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Title: An Inquiry into the Nature and Causes of the Wealth of Nations

Author: Adam Smith

Release Date: April, 2002 [Etext #3300]
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[The actual date this file first posted = 03/17/01]

Edition: 10

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The Project Gutenberg Etext of Wealth of Nations, by Adam Smith
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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 DISTRlBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE.

CHAPTER I.

OF THE DIVISlON 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 to 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 rnoney.

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 3:17:10 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 he 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 be.
fore, 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 Abb 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 he 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 he 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 what. ever.

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, 1 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 4d. 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 4d. the
pound; and the coarse pieces in general to be from seven farthings to 2d.
and 2d.; and this, they said, was in general one halfpenny dearer than the
same sort of pieces had usually been sold in the month of March. But even
this high price is still a good deal cheaper than what we can well suppose
the ordinary retail price to have been 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 1:18:3d. 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
2:1:9d.

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 1
have frequently heard the same doctrine held in Scotland. I am, however,
somewhat doubtful of the truth of if. 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
acknowdedgment 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 Dupr 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 l202 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 Dupr
de St Maur, and with that which I have been endeavouring to explain. Bishop
Fleetwood and Mr Dupr 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 he 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 augmetation 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 Dupr 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 he 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 3,4l3,43l: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 te 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 prot 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 Dupr 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 1

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 0 0 9 1
0 2 0
0 3 4
0 9 4
1289 0 12 0
0 6 0
0 2 0 0 10 1 1 10 4
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 11
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 4
0 3 4 0 3 10 0 8 10
1416 0 16 0 1 12 0
Total 15 9 4
Average 1 5 9

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 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 8 0 17 8
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 2
Average 0 10 0

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 5


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 8
1615 1 18 8
1616 2 0 4
1617 2 8 8
1618 2 6 8
1619 1 15 4
1620 1 10 4
26)54 0 6
Average 2 1 6

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 0/

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 3

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 9

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 6




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 te 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 he 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 assertain 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: 10d. 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 3,375,027:17:10d.

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. 10d.; 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, sufficient1y
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 he expected from
the occupiers of land. That order of people, with all the liberty and
security which law can give, must always improve under great disadvantage.
The farmer, compared with the proprietor, is as a merchant who trades with
burrowed money, compared with one who trades with his own. The stock of both
may improve; but that of the one, with only equal good conduct, must always
improve more slowly than that of the other, on account of the large share
of the profits which is consumed by the interest of the loan. The lands
cultivated by the farmer must, in the same manner, with only equal good
conduct, be improved more slowly than those cultivated by the proprietor,
on account of the large share of the produce which is consumed in the rent,
and which, had the farmer been proprietor, he might have employed in the
further improvement of the land. The station of a farmer, besides, is, from
the nature of things, inferior to that of a proprietor. Through the greater
part of Europe, the yeomanry are regarded as an inferior rank of people,
even to the better sort of tradesmen and mechanics, and in all parts of
Europe to the great merchants and master manufacturers. It can seldom
happen, therefore, that a man of any considerable stock should quit the
superior, in order to place himself in an inferior station. Even in the
present state of Europe, therefore, little stock is likely to go from any
other profession to the improvement of land in the way of farming. More
does, perhaps, in Great Britain than in any other country, though even there
the great stocks which are in some places employed in farming, have
generally been acquired by fanning, the trade, perhaps, in which, of all
others, stock is commonly acquired most slowly. After small proprietors,
however, rich and great farmers are in every country the principal
improvers. There are more such, perhaps, in England than in any other
European monarchy. In the republican governments of Holland, and of Berne
in Switzerland, the farmers are said to be not inferior to those of England.

The ancient policy of Europe was, over and above all this, unfavourable to
the improvement and cultivation of land, whether carried on by the
proprietor or by the farmer ; first, by the general prohibition of the
exportation of corn, without a special licence, which seems to have been a
very universal regulation ; and, secondly, by the restraints which were laid
upon the inland commerce, not only of corn, but of almost every other part
of the produce of the farm, by the absurd laws against engrossers,
regraters, and forestallers, and by the privileges of fairs and markets. It
has already been observed in what manner the prohibition of the exportation
of corn, together with some encouragement given to the importation of
foreign corn, obstructed the cultivation of ancient Italy, naturally the most
fertile country in Europe, and at that time the seat of the greatest empire
in the world. To what degree such restraints upon the inland commerce of
this commodity, joined to the general prohibition of exportation, must have
discouraged the cultivation of countries less fertile, and less favourably
circumstanced, it is not, perhaps, very easy to imagine.




CHAPTER III.

OF THE RISE AND PROGRESS OF CITIES AND TOWNS, AFTER THE FALL OF THE ROMAN
EMPIRE.

