Title: An Inquiry into the Nature and Causes of the Wealth of Nations
Author: Smith, Adam, 1723-1790
Language: English
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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 conveniencies 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 conveniencies 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 conveniencies of life,
for himself, and 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
civilized 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 conveniencies 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; and 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
down-fall 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 shew, 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 inconveniencies
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 I. 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 improvements 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 a 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 carried 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 in 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 workmen, 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 increases very much the 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 manufactures 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 loose 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, whenever 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 invention 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 shewn very pretty machines, which were the inventions of such
workmen, in order to facilitate and quicken their own particular part
of the work. In the first fire engines {this was the current designation
for steam 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
play-fellows. 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 any thing, but to observe
every thing, 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, improve 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 daylabourer in
a civilized 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 feller of
the timber, the burner of the charcoal to be made use of in the
smelting-house, the brickmaker, the bricklayer, the workmen who attend
the furnace, the millwright, 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 conveniencies; 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 civilized 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 an 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 masters
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 civilized society he
stands at all times in need of the co-operation 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 shew 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 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 moveable 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 clothing 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 of 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 in to the world, and for the first six or
eight years of their existence, they were, perhaps, very much alike,
and neither their parents nor play-fellows 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 grey-hound, or a grey-hound 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
and 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
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 burthen, 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 the 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 civilized, 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 ship-building, 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 farm-houses in the country,
nearly in the same manner as the Rhine and the Maese 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 uncivilized 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 all times 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 a 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 ale-house.

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 any thing 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 re-united 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
(Plin. Hist Nat. lib. 33, cap. 3), 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 rude bars, therefore,
performed at this time the function of money.

The use of metals in this rude state was attended with two very
considerable inconveniences; 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 woollen 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 the 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 penny-weight 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 fourpence". 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 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 civilized 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 any thing; scarce any thing 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 shew,

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 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 OF 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, conveniencies, 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 every thing, what every thing really costs to the man
who wants to acquire it, is the toil and trouble of acquiring it. What
every thing 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 every thing 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 often 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 produce.
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 three-pence 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 cost
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 lay down 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 conveniencies 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 price 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 shew 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 shew 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 shew 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 mean time, 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 the 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 conveniencies 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 conveniencies
of life than an ounce can do at London. An ounce at London will always
give him the command of double the quantity of all 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 or 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 happen 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 (Pliny, lib. xxxiii. cap. 3),
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 seven-pence
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 cold 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 £ 3:17:10½ 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 £3:18s.
sometimes £ 3:19s, and very frequently £4 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 £ 3:17:7 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;
though the price of the greater part of other commodities being
influenced by so many other causes, the rise in the value of either
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 its 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 or 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 coin 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 eight pence,
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 PART 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 hour's 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 of labour 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
case 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 profit
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 time 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 miller 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 flax-dresser, 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 fisherman, 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 shew
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 wares 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 makes an 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 employs 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 all 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 that 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 civilized 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 was 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 shew 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 shew
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
sells 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
maybe 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 can not 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 or 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 woollen 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 overstocked 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 policy, 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 policy 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 no 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 policy 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 shew 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 shew 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 recompence 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 tenfold, or that a day's
labour could produce ten times the quantity of work which it had done
originally; but that in a particular employment they had been improved
only to double, or that a day's labour could produce only twice the
quantity of work which it had done before. In exchanging the produce of
a day's labour in the 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 recompence 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,
authorises, 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, or 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 combination 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 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 able-bodied 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 many 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 to the payment of wages. These funds are of two
kinds, first, the 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 earned in 1773, before the
commencement of the late disturbances, 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 burden, 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 off 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 the 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 the 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
work-houses 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 services, 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 maybe 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 winch 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 butchers' 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. Eighteen pence 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 fifteen pence. 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 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 a-foot, 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
a-foot.

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
eight pence 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 enquired very carefully into this subject {See his scheme for
the maintenance of the poor, in Burn's History of the Poor Laws.}. In
1688, Mr Gregory King, whose skill in political arithmetic is so much
extolled by Dr 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 workman,
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 shew that law can never
regulate them properly, though it has often pretended to do so.

The real recompence of labour, the real quantity of the necessaries and
conveniencies 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 manufactories of
both linen and woollen cloth furnish the labourers with cheaper and
better clothing; and those in the manufactories 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 an 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 recompence, 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 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 any 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 born 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 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 be yond it. But
in civilized 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 freeman is managed by the freeman 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 cause and effect 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, bring 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 times 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 be well 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 stock 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 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 shew 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 manufactories 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 or great scarcity, the Scotch manufactures 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.

Through 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 conveniencies 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 quantities 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 one against 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 prices 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 employments. 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 me 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 he given for it. Accordingly, 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, cap. 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
{See Denisart, Article Taux des Interests, tom. iii, p.13}. 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 three and a third 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 Abbé 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 chuse
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 I 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 borrow 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
that 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
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 business 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 percent.
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 Jess 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 vessel 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 M. 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, mere charity or friendship could be
the only motives 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 recompence 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 the
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 flax dressers 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 alike 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
imagination 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 I. 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 day-light, 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 shew 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. {See Idyllium xxi.}. 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
any thing 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
us 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 it is quite otherwise, as I shall
endeavour to shew 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
every body. 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 recompence, 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 manufactures, a journeyman maybe 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 or 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 recompence of their skill,
as the compensation for the inconstancy of their employment.

