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Title: An Inquiry Into the Nature and Causes of the Wealth of Nations
Author: Adam Smith
Germain Garnier
Release Date: December 3, 2011 [EBook #38194]
Language: English
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HARVARD
COLLEGE
LIBRARY
AN
INQUIRY INTO THE NATURE AND CAUSES
OF THE
WEALTH OF NATIONS.
BY
ADAM SMITH LL.D. F.R.S.
WITH A LIFE OF THE AUTHOR.
ALSO,
A VIEW OF THE DOCTRINE OF SMITH, COMPARED WITH THAT OF
THE FRENCH ECONOMISTS;
WITH A METHOD OF FACILITATING THE STUDY OF HIS WORKS;
FROM THE FRENCH OF M. GARNIER.
COMPLETE IN ONE VOLUME
London:
T. NELSON AND SONS, PATERNOSTER
ROW;
AND EDINBURGH.
MDCCCLII.
CONTENTS
Page
Life of the Author
Short View of the Doctrine of Smith, compared with that of the French
Economists
Introduction
BOOK I.
i
xvii
1
OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS OF LABOUR, AND OF
THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRIBUTED AMONG
THE DIFFERENT RANKS OF THE PEOPLE.
CHAP. I.
Of the Division of Labour
2
CHAP. II.
Of the Principle which gives occasion to the Division of Labour
6
CHAP. III.
That the Division of Labour is limited by the Extent of the Market
8
CHAP. IV.
Of the Origin and Use of Money
9
CHAP. V.
Of the real and nominal Price of Commodities, or of their Price in Labour,
and their Price in Money
12
CHAP. VI.
Of the Component Parts of the Price of Commodities
20
CHAP. VII.
Of the Natural and Market Price of Commodities
23
CHAP. VIII.
Of the Wages of Labour
27
CHAP. IX.
Of the Profits of Stock
36
CHAP. X.
Of Wages and Profit in the different Employments of Labour and Stock
PART I. Inequalities arising from the Nature of the Employments
themselves
PART II. Inequalities occasioned by the Policy of Europe
41
ib.
50
CHAP. XI.
Of the Rent of Land
PART I. Of the Produce of Land which always affords Rent
PART II. Of the Produce of Land which sometimes does, and
sometimes does not, afford Rent
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
Digression concerning the Variations in the Value of Silver during the
course of the four last centuries
First Period
Second Period
Third Period
Variations in the Proportion between the respective Values of Gold and
Silver
Grounds of the Suspicion that the Value of Silver still continues to
decrease
Different Effects of the Progress of Improvement upon the real Price
of three different sorts of rude Produce
First Sort
Second Sort
Third Sort
Conclusion of the Digression concerning the Variations in the Value of
Silver
Effects of the Progress of Improvement upon the real Price of
Manufactures
Conclusion of the Chapter
BOOK II.
60
61
68
74
ib.
ib.
81
ib.
89
91
ib.
92
ib.
97
101
103
105
OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK.
Introduction
111
CHAP. I.
Of the Division of Stock
112
CHAP. II.
Of Money considered as a particular Branch of the general Stock of the
Society, or of the Expense of maintaining the National Capital
CHAP. III.
115
Of the Accumulation of Capital, or of productive and unproductive Labour 135
CHAP. IV.
Of Stock lent at Interest
144
CHAP. V.
Of the different Employment of Capitals
BOOK III.
147
OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS.
CHAP. I.
Of the Natural Progress of Opulence
155
CHAP. II.
Of the Discouragement of Agriculture in the ancient States of Europe, after
157
the fall of the Roman Empire
CHAP. III.
Of the Rise and Progress of Cities and Towns, after the fall of the Roman
Empire
162
CHAP. IV.
How the Commerce of the Towns contributed to the Improvement of the
Country
BOOK IV.
167
OF THE SYSTEMS OF POLITICAL ECONOMY.
Introduction
173
CHAP. I.
Of the Principle of the Commercial or Mercantile system
ib.
CHAP. II.
Of Restraints upon the Importation from Foreign Countries, of such Goods
183
as can be produced at Home
CHAP. III.
Of the extraordinary Restraints upon the Importation of Goods of almost all
kinds, from those Countries with which the Balance is supposed to be
disadvantageous
PART I. Of the Unreasonableness of those Restraints, even upon the
Principles of the Commercial System
Digression concerning Banks of Deposit, particularly concerning
that of Amsterdam
PART II. Of the Unreasonableness of these extraordinary Restraints,
upon other Principles
CHAP. IV.
192
ib.
194
199
Of Drawbacks
203
CHAP. V.
Of Bounties
Digression concerning the Corn Trade and Corn Laws
205
213
CHAP. VI.
Of Treaties of Commerce
222
CHAP. VII.
Of Colonies
PART I. Of the Motives for establishing new Colonies
PART II. Causes of the Prosperity of new Colonies
PART III. Of the Advantages which Europe has derived from the
Discovery of America, and from that of a Passage to the East Indies by
the Cape of Good Hope
227
ib.
231
243
CHAP. VIII.
Conclusion of the Mercantile System
266
CHAP. IX.
Of the Agricultural Systems, or of those Systems of Political Economy
which represent the Produce of Land as either the sole or the principal
Source of the Revenue and Wealth of every Country
275
APPENDIX.
Account of Herring Busses fitted out in Scotland, the Amount of the
Cargoes and the Bounties on them
Account of Foreign Salt imported into Scotland, and of Scotch Salt
delivered duty free, for the Herring Fishery
BOOK V.
287
288
OF THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH.
CHAP. I.
Of the Expenses of the Sovereign or Commonwealth
PART I. Of the Expense of Defence
PART II. Of the Expense of Justice
PART III. Of the Expense of Public Works and Public Institutions
ART. I. Of the Public Works and Institutions for facilitating the
Commerce of Society.—1st, For facilitating the general
Commerce of the Society.—2d, For facilitating particular
Branches of Commerce
ART. II. Of the Expense of the Institutions for the Education of
289
ib.
297
302
303
318
Youth
ART. III. Of the Expense of the Institutions for the Instruction of
People of all Ages
PART IV. Of the Expense of supporting the Dignity of the Sovereign
Conclusion of the Chapter
330
342
ib.
CHAP. II.
Of the Sources of the general or Public Revenue of the Society
PART I. Of the Funds or Sources of Revenue which may particularly
belong to the Sovereign or Commonwealth
PART II. Of Taxes
ART. I. Taxes upon rent; Taxes upon the Rent of Land
Taxes which are proportioned, not to the Rent, but to the Produce
of Land
Taxes upon the Rent of Houses
ART. II. Taxes upon Profit, or upon the Revenue arising from
Stock
Taxes upon the Profit of particular Employments
APPENDIX to Articles I. and II.—Taxes upon the Capital Value of
Lands, Houses, and Stock
ART. III. Taxes upon the Wages of Labour
ART. IV. Taxes which, it is intended, should fall indifferently upon
every different Species of Revenue
Capitation Taxes
Taxes upon consumable Commodities
343
ib.
347
348
352
354
357
359
362
365
366
367
368
CHAP. III.
Of Public Debts
385
SHORT ACCOUNT
OF THE
LIFE AND WRITINGS
OF
DR. ADAM SMITH
Adam Smith, the celebrated author of 'An Inquiry into the Nature and Causes
of the Wealth of Nations,' was born in the town of Kirkaldy, on the 5th of June
1723. His father, at an early period of life, practised as a writer to the signet in
Edinburgh, and officiated as private secretary to the Earl of Loudon, during the
time his Lordship was principal secretary of state in Scotland, and keeper of the
great seal; but afterwards settled at Kirkaldy, where, for some time before his
death, he held the office of comptroller of the customs. He died a few months
before the birth of his son.
The constitution of young Smith, during infancy, was so sickly as to require
all the care and solicitude of his surviving parent, whose only child he was. The
duty which thus devolved on his mother, it is allowed, she discharged in the most
ample manner; and, indeed, carried her indulgence so far as to have drawn on
herself, it has been said, some degree of blame. But it certainly does not appear
that any bad consequences resulted, on this occasion, from unbounded parental
fondness; nor can it be said, that any permanent disadvantage was felt by the
retirement, and even seclusion, which long-continued weakness rendered
necessary. To the inability of young Smith to engage in the active sports of his
early companions, we ought, perhaps, to trace the foundation of those habits, and
love of retirement, which distinguished him, in a peculiar manner, during a long
life[1].
We are informed that Smith received the rudiments of education at the
grammar-school of Kirkaldy; and, at that time, attracted some notice by his
passion for books, and by the extraordinary powers of his memory. He was also
observed, even at this early period of life, to have contracted those habits of
absence in company, and of talking to himself, for which he was afterwards so
remarkable.
In 1737, he was sent to the university of Glasgow, where, it is said, he
evinced an uncommon partiality for the study of mathematics and natural
philosophy. Being designed for the English church, he left that place in about
three years, and entered, in 1740, an exhibitioner on Snell's foundation, at Baliol
college, Oxford. But to this celebrated seminary he acknowledged very slender
obligations. He had, however, attained a solid foundation of knowledge, and also
the precious habits of attention, and the most industrious application. Here he
diligently pursued his favourite speculations in private, interrupted only by the
regular calls of scholastic discipline. He cultivated, with the greatest assiduity
and success, the study of the languages, both ancient and modern; and formed an
intimate acquaintance with the works of the poets of his own country, as well as
with those of Greece and Rome, France and Italy. Of the turns and delicacies of
the English tongue, it has been observed, he then gained such a critical
knowledge, as was scarcely to be expected from his northern education. With the
view of improving his style, he employed himself in frequent translations,
particularly from the French; a practice which he used to recommend to all who
cultivate the art of writing. His modest deportment, and his secret studies,
however, provoked, it has been said, the jealousy or the suspicion of his
superiors. It has been mentioned, that the heads of the college having thought
proper to visit his chamber, found him engaged in perusing Hume's Treatise of
Human Nature, then recently published. This the reverend inquisitors seized,
while they severely reprimanded the young philosopher.
After a residence of seven years at Oxford, he returned, against the wishes of
his friends, to Kirkaldy, the place of his nativity, where he lived for some time
with his mother, without determining on any fixed plan of life; Mr. Smith having
thus chosen to forego every prospect of church preferment, rather than do
violence to his conscience by preaching a particular system of tenets.
In 1748, being then in the twenty-fifth year of his age, he took up his
residence in the capital of Scotland, when he first entered into public life, by
delivering lectures, under the patronage of Lord Kames, on rhetoric and the
belles lettres, which he continued for two years. These lectures were never
published; but the substance of them appears to have been afterwards
communicated to Dr. Blair, as he acknowledges, in his Lectures, to have been
indebted to Dr. Smith for a manuscript treatise, from which he had taken several
ideas in the eighteenth lecture, on the general characters of style, particularly the
plain and the simple; and also the characters of those English authors belonging
to the several classes in that and the following lecture.
In 1751, he was chosen professor of logic in the university of Glasgow. Of
the manner in which he discharged the duties of this important situation, it would
be difficult now to present a more satisfactory account than that which has been
given by one of his own pupils 'In the professorship of logic,' it is observed, 'Mr.
Smith soon saw the necessity of departing widely from the plan that had been
followed by his predecessors, and of directing the attention of his pupils to
studies of a more interesting and useful nature than the logic and metaphysics of
the schools. Accordingly, after exhibiting a general view of the powers of the
mind, and explaining so much of the ancient logic as was requisite to gratify
curiosity, with respect to an artificial mode of reasoning, which had once
occupied the universal attention of the learned, he dedicated all the rest of his
time to the delivery of a system of rhetoric and belles lettres.'
During the following year, he was nominated professor of moral philosophy
in the same university. By this appointment he was peculiarly gratified, and the
duties of it he was well fitted to discharge, as it embraced the study of his
favourite science, political economy, many of the doctrines of which, even then,
had been familiarised to his mind. After entering on the duties of his new
situation, he appears to have turned his attention to the division of the science of
morals, which he was induced to divide into four parts. The first contained
Natural Theology, in which he considered the proofs of the being and attributes
of God, and those principles of the human mind upon which religion is founded.
The second comprehended Ethics, strictly so called. In the third, he treated, at
more length, of that branch of morality which relates to Justice, and which, being
susceptible of precise and accurate rules, is capable of a more systematic
demonstration. In the fourth, he examined these political regulations which are
founded upon Expediency, and which are calculated to increase the riches, the
power, and the prosperity of a state.
His lectures on these subjects were always distinguished by a luminous
division of the subject, and by fulness and variety of illustration; and as they
were delivered in a plain unaffected manner, they were well calculated to afford
pleasure as well as instruction. They, accordingly, excited a degree of interest,
and gave rise to a spirit of inquiry in the great commercial city of Glasgow, from
which the most favourable consequences resulted. His reputation extended so
widely, that, on his account alone, a considerable number of students, from
different parts of the country, were attracted to the university of that city; and the
science which he taught became so popular, that even the trifling peculiarities in
his pronunciation and manner of speaking, were often objects of imitation.
During the time Mr. Smith was thus successfully engaged in his academical
labours, he was gradually laying the foundation of a more extensive reputation.
In the year 1759, he published his 'Theory of Moral Sentiments, or An Essay
towards an Analysis of the Principles by which Men naturally judge concerning
the Conduct and Character, first of their Neighbours, and afterwards of
Themselves.' This work was founded on the second division of his lectures, and
was divided into six parts:—The propriety of action: Merit and demerit, or the
objects of reward and punishment: The foundation of our judgments concerning
our own sentiments and conduct, and of the sense of duty: The effect of utility
upon the sentiment of approbation: The influence of custom and fashion upon
the sentiments of moral approbation and disapprobation: And, lastly, The
character of virtue. To these were added, a brief view of the different systems of
ancient and modern philosophy, which is universally acknowledged to be the
most candid and luminous that has yet appeared.
This Essay soon attracted a great share of the public attention, by the
ingenuity of the reasonings, and the perspicuity with which they were displayed.
The principle on which it is founded may be said to be, That the primary objects
of our moral perceptions are the actions of other men; and that our moral
judgments, with respect to our own conduct, are only applications to ourselves of
decisions which we have already passed on the conduct of others. With this
doctrine the author thinks all the most celebrated theories of morality coincide in
part, and from some partial view of it he apprehends they are all derived. To the
same work was subjoined a short treatise on the first formation of language, and
considerations on the different genius of those which were original and
compounded.
The Theory of Moral Sentiments, immediately on its publication, procured a
splendid reputation to the author, and led to a change in his situation in life, that
was to him no less pleasing in itself, than gratifying from the means by which it
was brought about. But the following lively letter to him, at that time, from his
friend Mr. Hume, dated London, 12th April, 1759, will best show the manner in
which this work was received, and the influence which it had in deciding on the
future life of its author:—
'I give you thanks for the agreeable present of your Theory. Wedderburn and I made presents of our
copies to such of our acquaintances as we thought good judges, and proper to spread the reputation of the
book. I sent one to the Duke of Argyll, to Lord Lyttleton, Horace Walpole, Soame Jenyns, and Burke, an
Irish gentleman, who wrote lately a very pretty treatise on the sublime, Millar desired my permission to
send one, in your name, to Dr. Warburton. I have delayed writing to you till I could tell you something of
the success of the book, and could prognosticate, with some probability, whether it should be finally
damned to oblivion, or should be registered in the temple of immortality. Though it has been published only
a few weeks, I think there appear already such strong symptoms, that I can almost venture to foretel its fate.
It is, in short, this——But I have been interrupted in my letter, by a foolish, impertinent visit of one who
has lately come from Scotland. He tells me, that the university of Glasgow intend to declare Rouet's office
vacant, upon his going abroad with Lord Hope. I question not but you will have our friend Fergusson in
your eye, in case another project for procuring him a place in the university of Edinburgh should fail.
Fergusson has very much polished and improved his treatise on Refinement, and with some amendments, it
will make an admirable book, and discovers an elegant and a singular genius. The Epigoniad, I hope, will
do; but it is somewhat up-hill work. As I doubt not but you consult the reviewers sometimes at present, you
will see in the Critical Review a letter upon that poem, and I desire you to employ your conjectures in
finding out the author. Let me see a sample of your skill in knowing hands, by your guessing at the person. I
am afraid of Lord Kames's Law Tracts. A man might as well think of making a fine sauce by a mixture of
wormwood and aloes, as an agreeable composition by joining metaphysics and Scotch law. However, the
book, I believe, has merit, though few people will take the pains of diving into it. But to return to your book
and its success in this town, I must tell you——A plague of interruptions! I ordered myself to be denied;
and yet here is one that has broke in upon me again. He is a man of letters, and we have had a good deal of
literary conversation. You told me that you was curious of literary anecdotes, and therefore I shall inform
you of a few that have come to my knowledge. I believe I have mentioned to you already Helvetius's book
De l'Esprit. It is worth your reading, not for its philosophy, which I do not highly value, but for its agreeable
composition. I had a letter from him a few days ago, wherein he tells me that my name was much oftener in
the manuscript, but that the censor of books at Paris obliged him to strike it out. Voltaire has lately
published a small work, called Candide, ou l'Optimisme I shall give a detail of it——But what is all this to
my book? say you.——My dear Mr. Smith, have patience; compose yourself to tranquillity; show yourself
a philosopher in practice as well as profession; think on the emptiness, and rashness, and futility of the
common judgments of men; how little they are regulated by reason in any subject, much more in
philosophical subjects, which so far exceed the comprehension of the vulgar.
——Non si quid turbida Roma
Elevat, accedas; examenve improbum in illa
Castiges trutina; nec te quæsiveris extra.
A wise man's kingdom is his own breast, or if he ever looks farther, it will only be to the judgment of a
select few, who are free from prejudices, and capable of examining his work. Nothing, indeed, can be a
stronger presumption of falsehood than the approbation of the multitude; and Phocion, you know, always
suspected himself of some blunder when he was attended with the applauses of the populace.
'Supposing, therefore, that you have duly prepared yourself for the worst, by all these reflections, I
proceed to tell you the melancholy news,—that your book has been very unfortunate; for the public seem
disposed to applaud it extremely. It was looked for by the foolish people with some impatience and the mob
of literati are beginning already to be very loud in its praises. Three bishops called yesterday at Millar's
shop, in order to buy copies, and to ask questions about the author. The bishop of Peterborough said he had
passed the evening in a company where he heard it extolled above all books in the world. The Duke of
Argyll is more decisive than he uses to be in its favour I suppose he either considers it as an exotic, or
thinks the author will be serviceable to him in the Glasgow elections. Lord Lyttleton says, that Robertson,
and Smith, and Bower, are the glories of English literature. Oswald protests, he does not know whether he
has reaped more instruction or entertainment from it. But you may easily judge what reliance can be put on
his judgment, who has been engaged all his life in public business, and who never sees any faults in his
friends. Millar exults, and brags that two thirds of the edition are already sold, and that he is now sure of
success. You see what a son of the earth that is, to value books only by the profit they bring him. In that
view, I believe, it may prove a very good book.
'Charles Townsend, who passes for the cleverest fellow in England, is so taken with the performance,
that he said to Oswald, he would put the Duke or Buccleugh under the author's care, and would make it
worth his while to accept of that charge. As soon as I heard this, I called on him twice with a view of talking
with him about the matter, and of convincing him of the propriety of sending that young nobleman to
Glasgow; for I could not hope, that he could offer you any terms which would tempt you to renounce your
professorship. But I missed him. Mr. Townsend passes for being a little uncertain in his resolutions; so,
perhaps, you need not build much on this sally.
'In recompense for so many mortifying things, which nothing but truth could have extorted from me,
and which I could easily have multiplied to a greater number, I doubt not but you are so good a christian as
to return good for evil, and to flatter my vanity, by telling me, that all the godly in Scotland abuse me for
my account of John Knox and the reformation.'
Mr. Smith having completed, and given to the world his system of ethics,
that subject afterwards occupied but a small part of his lectures. His attention
was now chiefly directed to the illustration of those other branches of science
which he taught; and, accordingly, he seems to have taken up the resolution,
even at that early period, of publishing an investigation into the principles of
what he considered to be the only other branch of Moral Philosophy,—
Jurisprudence, the subject of which formed the third division of his lectures. At
the conclusion of the Theory of Moral Sentiments, after treating of the
importance of a system of Natural Jurisprudence, and remarking that Grotius
was the first, and perhaps the only writer, who had given any thing like a system
of those principles which ought to run through, and be the foundation of the law
of nations, Mr. Smith promised, in another discourse, to give an account of the
general principles of law and government, and of the different revolutions they
have undergone in the different ages and periods of society, not only in what
concerns justice, but in what concerns police, revenue, and arms, and whatever
else is the object of law.
Four years after the publication of this work, and after a residence of thirteen
years in Glasgow, Mr. Smith, in 1763, was induced to relinquish his
professorship, by an invitation from the Hon. Mr. Townsend, who had married
the Duchess of Buccleugh, to accompany the young Duke, her son, in his travels.
Being indebted for this invitation to his own talents alone, it must have appeared
peculiarly flattering to him. Such an appointment was, besides, the more
acceptable, as it afforded him a better opportunity of becoming acquainted with
the internal policy of other states, and of completing that system of political
economy, the principles of which he had previously delivered in his lectures, and
which it was then the leading object of his studies to perfect.
Mr. Smith did not, however, resign his professorship till the day after his
arrival in Paris, in February 1764. He then addressed the following letter to the
Right Honourable Thomas Millar, lord advocate of Scotland, and then rector of
the college of Glasgow:—
'MY LORD,—I take this first opportunity after my arrival in this place, which was not till yesterday, to
resign my office into the hands of your lordship, of the dean of faculty, of the principal of the college, and
of all my other most respectable and worthy colleagues. Into your and their hands, therefore, I do resign my
office of professor of moral philosophy in the university of Glasgow, and in the college thereof, with all the
emoluments, privileges, and advantages, which belong to it. I reserve, however, my right to the salary for
the current half-year, which commenced at the 10th of October, for one part of my salary, and at Martinmas
last for another; and I desire that this salary may be paid to the gentleman who does that part of my duty
which I was obliged to leave undone, in the manner agreed on between my very worthy colleagues before
we parted. I never was more anxious for the good of the college than at this moment; and I sincerely wish,
that whoever is my successor, he may not only do credit to the office by his abilities, but be a comfort to the
very excellent men with whom he is likely to spend his life, by the probity of his heart and the goodness of
his temper.'
His lordship having transmitted the above to the professors, a meeting was
held; on which occasion the following honourable testimony of the sense they
entertained of the worth of their former colleague was entered in their minutes:
—
'The meeting accept of Dr. Smith's resignation in terms of the above letter; and the office of professor of
moral philosophy in this university is therefore hereby declared to be vacant. The university at the same
time, cannot help expressing their sincere regret at the removal of Dr. Smith, whose distinguished probity
and amiable qualities procured him the esteem and affection of his colleagues; whose uncommon genius,
great abilities, and extensive learning, did so much honour to this society. His elegant and ingenious Theory
of Moral Sentiments having recommended him to the esteem of men of taste and literature throughout
Europe, his happy talents in illustrating abstracted subjects, and faithful assiduity in communicating useful
knowledge, distinguished him as a professor, and at once afforded the greatest pleasure, and the most
important instruction, to the youth under his care.'
In the first visit that Mr. Smith and his noble pupil made to Paris, they only
remained ten or twelve days; after which, they proceeded to Thoulouse, where,
during a residence of eighteen months, Mr. Smith had an opportunity of
extending his information concerning the internal policy of France, by the
intimacy in which he lived with some of the members of the parliament. After
visiting several other places in the south of France, and residing two months at
Geneva, they returned about Christmas to Paris. Here Mr. Smith ranked among
his friends many of the highest literary characters, among whom were several of
the most distinguished of those political philosophers who were denominated
Economists.
Before Mr. Smith left Paris, he received a flattering letter from the
unfortunate Duke of Rochefoucault, with a copy of a new edition of the Maxims
of his grandfather. Notwithstanding the unfavourable manner in which the
opinions of the author of that work were mentioned in the Theory of Moral
Sentiments, the Duke informed Mr. Smith, on this occasion, that he had been
prevented only from finishing a translation, which he had begun, of his estimable
system of morals, into French, by the knowledge of having been anticipated in
the design. He also observed, that some apology might be made for his ancestor,
when it was considered, that he formed his opinions of mankind in two of the
worst situations of life,—a court and a camp. The last communication Mr. Smith
had with this nobleman was in 1789, when he gave him to understand, that he
would no longer rank the name of Rochefoncault with that of the author of the
Fable of the Bees; and, accordingly, in the first edition that was afterwards
published of the Theory of Moral Sentiments, this promised alteration was made.
The next ten years of his life, after his arrival from the continent, Mr. Smith
passed with his mother at Kirkaldy, though he occasionally, during that time,
visited London and Edinburgh. Mr. Hume, who considered a town as the proper
scene for a man of letters, made many attempts to prevail on him to leave his
retirement.
At length, in the beginning of the year 1776, Mr. Smith accounted to the
world for his long retreat, by the publication of his 'Inquiry into the Nature and
Causes of the Wealth of Nations.' This work chiefly comprehended the subject of
the fourth and last division of his lectures, namely, those political regulations
that have their origin in expediency. For about twenty years of his life, his
attention had been chiefly devoted to the study of subjects connected with the
science of political economy. His long residence in the mercantile city of
Glasgow afforded him opportunities of deriving information, in many
particulars, from the best sources; his travels on the continent contributed to
extend his knowledge, and correct many of those misapprehensions of life and
manners which the best descriptions of them are found to convey; and the
intimacy in which he lived with some of the leaders of the sect of economists,
and other writers on the subject of political economy, could not fail to assist him
in methodizing his speculations, and of adding to the soundness of his
conclusions.—After his arrival in this country, he wanted nothing more than
leisure, to arrange his materials, and prepare them for publication: and for this
purpose he passed in retirement the subsequent ten years.
The great aim of Mr. Smith's Inquiry, the fruit of so much research, and the
work of so many years, is, as Professor Stewart observes, to direct the policy of
nations with respect to one most important class of its laws,—those which form
its system of political economy: 'and he has unquestionably,' the same eloquent
writer adds, 'had the merit of presenting to the world the most comprehensive
and perfect work that has yet appeared on the general principles of any branch of
legislation.'
'A great and leading object of Mr. Smith's speculations,' as Mr. Stewart also
observes, 'is to demonstrate, that the most effectual plan for advancing a people
to greatness, is to maintain that order of things which nature has pointed out, by
allowing every man, as long as he observes the rules of justice, to pursue his
own interest in his own way, and to bring both his industry and his capital into
the freest competition with these of his fellow citizens.'
Several authors, in this country, had before written on commercial affairs,
but Mr. Smith was the first who reduced to a regular form and order the
information that was to be obtained on that subject, and deduced from it the
policy which an enlightened commercial nation ought to adopt. The successful
manner in which he has treated this unlimited freedom of trade, as well as some
others, and his able exposure of the errors of the commercial system, have
rendered the science of which he treats highly interesting to the great body of the
people; and a spirit of inquiry, on every branch of political economy, has, in
consequence, been excited, which promises now, more than ever, to be attended
with the most beneficial effects. This intricate science, the most important to the
interests of mankind though long neglected, Dr. Smith has had the merit of
advancing so far, as to lay a foundation, on which, it may safely be said,
investigation may for a long time proceed.
It has frequently been alleged, that Dr. Smith was indebted for a large portion
of the reasonings in his Inquiry to the French economists, and that the
coincidence between some branches of his doctrine and theirs, particularly those
which relate to freedom of trade and the powers of labour, is more than casual.
But Professor Stewart has ably vindicated him from this charge, and established
his right to the general principles of his doctrine, which, he thinks, were
altogether original, and the result of his own reflections. That he, however,
derived some advantage from his intimacy with Turgot, and those great men who
were at the head of the sect of economists, and, perhaps, adopted some of their
illustrations, it would be as unnecessary to deny, as it would he far from
discreditable to his talents to acknowledge.
There is also a similar, or perhaps a greater coincidence between many parts
of his doctrine and the opinions of Sir James Stewart, as detailed in his 'Inquiry
into the Principles of Political Economy.' This congruity of opinion is chiefly
apparent in their respective conclusions concerning the effects of competition,—
the principles of exchangeable value,—the relation between the interest of
money and the profit of stock,—the functions of coin,—the rise and progress of
credit,—and the sources and limits of taxation. As this author had published his
Inquiry many years before Dr. Smith's work appeared, and had, besides, lived in
great intimacy with him, there was some reason to believe, what has been often
asserted, that he possessed a just claim to some of the doctrines contained in that
work, though Dr. Smith never once mentioned his name in any part of his work.