The inhabitants of cities and towns were, after the fall of the Roman
empire, not more favoured than those of the country. They consisted, indeed,
of a very different order of people from the first inhabitants of the
ancient republics of Greece and Italy. These last were composed chiefly of
the proprietors of lands, among whom the public territory was originally
divided, and who found it convenient to build their houses in the
neighbourhood of one another, and to surround them with a wall, for the sake
of common defence. After the fall of the Roman empire, on the contrary, the
proprietors of land seem generally to have lived in fortified castles on
their own estates, and in the midst of their own tenants and dependants. The
towns were chiefly inhabited by tradesmen and mechanics, who seem, in those
days, to have been of servile, or very nearly of servile condition. The
privileges which we find granted by ancient charters to the inhabitants of
some of the principal towns in Europe, sufficiently show what they were
before those grants. The people to whom it is granted as a privilege, that
they might give away their own daughters in marriage without the consent of
their lord, that upon their death their own children, and not their lord,
should succeed to their goods, and that they might dispose of their own
effects by will, must, before those grants, have been either altogether, or
very nearly, in the same state of villanage with the occupiers of land in
the country.

They seem, indeed, to have been a very poor, mean set of people, who seemed
to travel about with their goods from place to place, and from fair to fair,
like the hawkers and pedlars of the present times. In all the different
countries of Europe then, in the same manner as in several of the Tartar
governments of Asia at present, taxes used to be levied upon the persons and
goods of travellers, when they passed through certain manors, when they went
over certain bridges, when they carried about their goods from place to
place in a fair, when they erected in it a booth or stall to sell them in.
These different taxes were known in England by the names of passage,
pontage, lastage, and stallage. Sometimes the king, sometimes a great lord,
who had, it seems, upon some occasions, authority to do this, would grant to
particular traders, to such particularly as lived in their own demesnes, a
general exemption from such taxes. Such traders, though in other respects of
servile, or very nearly of servile condition, were upon this account called
free traders. They, in return, usually paid to their protector a sort of
annual poll-tax. In those days protection was seldom granted without a
valuable consideration, and this tax might perhaps be considered as
compensation for what their patrons might lose by their exemption from other
taxes. At first, both those poll-taxes and those exemptions seem to have
been altogether personal, and to have affected only particular individuals,
during either their lives, or the pleasure of their protectors. In the very
imperfect accounts which have been published from Doomsday-book, of several
of the towns of England, mention is frequently made, sometimes of the tax
which particular burghers paid, each of them, either to the king, or to some
other great lord, for this sort of protection, and sometimes of the general
amount only of all those taxes. {see Brady's Historical Treatise of Cities
and Boroughs, p. 3. etc.}

But how servile soever may have been originally the condition of the
inhabitants of the towns, it appears evidently, that they arrived at liberty
and independency much earlier than the occupiers of land in the country.
That part of the king's revenue which arose from such poll-taxes in any
particular town, used commonly to be let in farm, during a term of years,
for a rent certain, sometimes to the sheriff of the county, and sometimes to
other persons. The burghers themselves frequently got credit enough to be
admitted to farm the revenues of this sort winch arose out of their own
town, they becoming jointly and severally answerable for the whole rent.
{See Madox, Firma Burgi, p. 18; also History of the Exchequer, chap. 10,
sect. v, p. 223, first edition.} To let a farm in this manner, was quite
agreeable to the usual economy of, I believe, the sovereigns of all the
different countries of Europe, who used frequently to let whole manors to
all the tenants of those manors, they becoming jointly and severally
answerable for the whole rent ; but in return being allowed to collect it in
their own way, and to pay it into the king's exchequer by the hands of their
own bailiff, and being thus altogether freed from the insolence of the
king's officers; a circumstance in those days regarded as of the greatest
importance.

At first, the farm of the town was probably let to the burghers, in the same
manner as it had been to other farmers, for a term of years only. In process
of time, however, it seems to have become the general practice to grant it
to them in fee, that is for ever, reserving a rent certain, never afterwards
to be augmented. The payment having thus become perpetual, the exemptions,
in return, for which it was made, naturally became perpetual too. Those
exemptions, therefore, ceased to be personal, and could not afterwards be
considered as belonging to individuals, as individuals, but as burghers of a
particular burgh, which, upon this account, was called a free burgh, for the
same reason that they had been called free burghers or free traders.

Along with this grant, the important privileges, above mentioned, that they
might give away their own daughters in marriage, that their children should
succeed to them, and that they might dispose of their own effects by will,
were generally bestowed upon the burghers of the town to whom it was given.
Whether such privileges had before been usually granted, along with the
freedom of trade, to particular burghers, as individuals, I know not. I
reckon it not improbable that they were, though I cannot produce any direct
evidence of it. But however this may have been, the principal attributes of
villanage and slavery being thus taken away from them, they now at least
became really free, in our present sense of the word freedom.

