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Title: An Inquiry into the Nature and Causes of the Wealth of Nations
Author: Smith, Adam
Language: English
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An Inquiry into the Nature and Causes of the Wealth of Nations



by Adam Smith



Contents


 INTRODUCTION AND PLAN OF THE WORK.

 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.
 CHAPTER II. OF THE PRINCIPLE WHICH GIVES OCCASION TO THE
DIVISION OF LABOUR.
 CHAPTER III. THAT THE DIVISION OF LABOUR IS LIMITED BY
THE EXTENT OF THE MARKET.
 CHAPTER IV. OF THE ORIGIN AND USE OF MONEY.
 CHAPTER V. OF THE REAL AND NOMINAL PRICE OF
COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY.
 CHAPTER VI. OF THE COMPONENT PART OF THE PRICE OF COMMODITIES.
 CHAPTER VII. OF THE NATURAL AND MARKET PRICE OF COMMODITIES.
 CHAPTER VIII. OF THE WAGES OF LABOUR.
 CHAPTER IX. OF THE PROFITS OF STOCK.
 CHAPTER X. OF WAGES AND PROFIT IN THE DIFFERENT
EMPLOYMENTS OF LABOUR AND STOCK.
 CHAPTER XI. OF THE RENT OF LAND.

 BOOK II. OF THE NATURE, ACCUMULATION, AND
EMPLOYMENT OF STOCK.
 CHAPTER I. OF THE DIVISION OF STOCK.
 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.
 CHAPTER III. OF THE ACCUMULATION OF CAPITAL, OR OF
PRODUCTIVE AND UNPRODUCTIVE LABOUR.
 CHAPTER IV. OF STOCK LENT AT INTEREST.
 CHAPTER V. OF THE DIFFERENT EMPLOYMENTS OF
        CAPITALS.

 BOOK III. OF THE DIFFERENT PROGRESS OF OPULENCE IN
DIFFERENT NATIONS
 CHAPTER I. OF THE NATURAL PROGRESS OF OPULENCE.
 CHAPTER II. OF THE DISCOURAGEMENT OF AGRICULTURE IN THE
ANCIENT STATE OF EUROPE, AFTER THE FALL OF THE ROMAN EMPIRE.
 CHAPTER III. OF THE RISE AND PROGRESS OF CITIES AND
TOWNS, AFTER THE FALL OF THE ROMAN EMPIRE.
 CHAPTER IV. HOW THE COMMERCE OF TOWNS CONTRIBUTED TO THE
IMPROVEMENT OF THE COUNTRY.

 BOOK IV. OF SYSTEMS OF POLITICAL ECONOMY.
 CHAPTER I. OF THE PRINCIPLE OF THE COMMERCIAL OR
MERCANTILE SYSTEM.
 CHAPTER II. OF RESTRAINTS UPON IMPORTATION FROM FOREIGN
COUNTRIES OF SUCH GOODS AS CAN BE PRODUCED AT HOME.
 CHAPTER III. OF THE EXTRAORDINARY RESTRAINTS UPON THE
IMPORTATION OF GOODS OF ALMOST ALL KINDS, FROM THOSE COUNTRIES WITH WHICH THE
BALANCE IS SUPPOSED TO BE DISADVANTAGEOUS.
 CHAPTER IV. OF DRAWBACKS.
 CHAPTER V. OF BOUNTIES.
 CHAPTER VI. OF TREATIES OF COMMERCE.
 CHAPTER VII. OF COLONIES.
 CHAPTER VIII. CONCLUSION OF THE MERCANTILE SYSTEM.
 CHAPTER IX. OF THE AGRICULTURAL SYSTEMS, OR OF THOSE
SYSTEMS OF POLITICAL ECONOMY WHICH REPRESENT THE PRODUCE OF LAND, AS EITHER
THE SOLE OR THE PRINCIPAL SOURCE OF THE REVENUE AND WEALTH OF EVERY COUNTRY.

 BOOK V. OF THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH
 CHAPTER I. OF THE EXPENSES OF THE SOVEREIGN OR COMMONWEALTH.
 CHAPTER II. OF THE SOURCES OF THE GENERAL OR PUBLIC
REVENUE OF THE SOCIETY.
 CHAPTER III. OF PUBLIC DEBTS.