A house-carpenter seems to exercise rather a nicer and a 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 their half-a-crown
a-day, though eighteen pence 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 according 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
entrusted. 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 the 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 employments to which he is educated, is very different in different
occupations. In the greatest 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 as at least twenty to
one if he ever 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 of that of more than twenty
others, who are never likely to make any thing 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, is, 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, it
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 recompence,
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 recompence 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 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 any thing could be made
honourably by them.

The over-weening 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
over-valued, and the chance of loss is by most men under-valued, 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 hopes 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 shares 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 the 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 sail, 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 up on 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
any thing 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 recompence 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 hair-breadth 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 often
afraid to send her son to school at a sea-port 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 the 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 or disagreeableness, 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 sea-port 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 recompence 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 must be 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 butchers' 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 butchers' 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 butchers' 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
butchers' 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 lie 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 shilling's and three pounds a-month.
In a decaying manufacture, on the contrary, many workmen, rather than
quit their own 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 place 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 at 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
cottars or cottagers, though they were more frequent some years ago
than they are now. They are a sort of out-servants of the landlords
and farmers. The usual reward which they receive from their master 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 sixteen pence 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 recompence to any body, 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 seasons. The daily or weekly
recompence 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
recompence, 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 pleasure in representing both as
wonderfully low.

The produce of such labour comes frequently cheaper to market than
would otherwise be 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 seven-pence 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 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 living by one employment, and, at the
same time, deriving some little advantage from another, occur chiefly
in pour 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 so
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 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 every thing that
is contained under the same roof. In France, Scotland, and many other
parts of Europe, it frequently means no more than a single storey. 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 storeys to lodgers. He expects
to maintain his family by his trade, and not by his lodgers. Whereas
at Paris and Edinburgh, 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 II.--Inequalities occasioned by the Policy of Europe.

Such are the inequalities in the whole of the 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 term
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 my person to
become a master, and to have himself apprentices 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 coach-maker 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 wheel-wright, though he has never
served an apprenticeship to a coachmaker, may either himself make or
employ journeymen 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 butchers' meat upon any lawful day of the week. Three years is,
in Scotland, 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 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
lawgiver, 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 enquire whether the workman had served a seven years
apprenticeship.

The institution of long apprenticeships has no tendency to form 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 recompence
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 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 his 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 {See Madox Firma Burgi p. 26 etc.}. 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 that 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
recompence, 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 consist 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 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 incorporation 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 skill 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 none 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
stocks accumulated in them come 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 my 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 over flowings of the stock originally
accumulated in the towns, I shall endeavour to shew 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 recompence 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. {See the Statute of Labourers, 25, Ed. III.}
The wages of both these labourer's, 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 hand 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 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 circumstances 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
recompence. 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 recompence, 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 recompence.

Before the invention of the art of printing, the only employment by
which a man of letters could make any thing by his talents, was that
of a public or private teacher, or by communicating to other people the
curious and 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 recompence, 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 £ 33:6:8 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 would 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 £ 3335:6:8. 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. Georgias 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 inconvenient 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 hands; 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 workman 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 every body; but as it is not much cultivated
through the greater part of the country, it can afford no general
resource to the work men of other decaying manufactures, who, wherever
the statute of apprenticeship takes place, have no other choice, but
dither 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, chuse 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 43d 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
church-wardens, 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 church-wardens 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 sometime's 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 church-wardens 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
church-wardens 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 mean time; 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 purposes 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 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 church-wardens 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 some times
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 ill-contrived 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 regulating the price of provisions
and ether 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 clerk of the market, which does not exist there. This
defect was not remedied till the third 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 in 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 at 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
improvements. 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 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 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 the land. If it is not more,
though the commodity may be brought to market, it can afford no rent
to the landlord. Whether the price is, or is 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 I.--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 that 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 the 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 we 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 profit,
as has already been shewn, 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 every body 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 corn field 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, costs 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 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, at present, is 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 neighbour hood 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-inclosed 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 inclosed.
The present high rent of inclosed land in Scotland seems owing to
the scarcity of inclosure, and will probably last no longer than that
scarcity. The advantage of inclosure 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 of 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 eight-pence 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 twentyfour or twenty-five
shillings the hundred weight 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 eight-pence 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 3d. 4/5ths 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
4½d. 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 4½d.
the pound; and the coarse pieces in general to be from seven farthings
to 2½d. and 2¾d.; 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 in the
time of Prince Henry.

During the first twelve years of the last century, the average price of
the best wheat at the Windsor market was £ 1:18:3½d. 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 £
2:1:9½d.

In the first twelve 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 acorn 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 inclosed 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 inclosing 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 inclosure than mat 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 inclosure 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 shew, 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 these 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 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 their 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 generally sells
for three piastres the quintal, about thirteen shillings and sixpence
of our money, as we are told by Mr Poivre {Voyages d'un Philosophe.}, 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
muscovada 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
America. It is commonly said that a sugar planter expects that the rum
and the 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 towns, 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 most 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 bringing 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 shewn
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 {Douglas's
Summary, vol. ii. p. 379, 373.} (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 cuitivated 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 shew, 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 coal-heavers 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 II.--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 these 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, everyman, 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
any body 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 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 or 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 conveniencies 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 its 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 its 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 the
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 incumbrance, of no value to
the landlord, who would gladly give it to any body 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 cuitivated, 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 the 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 a 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 price 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 silver
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 Rev. 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 every body. 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 paving
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 dutchy. In waste and uninclosed lands, any person who discovers
a tin mine may mark out its limits to a certain extent, which is called
bounding a mine. The bounder becomes the real proprietor of the mine,
and may either work it 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 rental. 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 of 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 work-houses
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
any body 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 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, 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
any thing but the actual scarcity or plenty of these 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 the 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 yielded the
largest and finest stones. The other, it seems, were to the proprietor
not worth the working.