Nor was this all. They were generally at the same time erected into a
commonalty or corporation, with the privilege of having magistrates and a
town-council of their own, of making bye-laws for their own government, of
building walls for their own defence, and of reducing all their inhabitants
under a sort of military discipline, by obliging them to watch and ward;
that is, as anciently understood, to guard and defend those walls against
all attacks and surprises, by night as well as by day. In England they were
generally exempted from suit to the hundred and county courts : and all such
pleas as should arise among them, the pleas of the crown excepted, were left
to the decision of their own magistrates. In other countries, much greater
and more extensive jurisdictions were frequently granted to them. {See
Madox, Firma Burgi. See also Pfeffel in the Remarkable events under Frederick
II. and his Successors of the House of Suabia.}

It might, probably, be necessary to grant to such towns as were admitted to
farm their own revenues, some sort of compulsive jurisdiction to oblige
their own citizens to make payment. In those disorderly times, it might have
been extremely inconvenient to have left them to seek this sort of justice
from any other tribunal. But it must seem extraordinary, that the sovereigns
of all the different countries of Europe should have exchanged in this
manner for a rent certain, never more to be augmented, that branch of their
revenue, which was, perhaps, of all others, the most likely to be improved
by the natural course of things, without either expense or attention of
their own ; and that they should, besides, have in this manner voluntarily
erected a sort of independent republics in the heart of their own dominions.

In order to understand this, it must be remembered, that, in those days, the
sovereign of perhaps no country in Europe was able to protect, through the
whole extent of his dominions, the weaker part of his subjects from the
oppression of the great lords. Those whom the law could not protect, and who
were not strong enough to defend themselves, were obliged either to have
recourse to the protection of some great lord, and in order to obtain it, to
become either his slaves or vassals; or to enter into a league of mutual
defence for the common protection of one another. The inhabitants of cities
and burghs, considered as single individuals, had no power to defend
themselves; but by entering into a league of mutual defence with their
neighbours, they were capable of making no contemptible resistance. The
lords despised the burghers, whom they considered not only as a different
order, but as a parcel of emancipated slaves, almost of a different species
from themselves. The wealth of the burghers never failed to provoke their
envy and indignation, and they plundered them upon every occasion without
mercy or remorse. The burghers naturally hated and feared the lords. The
king hated and feared them too ; but though, perhaps, he might despise, he
had no reason either to hate or fear the burghers. Mutual interest,
therefore, disposed them to support the king, and the king to support them
against the lords. They were the enemies of his enemies, and it was his
interest to render them as secure and independent of those. enemies as he
could. By granting them magistrates of their own, the privilege of making
bye-laws for their own government, that of building walls for their own
defence, and that of reducing all their inhabitants under a sort of military
discipline, he gave them all the means of security and independency of the
barons which it was in his power to bestow. Without the establishment of
some regular government of this kind, without some authority to compel their
inhabitants to act according to some certain plan or system, no voluntary
league of mutual defence could either have afforded them any permanent
security, or have enabled them to give the king any considerable support. By
granting them the farm of their own town in fee, he took away from those
whom he wished to have for his friends, and, if one may say so, for his
allies, all ground of jealousy and suspicion, that he was ever afterwards to
oppress them, either by raising the farm-rent of their town, or by granting
it to some other farmer.

The princes who lived upon the worst terms with their barons, seem
accordingly to have been the most liberal in grants of this kind to their
burghs. King John of England, for example, appears to have been a most
munificent benefactor to his towns. {See Madox.} Philip I. of France lost
all authority over his barons. Towards the end of his reign, his son Lewis,
known afterwards by the name of Lewis the Fat, consulted, according to
Father Daniel, with the bishops of the royal demesnes, concerning the most
proper means of restraining the violence of the great lords. Their advice
consisted of two different proposals. One was to erect a new order of
jurisdiction, by establishing magistrates and a town-council in every
considerable town of his demesnes. The other was to form a new militia, by
making the inhabitants of those towns, under the command of their own
magistrates, march out upon proper occasions to the assistance of the king.
It is from this period, according to the French antiquarians, that we are to
date the institution of the magistrates and councils of cities in France. It
was during the unprosperous reigns of the princes of the house of Suabia,
that the greater part of the free towns of Germany received the first grants
of their privileges, and that the famous Hanseatic league first became
formidable. {See Pfeffel.}

The militia of the cities seems, in those times, not to have been inferior
to that of the country ; and as they could be more readily assembled upon
any sudden occasion, they frequently had the advantage in their disputes
with the neighbouring lords. In countries such as Italy or Switzerland, in
which, on account either of their distance from the principal seat of
government, of the natural strength of the country itself, or of some other
reason, the sovereign came to lose the whole of his authority; the cities
generally became independent republics, and conquered all the nobility in
their neighbourhood; obliging them to pull down their castles in the
country, and to live, like other peaceable inhabitants, in the city. This is
the short history of the republic of Berne, as well as of several other
cities in Switzerland. If you except Venice, for of that city the history is
somewhat different, it is the history of all the considerable Italian
republics, of which so great a number arose and perished between the end of
the twelfth and the beginning of the sixteenth century.

