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AN INQUIRY INTO THE NATURE AND CAUSES OF
THE WEALTH OF NATIONS.

by Adam Smith


INTRODUCTION AND PLAN OF THE WORK.


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

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

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

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

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

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

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

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

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




BOOK I.

OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS OF LABOUR, AND
OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRIBUTED
AMONG THE DIFFERENT RANKS OF THE PEOPLE.



CHAPTER I.

OF THE DIVISION OF LABOUR.

The greatest improvements in the productive powers of labour, and the
greater part of the skill, dexterity, and judgment, with which it is
anywhere directed, or applied, seem to have been the effects of the
division of labour. The effects of the division of labour, in the
general business of society, will be more easily understood, by
considering in what manner it operates in some particular
manufactures. It is commonly supposed to be carried furthest in some
very trifling ones; not perhaps that it really is carried further in
them than in others of more importance: but in those trifling
manufactures which are destined to supply the small wants of but a
small number of people, the whole number of workmen must necessarily
be small; and those employed in every different branch of the work can
often be collected into the same workhouse, and placed at once under
the view of the spectator.

In those great manufactures, on the contrary, which are destined to
supply the great wants of the great body of the people, every
different branch of the work employs so great a number of workmen,
that it is impossible to collect them all into the same workhouse. We
can seldom see more, at one time, than those employed in one single
branch. Though in such manufactures, therefore, the work may really be
divided into a much greater number of parts, than in those of a more
trifling nature, the division is not near so obvious, and has
accordingly been much less observed.

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

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

This great increase in the quantity of work, which, in consequence of
the division of labour, the same number of people are capable of
performing, is owing to three different circumstances; first, to the
increase of dexterity in every particular workman; secondly, to the
saving of the time which is commonly lost in passing from one species
of work to another; and, lastly, to the invention of a great number of
machines which facilitate and abridge labour, and enable one man to do
the work of many.

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

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

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

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

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

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




CHAPTER II.

OF THE PRINCIPLE WHICH GIVES OCCASION TO THE DIVISION OF LABOUR.

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

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

As it is by treaty, by barter, and by purchase, that we obtain from
one another the greater part of those mutual good offices which we
stand in need of, so it is this same trucking disposition which
originally gives occasion to the division of labour. In a tribe of
hunters or shepherds, a particular person makes bows and arrows, for
example, with more readiness and dexterity than any other. He
frequently exchanges them for cattle or for venison, with his
companions; and he finds at last that he can, in this manner, get more
cattle and venison, than if he himself went to the field to catch
them. From a regard to his own interest, therefore, the making of bows
and arrows grows to be his chief business, and he becomes a sort of
armourer. Another excels in making the frames and covers of their
little huts or moveable houses. He is accustomed to be of use in this
way to his neighbours, who reward him in the same manner with cattle
and with venison, till at last he finds it his interest to dedicate
himself entirely to this employment, and to become a sort of
house-carpenter. In the same manner a third becomes a smith or a
brazier; a fourth, a tanner or dresser of hides or skins, the
principal part of the clothing of savages. And thus the certainty of
being able to exchange all that surplus part of the produce of his own
labour, which is over and above his own consumption, for such parts of
the produce of other men's labour as he may have occasion for,
encourages every man to apply himself to a particular occupation, and
to cultivate and bring to perfection whatever talent of genius he may
possess for that particular species of business.

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

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




CHAPTER III.

THAT THE DIVISION OF LABOUR IS LIMITED BY THE EXTENT OF THE MARKET.

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

There are some sorts of industry, even of the lowest kind, which can
be carried on nowhere but in a great town. A porter, for example, can
find employment and subsistence in no other place. A village is by
much too narrow a sphere for him; even an ordinary market-town is
scarce large enough to afford him constant occupation. In the lone
houses and very small villages which are scattered about in so desert
a country as the highlands of Scotland, every farmer must be butcher,
baker, and brewer, for his own family. In such situations we can
scarce expect to find even a smith, a carpenter, or a mason, within
less than twenty miles of another of the same trade. The scattered
families that live at eight or ten miles distance from the nearest of
them, must learn to perform themselves a great number of little pieces
of work, for which, in more populous countries, they would call in the
assistance of those workmen. Country workmen are almost everywhere
obliged to apply themselves to all the different branches of industry
that have so much affinity to one another as to be employed about the
same sort of materials. A country carpenter deals in every sort of
work that is made of wood; a country smith in every sort of work that
is made of iron. The former is not only a carpenter, but a joiner, a
cabinet-maker, and even a carver in wood, as well as a wheel-wright, a
plough-wright, a cart and waggon-maker. The employments of the latter
are still more various. It is impossible there should be such a trade
as even that of a nailer in the remote and inland parts of the
highlands of Scotland. Such a workman at the rate of a thousand nails
a-day, and three hundred working days in the year, will make three
hundred thousand nails in the year. But in such a situation it would
be impossible to dispose of one thousand, that is, of one day's work
in the year. As by means of water-carriage, a more extensive market is
opened to every sort of industry than what land-carriage alone can
afford it, so it is upon the sea-coast, and along the banks of
navigable rivers, that industry of every kind naturally begins to
subdivide and improve itself, and it is frequently not till a long
time after that those improvements extend themselves to the inland
parts of the country. A broad-wheeled waggon, attended by two men, and
drawn by eight horses, in about six weeks time, carries and brings
back between London and Edinburgh near four ton weight of goods. In
about the same time a ship navigated by six or eight men, and sailing
between the ports of London and Leith, frequently carries and brings
back two hundred ton weight of goods. Six or eight men, therefore, by
the help of water-carriage, can carry and bring back, in the same
time, the same quantity of goods between London and Edinburgh as fifty
broad-wheeled waggons, attended by a hundred men, and drawn by four
hundred horses. Upon two hundred tons of goods, therefore, carried by
the cheapest land-carriage from London to Edinburgh, there must be
charged the maintenance of a hundred men for three weeks, and both the
maintenance and what is nearly equal to maintenance the wear and tear
of four hundred horses, as well as of fifty great waggons. Whereas,
upon the same quantity of goods carried by water, there is to be
charged only the maintenance of six or eight men, and the wear and
tear of a ship of two hundred tons burthen, together with the value of
the superior risk, or the difference of the insurance between land and
water-carriage. Were there no other communication between those two
places, therefore, but by land-carriage, as no goods could be
transported from the one to the other, except such whose price was
very considerable in proportion to their weight, they could carry on
but a small part of that commerce which at present subsists between
them, and consequently could give but a small part of that
encouragement which they at present mutually afford to each other's
industry. There could be little or no commerce of any kind between the
distant parts of the world. What goods could bear the expense of
land-carriage between London and Calcutta? Or if there were any so
precious as to be able to support this expense, with what safety could
they be transported through the territories of so many barbarous
nations? Those two cities, however, at present carry on a very
considerable commerce with each other, and by mutually affording a
market, give a good deal of encouragement to each other's industry.

Since such, therefore, are the advantages of water-carriage, it is
natural that the first improvements of art and industry should be made
where this conveniency opens the whole world for a market to the
produce of every sort of labour, and that they should always be much
later in extending themselves into the inland parts of the country.
The inland parts of the country can for a long time have no other
market for the greater part of their goods, but the country which lies
round about them, and separates them from the sea-coast, and the great
navigable rivers. The extent of the market, therefore, must for a long
time be in proportion to the riches and populousness of that country,
and consequently their improvement must always be posterior to the
improvement of that country. In our North American colonies, the
plantations have constantly followed either the sea-coast or the banks
of the navigable rivers, and have scarce anywhere extended themselves
to any considerable distance from both.

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

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

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

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




CHAPTER IV.

OF THE ORIGIN AND USE OF MONEY.

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

But when the division of labour first began to take place, this power
of exchanging must frequently have been very much clogged and
embarrassed in its operations. One man, we shall suppose, has more of
a certain commodity than he himself has occasion for, while another
has less. The former, consequently, would be glad to dispose of; and
the latter to purchase, a part of this superfluity. But if this latter
should chance to have nothing that the former stands in need of, no
exchange can be made between them. The butcher has more meat in his
shop than he himself can consume, and the brewer and the baker would
each of them be willing to purchase a part of it. But they have
nothing to offer in exchange, except the different productions of
their respective trades, and the butcher is already provided with all
the bread and beer which he has immediate occasion for. No exchange
can, in this case, be made between them. He cannot be their merchant,
nor they his customers; and they are all of them thus mutually less
serviceable to one another. In order to avoid the inconveniency of
such situations, every prudent man in every period of society, after
the first establishment of the division of labour, must naturally have
endeavoured to manage his affairs in such a manner, as to have at all
times by him, besides the peculiar produce of his own industry, a
certain quantity of some one commodity or other, such as he imagined
few people would be likely to refuse in exchange for the produce of
their industry. Many different commodities, it is probable, were
successively both thought of and employed for this purpose. In the
rude ages of society, cattle are said to have been the common
instrument of commerce; and, though they must have been a most
inconvenient one, yet, in old times, we find things were frequently
valued according to the number of cattle which had been given in
exchange for them. The armour of Diomede, says Homer, cost only nine
oxen; but that of Glaucus cost a hundred oxen. Salt is said to be the
common instrument of commerce and exchanges in Abyssinia; a species of
shells in some parts of the coast of India; dried cod at Newfoundland;
tobacco in Virginia; sugar in some of our West India colonies; hides
or dressed leather in some other countries; and there is at this day a
village In Scotland, where it is not uncommon, I am told, for a
workman to carry nails instead of money to the baker's shop or the
ale-house.

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

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

Those metals seem originally to have been made use of for this purpose
in rude bars, without any stamp or coinage. Thus we are told by Pliny
(Plin. Hist Nat. lib. 33, cap. 3), upon the authority of Timaeus, an
ancient historian, that, till the time of Servius Tullius, the Romans
had no coined money, but made use of unstamped bars of copper, to
purchase whatever they had occasion for. These rude bars, therefore,
performed at this time the function of money.

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

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

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

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

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

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

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

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

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

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

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

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






CHAPTER V.

OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN
LABOUR, AND THEIR PRICE IN MONEY.

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

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

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

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

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

But when barter ceases, and money has become the common instrument of
commerce, every particular commodity is more frequently exchanged for
money than for any other commodity. The butcher seldom carries his
beef or his mutton to the baker or the brewer, in order to exchange
them for bread or for beer; but he carries them to the market, where
he exchanges them for money, and afterwards exchanges that money for
bread and for beer. The quantity of money which he gets for them
regulates, too, the quantity of bread and beer which he can afterwards
purchase. It is more natural and obvious to him, therefore, to
estimate their value by the quantity of money, the commodity for which
he immediately exchanges them, than by that of bread and beer, the
commodities for which he can exchange them only by the intervention of
another commodity; and rather to say that his butcher's meat is worth
three-pence or fourpence a-pound, than that it is worth three or four
pounds of bread, or three or four quarts of small beer. Hence it comes
to pass, that the exchangeable value of every commodity is more
frequently estimated by the quantity of money, than by the quantity
either of labour or of any other commodity which can be had in
exchange for it.

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

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

In this popular sense, therefore, labour, like commodities, may be
said to have a real and a nominal price. Its real price may be said to
consist in the quantity of the necessaries and conveniencies of life
which are given for it; its nominal price, in the quantity of money.
The labourer is rich or poor, is well or ill rewarded, in proportion
to the real, not to the nominal price of his labour.

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

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

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

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

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

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

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

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

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

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

Though at distant places there is no regular proportion between the
real and the money price of commodities, yet the merchant who carries
goods from the one to the other, has nothing to consider but the money
price, or the difference between the quantity of silver for which he
buys them, and that for which he is likely to sell them. Half an ounce
of silver at Canton in China may command a greater quantity both of
labour and of the necessaries and conveniencies of life, than an ounce
at London. A commodity, therefore, which sells for half an ounce of
silver at Canton, may there be really dearer, of more real importance
to the man who possesses it there, than a commodity which sells for an
ounce at London is to the man who possesses it at London. If a London
merchant, however, can buy at Canton, for half an ounce of silver, a
commodity which he can afterwards sell at London for an ounce, he
gains a hundred per cent. by the bargain, just as much as if an ounce
of silver was at London exactly of the same value as at Canton. It is
of no importance to him that half an ounce of silver at Canton would
have given him the command of more labour, and of a greater quantity
of the necessaries and conveniencies of life than an ounce can do at
London. An ounce at London will always give him the command of double
the quantity of all these, which half an ounce could have done there,
and this is precisely what he wants.

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

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

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

The Romans are said to have had nothing but copper money till within
five years before the first Punic war (Pliny, lib. xxxiii. cap. 3),
when they first began to coin silver. Copper, therefore, appears to
have continued always the measure of value in that republic. At Rome
all accounts appear to have been kept, and the value of all estates to
have been computed, either in asses or in sestertii. The as was always
the denomination of a copper coin. The word sestertius signifies two
asses and a half. Though the sestertius, therefore, was originally a
silver coin, its value was estimated in copper. At Rome, one who owed
a great deal of money was said to have a great deal of other people's
copper.

The northern nations who established themselves upon the ruins of the
Roman empire, seem to have had silver money from the first beginning
of their settlements, and not to have known either gold or copper
coins for several ages thereafter. There were silver coins in England
in the time of the Saxons; but there was little gold coined till the
time of Edward III nor any copper till that of James I. of Great
Britain. In England, therefore, and for the same reason, I believe, in
all other modern nations of Europe, all accounts are kept, and the
value of all goods and of all estates is generally computed, in
silver: and when we mean to express the amount of a person's fortune,
we seldom mention the number of guineas, but the number of pounds
sterling which we suppose would be given for it.

Originally, in all countries, I believe, a legal tender of payment
could be made only in the coin of that metal which was peculiarly
considered as the standard or measure of value. In England, gold was
not considered as a legal tender for a long time after it was coined
into money. The proportion between the values of gold and silver money
was not fixed by any public law or proclamation, but was left to be
settled by the market. If a debtor offered payment in gold, the
creditor might either reject such payment altogether, or accept of it
at such a valuation of the gold as he and his debtor could agree upon.
Copper is not at present a legal tender, except in the change of the
smaller silver coins.

In this state of things, the distinction between the metal which was
the standard, and that which was not the standard, was something more
than a nominal distinction.

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

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

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

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

In the English mint, a pound weight of gold is coined into forty-four
guineas and a half, which at one-and-twenty shillings the guinea, is
equal to forty-six pounds fourteen shillings and sixpence. An ounce of
such gold coin, therefore, is worth £ 3:17:10½ in silver. In England,
no duty or seignorage is paid upon the coinage, and he who carries a
pound weight or an ounce weight of standard gold bullion to the mint,
gets back a pound weight or an ounce weight of gold in coin, without
any deduction. Three pounds seventeen shillings and tenpence halfpenny
an ounce, therefore, is said to be the mint price of gold in England,
or the quantity of gold coin which the mint gives in return for
standard gold bullion.

Before the reformation of the gold coin, the price of standard gold
bullion in the market had, for many years, been upwards of £3:18s.
sometimes £ 3:19s, and very frequently £4 an ounce; that sum, it is
probable, in the worn and degraded gold coin, seldom containing more
than an ounce of standard gold. Since the reformation of the gold
coin, the market price of standard gold bullion seldom exceeds £
3:17:7 an ounce. Before the reformation of the gold coin, the market
price was always more or less above the mint price. Since that
reformation, the market price has been constantly below the mint
price. But that market price is the same whether it is paid in gold or
in silver coin. The late reformation of the gold coin, therefore, has
raised not only the value of the gold coin, but likewise that of the
silver coin in proportion to gold bullion, and probably, too, in
proportion to all other commodities; though the price of the greater
part of other commodities being influenced by so many other causes,
the rise in the value of either gold or silver coin in proportion to
them may not be so distinct and sensible.

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

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

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

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

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

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

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

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

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

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




CHAPTER VI.

OF THE COMPONENT PART OF THE PRICE OF COMMODITIES.

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

If the one species of labour should be more severe than the other,
some allowance will naturally be made for this superior hardship; and
the produce of one hour's labour in the one way may frequently
exchange for that of two hour's labour in the other.

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

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

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

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

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

As soon as the land of any country has all become private property,
the landlords, like all other men, love to reap where they never
sowed, and demand a rent even for its natural produce. The wood of the
forest, the grass of the field, and all the natural fruits of the
earth, which, when land was in common, cost the labourer only the
trouble of gathering them, come, even to him, to have an additional
price fixed upon them. He must then pay for the licence to gather
them, and must give up to the landlord a portion of what his labour
either collects or produces. This portion, or, what comes to the same
thing, the price of this portion, constitutes the rent of land, and in
the price of the greater part of commodities, makes a third component
part.

The real value of all the different component parts of price, it must
be observed, is measured by the quantity of labour which they can,
each of them, purchase or command. Labour measures the value, not only
of that part of price which resolves itself into labour, but of that
which resolves itself into rent, and of that which resolves itself
into profit.

In every society, the price of every commodity finally resolves itself
into some one or other, or all of those three parts; and in every
improved society, all the three enter, more or less, as component
parts, into the price of the far greater part of commodities.

In the price of corn, for example, one part pays the rent of the
landlord, another pays the wages or maintenance of the labourers and
labouring cattle employed in producing it, and the third pays the
profit of the farmer. These three parts seem either immediately or
ultimately to make up the whole price of corn. A fourth part, it may
perhaps be thought is necessary for replacing the stock of the farmer,
or for compensating the wear and tear of his labouring cattle, and
other instruments of husbandry. But it must be considered, that the
price of any instrument of husbandry, such as a labouring horse, is
itself made up of the same time parts; the rent of the land upon which
he is reared, the labour of tending and rearing him, and the profits
of the farmer, who advances both the rent of this land, and the wages
of this labour. Though the price of the corn, therefore, may pay the
price as well as the maintenance of the horse, the whole price still
resolves itself, either immediately or ultimately, into the same three
parts of rent, labour, and profit.

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

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

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

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

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

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

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

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

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

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

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

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

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




CHAPTER VII.

OF THE NATURAL AND MARKET PRICE OF COMMODITIES.

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

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

These ordinary or average rates may be called the natural rates of
wages, profit and rent, at the time and place in which they commonly
prevail.

When the price of any commodity is neither more nor less than what is
sufficient to pay the rent of the land, the wages of the labour, and
the profits of the stock employed in raising, preparing, and bringing
it to market, according to their natural rates, the commodity is then
sold for what may be called its natural price.

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

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

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

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

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

When the quantity brought to market exceeds the effectual demand, it
cannot be all sold to those who are willing to pay the whole value of
the rent, wages, and profit, which must be paid in order to bring it
thither. Some part must be sold to those who are willing to pay less,
and the low price which they give for it must reduce the price of the
whole. The market price will sink more or less below the natural
price, according as the greatness of the excess increases more or less
the competition of the sellers, or according as it happens to be more
or less important to them to get immediately rid of the commodity. The
same excess in the importation of perishable, will occasion a much
greater competition than in that of durable commodities; in the
importation of oranges, for example, than in that of old iron.

When the quantity brought to market is just sufficient to supply the
effectual demand, and no more, the market price naturally comes to be
either exactly, or as nearly as can be judged of, the same with the
natural price. The whole quantity upon hand can be disposed of for
this price, and can not be disposed of for more. The competition of
the different dealers obliges them all to accept of this price, but
does not oblige them to accept of less.

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

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

If, on the contrary, the quantity brought to market should at any time
fall short of the effectual demand, some of the component parts of its
price must rise above their natural rate. If it is rent, the interest
of all other landlords will naturally prompt them to prepare more land
for the raising of this commodity; if it is wages or profit, the
interest of all other labourers and dealers will soon prompt them to
employ more labour and stock in preparing and bringing it to market.
The quantity brought thither will soon be sufficient to supply the
effectual demand. All the different parts of its price will soon sink
to their natural rate, and the whole price to its natural price.

The natural price, therefore, is, as it were, the central price, to
which the prices of all commodities are continually gravitating.
Different accidents may sometimes keep them suspended a good deal
above it, and sometimes force them down even somewhat below it. But
whatever may be the obstacles which hinder them from settling in this
centre of repose and continuance, they are constantly tending towards
it.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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




CHAPTER VIII.

OF THE WAGES OF LABOUR.

The produce of labour constitutes the natural recompence or wages of
labour.

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

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

But though all things would have become cheaper in reality, in
appearance many things might have become dearer, than before, or have
been exchanged for a greater quantity of other goods. Let us suppose,
for example, that in the greater part of employments the productive
powers of labour had been improved to tenfold, or that a day's labour
could produce ten times the quantity of work which it had done
originally; but that in a particular employment they had been improved
only to double, or that a day's labour could produce only twice the
quantity of work which it had done before. In exchanging the produce
of a day's labour in the greater part of employments for that of a
day's labour in this particular one, ten times the original quantity
of work in them would purchase only twice the original quantity in it.
Any particular quantity in it, therefore, a pound weight, for example,
would appear to be five times dearer than before. In reality, however,
it would be twice as cheap. Though it required five times the quantity
of other goods to purchase it, it would require only half the quantity
of labour either to purchase or to produce it. The acquisition,
therefore, would be twice as easy as before.

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

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

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

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

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

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

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

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

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

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

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

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

When in any country the demand for those who live by wages, labourers,
journeymen, servants of every kind, is continually increasing; when
every year furnishes employment for a greater number than had been
employed the year before, the workmen have no occasion to combine in
order to raise their wages. The scarcity of hands occasions a
competition among masters, who bid against one another in order to get
workmen, and thus voluntarily break through the natural combination of
masters not to raise wages. The demand for those who live by wages, it
is evident, cannot increase but in proportion to the increase of the
funds which are destined to the payment of wages. These funds are of
two kinds, first, the revenue which is over and above what is
necessary for the maintenance; and, secondly, the stock which is over
and above what is necessary for the employment of their masters.

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

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

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

It is not the actual greatness of national wealth, but its continual
increase, which occasions a rise in the wages of labour. It is not,
accordingly, in the richest countries, but in the most thriving, or in
those which are growing rich the fastest, that the wages of labour are
highest. England is certainly, in the present times, a much richer
country than any part of North America. The wages of labour, however,
are much higher in North America than in any part of England. In the
province of New York, common labourers earned in 1773, before the
commencement of the late disturbances, three shillings and sixpence
currency, equal to two shillings sterling, a-day; ship-carpenters, ten
shillings and sixpence currency, with a pint of rum, worth sixpence
sterling, equal in all to six shillings and sixpence sterling;
house-carpenters and bricklayers, eight shillings currency, equal to
four shillings and sixpence sterling; journeymen tailors, five
shillings currency, equal to about two shillings and tenpence
sterling. These prices are all above the London price; and wages are
said to be as high in the other colonies as in New York. The price of
provisions is everywhere in North America much lower than in England.
A dearth has never been known there. In the worst seasons they have
always had a sufficiency for themselves, though less for exportation.
If the money price of labour, therefore, be higher than it is anywhere
in the mother-country, its real price, the real command of the
necessaries and conveniencies of life which it conveys to the
labourer, must be higher in a still greater proportion.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Poverty, though it no doubt discourages, does not always prevent,
marriage. It seems even to be favourable to generation. A half-starved
Highland woman frequently bears more than twenty children, while a
pampered fine lady is often incapable of bearing any, and is generally
exhausted by two or three. Barrenness, so frequent among women of
fashion, is very rare among those of inferior station. Luxury, in the
fair sex, while it inflames, perhaps, the passion for enjoyment, seems
always to weaken, and frequently to destroy altogether, the powers of
generation.

But poverty, though it does not prevent the generation, is extremely
unfavourable to the rearing of children. The tender plant is produced;
but in so cold a soil, and so severe a climate, soon withers and dies.
It is not uncommon, I have been frequently told, in the Highlands of
Scotland, for a mother who has born twenty children not to have two
alive. Several officers of great experience have assured me, that, so
far from recruiting their regiment, they have never been able to
supply it with drums and fifes, from all the soldiers' children that
were born in it. A greater number of fine children, however, is seldom
seen anywhere than about a barrack of soldiers. Very few of them, it
seems, arrive at the age of thirteen or fourteen. In some places, one
half the children die before they are four years of age, in many
places before they are seven, and in almost all places before they are
nine or ten. This great mortality, however will everywhere be found
chiefly among the children of the common people, who cannot afford to
tend them with the same care as those of better station. Though their
marriages are generally more fruitful than those of people of fashion,
a smaller proportion of their children arrive at maturity. In
foundling hospitals, and among the children brought up by parish
charities, the mortality is still greater than among those of the
common people.

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

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

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

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

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

The liberal reward of labour, as it encourages the propagation, so it
increases the industry of the common people. The wages of labour are
the encouragement of industry, which, like every other human quality,
improves in proportion to the encouragement it receives. A plentiful
subsistence increases the bodily strength of the labourer, and the
comfortable hope of bettering his condition, and of ending his days,
perhaps, in ease and plenty, animates him to exert that strength to
the utmost. Where wages are high, accordingly, we shall always find
the workmen more active, diligent, and expeditious, than where they
are low; in England, for example, than in Scotland; in the
neighbourhood of great towns, than in remote country places. Some
workmen, indeed, when they can earn in four days what will maintain
them through the week, will be idle the other three. This, however, is
by no means the case with the greater part. Workmen, on the contrary,
when they are liberally paid by the piece, are very apt to overwork
themselves, and to ruin their health and constitution in a few years.
A carpenter in London, and in some other places, is not supposed to
last in his utmost vigour above eight years. Something of the same
kind happens in many other trades, in which the workmen are paid by
the piece; as they generally are in manufactures, and even in country
labour, wherever wages are higher than ordinary. Almost every class of
artificers is subject to some peculiar infirmity occasioned by
excessive application to their peculiar species of work. Ramuzzini, an
eminent Italian physician, has written a particular book concerning
such diseases. We do not reckon our soldiers the most industrious set
of people among us; yet when soldiers have been employed in some
particular sorts of work, and liberally paid by the piece, their
officers have frequently been obliged to stipulate with the
undertaker, that they should not be allowed to earn above a certain
sum every day, according to the rate at which they were paid. Till
this stipulation was made, mutual emulation, and the desire of greater
gain, frequently prompted them to overwork themselves, and to hurt
their health by excessive labour. Excessive application, during four
days of the week, is frequently the real cause of the idleness of the
other three, so much and so loudly complained of. Great labour, either
of mind or body, continued for several days together is, in most men,
naturally followed by a great desire of relaxation, which, if not
restrained by force, or by some strong necessity, is almost
irresistible. It is the call of nature, which requires to be relieved
by some indulgence, sometimes of ease only, but sometimes too of
dissipation and diversion. If it is not complied with, the
consequences are often dangerous and sometimes fatal, and such as
almost always, sooner or later, bring on the peculiar infirmity of the
trade. If masters would always listen to the dictates of reason and
humanity, they have frequently occasion rather to moderate, than to
animate the application of many of their workmen. It will be found, I
believe, in every sort of trade, that the man who works so moderately,
as to be able to work constantly, not only preserves his health the
longest, but, in the course of the year, executes the greatest
quantity of work.

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

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

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

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

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

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

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

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

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

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

The contrary of this happens in a year of sudden and extraordinary
scarcity. The funds destined for employing industry are less than they
had been the year before. A considerable number of people are thrown
out of employment, who bid one against another, in order to get it,
which sometimes lowers both the real and the money price of labour. In
1740, a year of extraordinary scarcity, many people were willing to
work for bare subsistence. In the succeeding years of plenty, it was
more difficult to get labourers and servants. The scarcity of a dear
year, by diminishing the demand for labour, tends to lower its price,
as the high price of provisions tends to raise it. The plenty of a
cheap year, on the contrary, by increasing the demand, tends to raise
the price of labour, as the cheapness of provisions tends to lower it.
In the ordinary variations of the prices of provisions, those two
opposite causes seem to counterbalance one another, which is probably,
in part, the reason why the wages of labour are everywhere so much
more steady and permanent than the price of provisions.

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




CHAPTER IX.

OF THE PROFITS OF STOCK.

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

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

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

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

By the 37th of Henry VIII. all interest above ten per cent. was
declared unlawful. More, it seems, had sometimes been taken before
that. In the reign of Edward VI. religious zeal prohibited all
interest. This prohibition, however, like all others of the same kind,
is said to have produced no effect, and probably rather increased than
diminished the evil of usury. The statute of Henry VIII. was revived
by the 13th of Elizabeth, cap. 8. and ten per cent. continued to be
the legal rate of interest till the 21st of James I. when it was
restricted to eight per cent. It was reduced to six per cent. soon
after the Restoration, and by the 12th of Queen Anne, to five per
cent. All these different statutory regulations seem to have been made
with great propriety. They seem to have followed, and not to have gone
before, the market rate of interest, or the rate at which people of
good credit usually borrowed. Since the time of Queen Anne, five per
cent. seems to have been rather above than below the market rate.
Before the late war, the government borrowed at three per cent.; and
people of good credit in the capital, and in many other parts of the
kingdom, at three and a-half, four, and four and a-half per cent.

Since the time of Henry VIII. the wealth and revenue of the country
have been continually advancing, and in the course of their progress,
their pace seems rather to have been gradually accelerated than
retarded. They seem not only to have been going on, but to have been
going on faster and faster. The wages of labour have been continually
increasing during the same period, and, in the greater part of the
different branches of trade and manufactures, the profits of stock
have been diminishing.

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

In Scotland, though the legal rate of interest is the same as in
England, the market rate is rather higher. People of the best credit
there seldom borrow under five per cent. Even private bankers in
Edinburgh give four per cent. upon their promissory-notes, of which
payment, either in whole or in part may be demanded at pleasure.
Private bankers in London give no interest for the money which is
deposited with them. There are few trades which cannot be carried on
with a smaller stock in Scotland than in England. The common rate of
profit, therefore, must be somewhat greater. The wages of labour, it
has already been observed, are lower in Scotland than in England. The
country, too, is not only much poorer, but the steps by which it
advances to a better condition, for it is evidently advancing, seem to
be much slower and more tardy. The legal rate of interest in France
has not during the course of the present century, been always
regulated by the market rate {See Denisart, Article Taux des
Interests, tom. iii, p.13}. In 1720, interest was reduced from the
twentieth to the fiftieth penny, or from five to two per cent. In
1724, it was raised to the thirtieth penny, or to three and a third
per cent. In 1725, it was again raised to the twentieth penny, or to
five per cent. In 1766, during the administration of Mr Laverdy, it
was reduced to the twenty-fifth penny, or to four per cent. The Abbé
Terray raised it afterwards to the old rate of five per cent. The
supposed purpose of many of those violent reductions of interest was
to prepare the way for reducing that of the public debts; a purpose
which has sometimes been executed. France is, perhaps, in the present
times, not so rich a country as England; and though the legal rate of
interest has in France frequently been lower than in England, the
market rate has generally been higher; for there, as in other
countries, they have several very safe and easy methods of evading the
law. The profits of trade, I have been assured by British merchants
who had traded in both countries, are higher in France than in
England; and it is no doubt upon this account, that many British
subjects chuse rather to employ their capitals in a country where
trade is in disgrace, than in one where it is highly respected. The
wages of labour are lower in France than in England. When you go from
Scotland to England, the difference which you may remark between the
dress and countenance of the common people in the one country and in
the other, sufficiently indicates the difference in their condition.
The contrast is still greater when you return from France. France,
though no doubt a richer country than Scotland, seems not to be going
forward so fast. It is a common and even a popular opinion in the
country, that it is going backwards; an opinion which I apprehend, is
ill-founded, even with regard to France, but which nobody can possibly
entertain with regard to Scotland, who sees the country now, and who
saw it twenty or thirty years ago.