But the present Sir James Stewart, who has recently published a full edition of
the writings of his father, relinquishes, on his part, all such pretensions. With the
partiality of a friend, in ranking his father with Dr. Smith, he gives it as his
opinion, however, that both had, with original powers of equal strength, drawn
their knowledge from the same source, the French economists.
Dr. Mandeville has also, of late, got the credit of being the author of those
Principles of Political Economy, which have interested the world for the last fifty
years, and to him alone, it is said, not only the English, but also the French
writers, are indebted for their doctrines in that science. In the work of this
eccentric writer, there seems, indeed, a similarity of opinion on some of the more
obvious sources of wealth, particularly in the division of labour, which Dr. Smith
investigates so fully; and in the erroneous doctrine of productive and nonproductive labour; and also, perhaps, on some other points: but it would be
difficult to show, that he ought, on this account, to be considered the author of
all, or even the chief part of what has been written on the subject. On this, as
well as on all questions of a similar nature, a great diversity of opinions will
subsist. But it may be a matter of curiosity to those who are unacquainted with
his work, the Fable of the Bees, not only to trace the connection of that author's
sentiments with what is advanced by subsequent writers on this important
subject, but also to learn his peculiar notions of morality, that attracted, at one
time, so much attention. These last, Dr. Smith says, though described by a lively
and humorous, yet coarse and rustic eloquence, which throws an air of truth and
probability on them, are, almost in every respect, erroneous.
Soon after the publication of the Wealth of Nations, Mr. Smith received the
following congratulatory letter from Mr. Hume, six months before his death,
dated Edinburgh, 1st April 1776.
'Euge! Belle! Dear Mr. Smith—I am much pleased with your performance, and the perusal of it has
taken me from a state of great anxiety. It was a work of so much expectation, by yourself, by your friends,
and by the public, that I trembled for its appearance; but am now much relieved; not but that the reading of
it necessarily requires so much attention, and the public is disposed to give so little, that I shall still doubt
for some time of its being at first very popular. But it has depth, and solidity, and acuteness, and is so much
illustrated by curious facts, that it must at last take the public attention. It is probably much improved by
your last abode in London. If you were here at my fireside, I should dispute some of your principles. But
these, and a hundred other points, are fit, only to be discussed in conversation. I hope it will be soon, for I
am in a very bad state of health, and cannot afford a long delay.'
The publication of this great work drew praise to its author, indeed, from
many different quarters.—Dr. Barnard, in a political epistle, addressed to Sir
Joshua Reynolds, where the characteristic qualities of some eminent literary men
of that time are brought forward, spoke of Smith as one who would teach him
how to think. Gibbon made honourable mention of him in his Roman history;
and Mr. Fox contributed, in no small degree, to extend his reputation, by
observing in the House of Commons, that 'the way, as my learned friend Dr.
Adam Smith says, for a nation, as well as an individual, to be rich, is for both to
live within their income.'
The opinion which Dr. Johnson delivered, at that time, on its being alleged
by Sir John Pringle, that a person who, like Dr. Smith, was not practically
acquainted with trade, could not be qualified to write on that subject, may also
be mentioned here, though somewhat erroneous, as far as it respects the received
doctrines of Political Economy:—'He is mistaken,' said Johnson. 'A man who has
never been engaged in trade himself, may undoubtedly write well on trade; and
there is nothing which requires more to be illustrated by philosophy than trade
does. As to mere wealth, that is to say, money, it is clear that one nation, or one
individual, cannot increase its store but by making another poorer; but trade
procures what is more valuable, the reciprocation of the peculiar advantages of
different countries. A merchant seldom thinks of any but his own trade. To write
a good book upon it, a man must have extensive views. It is not necessary to
have practised, to write well upon a subject.'[2]
On the Inquiry into the Causes of the Wealth of Nations, it only remains
farther to be observed, that its success has been every way commensurate to its
merits. It has, however, been often regretted, that the author did not live to
favour the world with his reasonings on those important events which have taken
place since 1784, when he put the last hand to his invaluable work. That another,
with competent talents, and a mind disposed to the task, should soon appear, to
treat of these occurrences, and give a satisfactory view of the progress of the
science from that time to the present, is not to be expected. But as the honour to
be gained from a successful execution of such an undertaking is very
considerable, it is not to be wondered at that an attempt of this kind should be
made. Accordingly, Mr Playfair of London has had the boldness to follow Smith,
by endeavouring to supply, in part, this desideratum, by adding supplementary
chapters and notes to the Treatise on the Wealth of Nations.
But it is greatly to be feared, that there are few persons who have read this
improved edition, as it is called, of Dr. Smith's Inquiry, but will still look forward
to the accomplishment of the wishes they must previously have formed, for a
continuation, and probably an illustration, of the discussions contained in that
work. Leaving, therefore, the supplementary chapters and elucidations of Mr
Playfair, it must be observed, that Dr. Smith has, on this occasion, been equally
unfortunate in a biographer. The detail of his peaceful life is almost lost among
dissertations on the wickedness of atheism and the horrors of a revolution. But
these dissertations, strangely misplaced as they appear to be, would certainly not
alone have been sufficient to attract observation here, whatever latitude the
author might have allowed to himself on such subjects. When he goes on,
however, to apologise for Dr. Smith's acquaintance with some individuals among
the economists, and to connect the whole of that sect with those philosophers to
whom he ascribes the evils which have so long afflicted France, his opinions
become still more insupportable. It will, perhaps, be said, and with some reason,
that, in this instance, at least, the writer has followed those alarmists, who, on
any men of learning belonging to that country being mentioned, immediately
ally them to the revolutionists without regard to difference of opinion, or
distance of time.
The reputation, however, of the economists is too well established to be
affected, either by the clamours of the ignorant, or the mad intemperance of
political alarmists. The doctrine of the great men who formed the school of the
economists, was, that the produce of the land is the sole or principal source of
the revenue and wealth of every country; and this doctrine, with the manner of
deriving from it the greatest possible advantage, it is almost universally
acknowledged, engaged entirely their attention. Dr. Smith, who lived in great
intimacy with many of the founders of that sect, does ample justice, on every
occasion, to the purity of their views; and indeed they, as well as himself, it has
always been said, by the impartial and well informed, were ever animated by a
zeal for the best interests of society.
M. Quesnai, the first of that sect, and the author of the Economical Table, a
work of the greatest profoundness and originality, was, in particular, represented
by Mr. Smith as a man of the greatest modesty and simplicity; and his system he
pronounced, with all its imperfections, to be the nearest approximation to the
truth, of any that had then been published on the principles of political science.
His veneration for this worthy man was even so great, that had he lived, it was
his intention to have inscribed to him the Inquiry into the Causes of the Wealth
of Nations.
Nor will the memory of those illustrious men be soon forgotten,
notwithstanding the calumnies with which it has been charged. It may safely be
predicted, in the words of a highly respectable periodical publication, that 'Those
prospects of political improvements which flattered the benevolent anticipations
of the economists, will soon be recognised as sound conclusions of science; and
it will at length be acknowledged that Turgot, Mirabeau, and Quesnai, were the
friends of mankind, and that their genius and their labours were devoted to the
refinement of social happiness and the consolidation of the political fabric.'[3]
The life of Mr. Smith, after the publication of his Inquiry, might be said to
draw towards a close. The following particulars of the last years, are mostly
extracted from Professor Stewart's Life of this incomparable writer.
After residing some time in London, he was appointed one of the
commissioners of customs in Scotland, in 1778, when he removed to Edinburgh.
He was accompanied by his mother, who, though in extreme old age, possessed a
considerable share of good health; and his cousin, Miss Douglass, who had long
resided with him at Glasgow, undertook to superintend his domestic economy.
The Duke of Buccleugh had continued to allow Mr. Smith L.300 a-year, and
the accession which he now received to his income enabled him to live, not only
with comfort and independence, but to indulge the benevolence of his heart, in
making numerous private benefactions.
During the remaining period of his life, he appears to have done little more
than to discharge, with peculiar exactness, the duties of his office, which, though
they required no great exertion, were sufficient to divert his attention from his
studies. He very early felt the infirmities of old age, but his health and strength
were not greatly affected till he was left alone, by the death of his mother, in
1784, and of his cousin four years after. They had been the objects of his
affection for more than sixty years; and in their society he had enjoyed, from his
infancy, all that he ever knew of the endearments of a family. In return for the
anxious and watchful solicitude of his mother during infancy, he had the singular
good fortune of being able to show his gratitude to her during a very long life;
and it was often observed, that the nearest avenue to his heart was through his
mother.
He now gradually declined till the period of his death, which happened in
1790. His last illness, which arose from a chronic obstruction in the bowels, was
lingering and painful; but he had every consolation to soothe it which he could
desire, from the tenderest sympathy of his friends, and from the completest
resignation of his own mind.
His friends had been in use to sup with him every Sunday. The last time he
received them, which was a few days before his death, there was a pretty
numerous meeting; but not being able to sit up as usual, he retired to bed before
supper. On going away, he took leave of the company, by saying, 'I believe we
must adjourn this meeting to some other place.'
In a letter addressed, in the year 1787, to the principal of the university of
Glasgow, in consequence of his being elected rector of that learned body, a
pleasing memorial remains of the satisfaction with which he always recollected
that period of his literary career, which had been more peculiarly consecrated to
his academical studies. On that occasion he writes:—
'No preferment could have given me so much real satisfaction. No man can owe greater obligations to a
society than I do to the university of Glasgow. They educated me; they sent me to Oxford. Soon after my
return to Scotland, they elected me one of their own members, and afterwards preferred me to another
office, to which the abilities and virtues of the never-to-be-forgotten Dr. Hutcheson had given a superior
degree of illustration. The period of thirteen years, which I spent as a member of that society, I remember as
by far the most useful, and therefore, as by far the happiest and most honourable period of my life; and now,
after three-and-twenty years absence, to be remembered in so very agreeable a manner by my old friends
and protectors, gives me a heart-felt joy which I cannot easily express to you.'
Not long before the death of Smith, finding his end approach rapidly, he gave
orders to destroy all his manuscripts, excepting some detached essays, which he
entrusted to the care of his executors. With the exception of these essays, all his
papers were committed to the flames. What were the particular contents of these
papers was not known, even to his most intimate friends. The additions to the
Theory of Moral Sentiments, most of which were composed under severe illness,
had fortunately been sent to the press in the beginning of the preceding winter;
and the author lived to see the publication of this new edition.[4]
Some time before his last illness, when he had occasion to go to London, he
enjoined his friends, to whom he had entrusted the disposal of his manuscripts,
to destroy, in the event of his death, all the volumes of his lectures, doing with
the rest what they pleased. When he had become weak, and saw the last period
of his life approach, he spoke to his friends again upon the same subject. They
entreated him to make his mind easy, as he might depend upon their fulfilling his
desire. Though he then seemed to be satisfied, he, some days afterwards, begged
that the volume might be immediately destroyed; which was accordingly done.
Mr. Riddell, an intimate friend of Mr. Smith, mentions, that on one of these
occasions he regretted he had done so little; 'but I meant,' he added, 'to have done
more; and there are materials in my papers of which I could make a great deal.—
But that is now out of the question.'
That the idea of destroying such unfinished works as might be in his
possession at the time of his death, was not the effect of any sudden or hasty
resolution, appears from the following letter to Mr. Hume, written in 1773, at the
time when he was preparing for a journey to London, with the prospect of a
pretty long absence from Scotland.
'My dear friend,—As I have left the care of all my literary papers to you, I must tell you, that except
those which I carry along with me, there are none worth the publication, but a fragment of a great work,
which contains a history of the astronomical systems that were successively in fashion down to the time of
Descartes. Whether that might not be published as a fragment of an intended juvenile work, I leave entirely
to your judgment, though I begin to suspect myself, that there is more refinement than solidity in some parts
of it. This little work you will find in a thin folio paper book in my back-room. All the other loose papers
which you will find in that desk, or within the glass folding-doors of a bureau, which stands in my bedroom, together with about eighteen thin paper folio books, which you will likewise find within the same
glass folding doors, I desire may be destroyed without any examination. Unless I die very suddenly, I shall
take care that the papers I carry with me shall he carefully sent to you.'
But he himself long survived his friend Mr. Hume. The persons entrusted
with his remaining papers were Dr. Black and Dr. Hutton, his executors, with
whom he had long lived in habits of the closest friendship. These gentlemen
afterwards collected into a volume, such of the writings of Dr. Smith as were
fitted for publication: and they appeared in 1795, under the title of Essays on
Philosophical Subjects. These essays had been composed early in life, and were
designed to illustrate the principles of the human mind, by a theoretical
deduction of the progress of the sciences and the liberal arts. The most
considerable piece in this volume is, on the principles which lead and direct
philosophical inquiries, illustrated by the history of astronomy, ancient physics,
and ancient logic and metaphysics. The others, with the exception of an essay on
the external senses, relate to the imitative and liberal arts. The contents of this
volume, Mr. Smith's executors observe, appear to be parts of a plan he once had
formed for giving a connected history of the liberal sciences and elegant arts; but
which he had been obliged to abandon, as being far too extensive; and these
parts lay beside him neglected till after his death. In them, however, will be
found that happy connection, that full and accurate expression, and the same
copiousness and facility of illustration, which are conspicuous in the rest of his
writings.
As a writer, the character of Mr. Smith is so well known, that any
observation on his merits, must appear almost unnecessary. His literary fame is
circumscribed by no ordinary limits. To the voice of his own country, is added
the testimony of Europe, and, indeed, of the civilized world. And had even only
one volume of his inestimable writings appeared, his name would have been
carried down to posterity in the first rank of those illustrious characters that
adorn the last century.
In the words of Professor Stewart, it may be said, that,—of the intellectual
gifts and attainments by which he was so eminently distinguished;—of the
originality and comprehensiveness of his views; the extent, the variety, and the
correctness of his information; the inexhaustible fertility of his invention; and
the ornaments which his rich and beautiful imagination had borrowed from
classical culture;—he has left behind him lasting monuments.
One observation more may he added to what is now said on his writings,
that, whatever be the nature of his subject, he seldom misses an opportunity of
indulging his curiosity, in tracing, from the principles of human nature, or from
the circumstances of society, the origin of the opinions and the institutions which
he describes.
With regard to the private character of this amiable and enlightened
philosopher, it fortunately happens, that the most certain of all testimonies to his
private worth may be found in the confidence, respect, and attachment which
followed him through all the various relations of life. There were many
peculiarities, indeed, both in his manners and in his intellectual habits; but to
those who knew him, these peculiarities, so far from detracting from the respect
which his abilities commanded, added an irresistible charm to his conversation,
and strongly displayed the artless simplicity of his heart. The comprehensive
speculations with which he had always been occupied, and the variety of
materials which his own invention continually supplied to his thoughts, rendered
him habitually inattentive to familiar objects, and to common occurrences. On
this account, he was remarkable, throughout the whole of life, for speaking to
himself when alone, and for being so absent in company, as, on some occasions,
to exceed almost what the fancy of a Bruyere could imagine. In company, he was
apt to be engrossed by his studies; and appeared, at times, by the motion of his
lips, as well as by his looks and gestures, to be in the fervour of composition. It
was observed, that he rarely started a topic himself, or even fell in easily with the
common dialogue of conversation. When he did speak, however, he was
somewhat apt to convey his ideas in the form of a lecture; but this never
proceeded from a wish to engross the discourse, or to gratify his vanity. His own
inclination disposed him so strongly to enjoy, in silence, the gaiety of those
around him, that his friends were often led to concert little schemes, in order to
bring on the subjects most likely to interest him.
SHORT VIEW
OF THE
DOCTRINE OF SMITH, COMPARED WITH THAT OF THE
FRENCH ECONOMISTS.
TRANSLATED FROM THE FRENCH OF M. GARNIER.
The ancient philosophers were little accustomed to employ themselves in the
observation of those laws which regulate the distribution of riches among the
different orders of society in a nation, or in the search after the sources of the
increase of its wealth. In fact, political economy is a science of very modern
origin; for although, towards the end of the seventeenth century, several writers,
both of France and England, had begun to discuss the comparative advantages of
agriculture and commerce, yet it was not till the middle of the eighteenth, that
any thing like a complete system appeared upon the growth and distribution of
national wealth. At this period, the philosophical Quesnai directed his attention
to this very abstract subject, and became the founder of a celebrated school,
which may boast among its adherents many distinguished men of talents and
extensive knowledge.
All philosophical sects owe their first origin and foundation to the discovery
of some great truth; and it is the madness inspiring their members, to deduce
every thing from this new discovery, that contributes most to their downfal. Thus
it was with the economists. They saw that the original source of all wealth was
the soil, and that the labour of its cultivation produced not only the means of
subsisting the labourer, but also a neat surplus, which went to the increase of the
existing stock: while, on the other hand, the labour applied to the productions of
the earth, the labour of manufactures and commerce, can only add to the material
a value exactly equal to that expended during the execution of the work; by
which means, in the end, this species of labour operates no real change on the
total sum of national riches. They perceived that the landed proprietors are the
first receivers of the whole wealth of the community; and that, whatever is
consumed by those who are not possessed of land, must come, directly or
indirectly, from the former; and hence, that these receive wages from the
proprietors, and that the circulation of national wealth, is, in fact, only a
succession of exchanges between these two classes of men, the proprietors
furnishing their wealth, and the non-proprietors giving as an equivalent their
labour and industry. They perceived that a tax, being a portion of the national
wealth applied to public use, in every instance, however levied, bears finally
upon the landed proprietors, inasmuch as they are the distributors of that wealth,
either by retrenching their luxuries, or by loading them with an additional
expense; and that, therefore, every tax which is not levied directly on the rude
produce of the earth, falls in the end on the landed proprietors, with a surplus
produce, from which the amount of the revenue receives no addition.
These assertions are almost all incontestible, and capable of a rigorous
demonstration; and those who have attempted to shew their falsity, have, in
general, opposed them only with idle sophistry. Why, then, has this doctrine met
with so little success, and why does every day diminish its reputation? because it
agrees in no one point with the moral condition, either of societies or of
individuals; because it is continually contradicted by experience, and by the
infallible instinct of self-interest; because it does not possess that indispensible
sanction of all truths, utility. In fact, of what consequence is it, that the labour of
agriculture produces not only what covers its own expenses, but new beings
which would never have existed without it, and that it has this advantage over
the labour of manufactures and commerce? Does it by any means follow from
this, that the former kind of labour is more profitable to the community than the
latter? The real essence of all wealth, and that which determines its value, is the
necessity under which the consumer lies to purchase it; for, in truth, there is no
such thing as wealth properly so called, nor absolute value; but the words wealth
and value are really nothing more than the co-relatives of consumption and
demand. Even the necessaries of life, in a country which is inhabited, but
incapable of commercial intercourse, will not form wealth; and to whatever
degree of civilization that country may have reached, still the same principle will
hold without alteration. If the sum of national wealth shall in any case have
exceeded the sum of demands, then a part of the former sum will cease to bear
the name of wealth, and will again be without value. In vain, then, will
agriculture multiply her produce; for the instant that it exceeds the bounds of
actual consumption, a part will lose its value; and self-interest, that prime
director of all labour and industry, seeing herself thus deceived in her
expectations, will not fail to turn her activity and efforts to another quarter.
In almost every instance, it is an idle refinement to distinguish between the
labour of those employed in agriculture, and of those employed in manufactures
and commerce; for wealth is necessarily the result of both descriptions of labour,
and consumption can no more take place independently of the one, than it can
independently of the other. It is by their simultaneous concurrence that any thing
becomes consumable, and, of course, that it comes to constitute wealth. How
then are we entitled to compare their respective products, since it is impossible
to distinguish these in the joint product, and thus appreciate the separate value of
each? The value of growing wheat results as much from the industry of the
reaper who gathers it in, of the thrasher who separates it from the chaff and
straw, of the miller and baker who convert it successively into flour and bread, as
it does from that of the ploughman and of the sower. Without the labour of the
weaver, the raw material of flax would lose all its value, and be regarded as no
way superior to the most useless weed that grows. What then can we gain by any
attempts to determine which of these two species of labour conduces most to the
advancement of national wealth; or, are they not as idle, as if we busied
ourselves in inquiring, whether the right or the left foot is the most useful in
walking?
It is true, indeed, that in every species of manufacture, the workman adds to
the value of the raw material a value exactly equal to that which was expended
during the process of manufacture; and what is the conclusion we are to draw
this? It is merely, that a certain exchange has taken place and that the food
consumed by the manufacturer is now represented by the increase of value
resulting from his manual labour. Thus wool, when converted into cloth, has
gained a value precisely equal to that expended by the manufacturer during the
conversion. But, if it is shown that, without this exchange, the wool would have
remained without value, while, on the other hand, the food of the manufacturer
would have been without a consumer; it will then appear, that this exchange has,
in fact, done what is equivalent to creating these two values, and that it has
proved to the society an operation infinitely more useful, than if an equal
quantity of labour had been spent in the increase of that rude produce, which
already existed in overabundance. The first description of labour has been truly
productive; while the last would have been altogether unproductive, since it
would not have created any value.
'The soil,' say the economists, 'is the source of all wealth.' But, to prevent this
assertion from leading us into erroneous conclusions, it will be necessary to
explain it. The materials of all wealth originate primarily in the bosom of the
earth; but it is only by the aid of labour that they can ever truly constitute wealth.
The earth furnishes the means of wealth; but wealth itself cannot possibly have
any existence, unless through that industry and labour which modifies, divides,
connects, and combines the various productions of the soil, so as to render them
fit for consumption. Commerce, indeed, regards those rude productions as real
wealth; but it is only from the consideration, that the proprietor has it always in
his power to convert them, at will, into consumable goods, by submitting them to
the necessary operations of manufacture. They possess, as yet, merely the virtual
value of a promissory-note, which passes current, because the bearer is assured
that he can, at pleasure, convert it into cash. Many gold mines, which are well
known, are not worked, because their whole produce would not cover the
incidental expenses; but the gold which they contain is, in reality, the same with
that of our coin; and yet no one would be foolish enough to call it wealth, for
there is no probability it will ever be extracted from the mine, or purified; and, of
course, it possesses no value. The wild fowl becomes wealth the moment it is in
the possession of the sportsman; while those of the very same species, that have
escaped his attempts, remain without any title to the term.
It is further, without question, true, that all who do not possess property in
land must draw their subsistence from wages received, directly or indirectly,
from the proprietors, unless they violate all rights, and become robbers. In this
respect, every service is alike; the most honourable and the most disgraceful
receives each its wages. It is certain, too, that if the circumstances determining
the rate of the various kinds of wages remain the same, that is if the offers of
service, and the demand, preserve the same proportion to each other, after as
well as before the imposition of a tax; then, of course, the wages will continue at
the same rate, and thus the tax, however imposed, will uniformly, in the end, fall
on that class in the community who furnish the wages; so that they must suffer,
either an addition to their former expenses, or a retrenchment of those luxuries
they enjoyed. And according as the tax is less directly levied, the greater will be
the burden they are subjected to; for besides indemnifying all the other classes
who have advanced the tax-money, a further expense must be incurred, in the
additional number of persons now necessary to collect it. The natural conclusion
we must draw from the theory is, that a tax, directly levied on the neat revenue
of the land proprietors, is that which agrees best with reason and justice, and that
which bears lightest on the contributors.
If, however, this theory should be found to throw entirely out of
consideration a multitude of circumstances, which possess a powerful influence
over the facility of collecting a tax, as well an over its consequences; and if the
general result of this influence be of far more importance than the single
advantage of a less burden; then the theory, inasmuch as it neglects a part of
those particulars which have their weight in the practice, is contradicted by this
last. And this is exactly what happens in the question respecting the comparative
advantages and inconveniencies of the two modes of levying taxes.
The habit which men have acquired, of viewing money as the representation
of every thing which contributes to the support or comfort of life, makes them
naturally very unwilling to part with what portion of it they possess, unless it be
to procure some necessary or enjoyment. We spend money with pleasure, but it
requires an effort to pay a debt, and particularly so when the value received in
exchange is not very obvious to the generality, as in the case of a tax. But by
levying the tax on some object of consumption, by thus confounding it with the
price of the latter, and by making the payment of the duty and of the price of
enjoyment become one and the same act, we render the consumer desirous to
pay the impost. It is amid the profusion of entertainments, that the duties on
wine, salt, &c. are paid; the public treasury thus finding a source of gain in the
excitements to expense produced by the extravagance and gaiety of feasts.
Another advantage of the same nature, possessed by the indirect mode of
taxation, is its extreme divisibility into minute parts, and the facility which it
affords to the individual, of paying it off day by day, or even minute by minute.
Thus the mechanic, who sups on a portion of his day's wages, will sometimes in
one quarter of an hour, pay part of four or five different duties.
In the plan of direct taxation, the impost appears without any disguise; it
comes upon us unexpectedly, from the imprudence so common to the bulk of
mankind, and never fails to carry with it constraint and discouragement.
All these considerations are overlooked by the friends of direct taxation; and
yet their importance must be well known to all who have ever attended to the art
of governing men.
But, perhaps, this is not all. An indirect tax, by increasing from time to time
the price of the objects of general consumption, when the members of the
community have contracted the habit of this consumption, renders these objects
a little more costly, and thus gives birth to that increase of labour and industry
which is now required to obtain them. But if this tax be so proportioned as not to
discourage the consumption, will it not then operate as a universal stimulus upon
the active and industrious part of the community? Will it not incite that part to
redoubled efforts, by which it may still enjoy those luxuries which, by habit,
have become almost necessaries, and, of course, produce a further developement
of the productive powers of labour, and of the resources of industry? Are we not,
in such a case, to conclude, that after the imposition of a tax, there will exist not
only the quantity of labour and industry which was formerly requisite to procure
the necessaries and habitual enjoyments of the active class of mankind, but also
such an addition to this, as will suffice for the payment of the tax? And will not
this tax, or increase of produce required for the tax—as it is spent by the
government that receives it—will it not serve to support a new class of
consumers, requiring a variety of commodities which the impost enables them to
pay? If these conjectures are well founded, it will follow, that indirect taxation,
far from having any hurtful influence on wealth and population, must, when
wisely regulated, tend to increase and strengthen these two great foundations of
national prosperity and power. And it will tend to do this, inasmuch as it bears
immediately on the body of the people, and operates on the working and
industrious class, which forms the active part of the community; while, on the
other hand, direct taxation operates solely on the idle class of landed proprietors
—which furnishes us with the characteristic difference existing between these
two modes of taxation.[5] These hints, which seem to afford an explanation of
that most extraordinary phenomenon in political economy, viz. the rapid and
prodigious increase of wealth in those nations which are most loaded with
indirect taxes, deserve to be discussed at greater length than our limits will allow.
Enough, however, has been said to shew, that no rigorous and purely
mathematical calculation will ever enable us to appreciate the real influence of
taxes upon the prosperity of a nation. Thus, some of the truths perceived by the
economists are of little use in practice; while others are found to be contradicted
in their application, by those accessory circumstances which were overlooked in
the calculations of the theory.
While this sect of philosophers filled all Europe with their speculations, an
observer of more depth and ability directed his researches to the same subject,
and laboured to establish, on a true and lasting foundation, the doctrines of
political economy.
Dr. Smith succeeded in discovering a great truth,—the most fruitful in
consequences, the most useful in practice, the origin of all the principles of the
science, and one which unveiled to him all the mysteries of the growth and
distribution of wealth. This great man perceived, that the universal agent in the
creation of wealth is labour; and was thence led to analyse the powers of this
agent, and to search after the causes to which they owe their origin and increase.
The great difference between the doctrine of Smith and of the economists,
lies in the point from which they set out, in the reduction of their consequences.
The latter go back to the soil as the primary source of all wealth; while the
former regards labour as the universal agent which, in every case, produces it. It
will appear, at first sight, how very superior the school of the Scotch professor is
to that of the French philosophers, with regard to the practical utility, as well as
to the application of its precepts. Labour is a power of which man is the
machine; and, of course, the increase of this power can only be limited by the
indefinite bounds of human intelligence and industry; and it possesses, like these
faculties, a susceptibility of being directed by design, and perfected by the aid of
study. The earth, on the contrary, if we set aside the influence which labour has
over the nature and quantity of its productions, is totally out of our power, in
every respect which can render it more or less useful—in its extent, in its
situation, and in its physical properties.
Thus the science of political economy, considered according to the view of
the French economists, must be classed with the natural sciences, which are
purely speculative, and can have no other end than the knowledge of the laws
which regulate the object of their researches; while, viewed according to the
doctrine of Smith, political economy becomes connected with the other moral
sciences, which tend to ameliorate the condition of their object, and to carry it to
the highest perfection of which it is susceptible.