In countries such as France and England, where the authority of the
sovereign, though frequently very low, never was destroyed altogether, the
cities had no opportunity of becoming entirely independent. They became,
however, so considerable, that the sovereign could impose no tax upon them,
besides the stated farm-rent of the town, without their own consent. They
were, therefore, called upon to send deputies to the general assembly of the
states of the kingdom, where they might join with the clergy and the barons
in granting, upon urgent occasions, some extraordinary aid to the king.
Being generally, too, more favourable to his power, their deputies seem
sometimes to have been employed by him as a counterbalance in those
assemblies to the authority of the great lords. Hence the origin of the
representation of burghs in the states-general of all great monarchies in
Europe.

Order and good government, and along with them the liberty and security of
individuals, were in this manner established in cities, at a time when the
occupiers of land in the country, were exposed to every sort of violence.
But men in this defenceless state naturally content themselves with their
necessary subsistence ; because, to acquire more, might only tempt the
injustice of their oppressors. On the contrary, when they are secure of
enjoying the fruits of their industry, they naturally exert it to better
their condition, and to acquire not only the necessaries, but the
conveniencies and elegancies of life. That industry, therefore, which aims
at something more than necessary subsistence, was established in cities long
before it was commonly practised by the occupiers of land in the country.
If, in the hands of a poor cultivator, oppressed with the servitude of
villanage, some little stock should accumulate, he would naturally conceal
it with great care from his master, to whom it would otherwise have
belonged, and take the first opportunity of running away to a town. The law
was at that time so indulgent to the inhabitants of towns, and so desirous
of diminishing the authority of the lords over those of the country, that if
he could conceal himself there from the pursuit of his lord for a year, he
was free for ever. Whatever stock, therefore, accumulated in the hands of
the industrious part of the inhabitants of the country, naturally took
refuge in cities, as the only sanctuaries in which it could be secure to the
person that acquired it.

The inhabitants of a city, it is true, must always ultimately derive their
subsistence, and the whole materials and means of their industry, from the
country. But those of a city, situated near either the sea-coast or the
banks of a navigable river, are not necessarily confined to derive them from
the country in their neighbourhood. They have a much wider range, and
may draw them from the most remote corners of the world, either in exchange
for the manufactured produce of their own industry, or by performing the
office of carriers between distant countries, and exchanging the produce of
one for that of another. A city might, in this manner, grow up to great
wealth and splendour, while not only the country in its neighbourhood, but
all those to which it traded, were in poverty and wretchedness. Each of
those countries, perhaps, taken singly, could afford it but a small part,
either of its subsistence or of its employment ; but all of them taken
together, could afford it both a great subsistence and a great employment.
There were, however, within the narrow circle of the commerce of those
times, some countries that were opulent and industrious. Such was the Greek
empire as long as it subsisted, and that of the Saracens during the reigns
of the Abassides. Such, too, was Egypt till it was conquered by the Turks,
some part of the coast of Barbary, and all those provinces of Spain which
were under the government of the Moors.

The cities of Italy seem to have been the first in Europe which were raised
by commerce to any considerable degree of opulence. Italy lay in the centre
of what was at that time the improved and civilized part of the world. The
crusades, too, though, by the great waste of stock and destruction of
inhabitants which they occasioned, they must necessarily have retarded the
progress of the greater part of Europe, were extremely favourable to that of
some Italian cities. The great armies which marched from all parts to the
conquest of the Holy Land, gave extraordinary encouragement to the shipping
of Venice, Genoa, and Pisa, sometimes in transporting them thither, and
always in supplying them with provisions. They were the commissaries, if one
may say so, of those armies ; and the most destructive frenzy that ever
befel the European nations, was a source of opulence to those republics.

The inhabitants of trading cities, by importing the improved manufactures
and expensive luxuries of richer countries, afforded some food to the vanity
of the great proprietors, who eagerly purchased them with great quantities
of the rude produce of their own lands. The commerce of a great part of
Europe in those times, accordingly, consisted chiefly in the exchange of
their own rude, for the manufactured produce of more civilized nations. Thus
the wool of England used to be exchanged for the wines of France, and the
fine cloths of Flanders, in the same manner as the corn in Poland is at this
day, exchanged for the wines and brandies of France, and for the silks and
velvets of France and Italy.

A taste for the finer and more improved manufactures was, in this manner,
introduced by foreign commerce into countries where no such works were
carried on. But when this taste became so general as to occasion a
considerable demand, the merchants, in order to save the expense of carriage,
naturally endeavoured to establish some manufactures of the same kind in
their own country. Hence the origin of the first manufactures for distant
sale, that seem to have been established in the western provinces of Europe,
after the fall of the Roman empire.

No large country, it must be observed, ever did or could subsist without
some sort of manufactures being carried on in it ; and when it is said of
any such country that it has no manufactures, it must always be understood
of the finer and more improved, or of such as are fit for distant sale. In
every large country both the clothing and household furniture or the far
greater part of the people, are the produce of their own industry. This is
even more universally the case in those poor countries which are commonly
said to have no manufactures, than in those rich ones that are said to
abound in them. In the latter you will generally find, both in the clothes
and household furniture of the lowest rank of people, a much greater
proportion of foreign productions than in the former.

Those manufactures which are fit for distant sale, seem to have been
introduced into different countries in two different ways.