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 lose a good deal of time in passing from
      his loom to the field, and from the field to his loom. When the two trades
      can be carried on in the same workhouse, the loss of time is, no doubt,
      much less. It is, even in this case, however, very considerable. A man
      commonly saunters a little in turning his hand from one sort of employment
      to another. When he first begins the new work, he is seldom very keen and
      hearty; his mind, as they say, does not go to it, and for some time he
      rather trifles than applies to good purpose. The habit of sauntering, and
      of indolent careless application, which is naturally, or rather
      necessarily, acquired by every country workman who is obliged to change
      his work and his tools every half hour, and to apply his hand in twenty
      different ways almost every day of his life, renders him almost always
      slothful and lazy, and incapable of any vigorous application, even on the
      most pressing occasions. Independent, therefore, of his deficiency in
      point of dexterity, this cause alone must always reduce considerably the
      quantity of work which he is capable of performing.
    
      Thirdly, and lastly, everybody must be sensible how much labour is
      facilitated and abridged by the application of proper machinery. It is
      unnecessary to give any example. I shall only observe, therefore, that the
      invention of all those machines by which labour is so much facilitated and
      abridged, seems to have been originally owing to the division of labour.
      Men are much more likely to discover easier and readier methods of
      attaining any object, when the whole attention of their minds is directed
      towards that single object, than when it is dissipated among a great
      variety of things. But, in consequence of the division of labour, the
      whole of every man’s attention comes naturally to be directed towards some
      one very simple object. It is naturally to be expected, therefore, that
      some one or other of those who are employed in each particular branch of
      labour should soon find out easier and readier methods of performing their
      own particular work, 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, improves dexterity, and
      saves time. Each individual becomes more expert in his own peculiar
      branch, more work is done upon the whole, and the quantity of science is
      considerably increased by it.
    
      It is the great multiplication of the productions of all the different
      arts, in consequence of the division of labour, which occasions, in a
      well-governed society, that universal opulence which extends itself to the
      lowest ranks of the people. Every workman has a great quantity of his own
      work to dispose of beyond what he himself has occasion for; and every
      other workman being exactly in the same situation, he is enabled to
      exchange a great quantity of his own goods for a great quantity or, what
      comes to the same thing, for the price of a great quantity of theirs. He
      supplies them abundantly with what they have occasion for, and they
      accommodate him as amply with what he has occasion for, and a general
      plenty diffuses itself through all the different ranks of the society.
    
      Observe the accommodation of the most common artificer or 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 so much labour, or so much stock, from being employed about
      it, that the quantity brought to market would soon be no more than
      sufficient to supply the effectual demand. Its market price, therefore,
      would soon rise to the natural price; this at least would be the case
      where there was perfect liberty.
    
      The same statutes of apprenticeship and other corporation laws, indeed,
      which, when a manufacture is in prosperity, enable the workman to raise
      his wages a good deal above their natural rate, sometimes oblige him, when
      it decays, to let them down a good deal below it. As in the one case they
      exclude many people from his employment, so in the other they exclude him
      from many employments. The effect of such regulations, however, is not
      near so durable in sinking the workman’s wages below, as in raising them
      above their natural rate. Their operation in the one way may endure for
      many centuries, but in the other it can last no longer than the lives of
      some of the workmen who were bred to the business in the time of its
      prosperity. When they are gone, the number of those who are afterwards
      educated to the trade will naturally suit itself to the effectual demand.
      The 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 of labour had ever been more than sufficient to
      maintain the labourer, and to enable him to bring up a family, the
      competition of the labourers and the interest of the masters would soon
      reduce them to 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 may be assured that the funds
      destined for the maintenance of the labouring poor are fast decaying. The
      difference between the genius of the British constitution, which protects
      and governs North America, and that of the mercantile company which
      oppresses and domineers in the East Indies, cannot, perhaps, be better
      illustrated than by the different state of those countries.
    