As the prices, 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 of 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
proprietors 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 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 land 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 stones,
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 any body 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 III.--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 the 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 materials 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 free-stone 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 improvements, 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 civilized 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 that 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 seems to have taken place in the European market, and
nearly in the same order, too, in which I have here set them down.

Digression 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, 1st, 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; 2dly,
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; 3dly, 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 lie 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 III. 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, some time kings
of England. It is probably, therefore, as old at least as the time of
his grandfather, Henry II. 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 shilling 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 of 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 penny worth
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 Dupré de St Maur, and by the elegant author of the Essay on the
Policy 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 mean time, 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 one, and 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 from
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 prices 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
it 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 conclude 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 other.

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 {See his Preface
to Anderson's Diplomata Scotiae.} 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 praescripta, habendo respectum ad pretium bladi."--"You shall
judge of the remaining cases, according to what is above written, having
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 any thing that had
ever 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 any thing 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 Dupré de St Maur, and with
that which I have been endeavouring to explain. Bishop Fleetwood and Mr
Dupré 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 some what 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 states 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 improved state of cultivation,
being more or less counterbalanced by the continual 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 civilized 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 wealth, 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 every thing; and
in countries where labour is equally well rewarded, 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 any where
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 recompence 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 recompence of labour is much
lower: Scotland, though advancing to greater wealth, advances 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
recompence 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 scarce of
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 my 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 the 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
every body; 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 £ 2:1:6 9/13. 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 £ 1:16:10
2/3. And from this sum, neglecting likewise the fraction, and deducting
a ninth, or 4s. 1 1/9d., 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 £ 1:12:8 8/9, 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 £ 2:10s.; 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 £ 1:19:6, 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 £ 2:11:0 1/3, which is only 1s. 0 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 season is 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 £ 4:5s., and, in
1649, to have been £ 4, the quarter of nine bushels. The excess of
those two years above £ 2:10s. (the average price of the sixteen years
preceding 1637 is £ 3:5s., 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, {Lowndes's Essay on the Silver Coin, 68.} which is
fifteen pence 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 a 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 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 £ 2:0:6 10/32, which is about ten shillings and sixpence,
or more than five-and-twenty percent. cheaper than it had been during
the sixty-four last years of the last century; and about nine shillings
and sixpence 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 £ 1:5:2, 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 II. It was to take place, therefore, till
wheat was so high as fortyeight shillings the quarter; that is, twenty
shillings, or 5-7ths 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 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 Dupré 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 £ 1:13:9 4/5, 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 £
1:6:8.

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 8,029,156 quarters, one bushel. The bounty paid for this amounted
to £ 1,514,962:17:4 1/2. 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 £ 324,176:10:6. {See
Tracts on the Corn Trade, Tract 3,} 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 variations 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 recompence
of labour, it has already been shewn, 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 late 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 the works.

The tax of the king of Spain was reduced to a fifth of the registered
silver in 1504 {Solorzano, vol, ii.}, 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 every thing abounded in France, but that every thing
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 continual 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 civilized
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 those 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 of 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 began 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 over land 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, has been almost
continually augmenting. The increasing consumptions 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 a
somewhat 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 navigations 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 these accounts, the precious metals are 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 continued 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 {Postscript to the Universal Merchant p. 15 and
16. This postscript was not printed till 1756, three years after the
publication of the book, which has never had a second edition. The
postscript is, therefore, to be found in few copies; it corrects several
errors in the book.}, 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 49,940 pounds weight. The silver, at sixty two
shillings the pound troy, amounts to £ 3,413,431:10s. sterling. The
gold, at forty-four guineas and a half the pound troy, amounts to
£ 2,333,446:14s. sterling. Both together amount to £ 5,746,878:4s.
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 3/5 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 £ 3,825,000
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 to 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 twenty millions
sterling. On account of what may have been smuggled, however, we may
safely, he says, add to this sum an eighth more, or £ 250,000 sterling,
so that the whole will amount to £ 2,250,000 sterling. According to this
account, therefore, the whole annual importation of the precious metals
into both Spain and Portugal, mounts to about £ 6,075,000 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 a 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 their's; 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 this 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 mines 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 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
proportionally 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' 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 three score 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 three score lambs for one ox; and it would be
just as absurd to infer, because an ounce of gold will commonly purchase
from fourteen or 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 poultry, than 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 watch-cases, 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
{See Ruddiman's Preface to Anderson's Diplomata, etc. Scotiae.}, 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
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
becoming 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 farther 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 shew 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 shew 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 a-piece, 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 sometime 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 {Lib. X, c. 29.} bought a white nightingale, as
a present for the empress Agrippina, at the price of six thousand
sestertii, equal to about fifty pounds of our present money; and that
Asinius Celer {Lib. IX, c. 17.} 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 £ 66:13: 4d. would
purchase in the present times; and Asinius Celer gave for a surmullet
the command of a quantity equal to what £ 88:17: 9d. 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 produce, 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 any thing 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
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, rises first 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. It the price of the cattle, therefore, is not sufficient
to pay for the produce of improved and cuitivated 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
farm-yard. 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 any thing but some miserable pasture,
just sufficient to keep alive a few straggling, half-starved cattle; the
farm, though much overstocked 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 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 lands 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 the
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 every thing 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 a 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. {Kalm's Travels,
vol 1, pp. 343, 344.} 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 me 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 stable 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 any thing, 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
buckwheat 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
improvements, 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, cabbages, 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 either 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 both of 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 butter milk, supply those animals with a part of their food,
and they find the rest in the neighbouring fields, without doing any
sensible damage to any body. 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 is 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. Through 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 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 {See Smith's Memoirs of Wool, vol. i c. 5, 6, 7. also vol. ii.},
containing, at the rate of twenty-pence 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 price 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 recompence 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 another 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
smaller 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; thirtysix sheep skins of two years old at
nine shillings; sixteen calf 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. 4/5ths 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 of 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.
Through 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 seal skins,
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 he, 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 the 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 in 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 ton 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 sought 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 maybe 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 any thing 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 insure. 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, that 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 price 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
civilized 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 civilized
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 Dupré 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 recompence 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
anti 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, 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 material
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, than
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
cutlers 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 1463, 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 fourteen-pence the pair, equal
to about eight-and-twenty pence of our present money. But fourteen-pence
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 conveniencies 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 the 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 rent 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 conveniencies, 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 civilized 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 consequence 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 shewn, 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 connexion
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 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 operation 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 connexion 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 only serve 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.