The province of Holland, on the other hand, in proportion to the
extent of its territory and the number of its people, is a richer
country than England. The government there borrow at two per cent. and
private people of good credit at three. The wages of labour are said
to be higher in Holland than in England, and the Dutch, it is well
known, trade upon lower profits than any people in Europe. The trade
of Holland, it has been pretended by some people, is decaying, and it
may perhaps be true that some particular branches of it are so; but
these symptoms seem to indicate sufficiently that there is no general
decay. When profit diminishes, merchants are very apt to complain that
trade decays, though the diminution of profit is the natural effect of
its prosperity, or of a greater stock being employed in it than
before. During the late war, the Dutch gained the whole carrying trade
of France, of which they still retain a very large share. The great
property which they possess both in French and English funds, about
forty millions, it is said in the latter (in which, I suspect,
however, there is a considerable exaggeration ), the great sums which
they lend to private people, in countries where the rate of interest
is higher than in their own, are circumstances which no doubt
demonstrate the redundancy of their stock, or that it has increased
beyond what they can employ with tolerable profit in the proper
business of their own country; but they do not demonstrate that that
business has decreased. As the capital of a private man, though
acquired by a particular trade, may increase beyond what he can employ
in it, and yet that trade continue to increase too, so may likewise
the capital of a great nation.

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

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

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

In a country which had acquired that full complement of riches which
the nature of its soil and climate, and its situation with respect to
other countries, allowed it to acquire, which could, therefore,
advance no further, and which was not going backwards, both the wages
of labour and the profits of stock would probably be very low. In a
country fully peopled in proportion to what either its territory could
maintain, or its stock employ, the competition for employment would
necessarily be so great as to reduce the wages of labour to what was
barely sufficient to keep up the number of labourers, and the country
being already fully peopled, that number could never be augmented. In
a country fully stocked in proportion to all the business it had to
transact, as great a quantity of stock would be employed in every
particular branch as the nature and extent of the trade would admit.
The competition, therefore, would everywhere be as great, and,
consequently, the ordinary profit as low as possible.

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

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

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

The lowest ordinary rate of profit must always be something more than
what is sufficient to compensate the occasional losses to which every
employment of stock is exposed. It is this surplus only which is neat
or clear profit. What is called gross profit, comprehends frequently
not only this surplus, but what is retained for compensating such
extraordinary losses. The interest which the borrower can afford to
pay is in proportion to the clear profit only. The lowest ordinary
rate of interest must, in the same manner, be something more than
sufficient to compensate the occasional losses to which lending, even
with tolerable prudence, is exposed. Were it not, mere charity or
friendship could be the only motives for lending.

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

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

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

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

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




CHAPTER X.

OF WAGES AND PROFIT IN THE DIFFERENT EMPLOYMENTS OF LABOUR AND STOCK.

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

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

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


PART I. Inequalities arising from the nature of the employments
themselves.

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

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

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

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

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

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

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

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

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

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

Employment is much more constant in some trades than in others. In the
greater part of manufactures, a journeyman maybe pretty sure of
employment almost every day in the year that he is able to work. A
mason or bricklayer, on the contrary, can work neither in hard frost
nor in foul weather, and his employment at all other times depends
upon the occasional calls of his customers. He is liable, in
consequence, to be frequently without any. What he earns, therefore,
while he is employed, must not only maintain him while he is idle, but
make him some compensation for those anxious and desponding moments
which the thought of so precarious a situation must sometimes
occasion. Where the computed earnings of the greater part of
manufacturers, accordingly, are nearly upon a level with the day-wages
of common labourers, those of masons and bricklayers are generally
from one-half more to double those wages. Where common labourers earn
four or five shillings a-week, masons and bricklayers frequently earn
seven and eight; where the former earn six, the latter often earn nine
and ten; and where the former earn nine and ten, as in London, the
latter commonly earn fifteen and eighteen. No species of skilled
labour, however, seems more easy to learn than that of masons and
bricklayers. Chairmen in London, during the summer season, are said
sometimes to be employed as bricklayers. The high wages of those
workmen, therefore, are not so much the recompence of their skill, as
the compensation for the inconstancy of their employment.

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

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

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

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

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

The wages of goldsmiths and jewellers are everywhere superior to those
of many other workmen, not only of equal, but of much superior
ingenuity, on account of the precious materials with which they are
entrusted. We trust our health to the physician, our fortune, and
sometimes our life and reputation, to the lawyer and attorney. Such
confidence could not safely be reposed in people of a very mean or low
condition. Their reward must be such, therefore, as may give them that
rank in the society which so important a trust requires. The long time
and the great expense which must be laid out in their education, when
combined with this circumstance, necessarily enhance still further the
price of their labour.

When a person employs only his own stock in trade, there is no trust;
and the credit which he may get from other people, depends, not upon
the nature of the trade, but upon their opinion of his fortune,
probity and prudence. The different rates of profit, therefore, in the
different branches of trade, cannot arise from the different degrees
of trust reposed in the traders.

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

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

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

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

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

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

That the chance of gain is naturally overvalued, we may learn from the
universal success of lotteries. The world neither ever saw, nor ever
will see, a perfectly fair lottery, or one in which the whole gain
compensated the whole loss; because the undertaker could make nothing
by it. In the state lotteries, the tickets are really not worth the
price which is paid by the original subscribers, and yet commonly sell
in the market for twenty, thirty, and sometimes forty per cent.
advance. The vain hopes of gaining some of the great prizes is the
sole cause of this demand. The soberest people scarce look upon it as
a folly to pay a small sum for the chance of gaining ten or twenty
thousand pounds, though they know that even that small sum is perhaps
twenty or thirty per cent. more than the chance is worth. In a lottery
in which no prize exceeded twenty pounds, though in other respects it
approached much nearer to a perfectly fair one than the common state
lotteries, there would not be the same demand for tickets. In order to
have a better chance for some of the great prizes, some people
purchase several tickets; and others, small shares in a still greater
number. There is not, however, a more certain proposition in
mathematics, than that the more tickets you adventure upon, the more
likely you are to be a loser. Adventure upon all the tickets in the
lottery, and you lose for certain; and the greater the number of your
tickets, the nearer you approach to this certainty.

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

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

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

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

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

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

Of the five circumstances, therefore, which vary the wages of labour,
two only affect the profits of stock; the agreeableness or
disagreeableness of the business, and the risk or security with which
it is attended. In point of agreeableness or disagreeableness, there
is little or no difference in the far greater part of the different
employments of stock, but a great deal in those of labour; and the
ordinary profit of stock, though it rises with the risk, does not
always seem to rise in proportion to it. It should follow from all
this, that, in the same society or neighbourhood, the average and
ordinary rates of profit in the different employments of stock should
be more nearly upon a level than the pecuniary wages of the different
sorts of labour.

They are so accordingly. The difference between the earnings of a
common labourer and those of a well employed lawyer or physician, is
evidently much greater than that between the ordinary profits in any
two different branches of trade. The apparent difference, besides, in
the profits of different trades, is generally a deception arising from
our not always distinguishing what ought to be considered as wages,
from what ought to be considered as profit.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


PART II. -- Inequalities occasioned by the Policy of Europe.

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

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

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

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

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

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

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

By the 5th of Elizabeth, commonly called the Statute of
Apprenticeship, it was enacted, that no person should, for the future,
exercise any trade, craft, or mystery, at that time exercised in
England, unless he had previously served to it an apprenticeship of
seven years at least; and what before had been the bye-law of many
particular corporations, became in England the general and public law
of all trades carried on in market towns. For though the words of the
statute are very general, and seem plainly to include the whole
kingdom, by interpretation its operation has been limited to market
towns; it having been held that, in country villages, a person may
exercise several different trades, though he has not served a seven
years apprenticeship to each, they being necessary for the conveniency
of the inhabitants, and the number of people frequently not being
sufficient to supply each with a particular set of hands. By a strict
interpretation of the words, too, the operation of this statute has
been limited to those trades which were established in England before
the 5th of Elizabeth, and has never been extended to such as have been
introduced since that time. This limitation has given occasion to
several distinctions, which, considered as rules of police, appear as
foolish as can well be imagined. It has been adjudged, for example,
that a coach-maker can neither himself make nor employ journeymen to
make his coach-wheels, but must buy them of a master wheel-wright;
this latter trade having been exercised in England before the 5th of
Elizabeth. But a wheel-wright, though he has never served an
apprenticeship to a coachmaker, may either himself make or employ
journeymen to make coaches; the trade of a coachmaker not being within
the statute, because not exercised in England at the time when it was
made. The manufactures of Manchester, Birmingham, and Wolverhampton,
are many of them, upon this account, not within the statute, not
having been exercised in England before the 5th of Elizabeth.

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

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

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

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

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

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

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

It is to prevent his reduction of price, and consequently of wages and
profit, by restraining that free competition which would most
certainly occasion it, that all corporations, and the greater part of
corporation laws have been established. In order to erect a
corporation, no other authority in ancient times was requisite, in
many parts of Europe, but that of the town-corporate in which it was
established. In England, indeed, a charter from the king was likewise
necessary. But this prerogative of the crown seems to have been
reserved rather for extorting money from the subject, than for the
defence of the common liberty against such oppressive monopolies. Upon
paying a fine to the king, the charter seems generally to have been
readily granted; and when any particular class of artificers or
traders thought proper to act as a corporation, without a charter,
such adulterine guilds, as they were called, were not always
disfranchised upon that account, but obliged to fine annually to the
king, for permission to exercise their usurped privileges {See Madox
Firma Burgi p. 26 etc.}. The immediate inspection of all corporations,
and of the bye-laws which they might think proper to enact for their
own government, belonged to the town-corporate in which they were
established; and whatever discipline was exercised over them,
proceeded commonly, not from the king, but from that greater
incorporation of which those subordinate ones were only parts or
members.

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

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

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

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

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

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

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

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

In Great Britain, the superiority of the industry of the towns over
that of the country seems to have been greater formerly than in the
present times. The wages of country labour approach nearer to those of
manufacturing labour, and the profits of stock employed in agriculture
to those of trading and manufacturing stock, than they are said to
have none in the last century, or in the beginning of the present.
This change may be regarded as the necessary, though very late
consequence of the extraordinary encouragement given to the industry
of the towns. The stocks accumulated in them come in time to be so
great, that it can no longer be employed with the ancient profit in
that species of industry which is peculiar to them. That industry has
its limits like every other; and the increase of stock, by increasing
the competition, necessarily reduces the profit. The lowering of
profit in the town forces out stock to the country, where, by creating
a new demand for country labour, it necessarily raises its wages. It
then spreads itself, if I my say so, over the face of the land, and,
by being employed in agriculture, is in part restored to the country,
at the expense of which, in a great measure, it had originally been
accumulated in the town. That everywhere in Europe the greatest
improvements of the country have been owing to such over flowings of
the stock originally accumulated in the towns, I shall endeavour to
shew hereafter, and at the same time to demonstrate, that though some
countries have, by this course, attained to a considerable degree of
opulence, it is in itself necessarily slow, uncertain, liable to be
disturbed and interrupted by innumerable accidents, and, in every
respect, contrary to the order of nature and of reason The interests,
prejudices, laws, and customs, which have given occasion to it, I
shall endeavour to explain as fully and distinctly as I can in the
third and fourth books of this Inquiry.

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

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

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

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

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

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

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

It has been considered as of so much importance that a proper number
of young people should be educated for certain professions, that
sometimes the public, and sometimes the piety of private founders,
have established many pensions, scholarships, exhibitions, bursaries,
etc. for this purpose, which draw many more people into those trades
than could otherwise pretend to follow them. In all Christian
countries, I believe, the education of the greater part of churchmen
is paid for in this manner. Very few of them are educated altogether
at their own expense. The long, tedious, and expensive education,
therefore, of those who are, will not always procure them a suitable
reward, the church being crowded with people, who, in order to get
employment, are willing to accept of a much smaller recompence than
what such an education would otherwise have entitled them to; and in
this manner the competition of the poor takes away the reward of the
rich. It would be indecent, no doubt, to compare either a curate or a
chaplain with a journeyman in any common trade. The pay of a curate or
chaplain, however, may very properly be considered as of the same
nature with the wages of a journeyman. They are all three paid for
their work according to the contract which they may happen to make
with their respective superiors. Till after the middle of the
fourteenth century, five merks, containing about as much silver as ten
pounds of our present money, was in England the usual pay of a curate
or a stipendiary parish priest, as we find it regulated by the decrees
of several different national councils. At the same period, fourpence
a-day, containing the same quantity of silver as a shilling of our
present money, was declared to be the pay of a master mason; and
threepence a-day, equal to ninepence of our present money, that of a
journeyman mason. {See the Statute of Labourers, 25, Ed. III.} The
wages of both these labourer's, therefore, supposing them to have been
constantly employed, were much superior to those of the curate. The
wages of the master mason, supposing him to have been without
employment one-third of the year, would have fully equalled them. By
the 12th of Queen Anne, c. 12. it is declared, "That whereas, for want
of sufficient maintenance and encouragement to curates, the cures
have, in several places, been meanly supplied, the bishop is,
therefore, empowered to appoint, by writing under his hand and seal, a
sufficient certain stipend or allowance, not exceeding fifty, and not
less than twenty pounds a-year". Forty pounds a-year is reckoned at
present very good pay for a curate; and, notwithstanding this act of
parliament, there are many curacies under twenty pounds a-year. There
are journeymen shoemakers in London who earn forty pounds a-year, and
there is scarce an industrious workman of any kind in that metropolis
who does not earn more than twenty. This last sum, indeed, does not
exceed what frequently earned by common labourers in many country
parishes. Whenever the law has attempted to regulate the wages of
workmen, it has always been rather to lower them than to raise them.
But the law has, upon many occasions, attempted to raise the wages of
curates, and, for the dignity of the church, to oblige the rectors of
parishes to give them more than the wretched maintenance which they
themselves might be willing to accept of. And, in both cases, the law
seems to have been equally ineffectual, and has never either been able
to raise the wages of curates, or to sink those of labourers to the
degree that was intended; because it has never been able to hinder
either the one from being willing to accept of less than the legal
allowance, on account of the indigence of their situation and the
multitude of their competitors, or the other from receiving more, on
account of the contrary competition of those who expected to derive
either profit or pleasure from employing them.

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

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

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

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

In ancient times, before any charities of this kind had been
established for the education of indigent people to the learned
professions, the rewards of eminent teachers appear to have been much
more considerable. Isocrates, in what is called his discourse against
the sophists, reproaches the teachers of his own times with
inconsistency. "They make the most magnificent promises to their
scholars," says he, "and undertake to teach them to be wise, to be
happy, and to be just; and, in return for so important a service, they
stipulate the paltry reward of four or five minae." "They who teach
wisdom," continues he, "ought certainly to be wise themselves; but if
any man were to sell such a bargain for such a price, he would be
convicted of the most evident folly." He certainly does not mean here
to exaggerate the reward, and we may be assured that it was not less
than he represents it. Four minae were equal to thirteen pounds six
shillings and eightpence; five minae to sixteen pounds thirteen
shillings and fourpence. Something not less than the largest of those
two sums, therefore, must at that time have been usually paid to the
most eminent teachers at Athens. Isocrates himself demanded ten minae,
or £ 33:6:8 from each scholar. When he taught at Athens, he is said to
have had a hundred scholars. I understand this to be the number whom
he taught at one time, or who attended what we would call one course
of lectures; a number which will not appear extraordinary from so
great a city to so famous a teacher, who taught, too, what was at that
time the most fashionable of all sciences, rhetoric. He must have
made, therefore, by each course of lectures, a thousand minae, or £
3335:6:8. A thousand minae, accordingly, is said by Plutarch, in
another place, to have been his didactron, or usual price of teaching.
Many other eminent teachers in those times appear to have acquired
great fortunes. Georgias made a present to the temple of Delphi of his
own statue in solid gold. We must not, I presume, suppose that it was
as large as the life. His way of living, as well as that of Hippias
and Protagoras, two other eminent teachers of those times, is
represented by Plato as splendid, even to ostentation. Plato himself
is said to have lived with a good deal of magnificence. Aristotle,
after having been tutor to Alexander, and most munificently rewarded,
as it is universally agreed, both by him and his father, Philip,
thought it worth while, notwithstanding, to return to Athens, in order
to resume the teaching of his school. Teachers of the sciences were
probably in those times less common than they came to be in an age or
two afterwards, when the competition had probably somewhat reduced
both the price of their labour and the admiration for their persons.
The most eminent of them, however, appear always to have enjoyed a
degree of consideration much superior to any of the like profession in
the present times. The Athenians sent Carneades the academic, and
Diogenes the stoic, upon a solemn embassy to Rome; and though their
city had then declined from its former grandeur, it was still an
independent and considerable republic.

Carneades, too, was a Babylonian by birth; and as there never was a
people more jealous of admitting foreigners to public offices than the
Athenians, their consideration for him must have been very great.

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

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

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

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

Whatever obstructs the free circulation of labour from one employment
to another, obstructs that of stock likewise; the quantity of stock
which can be employed in any branch of business depending very much
upon that of the labour which can be employed in it. Corporation laws,
however, give less obstruction to the free circulation of stock from
one place to another, than to that of labour. It is everywhere much
easier for a wealthy merchant to obtain the privilege of trading in a
town-corporate, than for a poor artificer to obtain that of working in
it.

The obstruction which corporation laws give to the free circulation of
labour is common, I believe, to every part of Europe. That which is
given to it by the poor laws is, so far as I know, peculiar to
England. It consists in the difficulty which a poor man finds in
obtaining a settlement, or even in being allowed to exercise his
industry in any parish but that to which he belongs. It is the labour
of artificers and manufacturers only of which the free circulation is
obstructed by corporation laws. The difficulty of obtaining
settlements obstructs even that of common labour. It may be worth
while to give some account of the rise, progress, and present state of
this disorder, the greatest, perhaps, of any in the police of England.

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

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

Some frauds, it is said, were committed in consequence of this
statute; parish officers sometime's bribing their own poor to go
clandestinely to another parish, and, by keeping themselves concealed
for forty days, to gain a settlement there, to the discharge of that
to which they properly belonged. It was enacted, therefore, by the 1st
of James II. that the forty days undisturbed residence of any person
necessary to gain a settlement, should be accounted only from the time
of his delivering notice, in writing, of the place of his abode and
the number of his family, to one of the church-wardens or overseers of
the parish where he came to dwell.

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

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

This statute, therefore, rendered it almost impracticable for a poor
man to gain a new settlement in the old way, by forty days
inhabitancy. But that it might not appear to preclude altogether the
common people of one' parish from ever establishing themselves with
security in another, it appointed four other ways by which a
settlement might be gained without any notice delivered or published.
The first was, by being taxed to parish rates and paying them; the
second, by being elected into an annual parish office, and serving in
it a year; the third, by serving an apprenticeship in the parish; the
fourth, by being hired into service there for a year, and continuing
in the same service during the whole of it. Nobody can gain a
settlement by either of the two first ways, but by the public deed of
the whole parish, who are too well aware of the consequences to adopt
any new-comer, who has nothing but his labour to support him, either
by taxing him to parish rates, or by electing him into a parish
office.

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

No independent workman, it is evident, whether labourer or artificer,
is likely to gain any new settlement, either by apprenticeship or by
service. When such a person, therefore, carried his industry to a new
parish, he was liable to be removed, how healthy and industrious
soever, at the caprice of any churchwarden or overseer, unless he
either rented a tenement of ten pounds a-year, a thing impossible for
one who has nothing but his labour to live by, or could give such
security for the discharge of the parish as two justices of the peace
should judge sufficient.

What security they shall require, indeed, is left altogether to their
discretion; but they cannot well require less than thirty pounds, it
having been enacted, that the purchase even of a freehold estate of
less than thirty pounds value, shall not gain any person a settlement,
as not being sufficient for the discharge of the parish. But this is a
security which scarce any man who lives by labour can give; and much
greater security is frequently demanded.

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

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

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

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

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

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

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

In ancient times, too, it was usual to attempt to regulate the profits
of merchants and other dealers, by regulating the price of provisions
and ether goods. The assize of bread is, so far as I know, the only
remnant of this ancient usage. Where there is an exclusive
corporation, it may, perhaps, be proper to regulate the price of the
first necessary of life; but, where there is none, the competition
will regulate it much better than any assize. The method of fixing the
assize of bread, established by the 31st of George II. could not be
put in practice in Scotland, on account of a defect in the law, its
execution depending upon the office of clerk of the market, which does
not exist there. This defect was not remedied till the third of George
III. The want of an assize occasioned no sensible inconveniency; and
the establishment of one in the few places where it has yet taken
place has produced no sensible advantage. In the greater part of the
towns in Scotland, however, there is an incorporation of bakers, who
claim exclusive privileges, though they are not very strictly guarded.
The proportion between the different rates, both of wages and profit,
in the different employments of labour and stock, seems not to be much
affected, as has already been observed, by the riches or poverty, the
advancing, stationary, or declining state of the society. Such
revolutions in the public welfare, though they affect the general
rates both of wages and profit, must, in the end, affect them equally
in all different employments. The proportion between them, therefore,
must remain the same, and cannot well be altered, at least for any
considerable time, by any such revolutions.




CHAPTER XI.

OF THE RENT OF LAND.

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

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

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

The sea in the neighbourhood of the islands of Shetland is more than
commonly abundant in fish, which makes a great part of the subsistence
of their inhabitants. But, in order to profit by the produce of the
water, they must have a habitation upon the neighbouring land. The
rent of the landlord is in proportion, not to what the farmer can make
by the land, but to what he can make both by the land and the water.
It is partly paid in sea-fish; and one of the very few instances in
which rent makes a part of the price of that commodity, is to be found
in that country.

The rent of land, therefore, considered as the price paid for the use
of the land, is naturally a monopoly price. It is not at all
proportioned to what the landlord may have laid out upon the
improvement of the land, or to what he can afford to take, but to what
the farmer can afford to give.

Such parts only of the produce of land can commonly be brought to
market, of which the ordinary price is sufficient to replace the stock
which must be employed in bringing them thither, together with its
ordinary profits. If the ordinary price is more than this, the surplus
part of it will naturally go to the rent of the land. If it is not
more, though the commodity may be brought to market, it can afford no
rent to the landlord. Whether the price is, or is not more, depends
upon the demand.

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

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

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


PART   I. --   Of the Produce of Land which always affords Rent.

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

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

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

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

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

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

But the relative values of those two different species of food, bread
and butcher's meat, are very different in the different periods of
agriculture. In its rude beginnings, the unimproved wilds, which then
occupy the far greater part of the country, are all abandoned to
cattle. There is more butcher's meat than bread; and bread, therefore,
is the food for which there is the greatest competition, and which
consequently brings the greatest price. At Buenos Ayres, we are told
by Ulloa, four reals, one-and-twenty pence halfpenny sterling, was,
forty or fifty years ago, the ordinary price of an ox, chosen from a
herd of two or three hundred. He says nothing of the price of bread,
probably because he found nothing remarkable about it. An ox there, he
says, costs little more than the labour of catching him. But corn can
nowhere be raised without a great deal of labour; and in a country
which lies upon the river Plate, at that time the direct road from
Europe to the silver mines of Potosi, the money-price of labour could
be very cheap. It is otherwise when cultivation is extended over the
greater part of the country. There is then more bread than butcher's
meat. The competition changes its direction, and the price of
butcher's meat becomes greater than the price of bread.

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

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

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

Thus, in the neighbourhood of a great town, the demand for milk, and
for forage to horses, frequently contribute, together with the high
price of butcher's meat, to raise the value of grass above what may be
called its natural proportion to that of corn. This local advantage,
it is evident, cannot be communicated to the lands at a distance.

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

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

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

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

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

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

The price paid by Prince Henry amounts to 3d. 4/5ths per pound weight
of the whole carcase, coarse and choice pieces taken together; and at
that rate the choice pieces could not have been sold by retail for
less than 4½d. or 5d. the pound.

In the parliamentary inquiry in 1764, the witnesses stated the price
of the choice pieces of the best beef to be to the consumer 4d. and
4½d. the pound; and the coarse pieces in general to be from seven
farthings to 2½d. and 2¾d.; and this, they said, was in general one
halfpenny dearer than the same sort of pieces had usually been sold in
the month of March. But even this high price is still a good deal
cheaper than what we can well suppose the ordinary retail price to
have been in the time of Prince Henry.

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

But in the twelve years preceding 1764 including that year, the
average price of the same measure of the best wheat at the same market
was £ 2:1:9½d.

In the first twelve years of the last century, therefore, wheat
appears to have been a good deal cheaper, and butcher's meat a good
deal dearer, than in the twelve years preceding 1764, including that
year.

In all great countries, the greater part of the cultivated lands are
employed in producing either food for men or food for cattle. The rent
and profit of these regulate the rent and profit of all other
cultivated land. If any particular produce afforded less, the land
would soon be turned into corn or pasture; and if any afforded more,
some part of the lands in corn or pasture would soon be turned to that
produce.

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

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

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

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

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

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

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

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

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

In Virginia and Maryland, the cultivation of tobacco is preferred, as
most profitable, to that of corn. Tobacco might be cultivated with
advantage through the greater part of Europe; but, in almost every
part of Europe, it has become a principal subject of taxation; and to
collect a tax from every different farm in the country where this
plant might happen to be cultivated, would be more difficult, it has
been supposed, than to levy one upon its importation at the
custom-house. The cultivation of tobacco has, upon this account, been
most absurdly prohibited through the greater part of Europe, which
necessarily gives a sort of monopoly to the countries where it is
allowed; and as Virginia and Maryland produce the greatest quantity of
it, they share largely, though with some competitors, in the advantage
of this monopoly. The cultivation of tobacco, however, seems not to be
so advantageous as that of sugar. I have never even heard of any
tobacco plantation that was improved and cultivated by the capital of
merchants who resided in Great Britain; and our tobacco colonies send
us home no such wealthy planters as we see frequently arrive from our
sugar islands. Though, from the preference given in those colonies to
the cultivation of tobacco above that of corn, it would appear that
the effectual demand of Europe for tobacco is not completely supplied,
it probably is more nearly so than that for sugar; and though the
present price of tobacco is probably more than sufficient to pay the
whole rent, wages, and profit, necessary for preparing and bringing it
to market, according to the rate at which they are commonly paid in
corn land, it must not be so much more as the present price of sugar.
Our tobacco planters, accordingly, have shewn the same fear of the
superabundance of tobacco, which the proprietors of the old vineyards
in France have of the superabundance of wine. By act of assembly, they
have restrained its cultivation to six thousand plants, supposed to
yield a thousand weight of tobacco, for every negro between sixteen
and sixty years of age. Such a negro, over and above this quantity of
tobacco, can manage, they reckon, four acres of Indian corn. To
prevent the market from being overstocked, too, they have sometimes,
in plentiful years, we are told by Dr Douglas {Douglas's Summary,vol.
ii. p. 379, 373.} (I suspect he has been ill informed), burnt a
certain quantity of tobacco for every negro, in the same manner as the
Dutch are said to do of spices. If such violent methods are necessary
to keep up the present price of tobacco, the superior advantage of its
culture over that of corn, if it still has any, will not probably be
of long continuance.

It is in this manner that the rent of the cultivated land, of which
the produce is human food, regulates the rent of the greater part of
other cultivated land. No particular produce can long afford less,
because the land would immediately be turned to another use; and if
any particular produce commonly affords more, it is because the
quantity of land which can be fitted for it is too small to supply the
effectual demand.

In Europe, corn is the principal produce of land, which serves
immediately for human food. Except in particular situations,
therefore, the rent of corn land regulates in Europe that of all other
cultivated land. Britain need envy neither the vineyards of France,
nor the olive plantations of Italy. Except in particular situations,
the value of these is regulated by that of corn, in which the
fertility of Britain is not much inferior to that of either of those
two countries.

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

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

A good rice field is a bog at all seasons, and at one season a bog
covered with water. It is unfit either for corn, or pasture, or
vineyard, or, indeed, for any other vegetable produce that is very
useful to men; and the lands which are fit for those purposes are not
fit for rice. Even in the rice countries, therefore, the rent of rice
lands cannot regulate the rent of the other cuitivated land which can
never be turned to that produce.

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

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

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

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


PART  II.  --  Of the Produce of Land, which sometimes does, and
sometimes does not, afford Rent.

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

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

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

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

The materials of lodging cannot always be transported to so great a
distance as those of clothing, and do not so readily become an object
of foreign commerce. When they are superabundant in the country which
produces them, it frequently happens, even in the present commercial
state of the world, that they are of no value to the landlord. A good
stone quarry in the neighbourhood of London would afford a
considerable rent. In many parts of Scotland and Wales it affords
none. Barren timber for building is of great value in a populous and
well-cultivated country, and the land which produces it affords a
considerable rent. But in many parts of North America, the landlord
would be much obliged to any body who would carry away the greater
part of his large trees. In some parts of the Highlands of Scotland,
the bark is the only part of the wood which, for want of roads and
water-carriage, can be sent to market; the timber is left to rot upon
the ground. When the materials of lodging are so superabundant, the
part made use of is worth only the labour and expense of fitting it
for that use. It affords no rent to the landlord, who generally grants
the use of it to whoever takes the trouble of asking it. The demand of
wealthier nations, however, sometimes enables him to get a rent for
it. The paving of the streets of London has enabled the owners of some
barren rocks on the coast of Scotland to draw a rent from what never
afforded any before. The woods of Norway, and of the coasts of the
Baltic, find a market in many parts of Great Britain, which they could
not find at home, and thereby afford some rent to their proprietors.