A few words will suffice to explain the grounds of the doctrine of Smith. The
power by which a nation creates its wealth is its labour; and the quantity of
wealth created will increase in direct proportion as the power increases. But the
increase of this last may take place in two ways—in energy, and in extent.
Labour increases in energy, when the same quantity of labour furnishes a more
abundant product; and the two great means of effecting the increase, or of
perfecting the productive powers of labour, are the division of labour, and the
invention of such machines as shorten and facilitate the manual operations of
industry. Labour increases in extent, when the number of those engaged in it
augments in proportion to the increasing number of the consumers, which can
take place only in consequence of an increase of capitals, and of those branches
of business in which they are employed.
Now, to accomplish the increase of labour in both these ways, and to conduct
it gradually to the utmost pitch of energy and extent to which it can reach in any
nation, considering the situation, the nature, and the peculiarities of its
territories, what are the exertions to be made by its government? The subdivision
of labour, and the invention and perfecting of machines. These two great means
of augmenting the energy of labour, advance in proportion to the extent of the
market, or, in other words, in proportion to the number of exchanges which can
be made, and to the ease and readiness with which these can take place. Let the
government, then, direct all its attention to the enlargement of the market, by
forming safe and convenient roads, by the circulation of sterling coin, and by
securing the faithful fulfilment of contracts; all of which are indispensible
measures, at the same time that, when put in practice, they will never fail to
attain the desired end. And the nearer a government approaches to perfection in
each of these three points, the more certainly will it produce every possible
increase of the national market. The first of the three means is, without doubt,
the most essential, as no other expedient whatever can possibly supply its place.
The gradual accumulation of capitals is a necessary consequence of the
increased productive powers of labour, and it becomes also a cause of still
farther increase in these powers; but, in proportion as this accumulation becomes
greater and greater, it serves to increase the extent of labour, inasmuch as it
multiplies the number of labourers, or the sum of national industry. This
increase, however, of the number of hands in the nation employed, will always
be regulated by the nature of the business to which the capitals are dedicated.
Under this second head of the increase of the products of labour, the
exertions of government are much more easy. In fact, it has only to refrain from
doing harm. It is only required of it, that it shall protect the natural liberty of
industry; that it shall leave open every channel into which, by its own
tendencies, industry may be carried; that government shall abandon it to its own
direction, and shall not attempt to point its efforts one way more than another;
for private interest, that infallible instinct which guides the exertions of all
industry, is infinitely better suited than any legislator to judge of the direction
which it will with most advantage follow. Let government, then, renounce alike
the system of prohibitions and of bounties; let it no longer attempt to impede the
efforts of industry by regulations, or to accelerate her progress by rewards; let it
leave in the most perfect freedom the exertions of labour and the employment of
capital; let its protecting influence extend only to the removal of such obstacles
as avarice or ignorance have raised up to the unlimited liberty of industry and
commerce;—then capitals will naturally develope themselves, by their own
movement, in those directions which are at once most agreeable to the private
interest of the capitalist, and most favourable to the increase of the national
wealth.
METHOD OF FACILITATING THE STUDY OF
DR. SMITH'S WORK.
Such are the results of the doctrine of Smith, and the fruits we are to reap
from his immortal work. The proofs of the principle upon which his opinions are
grounded, and the natural and easy manner in which his deductions flow from it,
give it an air of simplicity and truth, which render it no less admirable than
convincing. This simplicity, however, to be fully perceived, requires much study
and consideration; for it cannot be denied that the 'Wealth of Nations' exhibits a
striking instance of that defect for which English authors have so often been
blamed, viz. a want of method, and a neglect, in their scientific works, of those
divisions and arrangements which serve to assist the memory of the reader, and
to guide his understanding. The author seems to have seized the pen at the
moment when he was most elevated with the importance of his subject, and with
the extent of his discoveries. He begins, by displaying before the eyes of his
reader the innumerable wonders effected by the division of labour; and with this
magnificent and impressive picture, he opens his course of instructions. He then
goes back, to consider those circumstances which give rise to or limit this
division; and is led by his subject to the definition of values—to the laws which
regulate them, to the analysis of their several elements, and to the relations
subsisting between those of different natures and origin; all of which are
preliminary ideas, which ought naturally to have been explained to the reader
before exhibiting to him the complicated instrument of the multiplication of
wealth, or unveiling the prodigies of the most powerful of its resources.
On the other hand, he has often introduced long digressions, which interrupt
the thread of his discussion, and, in many cases, completely destroy the
connection of its several parts. Of this description is the digression
On the variations in the value of the precious metals during the four last centuries, with a critical
examination of the opinions that their value is decreasing—book 1, chap. xi.
Upon banks of circulation and paper money—book 2, chap. ii.
Upon banks of deposit, and particularly that of Amsterdam—book 4, chap. iii.
Upon the advantage of seignorage in the coining of money—book 4, chap. vi.
Upon the commerce of grain, and the laws regarding this trade—book 4, chap. v.
These different treatises, although they are unquestionably the best that have
ever been written on the subjects to which they relate, are, however, so
introduced, as to distract the reader's attention—to make him lose sight of the
principal object of the work—and to lessen the general effect of it as a whole.
To remedy, as far as I am able, these inconveniencies, and to facilitate to
beginners the study of the doctrine of Smith, I have thought proper to point out
the order which appears to me most agreeable to the natural progress of ideas,
and, on this account, best calculated for the purpose of instruction.
I would begin by remarking, that the whole doctrine of Smith, upon the
origin, multiplication, and distribution of wealth, is contained in his two first
books; and that the three others may be read separately, as so many detached
treatises, which, no doubt, confirm and develope his opinions, but do not by any
means add to them.
The third book is an historical and political discussion on the progress which
wealth would make in a country where labour and industry were left free; and
upon the different causes which have tended, in all the countries of Europe, to
reverse this progress.
In the fourth book, the author has endeavoured to combat the various
systems of political economy which were popular previous to his time; and, in a
particular manner, that which is denominated the mercantile system, which has
exercised so strong an influence over the financial regulations of the European
governments, and particularly over those of England.
In the fifth and last book, he considers the expenses of government; the most
equitable and convenient modes of providing for these expenses; and lastly,
public debts, and the influence they have over national prosperity.
The three last books may be read and studied in the same order and
arrangement in which they were written, without any difficulty, by one who is
completely master of the general doctrine contained in the two first.
I regard, then, the two first books, as a complete work, which I would divide
into three parts.
The 1st relates to values in particular. It contains their definition; the laws
which regulate them; the analysis of the elements which constitute a value, or
enter into its composition; and the relations which values of different origin bear
to each other.
The 2d part treats of the general mass of national wealth, which is here
divided into separate classes, according to its destination or employment.
The 3d and last part explains the manner in which the growth and
distribution of national wealth takes place.
PART FIRST.—OF VALUES IN PARTICULAR.
The essential quality which constitutes wealth, and without which it would
not be entitled to the name, is its exchangeable value.
Exchangeable value differs from the value of utility—book 1, end of chap.
iv.
The relation existing between two exchangeable values, when expressed by a
value generally agreed upon, is denominated price.
The value generally agreed on among civilized nations, is that of metals.
Motives to this preference. Origin of money—book 1, chap. iv. Relation between
money and the metal in the state of bullion—book 1, chap. v.
The price in money, or nominal price of a thing, differs from its real price,
which is its valuation by the quantity of labour expended upon it, or which it
represents—ibid.
Laws, according to which the price of wealth is naturally fixed; and those
accidental circumstances which occasion the actual to differ from the natural
price, and which gave rise to a distinction between the natural and the market
price—book 1, chap. vii.
The price of a thing, in most cases, consists of three distinct elements—the
wages of the labour, the profit of the master who directs the labour, and the rent
of the ground that furnishes the materials on which it is erected. There are,
however, some descriptions of merchandize in which the rent forms no part of
the price; and others, in which the profit forms no part of it; but none, in which it
is not formed principally by the wages—book 1, chap. vi.
Of wages. Laws, according to which the natural rate of wages is fixed;
accidental circumstances which cause them to vary, during a short period, from
that natural rate—book 1, chap. viii.
Of the profit of capitals. Laws, by which the natural right of profit is fixed;
accidental circumstances which, for a long while, increase or diminish it beyond
that rate—book 1, chap. ix.
Labour and capitals tend naturally to diffuse themselves through every
species of employment; and, as certain employments are, by their nature,
accompanied with inconveniencies and difficulties which do not occur in others,
while these, on the contrary, offer some real or imaginary advantages which are
peculiar to themselves; wages and profits should rise and fall in proportion to
these advantages and disadvantages; thus forming a complete equilibrium
between the various kinds of employment. The arbitrary and oppressive policy
of Europe, in many instances, opposes the establishment of this equilibrium,
which is conformable to the order of nature—book 1, chap. x.
Of the rent of the ground. The nature of rent: the manner in which it enters
into the price of wealth; and according to what principles it in some cases forms
an integral part of that price, while in others it does not—book 1, chap. xi.
Division of the rude produce of the earth into two great classes:
1. That produce which is always necessarily disposed of in such a way as to bring a rent to the landed
proprietor.
2. That which, according to circumstances, may be disposed of so as to bring, or so as not to bring, a
rent.
The produce of the first description is derived from the ground appropriated
to furnishing subsistence for man, or for those animals which he uses as food.
The value of the produce of the ground cultivated for the support of man,
determines the value of the produce of all other ground proper for this species of
culture. This general rule allows of some exceptions. Causes of these exceptions.
The produce of the second class consists of the materials of clothing,
lodging, fuel, and the ornaments of dress and furniture. The value of this species
of produce depends on that of the first description. Some circumstances render it
possible that the produce of the second kind may be disposed of in such a way as
to furnish a rent to the landed proprietor. Principles which regulate the
proportion of the price of these products, which is formed by the rent—book 1,
chap. xi.
Relation between the respective values of the produce of the first class, and
those of the produce of the second. Variations which may take place in this
relation, and the causes of such variations—ibid.
Relation existing between the values of the two descriptions of rude produce
above mentioned, and the values of the produce of manufacture. Variations
which may occur in this relation—ibid.
Certain kinds of rude produce, procured from very different sources, are,
however, intended for the same kind of consumption; and hence it happens, the
value of one determines and limits that of another—ibid.
The relations between values of different natures vary according to the state
of society. This state is improving, declining, or stationary; that is to say, society
is either increasing in wealth, or falling into poverty, or remaining in the same
unchanged state of opulence.
Of the effects of these different states of society,
Upon the price of wages—book 1, chap. viii.
Upon the rate of profit—book 1, chap. ix.
Upon the value of the rude produce of the earth, and on that of the produce of manufacture—book 1,
chap. xi.
Difference, in this respect, between the various kinds of rude produce, viz. 1. Those which the industry
of man cannot multiply: 2. Those which his industry can always multiply in proportion to the
demand: 3. Those over which human exertions have only an uncertain or limited influence—ibid.
PART SECOND.—OF STOCK AND ITS EMPLOYMENT.
Wealth, accumulated in the possession of an individual, is of two
descriptions, according to its destination or employment:
1. That reserved for immediate consumption.
2. That employed as capital, for the production of a revenue—book 2, chap. i.
Capital is also of two kinds:
1. Fixed capital, which produces a revenue and still remains in the same hands
2. Circulating capital, which yields no revenue unless it be employed in trade—book 2 chap. i.
The whole accumulated wealth of any community may be divided into three
parts:
1. The fund appropriated to the immediate consumption of the proprietors of wealth.
2. The fixed capital of the community.
3. Its circulating capital.
The fixed capital of the society consists,
1. Of all machines and instruments of labour;
2. Of all buildings and edifices erected for the purposes of industry;
3. Of every kind of agricultural improvement which can tend to render the soil more productive;
4. Of the talents and skill which certain members of the community have acquired by time and
expense.
The circulating capital of a community consists,
1. In the money in circulation;
2. In the stock of provisions in the hands both of the producers and of the merchants, and from the sale
of which they expect to derive a profit;
3. In the materials of lodging, clothing, dress, and ornament, more or less manufactured, which are in
the hands of those who are employed in rendering them fit for use and consumption;
4. In the goods more completely fit for consumption, and preserved in warehouses and shops, by
merchants who propose to sell them with a profit—book 2, chap. i.
Of the relation existing between the employment of these two kinds of
capital—ibid.
Of the mode in which the capital withdrawn from circulation is disposed of
—ibid.
The sources which continually renew the circulating capital, as soon as it
enters into the fixed capital, or the stock for immediate consumption, are,
1. Lands;
2. Mines and quarries;
3. Fisheries—ibid.
Of the purposes accomplished by circulating coin—book 2, chap. ii; and the
expedients which may be resorted to, in order to attain these with less expense,
and fewer of those inconveniencies to which money is subjected—ibid.
Of the stock lent at interest; and of those things which regulate the
proportion that this kind of stock bears to the whole existing stock of the
community. The quantity of stock which may be lent depends in no degree upon
the quantity of money in circulation—book 2, chap. iv.
Of the principles which determine the rate of interest—ibid.
There exists a necessary relation between this and the price of land—ibid.
PART THIRD—OF THE MANNER IN WHICH THE MULTIPLICATION
AND DISTRIBUTION OF WEALTH TAKES PLACE.
Wealth uniformly increases in proportion to the augmentation which the
power producing it receives, whether that be in energy or in extent—book I.
introduction.
Labour, in which this power increases in energy,
1. By the division of the parts of the same work;
2. By the invention of such machines as abridge and facilitate labour—book I, chap. i.
The division of labour adds to its energy,
1. By the skill which the workman in this way acquires;
2. By the saving of time—ibid.
The invention of machines is itself an effect of the division of labour—ibid.
The natural disposition of mankind to exchange with each other the different
productions of their respective labours and talents, is the principle which has
given birth to the division of labour—book I, chap. ii.
The division of labour must of course be limited by the extent of the market;
therefore, whatever tends to widen the market, facilitates the progress of a nation
towards opulence—book I, chap. iii.
Labour gains in extent,
1. In proportion to the accumulation of capital;
2. In proportion to the manner in which these are employed—book I, introduction.
The accumulation of capitals is hastened by the increase of the proportion
existing between the productive and unproductive consumers—book 2, chap. iii.
The proportion between these two classes of consumers is determined by the
proportion existing between that part of the annual produce destined to the
replacement of capital, and that destined for the purpose of revenue—ibid.
The proportion between that part of the annual produce which goes to form
capital, and that which goes to form revenue, is great in a rich country, and small
in a poor one—ibid.
In a wealthy country, the rent of land, taken absolutely, is much greater than
in a poor country; but, taken in relation to the capital employed, it is much less—
book 2, chap. iii.
In a wealthy country, the whole profits of its capital are infinitely greater
than in one that is poor; although a given quantity of capital will, in a country of
the latter description, produce profits much greater than in an opulent one—ibid.
It is industry that furnishes the produce; but it is economy that places in the
capital that part of it which would otherwise have become revenue—ibid.
The economy of individuals arises from a principle which is universally
diffused, and one that is continually in action; the desire of ameliorating their
condition. This principle supports the existence and increase of national wealth,
in spite of the prodigality of some individuals; and even triumphs over the
profusion and errors of governments—ibid.[Pg xxviii]
Of the different modes of spending money, some are more favourable than
others to the increase of national wealth—ibid.
Those branches of employment which require a capital, never fail to call
forth more or less labour; and thus contribute, in a greater or less degree, to
increase the extent of national labour.
Capital can be employed only in four ways:
1. In cultivating and improving the earth, or, in other words, multiplying its rude produce;
2. In supporting manufactures;
3. In buying by the gross, to sell in the same manner;
4. In buying by the gross, to sell by retail.
These four modes of employing capital are equally necessary to, and serve
mutually to support, each other. The first supports, beyond all comparison, the
greatest number of productive hands; the second occupies more than the two
remaining; and the fourth the fewest of any.
Capital may be employed, according to the third mode, in three different
ways; each contributing in a very different degree to the support and
encouragement of national industry.
When capital is employed in exchanging one description of the produce of
national industry for another, it then supports as great a portion of industry as
can be done by any capital employed in commerce.
When it is employed in exchanging the produce of national for that of
foreign industry, for the purposes of home consumption, half of it goes to the
support of foreign industry; by which means, it is only of half that service to the
industry of the nation which it would have been had it been employed another
way.
Lastly, when it is employed in exchanging one description of the produce of
foreign industry for another, or in what is termed the carrying trade, it then
serves wholly for the support and encouragement of the industry of the two
foreign nations, and adds only to the annual produce of the country the profits of
the merchant—book 2, chap. v.
Self-interest, when left uncontrouled, will necessarily lead the proprietors of
capitals to prefer that species of employment which is most favourable to
national industry, because it is, at the same time, most profitable for themselves
—ibid. For, when capitals have been employed in a way different from that
suggested by the infallible instinct of self-interest, it has always been in
consequence of the peculiar circumstances of the European governments, and of
that influence which the vulgar prejudices of merchants have had over the
system of administration which these governments have adopted.
The account of these circumstances, with the discussion of the errors of this
system, form the matter of the third and fourth books.
Political Economy is, of all sciences, that which affords most room for
prejudices, and in which they are most liable to become deeply rooted. The
desire of improving our condition, that universal principle, which continually
acts upon every member of the community, is ever directing the thoughts of each
individual to the means of increasing his private fortune. But should this
individual ever chance to raise his views to the management of the public
money, he would naturally be led to reason from analogy, and apply to the
general interest of his country those principles which reflection and experience
have led him to regard as the best guides in the conduct of his own private
affairs. Thus, from attending to the fact, that money constitutes a part of the
productive stock in the fortune of an individual, and that his fortune increases in
proportion to the increase of this article, there arises that erroneous opinion so
generally received, that money is a constituent part of national wealth, and that a
country becomes rich, in proportion as it receives money from those countries
with which it has commercial connections.
Merchants who have been accustomed to retire each night to their desks, to
count, with eagerness, the quantity of currency, or of good debts, which their
day's sale has produced, calculating their profits only by this result, and
confident that such a calculation has never deceived them, are naturally led to
think that the affairs of the nation must follow the same rule; and they have been
strengthened in this opinion by that unshaken confidence which a long and
never-failing experience, that has been the source of wealth and prosperity,
inspires. Hence those extravagant opinions respecting the advantages and profits
of foreign commerce, and the importance of money; hence those absurd
calculations that have been made regarding what is termed the balance of trade,
the thermometer of public prosperity; hence those systems of regulations, and
those oppressive monopolies, which are resorted to for the purpose of making
one side of the balance preponderate; hence, too, those bloody and destructive
wars, which have raged in both hemispheres, from the period in which the road
to the Indies, and to the new world, became familiar to European nations.
When we observe, that the many bloody wars that have been waged in the
different parts of the world for these two last centuries, and even the present war,
in many points of view, have had, as their principal end, the maintenance of
some monopoly, contrary even to the interest of the nation armed to protect it;
we shall feel the full importance of those benefits which the illustrious author of
the 'Wealth of Nations' has endeavoured to confer upon mankind, by victoriously
combating such strong and baneful prejudices. But we cannot help deeply
lamenting, to see how slowly, and with what difficulty, reason in all its strength,
and truth in all its clearness, regain the possession of these territories which error
and passion have so rapidly overrun.
The prejudices so successfully attacked by Dr. Smith, appear again and
again, with undiminished assurance, in the tribunals of legislature, in the
councils of administration, in the cabinets of ministry, and in the writings of
politicians. They still talk of the importance of foreign and colonial commerce;
they still attempt to determine the balance of trade; they renew all the reveries of
political arithmetic, as if these questions had not been determined by Smith, in a
way which renders them no longer capable of controversy.
It was in the midst of a country, the most deeply imbued with mercantile
prejudices; the most completely subjected to its prohibitory policy, that Dr.
Smith sapped the foundations of this absurd and tyrannical system; it was at the
very moment when England, in alarm, saw, with terror, the possibility of a
separation from her American colonies: it was then that he derided the universal
fear, and proudly prophesied the success of the colonists, and their approaching
independence; and that he confidently announced, what experience has since
completely affirmed, the happy consequences which this separation and this
independence, so much dreaded, would produce upon the prosperity, both of
Great Britain and her colonies—book 4, chap. vii. part 3.
The wealth of communities is so intimately connected with their civil and
political existence, that the author has been drawn by his subject into numerous
other discussions, which seem more or less removed from it; and in which we
discover the same sagacity of observation, the same depth of research, and the
same force of reasoning.
The advantages of a complete and permanent freedom in the corn trade have
never been better shown; and they have been proved by Dr. Smith, to arise from
that fruitful source of wealth, the division of labour—book 4, chap. v.
The national defence and public education, two objects of very high
importance, have also been discussed at length by our author.
He proves, that, in conformity to that desire to better our condition, by which
all men are directed, and upon which the author has founded his whole doctrine,
the teacher, whose wages are a fixed salary, will have no other end than to spare
himself every trouble, and dedicate as little attention as possible to his pupils;
while he that is paid in proportion to his labour, will naturally endeavour, by
every means in his power, to increase his success, at the same time that he
confers a great advantage on his scholars and on society. He confirms his
theoretical opinions by incontestible examples—-book 5, chap. i. part 3.
The superiority of regular troops over national militia is proved in theory, by
the division of labour; and in practice, by the most remarkable facts in history—
book 5, chap. i, part 1.
AN
INQUIRY
INTO
THE NATURE AND CAUSES
OF THE
WEALTH OF NATIONS.
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 downfall of the Roman empire, the policy of Europe has been
more favourable to arts, manufactures, and commerce, the industry of towns,
than to agriculture, the industry of the country. The circumstances which seem to
have introduced and established this policy are explained in the third book.
Though those different plans were, perhaps, first introduced by the private
interests and prejudices of particular orders of men, without any regard to, or
foresight of, their consequences upon the general welfare of the society; yet they
have given occasion to very different theories of political economy; of which
some magnify the importance of that industry which is carried on in towns,
others of that which is carried on in the country. Those theories have had a
considerable influence, not only upon the opinions of men of learning, but upon
the public conduct of princes and sovereign states. I have endeavoured, in the
fourth book, to explain as fully and distinctly as I can those different theories,
and the principal effects which they have produced in different ages and nations.
To explain in what has consisted the revenue of the great body of the people,
or what has been the nature of those funds, which, in different ages and nations,
have supplied their annual consumption, is the object of these four first books.
The fifth and last book treats of the revenue of the sovereign, or commonwealth.
In this book I have endeavoured to shew, first, what are the necessary expenses
of the sovereign, or commonwealth; which of those expenses ought to be
defrayed by the general contribution of the whole society, and which of them, by
that of some particular part only, or of some particular members of it: secondly,
what are the different methods in which the whole society may be made to
contribute towards defraying the expenses incumbent on the whole society, and
what are the principal advantages and inconveniencies of each of those methods;
and, thirdly and lastly, what are the reasons and causes which have induced
almost all modern governments to mortgage some part of this revenue, or to
contract debts; and what have been the effects of those debts upon the real
wealth, the annual produce of the land and labour of the society.
BOOK I.
OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE
POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO
WHICH ITS PRODUCE IS NATURALLY DISTRIBUTED AMONG THE
DIFFERENT RANKS OF THE PEOPLE.
CHAP. I.
OF THE DIVISION OF LABOUR.
The greatest improvements in the productive powers of labour, and the
greater part of the skill, dexterity, and judgment, with which it is anywhere
directed, or applied, seem to have been the effects of the division of labour.
The effects of the division of labour, in the general business of society, will
be more easily understood, by considering in what manner it operates in some
particular manufactures. It is commonly supposed to be carried furthest in some
very trifling ones; not perhaps that it really is carried further in them than in
others of more importance: but in those trifling manufactures which are destined
to supply the small wants of but a small number of people, the whole number of
workmen must necessarily be small; and those employed in every different
branch of the work can often be collected into the same workhouse, and placed
at once under the view of the spectator. In those great manufactures, on the
contrary, which are destined to supply the great wants of the great body of the
people, every different branch of the work employs so great a number of
workmen, that it is impossible to collect them all into the same workhouse. We
can seldom see more, at one time, than those employed in one single branch.
Though in such manufactures, therefore, the work may really be divided into a
much greater number of parts, than in those of a more trifling nature, the division
is not near so obvious, and has accordingly been much less observed.
To take an example, therefore, from a very trifling manufacture, but one in
which the division of labour has been very often taken notice of, the trade of a
pin-maker: a workman not educated to this business (which the division of
labour has rendered a distinct trade), nor acquainted with the use of the
machinery employed in it (to the invention of which the same division of labour
has probably given occasion), could scarce, perhaps, with his utmost industry,
make one pin in a day, and certainly could not make twenty. But in the way in
which this business is now carried on, not only the whole work is a peculiar
trade, but it is divided into a number of branches, of which the greater part are
likewise peculiar trades. One man draws out the wire; another straights it; a third
cuts it; a fourth points it; a fifth grinds it at the top for receiving the head; to
make the head requires two or three distinct operations; to put it on is a peculiar
business; to whiten the pins is another; it is even a trade by itself to put them into
the paper; and the important business of making a pin is, in this manner, divided
into about eighteen distinct operations, which, in some manufactories, are all
performed by distinct hands, though in others the same man will sometimes
perform two or three of them. I have seen a small manufactory of this kind,
where ten men only were employed, and where some of them consequently
performed two or three distinct operations. But though they were very poor, and
therefore but indifferently accommodated with the necessary machinery, they
could, when they exerted themselves, make among them about twelve pounds of
pins in a day. There are in a pound upwards of four thousand pins of a middling
size. Those ten persons, therefore, could make among them upwards of fortyeight thousand pins in a day. Each person, therefore, making a tenth part of fortyeight 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 in 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 in obliged to change his tools.
The different operations into which the making of a pin, or of a metal button, is
subdivided, are all of them much more simple, and the dexterity of the person, of
whose life it has been the sole business to perform them, is usually much greater.
The rapidity with which some of the operations of those manufactures are
performed, exceeds what the human hand could, by those who had never seen
them, be supposed capable of acquiring.
Secondly, The advantage which is gained by saving the time commonly lost
in passing from one sort of work to another, is much greater than we should at
first view be apt to imagine it. It is impossible to pass very quickly from one
kind of work to another, that is carried on in a different place, and with quite
different tools. A country weaver, who cultivates a small farm, must loose a good
deal of time in passing from his loom to the field, and from the field to his loom.
When the two trades can be carried on in the same workhouse, the loss of time
is, no doubt, much less. It is, even in this case, however, very considerable. A
man commonly saunters a little in turning his hand from one sort of employment
to another. When he first begins the new work, he is seldom very keen and
hearty; his mind, as they say, does not go to it, and for some time he rather trifles
than applies to good purpose. The habit of sauntering, and of indolent careless
application, which is naturally, or rather necessarily, acquired by every country
workman who is obliged to change his work and his tools every half hour, and to
apply his hand in twenty different ways almost every day of his life, renders him
almost always slothful and lazy, and incapable of any vigorous application, even
on the most pressing occasions. Independent, therefore, of his deficiency in point
of dexterity, this cause alone must always reduce considerably the quantity of
work which he is capable of performing.
Thirdly, and lastly, everybody must be sensible how much labour is
facilitated and abridged by the application of proper machinery. It is unnecessary
to give any example. I shall only observe, therefore, that the invention of all
those machines by which labour is 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, wherever the nature of it admits of such improvement. A great
part of the machines made use of in those manufactures in which labour is most
subdivided, were originally the inventions of common workmen, who, being
each of them employed in some very simple operation, naturally turned their
thoughts towards finding out easier and readier methods of performing it.
Whoever has been much accustomed to visit such manufactures, must frequently
have been 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, a boy was constantly employed to open and shut
alternately the communication between the boiler and the cylinder, according as
the piston either ascended or descended. One of those boys, who loved to play
with his companions, observed that, by tying a string from the handle of the
valve which opened this communication to another part of the machine, the
valve would open and shut without his assistance, and leave him at liberty to
divert himself with his play-fellows. One of the greatest improvements that has
been made upon this machine, since it was first invented, was in this manner the
discovery of a boy who wanted to save his own labour.
All the improvements in machinery, however, have by no means been the
inventions of those who had occasion to use the machines. Many improvements
have been made by the ingenuity of the makers of the machines, when to make
them became the business of a peculiar trade; and some by that of those who are
called philosophers, or men of speculation, whose trade it is not to do any thing,
but to observe every thing, and who, upon that account, are often capable of
combining together the powers of the most distant and dissimilar objects. In the
progress of society, philosophy or speculation becomes, like every other
employment, the principal or sole trade and occupation of a particular class of
citizens. Like every other employment, too, it is subdivided into a great number
of different branches, each of which affords occupation to a peculiar tribe or
class of philosophers; and this subdivision of employment in philosophy, as well
as in every other business, improves dexterity, and saves time. Each individual
becomes more expert in his own peculiar branch, more work is done upon the
whole, and the quantity of science is considerably increased by it.