# PRICES OF WHEAT


  Year    Prices/Quarter  Average of different   Average prices of
          in each year     prices in one year    each year in money
                                                    of 1776

            £   s   d         £   s   d             £   s   d
  1202      0  12   0                               1  16   0
  1205      0  12   0
            0  13   4         0  13   5             2   0   3
            0  15   0
  1223      0  12   0                               1  16   0
  1237      0   3   4                               0  10   0
  1243      0   2   0                               0   6   0
  1244      0   2   0                               0   6   0
  1246      0  16   0                               2   8   0
  1247      0  13   5                               2   0   0
  1257      1   4   0                               3  12   0
  1258      1   0   0
            0  15   0         0  17   0             2  11   0
            0  16   0
  1270      4  16   0
            6   8   0         5  12   0            16  16   0
  1286      0   2   8
            0  16   0         0   9   4             1   8   0
                                          Total    35   9   3
                                          Average   2  19   1¼

  1287      0   3   4                               0  10   0
  1288      0   0   8
            0   1   0
            0   1   4
            0   1   6
            0   1   8         0   3   0¼            0   9   1¾
            0   2   0
            0   3   4
            0   9   4
  1289      0  12   0
            0   6   0
            0   2   0         0  10   1½            1  10   4½
            0  10   8
            1   0   0
  1290      0  16   0                               2   8   0
  1294      0  16   0                               2   8   0
  1302      0   4   0                               0  12   0
  1309      0   7   2                               1   1   6
  1315      1   0   0                               3   0   0
  1316      1   0   0
            1  10   0         1  10   6             4  11   6
            1  12   0
            2   0   0
  1317      2   4   0
            0  14   0
            2  13   0         1  19   6             5  18   6
            4   0   0
            0   6   8
  1336      0   2   0                               0   6   0
  1338      0   3   4                               0  10   0
                                          Total    23   4  11¼
                                          Average   1  18   8

  1339      0   9   0                               1   7   0
  1349      0   2   0                               0   5   2
  1359      1   6   8                               3   2   2
  1361      0   2   0                               0   4   8
  1363      0  15   0                               1  15   0
  1369      1   0   0
            1   4   0         1   2   0             2   9   4
  1379      0   4   0                               0   9   4
  1387      0   2   0                               0   4   8
  1390      0  13   4
            0  14   0         0  14   5             1  13   7
            0  16   0
  1401      0  16   0                               1  17   6
  1407      0   4   4¾
            0   3   4         0   3  10             0   8  10
  1416      0  16   0                               1  12   0
                                         Total     15   9   4
                                         Average    1   5   9½

  1423      0   8   0                                       0
  1425      0   4   0                                       0
  1434      1   6   8                                       4
  1435      0   5   4                                       8
  1439      1   0   0
            1   6   8         1   3   4             2   6   8
  1440      1   4   0                               2   8   0
  1444      0   4   4         0   4   2             0   4   8
            0   4   0
  1445      0   4   6                               0   9   0
  1447      0   8   0                               0  16   0
  1448      0   6   8                               0  13   4
  1449      0   5   0                               0  10   0
  1451      0   8   0                               0  16   0
                                         Total     12  15   4
                                         Average    1   1   3¹/³

  1453      0   5   4                               0  10   8
  1455      0   1   2                               0   2   4
  1457      0   7   8                               1  15   4
  1459      0   5   0                               0  10   0
  1460      0   8   0                               0  16   0
  1463      0   2   0         0   1  10             0   3   8
            0   1   8
  1464      0   6   8                               0  10   0
  1486      1   4   0                               1  17   0
  1491      0  14   8                               1   2   0
  1494      0   4   0                               0   6   0
  1495      0   3   4                               0   5   0
  1497      1   0   0                               1  11   0
                                         Total      8   9   0
                                         Average    0  14   1

  1499      0   4   0                               0   6   0
  1504      0   5   8                               0   8   6
  1521      1   0   0                               1  10   0
  1551      0   8   0                               0   8   0
  1553      0   8   0                               0   8   0
  1554      0   8   0                               0   8   0
  1555      0   8   0                               0   8   0
  1556      0   8   0                               0   8   0
  1557      0   8   0
            0   4   0         0  17   8½            0  17   8½
            0   5   0
            2  13   4
  1558      0   8   0                               0   8   0
  1559      0   8   0                               0   8   0
  1560      0   8   0                               0   8   0
                                         Total      6   0   2½
                                         Average    0  10   0½

  1561      0   8   0                               0   8   0
  1562      0   8   0                               0   8   0
  1574      2  16   0
            1   4   0         2   0   0             2   0   0
  1587      3   4   0                               3   4   0
  1594      2  16   0                               2  16   0
  1595      2  13   0                               2  13   0
  1596      4   0   0                               4   0   0
  1597      5   4   0
            4   0   0         4  12   0             4  12   0
  1598      2  16   8                               2  16   8
  1599      1  19   2                               1  19   8
  1600      1  17   8                               1  17   8
  1601      1  14  10                               1  14  10
                                         Total     28   9   4
                                         Average    2   7   5½


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 THESE TWO MARKET DAYS.