Countries are populous, not in proportion to the number of people whom
their produce can clothe and lodge, but in proportion to that of those
whom it can feed. When food is provided, it is easy to find the
necessary clothing and lodging. But though these are at hand, it may
often be difficult to find food. In some parts of the British
dominions, what is called a house may be built by one day's labour of
one man. The simplest species of clothing, the skins of animals,
require somewhat more labour to dress and prepare them for use. They
do not, however, require a great deal. Among savage or barbarous
nations, a hundredth, or little more than a hundredth part of the
labour of the whole year, will be sufficient to provide them with such
clothing and lodging as satisfy the greater part of the people. All
the other ninety-nine parts are frequently no more than enough to
provide them with food.

But when, by the improvement and cultivation of land, the labour of
one family can provide food for two, the labour of half the society
becomes sufficient to provide food for the whole. The other half,
therefore, or at least the greater part of them, can be employed in
providing other things, or in satisfying the other wants and fancies
of mankind. Clothing and lodging, household furniture, and what is
called equipage, are the principal objects of the greater part of
those wants and fancies. The rich man consumes no more food than his
poor neighbour. In quality it may be very different, and to select and
prepare it may require more labour and art; but in quantity it is very
nearly the same. But compare the spacious palace and great wardrobe of
the one, with the hovel and the few rags of the other, and you will be
sensible that the difference between their clothing, lodging, and
household furniture, is almost as great in quantity as it is in
quality. The desire of food is limited in every man by the narrow
capacity of the human stomach; but the desire of the conveniencies and
ornaments of building, dress, equipage, and household furniture, seems
to have no limit or certain boundary. Those, therefore, who have the
command of more food than they themselves can consume, are always
willing to exchange the surplus, or, what is the same thing, the price
of it, for gratifications of this other kind. What is over and above
satisfying the limited desire, is given for the amusement of those
desires which cannot be satisfied, but seem to be altogether endless.
The poor, in order to obtain food, exert themselves to gratify those
fancies of the rich; and to obtain it more certainly, they vie with
one another in the cheapness and perfection of their work. The number
of workmen increases with the increasing quantity of food, or with the
growing improvement and cultivation of the lands; and as the nature of
their business admits of the utmost subdivisions of labour, the
quantity of materials which they can work up, increases in a much
greater proportion than their numbers. Hence arises a demand for every
sort of material which human invention can employ, either usefully or
ornamentally, in building, dress, equipage, or household furniture;
for the fossils and minerals contained in the bowels of the earth, the
precious metals, and the precious stones.

Food is, in this manner, not only the original source of rent, but
every other part of the produce of land which afterwards affords rent,
derives that part of its value from the improvement of the powers of
labour in producing food, by means of the improvement and cultivation
of land.

Those other parts of the produce of land, however, which afterwards
afford rent, do not afford it always. Even in improved and cultivated
countries, the demand for them is not always such as to afford a
greater price than what is sufficient to pay the labour, and replace,
together with its ordinary profits, the stock which must be employed
in bringing them to market. Whether it is or is not such, depends upon
different circumstances.

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

A mine of any kind may be said to be either fertile or barren,
according as the quantity of mineral which can be brought from it by a
certain quantity of labour, is greater or less than what can be
brought by an equal quantity from the greater part of other mines of
the same kind.

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

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

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

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

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

Whatever may be the price of wood, if that of coals is such that the
expense of a coal fire is nearly equal to that of a wood one we may be
assured, that at that place, and in these circumstances, the price of
coals is as high as it can be. It seems to be so in some of the inland
parts of England, particularly in Oxfordshire, where it is usual, even
in the fires of the common people, to mix coals and wood together, and
where the difference in the expense of those two sorts of fuel cannot,
therefore, be very great. Coals, in the coal countries, are everywhere
much below this highest price. If they were not, they could not bear
the expense of a distant carriage, either by land or by water. A small
quantity only could be sold; and the coal masters and the coal
proprietors find it more for their interest to sell a great quantity
at a price somewhat above the lowest, than a small quantity at the
highest. The most fertile coal mine, too, regulates the price of coals
at all the other mines in its neighbourhood. Both the proprietor and
the undertaker of the work find, the one that he can get a greater
rent, the other that he can get a greater profit, by somewhat
underselling all their neighbours. Their neighbours are soon obliged
to sell at the same price, though they cannot so well afford it, and
though it always diminishes, and sometimes takes away altogether, both
their rent and their profit. Some works are abandoned altogether;
others can afford no rent, and can be wrought only by the proprietor.

The lowest price at which coals can be sold for any considerable time,
is, like that of all other commodities, the price which is barely
sufficient to replace, together with its ordinary profits, the stock
which must be employed in bringing them to market. At a coal mine for
which the landlord can get no rent, but, which he must either work
himself or let it alone altogether, the price of coals must generally
be nearly about this price.

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

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

The price of coals in Westmoreland or Shropshire can have little
effect on their price at Newcastle; and their price in the Lionnois
can have none at all. The productions of such distant coal mines can
never be brought into competition with one another. But the
productions of the most distant metallic mines frequently may, and in
fact commonly are.

The price, therefore, of the coarse, and still more that of the
precious metals, at the most fertile mines in the world, must
necessarily more or less affect their price at every other in it. The
price of copper in Japan must have some influence upon its price at
the copper mines in Europe. The price of silver in Peru, or the
quantity either of labour or of other goods which it will purchase
there, must have some influence on its price, not only at the silver
mines of Europe, but at those of China. After the discovery of the
mines of Peru, the silver mines of Europe were, the greater part of
them, abandoned. The value of silver was so much reduced, that their
produce could no longer pay the expense of working them, or replace,
with a profit, the food, clothes, lodging, and other necessaries which
were consumed in that operation. This was the case, too, with the
mines of Cuba and St. Domingo, and even with the ancient mines of
Peru, after the discovery of those of Potosi.

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

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

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

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

As the sovereign, however, derives a considerable part of his revenue
from the produce of silver mines, the law in Peru gives every possible
encouragement to the discovery and working of new ones. Whoever
discovers a new mine, is entitled to measure off two hundred and
forty-six feet in length, according to what he supposes to be the
direction of the vein, and half as much in breadth. He becomes
proprietor of this portion of the mine, and can work it without paving
any acknowledgment to the landlord. The interest of the duke of
Cornwall has given occasion to a regulation nearly of the same kind in
that ancient dutchy. In waste and uninclosed lands, any person who
discovers a tin mine may mark out its limits to a certain extent,
which is called bounding a mine. The bounder becomes the real
proprietor of the mine, and may either work it himself, or give it in
lease to another, without the consent of the owner of the land, to
whom, however, a very small acknowledgment must be paid upon working
it. In both regulations, the sacred rights of private property are
sacrificed to the supposed interests of public revenue.

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

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

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

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

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

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

The value, both of the produce and of the rent, the real revenue which
they afforded, both to the public and to the proprietor, might have
been the same.

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

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

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


PART III. --  Of the variations in the Proportion between the
respective Values of that sort of Produce which always affords Rent,
and of that which sometimes does, and sometimes does not, afford Rent.

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

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

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

If, by the general progress of improvement, the demand of this market
should increase, while, at the same time, the supply did not increase
in the same proportion, the value of silver would gradually rise in
proportion to that of corn. Any given quantity of silver would
exchange for a greater and a greater quantity of corn; or, in other
words, the average money price of corn would gradually become cheaper
and cheaper.

If, on the contrary, the supply, by some accident, should increase,
for many years together, in a greater proportion than the demand, that
metal would gradually become cheaper and cheaper; or, in other words,
the average money price of corn would, in spite of all improvements,
gradually become dearer and dearer.

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

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

Digression concerning the Variations in the value of Silver during the
Course of the Four last Centuries.

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

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

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

In 1309, Ralph de Born, prior of St Augustine's, Canterbury, gave a
feast upon his installation-day, of which William Thorn has preserved,
not only the bill of fare, but the prices of many particulars. In that
feast were consumed, 1st, fifty-three quarters of wheat, which cost
nineteen pounds, or seven shillings, and twopence a-quarter, equal to
about one-and-twenty shillings and sixpence of our present money;
2dly, fifty-eight quarters of malt, which cost seventeen pounds ten
shillings, or six shillings a-quarter, equal to about eighteen
shillings of our present money; 3dly, twenty quarters of oats, which
cost four pounds, or four shillings a-quarter, equal to about twelve
shillings of our present money. The prices of malt and oats seem here
to lie higher than their ordinary proportion to the price of wheat.

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

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

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

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

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

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

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

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

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

This rise in the value of silver, in proportion to that of corn, may
either have been owing altogether to the increase of the demand for
that metal, in consequence of increasing improvement and cultivation,
the supply, in the mean time, continuing the same as before; or, the
demand continuing the same as before, it may have been owing
altogether to the gradual diminution of the supply: the greater part
of the mines which were then known in the world being much exhausted,
and, consequently, the expense of working them much increased; or it
may have been owing partly to the one, and partly to the other of
those two circumstances. In the end of the fifteenth and beginning of
the sixteenth centuries, the greater part of Europe was approaching
towards a more settled from of government than it had enjoyed for
several ages before. The increase of security would naturally increase
industry and improvement; and the demand for the precious metals, as
well as for every other luxury and ornament, would naturally increase
with the increase of riches. A greater annual produce would require a
greater quantity of coin to circulate it; and a greater number of rich
people would require a greater quantity of plate and other ornaments
of silver. It is natural to suppose, too, that the greater part of the
mines which then supplied the European market with silver might be a
good deal exhausted, and have become more expensive in the working.
They had been wrought, many of them, from the time of the Romans.

It has been the opinion, however, of the greater part of those who
have written upon the prices of commodities in ancient times, that,
from the Conquest, perhaps from the invasion of Julius Caesar, till
the discovery of the mines of America, the value of silver was
continually diminishing. This opinion they seem to have been led into,
partly by the observations which they had occasion to make upon the
prices both of corn and of some other parts of the rude produce of
land, and partly by the popular notion, that as the quantity of silver
naturally increases in every country with the increase of wealth, so
its value diminishes as it quantity increases.

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

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

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

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

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

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

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

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

The reader will find at the end of this chapter all the prices of
wheat which have been collected by Fleetwood, from 1202 to 1597, both
inclusive, reduced to the money of the present times, and digested,
according to the order of time, into seven divisions of twelve years
each. At the end of each division, too, he will find the average price
of the twelve years of which it consists. In that long period of time,
Fleetwood has been able to collect the prices of no more than eighty
years; so that four years are wanting to make out the last twelve
years. I have added, therefore, from the accounts of Eton college, the
prices of 1598, 1599, 1600, and 1601. It is the only addition which I
have made. The reader will see, that from the beginning of the
thirteenth till after the middle of the sixteenth century, the average
price of each twelve years grows gradually lower and lower; and that
towards the end of the sixteenth century it begins to rise again. The
prices, indeed, which Fleetwood has been able to collect, seem to have
been those chiefly which were remarkable for extraordinary dearness or
cheapness; and I do not pretend that any very certain conclusion can
be drawn from them. So far, however, as they prove any thing at all,
they confirm the account which I have been endeavouring to give.
Fleetwood himself, however, seems, with most other writers, to have
believed, that, during all this period, the value of silver, in
consequence of its increasing abundance, was continually diminishing.
The prices of corn, which he himself has collected, certainly do not
agree with this opinion. They agree perfectly with that of Mr Dupré de
St Maur, and with that which I have been endeavouring to explain.
Bishop Fleetwood and Mr Dupré de St Maur are the two authors who seem
to have collected, with the greatest diligence and fidelity, the
prices of things in ancient times. It is some what curious that,
though their opinions are so very different, their facts, so far as
they relate to the price of corn at least, should coincide so very
exactly.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

From 1595 to 1620, both inclusive, the average price of the quarter of
nine bushels of the best wheat, at Windsor market, appears, from the
accounts of Eton college, to have been £ 2:1:6 9/13. From which sum,
neglecting the fraction, and deducting a ninth, or 4s. 7 1/3d., the
price of the quarter of eight bushels comes out to have been £ 1:16:10
2/3. And from this sum, neglecting likewise the fraction, and
deducting a ninth, or 4s. 1 1/9d., for the difference between the
price of the best wheat and that of the middle wheat, the price of the
middle wheat comes out to have been about £ 1:12:8 8/9, or about six
ounces and one-third of an ounce of silver.

From 1621 to 1636, both inclusive, the average price of the same
measure of the best wheat, at the same market, appears, from the same
accounts, to have been £ 2:10s.; from which, making the like
deductions as in the foregoing case, the average price of the quarter
of eight bushels of middle wheat comes out to have been £ 1:19:6, or
about seven ounces and two-thirds of an ounce of silver.

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

From 1637 to 1700, both inclusive, being the sixty-four last years of
the last century the average price of the quarter of nine bushels of
the best wheat, at Windsor market, appears, from the same accounts, to
have been £ 2:11:0 1/3, which is only 1s. 0 1/3d. dearer than it had
been during the sixteen years before. But, in the course of these
sixty-four years, there happened two events, which must have produced
a much greater scarcity of corn than what the course of the season is
would otherwise have occasioned, and which, therefore, without
supposing any further reduction in the value of silver, will much more
than account for this very small enhancement of price.

The first of these events was the civil war, which, by discouraging
tillage and interrupting commerce, must have raised the price of corn
much above what the course of the seasons would otherwise have
occasioned. It must have had this effect, more or less, at all the
different markets in the kingdom, but particularly at those in the
neighbourhood of London, which require to be supplied from the
greatest distance. In 1648, accordingly, the price of the best wheat,
at Windsor market, appears, from the same accounts, to have been £
4:5s., and, in 1649, to have been £ 4, the quarter of nine bushels.
The excess of those two years above £ 2:10s. (the average price of the
sixteen years preceding 1637 is £ 3:5s., which, divided among the
sixty four last years of the last century, will alone very nearly
account for that small enhancement of price which seems to have taken
place in them.) These, however, though the highest, are by no means the
only high prices which seem to have been occasioned by the civil wars.

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

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

In the course of the present century, the silver coin has not at any
time been more below its standard weight than it is at present. But
though very much defaced, its value has been kept up by that of the
gold coin, for which it is exchanged. For though, before the late
recoinage, the gold coin was a good deal defaced too, it was less so
than the silver. In 1695, on the contrary, the value of the silver
coin was not kept up by the gold coin; a guinea then commonly
exchanging for thirty shillings of the worn and clipt silver. Before
the late recoinage of the gold, the price of silver bullion was seldom
higher than five shillings and sevenpence an ounce, which is but
fivepence above the mint price. But in 1695, the common price of
silver bullion was six shillings and fivepence an ounce, {Lowndes's
Essay on the Silver Coin, 68.} which is fifteen pence above the mint
price. Even before the late recoinage of the gold, therefore, the
coin, gold and silver together, when compared with silver bullion, was
not supposed to be more than eight per cent. below its standard value,
In 1695, on the contrary, it had been supposed to be near
five-and-twenty per cent. below that value. But in the beginning of
the present century, that is, immediately after the great recoinage in
King William's time, the greater part of the current silver coin must
have been still nearer to its standard weight than it is at present.
In the course of the present century, too, there has been no great
public calamity, such as a civil war, which could either discourage
tillage, or interrupt the interior commerce of the country. And though
the bounty which has taken place through the greater part of this
century, must always raise the price of corn somewhat higher than it
otherwise would be in the actual state of tillage; yet, as in the
course of this century, the bounty has had full time to produce all
the good effects commonly imputed to it to encourage tillage, and
thereby to increase the quantity of corn in the home market, it may,
upon the principles of a system which I shall explain and examine
hereafter, be supposed to have done something to lower the price of
that commodity the one way, as well as to raise it the other. It is by
many people supposed to have done more. In the sixty-four years of the
present century, accordingly, the average price of the quarter of nine
bushels of the best wheat, at Windsor market, appears, by the accounts
of Eton college, to have been £ 2:0:6 10/32, which is about ten
shillings and sixpence, or more than five-and-twenty percent. cheaper
than it had been during the sixty-four last years of the last century;
and about nine shillings and sixpence cheaper than it had been during
the sixteen years preceding 1636, when the discovery of the abundant
mines of America may be supposed to have produced its full effect; and
about one shilling cheaper than it had been in the twenty-six years
preceding 1620, before that discovery can well be supposed to have
produced its full effect. According to this account, the average price
of middle wheat, during these sixty-four first years of the present
century, comes out to have been about thirty-two shillings the quarter
of eight bushels.

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


In 1687, the price of the quarter of nine bushels of the best wheat,
at Windsor market, was £ 1:5:2, the lowest price at which it had ever
been from 1595.

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

In 1688 was granted the parliamentary bounty upon the exportation of
corn. The country gentlemen, who then composed a still greater
proportion of the legislature than they do at present, had felt that
the money price of corn was falling. The bounty was an expedient to
raise it artificially to the high price at which it had frequently
been sold in the times of Charles I. and II. It was to take place,
therefore, till wheat was so high as fortyeight shillings the quarter;
that is, twenty shillings, or 5-7ths dearer than Mr King had, in that
very year, estimated the grower's price to be in times of moderate
plenty. If his calculations deserve any part of the reputation which
they have obtained very universally, eight-and-forty shillings the
quarter was a price which, without some such expedient as the bounty,
could not at that time be expected, except in years of extraordinary
scarcity. But the government of King William was not then fully
settled. It was in no condition to refuse anything to the country
gentlemen, from whom it was, at that very time, soliciting the first
establishment of the annual land-tax,

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

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

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

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

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

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

The high price of corn during these ten or twelve years past, indeed,
has occasioned a suspicion that the real value of silver still
continues to fall in the European market. This high price of corn,
however, seems evidently to have been the effect of the extraordinary
unfavourableness of the seasons, and ought, therefore, to be regarded,
not as a permanent, but as a transitory and occasional event. The
seasons, for these ten or twelve years past, have been unfavourable
through the greater part of Europe; and the disorders of Poland have
very much increased the scarcity in all those countries, which, in
dear years, used to be supplied from that market. So long a course of
bad seasons, though not a very common event, is by no means a singular
one; and whoever has inquired much into the history of the prices of
corn in former times, will be at no loss to recollect several other
examples of the same kind. Ten years of extraordinary scarcity,
besides, are not more wonderful than ten years of extraordinary
plenty. The low price of corn, from 1741 to 1750, both inclusive, may
very well be set in opposition to its high price during these last
eight or ten years. From 1741 to 1750, the average price of the
quarter of nine bushels of the best wheat, at Windsor market, it
appears from the accounts of Eton college, was only £ 1:13:9 4/5,
which is nearly 6s.3d. below the average price of the sixty-four first
years of the present century. The average price of the quarter of
eight bushels of middle wheat comes out, according to this account, to
have been, during these ten years, only £ 1:6:8.

Between 1741 and 1750, however, the bounty must have hindered the
price of corn from falling so low in the home market as it naturally
would have done. During these ten years, the quantity of all sorts of
grain exported, it appears from the custom-house books, amounted to no
less than 8,029,156 quarters, one bushel. The bounty paid for this
amounted to £ 1,514,962:17:4 1/2. In 1749, accordingly, Mr Pelham, at
that time prime minister, observed to the house of commons, that, for
the three years preceding, a very extraordinary sum had been paid as
bounty for the exportation of corn. He had good reason to make this
observation, and in the following year he might have had still better.
In that single year, the bounty paid amounted to no less than £
324,176:10:6. {See Tracts on the Corn Trade, Tract 3,} It is
unnecessary to observe how much this forced exportation must have
raised the price of corn above what it otherwise would have been in
the home market.

At the end of the accounts annexed to this chapter the reader will
find the particular account of those ten years separated from the
rest. He will find there, too, the particular account of the preceding
ten years, of which the average is likewise below, though not so much
below, the general average of the sixty-four first years of the
century. The year 1740, however, was a year of extraordinary scarcity.
These twenty years preceding 1750 may very well be set in opposition
to the twenty preceding 1770. As the former were a good deal below the
general average of the century, notwithstanding the intervention of
one or two dear years; so the latter have been a good deal above it,
notwithstanding the intervention of one or two cheap ones, of 1759,
for example. If the former have not been as much below the general
average as the latter have been above it, we ought probably to impute
it to the bounty. The change has evidently been too sudden to be
ascribed to any change in the value of silver, which is always slow
and gradual. The suddenness of the effect can be accounted for only by
a cause which can operate suddenly, the accidental variations of the
seasons.

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

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

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

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

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

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

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

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

But in the East Indies, particularly in China and Indostan, the value
of the precious metals, when the Europeans first began to trade to
those countries, was much higher than in Europe; and it still
continues to be so. In rice countries, which generally yield two,
sometimes three crops in the year, each of them more plentiful than
any common crop of corn, the abundance of food must be much greater
than in any corn country of equal extent. Such countries are
accordingly much more populous. In them, too, the rich, having a
greater superabundance of food to dispose of beyond what they
themselves can consume, have the means of purchasing a much greater
quantity of the labour of other people. The retinue of a grandee in
China or Indostan accordingly is, by all accounts, much more numerous
and splendid than that of the richest subjects in Europe. The same
superabundance of food, of which they have the disposal, enables them
to give a greater quantity of it for all those singular and rare
productions which nature furnishes but in very small quantities; such
as the precious metals and the precious stones, the great objects of
the competition of the rich. Though the mines, therefore, which
supplied the Indian market, had been as abundant as those which
supplied the European, such commodities would naturally exchange for a
greater quantity of food in India than in Europe. But the mines which
supplied the Indian market with the precious metals seem to have been
a good deal less abundant, and those which supplied it with the
precious stones a good deal more so, than the mines which supplied the
European. The precious metals, therefore, would naturally exchange in
India for a somewhat greater quantity of the precious stones, and for
a much greater quantity of food than in Europe. The money price of
diamonds, the greatest of all superfluities, would be somewhat lower,
and that of food, the first of all necessaries, a great deal lower in
the one country than in the other. But the real price of labour, the
real quantity of the necessaries of life which is given to the
labourer, it has already been observed, is lower both in China and
Indostan, the two great markets of India, than it is through the
greater part of Europe. The wages of the labourer will there purchase
a smaller quantity of food: and as the money price of food is much
lower in India than in Europe, the money price of labour is there
lower upon a double account; upon account both of the small quantity
of food which it will purchase, and of the low price of that food. But
in countries of equal art and industry, the money price of the greater
part of manufactures will be in proportion to the money price of
labour; and in manufacturing art and industry, China and Indostan,
though inferior, seem not to be much inferior to any part of Europe.
The money price of the greater part of manufactures, therefore, will
naturally be much lower in those great empires than it is anywhere in
Europe. Through the greater part of Europe, too, the expense of
land-carriage increases very much both the real and nominal price of
most manufactures. It costs more labour, and therefore more money, to
bring first the materials, and afterwards the complete manufacture to
market. In China and Indostan, the extent and variety of inland
navigations save the greater part of this labour, and consequently of
this money, and thereby reduce still lower both the real and the
nominal price of the greater part of their manufactures. Upon all
these accounts, the precious metals are a commodity which it always
has been, and still continues to be, extremely advantageous to carry
from Europe to India. There is scarce any commodity which brings a
better price there; or which, in proportion to the quantity of labour
and commodities which it costs in Europe, will purchase or command a
greater quantity of labour and commodities in India. It is more
advantageous, too, to carry silver thither than gold; because in
China, and the greater part of the other markets of India, the
proportion between fine silver and fine gold is but as ten, or at most
as twelve to one; whereas in Europe it is as fourteen or fifteen to
one. In China, and the greater part of the other markets of India,
ten, or at most twelve ounces of silver, will purchase an ounce of
gold; in Europe, it requires from fourteen to fifteen ounces. In the
cargoes, therefore, of the greater part of European ships which sail
to India, silver has generally been one of the most valuable articles.
It is the most valuable article in the Acapulco ships which sail to
Manilla. The silver of the new continent seems, in this manner, to be
one of the principal commodities by which the commerce between the two
extremities of the old one is carried on; and it is by means of it, in
a great measure, that those distant parts of the world are connected
with one another.

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

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

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

According to Mr Meggens {Postscript to the Universal Merchant p. 15
and 16. This postscript was not printed till 1756, three years after
the publication of the book, which has never had a second edition. The
postscript is, therefore, to be found in few copies; it corrects
several errors in the book.}, the annual importation of the precious
metals into Spain, at an average of six years, viz. from 1748 to 1753,
both inclusive, and into Portugal, at an average of seven years, viz.
from 1747 to 1753, both inclusive, amounted in silver to 1,101,107
pounds weight, and in gold to 49,940 pounds weight. The silver, at
sixty two shillings the pound troy, amounts to £ 3,413,431:10s.
sterling. The gold, at forty-four guineas and a half the pound troy,
amounts to £ 2,333,446:14s. sterling. Both together amount to £
5,746,878:4s. sterling. The account of what was imported under
register, he assures us, is exact. He gives us the detail of the
particular places from which the gold and silver were brought, and of
the particular quantity of each metal, which, according to the
register, each of them afforded. He makes an allowance, too, for the
quantity of each metal which, he supposes, may have been smuggled. The
great experience of this judicious merchant renders his opinion of
considerable weight.

According to the eloquent, and sometimes well-informed, author of the
Philosophical and Political History of the Establishment of the
Europeans in the two Indies, the annual importation of registered gold
and silver into Spain, at an average of eleven years, viz. from 1754
to 1764, both inclusive, amounted to 13,984,185 3/5 piastres of ten
reals. On account of what may have been smuggled, however, the whole
annual importation, he supposes, may have amounted to seventeen
millions of piastres, which, at 4s. 6d. the piastre, is equal to £
3,825,000 sterling. He gives the detail, too, of the particular places
from which the gold and silver were brought, and of the particular
quantities of each metal, which according to the register, each of
them afforded. He informs us, too, that if we were to judge of the
quantity of gold annually imported from the Brazils to Lisbon, by the
amount of the tax paid to the king of Portugal, which it seems, is
one-fifth of the standard metal, we might value it at eighteen
millions of cruzadoes, or forty-five millions of French livres, equal
to about twenty millions sterling. On account of what may have been
smuggled, however, we may safely, he says, add to this sum an eighth
more, or £ 250,000 sterling, so that the whole will amount to £
2,250,000 sterling. According to this account, therefore, the whole
annual importation of the precious metals into both Spain and
Portugal, mounts to about £ 6,075,000 sterling.

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

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

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

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

Variations in the Proportion between the respective Values of Gold and
Silver.

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

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

The proportion between the quantities of gold and silver annually
imported into Europe, according to Mr Meggens' account, is as one to
twenty-two nearly; that is, for one ounce of gold there are imported a
little more than twenty-two ounces of silver. The great quantity of
silver sent annually to the East Indies reduces, he supposes, the
quantities of those metals which remain in Europe to the proportion of
one to fourteen or fifteen, the proportion of their values. The
proportion between their values, he seems to think, must necessarily
be the same as that between their quantities, and would therefore be
as one to twenty-two, were it not for this greater exportation of
silver.

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

The quantity of silver commonly in the market, it is probable, is much
greater in proportion to that of gold, than the value of a certain
quantity of gold is to that of an equal quantity of silver. The whole
quantity of a cheap commodity brought to market is commonly not only
greater, but of greater value, than the whole quantity of a dear one.
The whole quantity of bread annually brought to market, is not only
greater, but of greater value, than the whole quantity of butcher's
meat; the whole quantity of butcher's meat, than the whole quantity of
poultry; and the whole quantity of poultry, than the whole quantity of
wild fowl. There are so many more purchasers for the cheap than for
the dear commodity, that, not only a greater quantity of it, but a
greater value can commonly be disposed of. The whole quantity,
therefore, of the cheap commodity, must commonly be greater in
proportion to the whole quantity of the dear one, than the value of a
certain quantity of the dear one, is to the value of an equal quantity
of the cheap one. When we compare the precious metals with one
another, silver is a cheap, and gold a dear commodity. We ought
naturally to expect, therefore, that there should always be in the
market, not only a greater quantity, but a greater value of silver
than of gold. Let any man, who has a little of both, compare his own
silver with his gold plate, and he will probably find, that not only
the quantity, but the value of the former, greatly exceeds that of the
latter. Many people, besides, have a good deal of silver who have no
gold plate, which, even with those who have it, is generally confined
to watch-cases, snuff-boxes, and such like trinkets, of which the
whole amount is seldom of great value. In the British coin, indeed,
the value of the gold preponderates greatly, but it is not so in that
of all countries. In the coin of some countries, the value of the two
metals is nearly equal. In the Scotch coin, before the union with
England, the gold preponderated very little, though it did somewhat
{See Ruddiman's Preface to Anderson's Diplomata, etc. Scotiae.}, as it
appears by the accounts of the mint. In the coin of many countries the
silver preponderates. In France, the largest sums are commonly paid in
that metal, and it is there difficult to get more gold than what is
necessary to carry about in your pocket. The superior value, however,
of the silver plate above that of the gold, which takes place in all
countries, will much more than compensate the preponderancy of the
gold coin above the silver, which takes place only in some countries.

Though, in one sense of the word, silver always has been, and probably
always will be, much cheaper than gold; yet, in another sense, gold
may perhaps, in the present state of the Spanish market, be said to be
somewhat cheaper than silver. A commodity may be said to be dear or
cheap not only according to the absolute greatness or smallness of its
usual price, but according as that price is more or less above the
lowest for which it is possible to bring it to market for any
considerable time together. This lowest price is that which barely
replaces, with a moderate profit, the stock which must be employed in
bringing the commodity thither. It is the price which affords nothing
to the landlord, of which rent makes not any component part, but which
resolves itself altogether into wages and profit. But, in the present
state of the Spanish market, gold is certainly somewhat nearer to this
lowest price than silver. The tax of the king of Spain upon gold is
only one-twentieth part of the standard metal, or five per cent.;
whereas his tax upon silver amounts to one-tenth part of it, or to ten
per cent. In these taxes, too, it has already been observed, consists
the whole rent of the greater part of the gold and silver mines of
Spanish America; and that upon gold is still worse paid than that upon
silver. The profits of the undertakers of gold mines, too, as they
more rarely make a fortune, must, in general, be still more moderate
than those of the undertakers of silver mines. The price of Spanish
gold, therefore, as it affords both less rent and less profit, must,
in the Spanish market, be somewhat nearer to the lowest price for
which it is possible to bring it thither, than the price of Spanish
silver. When all expenses are computed, the whole quantity of the one
metal, it would seem, cannot, in the Spanish market, be disposed of so
advantageously as the whole quantity of the other. The tax, indeed, of
the king of Portugal upon the gold of the Brazils, is the same with
the ancient tax of the king of Spain upon the silver of Mexico and
Peru; or one-fifth part of the standard metal. It may therefore be
uncertain, whether, to the general market of Europe, the whole mass of
American gold comes at a price nearer to the lowest for which it is
possible to bring it thither, than the whole mass of American silver.

