to their particular trades.

    Merchants and manufacturers are the people who derive the greatest
advantage from this monopoly of the home market. The prohibition of
the importation of foreign cattle, and of salt provisions, together
with the high duties upon foreign corn, which in times of moderate
plenty amount to a prohibition, are not near so advantageous to the
graziers and farmers of Great Britain as other regulations of the same
kind are to its merchants and manufacturers. Manufactures, those of
the finer kind especially, are more easily transported from one
country to another than corn or cattle. It is in the fetching and
carrying manufactures, accordingly, that foreign trade is chiefly
employed. In manufactures, a very small advantage will enable
foreigners to undersell our own workmen, even in the home market. It
will require a very great one to enable them to do so in the rude
produce of the soil. If the free importation of foreign manufactures
were permitted, several of the home manufactures would probably
suffer, and some of them, perhaps, go to ruin altogether, and a
considerable part of the stock and industry at present employed in
them would be forced to find out some other employment. But the freest
importation of the rude produce of the soil could have no such
effect upon the agriculture of the country.

    If the importation of foreign cattle, for example, were made
ever so free, so few could be imported that the grazing trade of Great
Britain could be little affected by it. Live cattle are, perhaps,
the only commodity of which the transportation is more expensive by
sea than by land. By land they carry themselves to market. By sea, not
only the cattle, but their food and their water too, must be carried
at no small expense and inconveniency. The short sea between Ireland
and Great Britain, indeed, renders the importation of Irish cattle
more easy. But though the free importation of them, which was lately
permitted only for a limited time, were rendered perpetual, it could
have no considerable effect upon the interest of the graziers of Great
Britain. Those parts of Great Britain which border upon the Irish
Sea are all grazing countries. Irish cattle could never be imported
for their use, but must be driven through those very extensive
countries, at no small expense and inconveniency, before they could
arrive at their proper market. Fat cattle could not be driven so
far. Lean cattle, therefore, only could be imported, and such
importation could interfere, not with the interest of the feeding or
fattening countries, to which, by reducing the price of lean cattle,
it would rather be advantageous, but with that of the breeding
countries only. The small number of Irish cattle imported since
their importation was permitted, together with the good price at which
lean cattle still continue to sell, seem to demonstrate that even
the breeding countries of Great Britain are never likely to be much
affected by the free importation of Irish cattle. The common people of
Ireland, indeed, are said to have sometimes opposed with violence
the exportation of their cattle. But if the exporters had found any
great advantage in continuing the trade, they could easily, when the
law was on their side, have conquered this mobbish opposition.

    Feeding and fattening countries, besides, must 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 against improvement. 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,
accordingly, is said to follow this maxim at present. The mountains of
Scotland, Wales, and Northumberland, indeed, are countries not capable
of much improvement, and seem destined by nature to be the breeding
countries of Great Britain. The freest importation of foreign cattle
could have no other effect than to hinder those breeding countries
from taking advantage of the increasing population and improvement
of the rest of the kingdom, from raising their price to an
exorbitant height, and from laying a real tax upon all the more
improved and cultivated parts of the country.

    The freest importation of salt provisions, in the same manner,
could have as little effect upon the interest of the graziers of Great
Britain as that of live cattle. Salt provisions are not only a very
bulky commodity, but when compared with fresh meat, they are a
commodity both of worse quality, and as they cost more labour and
expense, of higher price. They could never, therefore, come into
competition with the fresh meat, though they might with the salt
provisions of the country. They might be used for victualling ships
for distant voyages and such like uses, but could never make any
considerable part of the food of the people. The small quantity of
salt provisions imported from Ireland since their importation was
rendered free is an experimental proof that our graziers have
nothing to apprehend from it. It does not appear that the price of
butcher's meat has ever been sensibly affected by it.

    Even the free importation of foreign corn could very little affect
the interest 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 fourpence. The small quantity
of foreign corn imported even in times of the greatest scarcity may
satisfy our farmers that they can have nothing to fear from the freest
importation. The average quantity imported, one year with another,
amounts only, according to the very well informed author of the tracts
upon the corn trade, to twenty-three thousand seven hundred and
twenty-eight quarters of all sorts of grain, and does not exceed the
five hundred and seventy-first part of the annual consumption. But
as the bounty upon corn occasions a greater exportation in years of
plenty, so it must of consequence occasion a greater importation in
years of scarcity than in the actual state of tillage would
otherwise take place. By means of it the plenty of one year does not
compensate the scarcity of another, and as the average quantity
exported is necessarily augmented by it, so must likewise, in the
actual state of tillage, the average quantity imported. If there
were no bounty, as less corn would be exported, so it is probable
that, one year with another, less would be imported than at present.
The corn-merchants, the fetchers and carriers of corn between Great
Britain and foreign countries would have much less employment, and
might suffer considerably; but the country gentlemen and farmers could
suffer very little. It is in the corn merchants accordingly, rather
than in the country gentlemen and farmers, that I have observed the
greatest anxiety for the renewal and continuation of the bounty.