Sometimes they have been introduced in the manner above mentioned, by the
violent operation, if one may say so, of the stocks of particular merchants
and undertakers, who established them in imitation of some foreign
manufactures of the same kind. Such manufactures, therefore, are the offspring
of foreign commerce; and such seem to have been the ancient manufactures of
silks, velvets, and brocades, which flourished in Lucca during the
thirteenth century. They were banished from thence by the tyranny of one of
Machiavel's heroes, Castruccio Castracani. In 1310, nine hundred families
were driven out of Lucca, of whom thirty-one retired to Venice, and offered
to introduce there the silk manufacture. {See Sandi Istoria civile de
Vinezia, part 2 vol. i, page 247 and 256.} Their offer was accepted, many
privileges were conferred upon them, and they began the manufacture with
three hundred workmen. Such, too, seem to have been the manufactures of fine
cloths that anciently flourished in Flanders, and which were introduced into
England in the beginning of the reign of Elizabeth, and such are the present
silk manufactures of Lyons and Spitalfields. Manufactures introduced in this
manner are generally employed upon foreign materials, being imitations of
foreign manufactures. When the Venetian manufacture was first established,
the materials were all brought from Sicily and the Levant. The more ancient
manufacture of Lucca was likewise carried on with foreign materials. The
cultivation of mulberry trees, and the breeding of silk-woms, seem not to
have been common in the northern parts of Italy before the sixteenth
century. Those arts were not introduced into France till the reign of
Charles IX. The manufactures of Flanders were carried on chiefly with
Spanish and English wool. Spanish wool was the material, not of the first
woollen manufacture of England, but of the first that was fit for distant
sale. More than one half the materials of the Lyons manufacture is at this
day foreign silk; when it was first established, the whole, or very nearly
the whole, was so. No part of the materials of the Spitalfields manufacture
is ever likely to be the produce of England. The seat of such manufactures,
as they are generally introduced by the scheme and project of a few
individuals, is sometimes established in a maritime city, and sometimes in
an inland town, according as their interest, judgment, or caprice, happen to
determine.

At other times, manufactures for distant sale grow up naturally, and as it
were of their own accord, by the gradual refinement of those household and
coarser manufactures which must at all times be carried on even in the
poorest and rudest countries. Such manufactures are generally employed upon
the materials which the country produces, and they seem frequently to have
been first refined and improved In such inland countries as were not,
indeed, at a very great, but at a considerable distance from the sea-coast,
and sometimes even from all water carriage. An inland country, naturally
fertile and easily cultivated, produces a great surplus of provisions beyond
what is necessary for maintaining the cultivators; and on account of the
expense of land carriage, and inconveniency of river navigation, it may
frequently be difficult to send this surplus abroad. Abundance, therefore,
renders provisions cheap, and encourages a great number of workmen to settle
in the neighbourhood, who find that their industry can there procure them
more of the necessaries and conveniencies of life than in other places. They
work up the materials of manufacture which the land produces, and exchange
their finished work, or, what is the same thing, the price of it, for more
materials and provisions. They give a new value to the surplus part of the
rude produce, by saving the expense of carrying it to the water-side, or to
some distant market ; and they furnish the cultivators with something in
exchange for it that is either useful or agreeable to them, upon easier
terms than they could have obtained it before. The cultivators get a better
price for their surplus produce, and can purchase cheaper other
conveniencies which they have occasion for. They are thus both encouraged
and enabled to increase this surplus produce by a further improvement and
better cultivation of the land; and as the fertility of she land had given
birth to the manufacture, so the progress of the manufacture reacts upon the
land, and increases still further it's fertility. The manufacturers first
supply the neighbourhood, and afterwards, as their work improves and
refines, more distant markets. For though neither the rude produce, nor even
the coarse manufacture, could, without the greatest difficulty, support the
expense of a considerable land-carriage, the refined and improved
manufacture easily may. In a small bulk it frequently contains the price of
a great quantity of rude produce. A piece of fine cloth, for example which
weighs only eighty pounds, contains in it the price, not only of eighty
pounds weight of wool, but sometimes of several thousand weight of corn, the
maintenance of the different working people, and of their immediate
employers. The corn which could with difficulty have been carried abroad in
its own shape, is in this manner virtually exported in that of the complete
manufacture, and may easily be sent to the remotest corners of the world. In
this manner have grown up naturally, and, as it were, of their own accord,
the manufactures of Leeds, Halifax, Sheffield, Birmingham, and
Wolverhampton. Such manufactures are the offspring of agriculture. In the
modern history of Europe, their extension and improvement have generally
been posterior to those which were the offspring of foreign commerce.
England was noted for the manufacture of fine cloths made of Spanish wool,
more than a century before any of those which now flourish in the places
above mentioned were fit for foreign sale. The extension and improvement of
these last could not take place but in consequence of the extension and
improvement of agriculture, the last and greatest effect of foreign
commerce, and of the manufactures immediately introduced by it, and which I
shall now proceed to explain.