            £   s   d
  1595      2   0   0
  1596      2   8   0
  1597      3   9   6
  1598      2  16   8
  1599      1  19   2
  1600      1  17   8
  1601      1  14  10
  1602      1   9   4
  1603      1  15   4
  1604      1  10   8
  1605      1  15  10
  1606      1  13   0
  1607      1  16   8
  1608      2  16   8
  1609      2  10   0
  1610      1  15  10
  1611      1  18   8
  1612      2   2   4
  1613      2   8   8
  1614      2   1   8½
  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   6½
    Average 2   1   6¾

  1621      1  10    4
  1622      2  18    8
  1623      2  12    0
  1624      2   8    0
  1625      2  12    0
  1626      2   9    4
  1627      1  16    0
  1628      1   8    0
  1629      2   2    0
  1630      2  15    8
  1631      3   8    0
  1632      2  13    4
  1633      2  18    0
  1634      2  16    0
  1635      2  16    0
  1636      2  16    8
        16)40   0    0
    Average 2  10    0

  1637      2  13    0
  1638      2  17    4
  1639      2   4   10
  1640      2   4    8
  1641      2   8    0
  1646      2   8    0
  1647      3  13    0
  1648      4   5    0
  1649      4   0    0
  1650      3  16    8
  1651      3  13    4
  1652      2   9    6
  1653      1  15    6
  1654      1   6    0
  1655      1  13    4
  1656      2   3    0
  1657      2   6    8
  1658      3   5    0
  1659      3   6    0
  1660      2  16    6
  1661      3  10    0
  1662      3  14    0
  1663      2  17    0
  1664      2   0    6
  1665      2   9    4
  1666      1  16    0
  1667      1  16    0
  1668      2   0    0
  1669      2   4    4
  1670      2   1    8
  1671      2   2    0
  1672      2   1    0
  1673      2   6    8
  1674      3   8    8
  1675      3   4    8
  1676      1  18    0
  1677      2   2    0
  1678      2  19    0
  1679      3   0    0
  1680      2   5    0
  1681      2   6    8
  1682      2   4    0
  1683      2   0    0
  1684      2   4    0
  1685      2   6    8
  1686      1  14    0
  1687      1   5    2
  1688      2   6    0
  1689      1  10    0
  1690      1  14    8
  1691      1  14    0
  1692      2   6    8
  1693      3   7    8
  1694      3   4    0
  1695      2  13    0
  1696      3  11    0
  1697      3   0    0
  1698      3   8    4
  1699      3   4    0
  1700      2   0    0
      60) 153   1    8
   Average  2  11    0¹/³

  1701      1  17    8
  1702      1   9    6
  1703      1  16    0
  1704      2   6    6
  1705      1  10    0
  1706      1   6    0
  1707      1   8    6
  1708      2   1    6
  1709      3  18    6
  1710      3  18    0
  1711      2  14    0
  1712      2   6    4
  1713      2  11    0
  1714      2  10    4
  1715      2   3    0
  1716      2   8    0
  1717      2   5    8
  1718      1  18   10
  1719      1  15    0
  1720      1  17    0
  1721      1  17    6
  1722      1  16    0
  1723      1  14    8
  1724      1  17    0
  1725      2   8    6
  1726      2   6    0
  1727      2   2    0
  1728      2  14    6
  1729      2   6   10
  1730      1  16    6
  1731      1  12   10                     1  12   10
  1732      1   6    8                     1   6    8
  1733      1   8    4                     1   8    4
  1734      1  18   10                     1  18   10
  1735      2   3    0                     2   3    0
  1736      2   0    4                     2   0    4
  1737      1  18    0                     1  18    0
  1738      1  15    6                     1  15    6
  1739      1  18    6                     1  18    6
  1740      2  10    8                     2  10    8
                                      10) 18  12    8
                                           1  17    3½

  1741      2   6    8                     2   6    8
  1742      1  14    0                     1  14    0
  1743      1   4   10                     1   4   10
  1744      1   4   10                     1   4   10
  1745      1   7    6                     1   7    6
  1746      1  19    0                     1  19    0
  1747      1  14   10                     1  14   10
  1748      1  17    0                     1  17    0
  1749      1  17    0                     1  17    0
  1750      1  12    6                     1  12    6
                                      10) 16  18    2
                                           1  13    9¾

  1751      1  18    6
  1752      2   1   10
  1753      2   4    8
  1754      1  13    8
  1755      1  14   10
  1756      2   5    3
  1757      3   0    0
  1758      2  10    0
  1759      1  19   10
  1760      1  16    6
  1761      1  10    3
  1762      1  19    0
  1763      2   0    9
  1764      2   6    9
      64) 129  13    6
   Average  2   0    6¾



BOOK II. 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
every thing for himself, it is not necessary that any stock should be
accumulated, or stored up before-hand, 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 before-hand 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 before-hand.
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 capital 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 shew 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 maybe 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 changes, 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 such like 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
slit-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 bought 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 brought 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 anyone 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
dwelling-house of the proprietor, ceases from that moment to serve in
the function of a capital, or to afford any revenue to its owner. A
dwelling-house, 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, make 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 the proprietor who lets them for a
rent, but to the person who possesses them, and pays that rent for them;
such as shops, warehouses, work-houses, farm-houses, 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, inclosing, 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
and 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 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 brick-makers, etc.