The price of diamonds and other precious stones may, perhaps, be still
nearer to the lowest price at which it is possible to bring them to
market, than even the price of gold.

Though it is not very probable that any part of a tax, which is not
only imposed upon one of the most proper subjects of taxation, a mere
luxury and superfluity, but which affords so very important a revenue
as the tax upon silver, will ever be given up as long as it is
possible to pay it; yet the same impossibility of paying it, which, in
1736. made it necessary to reduce it from one-fifth to one-tenth, may
in time make it necessary to reduce it still further; in the same
manner as it made it necessary to reduce the tax upon gold to
one-twentieth. That the silver mines of Spanish America, like all
other mines, become gradually more expensive in the working, on
account of the greater depths at which it is necessary to carry on the
works, and of the greater expense of drawing out the water, and of
supplying them with fresh air at those depths, is acknowledged by
everybody who has inquired into the state of those mines.

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

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

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

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

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

Grounds of the suspicion that the Value of Silver still continues to
decrease.

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

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

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

Different Effects of the Progress of Improvement upon three different
sorts of rude Produce.

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

First Sort. -- The first sort of rude produce, of which the price
rises in the progress of improvement, is that which it is scarce in
the power of human industry to multiply at all. It consists in those
things which nature produces only in certain quantities, and which
being of a very perishable nature, it is impossible to accumulate
together the produce of many different seasons. Such are the greater
part of rare and singular birds and fishes, many different sorts of
game, almost all wild-fowl, all birds of passage in particular, as
well as many other things. When wealth, and the luxury which
accompanies it, increase, the demand for these is likely to increase
with them, and no effort of human industry may be able to increase the
supply much beyond what it was before this increase of the demand. The
quantity of such commodities, therefore, remaining the same, or nearly
the same, while the competition to purchase them is continually
increasing, their price may rise to any degree of extravagance, and
seems not to be limited by any certain boundary. If woodcocks should
become so fashionable as to sell for twenty guineas a-piece, no effort
of human industry could increase the number of those brought to
market, much beyond what it is at present. The high price paid by the
Romans, in the time of their greatest grandeur, for rare birds and
fishes, may in this manner easily be accounted for. These prices were
not the effects of the low value of silver in those times, but of the
high value of such rarities and curiosities as human industry could
not multiply at pleasure. The real value of silver was higher at Rome,
for sometime before, and after the fall of the republic, than it is
through the greater part of Europe at present. Three sestertii equal
to about sixpence sterling, was the price which the republic paid for
the modius or peck of the tithe wheat of Sicily. This price, however,
was probably below the average market price, the obligation to deliver
their wheat at this rate being considered as a tax upon the Sicilian
farmers. When the Romans, therefore, had occasion to order more corn
than the tithe of wheat amounted to, they were bound by capitulation
to pay for the surplus at the rate of four sestertii, or eightpence
sterling the peck; and this had probably been reckoned the moderate
and reasonable, that is, the ordinary or average contract price of
those times; it is equal to about one-and-twenty shillings the
quarter. Eight-and-twenty shillings the quarter was, before the late
years of scarcity, the ordinary contract price of English wheat, which
in quality is inferior to the Sicilian, and generally sells for a
lower price in the European market. The value of silver, therefore, in
those ancient times, must have been to its value in the present, as
three to four inversely; that is, three ounces of silver would then
have purchased the same quantity of labour and commodities which four
ounces will do at present. When we read in Pliny, therefore, that
Seius {Lib. X, c. 29.} bought a white nightingale, as a present for
the empress Agrippina, at the price of six thousand sestertii, equal
to about fifty pounds of our present money; and that Asinius Celer
{Lib. IX, c. 17.} purchased a surmullet at the price of eight thousand
sestertii, equal to about sixty-six pounds thirteen shillings and
fourpence of our present money; the extravagance of those prices, how
much soever it may surprise us, is apt, notwithstanding, to appear to
us about one third less than it really was. Their real price, the
quantity of labour and subsistence which was given away for them, was
about one-third more than their nominal price is apt to express to us
in the present times. Seius gave for the nightingale the command of a
quantity of labour and subsistence, equal to what £ 66:13: 4d. would
purchase in the present times; and Asinius Celer gave for a surmullet
the command of a quantity equal to what £ 88:17: 9d. would purchase.
What occasioned the extravagance of those high prices was, not so much
the abundance of silver, as the abundance of labour and subsistence,
of which those Romans had the disposal, beyond what was necessary for
their own use. The quantity of silver, of which they had the disposal,
was a good deal less than what the command of the same quantity of
labour and subsistence would have procured to them in the present
times.

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

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

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

In all new colonies, the great quantity of waste land, which can for
many years be applied to no other purpose but the feeding of cattle,
soon renders them extremely abundant; and in every thing great
cheapness is the necessary consequence of great abundance. Though all
the cattle of the European colonies in America were originally carried
from Europe, they soon multiplied so much there, and became of so
little value, that even horses were allowed to run wild in the woods,
without any owner thinking it worth while to claim them. It must be a
long time after the first establishment of such colonies, before it
can become profitable to feed cattle upon the produce of cultivated
land. The same causes, therefore, the want of manure, and the
disproportion between the stock employed in cultivation and the land
which it is destined to cultivate, are likely to introduce there a
system of husbandry, not unlike that which still continues to take
place in so many parts of Scotland. Mr Kalm, the Swedish traveller,
when he gives an account of the husbandry of some of the English
colonies in North America, as he found it in 1749, observes,
accordingly, that he can with difficulty discover there the character
of the English nation, so well skilled in all the different branches
of agriculture. They make scarce any manure for their corn fields, he
says; but when one piece of ground has been exhausted by continual
cropping, they clear and cultivate another piece of fresh land; and
when that is exhausted, proceed to a third. Their cattle are allowed
to wander through the woods and other uncultivated grounds, where they
are half-starved; having long ago extirpated almost all the annual
grasses, by cropping them too early in the spring, before they had
time to form their flowers, or to shed their seeds. {Kalm's Travels,
vol 1, pp. 343, 344.} The annual grasses were, it seems, the best
natural grasses in that part of North America; and when the Europeans
first settled there, they used to grow very thick, and to rise three
or four feet high. A piece of ground which, when he wrote, could not
maintain one cow, would in former times, he was assured, have
maintained four, each of which would have given four times the
quantity of milk which that one was capable of giving. The poorness of
the pasture had, in his opinion, occasioned the degradation of their
cattle, which degenerated sensibly from me generation to another. They
were probably not unlike that stunted breed which was common all over
Scotland thirty or forty years ago, and which is now so much mended
through the greater part of the low country, not so much by a change
of the breed, though that expedient has been employed in some places,
as by a more plentiful method of feeding them.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In England, however, notwithstanding the flourishing state of its
woollen manufacture, the price of English wool has fallen very
considerably since the time of Edward III. There are many authentic
records which demonstrate that, during the reign of that prince
(towards the middle of the fourteenth century, or about 1339), what
was reckoned the moderate and reasonable price of the tod, or
twenty-eight pounds of English wool, was not less than ten shillings
of the money of those times {See Smith's Memoirs of Wool, vol. i c.
5, 6, 7. also vol. ii.}, containing, at the rate of twenty-pence the
ounce, six ounces of silver, Tower weight, equal to about thirty
shillings of our present money. In the present times, one-and-twenty
shillings the tod may be reckoned a good price for very good English
wool. The money price of wool, therefore, in the time of Edward III.
was to its money price in the present times as ten to seven. The
superiority of its real price was still greater. At the rate of six
shillings and eightpence the quarter, ten shillings was in those
ancient times the price of twelve bushels of wheat. At the rate of
twenty-eight shillings the quarter, one-and-twenty shillings is in the
present times the price of six bushels only. The proportion between
the real price of ancient and modern times, therefore, is as twelve to
six, or as two to one. In those ancient times, a tod of wool would
have purchased twice the quantity of subsistence which it will
purchase at present, and consequently twice the quantity of labour, if
the real recompence of labour had been the same in both periods.

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

I have not been able to find any such authentic records concerning the
price of raw hides in ancient times. Wool was commonly paid as a
subsidy to the king, and its valuation in that subsidy ascertains, at
least in some degree, what was its ordinary price. But this seems not
to have been the case with raw hides. Fleetwood, however, from an
account in 1425, between the prior of Burcester Oxford and one of his
canons, gives us their price, at least as it was stated upon that
particular occasion, viz. five ox hides at twelve shillings; five cow
hides at seven shillings and threepence; thirtysix sheep skins of two
years old at nine shillings; sixteen calf skins at two shillings. In
1425, twelve shillings contained about the same quantity of silver as
four-and-twenty shillings of our present money. An ox hide, therefore,
was in this account valued at the same quantity of silver as 4s.
4/5ths of our present money. Its nominal price was a good deal lower
than at present. But at the rate of six shillings and eightpence the
quarter, twelve shillings would in those times have purchased fourteen
bushels and four-fifths of a bushel of wheat, which, at three and
sixpence the bushel, would in the present times cost 51s. 4d. An ox
hide, therefore, would in those times have purchased as much corn as
ten shillings and threepence would purchase at present. Its real value
was equal to ten shillings and threepence of our present money. In
those ancient times, when the cattle were half starved during the
greater part of the winter, we cannot suppose that they were of a very
large size. An ox hide which weighs four stone of sixteen pounds of
avoirdupois, is not in the present times reckoned a bad one; and in
those ancient times would probably have been reckoned a very good one.
But at half-a-crown the stone, which at this moment (February 1773) I
understand to be the common price, such a hide would at present cost
only ten shillings. Through its nominal price, therefore, is higher in
the present than it was in those ancient times, its real price, the
real quantity of subsistence which it will purchase or command, is
rather somewhat lower. The price of cow hides, as stated in the above
account, is nearly in the common proportion to that of ox hides. That
of sheep skins is a good deal above it. They had probably been sold
with the wool. That of calves skins, on the contrary, is greatly below
it. In countries where the price of cattle is very low, the calves,
which are not intended to be reared in order to keep up the stock, are
generally killed very young, as was the case in Scotland twenty or
thirty years ago. It saves the milk, which their price would not pay
for. Their skins, therefore, are commonly good for little.

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

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

The wool of Scotland fell very considerably in its price in
consequence of the union with England, by which it was excluded from
the great market of Europe, and confined to the narrow one of Great
Britain. The value of the greater part of the lands in the southern
counties of Scotland, which are chiefly a sheep country, would have
been very deeply affected by this event, had not the rise in the price
of butcher's meat fully compensated the fall in the price of wool.

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

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

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

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

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

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

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

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

Conclusion of the Digression concerning the Variations in the Value of
Silver.

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

As the low value of gold and silver, therefore, is no proof of the
wealth and flourishing state of the country where it takes place; so
neither is their high value, or the low money price either of goods in
general, or of corn in particular, any proof of its poverty and
barbarism.

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

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

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

As to the high price of corn during these last ten or twelve years, it
can be sufficiently accounted for from the badness of the seasons,
without supposing any degradation in the value of silver.

The opinion, therefore, that silver is continually sinking in its
value, seems not to be founded upon any good observations, either upon
the prices of corn, or upon those of other provisions.

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

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

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

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

Effects of the Progress of Improvement upon the real Price of
Manufactures.

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

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

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

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

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

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

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

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

In 1463, being the 3rd of Edward IV. it was enacted, that "no servant
in husbandry nor common labourer, nor servant to any artificer
inhabiting out of a city or burgh, shall use or wear in their clothing
any cloth above two shillings the broad yard." In the 3rd of Edward
IV., two shillings contained very nearly the same quantity of silver
as four of our present money. But the Yorkshire cloth which is now
sold at four shillings the yard, is probably much superior to any that
was then made for the wearing of the very poorest order of common
servants. Even the money price of their clothing, therefore, may, in
proportion to the quality, be somewhat cheaper in the present than it
was in those ancient times. The real price is certainly a good deal
cheaper. Tenpence was then reckoned what is called the moderate and
reasonable price of a bushel of wheat. Two shillings, therefore, was
the price of two bushels and near two pecks of wheat, which in the
present times, at three shillings and sixpence the bushel, would be
worth eight shillings and ninepence. For a yard of this cloth the poor
servant must have parted with the power of purchasing a quantity of
subsistence equal to what eight shillings and ninepence would purchase
in the present times. This is a sumptuary law, too, restraining the
luxury and extravagance of the poor. Their clothing, therefore, had
commonly been much more expensive.

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

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

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

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

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

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

Conclusion of the Chapter.

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

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

That rise in the real price of those parts of the rude produce of
land, which is first the effect of the extended improvement and
cultivation, and afterwards the cause of their being still further
extended, the rise in the price of cattle, for example, tends, too, to
raise the rent of land directly, and in a still greater proportion.
The real value of the landlord's share, his real command of the labour
of other people, not only rises with the real value of the produce,
but the proportion of his share to the whole produce rises with it.

That produce, after the rise in its real price, requires no more
labour to collect it than before. A smaller proportion of it will,
therefore, be sufficient to replace, with the ordinary profit, the
stock which employs that labour. A greater proportion of it must
consequently belong to the landlord.

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

Every increase in the real wealth of the society, every increase in
the quantity of useful labour employed within it, tends indirectly to
raise the real rent of land. A certain proportion of this labour
naturally goes to the land. A greater number of men and cattle are
employed in its cultivation, the produce increases with the increase
of the stock which is thus employed in raising it, and the rent
increases with the produce.

The contrary circumstances, the neglect of cultivation and
improvement, the fall in the real price of any part of the rude
produce of land, the rise in the real price of manufactures from the
decay of manufacturing art and industry, the declension of the real
wealth of the society, all tend, on the other hand, to lower the real
rent of land, to reduce the real wealth of the landlord, to diminish
his power of purchasing either the labour, or the produce of the
labour, of other people.

The whole annual produce of the land and labour of every country, or,
what comes to the same thing, the whole price of that annual produce,
naturally divides itself, it has already been observed, into three
parts; the rent of land, the wages of labour, and the profits of
stock; and constitutes a revenue to three different orders of people;
to those who live by rent, to those who live by wages, and to those
who live by profit. These are the three great, original, and
constituent, orders of every civilized society, from whose revenue
that of every other order is ultimately derived.

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

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

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



# PRICES OF WHEAT


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

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

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

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

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

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

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

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


PRICES OF THE QUARTER OF NINE BUSHELS OF THE BEST OR HIGHEST
PRICED WHEAT AT WINDSOR MARKET, ON LADY DAY AND MICHAELMAS,
FROM 1595 TO 1764 BOTH INCLUSIVE; THE PRICE OF EACH YEAR
BEING THE MEDIUM BETWEEN THE HIGHEST PRICES OF THESE TWO
MARKET DAYS.

          £   s   d
1595      2   0   0
1596      2   8   0
1597      3   9   6
1598      2  16   8
1599      1  19   2
1600      1  17   8
1601      1  14  10
1602      1   9   4
1603      1  15   4
1604      1  10   8
1605      1  15  10
1606      1  13   0
1607      1  16   8
1608      2  16   8
1609      2  10   0
1610      1  15  10
1611      1  18   8
1612      2   2   4
1613      2   8   8
1614      2   1   8½
1615      1  18   8
1616      2   0   4
1617      2   8   8
1618      2   6   8
1619      1  15   4
1620      1  10   4
      26)54   0   6½
  Average 2   1   6¾

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

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

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

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

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





BOOK II.

OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK.

INTRODUCTION.

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

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

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

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

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

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



CHAPTER I.

OF THE DIVISION OF STOCK.

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

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

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

First, it maybe employed in raising, manufacturing, or purchasing
goods, and selling them again with a profit. The capital employed in
this manner yields no revenue or profit to its employer, while it
either remains in his possession, or continues in the same shape. The
goods of the merchant yield him no revenue or profit till he sells
them for money, and the money yields him as little till it is again
exchanged for goods. His capital is continually going from him in one
shape, and returning to him in another; and it is only by means of
such circulation, or successive changes, that it can yield him any
profit. Such capitals, therefore, may very properly be called
circulating capitals.

Secondly, it may be employed in the improvement of land, in the
purchase of useful machines and instruments of trade, or in such like
things as yield a revenue or profit without changing masters, or
circulating any further. Such capitals, therefore, may very properly
be called fixed capitals.

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

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

Some part of the capital of every master artificer or manufacturer
must be fixed in the instruments of his trade. This part, however, is
very small in some, and very great in others, A master tailor requires
no other instruments of trade but a parcel of needles. Those of the
master shoemaker are a little, though but a very little, more
expensive. Those of the weaver rise a good deal above those of the
shoemaker. The far greater part of the capital of all such master
artificers, however, is circulated either in the wages of their
workmen, or in the price of their materials, and repaid, with a
profit, by the price of the work.

In other works a much greater fixed capital is required. In a great
iron-work, for example, the furnace for melting the ore, the forge,
the slit-mill, are instruments of trade which cannot be erected
without a very great expense. In coal works, and mines of every kind,
the machinery necessary, both for drawing out the water, and for other
purposes, is frequently still more expensive.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The produce of land, mines, and fisheries, when their natural
fertility is equal, is in proportion to the extent and proper
application of the capitals employed about them. When the capitals are
equal, and equally well applied, it is in proportion to their natural
fertility.

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

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




CHAPTER II.

OF MONEY, CONSIDERED AS A PARTICULAR BRANCH OF THE GENERAL STOCK OF
THE SOCIETY, OR OF THE EXPENSE OF MAINTAINING THE NATIONAL CAPITAL.

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

Since this is the case, it has been observed, with regard to every
particular commodity, taken separately, it must be so with regard to
all the commodities which compose the whole annual produce of the land
and labour of every country, taken complexly. The whole price or
exchangeable value of that annual produce must resolve itself into the
same three parts, and be parcelled out among the different inhabitants
of the country, either as the wages of their labour, the profits of
their stock, or the rent of their land.

But though the whole value of the annual produce of the land and
labour of every country, is thus divided among, and constitutes a
revenue to, its different inhabitants; yet, as in the rent of a
private estate, we distinguish between the gross rent and the neat
rent, so may we likewise in the revenue of all the inhabitants of a
great country.

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

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

The whole expense of maintaining the fixed capital must evidently be
excluded from the neat revenue of the society. Neither the materials
necessary for supporting their useful machines and instruments of
trade, their profitable buildings, etc. nor the produce of the labour
necessary for fashioning those materials into the proper form, can
ever make any part of it. The price of that labour may indeed make a
part of it; as the workmen so employed may place the whole value of
their wages in their stock reserved for immediate consumption. But in
other sorts of labour, both the price and the produce go to this
stock; the price to that of the workmen, the produce to that of other
people, whose subsistence, conveniencies, and amusements, are
augmented by the labour of those workmen.

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

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

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

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

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

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

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

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

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

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

When, by any particular sum of money, we mean not only to express the
amount of the metal pieces of which it is composed, but to include in
its signification some obscure reference to the goods which can be had
in exchange for them, the wealth or revenue which it in this case
denotes, is equal only to one of the two values which are thus
intimated somewhat ambiguously by the same word, and to the latter
more properly than to the former, to the money's worth more properly
than to the money.

Thus, if a guinea be the weekly pension of a particular person, he can
in the course of the week purchase with it a certain quantity of
subsistence, conveniencies, and amusements. In proportion as this
quantity is great or small, so are his real riches, his real weekly
revenue. His weekly revenue is certainly not equal both to the guinea
and to what can be purchased with it, but only to one or other of
those two equal values, and to the latter more properly than to the
former, to the guinea's worth rather than to the guinea.

If the pension of such a person was paid to him, not in gold, but in a
weekly bill for a guinea, his revenue surely would not so properly
consist in the piece of paper, as in what he could get for it. A
guinea may be considered as a bill for a certain quantity of
necessaries and conveniencies upon all the tradesmen in the
neighbourhood The revenue of the person to whom it is paid, does not
so properly consist in the piece of gold, as in what he can get for
it, or in what he can exchange it for. If it could be exchanged for
nothing, it would, like a bill upon a bankrupt, be of no more value
than the most useless piece of paper.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

When we compute the quantity of industry which the circulating capital
of any society can employ, we must always have regard to those parts
of it only which consist in provisions, materials, and finished work;
the other, which consists in money, and which serves only to circulate
those three, must always be deducted. In order to put industry into
motion, three things are requisite; materials to work upon, tools to
work with, and the wages or recompence for the sake of which the work
is done. Money is neither a material to work upon, nor a tool to work
with; and though the wages of the workman are commonly paid to him in
money, his real revenue, like that of all other men, consists, not in
the money, but in the money's worth; not in the metal pieces, but in
what can be got for them.

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

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

What is the proportion which the circulating money of any country
bears to the whole value of the annual produce circulated by means of
it, it is perhaps impossible to determine. It has been computed by
different authors at a fifth, at a tenth, at a twentieth, and at a
thirtieth, part of that value. But how small soever the proportion
which the circulating money may bear to the whole value of the annual
produce, as but a part, and frequently but a small part, of that
produce, is ever destined for the maintenance of industry, it must
always bear a very considerable proportion to that part. When,
therefore, by the substitution of paper, the gold and silver necessary
for circulation is reduced to, perhaps, a fifth part of the former
quantity, if the value of only the greater part of the other
four-fifths be added to the funds which are destined for the
maintenance of industry, it must make a very considerable addition to
the quantity of that industry, and, consequently, to the value of the
annual produce of land and labour.

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

The value of the silver money which circulated in Scotland before the
Union in 1707, and which, immediately after it, was brought into the
Bank of Scotland, in order to be recoined, amounted to £411,117: 10: 9
sterling. No account has been got of the gold coin; but it appears
from the ancient accounts of the mint of Scotland, that the value of
the gold annually coined somewhat exceeded that of the silver. There
were a good many people, too, upon this occasion, who, from a
diffidence of repayment, did not bring their silver into the Bank of
Scotland; and there was, besides, some English coin, which was not
called in. The whole value of the gold and silver, therefore, which
circulated in Scotland before the Union, cannot be estimated at less
than a million sterling. It seems to have constituted almost the whole
circulation of that country; for though the circulation of the Bank of
Scotland, which had then no rival, was considerable, it seems to have
made but a very small part of the whole. In the present times, the
whole circulation of Scotland cannot be estimated at less than two
millions, of which that part which consists in gold and silver, most
probably, does not amount to half a million. But though the
circulating gold and silver of Scotland have suffered so great a
diminution during this period, its real riches and prosperity do not
appear to have suffered any. Its agriculture, manufactures, and trade,
on the contrary, the annual produce of its land and labour, have
evidently been augmented.

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

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

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

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

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

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

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

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

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

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

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

By issuing too great a quantity of paper, of which the excess was
continually returning, in order to be exchanged for gold and silver,
the Bank of England was for many years together obliged to coin gold
to the extent of between eight hundred thousand pounds and a million
a-year; or, at an average, about eight hundred and fifty thousand
pounds. For this great coinage, the bank (inconsequence of the worn
and degraded state into which the gold coin had fallen a few years
ago) was frequently obliged to purchase gold bullion at the high price
of four pounds an ounce, which it soon after issued in coin at
£3:17:10 1/2 an ounce, losing in this manner between two and a half
and three per cent. upon the coinage of so very large a sum. Though
the bank, therefore, paid no seignorage, though the government was
properly at the expense of this coinage, this liberality of government
did not prevent altogether the expense of the bank.

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

The gold coin which was paid out, either by the Bank of England or by
the Scotch banks, in exchange for that part of their paper which was
over and above what could be employed in the circulation of the
country, being likewise over and above what could be employed in that
circulation, was sometimes sent abroad in the shape of coin, sometimes
melted down and sent abroad in the shape of bullion, and sometimes
melted down and sold to the Bank of England at the high price of four
pounds an ounce. It was the newest, the heaviest, and the best pieces
only, which were carefully picked out of the whole coin, and either
sent abroad or melted down. At home, and while they remained in the
shape of coin, those heavy pieces were of no more value than the
light; but they were of more value abroad, or when melted down into
bullion at home. The Bank of England, notwithstanding their great
annual coinage, found, to their astonishment, that there was every
year the same scarcity of coin as there had been the year before; and
that, notwithstanding the great quantity of good and new coin which
was every year issued from the bank, the state of the coin, instead of
growing better and better, became every year worse and worse. Every
year they found themselves under the necessity of coining nearly the
same quantity of gold as they had coined the year before; and from the
continual rise in the price of gold bullion, in consequence of the
continual wearing and clipping of the coin, the expense of this great
annual coinage became, every year, greater and greater. The Bank of
England, it is to be observed, by supplying its own coffers with coin,
is indirectly obliged to supply the whole kingdom, into which coin is
continually flowing from those coffers in a great variety of ways.
Whatever coin, therefore, was wanted to support this excessive
circulation both of Scotch and English paper money, whatever vacuities
this excessive circulation occasioned in the necessary coin of the
kingdom, the Bank of England was obliged to supply them. The Scotch
banks, no doubt, paid all of them very dearly for their own imprudence
and inattention: but the Bank of England paid very dearly, not only
for its own imprudence, but for the much greater imprudence of almost
all the Scotch banks.

The over-trading of some bold projectors in both parts of the united
kingdom, was the original cause of this excessive circulation of paper
money.

What a bank can with propriety advance to a merchant or undertaker of
any kind, is not either the whole capital with which he trades, or
even any considerable part of that capital; but that part of it only
which he would otherwise be obliged to keep by him unemployed and in
ready money, for answering occasional demands. If the paper money
which the bank advances never exceeds this value, it can never exceed
the value of the gold and silver which would necessarily circulate in
the country if there was no paper money; it can never exceed the
quantity which the circulation of the country can easily absorb and
employ.

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

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

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

First, by this attention they were enabled to make some tolerable
judgment concerning the thriving or declining circumstances of their
debtors, without being obliged to look out for any other evidence
besides what their own books afforded them; men being, for the most
part, either regular or irregular in their repayments, according as
their circumstances are either thriving or declining. A private man
who lends out his money to perhaps half a dozen or a dozen of debtors,
may, either by himself or his agents, observe and inquire both
constantly and carefully into the conduct and situation of each of
them. But a banking company, which lends money to perhaps five hundred
different people, and of which the attention is continually occupied
by objects of a very different kind, can have no regular information
concerning the conduct and circumstances of the greater part of its
debtors, beyond what its own books afford it. In requiring frequent
and regular repayments from all their customers, the banking companies
of Scotland had probably this advantage in view.

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

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

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

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

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

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

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

{The method described in the text was by no means either the most
common or the most expensive one in which those adventurers sometimes
raised money by circulation. It frequently happened, that A in
Edinburgh would enable B in London to pay the first bill of exchange,
by drawing, a few days before it became due, a second bill at three
months date upon the same B in London. This bill, being payable to his
own order, A sold in Edinburgh at par; and with its contents purchased
bills upon London, payable at sight to the order of B, to whom he sent
them by the post. Towards the end of the late war, the exchange
between Edinburgh and London was frequently three per cent. against
Edinburgh, and those bills at sight must frequently have cost A that
premium. This transaction, therefore, being repeated at least four
times in the year, and being loaded with a commission of at least one
half per cent. upon each repetition, must at that period have cost A,
at least, fourteen per cent. in the year. At other times A would
enable to discharge the first bill of exchange, by drawing, a few days
before it became due, a second bill at two months date, not upon B,
but upon some third person, C, for example, in London. This other bill
was made payable to the order of B, who, upon its being accepted by C,
discounted it with some banker in London; and A enabled C to discharge
it, by drawing, a few day's before it became due, a third bill
likewise at two months date, sometimes upon his first correspondent B,
and sometimes upon some fourth or fifth person, D or E, for example.
This third bill was made payable to the order of C, who, as soon as it
was accepted, discounted it in the same manner with some banker in
London. Such operations being repeated at least six times in the year,
and being loaded with a commission of at least one half per cent. upon
each repetition, together with the legal interest of five per cent.
this method of raising money, in the same manner as that described in
the text, must have cost A something more than eight per cent. By
saving, however, the exchange between Edinburgh and London, it was
less expensive than that mentioned in the foregoing part of this note;
but then it required an established credit with more houses than one
in London, an advantage which many of these adventurers could not
always find it easy to procure.}

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

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

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

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

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

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

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

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

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

The Bank of England is the greatest bank of circulation in Europe. It
was incorporated, in pursuance of an act of parliament, by a charter
under the great seal, dated the 27th of July 1694. It at that time
advanced to government the sum of £1,200,000 for an annuity of
£100,000, or for £ 96,000 a-year, interest at the rate of eight per
cent. and £4,000 year for the expense of management. The credit of the
new government, established by the Revolution, we may believe, must
have been very low, when it was obliged to borrow at so high an
interest.

In 1697, the bank was allowed to enlarge its capital stock, by an
ingraftment of £1,001,171:10s. Its whole capital stock, therefore,
amounted at this time to £2,201,171: 10s. This ingraftment is said to
have been for the support of public credit. In 1696, tallies had been
at forty, and fifty, and sixty, per cent. discount, and bank notes at
twenty per cent. {James Postlethwaite's History of the Public Revenue,
p.301.} During the great re-coinage of the silver, which was going on
at this time, the bank had thought proper to discontinue the payment
of its notes, which necessarily occasioned their discredit.

In pursuance of the 7th Anne, c. 7, the bank advanced and paid into
the exchequer the sum of £400,000; making in all the sum of
£1,600,000, which it had advanced upon its original annuity of £96,000
interest, and £4,000 for expense of management. In 1708, therefore,
the credit of government was as good as that of private persons, since
it could borrow at six per cent. interest, the common legal and market
rate of those times. In pursuance of the same act, the bank cancelled
exchequer bills to the amount of £ 1,775,027: 17s: 10½d. at six per
cent. interest, and was at the same time allowed to take in
subscriptions for doubling its capital. In 1703, therefore, the
capital of the bank amounted to £4,402,343; and it had advanced to
government the sum of £3,375,027:17:10½d.

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

In pursuance of the 3rd George I. c.8, the bank delivered up two
millions of exchequer Bills to be cancelled. It had at this time,
therefore, advanced to government £5,375,027:17 10d. In pursuance of
the 8th George I. c.21, the bank purchased of the South-sea company,
stock to the amount of £4,000,000: and in 1722, in consequence of the
subscriptions which it had taken in for enabling it to make this
purchase, its capital stock was increased by £ 3,400,000. At this
time, therefore, the bank had advanced to the public £ 9,375,027 17s.
10½d.; and its capital stock amounted only to £ 8,959,995:14:8d. It
was upon this occasion that the sum which the bank had advanced to the
public, and for which it received interest, began first to exceed its
capital stock, or the sum for which it paid a dividend to the
proprietors of bank stock; or, in other words, that the bank began to
have an undivided capital, over and above its divided one. It has
continued to have an undivided capital of the same kind ever since. In
1746, the bank had, upon different occasions, advanced to the public
£11,686,800, and its divided capital had been raised by different
calls and subscriptions to £ 10,780,000. The state of those two sums
has continued to be the same ever since. In pursuance of the 4th of
George III. c.25, the bank agreed to pay to government for the renewal
of its charter £110,000, without interest or re-payment. This sum,
therefore did not increase either of those two other sums.