    Country gentlemen and farmers are, to their great honour, of all
people, the least subject to the wretched spirit of monopoly. The
undertaker of a great manufactory is sometimes alarmed if another work
of the same kind is established within twenty miles of him. The
Dutch undertaker of the woollen manufacture at Abbeville stipulated
that no work of the same kind should be established within thirty
leagues of that city. Farmers and country gentlemen, on the
contrary, are generally disposed rather to promote than to obstruct
the cultivation and improvement of their neighbours' farms and
estates. They have no secrets such as those of the greater part of
manufacturers, but are generally rather fond of communicating to their
neighbours and of extending as far as possible any new practice
which they have found to be advantageous. Pius Questus, says old Cato,
stabilissimusque, minimeque invidiosus; minimeque male cogitantes
sunt, qui in eo studio occupati sunt. Country gentlemen and farmers,
dispersed in different parts of the country, cannot so easily
combine as merchants and manufacturers, who, being collected into
towns, and accustomed to that exclusive corporation spirit which
prevails in them, naturally endeavour to obtain against all their
countrymen the same exclusive privilege which they generally possess
against the inhabitants of their respective towns. They accordingly
seem to have been the original inventors of those restraints upon
the importation of foreign goods which secure to them the monopoly
of the home market. It was probably in imitation of them, and to put
themselves upon a level with those who, they found, were disposed to
oppress them, that the country gentlemen and farmers of Great
Britain in so far forgot the generosity which is natural to their
station as to demand the exclusive privilege of supplying their
countrymen with corn and butcher's meat. They did not perhaps take
time to consider how much less their interest could be affected by the
freedom of trade than that of the people whose example they followed.

    To prohibit by a perpetual law the importation of foreign corn and
cattle is in reality to enact that the population and industry of
the country shall at no time exceed what the rude produce of its own
soil can maintain.

    There seem, however, to be two cases in which it will generally be
advantageous to lay some burden upon foreign for the encouragement
of domestic industry.

    The first is, when some particular sort of industry is necessary
for the defence of the country. The defence of Great Britain, for
example, depends very much upon the number of its sailors and
shipping. The Act of Navigation, therefore, very properly endeavours
to give the sailors and shipping of Great Britain the monopoly of
the trade of their own country in some cases by absolute
prohibitions and in others by heavy burdens upon the shipping of
foreign countries. The following are the principal dispositions of
this Act.

    First, all ships, of which the owners and three-fourths of the
mariners are not British subjects, are prohibited, upon pain of
forfeiting ship and cargo, from trading to the British settlements and
plantations, or from being employed in the coasting trade of Great
Britain.

    Secondly, a great variety of the most bulky articles of
importation can be brought into Great Britain only, either in such
ships as are above described, or in ships of the country where those
goods are purchased, and of which the owners, masters, and
three-fourths of the mariners are of that particular country; and when
imported even in ships of this latter kind, they are subject to double
aliens' duty. If imported in ships of any other country, the penalty
is forfeiture of ship and goods. When this act was made, the Dutch
were, what they still are, the great carriers of Europe, and by this
regulation 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 most bulky articles of importation
are prohibited from being imported, even in British ships, from any
country but that in which they are produced, under pains of forfeiting
ship and cargo. This regulation, too, was probably intended against
the Dutch. Holland was then, as now, the great emporium for all
European goods, and by this regulation British ships were hindered
from loading in Holland the goods of any other European country.

    Fourthly, salt fish of all kinds, whale-fins, whale-bone, oil, and
blubber, not caught by and cured on board British vessels, when
imported into Great Britain, are subjected to double aliens' duty. The
Dutch, as they are they the principal, were then the only fishers in
Europe that attempted to supply foreign nations with fish. By this
regulation, a very heavy burden was laid upon their supplying Great
Britain.

    When the Act of Navigation was made, though England and Holland
were not actually at war, the most violent animosity subsisted between
the two nations. It had begun during the government of the Long
Parliament, which first framed this act, and it broke out soon after
in the Dutch wars during that of the Protector and of Charles the
Second. It is not impossible, therefore, that some of the
regulations of this famous act may have proceeded from national
animosity. They are as wise, however, as if they had all been dictated
by the most deliberate wisdom. National animosity at that particular
time aimed at the very same object which the most deliberate wisdom
would have recommended, the diminution of the naval power of
Holland, the only naval power which could endanger the security of
England.

    The Act of Navigation is not favourable to foreign commerce, or to
the growth of that opulence which can arise from it. The interest 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 sell as dear as possible. But it will be most
likely to buy cheap, when by the most perfect freedom of trade it
encourages all nations to bring to it the goods which it has
occasion to purchase; and, for the same reason, it will be most likely
to sell dear, when its markets are thus filled with the greatest
number of buyers. The Act of Navigation, it is true, lays no burden
upon foreign ships that come to export the produce of British
industry. Even the ancient aliens' duty, which used to be paid upon
all goods exported as well as imported, has, by several subsequent
acts, been taken off from the greater part of the articles of
exportation. But if foreigners, either by prohibitions or high duties,
are hindered from coming to sell, they cannot always afford to come to
buy; because coming without a cargo, they must lose the freight from
their own country to Great Britain. By diminishing the number of
sellers, therefore, we necessarily diminish that of buyers, and are
thus likely not only to buy foreign goods dearer, but to sell our
own cheaper, than if there was a more perfect freedom of trade. As
defence, however it is of much more importance than opulence, the
Act of Navigation is, perhaps, the wisest of all the commercial
regulations of England.