It is the great multiplication of the productions of all the different arts, in
consequence of the division of labour, which occasions, in a well-governed
society, that universal opulence which extends itself to the lowest ranks of the
people. Every workman has a great quantity of his own work to dispose of
beyond what he himself has occasion for; and every other workman being
exactly in the same situation, he is enabled to exchange a great quantity of his
own goods for a great quantity or, what comes to the same thing, for the price of
a great quantity of theirs. He supplies them abundantly with what they have
occasion for, and they accommodate him as amply with what he has occasion
for, and a general plenty diffuses itself through all the different ranks of the
society.
Observe the accommodation of the most common artificer or day-labourer 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.
CHAP. 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 these 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 fellowcitizens. Even a beggar does not depend upon it entirely. The charity of welldisposed 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 into the world, and for the
first six or eight years of their existence, they were, perhaps, very much alike,
and neither their parents nor playfellows could perceive any remarkable
difference. About that age, or soon after, they come to be employed in very
different occupations. The difference of talents comes then to be taken notice of,
and widens by degrees, till at last the vanity of the philosopher is willing to
acknowledge scarce any resemblance. But without the disposition to truck,
barter, and exchange, every man must have procured to himself every necessary
and conveniency of life which he wanted. All must have had the same duties to
perform, and the same work to do, and there could have been no such difference
of employment as could alone give occasion to any great difference of talents.
As it is this disposition which forms that difference of talents, so remarkable
among men of different professions, so it is this same disposition which renders
that difference useful. Many tribes of animals, acknowledged to be all of the
same species, derive from nature a much more remarkable distinction of genius,
than what, antecedent to custom and education, appears to take place among
men. By nature a philosopher is not in genius and disposition half so different
from a street porter, as a mastiff is from a 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 grey-hound, 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.
CHAP. 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 these 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 seacoast, 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 watercarriage. Were there no other communication between those two places,
therefore, but by land-carriage, as no goods could be transported from the one to
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 Phœnicians 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.
CHAP. IV.
OF THE ORIGIN AND USE OF MONEY.
When the division of labor 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 in
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[6], upon the
authority of Timæus, an ancient historian, that, till the time of Servius Tullius,
the Romans had no coined money, but made use of unstamped bars of copper, to
purchase whatever they had occasion for. These rude bars, therefore, performed
at this time the function of money.
The use of metals in this rude state was attended with two very considerable
inconveniences; first, with the trouble of weighing, and secondly, with that of
assaying them. In the precious metals, where a small difference in the quantity
makes a great difference in the value, even the business of weighing, with proper
exactness, requires at least very accurate weights and scales. The weighing of
gold, in particular, is an operation of some nicety. In the coarser metals, indeed,
where a small error would be of little consequence, less accuracy would, no
doubt, be necessary. Yet we should find it excessively troublesome if every time
a poor man had occasion either to buy or sell a farthing's worth of goods, he was
obliged to weigh the farthing. The operation of assaying is still more difficult,
still more tedious; and, unless 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 these 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 these 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 know 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.
CHAP. 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 threepence or fourpence apound, 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 of labour which those different
quantities of silver could have purchased. But the current prices of labour, at
distant times and places, can scarce ever be known with any degree of exactness.
Those of corn, though they have in few places been regularly recorded, are in
general better known, and have been more frequently taken notice of by
historians and other writers. We must generally, therefore, content ourselves with
them, not as being always exactly in the same proportion as the current prices of
labour, but as being the nearest approximation which can commonly be had to
that proportion. I shall hereafter have occasion to make several comparisons of
this kind.
In the progress of industry, commercial nations have found it convenient to
coin several different metals into money; gold for larger payments, silver for
purchases of moderate value, and copper, or some other coarse metal, for those
of still smaller consideration. They have always, however, considered one of
those metals as more peculiarly the measure of value than any of the other two;
and this preference seems generally to have been given to the metal which they
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[7], 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 of Edward III. nor any copper till that
of James I. of Great Britain. In England, therefore, and for the same reason, I
believe, in all other modern nations of Europe, all accounts are kept, and the
value of all goods and of all estates is generally computed, in silver: and when
we mean to express the amount of a person's fortune, we seldom mention the
number of guineas, but the number of pounds sterling which we suppose would
be given for it.
Originally, in all countries, I believe, a legal tender of payment could be
made only in the coin of that metal which was peculiarly considered as the
standard or measure of value. In England, gold was not considered as a legal
tender for a long time after it was coined into money. The proportion between
the values of gold and silver money was not fixed by any public law or
proclamation, but was left to be settled by the market. If a debtor offered
payment in gold, the creditor might either reject such payment altogether, or
accept of it at such a valuation of the gold as he and his debtor could agree upon.
Copper is not at present a legal tender, except in the change of the smaller silver
coins. In this state of things, the distinction between the metal which was the
standard, and that which was not the standard, was something more than a
nominal distinction.
In process of time, and as people became gradually more familiar with the
use of the different metals in coin, and consequently better acquainted with the
proportion between their respective values, it has, in most countries, I believe,
been found convenient to ascertain this proportion, and to declare by a public
law, that a guinea, for example, of such a weight and fineness, should exchange
for one-and-twenty shillings, or be a legal tender for a debt of that amount. In
this state of things, and during the continuance of any one regulated proportion
of this kind, the distinction between the metal, which is the standard, and that
which is not the standard, becomes little more than a nominal distinction.
In consequence of any change, however, in this regulated proportion, this
distinction becomes, or at least seems to become, something more than nominal
again. If the regulated value of a guinea, for example, was either reduced to
twenty, or raised to two-and-twenty shillings, all accounts being kept, and almost
all obligations for debt being expressed, in silver money, the greater part of
payments could in either case be made with the same quantity of silver money as
before; but would require very different quantities of gold money; a greater in
the one case, and a smaller in the other. Silver would appear to be more
invariable in its value than gold. Silver would appear to measure the value of
gold, and gold would not appear to measure the value of silver. The value of
gold would seem to depend upon the quantity of silver which it would exchange
for, and the value of silver would not seem to depend upon the quantity of gold
which it would exchange for. This difference, however, would be altogether
owing to the custom of keeping accounts, and of expressing the amount of all
great and small sums rather in silver than in gold money. One of Mr
Drummond's notes for five-and-twenty or fifty guineas would, after an alteration
of this kind, be still payable with five-and-twenty or fifty guineas, in the same
manner as before. It would, after such an alteration, be payable with the same
quantity of gold as before, but with very different quantities of silver. In the
payment of such a note, gold would appear to be more invariable in its value
than silver. Gold would appear to measure the value of silver, and silver would
not appear to measure the value of gold. If the custom of keeping accounts, and
of expressing promissory-notes and other obligations for money, in this manner
should ever become general, gold, and not silver, would be considered as the
metal which was peculiarly the standard or measure of value.
In reality, during the continuance of any one regulated proportion between
the respective values of the different metals in coin, the value of the most
precious metal regulates the value of the whole coin. Twelve copper pence
contain half a pound avoirdupois of copper, of not the best quality, which, before
it is coined, is seldom worth sevenpence in silver. But as, by the regulation,
twelve such pence are ordered to exchange for a shilling, they are in the market
considered as worth a shilling, and a shilling can at any time be had for them.
Even before the late reformation of the gold coin of Great Britain, the gold, that
part of it at least which circulated in London and its neighbourhood, was in
general less degraded below its standard weight than the greater part of the
silver. One-and-twenty worn and defaced shillings, however, were considered as
equivalent to a guinea, which, perhaps, indeed, was worn and defaced too, but
seldom so much so. The late regulations have brought the gold coin as near,
perhaps, to its standard weight as it is possible to bring the current coin of any
nation; and the order to receive no gold at the public offices but by weight, is
likely to preserve it so, as long as that order is enforced. The silver coin still
continues in the same worn and degraded state as before the reformation of the
gold coin. In the market, however, one-and-twenty shillings of this degraded
silver coin are still considered as worth a guinea of this excellent gold coin.
The reformation of the gold coin has evidently raised the value of the silver
coin which can be exchanged for it.
In the English mint, a pound weight of gold is coined into forty-four guineas
and a half, which at one-and-twenty shillings the guinea, is equal to forty-six
pounds fourteen shillings and sixpence. An ounce of such gold coin, therefore, is
worth L.3 : 17 : 10½ in silver. In England, no duty or seignorage is paid upon the
coinage, and he who carries a pound weight or an ounce weight of standard gold
bullion to the mint, gets back a pound weight or an ounce weight of gold in coin,
without any deduction. Three pounds seventeen shillings and tenpence halfpenny
an ounce, therefore, is said to be the mint price of gold in England, or the
quantity of gold coin which the mint gives in return for standard gold bullion.
Before the reformation of the gold coin, the price of standard gold bullion in
the market had, for many years, been upwards of L.3 : 18s. sometimes L.3 : 19s.
and very frequently L.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 L.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 would 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 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 lose 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
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 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 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.
CHAP. 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
three parts; the rent of the land upon which he is reared, the labour of tending
and rearing him, and the profits of the farmer, who advances both the rent of this
land, and the wages of this labour. Though the price of the corn, therefore, may
pay the price as well as the maintenance of the horse, the whole price still
resolves itself, either immediately or ultimately, into the same three parts of rent,
labour, and profit.
In the price of flour or meal, we must add to the price of the corn, the profits
of the miller, and the wages of his servants; in the price of bread, the profits of
the baker, and the wages of his servants; and in the price of both, the labour of
transporting the corn from the house of the farmer to that of the miller, and from
that of the 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, &c. 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 wages and profit. In some parts of Scotland, a few poor people make a
trade of gathering, along the sea-shore, those little variegated stones commonly
known by the name of Scotch pebbles. The price which is paid to them by the
stone-cutter, is altogether the wages of their labour; neither rent nor profit makes
any part of it.
But the whole price of any commodity must still finally resolve itself into
some one or other or all of those three parts; as whatever part of it remains after
paying the rent of the land, and the price of the whole labour employed in
raising, manufacturing, and bringing it to market, must necessarily be profit to
somebody.
As the price or exchangeable value of every particular commodity, taken
separately, resolves itself into some one or other, or all of those three parts; so
that of all the commodities which compose the whole annual produce of the
labour of every country, taken complexly, must resolve itself into the same three
parts, and be parcelled out among different inhabitants of the country, either as
the wages of their labour, the profits of their stock, or the rent of their land. The
whole of what is annually either collected or produced by the labour of every
society, or, what comes to the same thing, the whole price of it, is in this manner
originally distributed among some of its different members. Wages, profit, and
rent, are the three original sources of all revenue, as well as of all exchangeable
value. All other revenue is ultimately derived from some one or other of these.
Whoever derives his revenue from a fund which is his own, must draw it
either from his labour, from his stock, or from his land. The revenue derived
from labour is called wages; that derived from stock, by the person who manages
or 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, &c. 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 these 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.
CHAP. VII.
OF THE NATURAL AND MARKET PRICE OF COMMODITIES.
There is in every society or neighbourhood an ordinary or average rate, both
of wages and profit, in every different employment of labour and stock. This rate
is naturally regulated, as I shall show hereafter, partly by the general
circumstances of the society, their riches or poverty, their advancing, stationary,
or declining condition, and partly by the particular nature of each employment.
There is likewise in every society or neighbourhood an ordinary or average
rate of rent, which is regulated, too, as I shall shew hereafter, partly by the
general circumstances of the society or neighbourhood in which the land is
situated, and partly by the natural 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 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 may be sufficient to effectuate the
bringing of the commodity to market. It is different from the absolute demand. A
very poor man may be said, in some sense, to have a demand for a coach and
six; he might like to have it; but his demand is not an effectual demand, as the
commodity can never he 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 he paid in order to bring it thither, cannot be
supplied with the quantity which they want. Rather than want it altogether, some
of them will be willing to give more. A competition will immediately begin
among them, and the market price will rise more or less above the natural price,
according as either the greatness of the deficiency, or the wealth and wanton
luxury of the competitors, happen to animate more or less the eagerness of the
competition. Among competitors of equal wealth and luxury, the same
deficiency will generally occasion a more or less eager competition, according as
the acquisition of the commodity happens to be of more or less importance to
them. Hence the exorbitant price of the necessaries of life during the blockade of
a town, or in a famine.
When the quantity brought to market exceeds the effectual demand, it cannot
be all sold to those who are willing to pay the whole value of the rent, wages,
and profit, which must be paid in order to bring it thither. Some part must be sold
to those who are willing to pay less, and the low price which they give for it
must reduce the price of the whole. The market price will sink more or less
below the natural price, according as the greatness of the excess increases more
or less the competition of the sellers, or according as it happens to be more or
less important to them to get immediately rid of the commodity. The same
excess in the importation of perishable, will occasion a much greater competition
than in that of durable commodities; in the importation of oranges, for example,
than in that of old iron.
When the quantity brought to market is just sufficient to supply the effectual
demand, and no more, the market price naturally comes to be either exactly, or as
nearly as can be judged of, the same with the natural price. The whole quantity
upon hand can be disposed of for this price, and cannot be disposed of for more.
The competition of the different dealers obliges them all to accept of this price,
but does not oblige them to accept of less.
The quantity of every commodity brought to market naturally suits itself to
the effectual demand. It is the interest of all those who employ their land, labour,
or stock, in bringing any commodity to market, that the quantity never should
exceed the effectual demand; and it is the interest of all other people that it never
should fall short of that demand.
If at any time it exceeds the effectual demand, some of the component parts
of its price must be paid below their natural rate. If it is rent, the interest of the
landlords will immediately prompt them to withdraw a part of their land; and if it
is wages or profit, the interest of the labourers in the one case, and of their
employers in the other, will prompt them to withdraw a part of their labour or
stock, from this employment. The quantity brought to market will soon be no
more than sufficient to supply the effectual demand. All the different parts of its
price will rise to their natural rate, and the whole price to its natural price.
If, on the contrary, the quantity brought to market should at any time fall
short of the effectual demand, some of the component parts of its price must rise
above their natural rate. If it is rent, the interest of all other landlords will
naturally prompt them to prepare more land for the raising of this commodity; if
it is wages or profit, the interest of all other labourers and dealers will soon
prompt them to employ more labour and stock in preparing and bringing it to
market. The quantity brought thither will soon be sufficient to supply the
effectual demand. All the different parts of its price will soon sink to their
natural rate, and the whole price to its natural price.
The natural price, therefore, is, as it were, the central price, to which the
prices of all commodities are continually gravitating. Different accidents may
sometimes keep them suspended a good deal above it, and sometimes force them
down even somewhat below it. But whatever may be the obstacles which hinder
them from settling in this centre of repose and continuance, they are constantly
tending towards it.
The whole quantity of industry annually employed in order to bring any
commodity to market, naturally suits itself in this manner to the effectual
demand. It naturally aims at bringing always that precise quantity thither which
may be sufficient to supply, and no more than supply, that demand.
But, in some employments, the same quantity of industry will, in different
years, produce very different quantities of commodities; while, in others, it will
produce always the same, or very nearly the same. The same number of
labourers in husbandry will, in different years, produce very different quantities
of corn, wine, oil, hops, &c. 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 police, may, in many commodities, keep up the market
price, for a long time together, a good deal above the natural price.
When, by an increase in the effectual demand, the market price of some
particular commodity happens to rise a good deal above the natural price, those
who employ their stocks in supplying that market, are generally careful to
conceal this change. If it was commonly known, their great profit would tempt
so many new rivals to employ their stocks in the same way, that, the effectual
demand being fully supplied, the market price would soon be reduced to the
natural price, and, perhaps, for some time even below it. If the market is at a
great distance from the residence of those who supply it, they may sometimes be
able to keep the secret for several years together, and may so long enjoy their
extraordinary profits without any new rivals. Secrets of this kind, however, it
must be acknowledged, can seldom be long kept; and the extraordinary profit
can last very little longer than they are kept.
Secrets in manufactures are capable of being longer kept than secrets in
trade. A dyer who has found the means of producing a particular colour with
materials which cost only half the price of those commonly made use of, may,
with good management, enjoy the advantage of his discovery as long as he lives,
and even leave it as a legacy to his posterity. His extraordinary gains arise from
the high price which is paid for his private labour. They properly consist in the
high wages of that labour. But as they are repeated upon every part of his stock,
and as their whole amount bears, upon that account, a regular proportion to it,
they are commonly considered as extraordinary profits of stock.
Such enhancements of the market price are evidently the effects of particular
accidents, of which, however, the operation may sometimes last for many years
together.
Some natural productions require such a singularity of soil and situation, that
all the land in a great country, which is fit for producing them, may not be
sufficient to supply the effectual demand. The whole quantity brought to market,
therefore, may be disposed of to those who are willing to give more than what is
sufficient to pay the rent of the land which produced them, together with the
wages of the labour and the profits of the stock which were employed in
preparing and bringing them to market, according to their natural rates. Such
commodities may continue for whole centuries together to be sold at this high
price; and that part of it which resolves itself into the rent of land, is in this case
the part which is generally paid above its natural rate. The rent of the land which
affords such singular and esteemed productions, like the rent of some vineyards
in France of a peculiarly happy soil and situation, bears no regular proportion to
the rent of other equally fertile and equally well cultivated land in its
neighbourhood. The wages of the labour, and the profits of the stock employed
in bringing such commodities to market, on the contrary, are seldom out of their
natural proportion to those of the other employments of labour and stock in their
neighbourhood.
Such enhancements of the market price are evidently the effect of natural
causes, which may hinder the effectual demand from ever being fully supplied,
and which may continue, therefore, to operate for ever.
A monopoly granted either to an individual or to a trading company, has the
same effect as a secret in trade or manufactures. The monopolists, by keeping the
market constantly understocked by never fully supplying the effectual demand,
sell their commodities much above the natural price, and raise their emoluments,
whether they consist in wages or profit, greatly above their natural rate.
The price of monopoly is upon every occasion the highest which can be got.
The natural price, or the price of free competition, on the contrary, is the lowest
which can be taken, not upon every occasion indeed, but for any considerable
time together. The one is upon every occasion the highest which can be squeezed
out of the buyers, or which it is supposed they will consent to give; the other is
the lowest which the sellers can commonly afford to take, and at the same time
continue their business.
The exclusive privileges of corporations, statutes of apprenticeship, and all
those laws which restrain in particular employments, the competition to a
smaller number than might otherwise go into them, have the same tendency,
though in a less degree. They are a sort of enlarged monopolies, and may
frequently, for ages together, and in whole classes of employments, keep up the
market price of particular commodities above the natural price, and maintain
both wages of the labour and the profits of the stock employed about them
somewhat above their natural rate.
Such enhancements of the market price may last as long as the regulations of
police which give occasion to them.
The market price of any particular commodity, though it may continue long
above, can seldom continue long below, its natural price. Whatever part of it was
paid below the natural rate, the persons whose interest is affected would
immediately feel the loss, and would immediately withdraw either so much land
or so much labour, or so much stock, from being employed about it, that the
quantity brought to market would soon be no more than sufficient to supply the
effectual demand. Its market price, therefore, would soon rise to the natural
price; this at least would be the case where there was perfect liberty.
The same statutes of apprenticeship and other corporation laws, indeed,
which, when a manufacture is in prosperity, enable the workman to raise his
wages a good deal above their natural rate, sometimes oblige him, when it
decays, to let them down a good deal below it. As in the one case they exclude
many people from his employment, so in the other they exclude him from many
employments. The effect of such regulations, however, is not near so durable in
sinking the workman's wages below, as in raising them above their natural rate.
Their operation in the one way may endure for many centuries, but in the other it
can last no longer than the lives of some of the workmen who were bred to the
business in the time of prosperity. When they are gone, the number of those who
are afterwards educated to the trade will naturally suit itself to the effectual
demand. The police must be as violent as that of Indostan or ancient Egypt
(where every man was bound by a principle of religion to follow the occupation
of his father, and was supposed to commit the most horrid sacrilege if he
changed it for another), which can in any particular employment, and for several
generations together, sink either the wages of labour or the profits of stock below
their natural rate.
This is all that I think necessary to be observed at present concerning the
deviations, whether occasional or permanent, of the market price of commodities
from the natural price.
The natural price itself varies with the natural rate of each of its component
parts, or wages, profit, and rent; and in every society this rate varies according to
their circumstances, according to their riches and 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 price of all the different substances which it produces.
CHAP. 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 of 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 neighbors and equals. We seldom, indeed, hear of this
combination, because it is the usual, and, one may say, the natural state of things,
which nobody ever hears of. Masters, too, sometimes enter into particular
combinations to sink the wages of labour even below this rate. These are always
conducted with the utmost silence and secrecy till the moment of execution; and
when the workmen yield, as they sometimes do without resistance, though
severely felt by them, they are never heard of by other people. Such
combinations, however, are frequently resisted by a contrary defensive
combination of the workmen, who sometimes, too, without any provocation of
this kind, combine, of their own accord, to raise the price of their labour. Their
usual pretences are, sometimes the high price of provisions, sometimes the great
profit which their masters make by their work. But whether their combinations
be offensive or defensive, they are always abundantly heard of. In order to bring
the point to a speedy decision, they have always recourse to the loudest clamour,
and sometimes to the most shocking violence and outrage. They are desperate,
and act with the folly and extravagance of desperate men, who must either
starve, or frighten their masters into an immediate compliance with their
demands. The masters, upon these occasions, are just as clamorous upon the
other side, and never cease to call aloud for the assistance of the civil magistrate,
and the rigorous execution of those laws which have been enacted with so much
severity against the combination of servants, labourers, and journeymen. The
workmen, accordingly, very seldom derive any advantage from the violence of
those tumultuous combinations, which, partly from the interposition of the civil
magistrate, partly from the superior steadiness of the masters, partly from the
necessity which the greater part of the workmen are under of submitting for the
sake of present subsistence, generally end in nothing but the punishment or ruin
of the ringleaders.
But though, in disputes with their workmen, masters must generally have the
advantage, there is, however, a certain rate, below which it seems impossible to
reduce, for any considerable time, the ordinary wages even of the lowest species
of labour.
A man must always live by his work, and his wages must at least be
sufficient to maintain him. They must even upon most occasions be somewhat
more, otherwise it would be impossible for him to bring up a family, and the race
of such workmen could not last beyond the first generation. Mr. Cantillon seems,
upon this account, to suppose that the lowest species of common labourers must
everywhere earn at least double their own maintenance, in order that, one with
another, they may be enabled to bring up two children; the labour of the wife, on
account of her necessary attendance on the children, being supposed no more
than sufficient to provide for herself. But one half the children born, it is
computed, die before the age of manhood. The poorest labourers, therefore,
according to this account, must, one with another, attempt to rear at least four
children, in order that two may have an equal chance of living to that age. But
the necessary maintenance of four children, it is supposed, may be nearly equal
to that of one man. The labour of an able-bodied slave, the same author adds, is
computed to be worth double his maintenance; and that of the meanest labourer,
he thinks, cannot be worth less than that of an able-bodied slave. Thus far at
least seems certain, that, in order to bring up a family, the labour of the husband
and wife together must, even in the lowest species of common labour, be able to
earn something more than what in precisely necessary for their own
maintenance; but in what proportion, whether in that above-mentioned, or in any
other, I shall not take upon me to determine.
There are certain circumstances, however, which sometimes give the
labourers an advantage, and enable them to raise their wages considerably above
this rate, evidently the lowest which is consistent with common humanity.
When in any country the demand for those who live by wages, labourers,
journeymen, servants of every kind, is continually increasing; when every year
furnishes employment for a greater number than had been employed the year
before, the workmen have no occasion to combine in order to raise their wages.
The scarcity of hands occasions a competition among masters, who bid against
one another in order to get workmen, and thus voluntarily break through the
natural combination of master 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, in the most thriving, or in those which are growing rich the fastest,
that the wages of labour are highest. England is certainly, in the present times, a
much richer country than any part of North America. The wages of labour,
however, are much higher in North America than in any part of England. In the
province of New York, common labourers earn[8] three shillings and sixpence
currency, equal to two shillings sterling, a-day; ship-carpenters, ten shillings and
sixpence currency, with a pint of rum, worth sixpence sterling, equal in all to six
shillings and sixpence sterling; house-carpenters and bricklayers, eight shillings
currency, equal to four shillings and sixpence sterling; journeymen tailors, five
shillings currency, equal to about two shillings and tenpence sterling. These
prices are all above the London price; and wages are said to be as high in the
other colonies as in New York. The price of provisions is everywhere in North
America much lower than in England. A dearth has never been known there. In
the worst seasons they have always had a sufficiency for themselves, though less
for exportation. If the money price of labour, therefore, be higher than it is
anywhere in the mother-country, its real price, the real command of the
necessaries and conveniencies of life which it conveys to the labourer, must be
higher in a still greater proportion.
But though North America is not yet so rich as England, it is much more
thriving, and advancing with much greater rapidity to the further acquisition of
riches. The most decisive mark of the prosperity of any country is the increase of
the number of its inhabitants. In Great Britain, and most other European
countries, they are not supposed to double in less than five hundred years. In the
British colonies in North America, it has been found that they double in twenty
or five-and-twenty years. Nor in the present times is this increase principally
owing to the continual importation of new inhabitants, but to the great
multiplication of the species. Those who live to old age, it is said, frequently see
there from fifty to a hundred, and sometimes many more, descendants from their
own body. Labour is there so well rewarded, that a numerous family of children,
instead of being a burden, is a source of opulence and prosperity to the parents.
The labour of each child, before it can leave their house, is computed to be worth
a hundred pounds clear gain to them. A young widow with four or five young
children, who, among the middling or inferior ranks of people in Europe, would
have so little chance for a second husband, is there frequently courted as a sort of
fortune. The value of children is the greatest of all encouragements to marriage.
We cannot, therefore, wonder that the people in North America should generally
marry very young. Notwithstanding the great increase occasioned by such early
marriages, there is a continual complaint of the scarcity of hands in North
America. The demand for labourers, the funds destined for maintaining them
increase, it seems, still faster than they can find labourers to employ.
Though the wealth of a country should be very great, yet if it has been long
stationary, we must not expect to find the wages of labour very high in it. The
funds destined for the payment of wages, the revenue and stock of its
inhabitants, may be of the greatest extent; but if they have continued for several
centuries of the same, or very nearly of the same extent, the number of labourers
employed every year could easily supply, and even more than supply, the
number wanted the following year. There could seldom be any scarcity of hands,
nor could the masters be obliged to bid against one another in order to get them.
The hands, on the contrary, would, in this case, naturally multiply beyond their
employment. There would be a constant scarcity of employment, and the
labourers would be obliged to bid against one another in order to get it. If in such
a country the wages of labour had ever been more than sufficient to maintain the
labourer, and to enable him to bring up a family, the competition of the labourers
and the interest of the masters would soon reduce them to the lowest rate which
is consistent with common humanity. China has been long one of the richest, that
is, one of the most fertile, best cultivated, most industrious, and most populous,
countries in the world. It seems, however, to have been long stationary. Marco
Polo, who visited it more than five hundred years ago, describes its cultivation,
industry, and populousness, almost in the same terms in which they are described
by travellers in the present times. It had, perhaps, even long before his time,
acquired that full complement of riches which the nature of its laws and
institutions permits it to acquire. The accounts of all travellers, inconsistent in
many other respects, agree in the low wages of labour, and in the difficulty
which a labourer finds in bringing up a family in China. If by digging the ground
a whole day he can get what will purchase a small quantity of rice in the
evening, he is contented. The condition of artificers is, if possible, still worse.
Instead of waiting indolently in their work-houses for the calls of their
customers, as in Europe, they are continually running about the streets with the
tools of their respective trades, offering their services, and, as it were, begging
employment. The poverty of the lower ranks of people in China far surpasses
that of the most beggarly nations in Europe. In the neighborhood 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 other make shift to continue their race so far as to keep up
their usual numbers.