      The liberal reward of labour, therefore, as it is the necessary effect, so
      it is the natural symptom of increasing national wealth. The scanty
      maintenance of the labouring poor, on the other hand, is the natural
      symptom that things are at a stand, and their starving condition, that
      they are going fast backwards.
    
      In Great Britain, the wages of labour seem, in the present times, to be
      evidently more than what is precisely necessary to enable the labourer to
      bring up a family. In order to satisfy ourselves upon this point, it will
      not be necessary to enter into any tedious or doubtful calculation of what
      may be the lowest sum upon which it is possible to do this. There are many
      plain symptoms, that the wages of labour are nowhere in this country
      regulated by this lowest rate, which is consistent with common humanity.
    
      First, in almost every part of Great Britain there is a distinction, even
      in the lowest species of labour, between summer and winter wages. Summer
      wages are always highest. But, on account of the extraordinary expense of
      fuel, the maintenance of a family is most expensive in winter. Wages,
      therefore, being highest when this expense is lowest, it seems evident
      that they are not regulated by what is necessary for this expense, but by
      the quantity and supposed value of the work. A labourer, it may be said,
      indeed, ought to save part of his summer wages, in order to defray his
      winter expense; and that, through the whole year, they do not exceed what
      is necessary to maintain his family through the whole year. A slave,
      however, or one absolutely dependent on us for immediate subsistence,
      would not be treated in this manner. His daily subsistence would be
      proportioned to his daily necessities.
    
      Secondly, the wages of labour do not, in Great Britain, fluctuate with the
      price of provisions. These vary everywhere from year to year, frequently
      from month to month. But in many places, the money price of labour remains
      uniformly the same, sometimes for half a century together. If, in these
      places, therefore, the labouring poor can maintain their families in dear
      years, they must be at their ease in times of moderate plenty, and in
      affluence in those of extraordinary cheapness. The high price of
      provisions during these ten years past, has not, in many parts of the
      kingdom, been accompanied with any sensible rise in the money price of
      labour. It has, indeed, in some; owing, probably, more to the increase of
      the demand for labour, than to that of the price of provisions.
    
      Thirdly, as the price of provisions varies more from year to year than the
      wages of labour, so, on the other hand, the wages of labour vary more from
      place to place than the price of provisions. The prices of bread and
      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 are under any necessity of consuming, is so very small, that
      the increase in their price does not compensate the diminution in that of
      so many other things. The common complaint, that luxury extends itself
      even to the lowest ranks of the people, and that the labouring poor will
      not now be contented with the same food, clothing, and lodging, which
      satisfied them in former times, may convince us that it is not the money
      price of labour only, but its real 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 beyond 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 tallies 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 of
      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.
    
      Though the variations in the price of labour not only do not always
      correspond with those in the price of provisions, but are frequently quite
      opposite, we must not, upon this account, imagine that the price of
      provisions has no influence upon that of labour. The money price of labour
      is necessarily regulated by two circumstances; the demand for labour, and
      the price of the necessaries and 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 are many commodities,
      therefore, which, in consequence of these improvements, come to be
      produced by so much less labour than before, that the increase of its
      price is more than compensated by the diminution of its quantity.
    



CHAPTER IX.
OF THE PROFITS OF STOCK.


    

      The rise and fall in the profits of stock depend upon the same causes with
      the rise and fall in the wages of labour, the increasing or declining
      state of the wealth of the society; but those causes affect the one and
      the other very differently.
    
      The increase of stock, which raises wages, tends to lower profit. When the
      stocks of many rich merchants are turned into the same trade, their mutual
      competition naturally tends to lower its profit; and when there is a like
      increase of stock in all the different trades carried on in the same
      society, the same competition must produce the same effect in them all.
    