    The second case, in which it will generally be advantageous to lay
some burden upon foreign for the encouragement of domestic industry
is, when some tax is imposed at home upon the produce of the latter.
In this case, it seems reasonable that an equal tax should be
imposed upon the like produce of the former. This would not give the
monopoly of the home market to domestic industry, nor turn towards a
particular employment a greater share of the stock 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 away by the
tax into a less natural direction, and would leave the competition
between foreign and domestic industry, after the tax, as nearly as
possible upon the same footing as before it. In Great Britain, when
any such tax is laid upon the produce of domestic industry, it is
usual at the same time, in order to stop the clamorous complaints of
our merchants and manufacturers that they will be undersold at home,
to lay a much heavier duty upon the importation of all foreign goods
of the same kind.

    This second limitation of the freedom of trade according to some
people should, upon some occasions, be extended much farther than to
the precise foreign commodities which could come into competition with
those which had been taxed at home. When the necessaries of life
have been taxed any country, it becomes proper, they pretend, to tax
not only the like necessaries of life imported from other countries,
but all sorts of foreign goods which can come into competition with
anything that is the produce of domestic industry. Subsistence, they
say, becomes necessarily dearer in consequence of such taxes; and
the price of labour must always rise with the price of the
labourers' subsistence. Every commodity, therefore, which is the
produce of domestic industry, though not immediately taxed itself,
becomes dearer in consequence of such taxes, because the labour
which produces it becomes so. Such taxes, therefore, are really
equivalent, they say, to a tax upon every particular commodity
produced at home. In order to put domestic upon the same footing
with foreign industry, therefore, it becomes necessary, they think, to
lay some duty upon every foreign commodity equal to this enhancement
of the price of the home commodities with which it can come into
competition.

    Whether taxes upon the necessaries of life, such as those in Great
Britain upon soap, salt, leather, candles, etc., necessarily raise the
price of labour, and consequently that of all other commodities, I
shall consider hereafter when I come to treat of taxes. Supposing,
however, in the meantime, that they have this effect, and they have it
undoubtedly, this general enhancement of the price of all commodities,
in consequence of that of labour, is a case which differs in the two
following respects from that of a particular commodity of which the
price was enhanced by a particular tax immediately imposed upon it.

    First, it might always be known with great exactness how far the
price of such a commodity could be enhanced by such a tax: but how far
the general enhancement of the price of labour might affect that of
every different commodity about which labour was employed could
never be known with any tolerable exactness. It would be impossible,
therefore, to proportion with any tolerable exactness the tax upon
every foreign to this enhancement of the price of every home
commodity.

    Secondly, taxes upon the necessaries of life have nearly the
same effect upon the circumstances of the people as a poor soil and
a bad climate. Provisions are thereby rendered dearer in the same
manner as if it required extraordinary labour and expense to raise
them. As in the natural scarcity arising from soil and climate it
would be absurd to direct the people in what manner they ought to
employ their capitals and industry, so is it likewise in the
artificial scarcity arising from such taxes. To be left to
accommodate, as well as they could, their industry to their situation,
and to find out those employments in which, notwithstanding their
unfavourable circumstances, they might have some advantage either in
the home or in the foreign market, is what in both cases would
evidently be most for their advantage. To lay a new tax upon them,
because they are already overburdened with taxes, and because they
already pay too dear for the necessaries of life, to make them
likewise pay too dear for the greater part of other commodities, is
certainly a most absurd way of making amends.

    Such taxes, when they have grown up to a certain height, are a
curse equal to the barrenness of the earth and the inclemency of the
heavens; and yet it is in the richest and most industrious countries
that they have been most generally imposed. No other countries could
support so great a disorder. As the strongest bodies only can live and
enjoy health under an unwholesome regimen, so the nations only that in
every sort of industry have the greatest natural and acquired
advantages can subsist and prosper under such taxes. Holland is the
country in Europe in which they abound most, and which from peculiar
circumstances continues to prosper, not by means of them, as has
been most absurdly supposed, but in spite of them.

    As there are two cases in which it will generally be
advantageous to lay some burden upon foreign for the encouragement
of domestic industry, so there are two others in which it may
sometimes be a matter of deliberation; in the one, how far it is
proper to continue the free importation of certain foreign goods;
and in the other, how far, or in what manner, it may be proper to
restore that free importation after it has been for some time
interrupted.

    The case in which it may sometimes be a matter of deliberation how
far it is prope