But it would be otherwise in a country where the funds destined for the
maintenance of labour were sensibly decaying. Every year the demand for
servants and labourers would, in all the different classes of employments, be less
than it had been the year before. Many who had been bred in the superior
classes, not being able to find employment in their own business, would be glad
to seek it in the lowest. The lowest class being not only overstocked with its own
workmen, but with the overflowings of all the other classes, the competition for
employment would be so great in it, as to reduce the wages of labour to the most
miserable and scanty subsistence of the labourer. Many would not be able to find
employment even upon these hard terms, but would either starve, or be driven to
seek a subsistence, either by begging, or by the perpetration, perhaps, of the
greatest enormities. Want, famine, and mortality, would immediately prevail in
that class, and from thence extend themselves to all the superior classes, till the
number of inhabitants in the country was reduced to what could easily be
maintained by the revenue and stock which remained in it, and which had
escaped either the tyranny or calamity which had destroyed the rest. This,
perhaps, is nearly the present state of Bengal, and of some other of the English
settlements in the East Indies. In a fertile country, which had before been much
depopulated, where subsistence, consequently, should not be very difficult, and
where, notwithstanding, three or four hundred thousand people die of hunger in
one year, we may be assured that the funds destined for the maintenance of the
labouring poor are fast decaying. The difference between the genius of the
British constitution, which protects and governs North America, and that of the
mercantile company which oppresses and domineers in the East Indies, cannot,
perhaps, be better illustrated than by the different state of those countries.
The liberal reward of labour, therefore, as it is the necessary effect, so it is
the natural symptom of increasing national wealth. The scanty maintenance of
the labouring poor, on the other hand, is the natural symptom that things are at a
stand, and their starving condition, that they are going fast backwards.
In Great Britain, the wages of labour seem, in the present times, to be
evidently more than what is precisely necessary to enable the labourer to bring
up a family. In order to satisfy ourselves upon this point, it will not be necessary
to enter into any tedious or doubtful calculation of what may be the lowest sum
upon which it is possible to do this. There are many plain symptoms, that the
wages of labour are nowhere in this country regulated by this lowest rate, which
is consistent with common humanity.
First, in almost every part of Great Britain there is a distinction, even in the
lowest species of labour, between summer and winter wages. Summer wages are
always highest. But, on account of the extraordinary expense of fuel, the
maintenance of a family is most expensive in winter. Wages, therefore, being
highest when this expense is lowest, it seems evident that they are not regulated
by what is necessary for this expense, but by the quantity and supposed value of
the work. A labourer, it may be said, indeed, ought to save part of his summer
wages, in order to defray his winter expense; and that, through the whole year,
they do not exceed what is necessary to maintain his family through the whole
year. A slave, however, or one absolutely dependent on us for immediate
subsistence, would not be treated in this manner. His daily subsistence would be
proportioned to his daily necessities.
Secondly, the wages of labour do not, in Great Britain, fluctuate with the
price of provisions. These vary everywhere from year to year, frequently from
month to month. But in many places, the money price of labour remains
uniformly the same, sometimes for half a century together. If, in these places,
therefore, the labouring poor can maintain their families in dear years, they must
be at their ease in times of moderate plenty, and in affluence in those of
extraordinary cheapness. The high price of provisions during these ten years
past, has not, in many parts of the kingdom, been accompanied with any sensible
rise in the money price of labour. It has, indeed, in some; owing, probably, more
to the increase of the demand for labour, than to that of the price of provisions.
Thirdly, as the price of provisions varies more from year to year than the
wages of labour, so, on the other hand, the wages of labour vary more from place
to place than the price of provisions. The prices of bread and butchers' meat are
generally the same, or very nearly the same, through the greater part of the
united kingdom. These, and most other things which are sold by retail, the way
in which the labouring poor buy all things, are generally fully as cheap, or
cheaper, in great towns than in the remoter parts of the country, for reasons
which I shall have occasion to explain hereafter. But the wages of labour in a
great town and its neighbourhood, are frequently a fourth or a fifth part, twenty
or five-and-twenty per cent. higher than at a few miles distance. Eighteen pence
a day may be reckoned the common price of labour in London and its
neighborhood. 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 it 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 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 eightpence a-day; tenpence, sometimes a shilling, about
Edinburgh, in the counties which border upon England, probably on account of
that neighbourhood, and in a few other places where there has lately been a
considerable rise in the demand for labour, about Glasgow, Carron, Ayrshire, &c.
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[9]. In 1688, Mr Gregory King, whose skill in political
arithmetic is so much extolled by Dr Davenant, computed the ordinary income
of labourers and out-servants to be fifteen pounds a-year to a family, which he
supposed to consist, one with another, of three and a half persons. His
calculation, therefore, though different in appearance, corresponds very nearly at
bottom with that of Judge Hales. Both suppose the weekly expense of such
families to be about twenty-pence a-head. Both the pecuniary income and
expense of such families have increased considerably since that time through the
greater part of the kingdom, in some places more, and in some less, though
perhaps scarce anywhere so much as some exaggerated accounts of the present
wages of labour have lately represented them to the public. The price of labour,
it must be observed, cannot be ascertained very accurately anywhere, different
prices being often paid at the same place and for the same sort of labour, not
only according to the different abilities of the workman, but according to the
easiness or hardness of the masters. Where wages are not regulated by law, all
that we can pretend to determine is, what are the most usual; and experience
seems to shew that law can never regulate them properly, though it has often
pretended to do so.
The real recompence of labour, the real quantity of the necessaries and
conveniencies of life which it can procure to the labourer, has, during the course
of the present century, increased perhaps in a still greater proportion than its
money price. Not only grain has become somewhat cheaper, but many other
things, from which the industrious poor derive an agreeable and wholesome
variety of food, have become a great deal cheaper. Potatoes, for example, do not
at present, through the greater part of the kingdom, cost half the price which they
used to do thirty or forty years ago. The same thing may be said of turnips,
carrots, cabbages; things which were formerly never raised but by the spade, but
which are now commonly raised by the plough. All sort of garden stuff, too, has
become cheaper. The greater part of the apples, and even of the onions,
consumed in Great Britain, were, in the last century, imported from Flanders.
The great improvements in the coarser manufactories of both linen and woollen
cloth furnish the labourers with cheaper and better clothing; and those in the
manufactories of the coarser metals, with cheaper and better instruments of
trade, as well as with many agreeable and convenient pieces of household
furniture. Soap, salt, candles, leather, and fermented liquors, have, indeed,
become a good deal dearer, chiefly from the taxes which have been laid upon
them. The quantity of these, however, which the labouring poor are under any
necessity of consuming, is so very small, that the increase in their price does not
compensate the diminution in that of so many other things. The common
complaint, that luxury extends itself even to the lowest ranks of the people, and
that the labouring poor will not now be contented with the same food, clothing,
and lodging, which satisfied them in former times, may convince us that it is not
the money price of labour only, but its real recompence, which has augmented.
Is this improvement in the circumstances of the lower ranks of the people to
be regarded as an advantage, or as an inconveniency, to the society? The answer
seems at first abundantly plain. Servants, labourers, and workmen of different
kinds, make up the far greater part of every great political society. But what
improves the circumstances of the greater part, can never be regarded as any
inconveniency to the whole. No society can surely be flourishing and happy, of
which the far greater part of the members are poor and miserable. It is but equity,
besides, that they who feed, clothe, and lodge the whole body of the people,
should have such a share of the produce of their own labour as to be themselves
tolerably well fed, clothed, and lodged.
Poverty, though it no doubt discourages, does not always prevent, marriage.
It seems even to be favourable to generation. A half-starved Highland woman
frequently bears more than twenty children, while a pampered fine lady is often
incapable of bearing any, and is generally exhausted by two or three. Barrenness,
so frequent among women of fashion, is very rare among those of inferior
station. Luxury, in the fair sex, while it inflames, perhaps, the passion for
enjoyment, seems always to weaken, and frequently to destroy altogether, the
powers of generation.
But poverty, though it does not prevent the generation, is extremely
unfavourable to the rearing of children. The tender plant is produced; but in so
cold a soil, and so severe a climate, soon withers and dies. It is not uncommon, I
have been frequently told, in the Highlands of Scotland, for a mother who has
born twenty children not to have two alive. Several officers of great experience
have assured me, that, so far from recruiting their regiment, they have never
been able to supply it with drums and fifes, from all the soldiers' children that
were born in it. A greater number of fine children, however, is seldom seen
anywhere than about a barrack of soldiers. Very few of them, it seems, arrive at
the age of thirteen or fourteen. In some places, one half the children die before
they are four years of age, in many places before they are seven, and in almost
all places before they are nine or ten. This great mortality, however will
everywhere be found chiefly among the children of the common people, who
cannot afford to tend them with the same care as those of better station. Though
their marriages are generally more fruitful than those of people of fashion, a
smaller proportion of their children arrive at maturity. In foundling hospitals, and
among the children brought up by parish charities, the mortality is still greater
than among those of the common people.
Every species of animals naturally multiplies in proportion to the means of
their subsistence, and no species can ever multiply beyond it. But in civilized
society, it is only among the inferior ranks of people that the scantiness of
subsistence can set limits to the further multiplication of the human species; and
it can do so in no other way than by destroying a great part of the children which
their fruitful marriages produce.
The liberal reward of labour, by enabling them to provide better for their
children, and consequently to bring up a greater number, naturally tends to widen
and extend those limits. It deserves to be remarked, too, that it necessarily does
this as nearly as possible in the proportion which the demand for labour requires.
If this demand is continually increasing, the reward of labour must necessarily
encourage in such a manner the marriage and multiplication of labourers, as may
enable them to supply that continually increasing demand by a continually
increasing population. If the reward should at any time be less than what was
requisite for this purpose, the deficiency of hands would soon raise it; and if it
should at any time be more, their excessive multiplication would soon lower it to
this necessary rate. The market would be so much understocked with labour in
the one case, and so much overstocked in the other, as would soon force back its
price to that proper rate which the circumstances of the society required. It is in
this manner that the demand for men, like that for any other commodity,
necessarily regulates the production of men, quickens it when it goes on too
slowly, and stops it when it advances too fast. It is this demand which regulates
and determines the state of propagation in all the different countries of the world;
in North America, in Europe, and in China; which renders it rapidly progressive
in the first, slow and gradual in the second, and altogether stationary in the last.
The wear and tear of a slave, it has been said, is at the expense of his master;
but that of a free servant is at his own expense. The wear and tear of the latter,
however, is, in reality, as much at the expense of his master as that of the former.
The wages paid to journeymen and servants of every kind must be such as may
enable them, one with another to continue the race of journeymen and servants,
according as the increasing, diminishing, or stationary demand of the society,
may happen to require. But though the wear and tear of a free servant be equally
at the expense of his master, it generally costs him much less than that of a slave.
The fund destined for replacing or repairing, if I may say so, the wear and tear of
the slave, is commonly managed by a negligent master or careless overseer. That
destined for performing the same office with regard to the freeman is managed
by the freeman himself. The disorders which generally prevail in the economy of
the rich, naturally introduce themselves into the management of the former; the
strict frugality and parsimonious attention of the poor as naturally establish
themselves in that of the latter. Under such different management, the same
purpose must require very different degrees of expense to execute it. It appears,
accordingly, from the experience of all ages and nations, I believe, that the work
done by freemen comes cheaper in the end than that performed by slaves. It is
found to do so even at Boston, New-York, and Philadelphia, where the wages of
common labour are so very high.
The liberal reward of labour, therefore, as it is the effect of increasing wealth,
so it is the cause of increasing population. To complain of it, is to lament over
the necessary cause and effect of the greatest public prosperity.
It deserves to be remarked, perhaps, that it is in the progressive state, while
the society is advancing to the further acquisition, rather than when it has
acquired its full complement of riches, that the condition of the labouring poor,
of the great body of the people, seems to be the happiest and the most
comfortable. It is hard in the stationary, and miserable in the declining state. The
progressive state is, in reality, the cheerful and the hearty state to all the different
orders of the society; the stationary is dull; the declining melancholy.
The liberal reward of labour, as it encourages the propagation, so it increases
the industry of the common people. The wages of labour are the encouragement
of industry, which, like every other human quality, improves in proportion to the
encouragement it receives. A plentiful subsistence increases the bodily strength
of the labourer, and the comfortable hope of bettering his condition, and of
ending his days, perhaps, in ease and plenty, animates him to exert that strength
to the utmost. Where wages are high, accordingly, we shall always find the
workmen more active, diligent, and expeditious, than where they are low; in
England, for example, than in Scotland; in the neighbourhood of great towns,
than in remote country places. Some workmen, indeed, when they can earn in
four days what will maintain them through the week, will be idle the other three.
This, however, is by no means the case with the greater part. Workmen, on the
contrary, when they are liberally paid by the piece, are very apt to overwork
themselves, and to ruin their health and constitution in a few years. A carpenter
in London, and in some other places, is not supposed to last in his utmost vigour
above eight years. Something of the same kind happens in many other trades, in
which the workmen are paid by the piece; as they generally are in manufactures,
and even in country labour, wherever wages are higher than ordinary. Almost
every class of artificers is subject to some peculiar infirmity occasioned by
excessive application to their peculiar species of work. Ramuzzini, an eminent
Italian physician, has written a particular book concerning such diseases. We do
not reckon our soldiers the most industrious set of people among us; yet when
soldiers have been employed in some particular sorts of work, and liberally paid
by the piece, their officers have frequently been obliged to stipulate with the
undertaker, that they should not be allowed to earn above a certain sum every
day, according to the rate at which they were paid. Till this stipulation was made,
mutual emulation, and the desire of greater gain, frequently prompted them to
overwork themselves, and to hurt their health by excessive labour. Excessive
application, during four days of the week, is frequently the real cause of the
idleness of the other three, so much and so loudly complained of. Great labour,
either of mind or body, continued for several days together is, in most men,
naturally followed by a great desire of relaxation, which, if not restrained by
force, or by some strong necessity, is almost irresistible. It is the call of nature,
which requires to be relieved by some indulgence, sometimes of ease only, but
sometimes too of dissipation and diversion. If it is not complied with, the
consequences are often dangerous and sometimes fatal, and such as almost
always, sooner or later, bring on the peculiar infirmity of the trade. If masters
would always listen to the dictates of reason and humanity, they have frequently
occasion rather to moderate, than to animate the application of many of their
workmen. It will be found, I believe, in every sort of trade, that the man who
works so moderately, as to be able to work constantly, not only preserves his
health the longest, but, in the course of the year, executes the greatest quantity of
work.
In cheap years it is pretended, workmen are generally more idle, and in dear
times more industrious than ordinary. A plentiful subsistence, therefore, it has
been concluded, relaxes, and a scanty one quickens their industry. That a little
more plenty than ordinary may render some workmen idle, cannot be well
doubted; but that it should have this effect upon the greater part, or that men in
general should work better when they are ill fed, than when they are well fed,
when they are disheartened than when they are in good spirits, when they are
frequently sick than when they are generally in good health, seems not very
probable. Years of dearth, it is to be observed, are generally among the common
people years of sickness and mortality, which cannot fail to diminish the produce
of their industry.
In years of plenty, servants frequently leave their masters, and trust their
subsistence to what they can make by their own industry. But the same
cheapness of provisions, by increasing the fund which is destined for the
maintenance of servants, encourages masters, farmers especially, to employ a
greater number. Farmers, upon such occasions, expect more profit from their
corn by maintaining a few more labouring servants, than by selling it at a low
price in the market. The demand for servants increases, while the number of
those who offer to supply that demand diminishes. The price of labour, therefore,
frequently rises in cheap years.
In years of scarcity, the difficulty and uncertainty of subsistence make all
such people eager to return to service. But the high price of provisions, by
diminishing the funds destined for the maintenance of servants, disposes masters
rather to diminish than to increase the number of those they have. In dear years,
too, poor independent workmen frequently consume the little stock with which
they had used to supply themselves with the materials of their work, and are
obliged to become journeymen for subsistence. More people want employment
than easily get it; many are willing to take it upon lower terms than ordinary; and
the wages of both servants and journeymen frequently sink in dear years.
Masters of all sorts, therefore, frequently make better bargains with their
servants in dear than in cheap years, and find them more humble and dependent
in the former than in the latter. They naturally, therefore, commend the former as
more favourable to industry. Landlords and farmers, besides, two of the largest
classes of masters, have another reason for being pleased with dear years. The
rents of the one, and the profits of the other, depend very much upon the price of
provisions. Nothing can be more absurd, however, than to imagine that men in
general should work less when they work for themselves, than when they work
for other people. A poor independent workman will generally be more
industrious than even a journeyman who works by the piece. The one enjoys the
whole produce of his own industry, the other shares it with his master. The one,
in his separate independent state, is less liable to the temptations of bad
company, which, in large manufactories, so frequently ruin the morals of the
other. The superiority of the independent workman over those servants who are
hired by the month or by the year, and whose wages and maintenance are the
same, whether they do much or do little, is likely to be still greater. Cheap years
tend to increase the proportion of independent workmen to journeymen and
servants of all kinds, and dear years to diminish it.
A French author of great knowledge and ingenuity, Mr Messance, receiver of
the tallies in the election of St Etienne, endeavours to shew that the poor do more
work in cheap than in dear years, by comparing the quantity and value of the
goods made upon those different occasions in three different manufactures; one
of coarse woollens, carried on at Elbeuf; one of linen, and another of silk, both
which extend through the whole generality of Rouen. It appears from his
account, which is copied from the registers of the public offices, that the quantity
and value of the goods made in all those three manufactories has generally been
greater in cheap than in dear years, and that it has always been greatest in the
cheapest, and least in the dearest years. All the three seem to be stationary
manufactures, or which, though their produce may vary somewhat from year to
year, are, upon the whole, neither going backwards nor forwards.
The manufacture of linen in Scotland, and that of coarse woollens in the
West Riding of Yorkshire, are growing manufactures, of which the produce is
generally, though with some variations, increasing both in quantity and value.
Upon examining, however, the accounts which have been published of their
annual produce, I have not been able to observe that its variations have had any
sensible connection with the dearness or cheapness of the seasons. In 1740, a
year of great scarcity, both manufactures, indeed, appear to have declined very
considerably. But in 1756, another year of great scarcity, the Scotch
manufactures made more than ordinary advances. The Yorkshire manufacture,
indeed, declined, and its produce did not rise to what it had been in 1755, till
1766, after the repeal of the American stamp act. In that and the following year,
it greatly exceeded what it had ever been before, and it has continued to advance
ever since.
The produce of all great manufactures for distant sale must necessarily
depend, not so much upon the dearness or cheapness of the seasons in the
countries where they are carried on, as upon the circumstances which affect the
demand in the countries where they are consumed; upon peace or war, upon the
prosperity or declension of other rival manufactures, and upon the good or bad
humour of their principal customers. A great part of the extraordinary work,
besides, which is probably done in cheap years, never enters the public registers
of manufactures. The men-servants, who leave their masters, become
independent labourers. The women return to their parents, and commonly spin,
in order to make clothes for themselves and their families. Even the independent
workmen do not always work for public sale, but are employed by some of their
neighbours in manufactures for family use. The produce of their labour,
therefore, frequently makes no figure in those public registers, of which the
records are sometimes published with so much parade, and from which our
merchants and manufacturers would often vainly pretend to announce the
prosperity or declension of the greatest empires.
Though the variations in the price of labour not only do not always
correspond with those in the price of provisions, but are frequently quite
opposite, we must not, upon this account, imagine that the price of provisions
has no influence upon that of labour. The money price of labour is necessarily
regulated by two circumstances; the demand for labour, and the price of the
necessaries and conveniencies of life. The demand for labour, according as it
happens to be increasing, stationary, or declining, or to require an increasing,
stationary, or declining population, determines the quantities of the necessaries
and conveniencies of life which must be given to the labourer; and the money
price of labour is determined by what is requisite for purchasing this quantity.
Though the money price of labour, therefore, is sometimes high where the price
of provisions is low, it would be still higher, the demand continuing the same, if
the price of provisions was high.
It is because the demand for labour increases in years of sudden and
extraordinary plenty, and diminishes in those of sudden and extraordinary
scarcity, that the money price of labour sometimes rises in the one, and sinks in
the other.
In a year of sudden and extraordinary plenty, there are funds in the hands of
many of the employers of industry, sufficient to maintain and employ a greater
number of industrious people than had been employed the year before; and this
extraordinary number cannot always be had. Those masters, therefore, who want
more workmen, bid against one another, in order to get them, which sometimes
raises both the real and the money price of their labour.
The contrary of this happens in a year of sudden and extraordinary scarcity.
The funds destined for employing industry are less than they had been the year
before. A considerable number of people are thrown out of employment, who bid
one against another, in order to get it, which sometimes lowers both the real and
the money price of labour. In 1740, a year of extraordinary scarcity, many people
were willing to work for bare subsistence. In the succeeding years of plenty, it
was more difficult to get labourers and servants.
The scarcity of a dear year, by diminishing the demand for labour, tends to
lower its price, as the high price of provisions tends to raise it. The plenty of a
cheap year, on the contrary, by increasing the demand, tends to raise the price of
labour, as the cheapness of provisions tends to lower it. In the ordinary variations
of the prices of provisions, those two opposite causes seem to counterbalance
one another, which is probably, in part, the reason why the wages of labour are
everywhere so much more steady and permanent than the price of provisions.
The increase in the wages of labour necessarily increases the price of many
commodities, by increasing that part of it which resolves itself into wages, and
so far tends to diminish their consumption, both at home and abroad. The same
cause, however, which raises the wages of labour, the increase of stock, tends to
increase its productive powers, and to make a smaller quantity of labour produce
a greater quantity of work. The owner of the stock which employs a great
number of labourers necessarily endeavours, for his own advantage, to make
such a proper division and distribution of employment, that they may be enabled
to produce the greatest quantity of work possible. For the same reason, he
endeavours to supply them with the best machinery which either he or they can
think of. What takes place among the labourers in a particular workhouse, takes
place, for the same reason, among those of a great society. The greater their
number, the more they naturally divide themselves into different classes and
subdivisions of employments. More heads are occupied in inventing the most
proper machinery for executing the work of each, and it is, therefore, more likely
to be invented. There are many commodities, therefore, which, in consequence
of these improvements, come to be produced by so much less labour than before,
that the increase of its price is more than compensated by the diminution of its
quantity.
CHAP. IX.
OF THE PROFITS OF STOCK.
The rise and fall in the profits of stock depend upon the same causes with the
rise and fall in the wages of labour, the increasing or declining state of the wealth
of the society; but those causes affect the one and the other very differently.
The increase of stock, which raises wages, tends to lower profit. When the
stocks of many rich merchants are turned into the same trade, their mutual
competition naturally tends to lower its profit; and when there is a like increase
of stock in all the different trades carried on in the same society, the same
competition must produce the same effect in them all.
It is not easy, it has already been observed, to ascertain what are the average
wages of labour, even in a particular place, and at a particular time. We can, even
in this case, seldom determine more than what are the most usual wages. But
even this can seldom be done with regard to the profits of stock. Profit is so very
fluctuating, that the person who carries on a particular trade, cannot always tell
you himself what is the average of his annual profit. It is affected, not only by
every variation of price in the commodities which he deals in, but by the good or
bad fortune both of his rivals and of his customers, and by a thousand other
accidents, to which goods, when carried either by sea or by land, or even when
stored in a warehouse, are liable. It varies, therefore, not only from year to year,
but from day to day, and almost from hour to hour. To ascertain what is the
average profit of all the different trades carried on in a great kingdom, must be
much more difficult; and to judge of what it may have been formerly, or in
remote periods of time, with any degree of precision, must be altogether
impossible.
But though it may be impossible to determine, with any degree of precision,
what are or were the average profits of stock, either in the present or in ancient
times, some notion may be formed of them from the interest of money. It may be
laid down as a maxim, that wherever a great deal can be made by the use of
money, a great deal will commonly be given for the use of it; and that, wherever
little can be made by it, less will commonly be given for it. 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 ahalf 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 stock 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[10]. In 1720, interest was
reduced from the twentieth to the fiftieth penny, or from five to two per cent. In
1724, it was raised to the thirtieth penny, or to three and a third per cent. In 1725,
it was again raised to the twentieth penny, or to five per cent. In 1766, during the
administration of Mr Laverdy, it was reduced to the twenty-fifth penny, or to
four per cent. The Abbé Terray raised it afterwards to the old rate of five per
cent. The supposed purpose of many of those violent reductions of interest was
to prepare the way for reducing that of the public debts; a purpose which has
sometimes been executed. France is, perhaps, in the present times, not so rich a
country as England; and though the legal rate of interest has in France frequently
been lower than in England, the market rate has generally been higher; for there,
as in other countries, they have several very safe and easy methods of evading
the law. The profits of trade, I have been assured by British merchants who had
traded in both countries, are higher in France than in England; and it is no doubt
upon this account, that many British subjects chuse rather to employ their
capitals in a country where trade is in disgrace, than in one where it is highly
respected. The wages of labour are lower in France than in England. When you
go from Scotland to England, the difference which you may remark between the
dress and countenance of the common people in the one country and in the other,
sufficiently indicates the difference in their condition. The contrast is still greater
when you return from France. France, though no doubt a richer country than
Scotland, seems not to be going forward so fast. It is a common and even a
popular opinion in the country, that it is going backwards; an opinion which I
apprehend, is ill-founded, even with regard to France, but which nobody can
possibly entertain with regard to Scotland, who sees the country now, and who
saw it twenty or thirty years ago.
The province of Holland, on the other hand, in proportion to the extent of its
territory and the number of its people, is a richer country than England. The
government there borrow at two per cent. and private people of good credit at
three. The wages of labour are said to be higher in Holland than in England, and
the Dutch, it is well known, trade upon lower profits than any people in Europe.
The trade of Holland, it has been pretended by some people, is decaying, and it
may perhaps be true that some particular branches of it are so; but these
symptoms seem to indicate sufficiently that there is no general decay. When
profit diminishes, merchants are very apt to complain that trade decays, though
the diminution of profit is the natural effect of its prosperity, or of a greater stock
being employed in it than before. During the late war, the Dutch gained the
whole carrying trade of France, of which they still retain a very large share. The
great property which they possess both in French and English funds, about forty
millions, it is said in the latter (in which, I suspect, however, there is a
considerable exaggeration), the great sums which they lend to private people, in
countries where the rate of interest is higher than in their own, are circumstances
which no doubt demonstrate the redundancy of their stock, or that it has
increased beyond what they can employ with tolerable profit in the proper
business of their own country; but they do not demonstrate that that business has
decreased. As the capital of a private man, though acquired by a particular trade,
may increase beyond what he can employ in it, and yet that trade continue to
increase too, so may likewise the capital of a great nation.
In our North American and West Indian colonies, not only the wages of
labour, but the interest of money, and consequently the profits of stock, are
higher than in England. In the different colonies, both the legal and the market
rate of interest run from six to eight per cent. High wages of labour and high
profits of stock, however, are things, perhaps, which scarce ever go together,
except in the peculiar circumstances of new colonies. A new colony must
always, for some time, be more understocked in proportion to the extent of its
territory, and more underpeopled in proportion to the extent of its stock, than the
greater part of other countries. They have more land than they have stock to
cultivate. What they have, therefore, is applied to the cultivation only of what is
most fertile and most favourably situated, the land near the sea-shore and along
the banks of navigable rivers. Such land, too, is frequently purchased at a price
below the value even of its natural produce. Stock employed in the purchase and
improvement of such lands, must yield a very large profit, and, consequently,
afford to pay a very large interest. Its rapid accumulation in so profitable an
employment enables the planter to increase the number of his hands faster than
he can find them in a new settlement. Those whom he can find, therefore, are
very liberally rewarded. As the colony increases, the profits of stock gradually
diminish. When the most fertile and best situated lands have been all occupied,
less profit can be made by the cultivation of what is inferior both in soil and
situation, and less interest can be afforded for the stock which is so employed. In
the greater part of our colonies, accordingly, both the legal and the market rate of
interest have been considerably reduced during the course of the present century.
As riches, improvement, and population, have increased, interest has declined.
The wages of labour do not sink with the profits of stock. The demand for labour
increases with the increase of stock, whatever be its profits; and after these are
diminished, stock may not only continue to increase, but to increase much faster
than before. It is with industrious nations, who are advancing in the acquisition
of riches, as with industrious individuals. A great stock, though with small
profits, generally increases faster than a small stock with great profits. Money,
says the proverb, makes money. When you have got a little, it is often easy to get
more. The great difficulty is to get that little. The connection between the
increase of stock and that of industry, or of the demand for useful labour, has
partly been explained already, but will be explained more fully hereafter, in
treating of the accumulation of stock.