CHAPTER IV.

HOW THE COMMERCE OF TOWNS CONTRIBUTED TO THE IMPROVEMENT OF THE COUNTRY.

The increase and riches of commercial and manufacturing towns contributed to
the improvement and cultivation of the countries to which they belonged, in
three different ways :

First, by affording a great and ready market for the rude produce of the
country, they gave encouragement to its cultivation and further improvement.
This benefit was not even confined to the countries in which they were
situated, but extended more or less to all those with which they had any
dealings. To all of them they afforded a market for some part either of
their rude or manufactured produce, and, consequently, gave some
encouragement to the industry and improvement of all. Their own country,
however, on account of its neighbourhood, necessarily derived the greatest
benefit from this market. Its rude produce being charged with less carriage,
the traders could pay the growers a better price for it, and yet afford it
as cheap to the consumers as that of more distant countries.

Secondly, the wealth acquired by the inhabitants of cities was frequently
employed in purchasing such lands as were to be sold, of which a great part
would frequently be uncultivated. Merchants are commonly ambitious of
becoming country gentlemen, and, when they do, they are generally the best
of all improvers. A merchant is accustomed to employ his money chiefly in
profitable projects ; whereas a mere country gentleman is accustomed to
employ it chiefly in expense. The one often sees his money go from him, and
return to him again with a profit; the other, when once he parts with it,
very seldom expects to see any more of it. Those different habits naturally
affect their temper and disposition in every sort of business. The merchant
is commonly a bold, a country gentleman a timid undertaker. The one is not
afraid to lay out at once a large capital upon the improvement of his land,
when he has a probable prospect of raising the value of it in proportion to
the expense ; the other, if he has any capital, which is not always the
case, seldom ventures to employ it in this manner. If he improves at all, it
is commonly not with a capital, but with what he can save out or his annual
revenue. Whoever has had the fortune to live in a mercantile town, situated
in an unimproved country, must have frequently observed how much more
spirited the operations of merchants were in this way, than those of mere
country gentlemen. The habits, besides, of order, economy, and attention, to
which mercantile business naturally forms a merchant, render him much fitter
to execute, with profit and success, any project of improvement.

Thirdly, and lastly, commerce and manufactures gradually introduced order
and good government, and with them the liberty and security of individuals,
among the inhabitants of the country, who had before lived almost in a
continual state of war with their neighbours, and of servile dependency upon
their superiors. This, though it has been the least observed, is by far the
most important of all their effects. Mr Hume is the only writer who, so far
as I know, has hitherto taken notice of it.

In a country which has neither foreign commerce nor any of the finer
manufactures, a great proprietor, having nothing for which he can exchange
the greater part of the produce of his lands which is over and above the
maintenance of the cultivators, consumes the whole in rustic hospitality at
home. If this surplus produce is sufficient to maintain a hundred or a
thousand men, he can make use of it in no other way than by maintaining a
hundred or a thousand men. He is at all times, therefore, surrounded with a
multitude of retainers and dependants, who, having no equivalent to give in
return for their maintenance, but being fed entirely by his bounty, must
obey him, for the same reason that soldiers must obey the prince who pays
them. Before the extension of commerce and manufactures in Europe, the
hospitality of the rich and the great, from the sovereign down to the
smallest baron, exceeded every thing which, in the present times, we can
easily form a notion of Westminster-hall was the dining-room of William
Rufus, and might frequently, perhaps, not be too large for his company. It
was reckoned a piece of magnificence in Thomas Becket, that he strewed the
floor of his hall with clean hay or rushes in the season, in order that the
knights and squires, who could not get seats, might not spoil their fine
clothes when they sat down on the floor to eat their dinner. The great Earl
of Warwick is said to have entertained every day, at his different manors,
30,000 people ; and though the number here may have been exaggerated, it
must, however, have been very great to admit of such exaggeration. A
hospitality nearly of the same kind was exercised not many years ago in many
different parts of the Highlands of Scotland. It seems to be common in all
nations to whom commerce and manufactures are little known. I have seen,
says Doctor Pocock, an Arabian chief dine in the streets of a town where he
had come to sell his cattle, and invite all passengers, even common
beggars, to sit down with him and partake of his banquet.

The occupiers of land were in every respect as dependent upon the great
proprietor as his retainers. Even such of them as were not in a state of
villanage, were tenants at will, who paid a rent in no respect equivalent to
the subsistence which the land afforded them. A crown, half a crown, a
sheep, a lamb, was some years ago, in the Highlands of Scotland, a common
rent for lands which maintained a family. In some places it is so at this
day; nor will money at present purchase a greater quantity of commodities
there than in other places. In a country where the surplus produce of a
large estate must be consumed upon the estate itself, it will frequently be
more convenient for the proprietor, that part of it be consumed at a
distance from his own house, provided they who consume it are as dependent
upon him as either his retainers or his menial servants. He is thereby saved
from the embarrassment of either too large a company, or too large a family.
A tenant at will, who possesses land sufficient to maintain his family for
little more than a quit-rent, is as dependent upon the proprietor as any
servant or retainer whatever, and must obey him with as little reserve. Such
a proprietor, as he feeds his servants and retainers at his own house, so he
feeds his tenants at their houses. The subsistence of both is derived from
his bounty, and its continuance depends upon his good pleasure.