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

The stability of the bank of England is equal to that of the British
government. All that it has advanced to the public must be lost before
its creditors can sustain any loss. No other banking company in
England can be established by act of parliament, or can consist of
more than six members. It acts, not only as an ordinary bank, but as a
great engine of state. It receives and pays the greater part of the
annuities which are due to the creditors of the public; it circulates
exchequer bills; and it advances to government the annual amount of
the land and malt taxes, which are frequently not paid up till some
years thereafter. In these different operations, its duty to the
public may sometimes have obliged it, without any fault of its
directors, to overstock the circulation with paper money. It likewise
discounts merchants' bills, and has, upon several different occasions,
supported the credit of the principal houses, not only of England, but
of Hamburgh and Holland. Upon one occasion, in 1763, it is said to
have advanced for this purpose, in one week, about £1,600,000, a great
part of it in bullion. I do not, however, pretend to warrant either
the greatness of the sum, or the shortness of the time. Upon other
occasions, this great company has been reduced to the necessity of
paying in sixpences.

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

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

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

Paper money may be so regulated as either to confine itself very much
to the circulation between the different dealers, or to extend itself
likewise to a great part of that between the dealers and the
consumers. Where no bank notes are circulated under £10 value, as in
London, paper money confines itself very much to the circulation
between the dealers. When a ten pound bank note comes into the hands
of a consumer, he is generally obliged to change it at the first shop
where he has occasion to purchase five shillings worth of goods; so
that it often returns into the hands of a dealer before the consumer
has spent the fortieth part of the money. Where bank notes are issued
for so small sums as 20s. as in Scotland, paper money extends itself
to a considerable part of the circulation between dealers and
consumers. Before the Act of parliament which put a stop to the
circulation of ten and five shilling notes, it filled a still greater
part of that circulation. In the currencies of North America, paper
was commonly issued for so small a sum as a shilling, and filled
almost the whole of that circulation. In some paper currencies of
Yorkshire, it was issued even for so small a sum as a sixpence.

Where the issuing of bank notes for such very small sums is allowed,
and commonly practised, many mean people are both enabled and
encouraged to become bankers. A person whose promissory note for £5,
or even for 20s. would be rejected by every body, will get it to be
received without scruple when it is issued for so small a sum as a
sixpence. But the frequent bankruptcies to which such beggarly bankers
must be liable, may occasion a very considerable inconveniency, and
sometimes even a very great calamity, to many poor people who had
received their notes in payment.

It were better, perhaps, that no bank notes were issued in any part of
the kingdom for a smaller sum than £5. Paper money would then,
probably, confine itself, in every part of the kingdom, to the
circulation between the different dealers, as much as it does at
present in London, where no bank notes are issued under £10 value; £5
being, in most part of the kingdom, a sum which, though it will
purchase, perhaps, little more than half the quantity of goods, is as
much considered, and is as seldom spent all at once, as £10 are amidst
the profuse expense of London.

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

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

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

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

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

It would be otherwise, indeed, with a paper money, consisting in
promissory notes, of which the immediate payment depended, in any
respect, either upon the good will of those who issued them, or upon a
condition which the holder of the notes might not always have it in
his power to fulfil, or of which the payment was not exigible till
after a certain number of years, and which, in the mean time, bore no
interest. Such a paper money would, no doubt, fall more or less below
the value of gold and silver, according as the difficulty or
uncertainty of obtaining immediate payment was supposed to be greater
or less, or according to the greater or less distance of time at which
payment was exigible.

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

In the paper currencies of Yorkshire, the payment of so small a sum as
6d. sometimes depended upon the condition, that the holder of the note
should bring the change of a guinea to the person who issued it; a
condition which the holders of such notes might frequently find it
very difficult to fulfil, and which must have degraded this currency
below the value of gold and silver money. An act of parliament,
accordingly, declared all such clauses unlawful, and suppressed, in
the same manner as in Scotland, all promissory notes, payable to the
bearer, under 20s. value.

The paper currencies of North America consisted, not in bank notes
payable to the bearer on demand, but in a government paper, of which
the payment was not exigible till several years after it was issued;
and though the colony governments paid no interest to the holders of
this paper, they declared it to be, and in fact rendered it, a legal
tender of payment for the full value for which it was issued. But
allowing the colony security to be perfectly good, £100, payable
fifteen years hence, for example, in a country where interest is at
six per cent., is worth little more than £40 ready money. To oblige
a creditor, therefore, to accept of this as full payment for a debt of
£100, actually paid down in ready money, was an act of such violent
injustice, as has scarce, perhaps, been attempted by the government of
any other country which pretended to be free. It bears the evident
marks of having originally been, what the honest and downright Doctor
Douglas assures us it was, a scheme of fraudulent debtors to cheat
their creditors. The government of Pennsylvania, indeed, pretended,
upon their first emission of paper money, in 1722, to render their
paper of equal value with gold and silver, by enacting penalties
against all those who made any difference in the price of their goods
when they sold them for a colony paper, and when they sold them for
gold and silver, a regulation equally tyrannical, but much less,
effectual, than that which it was meant to support. A positive law may
render a shilling a legal tender for a guinea, because it may direct
the courts of justice to discharge the debtor who has made that
tender; but no positive law can oblige a person who sells goods, and
who is at liberty to sell or not to sell as he pleases, to accept of a
shilling as equivalent to a guinea in the price of them.
Notwithstanding any regulation of this kind, it appeared, by the
course of exchange with Great Britain, that £100 sterling was
occasionally considered as equivalent, in some of the colonies, to
£130, and in others to so great a sum as £1100 currency; this
difference in the value arising from the difference in the quantity of
paper emitted in the different colonies, and in the distance and
probability of the term of its final discharge and redemption.

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

Pennsylvania was always more moderate in its emissions of paper money
than any other of our colonies. Its paper currency, accordingly, is
said never to have sunk below the value of the gold and silver which
was current in the colony before the first emission of its paper
money. Before that emission, the colony had raised the denomination of
its coin, and had, by act of assembly, ordered 5s. sterling to pass in
the colonies for 6s:3d., and afterwards for 6s:8d. A pound, colony
currency, therefore, even when that currency was gold and silver, was
more than thirty per cent. below the value of £1 sterling; and when
that currency was turned into paper, it was seldom much more than
thirty per cent. below that value. The pretence for raising the
denomination of the coin was to prevent the exportation of gold and
silver, by making equal quantities of those metals pass for greater
sums in the colony than they did in the mother country. It was found,
however, that the price of all goods from the mother country rose
exactly in proportion as they raised the denomination of their coin,
so that their gold and silver were exported as fast as ever.

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

A prince, who should enact that a certain proportion of his taxes
should be paid in a paper money of a certain kind, might thereby give
a certain value to this paper money, even though the term of its final
discharge and redemption should depend altogether upon the will of the
prince. If the bank which issued this paper was careful to keep the
quantity of it always somewhat below what could easily be employed in
this manner, the demand for it might be such as to make it even bear a
premium, or sell for somewhat more in the market than the quantity of
gold or silver currency for which it was issued. Some people account
in this manner for what is called the agio of the bank of Amsterdam,
or for the superiority of bank money over current money, though this
bank money, as they pretend, cannot be taken out of the bank at the
will of the owner. The greater part of foreign bills of exchange must
be paid in bank money, that is, by a transfer in the books of the
bank; and the directors of the bank, they allege, are careful to keep
the whole quantity of bank money always below what this use occasions
a demand for. It is upon this account, they say, the bank money sells
for a premium, or bears an agio of four or five per cent. above the
same nominal sum of the gold and silver currency of the country. This
account of the bank of Amsterdam, however, it will appear hereafter,
is in a great measure chimerical.

A paper currency which falls below the value of gold and silver coin,
does not thereby sink the value of those metals, or occasion equal
quantities of them to exchange for a smaller quantity of goods of any
other kind. The proportion between the value of gold and silver and
that of goods of any other kind, depends in all cases, not upon the
nature and quantity of any particular paper money, which may be
current in any particular country, but upon the richness or poverty of
the mines, which happen at any particular time to supply the great
market of the commercial world with those metals. It depends upon the
proportion between the quantity of labour which is necessary in order
to bring a certain quantity of gold and silver to market, and that
which is necessary in order to bring thither a certain quantity of any
other sort of goods.

If bankers are restrained from issuing any circulating bank notes, or
notes payable to the bearer, for less than a certain sum; and if they
are subjected to the obligation of an immediate and unconditional
payment of such bank notes as soon as presented, their trade may, with
safety to the public, be rendered in all other respects perfectly
free. The late multiplication of banking companies in both parts of
the united kingdom, an event by which many people have been much
alarmed, instead of diminishing, increases the security of the public.
It obliges all of them to be more circumspect in their conduct, and,
by not extending their currency beyond its due proportion to their
cash, to guard themselves against those malicious runs, which the
rivalship of so many competitors is always ready to bring upon them.
It restrains the circulation of each particular company within a
narrower circle, and reduces their circulating notes to a smaller
number. By dividing the whole circulation into a greater number of
parts, the failure of any one company, an accident which, in the
course of things, must sometimes happen, becomes of less consequence
to the public. This free competition, too, obliges all bankers to be
more liberal in their dealings with their customers, lest their rivals
should carry them away. In general, if any branch of trade, or any
division of labour, be advantageous to the public, the freer and more
general the competition, it will always be the more so.




CHAPTER III.

OF THE ACCUMULATION OF CAPITAL, OR OF PRODUCTIVE AND UNPRODUCTIVE
LABOUR.

There is one sort of labour which adds to the value of the subject
upon which it is bestowed; there is another which has no such effect.
The former as it produces a value, may be called productive, the
latter, unproductive labour. {Some French authors of great learning
and ingenuity have used those words in a different sense. In the last
chapter of the fourth book, I shall endeavour to shew that their sense
is an improper one.} Thus the labour of a manufacturer adds generally
to the value of the materials which he works upon, that of his own
maintenance, and of his master's profit. The labour of a menial
servant, on the contrary, adds to the value of nothing. Though the
manufacturer has his wages advanced to him by his master, he in
reality costs him no expense, the value of those wages being generally
restored, together with a profit, in the improved value of the subject
upon which his labour is bestowed. But the maintenance of a menial
servant never is restored. A man grows rich by employing a multitude
of manufacturers; he grows poor by maintaining a multitude or menial
servants. The labour of the latter, however, has its value, and
deserves its reward as well as that of the former. But the labour of
the manufacturer fixes and realizes itself in some particular subject
or vendible commodity, which lasts for some time at least after that
labour is past. It is, as it were, a certain quantity of labour
stocked and stored up, to be employed, if necessary, upon some other
occasion. That subject, or, what is the same thing, the price of that
subject, can afterwards, if necessary, put into motion a quantity of
labour equal to that which had originally produced it. The labour of
the menial servant, on the contrary, does not fix or realize itself in
any particular subject or vendible commodity. His services generally
perish in the very instant of their performance, and seldom leave any
trace of value behind them, for which an equal quantity of service
could afterwards be procured.

The labour of some of the most respectable orders in the society is,
like that of menial servants, unproductive of any value, and does not
fix or realize itself in any permanent subject, or vendible commodity,
which endures after that labour is past, and for which an equal
quantity of labour could afterwards be procured. The sovereign, for
example, with all the officers both of justice and war who serve under
him, the whole army and navy, are unproductive labourers. They are the
servants of the public, and are maintained by a part of the annual
produce of the industry of other people. Their service, how
honourable, how useful, or how necessary soever, produces nothing for
which an equal quantity of service can afterwards be procured. The
protection, security, and defence, of the commonwealth, the effect of
their labour this year, will not purchase its protection, security,
and defence, for the year to come. In the same class must be ranked,
some both of the gravest and most important, and some of the most
frivolous professions; churchmen, lawyers, physicians, men of letters
of all kinds; players, buffoons, musicians, opera-singers,
opera-dancers, etc. The labour of the meanest of these has a certain
value, regulated by the very same principles which regulate that of
every other sort of labour; and that of the noblest and most useful,
produces nothing which could afterwards purchase or procure an equal
quantity of labour. Like the declamation of the actor, the harangue of
the orator, or the tune of the musician, the work of all of them
perishes in the very instant of its production.

Both productive and unproductive labourers, and those who do not
labour at all, are all equally maintained by the annual produce of the
land and labour of the country. This produce, how great soever, can
never be infinite, but must have certain limits. According, therefore,
as a smaller or greater proportion of it is in any one year employed
in maintaining unproductive hands, the more in the one case, and the
less in the other, will remain for the productive, and the next year's
produce will be greater or smaller accordingly; the whole annual
produce, if we except the spontaneous productions of the earth, being
the effect of productive labour.

Though the whole annual produce of the land and labour of every
country is no doubt ultimately destined for supplying the consumption
of its inhabitants, and for procuring a revenue to them; yet when it
first comes either from the ground, or from the hands of the
productive labourers, it naturally divides itself into two parts. One
of them, and frequently the largest, is, in the first place, destined
for replacing a capital, or for renewing the provisions, materials,
and finished work, which had been withdrawn from a capital; the other
for constituting a revenue either to the owner of this capital, as the
profit of his stock, or to some other person, as the rent of his land.
Thus, of the produce of land, one part replaces the capital of the
farmer; the other pays his profit and the rent of the landlord; and
thus constitutes a revenue both to the owner of this capital, as the
profits of his stock, and to some other person as the rent of his
land. Of the produce of a great manufactory, in the same manner, one
part, and that always the largest, replaces the capital of the
undertaker of the work; the other pays his profit, and thus
constitutes a revenue to the owner of this capital.

That part of the annual produce of the land and labour of any country
which replaces a capital, never is immediately employed to maintain
any but productive hands. It pays the wages of productive labour only.
That which is immediately destined for constituting a revenue, either
as profit or as rent, may maintain indifferently either productive or
unproductive hands.

Whatever part of his stock a man employs as a capital, he always
expects it to be replaced to him with a profit. He employs it,
therefore, in maintaining productive hands only; and after having
served in the function of a capital to him, it constitutes a revenue
to them. Whenever he employs any part of it in maintaining
unproductive hands of any kind, that part is from that moment
withdrawn from his capital, and placed in his stock reserved for
immediate consumption.

Unproductive labourers, and those who do not labour at all, are all
maintained by revenue; either, first, by that part of the annual
produce which is originally destined for constituting a revenue to
some particular persons, either as the rent of land, or as the profits
of stock; or, secondly, by that part which, though originally destined
for replacing a capital, and for maintaining productive labourers
only, yet when it comes into their hands, whatever part of it is over
and above their necessary subsistence, may be employed in maintaining
indifferently either productive or unproductive hands. Thus, not only
the great landlord or the rich merchant, but even the common workman,
if his wages are considerable, may maintain a menial servant; or he
may sometimes go to a play or a puppet-show, and so contribute his
share towards maintaining one set of unproductive labourers; or he may
pay some taxes, and thus help to maintain another set, more honourable
and useful, indeed, but equally unproductive. No part of the annual
produce, however, which had been originally destined to replace a
capital, is ever directed towards maintaining unproductive hands, till
after it has put into motion its full complement of productive labour,
or all that it could put into motion in the way in which it was
employed. The workman must have earned his wages by work done, before
he can employ any part of them in this manner. That part, too, is
generally but a small one. It is his spare revenue only, of which
productive labourers have seldom a great deal. They generally have
some, however; and in the payment of taxes, the greatness of their
number may compensate, in some measure, the smallness of their
contribution. The rent of land and the profits of stock are
everywhere, therefore, the principal sources from which unproductive
hands derive their subsistence. These are the two sorts of revenue of
which the owners have generally most to spare. They might both
maintain indifferently, either productive or unproductive hands. They
seem, however, to have some predilection for the latter. The expense
of a great lord feeds generally more idle than industrious people The
rich merchant, though with his capital he maintains industrious people
only, yet by his expense, that is, by the employment of his revenue,
he feeds commonly the very same sort as the great lord.

The proportion, therefore, between the productive and unproductive
hands, depends very much in every country upon the proportion between
that part of the annual produce, which, as soon as it comes either
from the ground, or from the hands of the productive labourers, is
destined for replacing a capital, and that which is destined for
constituting a revenue, either as rent or as profit. This proportion
is very different in rich from what it is in poor countries.

Thus, at present, in the opulent countries of Europe, a very large,
frequently the largest, portion of the produce of the land, is
destined for replacing the capital of the rich and independent farmer;
the other for paying his profits, and the rent of the landlord. But
anciently, during the prevalency of the feudal government, a very
small portion of the produce was sufficient to replace the capital
employed in cultivation. It consisted commonly in a few wretched
cattle, maintained altogether by the spontaneous produce of
uncultivated land, and which might, therefore, be considered as a part
of that spontaneous produce. It generally, too, belonged to the
landlord, and was by him advanced to the occupiers of the land. All
the rest of the produce properly belonged to him too, either as rent
for his land, or as profit upon this paltry capital. The occupiers of
land were generally bond-men, whose persons and effects were equally
his property. Those who were not bond-men were tenants at will; and
though the rent which they paid was often nominally little more than a
quit-rent, it really amounted to the whole produce of the land. Their
lord could at all times command their labour in peace and their
service in war. Though they lived at a distance from his house, they
were equally dependent upon him as his retainers who lived in it. But
the whole produce of the land undoubtedly belongs to him, who can
dispose of the labour and service of all those whom it maintains. In
the present state of Europe, the share of the landlord seldom exceeds
a third, sometimes not a fourth part of the whole produce of the land.
The rent of land, however, in all the improved parts of the country,
has been tripled and quadrupled since those ancient times; and this
third or fourth part of the annual produce is, it seems, three or four
times greater than the whole had been before. In the progress of
improvement, rent, though it increases in proportion to the extent,
diminishes in proportion to the produce of the land.

In the opulent countries of Europe, great capitals are at present
employed in trade and manufactures. In the ancient state, the little
trade that was stirring, and the few homely and coarse manufactures
that were carried on, required but very small capitals. These,
however, must have yielded very large profits. The rate of interest
was nowhere less than ten per cent. and their profits must have been
sufficient to afford this great interest. At present, the rate of
interest, in the improved parts of Europe, is nowhere higher than six
per cent.; and in some of the most improved, it is so low as four,
three, and two per cent. Though that part of the revenue of the
inhabitants which is derived from the profits of stock, is always much
greater in rich than in poor countries, it is because the stock is
much greater; in proportion to the stock, the profits are generally
much less.

That part of the annual produce, therefore, which, as soon as it comes
either from the ground, or from the hands of the productive labourers,
is destined for replacing a capital, is not only much greater in rich
than in poor countries, but bears a much greater proportion to that
which is immediately destined for constituting a revenue either as
rent or as profit. The funds destined for the maintenance of
productive labour are not only much greater in the former than in the
latter, but bear a much greater proportion to those which, though they
may be employed to maintain either productive or unproductive hands,
have generally a predilection for the latter.

The proportion between those different funds necessarily determines in
every country the general character of the inhabitants as to industry
or idleness. We are more industrious than our forefathers, because, in
the present times, the funds destined for the maintenance of industry
are much greater in proportion to those which are likely to be
employed in the maintenance of idleness, than they were two or three
centuries ago. Our ancestors were idle for want of a sufficient
encouragement to industry. It is better, says the proverb, to play for
nothing, than to work for nothing. In mercantile and manufacturing
towns, where the inferior ranks of people are chiefly maintained by
the employment of capital, they are in general industrious, sober, and
thriving; as in many English, and in most Dutch towns. In those towns
which are principally supported by the constant or occasional
residence of a court, and in which the inferior ranks of people are
chiefly maintained by the spending of revenue, they are in general
idle, dissolute, and poor; as at Rome, Versailles, Compeigne, and
Fontainbleau. If you except Rouen and Bourdeaux, there is little trade
or industry in any of the parliament towns of France; and the inferior
ranks of people, being chiefly maintained by the expense of the
members of the courts of justice, and of those who come to plead
before them, are in general idle and poor. The great trade of Rouen
and Bourdeaux seems to be altogether the effect of their situation.
Rouen is necessarily the entrepot of almost all the goods which are
brought either from foreign countries, or from the maritime provinces
of France, for the consumption of the great city of Paris. Bourdeaux
is, in the same manner, the entrepot of the wines which grow upon the
banks of the Garronne, and of the rivers which run into it, one of the
richest wine countries in the world, and which seems to produce the
wine fittest for exportation, or best suited to the taste of foreign
nations. Such advantageous situations necessarily attract a great
capital by the great employment which they afford it; and the
employment of this capital is the cause of the industry of those two
cities. In the other parliament towns of France, very little more
capital seems to be employed than what is necessary for supplying
their own consumption; that is, little more than the smallest capital
which can be employed in them. The same thing may be said of Paris,
Madrid, and Vienna. Of those three cities, Paris is by far the most
industrious, but Paris itself is the principal market of all the
manufactures established at Paris, and its own consumption is the
principal object of all the trade which it carries on. London, Lisbon,
and Copenhagen, are, perhaps, the only three cities in Europe, which
are both the constant residence of a court, and can at the same time
be considered as trading cities, or as cities which trade not only for
their own consumption, but for that of other cities and countries. The
situation of all the three is extremely advantageous, and naturally
fits them to be the entrepots of a great part of the goods destined
for the consumption of distant places. In a city where a great revenue
is spent, to employ with advantage a capital for any other purpose
than for supplying the consumption of that city, is probably more
difficult than in one in which the inferior ranks of people have no
other maintenance but what they derive from the employment of such a
capital. The idleness of the greater part of the people who are
maintained by the expense of revenue, corrupts, it is probable, the
industry of those who ought to be maintained by the employment of
capital, and renders it less advantageous to employ a capital there
than in other places. There was little trade or industry in Edinburgh
before the Union. When the Scotch parliament was no longer to be
assembled in it, when it ceased to be the necessary residence of the
principal nobility and gentry of Scotland, it became a city of some
trade and industry. It still continues, however, to be the residence
of the principal courts of justice in Scotland, of the boards of
customs and excise, etc. A considerable revenue, therefore, still
continues to be spent in it. In trade and industry, it is much
inferior to Glasgow, of which the inhabitants are chiefly maintained
by the employment of capital. The inhabitants of a large village, it
has sometimes been observed, after having made considerable progress
in manufactures, have become idle and poor, in consequence of a great
lord's having taken up his residence in their neighbourhood.

The proportion between capital and revenue, therefore, seems
everywhere to regulate the proportion between industry and idleness
Wherever capital predominates, industry prevails; wherever revenue,
idleness. Every increase or diminution of capital, therefore,
naturally tends to increase or diminish the real quantity of industry,
the number of productive hands, and consequently the exchangeable
value of the annual produce of the land and labour of the country, the
real wealth and revenue of all its inhabitants.

Capitals are increased by parsimony, and diminished by prodigality and
misconduct.

Whatever a person saves from his revenue he adds to his capital, and
either employs it himself in maintaining an additional number of
productive hands, or enables some other person to do so, by lending it
to him for an interest, that is, for a share of the profits. As the
capital of an individual can be increased only by what he saves from
his annual revenue or his annual gains, so the capital of a society,
which is the same with that of all the individuals who compose it, can
be increased only in the same manner.

Parsimony, and not industry, is the immediate cause of the increase of
capital. Industry, indeed, provides the subject which parsimony
accumulates; but whatever industry might acquire, if parsimony did not
save and store up, the capital would never be the greater.

Parsimony, by increasing the fund which is destined for the
maintenance of productive hands, tends to increase the number of those
hands whose labour adds to the value of the subject upon winch it is
bestowed. It tends, therefore, to increase the exchangeable value of
the annual produce of the land and labour of the country. It puts into
motion an additional quantity of industry, which gives an additional
value to the annual produce.

What is annually saved, is as regularly consumed as what is annually
spent, and nearly in the same time too: but it is consumed by a
different set of people. That portion of his revenue which a rich man
annually spends, is, in most cases, consumed by idle guests and menial
servants, who leave nothing behind them in return for their
consumption. That portion which he annually saves, as, for the sake of
the profit, it is immediately employed as a capital, is consumed in
the same manner, and nearly in the same time too, but by a different
set of people: by labourers, manufacturers, and artificers, who
reproduce, with a profit, the value of their annual consumption. His
revenue, we shall suppose, is paid him in money. Had he spent the
whole, the food, clothing, and lodging, which the whole could have
purchased, would have been distributed among the former set of people.
By saving a part of it, as that part is, for the sake of the profit,
immediately employed as a capital, either by himself or by some other
person, the food, clothing, and lodging, which may be purchased with
it, are necessarily reserved for the latter. The consumption is the
same, but the consumers are different.

By what a frugal man annually saves, he not only affords maintenance
to an additional number of productive hands, for that of the ensuing
year, but like the founder of a public work-house he establishes, as
it were, a perpetual fund for the maintenance of an equal number in
all times to come. The perpetual allotment and destination of this
fund, indeed, is not always guarded by any positive law, by any
trust-right or deed of mortmain. It is always guarded, however, by a
very powerful principle, the plain and evident interest of every
individual to whom any share of it shall ever belong. No part of it
can ever afterwards be employed to maintain any but productive hands,
without an evident loss to the person who thus perverts it from its
proper destination.

The prodigal perverts it in this manner: By not confining his expense
within his income, he encroaches upon his capital. Like him who
perverts the revenues of some pious foundation to profane purposes, he
pays the wages of idleness with those funds which the frugality of his
forefathers had, as it were, consecrated to the maintenance of
industry. By diminishing the funds destined for the employment of
productive labour, he necessarily diminishes, so far as it depends
upon him, the quantity of that labour which adds a value to the
subject upon which it is bestowed, and, consequently, the value of the
annual produce of the land and labour of the whole country, the real
wealth and revenue of its inhabitants. If the prodigality of some were
not compensated by the frugality of others, the conduct of every
prodigal, by feeding the idle with the bread of the industrious, would
tend not only to beggar himself, but to impoverish his country.

Though the expense of the prodigal should be altogether in home made,
and no part of it in foreign commodities, its effect upon the
productive funds of the society would still be the same. Every year
there would still be a certain quantity of food and clothing, which
ought to have maintained productive, employed in maintaining
unproductive hands. Every year, therefore, there would still be some
diminution in what would otherwise have been the value of the annual
produce of the land and labour of the country.

This expense, it may be said, indeed, not being in foreign goods, and
not occasioning any exportation of gold and silver, the same quantity
of money would remain in the country as before. But if the quantity of
food and clothing which were thus consumed by unproductive, had been
distributed among productive hands, they would have reproduced,
together with a profit, the full value of their consumption. The same
quantity of money would, in this case, equally have remained in the
country, and there would, besides, have been a reproduction of an
equal value of consumable goods. There would have been two values
instead of one.

The same quantity of money, besides, can not long remain in any
country in which the value of the annual produce diminishes. The sole
use of money is to circulate consumable goods. By means of it,
provisions, materials, and finished work, are bought and sold, and
distributed to their proper consumers. The quantity of money,
therefore, which can be annually employed in any country, must be
determined by the value of the consumable goods annually circulated
within it. These must consist, either in the immediate produce of the
land and labour of the country itself, or in something which had been
purchased with some part of that produce. Their value, therefore, must
diminish as the value of that produce diminishes, and along with it
the quantity of money which can be employed in circulating them. But
the money which, by this annual diminution of produce, is annually
thrown out of domestic circulation, will not be allowed to lie idle.
The interest of whoever possesses it requires that it should be
employed; but having no employment at home, it will, in spite of all
laws and prohibitions, be sent abroad, and employed in purchasing
consumable goods, which may be of some use at home. Its annual
exportation will, in this manner, continue for some time to add
something to the annual consumption of the country beyond the value of
its own annual produce. What in the days of its prosperity had been
saved from that annual produce, and employed in purchasing gold and
silver, will contribute, for some little time, to support its
consumption in adversity. The exportation of gold and silver is, in
this case, not the cause, but the effect of its declension, and may
even, for some little time, alleviate the misery of that declension.

The quantity of money, on the contrary, must in every country
naturally increase as the value of the annual produce increases. The
value of the consumable goods annually circulated within the society
being greater, will require a greater quantity of money to circulate
them. A part of the increased produce, therefore, will naturally be
employed in purchasing, wherever it is to be had, the additional
quantity of gold and silver necessary for circulating the rest. The
increase of those metals will, in this case, be the effect, not the
cause, of the public prosperity. Gold and silver are purchased
everywhere in the same manner. The food, clothing, and lodging, the
revenue and maintenance, of all those whose labour or stock is
employed in bringing them from the mine to the market, is the price
paid for them in Peru as well as in England. The country which has
this price to pay, will never belong without the quantity of those
metals which it has occasion for; and no country will ever long retain
a quantity which it has no occasion for.

Whatever, therefore, we may imagine the real wealth and revenue of a
country to consist in, whether in the value of the annual produce of
its land and labour, as plain reason seems to dictate, or in the
quantity of the precious metals which circulate within it, as vulgar
prejudices suppose; in either view of the matter, every prodigal
appears to be a public enemy, and every frugal man a public
benefactor.

The effects of misconduct are often the same as those of prodigality.
Every injudicious and unsuccessful project in agriculture, mines,
fisheries, trade, or manufactures, tends in the same manner to
diminish the funds destined for the maintenance of productive labour.
In every such project, though the capital is consumed by productive
hands only, yet as, by the injudicious manner in which they are
employed, they do not reproduce the full value of their consumption,
there must always be some diminution in what would otherwise have been
the productive funds of the society.

It can seldom happen, indeed, that the circumstances of a great nation
can be much affected either by the prodigality or misconduct of
individuals; the profusion or imprudence of some being always more
than compensated by the frugality and good conduct of others.

With regard to profusion, the principle which prompts to expense is
the passion for present enjoyment; which, though sometimes violent and
very difficult to be restrained, is in general only momentary and
occasional. But the principle which prompts to save, is the desire of
bettering our condition; a desire which, though generally calm and
dispassionate, comes with us from the womb, and never leaves us till
we go into the grave. In the whole interval which separates those two
moments, there is scarce, perhaps, a single instance, in which any man
is so perfectly and completely satisfied with his situation, as to be
without any wish of alteration or improvement of any kind. An
augmentation of fortune is the means by which the greater part of men
propose and wish to better their condition. It is the means the most
vulgar and the most obvious; and the most likely way of augmenting
their fortune, is to save and accumulate some part of what they
acquire, either regularly and annually, or upon some extraordinary
occasion. Though the principle of expense, therefore, prevails in
almost all men upon some occasions, and in some men upon almost all
occasions; yet in the greater part of men, taking the whole course of
their life at an average, the principle of frugality seems not only to
predominate, but to predominate very greatly.