The acquisition of new territory, or of new branches of trade, may sometimes
raise the profits of stock, and with them the interest of money, even in a country
which is fast advancing in the acquisition of riches. The stock of the country, not
being sufficient for the whole accession of business which such acquisitions
present to the different people among whom it is divided, is applied to those
particular branches only which afford the greatest profit. Part of what had before
been employed in other trades, is necessarily withdrawn from them, and turned
into some of the new and more profitable ones. In all those old trades, therefore,
the competition comes to be less than before. The market comes to be less fully
supplied with many different sorts of goods. Their price necessarily rises more or
less, and yields a greater profit to those who deal in them, who can, therefore,
afford to borrow at a higher interest. For some time after the conclusion of the
late war, not only private people of the best credit, but some of the greatest
companies in London, commonly borrowed at five per cent. who, before that,
had not been used to pay more than four, and four and a half per cent. The great
accession both of territory and trade by our acquisitions in North America and
the West Indies, will sufficiently account for this, without supposing any
diminution in the capital stock of the society. So great an accession of new
business to be carried on by the old stock, must necessarily have diminished the
quantity employed in a great number of particular branches, in which the
competition being less, the profits must have been greater. I shall hereafter have
occasion to mention the reasons which dispose me to believe that the capital
stock of Great Britain was not diminished, even by the enormous expense of the
late war.
The diminution of the capital stock of the society, or of the funds destined for
the maintenance of industry, however, as it lowers the wages of labour, so it
raises the profits of stock, and consequently the interest of money. By the wages
of labour being lowered, the owners of what stock remains in the society can
bring their goods at less expense to market than before; and less stock being
employed in supplying the market than before, they can sell them dearer. Their
goods cost them less, and they get more for them. Their profits, therefore, being
augmented at both ends, can well afford a large interest. The great fortunes so
suddenly and so easily acquired in Bengal and the other British settlements in
the East Indies, may satisfy us, that as the wages of labour are very low, so the
profits of stock are very high in those ruined countries. The interest of money is
proportionably so. In Bengal, money is frequently lent to the farmers at forty,
fifty, and sixty per cent. and the succeeding crop is mortgaged for the payment.
As the profits which can afford such an interest must eat up almost the whole
rent of the landlord, so such enormous usury must in its turn eat up the greater
part of those profits. Before the fall of the Roman republic, a usury of the same
kind seems to have been common in the provinces, under the ruinous
administration of their proconsuls. The virtuous Brutus lent money in Cyprus at
eight-and-forty per cent. as we learn from the letters of Cicero.
In a country which had acquired that full complement of riches which the
nature of its soil and climate, and its situation with respect to other countries,
allowed it to acquire, which could, therefore, advance no further, and which was
not going backwards, both the wages of labour and the profits of stock would
probably be very low. In a country fully peopled in proportion to what either its
territory could maintain, or its stock employ, the competition for employment
would necessarily be so great as to reduce the wages of labour to what was
barely sufficient to keep up the number of labourers, and the country being
already fully peopled, that number could never be augmented. In a country fully
stocked in proportion to all the business it had to transact, as great a quantity of
stock would be employed in every particular branch as the nature and extent of
the trade would admit. The competition, therefore, would everywhere be as
great, and, consequently, the ordinary profit as low as possible.
But, perhaps, no country has ever yet arrived at this degree of opulence.
China seems to have been long stationary, and had, probably, long ago acquired
that full complement of riches which is consistent with the nature of its laws and
institutions. But this complement may be much inferior to what, with other laws
and institutions, the nature of its soil, climate, and situation, might admit of. A
country which neglects or despises foreign commerce, and which admits the
vessels of foreign nations into one or two of its ports only, cannot transact the
same quantity of business which it might do with different laws and institutions.
In a country, too, where, though the rich, or the owners of large capitals, enjoy a
good deal of security, the poor, or the owners of small capitals, enjoy scarce any,
but are liable, under the pretence of justice, to be pillaged and plundered at any
time by the inferior mandarins, the quantity of stock employed in all the different
branches of business transacted within it, can never be equal to what the nature
and extent of that business might admit. In every different branch, the oppression
of the poor must establish the monopoly of the rich, who, by engrossing the
whole trade to themselves, will be able to make very large profits. Twelve per
cent. accordingly, is said to be the common interest of money in China, and the
ordinary profits of stock must be sufficient to afford this large interest.
A defect in the law may sometimes raise the rate of interest considerably
above what the condition of the country, as to wealth or poverty, would require.
When the law does not enforce the performance of contracts, it puts all
borrowers nearly upon the same footing with bankrupts, or people of doubtful
credit, in better regulated countries. The uncertainty of recovering his money
makes the lender exact the same usurious interest which is usually required from
bankrupts. Among the barbarous nations who overran the western provinces of
the Roman empire, the performance of contracts was left for many ages to the
faith of the contracting parties. The courts of justice of their kings seldom
intermeddled in it. The high rate of interest which took place in those ancient
times, may perhaps, be partly accounted for from this cause.
When the law prohibits interest altogether, it does not prevent it. Many
people must borrow, and nobody will lend without such a consideration for the
use of their money as is suitable, not only to what can be made by the use of it,
but to the difficulty and danger of evading the law. The high rate of interest
among all Mahometan nations is accounted for by 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 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, &c. 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 a like five per cent. both upon the
advanced price of the linen-yarn, and upon the wages of the weavers. In raising
the price of commodities, the rise of wages operates in the same manner as
simple interest does in the accumulation of debt. The rise of profit operates like
compound interest. Our merchants and master manufacturers complain much of
the bad effects of high wages in raising the price, and thereby lessening the sale
of their goods, both at home and abroad. They say nothing concerning the bad
effects of high profits; they are silent with regard to the pernicious effects of
their own gains; they complain only of those of other people.
CHAP. 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[11]. 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 as common
labour. It seems to suppose that of the former to be of a more nice and delicate
nature than that of the latter. It is so perhaps in some cases; but in the greater part
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 the 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 may be pretty sure of employment
almost every day in the year that he is able to work. A mason or bricklayer, on
the contrary, can work neither in hard frost nor in foul weather, and his
employment at all other times depends upon the occasional calls of his
customers. He is liable, in consequence, to be frequently without any. What he
earns, therefore, while he is employed, must not only maintain him while he is
idle, but make him some compensation for those anxious and desponding
moments which the thought of so precarious a situation must sometimes
occasion. Where the computed earnings of the greater part of manufacturers,
accordingly, are nearly upon a level with the day-wages of common labourers,
those of masons and bricklayers are generally from one-half more to double
those wages. Where common labourers earn four of 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 daywages 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 daylabourers 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 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 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 of 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 for 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, &c. are founded upon those two
principles; the rarity and beauty of the talent, 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 of 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 great 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 over-valued, 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 your approach to this certainty.
That the chance of loss is frequently under-valued, 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 merchantservice, the London price is from a guinea to about seven-and-twenty shillings
the calendar month. A common labourer in London, at the rate of nine or ten
shillings a-week, may earn in the calendar month from forty to five-and-forty
shillings. The sailor, indeed, over and above his pay, is supplied with provisions.
Their value, however, may not perhaps always exceed the difference between his
pay and that of the common labourer; and though it sometimes should, the
excess will not be clear gain to the sailor, because he cannot share it with his
wife and family, whom he must maintain out of his wages at home.
The dangers and hair-breadth escapes of a life of adventures, instead of
disheartening young people, seem frequently to recommend a trade to them. A
tender mother, among the inferior ranks of people, is often afraid to send her son
to school at a sea-port town, lest the sight of the ships, and the conversation and
adventures of the sailors, should entice him to go to sea. The distant prospect of
hazards, from which we can hope to extricate ourselves by courage and address,
is not disagreeable to us, and does not raise the wages of labour in any
employment. It is otherwise with those in which courage and address can be of
no avail. In trades which are known to be very unwholesome, the wages of
labour are always remarkably high. Unwholesomeness is a species of
disagreeableness, and its effects upon the wages of labour are to be ranked under
that general head.
In all the different employments of stock, the ordinary rate of profit varies
more or less with the certainty or uncertainty of the returns. These are, in
general, less uncertain in the inland than in the foreign trade, and in some
branches of foreign trade than in others; in the trade to North America, for
example, than in that to Jamaica. The ordinary rate of profit always rises more or
less with the risk. It does not, however, seem to rise in proportion to it, or so as
to compensate it completely. Bankruptcies are most frequent in the most
hazardous trades. The most hazardous of all trades, that of a smuggler, though,
when the adventure succeeds, it is likewise the most profitable, is the infallible
road to bankruptcy. The presumptuous hope of success seems to act here as upon
all other occasions, and to entice so many adventurers into those hazardous
trades, that their competition reduces the profit below what is sufficient to
compensate the risk. To compensate it completely, the common returns ought,
over and above the ordinary profits of stock, not only to make up for all
occasional losses, but to afford a surplus profit to the adventurers, of the same
nature with the profit of insurers. But if the common returns were sufficient for
all this, bankruptcies would not be more frequent in these than in other trades.
Of the five circumstances, therefore, which vary the wages of labour, two
only affect the profits of stock; the agreeableness or disagreeableness of the
business, and the risk or security with which it is attended. In point of
agreeableness or disagreeableness, there is little or no difference in the far
greater part of the different employments of stock, but a great deal in those of
labour; and the ordinary profit of stock, though it rises with the risk, does not
always seem to rise in proportion to it. It should follow from all this, that, in the
same society or neighbourhood, the average and ordinary rates of profit in the
different employments of stock should be more nearly upon a level than the
pecuniary wages of the different sorts of labour.
They are so accordingly. The difference between the earnings of a common
labourer and those of a well employed lawyer or physician, is evidently much
greater than that between the ordinary profits in any two different branches of
trade. The apparent difference, besides, in the profits of different trades, is
generally a deception arising from our not always distinguishing what ought to
be considered as wages, from what ought to be considered as profit.
Apothecaries' profit is become a bye-word, denoting something uncommonly
extravagant. This great apparent profit, however, is frequently no more than the
reasonable wages of labour. The skill of an apothecary is a much nicer and more
delicate matter than that of any artificer whatever; and the trust which is reposed
in him is of much greater importance. He is the physician of the poor in all cases,
and of the rich when the distress or danger is not very great. His reward,
therefore, ought to be suitable to his skill and his trust; and it arises generally
from the price at which he sells his drugs. But the whole drugs which the best
employed apothecary in a large market-town, will sell in a year, may not perhaps
cost him above thirty or forty pounds. Though he should sell them, therefore, for
three or four hundred, or at a thousand per cent, profit, this may frequently be no
more than the reasonable wages of his labour, charged, in the only way in which
he can charge them, upon the price of his drugs. The greater part of the apparent
profit is real wages disguised in the garb of profit.
In a small sea-port town, a little grocer will make forty or fifty per cent. upon
a stock of a single hundred pounds, while a considerable wholesale merchant in
the same place will scarce make eight or ten per cent. upon a stock of ten
thousand. The trade of the grocer may be necessary for the conveniency of the
inhabitants, and the narrowness of the market may not admit the employment of
a larger capital in the business. The man, however, must not only live by his
trade, but live by it suitably to the qualifications which it requires. Besides
possessing a little capital, he must be able to read, write, and account, and must
be a tolerable judge, too, of perhaps fifty or sixty different sorts of goods, their
prices, qualities, and the markets where they are to be had cheapest. He must
have all the knowledge, in short, that is necessary for a great merchant, which
nothing hinders him from becoming but the want of a sufficient capital. Thirty or
forty pounds a-year cannot be considered as too great a recompence for the
labour of a person so accomplished. Deduct this from the seemingly great profits
of his capital, and little more will remain, perhaps, than the ordinary profits of
stock. The greater part of the apparent profit is, in this case too, real wages.
The difference between the apparent profit of the retail and that of the
wholesale trade, is much less in the capital than in small towns and country
villages. Where ten thousand pounds can be employed in the grocery trade, the
wages of the grocer's labour must be a very trifling addition to the real profits of
so great a stock. The apparent profits of the wealthy retailer, therefore, are there
more nearly upon a level with these of the wholesale merchant. It is upon this
account that goods sold by retail are generally 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 the same cause which
diminishes apparent profit, increases prime cost. The extent of the market, by
giving employment to greater stocks, diminishes apparent profit; but by
requiring supplies from a greater distance, it increases prime cost. This
diminution of the one and increase of the other, seem, in most cases, nearly to
counterbalance one another, which is probably the reason that, though the prices
of corn and cattle are commonly very different in different parts of the kingdom,
those of bread and butchers' meat are generally very nearly the same through the
greater part of it.
Though the profits of stock, both in the wholesale and retail trade, are
generally less in the capital than in small towns and country villages, yet great
fortunes are frequently acquired from small beginnings in the former, and scarce
ever in the latter. In small towns and country villages, on account of the
narrowness of the market, trade cannot always be extended as stock extends. In
such places, therefore, though the rate of a particular person's profits may be
very high, the sum or amount of them can never be very great, nor consequently
that of his annual accumulation. In great towns, on the contrary, trade can be
extended as stock increases, and the credit of a frugal and thriving man increases
much faster than his stock. His trade is extended in proportion to the amount of
both; and the sum or amount of his profits is in proportion to the extent of his
trade, and his annual accumulation in proportion to the amount of his profits. It
seldom happens, however, that great fortunes are made, even in great towns, by
any one regular, established, and well-known branch of business, but in
consequence of a long life of industry, frugality, and attention. Sudden fortunes,
indeed, are sometimes made in such places, by what is called the trade of
speculation. The speculative merchant exercises no one regular, established, or
well-known branch of business. He is a corn merchant this year, and a wine
merchant the next, and a sugar, tobacco, or tea merchant the year after. He enters
into every trade, when he foresees that it is likely to be more than commonly
profitable, and he quits it when he foresees that its profits are likely to return to
the level of other trades. His profits and losses, therefore, can bear no regular
proportion to those of any one established and well-known branch of business. A
bold adventurer may sometimes acquire a considerable fortune by two or three
successful speculations, but is just as likely to lose one by two or three
unsuccessful ones. This trade can be carried on nowhere but in great towns. It is
only in places of the most extensive commerce and correspondence that the
intelligence requisite for it can he 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 lake 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 of fabric may continue in demand for whole
centuries together. The wages of labour, therefore, are likely to be higher in
manufactures of the former, than in those of the latter kind. Birmingham deals
chiefly in manufactures of the former kind; Sheffield in those of the latter; and
the wages of labour in those two different places are said to be suitable to this
difference in the nature of their manufactures.
The establishment of any new manufacture, of any new branch of commerce,
or of any new practice in agriculture, is always a speculation from which the
projector promises himself extraordinary profits. These profits sometimes are
very great, and sometimes, more frequently, perhaps, they are quite otherwise;
but, in general, they bear no regular proportion to those of other old trades in the
neighbourhood. If the project succeeds, they are commonly at first very high.
When the trade or practice becomes thoroughly established and well known, the
competition reduces them to the level of other trades.
Secondly, this equality in the whole of the advantages and disadvantages of
the different employments of labour and stock, can take place only in the
ordinary, or what may be called the natural state of those employments.
The demand for almost every different species of labour is sometimes
greater, and sometimes less than usual. In the one case, the advantages of the
employment rise above, in the other they fall below the common level. The
demand for country labour is greater at hay-time and harvest than during the
greater part of the year; and wages rise with the demand. In time of war, when
forty or fifty thousand sailors are forced from the merchant service into that of
the king, the demand for sailors to merchant ships necessarily rises with their
scarcity; and their wages, upon such occasions, commonly rise from a guinea
and seven-and-twenty shillings to forty shillings and three pounds a-month. In a
decaying manufacture, on the contrary, many workmen, rather than quit their
own trade, are contented with smaller wages than would 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, &c.
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
sevenpence a pair. At Lerwick, the small capital of the Shetland islands,
tenpence a-day, I have been assured, is a common price of common labour. In
the same islands, they knit worsted stockings to the value of a guinea a pair and
upwards.
The spinning of linen yarn is carried on in Scotland nearly in the same way
as the knitting of stockings, by servants, who are chiefly hired for other
purposes. They earn but a very scanty subsistence, who endeavour to get their
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 poor countries. The
following instance, however, of something of the same kind, is to be found in the
capital of a very rich one. There is no city in Europe, I believe, in which houserent 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 amonth, 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, &c. 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 any 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 coachmaker can neither himself make nor
employ journeymen to make his coach-wheels, but must buy them of a master
wheel-wright; this latter trade having been exercised in England before the 5th of
Elizabeth. But a 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, &c. 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 no doubt have been the work of deep
thought and long time, and may justly be considered as among the happiest
efforts of human ingenuity. But when both have been fairly invented, and are
well understood, to explain to any young man, in the completest manner, how to
apply the instruments, and how to construct the machines, cannot well require
more than the lessons of a few weeks; perhaps those of a few days might be
sufficient. In the common mechanic trades, those of a few days might certainly
be sufficient. The dexterity of hand, indeed, even in common trades, cannot be
acquired without much practice and experience. But a young man would practice
with much more diligence and attention, if from the beginning he wrought as a
journeyman, being paid in proportion to the little work which he could execute,
and paying in his turn for the materials which he might sometimes spoil through
awkwardness and inexperience. His education would generally in this way be
more effectual, and always less tedious and expensive. The master, indeed,
would be a loser. He would lose all the wages of the apprentice, which he now
saves, for seven years together. In the end, perhaps, the apprentice himself would
be a loser. In a trade so easily learnt he would have more competitors, and his
wages, when he came to be a complete workman, would be much less than at
present. The same increase of competition would reduce the profits of the
masters, as well as the wages of workmen. The trades, the crafts, the mysteries,
would all be losers. But the public would be a gainer, the work of all artificers
coming in this way much cheaper to market.
It is to prevent this reduction of price, and consequently of wages and profit,
by restraining that free competition which would most certainly occasion it, that
all corporations, and the greater part of corporation laws, have been established.
In order to erect a corporation, no other authority in ancient times was requisite,
in many parts of Europe, but that of the town-corporate in which it was
established. In England, indeed, a charter from the king was likewise necessary.
But this prerogative of the crown seems to have been reserved rather for
extorting money from the subject, than for the defence of the common liberty
against such oppressive monopolies. Upon paying a fine to the king, the charter
seems generally to have been readily granted; and when any particular class of
artificers or traders thought proper to act as a corporation, without a charter, such
adulterine guilds, as they were called, were not always disfranchised upon that
account, but obliged to fine annually to the king, for permission to exercise their
usurped privileges[12]. 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 these 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 done in the last century, or in the
beginning of the present. This change may be regarded as the necessary, though
very late consequence of the extraordinary encouragement given to the industry
of the towns. The 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 in peculiar to them. That industry has its limits like every other; and the
increase of stock, by increasing the competition, necessarily reduces the profit.
The lowering of profit in the town forces out stock to the country, where, by
creating a new demand for country labour, it necessarily raises its wages. It then
spreads itself, if I may say so, over the face of the land, and, by being employed
in agriculture, is in part restored to the country, at the expense of which, in a
great measure, it had originally been accumulated in the town. That everywhere
in Europe the greatest improvements of the country have been owing to such
overflowings of the stock originally accumulated in the towns, I shall endeavour
to 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
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 make the act of the
majority binding upon the whole. In a free trade, an effectual combination
cannot be established but by the unanimous consent of every single trader, and it
cannot last longer than every single trader continues of the same mind. The
majority of a corporation can enact a bye-law, with proper penalties, which will
limit the competition more effectually and more durably than any voluntary
combination whatever.
The pretence that corporations are necessary for the better government of the
trade, is without any foundation. The real and effectual discipline which is
exercised over a workman, is not that of his corporation, but that of his
customers. It is the fear of losing their employment which restrains his frauds
and corrects his negligence. An exclusive corporation necessarily weakens the
force of this discipline. A particular set of workmen must then be employed, let
them behave well or ill. It is upon this account that, in many large incorporated
towns, no tolerable workmen are to be found, even in some of the most
necessary trades. If you would have your work tolerably executed, it must be
done in the suburbs, where the workmen, having no exclusive privilege, have
nothing but their character to depend upon, and you must then smuggle it into
the town as well as you can.
It is in this manner that the policy of Europe, by restraining the competition
in some employments to a smaller number than would otherwise be disposed to
enter into them, occasions a very important inequality in the whole of the
advantages and disadvantages of the different employments of labour and stock.
Secondly, The policy of Europe, by increasing the competition in some
employments beyond what it naturally would be, occasions another inequality, of
an opposite kind, in the whole of the advantages and disadvantages of the
different employments of labour and stock.
It has been considered as of so much importance that a proper number of
young people should be educated for certain professions, that sometimes the
public, and sometimes the piety of private founders, have established many
pensions, scholarships, exhibitions, bursaries, &c. 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[13]. The wages of
both these labourers, therefore, supposing them to have been constantly
employed, were much superior to those of the curate. The wages of the master
mason, supposing him to have been without employment one-third of the year,
would have fully equalled them. By the 12th of Queen Anne, c. 12. it is declared,
'That whereas, for want of sufficient maintenance and encouragement to curates,
the cures have, in several places, been meanly supplied, the bishop is, therefore,
empowered to appoint, by writing under his hand and seal, a sufficient certain
stipend or allowance, not exceeding fifty, and not less than twenty pounds ayear.' Forty pounds a-year is reckoned at present very good pay for a curate; and,
notwithstanding this act of parliament, there are many curacies under twenty
pounds a-year. There are journeymen shoemakers in London who earn forty
pounds a-year, and there is scarce an industrious workman of any kind in that
metropolis who does not earn more than twenty. This last sum, indeed, does not
exceed what is frequently earned by common labourers in many country
parishes. Whenever the law has attempted to regulate the wages of workmen, it
has always been rather to lower them than to raise them. But the law has, upon
many occasions, attempted to raise the wages of curates, and, for the dignity of
the church, to oblige the rectors of parishes to give them more than the wretched
maintenance which they themselves might be willing to accept of. And, in both
cases, the law seems to have been equally ineffectual, and has never either been
able to raise the wages of curates, or to sink those of labourers to the degree that
was intended; because it has never been able to hinder either the one from being
willing to accept of less than the legal allowance, on account of the indigence of
their situation and the multitude of their competitors, or the other from receiving
more, on account of the contrary competition of those who expected to derive
either profit or pleasure from employing them.
The great benefices and other ecclesiastical dignities support the honour of
the church, notwithstanding the mean 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 minæ." "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 minæ were equal to thirteen pounds six shillings and
eightpence; five minæ 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 minæ, or L.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 minæ, or L.3333 : 6 : 8. A thousand minæ,
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 workmen
of other decaying manufactures, who, wherever the statute of apprenticeship
takes place, have no other choice, but either to come upon the parish, or to work
as common labourers; for which, by their habits, they are much worse qualified
than for any sort of manufacture that bears any resemblance to their own. They
generally, therefore, 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 churchwardens or overseers of the poor, to remove any new inhabitant to the parish
where he was last legally settled; unless he either rented a tenement of ten
pounds a-year, or could give such security for the discharge of the parish where
he was then living, as those justices should judge sufficient.
Some frauds, it is said, were committed in consequence of this statute; parish
officers sometimes bribing their own poor to go clandestinely to another parish,
and, by keeping themselves concealed for forty days, to gain a settlement there,
to the discharge of that to which they properly belonged. It was enacted,
therefore, by the 1st of James II. that the forty days undisturbed residence of any
person necessary to gain a settlement, should be accounted only from the time of
his delivering notice, in writing, of the place of his abode and the number of his
family, to one of the 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 3d 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 first two 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 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 to himself by living elsewhere."
Though a certificate carries along with it no testimonial of good behaviour,
and certifies nothing but that the person belongs to the parish to which he really
does belong, it is altogether discretionary in the parish officers either to grant or
to refuse it. A mandamus was once moved for, says Doctor Burn, to compel the
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 sometimes complained of the law of settlements as a public grievance; yet
it has never been the object of any general popular clamour, such as that against
general warrants, an abusive practice undoubtedly, but such a one as was not
likely to occasion any general oppression. There is scarce a poor man in
England, of forty years of age, I will venture to say, who has not, in some part of
his life, felt himself most cruelly oppressed by this 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 other
goods. The assize of bread is, so far as I know, the only remnant of this ancient
usage. Where there is an exclusive corporation, it may, perhaps, he 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 81st 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, as least for any considerable
time, by any such revolutions.
CHAP. 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, soup, 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 profit. 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 are brought within a smaller compass, less labour becomes
requisite to tend them, and to collect their produce. The landlord gains both
ways; by the increase of the produce, and by the diminution of the labour which
must be maintained out of it.
The rent of land not only varies with its fertility, whatever be its produce, but
with its situation, whatever be its fertility. Land in the neighbourhood of a town
gives a greater rent than land equally fertile in a distant part of the country.
Though it may cost no more labour to cultivate the one than the other, it must
always cost more to bring the produce of the distant land to market. A greater
quantity of labour, therefore, must be maintained out of it; and the surplus, from
which are drawn both the profit of the farmer and the rent of the landlord, must
be diminished. But in remote parts of the country, the rate of 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 selfdefence. 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
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 these 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
neighbourhood of Rome, must have been very much discouraged by the
distributions of corn which were frequently made to the people, either
gratuitously, or at a very low price. This corn was brought from the conquered
provinces, of which several, instead of taxes, were obliged to furnish a tenth part
of their produce at a stated price, about sixpence a-peck, to the republic. The low
price at which this corn was distributed to the people, must necessarily have
sunk the price of what could be brought to the Roman market from Latium, or
the ancient territory of Rome, and must have discouraged its cultivation in that
country.
In an open country, too, of which the principal produce is corn, a wellinclosed 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 these 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 twenty-four or twenty-five shillings the hundred weight
of beef, which he considered as the ordinary price; whereas, in that dear year, he
had paid twenty-seven shillings for the same weight and sort. This high price in
1764 is, however, four shillings and eight-pence cheaper than the ordinary price
paid by Prince Henry; and it is the best beef only, it must be observed, which is
fit to be salted for those distant voyages.
The price paid by Prince Henry amounts to 3d. 4-5ths per pound weight of
the whole carcase, coarse and choice pieces taken together; and at that rate the
choice pieces could not have been sold by retail for less than 4½d. or 5d. the
pound.
In the parliamentary inquiry in 1764, the witnesses stated the price of the
choice pieces of the best beef to be to the consumer 4d. and 4½d. the pound; and
the coarse pieces in general to be from seven farthings to 2½d. and 2¾d.; and
this, they said, was in general one halfpenny dearer than the same sort of pieces
had usually been sold in the month of March. But even this high price is still a
good deal cheaper than what we can well suppose the ordinary retail price to
have been in the time of Prince Henry.
During the first twelve years of the last century, the average price of the best
wheat at the Windsor market was L.1 : 18 : 3½d. the quarter of nine Winchester
bushels.
But in the twelve years preceding 1764, including that year, the average price
of the same measure of the best wheat at the same market was L.2 : 1 : 9½d.
In the first twelve years of the last century, therefore, wheat appears to have
been a good deal cheaper, and butcher's meat a good deal dearer, than in the
twelve years preceding 1764, including that year.
In all great countries, the greater part of the cultivated lands are employed in
producing either food for men or food for cattle. The rent and profit of these
regulate the rent and profit of all other cultivated land. If any particular produce
afforded less, the land would soon be turned into corn or pasture; and if any
afforded more, some part of the lands in corn or pasture would soon be turned to
that produce.
Those productions, indeed, which require either a greater original expense of
improvement, or a greater annual expense of cultivation in order to fit the land
for them, appear commonly to afford, the one a greater rent, the other a greater
profit, than corn pasture. This superiority, however, will seldom be found to
amount to more than a reasonable interest or compensation for this superior
expense.
In a hop garden, a fruit garden, a kitchen garden, both the rent of the
landlord, and the profit of the farmer, are generally greater than in a corn or grass
field. But to bring the ground into this condition requires more expense. Hence a
greater rent becomes due to the landlord. It requires, too, a more attentive and
skilful management. Hence a greater profit becomes due to the farmer. The crop,
too, at least in the hop and fruit garden, is more precarious. Its price, therefore,
besides compensating all occasional losses, must afford something like the profit
of insurance. The circumstances of gardeners, generally mean, and always
moderate, may satisfy us that their great ingenuity is not commonly overrecompensed. Their delightful art is practised by so many rich people for
amusement, that little advantage is to be made by these 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 wellwatered 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 the 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 these 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 that recommended by Columella. In Great Britain, and
some other northern countries, the finer fruits cannot be brought to perfection
but by the assistance of a wall. Their price, therefore, in such countries, must be
sufficient to pay the expense of building and maintaining what they cannot be
had without. The fruit-wall frequently surrounds the kitchen garden, which thus
enjoys the benefit of an 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[14], 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[15] (I suspect he has been ill informed), burnt a certain quantity of
tobacco for every negro, in the same manner as the Dutch are said to do of
spices. If such violent methods are necessary to keep up the present price of
tobacco, the superior advantage of its culture over that of corn, if it still has any,
will not probably be of long continuance.
It is in this manner that the rent of the cultivated land, of which the produce
is human food, regulates the rent of the greater part of other cultivated land. No
particular produce can long afford less, because the land would immediately be
turned to another use; and if any particular produce commonly affords more, it is
because the quantity of land which can be fitted for it is too small to supply the
effectual demand.