Upon the authority which the great proprietors necessarily had, in such a
state of things, over their tenants and retainers, was founded the power of
the ancient barons. They necessarily became the judges in peace, and the
leaders in war, of all who dwelt upon their estates. They could maintain
order, and execute the law, within their respective demesnes, because each
of them could there turn the whole force of all the inhabitants against the
injustice of anyone. No other person had sufficient authority to do this.
The king, in particular, had not. In those ancient times, he was little more
than the greatest proprietor in his dominions, to whom, for the sake of
common defence against their common enemies, the other great proprietors
paid certain respects. To have enforced payment of a small debt within the
lands of a great proprietor, where all the inhabitants were armed, and
accustomed to stand by one another, would have cost the king, had he
attempted it by his own authority, almost the same effort as to extinguish a
civil war. He was, therefore, obliged to abandon the administration of
justice, through the greater part of the country, to those who were capable
of administering it; and, for the same reason, to leave the command of the
country militia to those whom that militia would obey.

It is a mistake to imagine that those territorial jurisdictions took their
origin from the feudal law. Not only the highest jurisdictions, both civil
and criminal, but the power of levying troops, of coining money, and even
that of making bye-laws for the government of their own people, were all
rights possessed allodially by the great proprietors of land, several
centuries before even the name of the feudal law was known in Europe. The
authority and jurisdiction of the Saxon lords in England appear to have been
as great before the Conquest as that of any of the Norman lords after it.
But the feudal law is not supposed to have become the common law of England
till after the Conquest. That the most extensive authority and jurisdictions
were possessed by the great lords in France allodially, long before the
feudal law was introduced into that country, is a matter of fact that admits
of no doubt. That authority, and those jurisdictions, all necessarily flowed
from the state of property and manners just now described. Without
remounting to the remote antiquities of either the French or English
monarchies, we may find, in much later times, many proofs that such effects
must always flow from such causes. It is not thirty years ago since Mr
Cameron of Lochiel, a gentleman of Lochaber in Scotland, without any legal
warrant whatever, not being what was then called a lord of regality, nor
even a tenant in chief, but a vassal of the Duke of Argyll, and with out
being so much as a justice of peace, used, notwithstanding, to exercise the
highest criminal jurisdictions over his own people. He is said to have done
so with great equity, though without any of the formalities of justice; and
it is not improbable that the state of that part of the country at that time
made it necessary for him to assume this authority, in order to maintain the
public peace. That gentleman, whose rent never exceeded 500 a-year,
carried, in 1745, 800 of his own people into the rebellion with him.

The introduction of the feudal law, so far from extending, may be regarded
as an attempt to moderate, the authority of the great allodial lords. It
established a regular subordination, accompanied with a long train of
services and duties, from the king down to the smallest proprietor. During
the minority of the proprietor, the rent, together with the management of
his lands, fell into the hands of his immediate superior ; and,
consequently, those of all great proprietors into the hands of the king, who
was charged with the maintenance and education of the pupil, and who, from
his authority as guardian, was supposed to have a right of disposing of him
in marriage, provided it was in a manner not unsuitable to his rank. But
though this institution necessarily tended to strengthen the authority of
the king, and to weaken that of the great proprietors, it could not do
either sufficiently for establishing order and good government among the
inhabitants of the country; because it could not alter sufficiently that
state of property and manners from which the disorders arose. The authority
of government still continued to be, as before, too weak in the head, and
too strong in the inferior members; and the excessive strength of the
inferior members was the cause of the weakness of the head. After the
institution of feudal subordination, the king was as incapable of
restraining the violence of the great lords as before. They still continued
to make war according to their own discretion, almost continually upon one
another, and very frequently upon the king; and the open country still
continued to be a scene of violence, rapine, and disorder.

But what all the violence of the feudal institutions could never have
effected, the silent and insensible operation of foreign commerce and
manufactures gradually brought about. These gradually furnished the great
proprietors with something for which they could exchange the whole surplus
produce of their lands, and which they could consume themselves. without
sharing it either with tenants or retainers. All for ourselves, and nothing
for other people, seems, in every age of the world, to have been the vile
maxim of the masters of mankind. As soon, therefore, as they could find a
method of consuming the whole value of their rents themselves, they had no
disposition to share them with any other persons. For a pair of diamond
buckles, perhaps, or for something as frivolous and useless, they exchanged
the maintenance, or, what is the same thing, the price of the maintenance of
1000 men for a year, and with it the whole weight and authority which it
could give them. The buckles, however, were to be all their own, and no
other human creature was to have any share of them; whereas, in the more
ancient method of expense, they must have shared with at least 1000 people.
With the judges that were to determine the preference, this difference was
perfectly decisive; and thus, for the gratification of the most childish,
the meanest, and the most sordid of all vanities they gradually bartered
their whole power and authority.