Fourthly, and lastly, of the work which is made up and completed, but
which is still in the hands of the merchant and 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 maybe 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 depend 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.

Lands, mines, and fisheries, require all both a fixed and 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 he 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 chuses 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 a 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 by staying with him, or by going from
him. In the one case it is a fixed, in the other it is a circulating
capital. A man must be perfectly crazy, who, where there is a tolerable
security, does not employ all the stock which he commands, whether it
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 or 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 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 these 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 those three parts;
every part of it which goes neither to rent nor to wages, being
necessarily profit to some body.

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 neat 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 neat 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 neat rent.

The gross revenue of all the inhabitants of a great country comprehends
the whole annual produce of their land and labour; the neat 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 neat revenue.

The whole expense of maintaining the fixed capital must evidently be
excluded from the neat 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, conveniencies, 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 neat 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 neat rent is necessarily
augmented.

But though the whole expense of maintaining the fixed capital is thus
necessarily excluded from the neat 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 not employed
in maintaining the former, goes all to the latter, and makes a part of
the neat revenue of the society. The maintenance of those three parts of
the circulating capital, therefore, withdraws no portion of the annual
produce from the neat 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 neat 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 neat
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
neat 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 neat 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 neat 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 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 neat 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 neat revenue of any society, we
must always, from the 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 introductive powers of labour, is an improvement of
the neat 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 neat 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 neat 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 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 into 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 a 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 in addition to the neat 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
neat 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 maybe
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 recompence 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 the 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 all kinds are commonly made. Silver very seldom appears,
except in the change of a twenty shilling 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, and the other, called the
Royal Bank, by royal charter in 1727. Whether the trade, either of
Scotland in general, or of 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 £411,117: 10: 9
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 call 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 piece-meal, 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
my 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 for 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 farther 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 (inconsequence 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 £3:17:10 1/2 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
this 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 commission, some 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 over-trading 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 over-trading, 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 piece-meal
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 in 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 hanks 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 his 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-houses, his work-houses, 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, inclosing, manuring, and ploughing waste and
uncultivated fields; in building farmhouses, 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 insure, 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 over-traded 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
over-trading. 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 over-trading, is said to have been
carried on to a very great extent. From England it was brought into
Scotland, where, in proportion to the very limited commerce, and to the
very moderate capital of the country, it was 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 any
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 indorsed, that is, written
their names upon the back of the bill; each indorser 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 indorsers 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 draught. This commission
being repeated more than six times in the year, whatever money A might
raise by this expedient might 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 awakening, 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 method described in the text was by no means either the most common
or the most expensive one in which those adventurers sometimes raised
money by circulation. It frequently happened, that A in Edinburgh would
enable B in London to pay the first bill of exchange, by drawing, a few
days before it became due, a second bill at three months date upon the
same B in London. This bill, being payable to his own order, A sold in
Edinburgh at par; and with its contents purchased bills upon London,
payable at sight to the order of B, to whom he sent them by the post.
Towards the end of the late war, the exchange between Edinburgh and
London was frequently three per cent. against Edinburgh, and those bills
at sight must frequently have cost A that premium. This transaction,
therefore, being repeated at least four times in the year, and being
loaded with a commission of at least one half per cent. upon each
repetition, must at that period have cost A, at least, fourteen per
cent. in the year. At other times A would enable to discharge the first
bill of exchange, by drawing, a few days before it became due, a second
bill at two months date, not upon B, but upon some third person, C, for
example, in London. This other bill was made payable to the order of
B, who, upon its being accepted by C, discounted it with some banker in
London; and A enabled C to discharge it, by drawing, a few day's before
it became due, a third bill likewise at two months date, sometimes
upon his first correspondent B, and sometimes upon some fourth or fifth
person, D or E, for example. This third bill was made payable to the
order of C, who, as soon as it was accepted, discounted it in the same
manner with some banker in London. Such operations being repeated at
least six times in the year, and being loaded with a commission of at
least one half per cent. upon each repetition, together with the legal
interest of five per cent. this method of raising money, in the same
manner as that described in the text, must have cost A something more
than eight per cent. By saving, however, the exchange between Edinburgh
and London, it was less expensive than that mentioned in the foregoing
part of this note; but then it required an established credit with more
houses than one in London, an advantage which many of these adventurers
could not always find it easy to procure.}

The bills which 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 banker 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 ran 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 two same 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 a 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 these
projectors by degrees to have recourse, either to other bankers, or to
other methods of raising money: so as 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
draught 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 as 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 stopt, 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 a 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 at 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 draughts on 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 of 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 front 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 redrawers 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 money 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 £1,200,000 for an annuity of £100,000,
or for £ 96,000 a-year, interest at the rate of eight per cent. and
£4,000 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
ingraftment of £1,001,171:10s. Its whole capital stock, therefore,
amounted at this time to £2,201,171: 10s. This ingraftment 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. {James Postlethwaite's History of the Public Revenue,
p.301.} During the great re-coinage 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 £400,000; making in all the sum of £1,600,000,
which it had advanced upon its original annuity of £96,000 interest,
and £4,000 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 £ 1,775,027: 17s: 10½d. at six per cent. interest, and
was at the same time allowed to take in subscriptions for doubling
its capital. In 1703, therefore, the capital of the bank amounted
to £4,402,343; and it had advanced to government the sum of
£3,375,027:17:10½d.