      It is not easy, it has already been observed, to ascertain what are the
      average wages of labour, even in a particular place, and at a particular
      time. We can, even in this case, seldom determine more than what are the
      most usual wages. But even this can seldom be done with regard to the
      profits of stock. Profit is so very fluctuating, that the person who
      carries on a particular trade, cannot always tell you himself what is the
      average of his annual profit. It is affected, not only by every variation
      of price in the commodities which he deals in, but by the good or bad
      fortune both of his rivals and of his customers, and by a thousand other
      accidents, to which goods, when carried either by sea or by land, or even
      when stored in a warehouse, are liable. It varies, therefore, not only
      from year to year, but from day to day, and almost from hour to hour. To
      ascertain what is the average profit of all the different trades carried
      on in a great kingdom, must be much more difficult; and to judge of what
      it may have been formerly, or in remote periods of time, with any degree
      of precision, must be altogether impossible.
    
      But though it may be impossible to determine, with any degree of
      precision, what are or were the average profits of stock, either in the
      present or in ancient times, some notion may be formed of them from the
      interest of money. It may be laid down as a maxim, that wherever a great
      deal can be made by the use of money, a great deal will commonly be given
      for the use of it; and that, wherever little can be made by it, less will
      commonly 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 less than before. The market comes to be less
      fully supplied with many different sorts of goods. Their price necessarily
      rises more or less, and yields a greater profit to those who deal in them,
      who can, therefore, afford to borrow at a higher interest. For some time
      after the conclusion of the late war, not only private people of the best
      credit, but some of the greatest companies in London, commonly borrowed at
      five per cent. who, before that, had not been used to pay more than four,
      and four and a half per cent. The great accession both of territory and
      trade by our acquisitions in North America and the West Indies, will
      sufficiently account for this, without supposing any diminution in the
      capital stock of the society. So great an accession of new business to be
      carried on by the old stock, must necessarily have diminished the quantity
      employed in a great number of particular branches, in which the
      competition being less, the profits must have been greater. I shall
      hereafter have occasion to mention the reasons which dispose me to believe
      that the capital stock of Great Britain was not diminished, even by the
      enormous expense of the late war.
    
      The diminution of the capital stock of the society, or of the funds
      destined for the maintenance of industry, however, as it lowers the wages
      of labour, so it raises the profits of stock, and consequently the
      interest of money. By the wages of labour being lowered, the owners of
      what stock remains in the society can bring their goods at less expense to
      market than before; and less stock being employed in supplying the market
      than before, they can sell them dearer. Their goods cost them less, and
      they get more for them. Their profits, therefore, being augmented at both
      ends, can well afford a large interest. The great fortunes so suddenly and
      so easily acquired in Bengal and the other British settlements in the East
      Indies, may satisfy us, that as the wages of labour are very low, so the
      profits of stock are very high in those ruined countries. The interest of
      money is proportionably so. In Bengal, money is frequently lent to the
      farmers at forty, fifty, and sixty per cent. and the succeeding crop is
      mortgaged for the payment. As the profits which can afford such an
      interest must eat up almost the whole rent of the landlord, so such
      enormous usury must in its turn eat up the greater part of those profits.
      Before the fall of the Roman republic, a usury of the same kind seems to
      have been common in the provinces, under the ruinous administration of
      their proconsuls. The virtuous Brutus lent money in Cyprus at
      eight-and-forty per cent. as we learn from the letters of Cicero.
    
      In a country which had acquired that full complement of riches which the
      nature of its soil and climate, and its situation with respect to other
      countries, allowed it to acquire, which could, therefore, advance no
      further, and which was not going backwards, both the wages of labour and
      the profits of stock would probably be very low. In a country fully
      peopled in proportion to what either its territory could maintain, or its
      stock employ, the competition for employment would necessarily be so great
      as to reduce the wages of labour to what was barely sufficient to keep up
      the number of labourers, and the country being already fully peopled, that
      number could never be augmented. In a country fully stocked in proportion
      to all the business it had to transact, as great a quantity of stock would
      be employed in every particular branch as the nature and extent of the
      trade would admit. The competition, therefore, would everywhere be as
      great, and, consequently, the ordinary profit as low as possible.
    