In a country where there is no foreign commerce, nor any of the finer
manufactures, a man of 10,000 a-year cannot well employ his revenue in any
other way than in maintaining, perhaps, 1000 families, who are all of them
necessarily at his command. In the present state of Europe, a man of 10,000
a-year can spend his whole revenue, and he generally does so, without
directly maintaining twenty people, or being able to command more than ten
footmen, not worth the commanding. Indirectly, perhaps, he maintains as
great, or even a greater number of people, than he could have done by the
ancient method of expense. For though the quantity of precious productions
for which he exchanges his whole revenue be very small, the number of
workmen employed in collecting and preparing it must necessarily have been
very great. Its great price generally arises from the wages of their labour,
and the profits of all their immediate employers. By paying that price, he
indirectly pays all those wages and profits, and thus indirectly contributes
to the maintenance of all the workmen and their employers. He generally
contributes, however, but a very small proportion to that of each; to a very
few, perhaps, not a tenth, to many not a hundredth, and to some not a
thousandth, or even a ten thousandth part of their whole annual maintenance.
Though he contributes, therefore, to the maintenance of them all, they are
all more or less independent of him, because generally they can all be
maintained without him.

When the great proprietors of land spend their rents in maintaining their
tenants and retainers, each of them maintains entirely all his own tenants
and all his own retainers. But when they spend them in maintaining tradesmen
and artificers, they may, all of them taken together, perhaps maintain as
great, or, on account of the waste which attends rustic hospitality, a
greater number of people than before. Each of them, however, taken singly,
contributes often but a very small share to the maintenance of any
individual of this greater number. Each tradesman or artificer derives his
subsistence from the employment, not of one, but of a hundred or a thousand
different customers. Though in some measure obliged to them all, therefore,
he is not absolutely dependent upon any one of them.

The personal expense of the great proprietors having in this manner
gradually increased, it was impossible that the number of their retainers
should not as gradually diminish, till they were at last dismissed
altogether. The same cause gradually led them to dismiss the unnecessary
part of their tenants. Farms were enlarged, and the occupiers of land, not.
withstanding the complaints of depopulation, reduced to the number necessary
for cultivating it, according to the imperfect state of cultivation and
improvement in those times. By the removal of the unnecessary mouths, and by
exacting from the farmer the full value of the farm, a greater surplus, or,
what is the same thing, the price of a greater surplus, was obtained for the
proprietor, which the merchants and manufacturers soon furnished him with a
method of spending upon his own person, in the same manner as he had done
the rest. The cause continuing to operate, he was desirous to raise his
rents above what his lands, in the actual state of their improvement, could
afford. His tenants could agree to this upon one condition only, that they
should be secured in their possession for such a term of years as might give
them time to recover, with profit, whatever they should lay not in the
further improvement of the land. The expensive vanity of the landlord made
him willing to accept of this condition ; and hence the origin of long
leases.

Even a tenant at will, who pays the full value of the land, is not
altogether dependent upon the landlord. The pecuniary advantages which they
receive from one another are mutual and equal, and such a tenant will expose
neither his life nor his fortune in the service of the proprietor. But if he
has a lease for along term of years, he is altogether independent; and his
landlord must not expect from him even the most trifling service, beyond
what is either expressly stipulated in the lease, or imposed upon him by the
common and known law of the country.

The tenants having in this manner become independent, and the retainers
being dismissed, the great proprietors were no longer capable of
interrupting the regular execution of justice, or of disturbing the peace of
the country. Having sold their birth-right, not like Esau, for a mess of
pottage in time of hunger and necessity, but, in the wantonness of plenty,
for trinkets and baubles, fitter to be the playthings of children than the
serious pursuits of men, they became as insignificant as any substantial
burgher or tradesmen in a city. A regular government was established in the
country as well as in the city, nobody having sufficient power to disturb
its operations in the one, any more than in the other.

It does not, perhaps, relate to the present subject, but I cannot help
remarking it, that very old families, such as have possessed some
considerable estate from father to son for many successive generations, are
very rare in commercial countries. In countries which have little commerce,
on the contrary, such as Wales, or the Highlands of Scotland, they are very
common. The Arabian histories seem to be all full of genealogies; and there
is a history written by a Tartar Khan, which has been translated into
several European languages, and which contains scarce any thing else; a
proof that ancient families are very common among those nations. In
countries where a rich man can spend his revenue in no other way than by
maintaining as many people as it can maintain, he is apt to run out, and his
benevolence, it seems, is seldom so violent as to attempt to maintain more
than he can afford. But where he can spend the greatest revenue upon his own
person, he frequently has no bounds to his expense, because he frequently
has no bounds to his vanity, or to his affection for his own person. In
commercial countries, therefore, riches, in spite of the most violent
regulations of law to prevent their dissipation, very seldom remain long in
the same family. Among simple nations, on the contrary, they frequently do,
without any regulations of law ; for among nations of shepherds, such a