By a call of fifteen per cent. in 1709, there was paid in, and made
stock, £ 656,204:1:9d.; and by another of ten per cent. in 1710,
£501,448:12:11d. In consequence of those two calls, therefore, the bank
capital amounted to £ 5,559,995:14:8d.

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 £5,375,027:17 10d. In pursuance of the
8th George I. c.21, the bank purchased of the South-sea company,
stock to the amount of £4,000,000: 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 £ 3,400,000. At this time,
therefore, the bank had advanced to the public £ 9,375,027 17s. 10½d.;
and its capital stock amounted only to £ 8,959,995:14:8d. 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 £11,686,800, and its
divided capital had been raised by different calls and subscriptions to
£ 10,780,000. 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 £110,000, without
interest or re-payment. 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 these
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 Hamburgh and Holland. Upon one
occasion, in 1763, it is said to have advanced for this purpose, in
one week, about £1,600,000, 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, enable 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
unskilfulness 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 £10 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 20s. 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 £5, or even for 20s.
would be rejected by every body, 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 £5. 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 £10 value; £5 being, in most part of the
kingdom, a sum which, though it will purchase, perhaps, little more
than half the quantity of goods, is as much considered, and is as seldom
spent all at once, as £10 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 will
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 respect 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 or 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 anytime
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 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 mean time, 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
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 these 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
6d. 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 20s.
value.

The paper currencies of North America consisted, not in bank notes
payable to the bearer on demand, but in a 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, £100, payable fifteen years hence,
for example, in a country where interest is at six per cent., is worth
little more than £40 ready money. To oblige a creditor, therefore, to
accept of this as full payment for a debt of £100, 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 a
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 £100 sterling was
occasionally considered as equivalent, in some of the colonies, to £130,
and in others to so great a sum as £1100 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 5s. sterling to pass in the
colonies for 6s:3d., and afterwards for 6s:8d. A pound, colony currency,
therefore, even when that currency was gold and silver, was more than
thirty per cent. below the value of £1 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, the 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
and 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. {Some French authors of great learning and
ingenuity have used those words in a different sense. In the last
chapter of the fourth book, I shall endeavour to shew that their sense
is an improper one.} 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 or 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 of 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
noblest and most useful, 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
it to be replaced to him with a profit. He employs it, therefore,
in maintaining productive hands 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 puppet-show, 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 bond-men, whose persons
and effects were equally his property. Those who were not bond-men 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, Compeigne, and Fontainbleau. If you except
Rouen and Bourdeaux, there is little trade or industry in any of the
parliament towns of France; and the inferior ranks of people, being
chiefly 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 Bourdeaux 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. Bourdeaux is, in the same manner, the entrepot of the
wines which grow upon the banks of the Garronne, 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's 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 winch 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 of the ensuing year,
but like the founder of a public work-house 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 were not compensated by the
frugality of others, the conduct of every prodigal, by feeding the
idle with the bread of the industrious, would tend 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, can not 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 belong 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 instance, 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 occasion. 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 befal 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
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 is 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 a 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, 1701, 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 £145,000,000 of debt, over and
above all the other extraordinary annual expense which they occasioned;
so that the whole cannot be computed at less than £200,000,000. 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 years 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
characteristic 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 the subject 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 mere
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 I. 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 hundred weight
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 any body without an equivalent. The latter species of
expense, therefore, especially when directed towards frivolous objects,
the little ornaments of dress and furniture, jewels, trinkets, gew-gaws,
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 mean time, 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 shop-keepers 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 shop-keepers 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
readily 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 £1000, with which W immediately
purchases of B £1000 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 £1000 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 of 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, assigned to the three borrowers, W, X, and 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 borrower, of a certain considerable
portion of the annual produce, upon condition that the burrower in
return shall, during the continuance of the loan, annually assign to the
lender a small 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 justle 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 Lawe, 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 so plausible, has
been so fully exposed by Mr Hume, that it is, perhaps, unnecessary
to say any thing 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 £100 are in those countries now of no more value than £50 were then,
£10 must now be of no more value than £5 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 never been altered.
By altering the rate, on the contrary, the proportion between those two
values is necessarily altered. If £100 now are worth no more than
£50 were then, £5 now can be worth no more than £2:10s. 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.

An 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, 5s. 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 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 or 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 EMPLOYMENTS 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 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 those 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 alehouses, to give the must 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 alehouses.

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 profit 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 capital's 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 masters' 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 owner's 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 every thing
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 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 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 here, 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
a 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 great 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 or 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 coarser 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 unable 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,
maybe 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 hack 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 of 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 never 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
round-about 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 hemp and flax 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 repurchasing 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 inconveniencies 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 round-about 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 maybe 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.

Each of those different branches of trade, however, is not only
advantageous, but necessary and unavoidable, when the course of things,
without any constraint or violence, naturally introduces it.

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 acquired 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 96,000 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 14,000. If the remaining 82,000, 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 82,000 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 encouragement, seem to have
mistaken the effect and symptom for the cause. Holland, in proportion
to the extent of the land and the number of it's 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 in 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 the 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 one 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 manufactures, 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 III. OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS

CHAPTER I. OF THE NATURAL PROGRESS OF OPULENCE.