With regard to misconduct, the number of prudent and successful
undertakings is everywhere much greater than that of injudicious and
unsuccessful ones. After all our complaints of the frequency of
bankruptcies, the unhappy men who fall into this misfortune, make but
a very small part of the whole number engaged in trade, and all other
sorts of business; not much more, perhaps, than one in a thousand.
Bankruptcy is, perhaps, the greatest and most humiliating calamity
which can befal an innocent man. The greater part of men, therefore,
are sufficiently careful to avoid it. Some, indeed, do not avoid it;
as some do not avoid the gallows.

Great nations are never impoverished by private, though they sometimes
are by public prodigality and misconduct. The whole, or almost the
whole public revenue is, in most countries, employed in maintaining
unproductive hands. Such are the people who compose a numerous and
splendid court, a great ecclesiastical establishment, great fleets and
armies, who in time of peace produce nothing, and in time of war
acquire nothing which can compensate the expense of maintaining them,
even while the war lasts. Such people, as they themselves produce
nothing, are all maintained by the produce of other men's labour. When
multiplied, therefore, to an unnecessary number, they may in a
particular year consume so great a share of this produce, as not to
leave a sufficiency for maintaining the productive labourers, who
should reproduce it next year. The next year's produce, therefore,
will be less than that of the foregoing; and if the same disorder
should continue, that of the third year will be still less than that
of the second. Those unproductive hands who should be maintained by a
part only of the spare revenue of the people, may consume so great a
share of their whole revenue, and thereby oblige so great a number to
encroach upon their capitals, upon the funds destined for the
maintenance of productive labour, that all the frugality and good
conduct of individuals may not be able to compensate the waste and
degradation of produce occasioned by this violent and forced
encroachment.

This frugality and good conduct, however, is, upon most occasions, it
appears from experience, sufficient to compensate, not only the
private prodigality and misconduct of individuals, but the public
extravagance of government. The uniform, constant, and uninterrupted
effort of every man to better his condition, the principle from which
public and national, as well as private opulence is originally
derived,is frequently powerful enough to maintain the natural progress
of things towards improvement, in spite both of the extravagance of
government, and of the greatest errors of administration. Like the
unknown principle of animal life, it frequently restores health and
vigour to the constitution, in spite not only of the disease, but of
the absurd prescriptions of the doctor.

The annual produce of the land and labour of any nation can be
increased in its value by no other means, but by increasing either the
number of its productive labourers, or the productive powers of those
labourers who had before been employed. The number of its productive
labourers, it is evident, can never be much increased, but in
consequence of an increase of capital, or of the funds destined for
maintaining them. The productive powers of the same number of
labourers cannot be increased, but in consequence either of some
addition and improvement to those machines and instruments which
facilitate and abridge labour, or of more proper division and
distribution of employment. In either case, an additional capital is
almost always required. It is by means of an additional capital only,
that the undertaker of any work can either provide his workmen with
better machinery, or make a more proper distribution of employment
among them. When the work to be done consists of a number of parts, to
keep every man constantly employed in one way, requires a much greater
capital than where every man is occasionally employed in every
different part of the work. When we compare, therefore, the state of a
nation at two different periods, and find that the annual produce of
its land and labour is evidently greater at the latter than at the
former, that its lands are better cultivated, its manufactures more
numerous and more flourishing, and its trade more extensive; we may be
assured that its capital must have increased during the interval
between those two periods, and that more must have been added to it by
the good conduct of some, than had been taken from it either by the
private misconduct of others, or by the public extravagance of
government. But we shall find this to have been the case of almost all
nations, in all tolerably quiet and peaceable times, even of those who
have not enjoyed the most prudent and parsimonious governments. To
form a right judgment of it, indeed, we must compare the state of the
country at periods somewhat distant from one another. The progress is
frequently so gradual, that, at near periods, the improvement is not
only not sensible, but, from the declension either of certain branches
of industry, or of certain districts of the country, things which
sometimes happen, though the country in general is in great
prosperity, there frequently arises a suspicion, that the riches and
industry of the whole are decaying.

The annual produce of the land and labour of England, for example, is
certainly much greater than it was a little more than a century ago,
at the restoration of Charles II. Though at present few people, I
believe, doubt of this, yet during this period five years have seldom
passed away, in which some book or pamphlet has not been published,
written, too, with such abilities as to gain some authority with the
public, and pretending to demonstrate that the wealth of the nation
was fast declining; that the country was depopulated, agriculture
neglected, manufactures decaying, and trade undone. Nor have these
publications been all party pamphlets, the wretched offspring of
falsehood and venality. Many of them have been written by very candid
and very intelligent people, who wrote nothing but what they believed,
and for no other reason but because they believed it.

The annual produce of the land and labour of England, again, was
certainly much greater at the Restoration than we can suppose it to
have been about a hundred years before, at the accession of Elizabeth.
At this period, too, we have all reason to believe, the country was
much more advanced in improvement, than it had been about a century
before, towards the close of the dissensions between the houses of
York and Lancaster. Even then it was, probably, in a better condition
than it had been at the Norman conquest: and at the Norman conquest,
than during the confusion of the Saxon heptarchy. Even at this early
period, it was certainly a more improved country than at the invasion
of Julius Caesar, when its inhabitants were nearly in the same state
with the savages in North America.

In each of those periods, however, there was not only much private and
public profusion, many expensive and unnecessary wars, great
perversion of the annual produce from maintaining productive to
maintain unproductive hands; but sometimes, in the confusion of civil
discord, such absolute waste and destruction of stock, as might be
supposed, not only to retard, as it certainly did, the natural
accumulation of riches, but to have left the country, at the end of
the period, poorer than at the beginning. Thus, in the happiest and
most fortunate period of them all, that which has passed since the
Restoration, how many disorders and misfortunes have occurred, which,
could they have been foreseen, not only the impoverishment, but the
total ruin of the country would have been expected from them? The fire
and the plague of London, the two Dutch wars, the disorders of the
revolution, the war in Ireland, the four expensive French wars of
1688, 1701, 1742, and 1756, together with the two rebellions of 1715
and 1745. In the course of the four French wars, the nation has
contracted more than £145,000,000 of debt, over and above all the
other extraordinary annual expense which they occasioned; so that the
whole cannot be computed at less than £200,000,000. So great a share
of the annual produce of the land and labour of the country, has,
since the Revolution, been employed upon different occasions, in
maintaining an extraordinary number of unproductive hands. But had not
those wars given this particular direction to so large a capital, the
greater part of it would naturally have been employed in maintaining
productive hands, whose labour would have replaced, with a profit, the
whole value of their consumption. The value of the annual produce of
the land and labour of the country would have been considerably
increased by it every year, and every years increase would have
augmented still more that of the following year. More houses would
have been built, more lands would have been improved, and those which
had been improved before would have been better cultivated; more
manufactures would have been established, and those which had been
established before would have been more extended; and to what height
the real wealth and revenue of the country might by this time have
been raised, it is not perhaps very easy even to imagine.

But though the profusion of government must undoubtedly have retarded
the natural progress of England towards wealth and improvement, it has
not been able to stop it. The annual produce of its land and labour is
undoubtedly much greater at present than it was either at the
Restoration or at the Revolution. The capital, therefore, annually
employed in cultivating this land, and in maintaining this labour,
must likewise be much greater. In the midst of all the exactions of
government, this capital has been silently and gradually accumulated
by the private frugality and good conduct of individuals, by their
universal, continual, and uninterrupted effort to better their own
condition. It is this effort, protected by law, and allowed by liberty
to exert itself in the manner that is most advantageous, which has
maintained the progress of England towards opulence and improvement in
almost all former times, and which, it is to be hoped, will do so in
all future times. England, however, as it has never been blessed with
a very parsimonious government, so parsimony has at no time been the
characteristic virtue of its inhabitants. It is the highest
impertinence and presumption, therefore, in kings and ministers to
pretend to watch over the economy of private people, and to restrain
their expense, either by sumptuary laws, or by prohibiting the
importation of foreign luxuries. They are themselves always, and
without any exception, the greatest spendthrifts in the society. Let
them look well after their own expense, and they may safely trust
private people with theirs. If their own extravagance does not ruin
the state, that of the subject never will.

As frugality increases, and prodigality diminishes, the public
capital, so the conduct of those whose expense just equals their
revenue, without either accumulating or encroaching, neither increases
nor diminishes it. Some modes of expense, however, seem to contribute
more to the growth of public opulence than others.

The revenue of an individual may be spent, either in things which are
consumed immediately, and in which one day's expense can neither
alleviate nor support that of another; or it may be spent in things
mere durable, which can therefore be accumulated, and in which every
day's expense may, as he chooses, either alleviate, or support and
heighten, the effect of that of the following day. A man of fortune,
for example, may either spend his revenue in a profuse and sumptuous
table, and in maintaining a great number of menial servants, and a
multitude of dogs and horses; or, contenting himself with a frugal
table, and few attendants, he may lay out the greater part of it in
adorning his house or his country villa, in useful or ornamental
buildings, in useful or ornamental furniture, in collecting books,
statues, pictures; or in things more frivolous, jewels, baubles,
ingenious trinkets of different kinds; or, what is most trifling of
all, in amassing a great wardrobe of fine clothes, like the favourite
and minister of a great prince who died a few years ago. Were two men
of equal fortune to spend their revenue, the one chiefly in the one
way, the other in the other, the magnificence of the person whose
expense had been chiefly in durable commodities, would be continually
increasing, every day's expense contributing something to support and
heighten the effect of that of the following day; that of the other,
on the contrary, would be no greater at the end of the period than at
the beginning. The former too would, at the end of the period, be the
richer man of the two. He would have a stock of goods of some kind or
other, which, though it might not be worth all that it cost, would
always be worth something. No trace or vestige of the expense of the
latter would remain, and the effects of ten or twenty years' profusion
would be as completely annihilated as if they had never existed.

As the one mode of expense is more favourable than the other to the
opulence of an individual, so is it likewise to that of a nation. The
houses, the furniture, the clothing of the rich, in a little time,
become useful to the inferior and middling ranks of people. They are
able to purchase them when their superiors grow weary of them; and the
general accommodation of the whole people is thus gradually improved,
when this mode of expense becomes universal among men of fortune. In
countries which have long been rich, you will frequently find the
inferior ranks of people in possession both of houses and furniture
perfectly good and entire, but of which neither the one could have
been built, nor the other have been made for their use. What was
formerly a seat of the family of Seymour, is now an inn upon the Bath
road. The marriage-bed of James I. of Great Britain, which his queen
brought with her from Denmark, as a present fit for a sovereign to
make to a sovereign, was, a few years ago, the ornament of an alehouse
at Dunfermline. In some ancient cities, which either have been long
stationary, or have gone somewhat to decay, you will sometimes scarce
find a single house which could have been built for its present
inhabitants. If you go into those houses, too, you will frequently
find many excellent, though antiquated pieces of furniture, which are
still very fit for use, and which could as little have been made for
them. Noble palaces, magnificent villas, great collections of books,
statues, pictures, and other curiosities, are frequently both an
ornament and an honour, not only to the neighbourhood, but to the
whole country to which they belong. Versailles is an ornament and an
honour to France, Stowe and Wilton to England. Italy still continues
to command some sort of veneration, by the number of monuments of this
kind which it possesses, though the wealth which produced them has
decayed, and though the genius which planned them seems to be
extinguished, perhaps from not having the same employment.

The expense, too, which is laid out in durable commodities, is
favourable not only to accumulation, but to frugality. If a person
should at any time exceed in it, he can easily reform without exposing
himself to the censure of the public. To reduce very much the number
of his servants, to reform his table from great profusion to great
frugality, to lay down his equipage after he has once set it up, are
changes which cannot escape the observation of his neighbours, and
which are supposed to imply some acknowledgment of preceding bad
conduct. Few, therefore, of those who have once been so unfortunate as
to launch out too far into this sort of expense, have afterwards the
courage to reform, till ruin and bankruptcy oblige them. But if a
person has, at any time, been at too great an expense in building, in
furniture, in books, or pictures, no imprudence can be inferred from
his changing his conduct. These are things in which further expense is
frequently rendered unnecessary by former expense; and when a person
stops short, he appears to do so, not because he has exceeded his
fortune, but because he has satisfied his fancy.

The expense, besides, that is laid out in durable commodities, gives
maintenance, commonly, to a greater number of people than that which
is employed in the most profuse hospitality. Of two or three hundred
weight of provisions, which may sometimes be served up at a great
festival, one half, perhaps, is thrown to the dunghill, and there is
always a great deal wasted and abused. But if the expense of this
entertainment had been employed in setting to work masons, carpenters,
upholsterers, mechanics, etc. a quantity of provisions of equal value
would have been distributed among a still greater number of people,
who would have bought them in pennyworths and pound weights, and not
have lost or thrown away a single ounce of them. In the one way,
besides, this expense maintains productive, in the other unproductive
hands. In the one way, therefore, it increases, in the other it does
not increase the exchangeable value of the annual produce of the land
and labour of the country.

I would not, however, by all this, be understood to mean, that the one
species of expense always betokens a more liberal or generous spirit
than the other. When a man of fortune spends his revenue chiefly in
hospitality, he shares the greater part of it with his friends and
companions; but when he employs it in purchasing such durable
commodities, he often spends the whole upon his own person, and gives
nothing to any body without an equivalent. The latter species of
expense, therefore, especially when directed towards frivolous
objects, the little ornaments of dress and furniture, jewels,
trinkets, gew-gaws, frequently indicates, not only a trifling, but a
base and selfish disposition. All that I mean is, that the one sort of
expense, as it always occasions some accumulation of valuable
commodities, as it is more favourable to private frugality, and,
consequently, to the increase of the public capital, and as it
maintains productive rather than unproductive hands, conduces more
than the other to the growth of public opulence.




CHAPTER IV.

OF STOCK LENT AT INTEREST.

The stock which is lent at interest is always considered as a capital
by the lender. He expects that in due time it is to be restored to
him, and that, in the mean time, the borrower is to pay him a certain
annual rent for the use of it. The borrower may use it either as a
capital, or as a stock reserved for immediate consumption. If he uses
it as a capital, he employs it in the maintenance of productive
labourers, who reproduce the value, with a profit. He can, in this
case, both restore the capital, and pay the interest, without
alienating or encroaching upon any other source of revenue. If he uses
it as a stock reserved for immediate consumption, he acts the part of
a prodigal, and dissipates, in the maintenance of the idle, what was
destined for the support of the industrious. He can, in this case,
neither restore the capital nor pay the interest, without either
alienating or encroaching upon some other source of revenue, such as
the property or the rent of land.

The stock which is lent at interest is, no doubt, occasionally
employed in both these ways, but in the former much more frequently
than in the latter. The man who borrows in order to spend will soon be
ruined, and he who lends to him will generally have occasion to repent
of his folly. To borrow or to lend for such a purpose, therefore, is,
in all cases, where gross usury is out of the question, contrary to
the interest of both parties; and though it no doubt happens
sometimes, that people do both the one and the other, yet, from the
regard that all men have for their own interest, we may be assured,
that it cannot happen so very frequently as we are sometimes apt to
imagine. Ask any rich man of common prudence, to which of the two
sorts of people he has lent the greater part of his stock, to those
who he thinks will employ it profitably, or to those who will spend it
idly, and he will laugh at you for proposing the question. Even among
borrowers, therefore, not the people in the world most famous for
frugality, the number of the frugal and industrious surpasses
considerably that of the prodigal and idle.

The only people to whom stock is commonly lent, without their being
expected to make any very profitable use of it, are country gentlemen,
who borrow upon mortgage. Even they scarce ever borrow merely to
spend. What they borrow, one may say, is commonly spent before they
borrow it. They have generally consumed so great a quantity of goods,
advanced to them upon credit by shop-keepers and tradesmen, that they
find it necessary to borrow at interest, in order to pay the debt. The
capital borrowed replaces the capitals of those shop-keepers and
tradesmen which the country gentlemen could not have replaced from the
rents of their estates. It is not properly borrowed in order to be
spent, but in order to replace a capital which had been spent before.

Almost all loans at interest are made in money, either of paper, or of
gold and silver; but what the borrower really wants, and what the
lender readily supplies him with, is not the money, but the money's
worth, or the goods which it can purchase. If he wants it as a stock
for immediate consumption, it is those goods only which he can place
in that stock. If he wants it as a capital for employing industry, it
is from those goods only that the industrious can be furnished with
the tools, materials, and maintenance necessary for carrying on their
work. By means of the loan, the lender, as it were, assigns to the
borrower his right to a certain portion of the annual produce of the
land and labour of the country, to be employed as the borrower
pleases.

The quantity of stock, therefore, or, as it is commonly expressed, of
money, which can be lent at interest in any country, is not regulated
by the value of the money, whether paper or coin, which serves as the
instrument of the different loans made in that country, but by the
value of that part of the annual produce, which, as soon as it comes
either from the ground, or from the hands of the productive labourers,
is destined, not only for replacing a capital, but such a capital as
the owner does not care to be at the trouble of employing himself. As
such capitals are commonly lent out and paid back in money, they
constitute what is called the monied interest. It is distinct, not
only from the landed, but from the trading and manufacturing
interests, as in these last the owners themselves employ their own
capitals. Even in the monied interest, however, the money is, as it
were, but the deed of assignment, which conveys from one hand to
another those capitals which the owners do not care to employ
themselves. Those capitals may be greater, in almost any proportion,
than the amount of the money which serves as the instrument of their
conveyance; the same pieces of money successively serving for many
different loans, as well as for many different purchases. A, for
example, lends to W £1000, with which W immediately purchases of B
£1000 worth of goods. B having no occasion for the money himself,
lends the identical pieces to X, with which X immediately purchases of
C another £1000 worth of goods. C, in the same manner, and for the
same reason, lends them to Y, who again purchases goods with them of
D. In this manner, the same pieces, either of coin or of paper, may,
in the course of a few days, serve as the Instrument of three
different loans, and of three different purchases, each of which is,
in value, equal to the whole amount of those pieces. What the three
monied men, A, B, and C, assigned to the three borrowers, W, X, and Y,
is the power of making those purchases. In this power consist both the
value and the use of the loans. The stock lent by the three monied men
is equal to the value of the goods which can be purchased with it, and
is three times greater than that of the money with which the purchases
are made. Those loans, however, may be all perfectly well secured, the
goods purchased by the different debtors being so employed as, in due
time, to bring back, with a profit, an equal value either of coin or
of paper. And as the same pieces of money can thus serve as the
instrument of different loans to three, or, for the same reason, to
thirty times their value, so they may likewise successively serve as
the instrument of repayment.

A capital lent at interest may, in this manner, be considered as an
assignment, from the lender to the borrower, of a certain considerable
portion of the annual produce, upon condition that the burrower in
return shall, during the continuance of the loan, annually assign to
the lender a small portion, called the interest; and, at the end of
it, a portion equally considerable with that which had originally been
assigned to him, called the repayment. Though money, either coin or
paper, serves generally as the deed of assignment, both to the smaller
and to the more considerable portion, it is itself altogether
different from what is assigned by it.

In proportion as that share of the annual produce which, as soon as it
comes either from the ground, or from the hands of the productive
labourers, is destined for replacing a capital, increases in any
country, what is called the monied interest naturally increases with
it. The increase of those particular capitals from which the owners
wish to derive a revenue, without being at the trouble of employing
them themselves, naturally accompanies the general increase of
capitals; or, in other words, as stock increases, the quantity of
stock to be lent at interest grows gradually greater and greater.

As the quantity of stock to be lent at interest increases, the
interest, or the price which must be paid for the use of that stock,
necessarily diminishes, not only from those general causes which make
the market price of things commonly diminish as their quantity
increases, but from other causes which are peculiar to this particular
case. As capitals increase in any country, the profits which can be
made by employing them necessarily diminish. It becomes gradually more
and more difficult to find within the country a profitable method of
employing any new capital. There arises, in consequence, a competition
between different capitals, the owner of one endeavouring to get
possession of that employment which is occupied by another; but, upon
most occasions, he can hope to justle that other out of this
employment by no other means but by dealing upon more reasonable
terms. He must not only sell what he deals in somewhat cheaper, but,
in order to get it to sell, he must sometimes, too, buy it dearer. The
demand for productive labour, by the increase of the funds which are
destined for maintaining it, grows every day greater and greater.
Labourers easily find employment; but the owners of capitals find it
difficult to get labourers to employ. Their competition raises the
wages of labour, and sinks the profits of stock. But when the profits
which can be made by the use of a capital are in this manner
diminished, as it were, at both ends, the price which can be paid for
the use of it, that is, the rate of interest, must necessarily be
diminished with them.

Mr Locke, Mr Lawe, and Mr Montesquieu, as well as many other writers,
seem to have imagined that the increase of the quantity of gold and
silver, in consequence of the discovery of the Spanish West Indies,
was the real cause of the lowering of the rate of interest through the
greater part of Europe. Those metals, they say, having become of less
value themselves, the use of any particular portion of them
necessarily became of less value too, and, consequently, the price
which could be paid for it. This notion, which at first sight seems so
plausible, has been so fully exposed by Mr Hume, that it is, perhaps,
unnecessary to say any thing more about it. The following very short
and plain argument, however, may serve to explain more distinctly the
fallacy which seems to have misled those gentlemen.

Before the discovery of the Spanish West Indies, ten per cent. seems
to have been the common rate of interest through the greater part of
Europe. It has since that time, in different countries, sunk to six,
five, four, and three per cent. Let us suppose, that in every
particular country the value of silver has sunk precisely in the same
proportion as the rate of interest; and that in those countries, for
example, where interest has been reduced from ten to five per cent.
the same quantity of silver can now purchase just half the quantity of
goods which it could have purchased before. This supposition will not,
I believe, be found anywhere agreeable to the truth; but it is the
most favourable to the opinion which we are going to examine; and,
even upon this supposition, it is utterly impossible that the lowering
of the value of silver could have the smallest tendency to lower the
rate of interest. If £100 are in those countries now of no more value
than £50 were then, £10 must now be of no more value than £5 were
then. Whatever were the causes which lowered the value of the capital,
the same must necessarily have lowered that of the interest, and
exactly in the same proportion. The proportion between the value of
the capital and that of the interest must have remained the same,
though the rate had never been altered. By altering the rate, on the
contrary, the proportion between those two values is necessarily
altered. If £100 now are worth no more than £50 were then, £5 now can
be worth no more than £2:10s. were then. By reducing the rate of
interest, therefore, from ten to five per cent. we give for the use of
a capital, which is supposed to be equal to one half of its former
value, an interest which is equal to one fourth only of the value of
the former interest.

An increase in the quantity of silver, while that of the commodities
circulated by means of it remained the same, could have no other
effect than to diminish the value of that metal. The nominal value of
all sorts of goods would be greater, but their real value would be
precisely the same as before. They would be exchanged for a greater
number of pieces of silver; but the quantity of labour which they
could command, the number of people whom they could maintain and
employ, would be precisely the same. The capital of the country would
be the same, though a greater number of pieces might be requisite for
conveying any equal portion of it from one hand to another. The deeds
of assignment, like the conveyances of a verbose attorney, would be
more cumbersome; but the thing assigned would be precisely the same as
before, and could produce only the same effects. The funds for
maintaining productive labour being the same, the demand for it would
be the same. Its price or wages, therefore, though nominally greater,
would really be the same. They would be paid in a greater number of
pieces of silver, but they would purchase only the same quantity of
goods. The profits of stock would be the same, both nominally and
really. The wages of labour are commonly computed by the quantity of
silver which is paid to the labourer. When that is increased,
therefore, his wages appear to be increased, though they may sometimes
be no greater than before. But the profits of stock are not computed
by the number of pieces of silver with which they are paid, but by the
proportion which those pieces bear to the whole capital employed.
Thus, in a particular country, 5s. a-week are said to be the common
wages of labour, and ten per cent. the common profits of stock; but
the whole capital of the country being the same as before, the
competition between the different capitals of individuals into which
it was divided would likewise be the same. They would all trade with
the same advantages and disadvantages. The common proportion between
capital and profit, therefore, would be the same, and consequently the
common interest of money; what can commonly be given for the use of
money being necessarily regulated by what can commonly be made by the
use of it.

Any increase in the quantity of commodities annually circulated within
the country, while that of the money which circulated them remained
the same, would, on the contrary, produce many other important
effects, besides that of raising the value of the money. The capital
of the country, though it might nominally be the same, would really be
augmented. It might continue to be expressed by the same quantity of
money, but it would command a greater quantity of labour. The quantity
of productive labour which it could maintain and employ would be
increased, and consequently the demand for that labour. Its wages
would naturally rise with the demand, and yet might appear to sink.
They might be paid with a smaller quantity of money, but that smaller
quantity might purchase a greater quantity of goods than a greater had
done before. The profits of stock would be diminished, both really and
in appearance. The whole capital of the country being augmented, the
competition between the different capitals of which it was composed
would naturally be augmented along with it. The owners of those
particular capitals would be obliged to content themselves with a
smaller proportion of the produce of that labour which their
respective capitals employed. The interest of money, keeping pace
always with the profits of stock, might, in this manner, be greatly
diminished, though the value of money, or the quantity of goods which
any particular sum could purchase, was greatly augmented.

In some countries the interest of money has been prohibited by law.
But as something can everywhere be made by the use of money, something
ought everywhere to be paid for the use of it. This regulation,
instead of preventing, has been found from experience to increase the
evil of usury. The debtor being obliged to pay, not only for the use
of the money, but for the risk which his creditor runs by accepting a
compensation for that use, he is obliged, if one may say so, to insure
his creditor from the penalties of usury.

In countries where interest is permitted, the law in order to prevent
the extortion of usury, generally fixes the highest rate which can be
taken without incurring a penalty. This rate ought always to be
somewhat above the lowest market price, or the price which is commonly
paid for the use of money by those who can give the most undoubted
security. If this legal rate should be fixed below the lowest market
rate, the effects of this fixation must be nearly the same as those of
a total prohibition of interest. The creditor will not lend his money
for less than the use of it is worth, and the debtor must pay him for
the risk which he runs by accepting the full value of that use. If it
is fixed precisely at the lowest market price, it ruins, with honest
people who respect the laws of their country, the credit of all those
who cannot give the very best security, and obliges them to have
recourse to exorbitant usurers. In a country such as Great Britain,
where money is lent to government at three per cent. and to private
people, upon good security, at four and four and a-half, the present
legal rate, five per cent. is perhaps as proper as any.

The legal rate, it is to be observed, though it ought to be somewhat
above, ought not to be much above the lowest market rate. If the legal
rate of interest in Great Britain, for example, was fixed so high as
eight or ten per cent. the greater part of the money which was to be
lent, would be lent to prodigals and projectors, who alone would be
willing to give this high interest. Sober people, who will give for
the use of money no more than a part of what they are likely to make
by the use of it, would not venture into the competition. A great part
of the capital of the country would thus be kept out of the hands
which were most likely to make a profitable and advantageous use of
it, and thrown into those which were most likely to waste and destroy
it. Where the legal rate of interest, on the contrary, is fixed but a
very little above the lowest market rate, sober people are universally
preferred, as borrowers, to prodigals and projectors. The person who
lends money gets nearly as much interest from the former as he dares
to take from the latter, and his money is much safer in the hands of
the one set of people than in those of the other. A great part of the
capital of the country is thus thrown into the hands in which it is
most likely to be employed with advantage.

No law can reduce the common rate of interest below the lowest
ordinary market rate at the time when that law is made.
Notwithstanding the edict of 1766, by which the French king attempted
to reduce the rate of interest from five to four per cent. money
continued to be lent in France at five per cent. the law being evaded
in several different ways.

The ordinary market price of land, it is to be observed, depends
everywhere upon the ordinary market rate of interest. The person who
has a capital from which he wishes to derive a revenue, without taking
the trouble to employ it himself, deliberates whether he should buy
land with it, or lend it out at interest. The superior security of
land, together with some other advantages which almost everywhere
attend upon this species of property, will generally dispose him to
content himself with a smaller revenue from land, than what he might
have by lending out his money at interest. These advantages are
sufficient to compensate a certain difference of revenue; but they
will compensate a certain difference only; and if the rent of land
should fall short of the interest of money by a greater difference,
nobody would buy land, which would soon reduce its ordinary price. On
the contrary, if the advantages should much more than compensate the
difference, everybody would buy land, which again would soon raise its
ordinary price. When interest was at ten per cent. land was commonly
sold for ten or twelve years purchase. As interest sunk to six, five,
and four per cent. the price of land rose to twenty, five-and-twenty,
and thirty years purchase. The market rate of interest is higher in
France than in England, and the common price of land is lower. In
England it commonly sells at thirty, in France at twenty years
purchase.




CHAPTER V.

OF THE DIFFERENT EMPLOYMENTS OF CAPITALS.

Though all capitals are destined for the maintenance of productive
labour only, yet the quantity of that labour which equal capitals are
capable of putting into motion, varies extremely according to the
diversity of their employment; as does likewise the value which that
employment adds to the annual produce of the land and labour of the
country.

A capital may be employed in four different ways; either, first, in
procuring the rude produce annually required for the use and
consumption of the society; or, secondly, in manufacturing and
preparing that rude produce for immediate use and consumption; or,
thirdly in transporting either the rude or manufactured produce from
the places where they abound to those where they are wanted; or,
lastly, in dividing particular portions of either into such small
parcels as suit the occasional demands of those who want them. In the
first way are employed the capitals of all those who undertake
improvement or cultivation of lands, mines, or fisheries; in the
second, those of all master manufacturers; in the third, those of all
wholesale merchants; and in the fourth, those of all retailers. It is
difficult to conceive that a capital should be employed in any way
which may not be classed under some one or other of those four.

Each of those four methods of employing a capital is essentially
necessary, either to the existence or extension of the other three, or
to the general conveniency of the society.

Unless a capital was employed in furnishing rude produce to a certain
degree of abundance, neither manufactures nor trade of any kind could
exist.

Unless a capital was employed in manufacturing that part of the rude
produce which requires a good deal of preparation before it can be fit
for use and consumption, it either would never be produced, because
there could be no demand for it; or if it was produced spontaneously,
it would be of no value in exchange, and could add nothing to the
wealth of the society.

Unless a capital was employed in transporting either the rude or
manufactured produce from the places where it abounds to those where
it is wanted, no more of either could be produced than was necessary
for the consumption of the neighbourhood. The capital of the merchant
exchanges the surplus produce of one place for that of another, and
thus encourages the industry, and increases the enjoyments of both.