In Europe, corn is the principal produce of land, which serves immediately
for human food. Except in particular situations, therefore, the rent of corn land
regulates in Europe that of all other cultivated land. Britain need envy neither the
vineyards of France, nor the olive plantations of Italy. Except in particular
situations, the value of these is regulated by that of corn, in which the fertility of
Britain is not much inferior to that of either of those two countries.
If, in any country, the common and favourite vegetable food of the people
should be drawn from a plant, of which the most common land, with the same,
or nearly the same culture, produced a much greater quantity than the most
fertile does of corn; the rent of the landlord, or the surplus quantity of food
which would remain to him, after paying the labour, and replacing the stock of
the farmer, together with its ordinary profits, would necessarily be much greater.
Whatever was the rate at which labour was commonly maintained in that
country, this greater surplus could always maintain a greater quantity of it, and,
consequently, enable the landlord to purchase or command a greater quantity of
it. The real value of his rent, his real power and authority, his command of the
necessaries and conveniencies of life with which the labour of other people
could supply him, would necessarily be much greater.
A rice field produces a much greater quantity of food than the most fertile
corn field. Two crops in the year, from thirty to sixty bushels each, are said to be
the ordinary produce of an acre. Though its cultivation, therefore, requires more
labour, a much greater surplus remains after maintaining all that labour. In those
rice countries, therefore, where rice is the common and favourite vegetable food
of the people, and where the cultivators are chiefly maintained with it, a greater
share of this greater surplus should belong to the landlord than in corn countries.
In Carolina, where the planters, as in other British colonies, are generally both
farmers and landlords, and where rent, consequently, is confounded with profit,
the cultivation of rice is found to be more profitable than that of corn, though
their fields produce only one crop in the year, and though, from the prevalence of
the customs of Europe, rice is not there the common and favourite vegetable
food of the people.
A good rice field is a bog at all seasons, and at one season a bog covered
with water. It is unfit either for corn, or pasture, or vineyard, or, indeed, for any
other vegetable produce that is very useful to men; and the lands which are fit
for those purposes are not fit for rice. Even in the rice countries, therefore, the
rent of rice lands cannot regulate the rent of the other cultivated land which can
never be turned to that produce.
The food produced by a field of potatoes is not inferior in quantity to that
produced by a field of rice, and much superior to what is produced by a field of
wheat. Twelve thousand weight of potatoes from an acre of land is not a greater
produce than two thousand weight of wheat. The food or solid nourishment,
indeed, which can be drawn from each of those two plants, is not altogether in
proportion to their weight, on account of the watery nature of potatoes.
Allowing, however, half the weight of this root to go to water, a very large
allowance, such an acre of potatoes will still produce six thousand weight of
solid nourishment, three times the quantity produced by the acre of wheat. An
acre of potatoes is cultivated with less expense than an acre of wheat; the fallow,
which generally precedes the sowing of wheat, more than compensating the
hoeing and other extraordinary culture which is always given to potatoes. Should
this root ever become in any part of Europe, like rice in some rice countries, the
common and favourite vegetable food of the people, so as to occupy the same
proportion of the lands in tillage, which wheat and other sorts of grain for human
food do at present, the same quantity of cultivated land would maintain a much
greater number of people; and the labourers being generally fed with potatoes, a
greater surplus would remain after replacing all the stock, and maintaining all
the labour employed in cultivation. A greater share of this surplus, too, would
belong to the landlord. Population would increase, and rents would rise much
beyond what they are at present.
The land which is fit for potatoes, is fit for almost every other useful
vegetable. If they occupied the same proportion of cultivated land which corn
does at present, they would regulate, in the same manner, the rent of the greater
part of other cultivated land.
In some parts of Lancashire, it is pretended, I have been told, that bread of
oatmeal is a heartier food for labouring people than wheaten bread, and I have
frequently heard the same doctrine held in Scotland. I am, however, somewhat
doubtful of the truth of it. The common people in Scotland, who are fed with
oatmeal, are in general neither so strong nor so handsome as the same rank of
people in England, who are fed with wheaten bread. They neither work so well,
nor look so well; and as there is not the same difference between the people of
fashion in the two countries, experience would seem to 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
those materials, which are frequently, upon that account, of little or no value. In
the other, there is often a scarcity, which necessarily augments their value. In the
one state, a great part of them is thrown away as useless; and the price of what is
used is considered as equal only to the labour and expense of fitting it for use,
and can, therefore, afford no rent to the landlord. In the other, they are all made
use of, and there is frequently a demand for more than can be had. Somebody is
always willing to give more for every part of them, than what is sufficient to pay
the expense of bringing them to market. Their price, therefore, can always afford
some rent to the landlord.
The skins of the larger animals were the original materials of clothing.
Among nations of hunters and shepherds, therefore, whose food consists chiefly
in the flesh of those animals, every man, by providing himself with food,
provides himself with the materials of more clothing than he can wear. If there
was no foreign commerce, the greater part of them would be thrown away as
things of no value. This was probably the case among the hunting nations of
North America, before their country was discovered by the Europeans, with
whom they now exchange their surplus peltry, for blankets, fire-arms, and
brandy, which gives it some value. In the present commercial state of the known
world, the most barbarous nations, I believe, among whom land property is
established, have some foreign commerce of this kind, and find among their
wealthier neighbours such a demand for all the materials of clothing, which their
land produces, and which can neither be wrought up nor consumed at home, as
raises their price above what it costs to send them to those wealthier neighbors.
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 wellcultivated 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, as 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 cultivated, it will frequently not fall much short
of this rent. Upon the sea-coast of a well-improved country, indeed, if coals can
conveniently be had for fuel, it may sometimes be cheaper to bring barren timber
for building from less cultivated foreign countries than to raise it at home. In the
new town of Edinburgh, built within these few years, there is not, perhaps, a
single stick of Scotch timber.
Whatever may be the price of wood, if that of coals is such that the expense
of a coal fire is nearly equal to that of a wood one, we may be assured, that at
that place, and in these circumstances, the price of coals is as high as it can be. It
seems to be so in some of the inland parts of England, particularly in
Oxfordshire, where it is usual, even in the fires of the common people, to mix
coals and wood together, and where the difference in the expense of those two
sorts of fuel cannot, therefore, be very great. Coals, in the coal countries, are
everywhere much below this highest price. If they were not, they could not bear
the expense of a distant carriage, either by land or by water. A small quantity
only could be sold; and the coal masters and 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 must 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 paying
any acknowledgment to the landlord. The interest of the duke of Cornwall has
given occasion to a regulation nearly of the same kind in that ancient dutchy. In
waste and uninclosed lands, any person who discovers a tin mine may mark out
its limits to a certain extent, which is called bounding a mine. The bounder
becomes the real proprietor of the mine, and may either work it himself, or give
it in lease to another, without the consent of the owner of the land, to whom,
however, a very small acknowledgment must be paid upon working it. In both
regulations, the sacred rights of private property are sacrificed to the supposed
interests of public revenue.
The same encouragement is given in Peru to the discovery and working of
new gold mines; and in gold the king's tax amounts only to a twentieth part of
the standard rental. It was once a fifth, and afterwards a tenth, as in silver; but it
was found that the work could not bear even the lowest of these two taxes. If it is
rare, however, say the same authors, Frezier and Ulloa, to find a person who has
made his fortune by a silver, it is still much rarer to find one who has done so by
a gold mine. This twentieth part seems to be the whole rent which is paid by the
greater part of the gold mines of Chili and Peru. Gold, too, is much more liable
to be smuggled than even silver; not only on account of the superior value of the
metal in proportion to its bulk, but on account of the peculiar way in which
nature produces it. Silver is very seldom found virgin, but, like most other
metals, is generally mineralized with some other body, from which it is
impossible to separate it in such quantities as will pay for the expense, but by a
very laborious and tedious operation, which cannot well be carried on but in
work-houses erected for the purpose, and, therefore, exposed to the inspection of
the king's officers. Gold, on the contrary, is almost always found virgin. It is
sometimes found in pieces of some bulk; and, even when mixed, in small and
almost insensible particles, with sand, earth, and other extraneous bodies, it can
be separated from them by a very short and simple operation, which can be
carried on in any private house by any body who is possessed of a small quantity
of mercury. If the king's tax, therefore, is but ill paid upon silver, it is likely to be
much worse paid upon gold; and rent must make a much smaller part of the price
of gold than that of silver.
The lowest price at which the precious metals can be sold, or the smallest
quantity of other goods for which they can be exchanged, during any
considerable time, is regulated by the same principles which fix the lowest
ordinary price of all other goods. The stock which must commonly be employed,
the food, clothes, and lodging, which must commonly be consumed in bringing
them from the mine to the market, determine it. It must at least be sufficient to
replace that stock, with the ordinary profits.
Their highest price, however, seems not to be necessarily determined by any
thing but the actual scarcity or plenty of these metals themselves. It is not
determined by that of any other commodity, in the same manner as the price of
coals is by that of wood, beyond which no scarcity can ever raise it. Increase the
scarcity of gold to a certain degree, and the smallest bit of it may become more
precious than a diamond, and exchange for a greater quantity of other goods.
The demand for those metals arises partly from their utility, and partly from
their beauty. If you except iron, they are more useful than, perhaps, any other
metal. As they are less liable to rust and impurity, they can more easily be kept
clean; and the utensils, either of the table or the kitchen, are often, upon that
account, more agreeable when made of them. A silver boiler is more cleanly than
a lead, copper, or tin one; and the same quality would render a gold boiler still
better than a silver one. Their principal merit, however, arises from their beauty,
which renders them peculiarly fit for the ornaments of dress and furniture. No
paint or dye can give so splendid a colour as gilding. The merit of their beauty is
greatly enhanced by their scarcity. With the greater part of rich people, the chief
enjoyment of riches consists in the parade of riches; which, in their eye, is never
so complete as when they appear to possess those decisive marks of opulence
which nobody can possess but themselves. In their eyes, the merit of an object,
which is in any degree either useful or beautiful, is greatly enhanced by its
scarcity, or by the great labour which it requires to collect any considerable
quantity of it; a labour which nobody can afford to pay but themselves. Such
objects they are willing to purchase at a higher price than things much more
beautiful and useful, but more common. These qualities of utility, beauty, and
scarcity, are the original foundation of the high price of those metals, or of the
great quantity of other goods for which they can everywhere be exchanged. This
value was antecedent to, and independent of their being employed as coin, and
was the quality which fitted them for that employment. That employment,
however, by occasioning a new demand, and by diminishing the quantity which
could be employed in any other way, may have afterwards contributed to keep
up or increase their value.
The demand for the precious stones arises altogether from their beauty. They
are of no use but as ornaments; and the merit of their beauty is greatly enhanced
by their scarcity, or by the difficulty and expense of getting them from the mine.
Wages and profit accordingly make up, upon most occasions, almost the whole
of the high price. Rent comes in but for a very small share, frequently for no
share; and the most fertile mines only afford any considerable rent. When
Tavernier, a jeweller, visited the diamond mines of Golconda and Visiapour, he
was informed that the sovereign of the country, for whose benefit they were
wrought, had ordered all of them to be shut up except those which yielded the
largest and finest stones. The other, it seems, were to the proprietor not worth the
working.
As the prices, both of the precious metals and of the precious stones, is
regulated all over the world by their price at the most fertile mine in it, the rent
which a mine of either can afford to its proprietor is in proportion, not to its
absolute, but to what may be called its relative fertility, or to its superiority over
other mines of the same kind. If new mines were discovered, as much superior to
those of Potosi, as they were superior to those of Europe, the value of silver
might be so much degraded as to render even the mines of Potosi not worth the
working. Before the discovery of the Spanish West Indies, the most fertile mines
in Europe may have afforded as great a rent to their proprietors as the richest
mines in Peru do at present. Though the quantity of silver was much less, it
might have exchanged for an equal quantity of other goods, and the proprietor's
share might have enabled him to purchase or command an equal quantity either
of labour or of commodities.
The value, both of the product and of the rent, the real revenue which they
afforded, both to the public and to the proprietor, might have been the same.
The most abundant mines, either of the precious metals, or of the precious
stones, could add little to the wealth of the world. A produce, of which the value
is principally derived from its scarcity, is necessarily degraded by its abundance.
A service of plate, and the other frivolous ornaments of dress and furniture,
could be purchased for a smaller quantity of labour, or for a smaller quantity of
commodities; and in this would consist the sole advantage which the world could
derive from that abundance.
It is otherwise in estates above ground. The value, both of their produce and
of their rent, is in proportion to their absolute, and not to their relative fertility.
The land which produces 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 or 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 be higher than their ordinary proportion to
the price of wheat.
These prices are not recorded, on account of their extraordinary dearness or
cheapness, but are mentioned accidentally, as the prices actually paid for large
quantities of grain consumed at a feast, which was famous for its magnificence.
In 1262, being the 51st of Henry 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 shillings and eightpence the quarter, in the other at five shillings
and eightpence only. In 1512, six shillings and eightpence contained only two
ounces of silver, Tower weight, and were equal to about ten shillings of our
present money.
From the 25th of Edward III. to the beginning of the reign of Elizabeth,
during the space of more than two hundred years, six shillings and eightpence, it
appears from several different statutes, had continued to be considered as what is
called the moderate and reasonable, that is, the ordinary or average price of
wheat. The quantity of silver, however, contained in that nominal sum was,
during the course of this period, continually diminishing, in consequence of
some alterations which were made in the coin. But the increase of the value of
silver had, it seems, so far compensated the diminution of the quantity of it
contained in the same nominal sum, that the legislature did not think it worth
while to attend to this circumstance.
Thus, in 1436, it was enacted, that wheat might be exported without a licence
when the price was so low as six shillings and eightpence: and in 1463, it was
enacted, that no wheat should be imported if the price was not above six
shillings and eightpence the quarter. The legislature had imagined, that when the
price was so low, there could be no inconveniency in exportation, but that when
it rose higher, it became prudent to allow 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 2d of Philip and Mary, and in 1558, by the 1st of
Elizabeth, the exportation of wheat was in the same manner prohibited,
whenever the price of the quarter should exceed six shillings and eightpence,
which did not then contain two penny worth more silver than the same nominal
sum does at present. But it had soon been found, that to restrain the exportation
of wheat till the price was so very low, was, in reality, to prohibit it altogether. In
1562, therefore, by the 5th of Elizabeth, the exportation of wheat was allowed
from certain ports, whenever the price of the quarter should not exceed ten
shillings, containing nearly the same quantity of silver as the like nominal sum
does at present. This price had at this time, therefore, been considered as what is
called the moderate and reasonable price of wheat. It agrees nearly with the
estimation of the Northumberland book in 1512.
That in France the average price of grain was, in the same manner, much
lower in the end of the fifteenth and beginning of the sixteenth century, than in
the two centuries preceding, has been observed both by Mr Dupré de St Maur,
and by the elegant author of the Essay on the Policy of Grain. Its price, during
the same period, had probably sunk in the same manner through the greater part
of Europe.
This rise in the value of silver, in proportion to that of corn, may either have
been owing altogether to the increase of the demand for that metal, in
consequence of increasing improvement and cultivation, the supply, in the mean
time, continuing the same as before; or, the demand continuing the same as
before, it may have been owing altogether to the gradual diminution of the
supply: the greater part of the mines which were then known in the world being
much exhausted, and, consequently, the expense of working them much
increased; or it may have been owing partly to the one, and partly to the other of
those two circumstances. In the end of the fifteenth and beginning of the
sixteenth centuries, the greater part of Europe was approaching towards a more
settled form of government than it had enjoyed for several ages before. The
increase of security would naturally increase industry and improvement; and the
demand for the precious metals, as well as for every other luxury and ornament,
would naturally increase with the increase of riches. A greater annual produce
would require a greater quantity of coin to circulate it; and a greater number of
rich people would require a greater quantity of plate and other ornaments of
silver. It is natural to suppose, too, that the greater part of the mines which then
supplied the European market with silver might be a good deal exhausted, and
have become more expensive in the working. They had been wrought, many of
them, from the time of the Romans.
It has been the opinion, however, of the greater part of those who have
written upon the prices of commodities in ancient times, that, from the Conquest,
perhaps from the invasion of Julius Cæsar, till the discovery of the mines of
America, the value of silver was continually diminishing. This opinion they
seem to have been led into, partly by the observations which they had occasion
to make upon the prices both of corn and of some other parts of the rude produce
of land, and partly by the popular notion, that as the quantity of silver naturally
increases in every country with the increase of wealth, so its value diminishes as
its quantity increases.
In their observations upon the prices of corn, three different circumstances
seem frequently to have misled them.
First, in ancient times, almost all rents were paid in kind; in a certain quantity
of corn, cattle, poultry, &c. 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[16] 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 præscripta, habendo respectum ad
pretium bladi."—"You shall judge of the remaining cases, according to what is
above written, having respect to the price of corn."
Thirdly, they seem to have been misled too, by the very low price at which
wheat was sometimes sold in very ancient times; and to have imagined, that as
its lowest price was then much lower than in later times its ordinary price must
likewise have been much lower. They might have found, however, that in those
ancient times its highest price was fully as much above, as its lowest price was
below any thing that had ever been known in later times. Thus, in 1270,
Fleetwood gives us two prices of the quarter of wheat. The one is four pounds
sixteen shillings of the money of those times, equal to fourteen pounds eight
shillings of that of the present; the other is six pounds eight shillings, equal to
nineteen pounds four shillings of our present money. No price can be found in
the end of the fifteenth, or beginning of the sixteenth century, which approaches
to the extravagance of these. The price of corn, though at all times liable to
variation, varies most in those turbulent and disorderly societies, in which the
interruption of all commerce and communication hinders the plenty of one part
of the country from relieving the scarcity of another. In the disorderly state of
England under the Plantagenets, who governed it from about the middle of the
twelfth till towards the end of the fifteenth century, one district might be in
plenty, while another, at no great distance, by having its crop destroyed, either by
some accident of the seasons, or by the incursion of some neighbouring baron,
might be suffering all the horrors of a famine; and yet if the lands of some
hostile lord were interposed between them, the one might not be able to give the
least assistance to the other. Under the vigorous administration of the Tudors,
who governed England during the latter part of the fifteenth, and through the
whole of the sixteenth century, no baron was powerful enough to dare to disturb
the public security.
The reader will find at the end of this chapter all the prices of wheat which
have been collected by Fleetwood, from 1202 to 1597, both inclusive, reduced to
the money of the present times, and digested, according to the order of time, into
seven divisions of twelve years each. At the end of each division, too, he will
find the average price of the twelve years of which it consists. In that long period
of time, Fleetwood has been able to collect the prices of no more than eighty
years; so that four years are wanting to make out the last twelve years. I have
added, therefore, from the accounts of Eton college, the prices of 1598, 1599,
1600, and 1601. It is the only addition which I have made. The reader will see,
that from the beginning of the thirteenth till after the middle of the sixteenth
century, the average price of each twelve years grows gradually lower and lower;
and that towards the and of the sixteenth century it begins to rise again. The
prices, indeed, which Fleetwood has been able to collect, seem to have been
those chiefly which were remarkable for extraordinary dearness or cheapness;
and I do not pretend that any very certain conclusion can be drawn from them.
So far, however, as they prove any thing at all, they confirm the account which I
have been endeavouring to give. Fleetwood himself, however, seems, with most
other writers, to have believed, that, during all this period, the value of silver, in
consequence of its increasing abundance, was continually diminishing. The
prices of corn, which he himself has collected, certainly do not agree with this
opinion. They agree perfectly with that of Mr Dupré de St Maur, and with that
which I have been endeavouring to explain. Bishop Fleetwood and Mr Dupré de
St Maur are the two authors who seem to have collected, with the greatest
diligence and fidelity, the prices of things in ancient times. It is somewhat
curious that, though their opinions are so very different, their facts, so far as they
relate to the price of corn at least, should coincide so very exactly.
It is not, however, so much from the low price of corn, as from that of some
other parts of the rude produce of land, that the most judicious writers have
inferred the great value of silver in those very ancient times. Corn, it has been
said, being a sort of manufacture, was, in those rude ages, much dearer in
proportion than the greater part of other commodities; it is meant, I suppose,
than the greater part of unmanufactured commodities, such as cattle, poultry,
game of all kinds, &c. 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 time 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, &c. 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, &c. as they are the spontaneous productions of Nature, so she
frequently produces them in much greater quantities than the consumption of the
inhabitants requires. In such a state of things, the supply commonly exceeds the
demand. In different states of society, in different states of improvement,
therefore, such commodities will represent, or be equivalent, to very different
quantities of labour.
In every state of society, in every stage of improvement, corn is the
production of human industry. But the average produce of every sort of industry
is always suited, more or less exactly, to the average consumption; the average
supply to the average demand. In every different stage of improvement, besides,
the raising of equal quantities of corn in the same soil and climate, will, at an
average, require nearly equal quantities of labour; or, what comes to the same
thing, the price of nearly equal quantities; the continual increase of the
productive powers of labour, in an improved state of cultivation, being more or
less counterbalanced by the continual increasing price of cattle, the principal
instruments of agriculture. Upon all these accounts, therefore, we may rest
assured, that equal quantities of corn will, in every state of society, in every stage
of improvement, more nearly represent, or be equivalent to, equal quantities of
labour, than equal quantities of any other part of the rude produce of land. Corn,
accordingly, it has already been observed, is, in all the different stages of wealth
and improvement, a more accurate measure of value than any other commodity
or set of commodities. In all those different stages, therefore, we can judge better
of the real value of silver, by comparing it with corn, than by comparing it with
any other commodity or set of commodities.
Corn, besides, or whatever else is the common and favourite vegetable food
of the people, constitutes, in every civilized country, the principal part of the
subsistence of the labourer. In consequence of the extension of agriculture, the
land of every country produces a much greater quantity of vegetable than of
animal food, and the labourer everywhere lives chiefly upon the wholesome food
that is cheapest and most abundant. Butcher's meat, except in the most thriving
countries, or where labour is most highly rewarded, makes but an insignificant
part of his subsistence; poultry makes a still smaller part of it, and game no part
of it. In France, and even in Scotland, where labour is somewhat better rewarded
than in France, the labouring poor seldom eat butcher's meat, except upon
holidays, and other extraordinary occasions. The money price of labour,
therefore, depends much more upon the average money price of corn, the
subsistence of the labourer, than upon that of butcher's meat, or of any other part
of the rude produce of land. The real value of gold and silver, therefore, the real
quantity of labour which they can purchase or command, depends much more
upon the quantity of corn which they can purchase or command, than upon that
of butcher's meat, or any other part of the rude produce of land.
Such slight observations, however, upon the prices either of corn or of other
commodities, would not probably have misled so many intelligent authors, had
they not been influenced at the same time by the popular notion, that as the
quantity of silver naturally increases in every country with the increase of
wealth, so its value diminishes as its quantity increases. This notion, however,
seems to be altogether groundless.
The quantity of the precious metals may increase in any country from two
different causes; either, first, from the increased abundance of the mines which
supply it; or, secondly, from the increased wealth of the people, from the
increased produce of their annual labour. The first of these causes is no doubt
necessarily connected with the diminution of the value of the precious metals;
but the second is not.
When more abundant mines are discovered, a greater quantity of the precious
metals is brought to market; and the quantity of the necessaries and
conveniencies of life for which they must be exchanged being the same as
before, equal quantities of the metals must be exchanged for smaller quantities
of commodities. So far, therefore, as the increase of the quantity of the precious
metals in any country arises from the increased abundance of the mines, it is
necessarily connected with some diminution of their value.
When, on the contrary, the wealth of any country increases, when the annual
produce of its labour becomes gradually greater and greater, a greater quantity of
coin becomes necessary in order to circulate a greater quantity of commodities:
and the people, as they can afford it, as they have more commodities to give for
it, will naturally purchase a greater and a greater quantity of plate. The quantity
of their coin will increase from necessity; the quantity of their plate from vanity
and ostentation, or from the same reason that the quantity of fine statues,
pictures, and of every other luxury and curiosity, is likely to increase among
them. But as statuaries and painters are not likely to be worse rewarded in times
of wealth and prosperity, than in times of poverty and depression, so gold and
silver are not likely to be worse paid for.
The price of gold and silver, when the accidental discovery of more abundant
mines does not keep it down, as it naturally rises with the wealth of every
country; so, whatever be the state of the mines, it is at all times naturally higher
in a rich than in a poor country. Gold and silver, like all other commodities,
naturally seek the market where the best price is given for them, and the best
price is commonly given for every thing in the country which can best afford it.
Labour, it must be remembered, is the ultimate price which is paid for every
thing; and in countries where labour is equally well rewarded, the money price
of labour will be in proportion to that of the subsistence of the labourer. But gold
and silver will naturally exchange for a greater quantity of subsistence in a rich
than in a poor country; in a country which abounds with subsistence, than in one
which is but indifferently supplied with it. If the two countries are at a great
distance, the difference may be very great; because, though the metals naturally
fly from the worse to the better market, yet it may be difficult to transport them
in such quantities as to bring their price nearly to a level in both. If the countries
are near, the difference will be smaller, and may sometimes be scarce
perceptible; because in this case the transportation will be easy. China is a much
richer country than any part of Europe, and the difference between the price of
subsistence in China and in Europe is very great. Rice in China is much cheaper
than wheat is anywhere in Europe. England is a much richer country than
Scotland, but the difference between the money price of corn in those two
countries is much smaller, and is but just perceptible. In proportion to the
quantity or measure, Scotch corn generally appears to be a good deal cheaper
than English; but, in proportion to its quality, it is certainly somewhat dearer.
Scotland receives almost every year very large supplies from England, and every
commodity must commonly be somewhat dearer in the country to which it is
brought than in that from which it comes. English corn, therefore, must be dearer
in Scotland than in England; and yet in proportion to its quality, or to the
quantity and goodness of the flour or meal which can be made from it, it cannot
commonly be sold higher there than the Scotch corn which comes to market in
competition with it.
The difference between the money price of labour in China and in Europe, is
still greater than that between the money price of subsistence; because the real
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 these 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 cast of silver must be nearly the same in both
places; but that of corn must be very different. Diminish the real opulence either
of Holland or of the territory of Genoa, while the number of their inhabitants
remains the same; diminish their power of supplying themselves from distant
countries; and the price of corn, instead of sinking with that diminution in the
quantity of their silver, which must necessarily accompany this declension, either
as its cause or as its effect, will rise to the price of a famine. When we are in
want of necessaries, we must part with all superfluities, of which the value, as it
rises in times of opulence and prosperity, so it sinks in times of poverty and
distress. It is otherwise with necessaries. Their real price, the quantity of labour
which they can purchase or command, rises in times of poverty and distress, and
sinks in times of opulence and prosperity, which are always times of great
abundance; for they could not otherwise be times of opulence and prosperity
Corn is a necessary, silver is only a superfluity.
Whatever, therefore, may have been the increase in the quantity of the
precious metals, which, during the period between the middle of the fourteenth
and that of the sixteenth century, arose from the increase of wealth and
improvement, it could have no tendency to diminish their value, either in Great
Britain, or in any other part of Europe. If those who have collected the prices of
things in ancient times, therefore, had, during this period, no reason to infer the
diminution of the value of silver from any observations which they had made
upon the prices either of corn, or of other commodities, they had still less reason
to infer it from any supposed increase of wealth and improvement.
Second Period.—But how various soever may have been the opinions of the
learned concerning the progress of the value of silver during 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; even though 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 L.2 : 1 : 69⁄13. From which sum, neglecting the fraction,
and deducting a ninth, or 4s. 71⁄3d., the price of the quarter of eight bushels
comes out to have been L.1 : 16 : 102⁄3. And from this sum, neglecting likewise
the fraction, and deducting a ninth, or 4s. 11⁄9d., 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 L.1 : 12 : 88⁄9, or about six ounces and onethird 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 L.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 L.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, is 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 L.2 : 11 : 01⁄3,
which is only 1s. 01⁄3d. dearer than it had been during the sixteen years before.
But, in the course of these sixty-four years, there happened two events, which
must have produced a much greater scarcity of corn than what the course of the
seasons would otherwise have occasioned, and which, therefore, without
supposing any further reduction in the value of silver, will much more than
account for this very small enhancement of price.
The first of these events was the civil war, which, by discouraging tillage and
interrupting commerce, must have raised the price of corn much above what the
course of the seasons would otherwise have occasioned. It must have had this
effect, more or less, at all the different markets in the kingdom, but particularly
at those in the neighborhood 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 L.4 : 5s., and, in 1649, to
have been L.4, the quarter of nine bushels. The excess of those two years above
L.2 10s. (the average price of the sixteen years preceding 1637) is L.3 5s.,
which, divided among the sixty-four last years of the last century, will alone very
nearly account for that small enhancement of price which seems to have taken
place in them. These, however, though the highest, are by no means the only
high prices which seem to have been occasioned by the civil wars.