The great commerce of every civilized 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 it 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 save,
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 bow 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 the 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 pleasure 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 of
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 farther.

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 the 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 moveables, 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 all 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
moveables. 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 in his possession as
the proprietor of 100,000. 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 device, 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 fidei commisses, 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 in 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 south-western 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 both by 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 5000 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 proprietors, 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 sovereigns, always jealous of
the great lords, gradually encouraged their villains to make upon their
authority, and which seem, at least, 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 call 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 landlord, 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 their 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 Dr Blackstone to have been rather bailiffs of the landlord
than farmers, properly so called, were probably of the same kind.

To this species of tenantry 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 ousted of their leases 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 a 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 a 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 a 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, by 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 twentyseven, 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 all 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
disadvantage. The farmer, compared with the proprietor, is as a merchant
who trades with burrowed 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 fanning, 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, regraters, 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
seemed 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 Doomsday-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. {see Brady's Historical Treatise of Cities and Boroughs, p.
3. etc.}

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 winch arose out of their own town, they becoming jointly and
severally answerable for the whole rent. {See Madox, Firma Burgi, p.
18; also History of the Exchequer, chap. 10, sect. v, p. 223, first
edition.} 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. {See Madox, Firma Burgi.
See also Pfeffel in the Remarkable events under Frederick II. and his
Successors of the House of Suabia.}

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 their 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 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 own
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. {See Madox.} Philip I. 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. {See Pfeffel.}

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
or 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 and 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 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 conveniencies 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 civilized 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 befel 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 civilized 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 or 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.
{See Sandi Istoria civile de Vinezia, part 2 vol. i, page 247 and 256.}
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 to 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 grow 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 conveniencies 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 she land had given birth to the
manufacture, so the progress of the manufacture reacts upon the land,
and increases still further it's 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 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. The 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 or 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
manufactures in Europe, the hospitality of the rich and the great, from
the sovereign down to the smallest baron, exceeded every thing 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, 30,000 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 proprietors 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 anyone. No other person 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 Lochaber 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 Argyll, and with out being
so much as a justice of peace, used, notwithstanding, to exercise the
highest criminal jurisdictions 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 £500 a-year, carried, in 1745, 800 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 1000 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 1000 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 £10,000 a-year cannot well employ his revenue in
any other way than in maintaining, perhaps, 1000 families, who are all
of them necessarily at his command. In the present state of Europe, a
man of £10,000 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 a very few, perhaps, not a
tenth, to many not a hundredth, and to some not a thousandth, or 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 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 not 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 along term of years, he is
altogether independent; and his landlord must not expect from him even
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 birth-right, 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 tradesmen 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 any thing 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 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 was 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, 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 for ever 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 required 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 no
nearer to pay the interest of the purchase-money, and a small capital
might be employed in purchasing land as profitable 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 interest 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, although 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, 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 Portual 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 Guicciardini, 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 status 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 always 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 Hanse 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 IV. OF SYSTEMS OF POLITICAL ECONOMY.



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 in gold 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 silver 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 any 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 Gengis 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 moveable goods.
All other moveable 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 by 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 must solid and substantial
part of the moveable 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 those 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 the 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
actions."

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 105 ounces of silver in England
to purchase a bill for 100 ounces of silver in Holland: that 105 ounces
of silver in England, therefore, would be worth only 100 ounces of
silver in Holland, and would purchase only a proportionable quantity of
Dutch goods; but that 100 ounces of silver in Holland, on the
contrary, would be worth 105 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 them selves 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. The 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 Lacedaemon. All the sanguinary laws of the customs
are not able to prevent the importation of the teas of the Dutch and
Gottenburg 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, not withstanding 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.
Over-trading 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 over-trading 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 creditor
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 finds 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 every thing is readily
given in exchange, but which is not always with equal readiness to be
got in exchange for every thing. 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 perishable 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 or 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 of 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, and 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, too, 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 of 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 £90,000,000, including not
only the £75,000,000 of new debt that was contracted, but the additional
2s. 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 £18,000,000. 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 £30,000,000. 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
any body's knowing any thing 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 over-trading in all the ports of Great
Britain; and this again occasioned the usual complaint of the scarcity
of money, which always follows over-trading. 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 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 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 in 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
£19,000,000. 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 £6,000,000 sterling, which, in some years, would
scarce have paid four months 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 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 into a foreign country as
might purchase the pay and provisions of an army would be too great. Few
countries, too, 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 Cossacks in the Ukraine, the famous
ally of Charles XII., are said to have been very great. The French
kings of the Merovingian race had all treasures. When they divided their
kingdom among their different children, they divided their treasures
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 power, 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 bad 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 the 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 civilized 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 of 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 any thing 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 encouragement 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 were
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 of other countries.

By the 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 farther 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 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 woollen 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 manufactures 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 can never 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 the 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 Koningsberg to Lisbon, and fruit and wine from Lisbon to
Koningsberg, must generally be the one half of it at Koningsberg, 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 Koningsberg 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 Koningsberg goods which he
destines for the market of Lisbon, and of the Lisbon goods which
he destines for that of Koningsberg, 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 maybe 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 abovementioned
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 anyone 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, hot-beds, 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 drove through those very extensive countries, at no small expense
and inconveniency, before they could arrive at their proper market. Fat
cattle could not be drove so far. Lean cattle, therefore, could only 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 23,728 quarters of all sorts of grain, and does not exceed the
five hundredth and seventy-one 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, suit 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 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 A