Unless a capital was employed in breaking and dividing certain
portions either of the rude or manufactured produce into such small
parcels as suit the occasional demands of those who want them, every
man would be obliged to purchase a greater quantity of the goods he
wanted than his immediate occasions required. If there was no such
trade as a butcher, for example, every man would be obliged to
purchase a whole ox or a whole sheep at a time. This would generally
be inconvenient to the rich, and much more so to the poor. If a poor
workman was obliged to purchase a month's or six months' provisions at
a time, a great part of the stock which he employs as a capital in the
instruments of his trade, or in the furniture of his shop, and which
yields him a revenue, he would be forced to place in that part of his
stock which is reserved for immediate consumption, and which yields
him no revenue. Nothing can be more convenient for such a person than
to be able to purchase his subsistence from day to day, or even from
hour to hour, as he wants it. He is thereby enabled to employ almost
his whole stock as a capital. He is thus enabled to furnish work to a
greater value; and the profit which he makes by it in this way much
more than compensates the additional price which the profit of the
retailer imposes upon the goods. The prejudices of some political
writers against shopkeepers and tradesmen are altogether without
foundation. So far is it from being necessary either to tax them, or
to restrict their numbers, that they can never be multiplied so as to
hurt the public, though they may so as to hurt one another. The
quantity of grocery goods, for example, which can be sold in a
particular town, is limited by the demand of that town and its
neighbourhood. The capital, therefore, which can be employed in the
grocery trade, cannot exceed what is sufficient to purchase that
quantity. If this capital is divided between two different grocers,
their competition will tend to make both of them sell cheaper than if
it were in the hands of one only; and if it were divided among twenty,
their competition would be just so much the greater, and the chance of
their combining together, in order to raise the price, just so much
the less. Their competition might, perhaps, ruin some of themselves;
but to take care of this, is the business of the parties concerned,
and it may safely be trusted to their discretion. It can never hurt
either the consumer or the producer; on the contrary, it must tend to
make the retailers both sell cheaper and buy dearer, than if the whole
trade was monopolized by one or two persons. Some of them, perhaps,
may sometimes decoy a weak customer to buy what he has no occasion
for. This evil, however, is of too little importance to deserve the
public attention, nor would it necessarily be prevented by restricting
their numbers. It is not the multitude of alehouses, to give the must
suspicious example, that occasions a general disposition to
drunkenness among the common people; but that disposition, arising
from other causes, necessarily gives employment to a multitude of
alehouses.

The persons whose capitals are employed in any of those four ways, are
themselves productive labourers. Their labour, when properly directed,
fixes and realizes itself in the subject or vendible commodity upon
which it is bestowed, and generally adds to its price the value at
least of their own maintenance and consumption. The profits of the
farmer, of the manufacturer, of the merchant, and retailer, are all
drawn from the price of the goods which the two first produce, and the
two last buy and sell. Equal capitals, however, employed in each of
those four different ways, will immediately put into motion very
different quantities of productive labour; and augment, too, in very
different proportions, the value of the annual produce of the land and
labour of the society to which they belong.

The capital of the retailer replaces, together with its profits, that
of the merchant of whom he purchases goods, and thereby enables him to
continue his business. The retailer himself is the only productive
labourer whom it immediately employs. In his profit consists the whole
value which its employment adds to the annual produce of the land and
labour of the society.

The capital of the wholesale merchant replaces, together with their
profits, the capital's of the farmers and manufacturers of whom he
purchases the rude and manufactured produce which he deals in, and
thereby enables them to continue their respective trades. It is by
this service chiefly that he contributes indirectly to support the
productive labour of the society, and to increase the value of its
annual produce. His capital employs, too, the sailors and carriers who
transport his goods from one place to another; and it augments the
price of those goods by the value, not only of his profits, but of
their wages. This is all the productive labour which it immediately
puts into motion, and all the value which it immediately adds to the
annual produce. Its operation in both these respects is a good deal
superior to that of the capital of the retailer.

Part of the capital of the master manufacturer is employed as a fixed
capital in the instruments of his trade, and replaces, together with
its profits, that of some other artificer of whom he purchases them.
Part of his circulating capital is employed in purchasing materials,
and replaces, with their profits, the capitals of the farmers and
miners of whom he purchases them. But a great part of it is always,
either annually, or in a much shorter period, distributed among the
different workmen whom he employs. It augments the value of those
materials by their wages, and by their masters' profits upon the whole
stock of wages, materials, and instruments of trade employed in the
business. It puts immediately into motion, therefore, a much greater
quantity of productive labour, and adds a much greater value to the
annual produce of the land and labour of the society, than an equal
capital in the hands of any wholesale merchant.

No equal capital puts into motion a greater quantity of productive
labour than that of the farmer. Not only his labouring servants, but
his labouring cattle, are productive labourers. In agriculture, too,
Nature labours along with man; and though her labour costs no expense,
its produce has its value, as well as that of the most expensive
workmen. The most important operations of agriculture seem intended,
not so much to increase, though they do that too, as to direct the
fertility of Nature towards the production of the plants most
profitable to man. A field overgrown with briars and brambles, may
frequently produce as great a quantity of vegetables as the best
cultivated vineyard or corn field. Planting and tillage frequently
regulate more than they animate the active fertility of Nature; and
after all their labour, a great part of the work always remains to be
done by her. The labourers and labouring cattle, therefore, employed
in agriculture, not only occasion, like the workmen in manufactures,
the reproduction of a value equal to their own consumption, or to the
capital which employs them, together with its owner's profits, but of
a much greater value. Over and above the capital of the farmer, and
all its profits, they regularly occasion the reproduction of the rent
of the landlord. This rent may be considered as the produce of those
powers of Nature, the use of which the landlord lends to the farmer.
It is greater or smaller, according to the supposed extent of those
powers, or, in other words, according to the supposed natural or
improved fertility of the land. It is the work of Nature which
remains, after deducting or compensating every thing which can be
regarded as the work of man. It is seldom less than a fourth, and
frequently more than a third, of the whole produce. No equal quantity
of productive labour employed in manufactures, can ever occasion so
great reproduction. In them Nature does nothing; man does all; and the
reproduction must always be in proportion to the strength of the
agents that occasion it. The capital employed in agriculture,
therefore, not only puts into motion a greater quantity of productive
labour than any equal capital employed in manufactures; but in
proportion, too, to the quantity of productive labour which it
employs, it adds a much greater value to the annual produce of the
land and labour of the country, to the real wealth and revenue of its
inhabitants. Of all the ways in which a capital can be employed, it is
by far the most advantageous to society.

The capitals employed in the agriculture and in the retail trade of
any society, must always reside within that society. Their employment
is confined almost to a precise spot, to the farm, and to the shop of
the retailer. They must generally, too, though there are some
exceptions to this, belong to resident members of the society.

The capital of a wholesale merchant, on the contrary, seems to have no
fixed or necessary residence anywhere, but may wander about from place
to place, according as it can either buy cheap or sell dear.

The capital of the manufacturer must, no doubt, reside where the
manufacture is carried on; but where this shall be, is not always
necessarily determined. It may frequently be at a great distance, both
from the place where the materials grow, and from that where the
complete manufacture is consumed. Lyons is very distant, both from the
places which afford the materials of its manufactures, and from those
which consume them. The people of fashion in Sicily are clothed in
silks made in other countries, from the materials which their own
produces. Part of the wool of Spain is manufactured in Great Britain,
and some part of that cloth is afterwards sent back to Spain.

Whether the merchant whose capital exports the surplus produce of any
society, be a native or a foreigner, is of very little importance. If
he is a foreigner, the number of their productive labourers is
necessarily less than if he had been a native, by one man only; and
the value of their annual produce, by the profits of that one man. The
sailors or carriers whom he employs, may still belong indifferently
either to his country, or to their country, or to some third country,
in the same manner as if he had been a native. The capital of a
foreigner gives a value to their surplus produce equally with that of
a native, by exchanging it for something for which there is a demand
at home. It as effectually replaces the capital of the person who
produces that surplus, and as effectually enables him to continue his
business, the service by which the capital of a wholesale merchant
chiefly contributes to support the productive labour, and to augment
the value of the annual produce of the society to which he belongs.

It is of more consequence that the capital of the manufacturer should
reside within the country. It necessarily puts into motion a greater
quantity of productive labour, and adds a greater value to the annual
produce of the land and labour of the society. It may, however, be
very useful to the country, though it should not reside within it. The
capitals of the British manufacturers who work up the flax and hemp
annually imported from the coasts of the Baltic, are surely very
useful to the countries which produce them. Those materials are a part
of the surplus produce of those countries, which, unless it was
annually exchanged for something which is in demand here, would be of
no value, and would soon cease to be produced. The merchants who
export it, replace the capitals of the people who produce it, and
thereby encourage them to continue the production; and the British
manufacturers replace the capitals of those merchants.

A particular country, in the same manner as a particular person, may
frequently not have capital sufficient both to improve and cultivate
all its lands, to manufacture and prepare their whole rude produce for
immediate use and consumption, and to transport the surplus part
either of the rude or manufactured produce to those distant markets,
where it can be exchanged for something for which there is a demand at
home. The inhabitants of many different parts of Great Britain have
not capital sufficient to improve and cultivate all their lands. The
wool of the southern counties of Scotland is, a great part of it,
after a long land carriage through very bad roads, manufactured in
Yorkshire, for want of a capital to manufacture it at home. There are
many little manufacturing towns in Great Britain, of which the
inhabitants have not capital sufficient to transport the produce of
their own industry to those distant markets where there is demand and
consumption for it. If there are any merchants among them, they are,
properly, only the agents of wealthier merchants who reside in some of
the great commercial cities.

When the capital of any country is not sufficient for all those three
purposes, in proportion as a greater share of it is employed in
agriculture, the greater will be the quantity of productive labour
which it puts into motion within the country; as will likewise be the
value which its employment adds to the annual produce of the land and
labour of the society. After agriculture, the capital employed in
manufactures puts into motion the greatest quantity of productive
labour, and adds the greatest value to the annual produce. That which
is employed in the trade of exportation has the least effect of any of
the three.

The country, indeed, which has not capital sufficient for all those
three purposes, has not arrived at that degree of opulence for which
it seems naturally destined. To attempt, however, prematurely, and
with an insufficient capital, to do all the three, is certainly not
the shortest way for a society, no more than it would be for an
individual, to acquire a sufficient one. The capital of all the
individuals of a nation has its limits, in the same manner as that of
a single individual, and is capable of executing only certain
purposes. The capital of all the individuals of a nation is increased
in the same manner as that of a single individual, by their
continually accumulating and adding to it whatever they save out of
their revenue. It is likely to increase the fastest, therefore, when
it is employed in the way that affords the greatest revenue to all the
inhabitants or the country, as they will thus be enabled to make the
greatest savings. But the revenue of all the inhabitants of the
country is necessarily in proportion to the value of the annual
produce of their land and labour.

It has been the principal cause of the rapid progress of our American
colonies towards wealth and greatness, that almost their whole
capitals have hitherto been employed in agriculture. They have no
manufactures, those household and coarser manufactures excepted, which
necessarily accompany the progress of agriculture, and which are the
work of the women and children in every private family. The greater
part, both of the exportation and coasting trade of America, is
carried on by the capitals of merchants who reside in Great Britain.
Even the stores and warehouses from which goods are retailed in some
provinces, particularly in Virginia and Maryland, belong many of them
to merchants who reside in the mother country, and afford one of the
few instances of the retail trade of a society being carried on by the
capitals of those who are not resident members of it. Were the
Americans, either by combination, or by any other sort of violence, to
stop the importation of European manufactures, and, by thus giving a
monopoly to such of their own countrymen as could manufacture the like
goods, divert any considerable part of their capital into this
employment, they would retard, instead of accelerating, the further
increase in the value of their annual produce, and would obstruct,
instead of promoting, the progress of their country towards real
wealth and greatness. This would be still more the case, were they to
attempt, in the same manner, to monopolize to themselves their whole
exportation trade.

The course of human prosperity, indeed, seems scarce ever to have been
of so long continuance as to unable any great country to acquire
capital sufficient for all those three purposes; unless, perhaps, we
give credit to the wonderful accounts of the wealth and cultivation of
China, of those of ancient Egypt, and of the ancient state of
Indostan. Even those three countries, the wealthiest, according to all
accounts, that ever were in the world, are chiefly renowned for their
superiority in agriculture and manufactures. They do not appear to
have been eminent for foreign trade. The ancient Egyptians had a
superstitious antipathy to the sea; a superstition nearly of the same
kind prevails among the Indians; and the Chinese have never excelled
in foreign commerce. The greater part of the surplus produce of all
those three countries seems to have been always exported by
foreigners, who gave in exchange for it something else, for which they
found a demand there, frequently gold and silver.

It is thus that the same capital will in any country put into motion a
greater or smaller quantity of productive labour, and add a greater or
smaller value to the annual produce of its land and labour, according
to the different proportions in which it is employed in agriculture,
manufactures, and wholesale trade. The difference, too, is very great,
according to the different sorts of wholesale trade in which any part
of it is employed.

All wholesale trade, all buying in order to sell again by wholesale,
maybe reduced to three different sorts: the home trade, the foreign
trade of consumption, and the carrying trade. The home trade is
employed in purchasing in one part of the same country, and selling in
another, the produce of the industry of that country. It comprehends
both the inland and the coasting trade. The foreign trade of
consumption is employed in purchasing foreign goods for home
consumption. The carrying trade is employed in transacting the
commerce of foreign countries, or in carrying the surplus produce of
one to another.

The capital which is employed in purchasing in one part of the
country, in order to sell in another, the produce of the industry of
that country, generally replaces, by every such operation, two
distinct capitals, that had both been employed in the agriculture or
manufactures of that country, and thereby enables them to continue
that employment. When it sends out from the residence of the merchant
a certain value of commodities, it generally brings hack in return at
least an equal value of other commodities. When both are the produce
of domestic industry, it necessarily replaces, by every such
operation, two distinct capitals, which had both been employed in
Supporting productive labour, and thereby enables them to continue
that support. The capital which sends Scotch manufactures to London,
and brings back English corn and manufactures to Edinburgh,
necessarily replaces, by every such operation, two British capitals,
which had both been employed in the agriculture or manufactures of
Great Britain.

The capital employed in purchasing foreign goods for home consumption,
when this purchase is made with the produce of domestic industry,
replaces, too, by every such operation, two distinct capitals; but one
of them only is employed in supporting domestic industry. The capital
which sends British goods to Portugal, and brings back Portuguese
goods to Great Britain, replaces, by every such operation, only one
British capital. The other is a Portuguese one. Though the returns,
therefore, of the foreign trade of consumption, should be as quick as
those of the home trade, the capital employed in it will give but one
half of the encouragement to the industry or productive labour of the
country.

But the returns of the foreign trade of consumption are very seldom so
quick as those of the home trade. The returns of the home trade
generally come in before the end of the year, and sometimes three or
four times in the year. The returns of the foreign trade of
consumption seldom come in before the end of the year, and sometimes
not till after two or three years. A capital, therefore, employed in
the home trade, will sometimes make twelve operations, or be sent out
and returned twelve times, before a capital employed in the foreign
trade of consumption has made one. If the capitals are equal,
therefore, the one will give four-and-twenty times more encouragement
and support to the industry of the country than the other.

The foreign goods for home consumption may sometimes be purchased, not
with the produce of domestic industry but with some other foreign
goods. These last, however, must have been purchased, either
immediately with the produce of domestic industry, or with something
else that had been purchased with it; for, the case of war and
conquest excepted, foreign goods can never be acquired, but in
exchange for something that had been produced at home, either
immediately, or after two or more different exchanges. The effects,
therefore, of a capital employed in such a round-about foreign trade
of consumption, are, in every respect, the same as those of one
employed in the most direct trade of the same kind, except that the
final returns are likely to be still more distant, as they must depend
upon the returns of two or three distinct foreign trades. If the hemp
and flax of Riga are purchased with the tobacco of Virginia, which had
been purchased with British manufactures, the merchant must wait for
the returns of two distinct foreign trades, before he can employ the
same capital in repurchasing a like quantity of British manufactures.
If the tobacco of Virginia had been purchased, not with British
manufactures, but with the sugar and rum of Jamaica, which had been
purchased with those manufactures, he must wait for the returns of
three. If those two or three distinct foreign trades should happen to
be carried on by two or three distinct merchants, of whom the second
buys the goods imported by the first, and the third buys those
imported by the second, in order to export them again, each merchant,
indeed, will, in this case, receive the returns of his own capital
more quickly; but the final returns of the whole capital employed in
the trade will be just as slow as ever. Whether the whole capital
employed in such a round about trade belong to one merchant or to
three, can make no difference with regard to the country, though it
may with regard to the particular merchants. Three times a greater
capital must in both cases be employed, in order to exchange a certain
value of British manufactures for a certain quantity of flax and hemp,
than would have been necessary, had the manufactures and the flax and
hemp been directly exchanged for one another. The whole capital
employed, therefore, in such a round-about foreign trade of
consumption, will generally give less encouragement and support to the
productive labour of the country, than an equal capital employed in a
more direct trade of the same kind.

Whatever be the foreign commodity with which the foreign goods for
home consumption are purchased, it can occasion no essential
difference, either in the nature of the trade, or in the encouragement
and support which it can give to the productive labour of the country
from which it is carried on. If they are purchased with the gold of
Brazil, for example, or with the silver of Peru, this gold and silver,
like the tobacco of Virginia, must have been purchased with something
that either was the produce of the industry of the country, or that
had been purchased with something else that was so. So far, therefore,
as the productive labour of the country is concerned, the foreign
trade of consumption, which is carried on by means of gold and silver,
has all the advantages and all the inconveniencies of any other
equally round-about foreign trade of consumption; and will replace,
just as fast, or just as slow, the capital which is immediately
employed in supporting that productive labour. It seems even to have
one advantage over any other equally round-about foreign trade. The
transportation of those metals from one place to another, on account
of their small bulk and great value, is less expensive than that of
almost any other foreign goods of equal value. Their freight is much
less, and their insurance not greater; and no goods, besides, are less
liable to suffer by the carriage. An equal quantity of foreign goods,
therefore, may frequently be purchased with a smaller quantity of the
produce of domestic industry, by the intervention of gold and silver,
than by that of any other foreign goods. The demand of the country may
frequently, in this manner, be supplied more completely, and at a
smaller expense, than in any other. Whether, by the continual
exportation of those metals, a trade of this kind is likely to
impoverish the country from which it is carried on in any other way, I
shall have occasion to examine at great length hereafter.

That part of the capital of any country which is employed in the
carrying trade, is altogether withdrawn from supporting the productive
labour of that particular country, to support that of some foreign
countries. Though it may replace, by every operation, two distinct
capitals, yet neither of them belongs to that particular country. The
capital of the Dutch merchant, which carries the corn of Poland to
Portugal, and brings back the fruits and wines of Portugal to Poland,
replaces by every such operation two capitals, neither of which had
been employed in supporting the productive labour of Holland; but one
of them in supporting that of Poland, and the other that of Portugal.
The profits only return regularly to Holland, and constitute the whole
addition which this trade necessarily makes to the annual produce of
the land and labour of that country. When, indeed, the carrying trade
of any particular country is carried on with the ships and sailors of
that country, that part of the capital employed in it which pays the
freight is distributed among, and puts into motion, a certain number
of productive labourers of that country. Almost all nations that have
had any considerable share of the carrying trade have, in fact,
carried it on in this manner. The trade itself has probably derived
its name from it, the people of such countries being the carriers to
other countries. It does not, however, seem essential to the nature of
the trade that it should be so. A Dutch merchant may, for example,
employ his capital in transacting the commerce of Poland and Portugal,
by carrying part of the surplus produce of the one to the other, not
in Dutch, but in British bottoms. It maybe presumed, that he actually
does so upon some particular occasions. It is upon this account,
however, that the carrying trade has been supposed peculiarly
advantageous to such a country as Great Britain, of which the defence
and security depend upon the number of its sailors and shipping. But
the same capital may employ as many sailors and shipping, either in
the foreign trade of consumption, or even in the home trade, when
carried on by coasting vessels, as it could in the carrying trade. The
number of sailors and shipping which any particular capital can
employ, does not depend upon the nature of the trade, but partly upon
the bulk of the goods, in proportion to their value, and partly upon
the distance of the ports between which they are to be carried;
chiefly upon the former of those two circumstances. The coal trade
from Newcastle to London, for example, employs more shipping than all
the carrying trade of England, though the ports are at no great
distance. To force, therefore, by extraordinary encouragements, a
larger share of the capital of any country into the carrying trade,
than what would naturally go to it, will not always necessarily
increase the shipping of that country.

The capital, therefore, employed in the home trade of any country,
will generally give encouragement and support to a greater quantity of
productive labour in that country, and increase the value of its
annual produce, more than an equal capital employed in the foreign
trade of consumption; and the capital employed in this latter trade
has, in both these respects, a still greater advantage over an equal
capital employed in the carrying trade. The riches, and so far as
power depends upon riches, the power of every country must always be
in proportion to the value of its annual produce, the fund from which
all taxes must ultimately be paid. But the great object of the
political economy of every country, is to increase the riches and
power of that country. It ought, therefore, to give no preference nor
superior encouragement to the foreign trade of consumption above the
home trade, nor to the carrying trade above either of the other two.
It ought neither to force nor to allure into either of those two
channels a greater share of the capital of the country, than what
would naturally flow into them of its own accord.

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

When the produce of any particular branch of industry exceeds what the
demand of the country requires, the surplus must be sent abroad, and
exchanged for something for which there is a demand at home. Without
such exportation, a part of the productive labour of the country must
cease, and the value of its annual produce diminish. The land and
labour of Great Britain produce generally more corn, woollens, and
hardware, than the demand of the home market requires. The surplus
part of them, therefore, must be sent abroad, and exchanged for
something for which there is a demand at home. It is only by means of
such exportation, that this surplus can acquired value sufficient to
compensate the labour and expense of producing it. The neighbourhood
of the sea-coast, and the banks of all navigable rivers, are
advantageous situations for industry, only because they facilitate the
exportation and exchange of such surplus produce for something else
which is more in demand there.

When the foreign goods which are thus purchased with the surplus
produce of domestic industry exceed the demand of the home market, the
surplus part of them must be sent abroad again, and exchanged for
something more in demand at home. About 96,000 hogsheads of tobacco
are annually purchased in Virginia and Maryland with a part of the
surplus produce of British industry. But the demand of Great Britain
does not require, perhaps, more than 14,000. If the remaining 82,000,
therefore, could not be sent abroad, and exchanged for something more
in demand at home, the importation of them must cease immediately, and
with it the productive labour of all those inhabitants of Great
Britain who are at present employed in preparing the goods with which
these 82,000 hogsheads are annually purchased. Those goods, which are
part of the produce of the land and labour of Great Britain, having no
market at home, and being deprived of that which they had abroad, must
cease to be produced. The most round-about foreign trade of
consumption, therefore, may, upon some occasions, be as necessary for
supporting the productive labour of the country, and the value of its
annual produce, as the most direct.

When the capital stock of any country is increased to such a degree
that it cannot be all employed in supplying the consumption, and
supporting the productive labour of that particular country, the
surplus part of it naturally disgorges itself into the carrying trade,
and is employed in performing the same offices to other countries. The
carrying trade is the natural effect and symptom of great national
wealth; but it does not seem to be the natural cause of it. Those
statesmen who have been disposed to favour it with particular
encouragement, seem to have mistaken the effect and symptom for the
cause. Holland, in proportion to the extent of the land and the number
of it's inhabitants, by far the richest country in Europe, has
accordingly the greatest share of the carrying trade of Europe.
England, perhaps the second richest country of Europe, is likewise
supposed to have a considerable share in it; though what commonly
passes for the carrying trade of England will frequently, perhaps, be
found to be no more than a round-about foreign trade of consumption.
Such are, in a great measure, the trades which carry the goods of the
East and West Indies and of America to the different European markets.
Those goods are generally purchased, either immediately with the
produce of British industry, or with something else which had been
purchased with that produce, and the final returns of those trades are
generally used or consumed in Great Britain. The trade which is
carried on in British bottoms between the different ports of the
Mediterranean, and some trade of the same kind carried on by British
merchants between the different ports of India, make, perhaps, the
principal branches of what is properly the carrying trade of Great
Britain.

The extent of the home trade, and of the capital which can be employed
in it, is necessarily limited by the value of the surplus produce of
all those distant places within the country which have occasion to
exchange their respective productions with one another; that of the
foreign trade of consumption, by the value of the surplus produce of
the whole country, and of what can be purchased with it; that of the
carrying trade, by the value of the surplus produce of all the
different countries in the world. Its possible extent, therefore, is
in a manner infinite in comparison of that of the other two, and is
capable of absorbing the greatest capitals.

The consideration of his own private profit is the sole motive which
determines the owner of any capital to employ it either in
agriculture, in manufactures, or in some particular branch of the
wholesale or retail trade. The different quantities of productive
labour which it may put into motion, and the different values which it
may add to the annual produce of the land and labour of the society,
according as it is employed in one or other of those different ways,
never enter into his thoughts. In countries, therefore, where
agriculture is the most profitable of all employments, and farming and
improving the most direct roads to a splendid fortune, the capitals of
individuals will naturally be employed in the manner most advantageous
to the whole society. The profits of agriculture, however, seem to
have no superiority over those of other employments in any part of
Europe. Projectors, indeed, in every corner of it, have, within these
few years, amused the public with most magnificent accounts of the
profits to be made by the cultivation and improvement of land. Without
entering into any particular discussion of their calculations, a very
simple observation may satisfy us that the result of them must be
false. We see, every day, the most splendid fortunes, that have been
acquired in the course of a single life, by trade and manufactures,
frequently from a very small capital, sometimes from no capital. A
single instance of such a fortune, acquired by agriculture in the same
time, and from such a capital, has not, perhaps, occurred in Europe,
during the course of the present century. In all the great countries
of Europe, however, much good land still remains uncultivated; and the
greater part of what is cultivated, is far from being improved to the
degree of which it is capable. Agriculture, therefore, is almost
everywhere capable of absorbing a much greater capital than has ever
yet been employed in it. What circumstances in the policy of Europe
have given the trades which are carried on in towns so great an
advantage over that which is carried on in the country, that private
persons frequently find it more for their advantage to employ their
capitals in the most distant carrying trades of Asia and America than
in the improvement and cultivation of the most fertile fields in their
own neighbourhood, I shall endeavour to explain at full length in the
two following books.





BOOK III.

OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS

CHAPTER I.

OF THE NATURAL PROGRESS OF OPULENCE.

The great commerce of every civilized society is that carried on
between the inhabitants of the town and those of the country. It
consists in the exchange of rude for manufactured produce, either
immediately, or by the intervention of money, or of some sort of paper
which represents money. The country supplies the town with the means
of subsistence and the materials of manufacture. The town repays this
supply, by sending back a part of the manufactured produce to the
inhabitants of the country. The town, in which there neither is nor
can be any reproduction of substances, may very properly be said to
gain its whole wealth and subsistence from the country. We must not,
however, upon this account, imagine that the gain of the town is the
loss of the country. The gains of both are mutual and reciprocal, and
the division of labour is in this, as in all other cases, advantageous
to all the different persons employed in the various occupations into
which it is subdivided. The inhabitants of the country purchase of the
town a greater quantity of manufactured goods with the produce of a
much smaller quantity of their own labour, than they must have
employed had they attempted to prepare them themselves. The town
affords a market for the surplus produce of the country, or what is
over and above the maintenance of the cultivators; and it is there
that the inhabitants of the country exchange it for something else
which is in demand among them. The greater the number and revenue of
the inhabitants of the town, the more extensive is the market which it
affords to those of the country; and the more extensive that market,
it is always the more advantageous to a great number. The corn which
grows within a mile of the town, sells there for the same price with
that which comes from twenty miles distance. But the price of the
latter must, generally, not only pay the expense of raising it and
bringing it to market, but afford, too, the ordinary profits of
agriculture to the farmer. The proprietors and cultivators of the
country, therefore, which lies in the neighbourhood of the town, over
and above the ordinary profits of agriculture, gain, in the price of
what they sell, the whole value of the carriage of the like produce
that is brought from more distant parts; and they save, besides, the
whole value of this carriage in the price of what they buy. Compare
the cultivation of the lands in the neighbourhood of any considerable
town, with that of those which lie at some distance from it, and you
will easily satisfy yourself bow much the country is benefited by the
commerce of the town. Among all the absurd speculations that have been
propagated concerning the balance of trade, it has never been
pretended that either the country loses by its commerce with the town,
or the town by that with the country which maintains it.

As subsistence is, in the nature of things, prior to conveniency and
luxury, so the industry which procures the former, must necessarily be
prior to that which ministers to the latter. The cultivation and
improvement of the country, therefore, which affords subsistence,
must, necessarily, be prior to the increase of the town, which
furnishes only the means of conveniency and luxury. It is the surplus
produce of the country only, or what is over and above the maintenance
of the cultivators, that constitutes the subsistence of the town,
which can therefore increase only with the increase of the surplus
produce. The town, indeed, may not always derive its whole subsistence
from the country in its neighbourhood, or even from the territory to
which it belongs, but from very distant countries; and this, though it
forms no exception from the general rule, has occasioned considerable
variations in the progress of opulence in different ages and nations.

That order of things which necessity imposes, in general, though not
in every particular country, is in every particular country promoted
by the natural inclinations of man. If human institutions had never
thwarted those natural inclinations, the towns could nowhere have
increased beyond what the improvement and cultivation of the territory
in which they were situated could support; till such time, at least,
as the whole of that territory was completely cultivated and improved.
Upon equal, or nearly equal profits, most men will choose to employ
their capitals, rather in the improvement and cultivation of land,
than either in manufactures or in foreign trade. The man who employs
his capital in land, has it more under his view and command; and his
fortune is much less liable to accidents than that of the trader, who
is obliged frequently to commit it, not only to the winds and the
waves, but to the more uncertain elements of human folly and
injustice, by giving great credits, in distant countries, to men with
whose character and situation he can seldom be thoroughly acquainted.
The capital of the landlord, on the contrary, which is fixed in the
improvement of his land, seems to be as well secured as the nature of
human affairs can admit of. The beauty of the country, besides, the
pleasure of a country life, the tranquillity of mind which it
promises, and, wherever the injustice of human laws does not disturb
it, the independency which it really affords, have charms that, more
or less, attract everybody; and as to cultivate the ground was the
original destination of man, so, in every stage of his existence, he
seems to retain a predilection for this primitive employment.