      But, perhaps, no country has ever yet arrived at this degree of opulence.
      China seems to have been long stationary, and had, probably, long ago
      acquired that full complement of riches which is consistent with the
      nature of its laws and institutions. But this complement may be much
      inferior to what, with other laws and institutions, the nature of its
      soil, climate, and situation, might admit of. A country which neglects or
      despises foreign commerce, and which admits the 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 be more than commonly
      profitable, and he quits it when he foresees that its profits are likely
      to return to the level of other trades. His profits and losses, therefore,
      can bear no regular proportion to those of any one established and
      well-known branch of business. A bold adventurer may sometimes acquire a
      considerable fortune by two or three successful speculations, but is just
      as likely to lose one by two or three unsuccessful ones. This trade can be
      carried on nowhere but in great towns. It is only in places of the most
      extensive commerce and correspondence that the intelligence requisite for
      it can be had.
    
      The five circumstances above mentioned, though they occasion considerable
      inequalities in the wages of labour and profits of stock, occasion none in
      the whole of the advantages and disadvantages, real or imaginary, of the
      different employments of either. The nature of those circumstances is
      such, that they make up for a small pecuniary gain in some, and
      counterbalance a great one in others.
    
      In order, however, that this equality may take place in the whole of their
      advantages or disadvantages, three things are requisite, even where there
      is the most perfect freedom. First the employments must be well known and
      long established in the neighbourhood; secondly, they must be in their
      ordinary, or what may be called their natural state; and, thirdly, they
      must be the sole or principal employments of those who occupy them.
    
      First, this equality can take place only in those employments which are
      well known, and have been long established in the neighbourhood.
    
      Where all other circumstances are equal, wages are generally higher in new
      than in old trades. When a projector attempts to establish a new
      manufacture, he must at first entice his workmen from other employments,
      by higher wages than they can either earn in their own trades, or than the
      nature of his work would otherwise require; and a considerable time must
      pass away before he can venture to reduce them to the common level.
      Manufactures for which the demand arises altogether from fashion and
      fancy, are continually changing, and seldom last long enough to be
      considered as old established manufactures. Those, on the contrary, for
      which the demand arises chiefly from use or necessity, are less liable to
      change, and the same form or fabric may continue in demand for whole
      centuries together. The wages of labour, therefore, are likely to be
      higher in manufactures of the former, than in those of the latter kind.
      Birmingham deals chiefly in manufactures of the former kind; Sheffield in
      those of the latter; and the wages of labour in those two different places
      are said to be suitable to this difference in the nature of their
      manufactures.
    
      The establishment of any new manufacture, of any new branch of commerce,
      or of any new practice in agriculture, is always a speculation from which
      the projector promises himself extraordinary profits. These profits
      sometimes are very great, and sometimes, more frequently, perhaps, they
      are quite otherwise; but, in general, they bear no regular proportion to
      those of other old trades in the neighbourhood. If the project succeeds,
      they are commonly at first very high. When the trade or practice becomes
      thoroughly established and well known, the competition reduces them to the
      level of other trades.
    
      Secondly, this equality in the whole of the advantages and disadvantages
      of the different employments of labour and stock, can take place only in
      the ordinary, or what may be called the natural state of those
      employments.
    
      The demand for almost every different species of labour is sometimes
      greater, and sometimes less than usual. In the one case, the advantages of
      the employment rise above, in the other they fall below the common level.
      The demand for country labour is greater at hay-time and harvest than
      during the greater part of the year; and wages rise with the demand. In
      time of war, when forty or fifty thousand sailors are forced from the
      merchant service into that of the king, the demand for sailors to merchant
      ships necessarily rises with their scarcity; and their wages, upon such
      occasions, commonly rise from a guinea and seven-and-twenty shillings to
      forty shillings and three pounds a-month. In a decaying manufacture, on
      the contrary, many workmen, rather than quit their 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 theirs; and the far greater part of
      their produce, it is likewise acknowledged, is annually imported into
      Cadiz and Lisbon. But the consumption of Birmingham alone, at the rate of
      fifty thousand pounds a-year, is equal to the hundred-and-twentieth part
      of this annual importation, at the rate of six millions a-year. The whole
      annual consumption of gold and silver, therefore, in all the different
      countries of the world where those metals are used, may, perhaps, be
      nearly equal to the whole annual produce. The remainder may be no more
      than sufficient to supply the increasing demand of all thriving countries.
      It may even have fallen so far short of 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 which it is bestowed. It tends,
      therefore, to increase the exchangeable value of the annual produce of the
      land and labour of the country. It puts into motion an additional quantity
      of industry, which gives an additional value to the annual produce.
    