Without the assistance of some artificers, indeed, the cultivation of
land cannot be carried on, but with great inconveniency and continual
interruption. Smiths, carpenters, wheelwrights and ploughwrights,
masons and bricklayers, tanners, shoemakers, and tailors, are people
whose service the farmer has frequent occasion for. Such artificers,
too, stand occasionally in need of the assistance of one another; and
as their residence is not, like that of the farmer, necessarily tied
down to a precise spot, they naturally settle in the neighbourhood of
one another, and thus form a small town or village. The butcher, the
brewer, and the baker, soon join them, together with many other
artificers and retailers, necessary or useful for supplying their
occasional wants, and who contribute still further to augment the
town. The inhabitants of the town, and those of the country, are
mutually the servants of one another. The town is a continual fair or
market, to which the inhabitants of the country resort, in order to
exchange their rude for manufactured produce. It is this commerce
which supplies the inhabitants of the town, both with the materials of
their work, and the means of their subsistence. The quantity of the
finished work which they sell to the inhabitants of the country,
necessarily regulates the quantity of the materials and provisions
which they buy. Neither their employment nor subsistence, therefore,
can augment, but in proportion to the augmentation of the demand from
the country for finished work; and this demand can augment only in
proportion to the extension of improvement and cultivation. Had human
institutions, therefore, never disturbed the natural course of things,
the progressive wealth and increase of the towns would, in every
political society, be consequential, and in proportion to the
improvement and cultivation of the territory of country.

In our North American colonies, where uncultivated land is still to be
had upon easy terms, no manufactures for distant sale have ever yet
been established in any of their towns. When an artificer has acquired
a little more stock than is necessary for carrying on his own business
in supplying the neighbouring country, he does not, in North America,
attempt to establish with it a manufacture for more distant sale, but
employs it in the purchase and improvement of uncultivated land. From
artificer he becomes planter; and neither the large wages nor the easy
subsistence which that country affords to artificers, can bribe him
rather to work for other people than for himself. He feels that an
artificer is the servant of his customers, from whom he derives his
subsistence; but that a planter who cultivates his own land, and
derives his necessary subsistence from the labour of his own family,
is really a master, and independent of all the world.

In countries, on the contrary, where there is either no uncultivated
land, or none that can be had upon easy terms, every artificer who has
acquired more stock than he can employ in the occasional jobs of the
neighbourhood, endeavours to prepare work for more distant sale. The
smith erects some sort of iron, the weaver some sort of linen or
woollen manufactory. Those different manufactures come, in process of
time, to be gradually subdivided, and thereby improved and refined in
a great variety of ways, which may easily be conceived, and which it
is therefore unnecessary to explain any farther.

In seeking for employment to a capital, manufactures are, upon equal
or nearly equal profits, naturally preferred to foreign commerce, for
the same reason that agriculture is naturally preferred to
manufactures. As the capital of the landlord or farmer is more secure
than that of the manufacturer, so the capital of the manufacturer,
being at all times more within his view and command, is more secure
than that of the foreign merchant. In every period, indeed, of every
society, the surplus part both of the rude and manufactured produce,
or that for which there is no demand at home, must be sent abroad, in
order to be exchanged for something for which there is some demand at
home. But whether the capital which carries this surplus produce
abroad be a foreign or a domestic one, is of very little importance.
If the society has not acquired sufficient capital, both to cultivate
all its lands, and to manufacture in the completest manner the whole
of its rude produce, there is even a considerable advantage that the
rude produce should be exported by a foreign capital, in order that
the whole stock of the society may be employed in more useful
purposes. The: wealth of ancient Egypt, that of China and Indostan,
sufficiently demonstrate that a nation may attain a very high degree
of opulence, though the greater part of its exportation trade be
carried on by foreigners. The progress of our North American and West
Indian colonies, would have been much less rapid, had no capital but
what belonged to themselves been employed in exporting their surplus
produce.

According to the natural course of things, therefore, the greater part
of the capital of every growing society is, first, directed to
agriculture, afterwards to manufactures, and, last of all, to foreign
commerce. This order of things is so very natural, that in every
society that had any territory, it has always, I believe, been in some
degree observed. Some of their lands must have been cultivated before
any considerable towns could be established, and some sort of coarse
industry of the manufacturing kind must have been carried on in those
towns, before they could well think of employing themselves in foreign
commerce.

But though this natural order of things must have taken place in some
degree in every such society, it has, in all the modern states of
Europe, been in many respects entirely inverted. The foreign commerce
of some of their cities has introduced all their finer manufactures,
or such as were fit for distant sale; and manufactures and foreign
commerce together have given birth to the principal improvements of
agriculture. The manners and customs which the nature of their
original government introduced, and which remained after that
government was greatly altered, necessarily forced them into this
unnatural and retrograde order.




CHAPTER II.

OF THE DISCOURAGEMENT OF AGRICULTURE IN THE ANCIENT STATE OF EUROPE,
AFTER THE FALL OF THE ROMAN EMPIRE.

When the German and Scythian nations overran the western provinces of
the Roman empire, the confusions which followed so great a revolution
lasted for several centuries. The rapine and violence which the
barbarians exercised against the ancient inhabitants, interrupted the
commerce between the towns and the country. The towns were deserted,
and the country was left uncultivated; and the western provinces of
Europe, which had enjoyed a considerable degree of opulence under the
Roman empire, sunk into the lowest state of poverty and barbarism.
During the continuance of those confusions, the chiefs and principal
leaders of those nations acquired, or usurped to themselves, the
greater part of the lands of those countries. A great part of them was
uncultivated; but no part of them, whether cultivated or uncultivated,
was left without a proprietor. All of them were engrossed, and the
greater part by a few great proprietors.

This original engrossing of uncultivated lands, though a great, might
have been but a transitory evil. They might soon have been divided
again, and broke into small parcels, either by succession or by
alienation. The law of primogeniture hindered them from being divided
by succession; the introduction of entails prevented their being broke
into small parcels by alienation.

When land, like moveables, is considered as the means only of
subsistence and enjoyment, the natural law of succession divides it,
like them, among all the children of the family; of all of whom the
subsistence and enjoyment may be supposed equally dear to the father.
This natural law of succession, accordingly, took place among the
Romans who made no more distinction between elder and younger, between
male and female, in the inheritance of lands, than we do in the
distribution of moveables. But when land was considered as the means,
not of subsistence merely, but of power and protection, it was thought
better that it should descend undivided to one. In those disorderly
times, every great landlord was a sort of petty prince. His tenants
were his subjects. He was their judge, and in some respects their
legislator in peace and their leader in war. He made war according to
his own discretion, frequently against his neighbours, and sometimes
against his sovereign. The security of a landed estate, therefore, the
protection which its owner could afford to those who dwelt on it,
depended upon its greatness. To divide it was to ruin it, and to
expose every part of it to be oppressed and swallowed up by the
incursions of its neighbours. The law of primogeniture, therefore,
came to take place, not immediately indeed, but in process of time, in
the succession of landed estates, for the same reason that it has
generally taken place in that of monarchies, though not always at
their first institution. That the power, and consequently the security
of the monarchy, may not be weakened by division, it must descend
entire to one of the children. To which of them so important a
preference shall be given, must be determined by some general rule,
founded not upon the doubtful distinctions of personal merit, but upon
some plain and evident difference which can admit of no dispute. Among
the children of the same family there can be no indisputable
difference but that of sex, and that of age. The male sex is
universally preferred to the female; and when all other things are
equal, the elder everywhere takes place of the younger. Hence the
origin of the right of primogeniture, and of what is called lineal
succession.

Laws frequently continue in force long after the circumstances which
first gave occasion to them, and which could alone render them
reasonable, are no more. In the present state of Europe, the
proprietor of a single acre of land is as perfectly secure in his
possession as the proprietor of 100,000. The right of primogeniture,
however, still continues to be respected; and as of all institutions
it is the fittest to support the pride of family distinctions, it is
still likely to endure for many centuries. In every other respect,
nothing can be more contrary to the real interest of a numerous
family, than a right which, in order to enrich one, beggars all the
rest of the children.

Entails are the natural consequences of the law of primogeniture. They
were introduced to preserve a certain lineal succession, of which the
law of primogeniture first gave the idea, and to hinder any part of
the original estate from being carried out of the proposed line,
either by gift, or device, or alienation; either by the folly, or by
the misfortune of any of its successive owners. They were altogether
unknown to the Romans. Neither their substitutions, nor fidei
commisses, bear any resemblance to entails, though some French lawyers
have thought proper to dress the modern institution in the language
and garb of those ancient ones.

When great landed estates were a sort of principalities, entails might
not be unreasonable. Like what are called the fundamental laws of some
monarchies, they might frequently hinder the security of thousands
from being endangered by the caprice or extravagance of one man. But
in the present state of Europe, when small as well as great estates
derive their security from the laws of their country, nothing can be
more completely absurd. They are founded upon the most absurd of all
suppositions, the supposition that every successive generation of men
have not an equal right to the earth, and to all that it possesses;
but that the property of the present generation should be restrained
and regulated according to the fancy of those who died, perhaps five
hundred years ago. Entails, however, are still respected, through the
greater part of Europe; In those countries, particularly, in which
noble birth is a necessary qualification for the enjoyment either of
civil or military honours. Entails are thought necessary for
maintaining this exclusive privilege of the nobility to the great
offices and honours of their country; and that order having usurped
one unjust advantage over the rest of their fellow-citizens, lest
their poverty should render it ridiculous, it is thought reasonable
that they should have another. The common law of England, indeed, is
said to abhor perpetuities, and they are accordingly more restricted
there than in any other European monarchy; though even England is not
altogether without them. In Scotland, more than one fifth, perhaps
more than one third part of the whole lands in the country, are at
present supposed to be under strict entail.

Great tracts of uncultivated land were in this manner not only
engrossed by particular families, but the possibility of their being
divided again was as much as possible precluded for ever. It seldom
happens, however, that a great proprietor is a great improver. In the
disorderly times which gave birth to those barbarous institutions, the
great proprietor was sufficiently employed in defending his own
territories, or in extending his jurisdiction and authority over those
of his neighbours. He had no leisure to attend to the cultivation and
improvement of land. When the establishment of law and order afforded
him this leisure, he often wanted the inclination, and almost always
the requisite abilities. If the expense of his house and person either
equalled or exceeded his revenue, as it did very frequently, he had no
stock to employ in this manner. If he was an economist, he generally
found it more profitable to employ his annual savings in new purchases
than in the improvement of his old estate. To improve land with
profit, like all other commercial projects, requires an exact
attention to small savings and small gains, of which a man born to a
great fortune, even though naturally frugal, is very seldom capable.
The situation of such a person naturally disposes him to attend rather
to ornament, which pleases his fancy, than to profit, for which he has
so little occasion. The elegance of his dress, of his equipage, of his
house and household furniture, are objects which, from his infancy, he
has been accustomed to have some anxiety about. The turn of mind which
this habit naturally forms, follows him when he comes to think of the
improvement of land. He embellishes, perhaps, four or five hundred
acres in the neighbourhood of his house, at ten times the expense
which the land is worth after all his improvements; and finds, that if
he was to improve his whole estate in the same manner, and he has
little taste for any other, he would be a bankrupt before he had
finished the tenth part of it. There still remain, in both parts of
the united kingdom, some great estates which have continued, without
interruption, in the hands of the same family since the times of
feudal anarchy. Compare the present condition of those estates with
the possessions of the small proprietors in their neighbourhood, and
you will require no other argument to convince you how unfavourable
such extensive property is to improvement.

If little improvement was to be expected from such great proprietors,
still less was to be hoped for from those who occupied the land under
them. In the ancient state of Europe, the occupiers of land were all
tenants at will. They were all, or almost all, slaves, but their
slavery was of a milder kind than that known among the ancient Greeks
and Romans, or even in our West Indian colonies. They were supposed to
belong more directly to the land than to their master. They could,
therefore, be sold with it, but not separately. They could marry,
provided it was with the consent of their master; and he could not
afterwards dissolve the marriage by selling the man and wife to
different persons. If he maimed or murdered any of them, he was liable
to some penalty, though generally but to a small one. They were not,
however, capable of acquiring property. Whatever they acquired was
acquired to their master, and he could take it from them at pleasure.
Whatever cultivation and improvement could be carried on by means of
such slaves, was properly carried on by their master. It was at his
expense. The seed, the cattle, and the instruments of husbandry, were
all his. It was for his benefit. Such slaves could acquire nothing but
their daily maintenance. It was properly the proprietor himself,
therefore, that in this case occupied his own lands, and cultivated
them by his own bondmen. This species of slavery still subsists in
Russia, Poland, Hungary, Bohemia, Moravia, and other parts of Germany.
It is only in the western and south-western provinces of Europe that
it has gradually been abolished altogether.

But if great improvements are seldom to be expected from great
proprietors, they are least of all to be expected when they employ
slaves for their workmen. The experience of all ages and nations, I
believe, demonstrates that the work done by slaves, though it appears
to cost only their maintenance, is in the end the dearest of any. A
person who can acquire no property can have no other interest but to
eat as much and to labour as little as possible. Whatever work he does
beyond what is sufficient to purchase his own maintenance, can be
squeezed out of him by violence only, and not by any interest of his
own. In ancient Italy, how much the cultivation of corn degenerated,
how unprofitable it became to the master, when it fell under the
management of slaves, is remarked both by Pliny and Columella. In the
time of Aristotle, it had not been much better in ancient Greece.
Speaking of the ideal republic described in the laws of Plato, to
maintain 5000 idle men (the number of warriors supposed necessary for
its defence), together with their women and servants, would require,
he says, a territory of boundless extent and fertility, like the
plains of Babylon.

The pride of man makes him love to domineer, and nothing mortifies him
so much as to be obliged to condescend to persuade his inferiors.
Wherever the law allows it, and the nature of the work can afford it,
therefore, he will generally prefer the service of slaves to that of
freemen. The planting of sugar and tobacco can afford the expense of
slave cultivation. The raising of corn, it seems, in the present
times, cannot. In the English colonies, of which the principal produce
is corn, the far greater part of the work is done by freemen. The late
resolution of the Quakers in Pennsylvania, to set at liberty all their
negro slaves, may satisfy us that their number cannot be very great.
Had they made any considerable part of their property, such a
resolution could never have been agreed to. In our sugar colonies., on
the contrary, the whole work is done by slaves, and in our tobacco
colonies a very great part of it. The profits of a sugar plantation in
any of our West Indian colonies, are generally much greater than those
of any other cultivation that is known either in Europe or America;
and the profits of a tobacco plantation, though inferior to those of
sugar, are superior to those of corn, as has already been observed.
Both can afford the expense of slave cultivation but sugar can afford
it still better than tobacco. The number of negroes, accordingly, is
much greater, in proportion to that of whites, in our sugar than in
our tobacco colonies.

To the slave cultivators of ancient times gradually succeeded a
species of farmers, known at present in France by the name of
metayers. They are called in Latin Coloni Partiarii. They have been so
long in disuse in England, that at present I know no English name for
them. The proprietor furnished them with the seed, cattle, and
instruments of husbandry, the whole stock, in short, necessary for
cultivating the farm. The produce was divided equally between the
proprietor and the farmer, after setting aside what was judged
necessary for keeping up the stock, which was restored to the
proprietor, when the farmer either quitted or was turned out of the
farm.

Land occupied by such tenants is properly cultivated at the expense of
the proprietors, as much as that occupied by slaves. There is,
however, one very essential difference between them. Such tenants,
being freemen, are capable of acquiring property; and having a certain
proportion of the produce of the land, they have a plain interest that
the whole produce should be as great as possible, in order that their
own proportion may be so. A slave, on the contrary, who can acquire
nothing but his maintenance, consults his own ease, by making the land
produce as little as possible over and above that maintenance. It is
probable that it was partly upon account of this advantage, and partly
upon account of the encroachments which the sovereigns, always jealous
of the great lords, gradually encouraged their villains to make upon
their authority, and which seem, at least, to have been such as
rendered this species of servitude altogether inconvenient, that
tenure in villanage gradually wore out through the greater part of
Europe. The time and manner, however, in which so important a
revolution was brought about, is one of the most obscure points in
modern history. The church of Rome claims great merit in it; and it is
certain, that so early as the twelfth century, Alexander III.
published a bull for the general emancipation of slaves. It seems,
however, to have been rather a pious exhortation, than a law to which
exact obedience was required from the faithful. Slavery continued to
take place almost universally for several centuries afterwards, till
it was gradually abolished by the joint operation of the two interests
above mentioned; that of the proprietor on the one hand, and that of
the sovereign on the other. A villain, enfranchised, and at the same
time allowed to continue in possession of the land, having no stock of
his own, could cultivate it only by means of what the landlord
advanced to him, and must therefore have been what the French call a
metayer.

It could never, however, be the interest even of this last species of
cultivators, to lay out, in the further improvement of the land, any
part of the little stock which they might save from their own share of
the produce; because the landlord, who laid out nothing, was to get
one half of whatever it produced. The tithe, which is but a tenth of
the produce, is found to be a very great hindrance to improvement. A
tax, therefore, which amounted to one half, must have been an
effectual bar to it. It might be the interest of a metayer to make the
land produce as much as could be brought out of it by means of the
stock furnished by the proprietor; but it could never be his interest
to mix any part of his own with it. In France, where five parts out of
six of the whole kingdom are said to be still occupied by this species
of cultivators, the proprietors complain, that their metayers take
every opportunity of employing their master's cattle rather in
carriage than in cultivation; because, in the one case, they get the
whole profits to themselves, in the other they share them with their
landlord. This species of tenants still subsists in some parts of
Scotland. They are called steel-bow tenants. Those ancient English
tenants, who are said by Chief-Baron Gilbert and Dr Blackstone to have
been rather bailiffs of the landlord than farmers, properly so called,
were probably of the same kind.

To this species of tenantry succeeded, though by very slow degrees,
farmers, properly so called, who cultivated the land with their own
stock, paying a rent certain to the landlord. When such farmers have a
lease for a term of years, they may sometimes find it for their
interest to lay out part of their capital in the further improvement
of the farm; because they may sometimes expect to recover it, with a
large profit, before the expiration of the lease. The possession, even
of such farmers, however, was long extremely precarious, and still is
so in many parts of Europe. They could, before the expiration of their
term, be legally ousted of their leases by a new purchaser; in
England, even, by the fictitious action of a common recovery. If they
were turned out illegally by the violence of their master, the action
by which they obtained redress was extremely imperfect. It did not
always reinstate them in the possession of the land, but gave them
damages, which never amounted to a real loss. Even in England, the
country, perhaps of Europe, where the yeomanry has always been most
respected, it was not till about the 14th of Henry VII. that the
action of ejectment was invented, by which the tenant recovers, not
damages only, but possession, and in which his claim is not
necessarily concluded by the uncertain decision of a single assize.
This action has been found so effectual a remedy, that, in the modern
practice, when the landlord has occasion to sue for the possession of
the land, he seldom makes use of the actions which properly belong to
him as a landlord, the writ of right or the writ of entry, but sues in
the name of his tenant, by the writ of ejectment. In England,
therefore the security of the tenant is equal to that of the
proprietor. In England, besides, a lease for life of forty shillings
a-year value is a freehold, and entitles the lessee to a vote for a
member of parliament; and as a great part of the yeomanry have
freeholds of this kind, the whole order becomes respectable to their
landlords, on account of the political consideration which this gives
them. There is, I believe, nowhere in Europe, except in England, any
instance of the tenant building upon the land of which he had no
lease, and trusting that the honour of his landlord would take no
advantage of so important an improvement. Those laws and customs, so
favourable to the yeomanry, have perhaps contributed more to the
present grandeur of England, than all their boasted regulations of
commerce taken together.

The law which secures the longest leases against successors of every
kind, is, so far as I know, peculiar to Great Britain. It was
introduced into Scotland so early as 1449, by a law of James II. Its
beneficial influence, however, has been much obstructed by entails;
the heirs of entail being generally restrained from letting leases for
any long term of years, frequently for more than one year. A late act
of parliament has, in this respect, somewhat slackened their fetters,
though they are still by much too strait. In Scotland, besides, as no
leasehold gives a vote for a member of parliament, the yeomanry are
upon this account less respectable to their landlords than in England.

In other parts of Europe, after it was found convenient to secure
tenants both against heirs and purchasers, the term of their security
was still limited to a very short period; in France, for example, to
nine years from the commencement of the lease. It has in that country,
indeed, been lately extended to twentyseven, a period still too short
to encourage the tenant to make the most important improvements. The
proprietors of land were anciently the legislators of every part of
Europe. The laws relating to land, therefore, were all calculated for
what they supposed the interest of the proprietor. It was for his
interest, they had imagined, that no lease granted by any of his
predecessors should hinder him from enjoying, during a long term of
years, the full value of his land. Avarice and injustice are always
short-sighted, and they did not foresee how much this regulation must
obstruct improvement, and thereby hurt, in the long-run, the real
interest of the landlord.

The farmers, too, besides paying the rent, were anciently, it was
supposed, bound to perform a great number of services to the landlord,
which were seldom either specified in the lease, or regulated by any
precise rule, but by the use and wont of the manor or barony. These
services, therefore, being almost entirely arbitrary, subjected the
tenant to many vexations. In Scotland the abolition of all services
not precisely stipulated in the lease, has, in the course of a few
years, very much altered for the better the condition of the yeomanry
of that country.

The public services to which the yeomanry were bound, were not less
arbitrary than the private ones. To make and maintain the high roads,
a servitude which still subsists, I believe, everywhere, though with
different degrees of oppression in different countries, was not the
only one. When the king's troops, when his household, or his officers
of any kind, passed through any part of the country, the yeomanry were
bound to provide them with horses, carriages, and provisions, at a
price regulated by the purveyor. Great Britain is, I believe, the only
monarchy in Europe where the oppression of purveyance has been
entirely abolished. It still subsists in France and Germany.

The public taxes, to which they were subject, were as irregular and
oppressive as the services The ancient lords, though extremely
unwilling to grant, themselves, any pecuniary aid to their sovereign,
easily allowed him to tallage, as they called it, their tenants, and
had not knowledge enough to foresee how much this must, in the end,
affect their own revenue. The taille, as it still subsists in France.
may serve as an example of those ancient tallages. It is a tax upon
the supposed profits of the farmer, which they estimate by the stock
that he has upon the farm. It is his interest, therefore, to appear to
have as little as possible, and consequently to employ as little as
possible in its cultivation, and none in its improvement. Should any
stock happen to accumulate in the hands of a French farmer, the taille
is almost equal to a prohibition of its ever being employed upon the
land. This tax, besides, is supposed to dishonour whoever is subject
to it, and to degrade him below, not only the rank of a gentleman, but
that of a burgher; and whoever rents the lands of another becomes
subject to it. No gentleman, nor even any burgher, who has stock, will
submit to this degradation. This tax, therefore, not only hinders the
stock which accumulates upon the land from being employed in its
improvement, but drives away all other stock from it. The ancient
tenths and fifteenths, so usual in England in former times, seem, so
far as they affected the land, to have been taxes of the same nature
with the taille.

Under all these discouragements, little improvement could be expected
from the occupiers of land. That order of people, with all the liberty
and security which law can give, must always improve under great
disadvantage. The farmer, compared with the proprietor, is as a
merchant who trades with burrowed money, compared with one who trades
with his own. The stock of both may improve; but that of the one, with
only equal good conduct, must always improve more slowly than that of
the other, on account of the large share of the profits which is
consumed by the interest of the loan. The lands cultivated by the
farmer must, in the same manner, with only equal good conduct, be
improved more slowly than those cultivated by the proprietor, on
account of the large share of the produce which is consumed in the
rent, and which, had the farmer been proprietor, he might have
employed in the further improvement of the land. The station of a
farmer, besides, is, from the nature of things, inferior to that of a
proprietor. Through the greater part of Europe, the yeomanry are
regarded as an inferior rank of people, even to the better sort of
tradesmen and mechanics, and in all parts of Europe to the great
merchants and master manufacturers. It can seldom happen, therefore,
that a man of any considerable stock should quit the superior, in
order to place himself in an inferior station. Even in the present
state of Europe, therefore, little stock is likely to go from any
other profession to the improvement of land in the way of farming.
More does, perhaps, in Great Britain than in any other country, though
even there the great stocks which are in some places employed in
farming, have generally been acquired by fanning, the trade, perhaps,
in which, of all others, stock is commonly acquired most slowly. After
small proprietors, however, rich and great farmers are in every
country the principal improvers. There are more such, perhaps, in
England than in any other European monarchy. In the republican
governments of Holland, and of Berne in Switzerland, the farmers are
said to be not inferior to those of England.

The ancient policy of Europe was, over and above all this,
unfavourable to the improvement and cultivation of land, whether
carried on by the proprietor or by the farmer; first, by the general
prohibition of the exportation of corn, without a special licence,
which seems to have been a very universal regulation; and, secondly,
by the restraints which were laid upon the inland commerce, not only
of corn, but of almost every other part of the produce of the farm, by
the absurd laws against engrossers, regraters, and forestallers, and
by the privileges of fairs and markets. It has already been observed
in what manner the prohibition of the exportation of corn, together
with some encouragement given to the importation of foreign corn,
obstructed the cultivation of ancient Italy, naturally the most
fertile country in Europe, and at that time the seat of the greatest
empire in the world. To what degree such restraints upon the inland
commerce of this commodity, joined to the general prohibition of
exportation, must have discouraged the cultivation of countries less
fertile, and less favourably circumstanced, it is not, perhaps, very
easy to imagine.




CHAPTER III.

OF THE RISE AND PROGRESS OF CITIES AND TOWNS, AFTER THE FALL OF THE
ROMAN EMPIRE.

The inhabitants of cities and towns were, after the fall of the Roman
empire, not more favoured than those of the country. They consisted,
indeed, of a very different order of people from the first inhabitants
of the ancient republics of Greece and Italy. These last were composed
chiefly of the proprietors of lands, among whom the public territory
was originally divided, and who found it convenient to build their
houses in the neighbourhood of one another, and to surround them with
a wall, for the sake of common defence. After the fall of the Roman
empire, on the contrary, the proprietors of land seem generally to
have lived in fortified castles on their own estates, and in the midst
of their own tenants and dependants. The towns were chiefly inhabited
by tradesmen and mechanics, who seem, in those days, to have been of
servile, or very nearly of servile condition. The privileges which we
find granted by ancient charters to the inhabitants of some of the
principal towns in Europe, sufficiently show what they were before
those grants. The people to whom it is granted as a privilege, that
they might give away their own daughters in marriage without the
consent of their lord, that upon their death their own children, and
not their lord, should succeed to their goods, and that they might
dispose of their own effects by will, must, before those grants, have
been either altogether, or very nearly, in the same state of villanage
with the occupiers of land in the country.

They seem, indeed, to have been a very poor, mean set of people, who
seemed to travel about with their goods from place to place, and from
fair to fair, like the hawkers and pedlars of the present times. In
all the different countries of Europe then, in the same manner as in
several of the Tartar governments of Asia at present, taxes used to be
levied upon the persons and goods of travellers, when they passed
through certain manors, when they went over certain bridges, when they
carried about their goods from place to place in a fair, when they
erected in it a booth or stall to sell them in. These different taxes
were known in England by the names of passage, pontage, lastage, and
stallage. Sometimes the king, sometimes a great lord, who had, it
seems, upon some occasions, authority to do this, would grant to
particular traders, to such particularly as lived in their own
demesnes, a general exemption from such taxes. Such traders, though in
other respects of servile, or very nearly of servile condition, were
upon this account called free traders. They, in return, usually paid
to their protector a sort of annual poll-tax. In those days protection
was seldom granted without a valuable consideration, and this tax
might perhaps be considered as compensation for what their patrons
might lose by their exemption from other taxes. At first, both those
poll-taxes and those exemptions seem to have been altogether personal,
and to have affected only particular individuals, during either their
lives, or the pleasure of their protectors. In the very imperfect
accounts which have been published from Doomsday-book, of several of
the towns of England, mention is frequently made, sometimes of the tax
which particular burghers paid, each of them, either to the king, or
to some other great lord, for this sort of protection, and sometimes
of the general amount only of all those taxes. {see Brady's Historical
Treatise of Cities and Boroughs, p. 3. etc.}

But how servile soever may have been originally the condition of the
inhabitants of the towns, it appears evidently, that they arrived at
liberty and independency much earlier than the occupiers of land in
the country. That part of the king's revenue which arose from such
poll-taxes in any particular town, used commonly to be let in farm,
during a term of years, for a rent certain, sometimes to the sheriff
of the county, and sometimes to other persons. The burghers themselves
frequently got credit enough to be admitted to farm the revenues of
this sort winch arose out of their own town, they becoming jointly and
severally answerable for the whole rent. {See Madox, Firma Burgi, p.
18; also History of the Exchequer, chap. 10, sect. v, p. 223, first
edition.} To let a farm in this manner, was quite agreeable to the
usual economy of, I believe, the sovereigns of all the different
countries of Europe, who used frequently to let whole manors to all
the tenants of those manors, they becoming jointly and severally
answerable for the whole rent; but in return being allowed to collect
it in their own way, and to pay it into the king's exchequer by the
hands of their own bailiff, and being thus altogether freed from the
insolence of the king's officers; a circumstance in those days
regarded as of the greatest importance.

At first, the farm of the town was probably let to the burghers, in
the same manner as it had been to other farmers, for a term of years
only. In process of time, however, it seems to have become the general
practice to grant it to them in fee, that is for ever, reserving a
rent certain, never afterwards to be augmented. The payment having
thus become perpetual, the exemptions, in return, for which it was
made, naturally became perpetual too. Those exemptions, therefore,
ceased to be personal, and could not afterwards be considered as
belonging to individuals, as individuals, but as burghers of a
particular burgh, which, upon this account, was called a free burgh,
for the same reason that they had been called free burghers or free
traders.

Along with this grant, the important privileges, above mentioned, that
they might give away their own daughters in marriage, that their
children should succeed to them, and that they might dispose of their
own effects by will, were generally bestowed upon the burghers of the
town to whom it was given. Whether such privileges had before been
usually granted, along with the freedom of trade, to particular
burghers, as individuals, I know not. I reckon it not improbable that
they were, though I cannot produce any direct evidence of it. But
however this may have been, the principal attributes of villanage and
slavery being thus taken away from them, they now at least became
really free, in our present sense of the word freedom.

Nor was this all. They were generally at the same time erected into a
commonalty or corporation, with the privilege of having magistrates
and a town-council of their own, of making bye-laws for their own
government, of building walls for their own defence, and of reducing
all their inhabitants under a sort of military discipline, by obliging
them to watch and ward; that is, as anciently understood, to guard and
defend those walls against all attacks and surprises, by night as well
as by day. In England they were generally exempted from suit to the
hundred and county courts: and all such pleas as should arise among
them, the pleas of the crown excepted, were left to the decision of