      What is annually saved, is as regularly consumed as what is annually
      spent, and nearly in the same time too: but it is consumed by a different
      set of people. That portion of his revenue which a rich man annually
      spends, is, in most cases, consumed by idle guests and menial servants,
      who leave nothing behind them in return for their consumption. That
      portion which he annually saves, as, for the sake of the profit, it is
      immediately employed as a capital, is consumed in the same manner, and
      nearly in the same time too, but by a different set of people: by
      labourers, manufacturers, and artificers, who reproduce, with a profit,
      the value of their annual consumption. His revenue, we shall suppose, is
      paid him in money. Had he spent the whole, the food, clothing, and
      lodging, which the whole could have purchased, would have been distributed
      among the former set of people. By saving a part of it, as that part is,
      for the sake of the profit, immediately employed as a capital, either by
      himself or by some other person, the food, clothing, and lodging, which
      may be purchased with it, are necessarily reserved for the latter. The
      consumption is the same, but the consumers are different.
    
      By what a frugal man annually saves, he not only affords maintenance to an
      additional number of productive hands, for that 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 capitals of the farmers and manufacturers of whom he
      purchases the rude and manufactured produce which he deals in, and thereby
      enables them to continue their respective trades. It is by this service
      chiefly that he contributes indirectly to support the productive labour of
      the society, and to increase the value of its annual produce. His capital
      employs, too, the sailors and carriers who transport his goods from one
      place to another; and it augments the price of those goods by the value,
      not only of his profits, but of their wages. This is all the productive
      labour which it immediately puts into motion, and all the value which it
      immediately adds to the annual produce. Its operation in both these
      respects is a good deal superior to that of the capital of the retailer.
    
      Part of the capital of the master manufacturer is employed as a fixed
      capital in the instruments of his trade, and replaces, together with its
      profits, that of some other artificer of whom he purchases them. Part of
      his circulating capital is employed in purchasing materials, and replaces,
      with their profits, the capitals of the farmers and miners of whom he
      purchases them. But a great part of it is always, either annually, or in a
      much shorter period, distributed among the different workmen whom he
      employs. It augments the value of those materials by their wages, and by
      their 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 its inhabitants, by far the richest country in
      Europe, has accordingly the greatest share of the carrying trade of
      Europe. England, perhaps the second richest country of Europe, is likewise
      supposed to have a considerable share 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 which 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 its fertility. The manufacturers first supply the
      neighbourhood, and afterwards, as their work improves and refines, more
      distant markets. For though neither the rude produce, nor even the coarse
      manufacture, could, without the greatest difficulty, support the expense
      of a considerable land-carriage, the refined and improved manufacture
      easily may. In a small bulk it frequently contains the price of a great
      quantity of rude produce. A piece of fine cloth, for example which weighs
      only eighty pounds, contains in it the price, not only of eighty pounds
      weight of wool, but sometimes of several thousand weight of corn, the
      maintenance of the different working people, and of their immediate
      employers. The corn which could with difficulty have been carried abroad
      in its own shape, is in this manner virtually exported in that of the
      complete manufacture, and may easily be sent to the remotest corners of
      the world. In this manner have grown up naturally, and, as it were, of
      their own accord, the manufactures of Leeds, Halifax, Sheffield,
      Birmingham, and Wolverhampton. Such manufactures are the offspring of
      agriculture. In the modern history of Europe, their extension and
      improvement have generally been posterior to those which were the
      offspring of foreign commerce. England was noted for the manufacture of
      fine cloths made of Spanish wool, more than a century before any of those
      which now flourish in the places above mentioned were fit for foreign
      sale. The extension and improvement of these last could not take place but
      in consequence of the extension and improvement of agriculture, the last
      and greatest effect of foreign commerce, and of the manufactures
      immediately introduced by it, and which I shall now proceed to explain.
    



CHAPTER IV.
HOW THE COMMERCE OF 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 in