The second event was the bounty upon the exportation of corn, granted in
1688. The bounty, it has been thought by many people, by encouraging tillage,
may, in a long course of years, have occasioned a greater abundance, and,
consequently, a greater cheapness of corn in the home market, than what would
otherwise have taken place there. How far the bounty could produce this effect at
any time I shall examine hereafter: I shall only observe at present, that between
1688 and 1700, it had not time to produce any such effect. During this short
period, its only effect must have been, by encouraging the exportation of the
surplus produce of every year, and thereby hindering the abundance of one year
from compensating the scarcity of another, to raise the price in the home market.
The scarcity which prevailed in England, from 1693 to 1699, both inclusive,
though no doubt principally owing to the badness of the seasons, and, therefore,
extending through a considerable part of Europe, must have been somewhat
enhanced by the bounty. In 1699, accordingly, the further exportation of corn
was prohibited for nine months.
There was a third event which occurred in the course of the same period, and
which, though it could not occasion any scarcity of corn, nor, perhaps, any
augmentation in the real quantity of silver which was usually paid for it, must
necessarily have occasioned some augmentation in the nominal sum. This event
was the great debasement of the silver coin, by clipping and wearing. This evil
had begun in the reign of Charles II. and had gone on continually increasing till
1695; at which time, as we may learn from Mr Lowndes, the current silver coin
was, at an average, near five-and-twenty per cent. below its standard value. But
the nominal sum which constitutes the market price of every commodity is
necessarily regulated, not so much by the quantity of silver, which, according to
the standard, ought to be contained in it, as by that which, it is found by
experience, actually is contained in it. This nominal sum, therefore, is
necessarily higher when the coin is much debased by clipping and wearing, than
when near to its standard value.
In the course of the present century, the silver coin has not at any time been
more below its standard weight than it is at present. But though very much
defaced, its value has been kept up by that of the gold coin, for which it is
exchanged. For though, before the late recoinage, the gold coin was a good deal
defaced too, it was less so than the silver. In 1695, on the contrary, the value of
the silver coin was not kept up by the gold coin; a guinea then commonly
exchanging for thirty shillings of the worn and clipt silver. Before the late
recoinage of the gold, the price of silver bullion was seldom higher than five
shillings and sevenpence an ounce, which is but fivepence above the mint price.
But in 1695, the common price of silver bullion was six shillings and fivepence
an ounce,[17] 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 rather
discourage, 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, open 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 L.2 : 0 : 610⁄32, which is about ten
shillings and sixpence, or more than five-and-twenty per cent. cheaper than it
had been during the sixty-four last years of the last century; and about nine
shillings and sixpence cheaper than is 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 L.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 times of Charles I. and II. It was to take
place, therefore, till wheat was so high as forty-eight 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-andforty 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 any thing 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 time 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 these 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 maybe said the state of tillage would not have
been the same. What may have been the effects of this institution upon the
agriculture of the country, I shall endeavour to explain hereafter, when I come to
treat particularly of bounties. I shall only observe at present, that this rise in the
value of silver, in proportion to that of corn, has not been peculiar to England. It
has been observed to have taken place in France during the same period, and
nearly in the same proportion, too, by three very faithful, diligent, and laborious
collectors of the prices of corn, Mr Dupré de St Maur, Mr Messance, and the
author of the Essay on the Police of Grain. But in France, till 1764, the
exportation of grain was by law prohibited; and it is somewhat difficult to
suppose, that nearly the same diminution of price which took place in one
country, notwithstanding this prohibition, should, in another, be owing to the
extraordinary encouragement given to exportation.
It would be more proper, perhaps, to consider this variation in the average
money price of corn as the effect rather of some gradual rise in the real value of
silver in the European market, than of any fall in the real average value of corn.
Corn, it has already been observed, is, at distant periods of time, a more accurate
measure of value than either silver or, perhaps, any other commodity. When,
after the discovery of the abundant mines of America, corn rose to three and four
times its former money price, this change was universally ascribed, not to any
rise in the real value of corn, but to a fall in the real value of silver. If, during the
sixty-four first years of the present century, therefore, the average money price
of corn has fallen somewhat below what it had been during the greater part of
the last century, we should, in the same manner, impute this change, not to any
fall in the real value of corn, but to some rise in the real value of silver in the
European market.
The high price of corn during these ten or twelve years past, indeed, has
occasioned a suspicion that the real value of silver still continues to fall in the
European market. This high price of corn, however, seems evidently to have
been the effect of the extraordinary unfavourableness of the seasons, and ought,
therefore, to be regarded, not as a permanent, but as a transitory and occasional
event. The seasons, for these ten or twelve years past, have been unfavourable
through the greater part of Europe; and the disorders of Poland have very much
increased the scarcity in all those countries, which, in dear years, used to be
supplied from that market. So long a course of bad seasons, though not a very
common event, is by no means a singular one; and whoever has inquired much
into the history of the prices of corn in former times, will be at no loss to
recollect several other examples of the same kind. Ten years of extraordinary
scarcity, besides, are not more wonderful than ten years of extraordinary plenty.
The low price of corn, from 1741 to 1750, both inclusive, may very well be set
in opposition to its high price during these last eight or ten years. From 1741 to
1750, the average price of the quarter of nine bushels of the best wheat, at
Windsor market, it appears from the accounts of Eton College, was only L.1 : 13
: 94⁄5, 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 L.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 L.1,514,962 : 17 : 4½. 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 L.324,176 : 10 : 6.[18] It is
unnecessary to observe how much this forced exportation must have raised the
price of corn above what it otherwise would have been in the home market.
At the end of the accounts annexed to this chapter the reader will find the
particular account of those ten years separated from the rest. He will find there,
too, the particular account of the preceding ten years, of which the average is
likewise below, though not so much below, the general average of the sixty-four
first years of the century. The year 1740, however, was a year of extraordinary
scarcity. These twenty years preceding 1750 may very well be set in opposition
to the twenty preceding 1770. As the former were a good deal below the general
average of the century, notwithstanding the intervention of one or two dear
years; so the latter have been a good deal above it, notwithstanding the
intervention of one or two cheap ones, of 1759, for example. If the former have
not been as much below the general average as the latter have been above it, we
ought probably to impute it to the bounty. The change has evidently been too
sudden to be ascribed to any change in the value of silver, which is always slow
and gradual. The suddenness of the effect can be accounted for only by a cause
which can operate suddenly, the accidental variations of the seasons.
The money price of labour in Great Britain has, indeed, risen during the
course of the present century. This, however, seems to be the effect, not so much
of any diminution in the value of silver in the European market, as of an increase
in the demand for labour in Great Britain, arising from the great, and almost
universal prosperity of the country. In France, a country not altogether so
prosperous, the money price of labour has, since the middle of the last century,
been observed to sink gradually with the average money price of corn. Both in
the last century and in the present, the day wages of common labour are there
said to have been pretty uniformly about the twentieth part of the average price
of the septier of wheat; a measure which contains a little more than four
Winchester bushels. In Great Britain, the real recompence of labour, it has
already been shewn, the real quantities of the necessaries and conveniencies of
life which are given to the labourer, has increased considerably during the course
of the present century. The rise in its money price seems to have been the effect,
not of any diminution of the value of silver in the general market of Europe, but
of a rise in the real price of labour, in the particular market of Great Britain,
owing to the peculiarly happy circumstances of the country.
For some time after the first discovery of America, silver would continue to
sell at its former, or not much below its former price. The profits of mining
would for some time be very great, and much above their natural rate. Those
who imported that metal into Europe, however, would soon find that the whole
annual importation could not be disposed of at this high price. Silver would
gradually exchange for a smaller and a smaller quantity of goods. Its price would
sink gradually lower and lower, till it fell to its natural price; or to what was just
sufficient to pay, according to their natural rates, the wages of the labour, the
profits of the stock, and the rent of the land, which must be paid in order to bring
it from the mine to the market. In the greater part of the silver mines of Peru, the
tax of the king of Spain, amounting to a tenth of the gross produce, eats up, it has
already been observed, the whole rent of the land. This tax was originally a half;
it soon afterwards fell to a third, then to a fifth, and at last to a tenth, at which
rate it still continues. In the greater part of the silver mines of Peru, this, it
seems, is all that remains, after replacing the stock of the undertaker of the work,
together with its ordinary profits; and it seems to be universally acknowledged
that these profits, which were once very high, are now as low as they can well
be, consistently with carrying on the works.
The tax of the king of Spain was reduced to a fifth of the registered silver in
1504[19], one-and-forty years before 1545, the date of the 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 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 and 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, &c. 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[20], 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
L.3,413,431 : 10s. sterling. The gold, at forty-four guineas and a half the pound
troy, amounts to L.2,333,446 : 14s. sterling. Both together amount to
L.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
13,984,1853⁄5 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
L.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 L.250,000 sterling, so that the whole
will amount to L.2,250,000 sterling. According to this account, therefore, the
whole annual importation of the precious metals into both Spain and Portugal,
amounts to about L.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 course 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, these variations have not the same effect upon the price of the
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 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, snuffboxes, 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[21], 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 in there
difficult to get more gold than what is necessary to carry about in your pocket.
The superior value, however, of the silver plate above that of the gold, which
takes place in all countries, will much more than compensate the preponderancy
of the gold coin above the silver, which takes place only in some countries.
Though, in one sense of the word, silver always has been, and probably
always will be, much cheaper than gold; yet, in another sense, gold may perhaps,
in the present state of the Spanish market, be said to be somewhat cheaper than
silver. A commodity may be said to be dear or cheap not only according to the
absolute greatness or smallness of its usual price, but according as that price is
more or less above the lowest for which it is possible to bring it to market for
any considerable time together. This lowest price is that which barely replaces,
with a moderate profit, the stock which must be employed in bringing of 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 us 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 onetenth, 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
every body 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 these 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 action, 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, &c. 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 rent 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, some times 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 some time before, and after the
fall of the republic, than it is through the greater part of Europe at present. Three
sestertii equal to about sixpence sterling, was the price which the republic paid
for the modius or peck of the tithe wheat of Sicily. This price, however, was
probably below the average market price, the obligation to deliver their wheat at
this rate being considered as a tax upon the Sicilian farmers. When the Romans,
therefore, had occasion to order more corn than the tithe of wheat amounted to,
they were bound by capitulation to pay for the surplus at the rate of four sestertii,
or eightpence sterling the peck; and this had probably been reckoned the
moderate and reasonable, that is, the ordinary or average contract price of those
times; it is equal to about one-and-twenty shillings the quarter. Eight-and-twenty
shillings the quarter was, before the late years of scarcity, the ordinary contract
price of English wheat, which in quality is inferior to the Sicilian, and generally
sells for a lower price in the European market. The value of silver, therefore, in
those ancient times, must have been to its value in the present, as three to four
inversely; that is, three ounces of silver would then have purchased the same
quantity of labour and commodities which four ounces will do at present. When
we read in Pliny, therefore, that Seius[22] 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[23] 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 or labour and subsistence, equal to what
L.66 : 13 : 4d. would purchase in the present times; and Asinius Celer gave for a
surmullet the command of a quantity equal to what L.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. If the price of the
cattle, therefore, is not sufficient to pay for the produce of improved and
cultivated land, when they are allowed to pasture it, that price will be still less
sufficient to pay for that produce, when it must be collected with a good deal of
additional labour, and brought into the stable to them. In these circumstances,
therefore, no more cattle can with profit be fed in the stable than what are
necessary for tillage. But these can never afford manure enough for keeping
constantly in good condition all the lands which they are capable of cultivating.
What they afford, being insufficient for the whole farm, will naturally be
reserved for the lands to which it can be most advantageously or conveniently
applied; the most fertile, or those, perhaps, in the neighbourhood of the farmyard. These, therefore, will be kept constantly in good condition, and fit for
tillage. The rest will, the greater part of them, be allowed to lie waste, producing
scarce 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.[24] The annual grasses were, it seems, the best natural grasses in that part
of North America; and when the Europeans first settled there, they used to grow
very thick, and to rise three or four feet high. A piece of ground which, when he
wrote, could not maintain one cow, would in former times, he was assured, have
maintained four, each of which would have given four times the quantity of milk
which that one was capable of giving. The poorness of the pasture had, in his
opinion, occasioned the degradation of their cattle, which degenerated sensibly
from one generation to another. They were probably not unlike that stunted
breed which was common all over Scotland thirty or forty years ago, and which
is now so much mended through the greater part of the low country, not so much
by a change of the breed, though that expedient has been employed in some
places, as by a more plentiful method of feeding them.
Though it is late, therefore, in the progress of improvement, before cattle can
bring such a price as to render it profitable to cultivate land for the sake of
feeding them; yet of all the different parts which compose this second sort of
rude produce, they are perhaps the first which bring this price; because, till they
bring it, it seems impossible that improvement can be brought near even to that
degree of perfection to which it has arrived in many parts of Europe.
As cattle are among the first, so perhaps venison is among the last parts of
this sort of rude produce which bring this price. The price of venison in Great
Britain, how extravagant soever it may appear, is not near sufficient to
compensate the expense of a deer park, as is well known to all those who have
had any experience in the feeding of deer. If it was otherwise, the feeding of deer
would soon become an article of common farming, in the same manner as the
feeding of those small birds, called turdi, was among the ancient Romans. Varro
and Columella assure us, that it was a most profitable article. The fattening of
ortolans, birds of passage which arrive lean in the country, is said to be so in
some parts of France. If venison continues in fashion, and the wealth and luxury
of Great Britain increase as they have done for some time past, its price may
very probably rise still higher than it is at present.
Between that period in the progress of improvement, which brings to its
height the price of so necessary an article as cattle, and that which brings to it the
price of such a superfluity as venison, there is a very long interval, in the course
of which many other sorts of rude produce gradually arrive at their highest price,
some sooner and some later, according to different circumstances.
Thus, in every farm, the offals of the barn and 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 in 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, &c. 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 saveall. 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 as to discourage him from sending
thither whatever is over and above the use of his own family. If it is very low
indeed, he will be likely to manage his dairy in a very slovenly and dirty manner,
and will scarce, perhaps, think it worth while to have a particular room or
building on purpose for it, but will suffer the business to be carried on amidst the
smoke, filth, and nastiness of his own kitchen, as was the case of almost all the
farmers' dairies in Scotland thirty or forty years ago, and as is the case of many
of them still. The same causes which gradually raise the price of butcher's meat,
the increase of the demand, and, in consequence of the improvement of the
country, the diminution of the quantity which can be fed at little or no expense,
raise, in the same manner, that of the produce of the dairy, of which the price
naturally connects with that of butcher's meat, or with the expense of feeding
cattle. The increase of price pays for more labour, care, and cleanliness. The
dairy becomes more worthy of the farmer's attention, and the quality of its
produce gradually improves. The price at last gets so high, that it become 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 in 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 these 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[25], 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 any
other country but England. In consequence of these regulations, the market for
English wool, instead of being somewhat extended, in consequence of the
improvement of England, has been confined to the home market, where the wool
of several other countries is allowed to come into competition with it, and where
that of Ireland is forced into competition with it. As the woollen manufactures,
too, of Ireland, are fully as much discouraged as is consistent with justice and
fair dealing, the Irish can work up but a 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 ocassion, viz. five ox hides at twelve shillings; five cow hides at
seven shillings and threepence; thirty-six sheep skins of two years old at nine
shillings; sixteen 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.—Though its nominal price, therefore, is higher in
the present than it was in those ancient times, its real price, the real quantity of
subsistence which it will purchase or command, is rather somewhat lower. The
price of cow hides, as stated in the above account, is nearly in the common
proportion to that of ox hides. That of sheep skins is a good deal above it. They
had probably been sold with the wool. That of calves skins, on the contrary, is
greatly below it. In countries where the price of cattle is very low, the calves,
which are not intended to be reared in order to keep up the stock, are generally
killed very young, as was the case in Scotland twenty or thirty years ago. It saves
the milk, which their price would not pay for. Their skins, therefore, are
commonly good for little.
The price of raw hides is a good deal lower at present than it was a few years
ago; owing probably to the taking off the duty upon 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 these which are not manufactured at home. The
hides of common cattle have, but within these few years, been put among the
enumerated commodities which the plantations can send nowhere but to the
mother country; neither has the commerce of Ireland been in this case oppressed
hitherto, in order to support the manufactures of Great Britain.
Whatever regulations tend to sink the price, either of wool or of raw hides,
below what it naturally would be, must, in an improved and cultivated country,
have some tendency to raise the price of butcher's meat. The price both of the
great and small cattle, which are fed on improved and cultivated land, must be
sufficient to pay the rent which the landlord, and the profit which the farmer, has
reason to expect from improved and cultivated land. If it is not, they will soon
cease to feed them. Whatever part of this price, therefore, is not paid by the wool
and the hide, must be paid by the carcase. The less there is paid for the one, the
more must be paid for the other. In what manner this price is to be divided upon
the different parts of the beast, is indifferent to the landlords and farmers,
provided it is all paid to them. In an improved and more cultivated country,
therefore, their interest as landlords and farmers cannot be much affected by
such regulations, though their interest as consumers may, by the rise in the price
of provisions. It would be quite otherwise, however, in an unimproved and
uncultivated country, where the greater part of the lands could be applied to no
other purpose but the feeding of cattle, and where the wool and the hide made
the principal part of the value of those cattle. Their interest as landlords and
farmers would in this case be very deeply affected by such regulations, and their
interest as consumers very little. The fall in the price of the wool and the hide
would not in this case raise the price of the carcase; because the greater part of
the lands of the country being applicable to no other purpose but the feeding of
cattle, the same number would still continue to be fed. The same quantity of
butcher's meat would still come to market. The demand for it would be no
greater than before. Its price, therefore, would be the same as before. The whole
price of cattle would fall, and along with it both the rent and the profit of all
those lands of which cattle was the principal produce, that is, of the greater part
of the lands of the country. The perpetual prohibition of the exportation of wool,
which is commonly, but very falsely, ascribed to Edward III., would, in the then
circumstances of the country, have been the most destructive regulation which
could well have been thought of. It would not only have reduced the actual value
of the greater part of the lands in the kingdom, but by reducing the price of the
most important species of small cattle, it would have retarded very much its
subsequent improvement.
The wool of Scotland fell very considerably in its price in consequence of
the union with England, by which it was excluded from the great market of
Europe, and confined to the narrow one of Great Britain. The value of the greater
part of the lands in the southern counties of Scotland, which are chiefly a sheep
country, would have been very deeply affected by this event, had not the rise in
the price of butcher's meat fully compensated the fall in the price of wool.
As the efficacy of human industry, in increasing the quantity either of wool
or of raw hides, is limited, so far as it depends upon the produce of the country
where it is exerted; so it is uncertain so far as it depends upon the produce of
other countries. It so far depends not so much upon the quantity which they
produce, as upon that which they do not manufacture; and upon the restraints
which they may or may not think proper to impose upon the exportation of this
sort of rude produce. These circumstances, as they are altogether independent of
domestic industry, so they necessarily render the efficiency 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 may be a very uncertain
matter, yet the local situation of the country being supposed, the general efficacy
of industry in bringing a certain quantity of fish to market, taking the course of a
year, or of several years together, it may, perhaps, be thought is certain enough;
and it, no doubt, is so. As it depends more, however, upon the local situation of
the country, than upon the state of its wealth and industry; as upon this account it
may in different countries be the same in very different periods of improvement,
and very different in the same period; its connection with the state of
improvement is uncertain; and it is of this sort of uncertainty that I am here
speaking.
In increasing the quantity of the different minerals and metals which are
drawn from the bowels of the earth, that of the more precious ones particularly,
the efficacy of human industry seems not to be limited, but to be altogether
uncertain.
The quantity of the precious metals which is to be found in any country, is
not limited by 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,
&c. 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 infer, with a degree of probability that approaches almost to certainty,
that it was rich or poor, that the greater part of its lands were improved or
unimproved, and that it was either in a more or less barbarous state, or in a more
or less civilised one.
Any rise in the money price of goods which proceeded altogether from the
degradation of the value of silver, would affect all sorts of goods equally, and
raise their price universally, a third, or a fourth, or a fifth part higher, according
as silver happened to lose a third, or a fourth, or a fifth part of its former value.
But the rise in the price of provisions, which has been the subject of so much
reasoning and conversation, does not affect all sorts of provisions equally.
Taking the course of the present century at an average, the price of corn, it is
acknowledged, even by those who account for this rise by the degradation of the
value of silver, has risen much less than that of some other sorts of provisions.
The rise in the price of those other sorts of provisions, therefore, cannot be
owing altogether to the degradation of the value of silver. Some other causes
must be taken into the account; and those which have been above assigned, will,
perhaps, without having recourse to the supposed degradation of the value of
silver, sufficiently explain this rise in those particular sorts of provisions, of
which the price has actually risen in proportion to that of corn.
As to the price of corn itself, it has, during the sixty-four first years of the
present century, and before the late extraordinary course of bad seasons, been
somewhat lower than was during the sixty-four last years of the preceding
century. This fact is attested, not only by the accounts of Windsor market, but by
the public fiars of all the different counties of Scotland, and by the accounts of
several different markets in France, which have been collected with great
diligence and fidelity by Mr Messance, and by Mr Dupré de St Maur. The
evidence is more complete than could well have been expected in a matter which
is naturally so very difficult to be ascertained.
As to the high price of corn during these last ten or twelve years, it can be
sufficiently accounted for from the badness of the seasons, without supposing
any degradation in the value of silver.
The opinion, therefore, that silver is continually sinking in its value, seems
not to be founded upon any good observations, either upon the prices of corn, or
upon those of other provisions.
The same quantity of silver, it may perhaps be said, will, in the present times,
even according to the account which has been here given, purchase a much
smaller quantity of several sorts of provisions than it would have done during
some part of the last century; and to ascertain whether this change be owing to a
rise in the value of those goods, or to a fall in the value of silver, is only to
establish a vain and useless distinction, which can be of no sort of service to the
man who has only a certain quantity of silver to go to market with, or a certain
fixed revenue in money. I certainly do not pretend that the knowledge of this
distinction will enable him to buy cheaper. It may not, however, upon that
account be altogether useless.
It may be of some use to the public, by affording an easy proof of the
prosperous condition of the country. If the rise in the price of some sorts of
provisions be owing altogether to a fall in the value of silver, it is owing to a
circumstance, from which nothing can be inferred but the fertility of the
American mines. The real wealth of the country, the annual produce of its land
and labour, may, notwithstanding this circumstance, be either gradually
declining, as in Portugal and Poland; or gradually advancing, as in most other
parts of Europe. But if this rise in the price of some sorts of provisions be owing
to a rise in the real value of the land which produces them, to its increased
fertility, or, in consequence of more extended improvement and good cultivation,
to its having been rendered fit for producing corn; it is owing to a circumstance
which indicates, in the clearest manner, the prosperous and advancing state of
the country. The land constitutes by far the greatest, the most important, and the
most durable part of the wealth of every extensive country. It may surely be of
some use, or, at least, it may give some satisfaction to the public, to have so
decisive a proof of the increasing value of by far the greatest, the most
important, and the most durable part of its wealth.
It may, too, be of some use to the public, in regulating the pecuniary reward
of some of its inferior servants. If this rise in the price of some sorts of
provisions be owing to a fall in the value of silver, their pecuniary reward,
provided it was not too large before, ought certainly to be augmented in
proportion to the extent of this fall. If it is not augmented, their real recompence
will evidently be so much diminished. But if this rise of price is owing in the
increased value, in consequence of the improved fertility of the land which
produces such provisions, it becomes a much nicer matter to judge, either in
what proportion any pecuniary reward ought to be augmented, or whether it
ought to be augmented at all. The extension of improvement and cultivation, as
it necessarily raises more or less, in proportion to the price of corn, that of every
sort of animal food, so it as necessarily lowers that of, I believe, every sort of
vegetable food. It raises the price of animal food; because a great part of the land
which produces it, being rendered fit for producing corn, must afford to the
landlord and farmer the rent and profit of corn land. It lowers the price of
vegetable food; because, by increasing the fertility of the land, it increases its
abundance. The improvements of agriculture, too, introduce many sorts of
vegetable food, which requiring less land, and not more labour than corn, come
much cheaper to market. Such are potatoes and maize, or what is called Indian
corn, the two most important improvements which the agriculture of Europe,
perhaps, which Europe itself, has received from the great extension of its
commerce and navigation. Many sorts of vegetable food, besides, which in the
rude state of agriculture are confined to the kitchen-garden, and raised only by
the spade, come, in its improved state, to be introduced into common fields, and
to be raised by the plough; such as turnips, carrots, cabbages, &c. 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 he
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, &c.
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 these 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 3d 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 3d 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 a very high price for a pair of
stockings to a servant of the poorest and lowest order. He must, however, in
these 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 fullingmill 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 course 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 these 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 cultivations 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 these 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 these 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 him, but their own particular
purposes.
His employers constitute the third order, that of those who live by profit. It is
the stock that is employed for the sake of profit, which puts into motion the
greater part of the useful labour of every society. The plans and projects of the
employers of stock regulate and direct all the most important operations of
labour, and profit is the end proposed by all those plans and projects. But the rate
of profit does not, like rent and wages, rise with the prosperity, and fall with the
declension of the society. On the contrary, it is naturally low in rich, and high in
poor countries, and it is always highest in the countries which are going fastest
to ruin. The interest of this third order, therefore, has not the same 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.
Price of the
Years Quarter of
XII. Wheat each
Year.
L. s. d.
1202
0 12 0
0 12 0
1205
0 13 4
0 15 0
1223
0 12 0
1237
0 34
1243
0 20
1244
0 20
1246
0 16 0
1247
0 13 5
1257
1 40
1 00
1258
0 15 0
0 16 0
4 16 0
1270
6 80
0 28
1286
0 16 0
1287
1288
1289
Average of The Average Price
the different
of each Year
Prices of the
in Money of
same Year. the present times.
L. s. d.
L. s. d.
--1 16 0
0 13 5
2 03
---------------
1 16 0
0 10 0
0 60
0 60
2 80
2 00
3 12 0
0 17 0
2 11 0
5 12 0
16 16 0
0 94
1 80
Total,
Average price,
0 34
--0 08
0 10
0 14
0 16
0 3 0¼
0 18
0 20
0 34
0 94
0 12 0
0 60
0 20
0 10 1½
35 9 3
2 19 1¼
0 10 0
0 9 1¾
1 10 4½
1290
1294
1302
1309
1315
1316
1317
1336
1338
1339
1349
1359
1361
1363
1369
1379
1387
1390
1401
1407
1416
0 10 8
1 00
0 16 0
0 16 0
0 40
0 72
1 00
1 00
1 10 0
1 12 0
2 00
2 40
0 14 0
2 13 0
4 00
0 68
0 20
0 34
-----------
2 80
2 80
0 12 0
1 16
3 00
1 10 6
4 11 6
1 19 6
5 18 6
----Total,
Average price,
0 90
--0 20
--1 68
--0 20
--0 15 0
--1 00
1 20
1 40
0 40
--0 20
--0 13 4
0 14 0
0 14 5
0 16 0
0 16 0
--0 4 4¾
0 3 10
0 34
0 16 0
---
0 60
0 10 0
23 4 11¼
1 18 8
1 70
0 52
3 22
0 48
1 15 0
2 94
0 94
0 48
1 13 7
1 17 6
0 8 11
1 12 0
Total,
Aver. price,
1423
1425
1434
1435
1439
1440
1444
1445
1447
1448
1449
1451
1453
1455
1457
1459
1460
080
040
168
054
100
168
140
044
040
046
080
068
050
080
1464
1486
1491
1494
1495
1497
0 54
0 12
0 78
0 50
0 80
0 20
0 18
0 68
1 40
0 14 8
0 40
0 34
1 00
1499
1504
0 40
0 58
1463
---------
15 9 4
1 5 9½
0 16 0
0 80
2 13 4
0 10 8
134
2 68
---
2 80
042
0 84
----------Total,
Aver. price,
-----------
0 90
0 16 0
0 13 4
0 10 0
0 16 0
12 15 4
1 1 3⅓
0 10 8
0 24
0 15 4
0 10 0
0 16 0
0 1 10
0 38
------------Total,
Aver. price,
-----
0 10 0
1 17 0
1 20
0 60
0 50
1 11 0
8 90
0 14 1
0 60
0 86
1521
1551
1553
1554
1555
1556
1957
1558
1559
1560
1561
1562
1574
1587
1594
1595
1596
1597
1598
1599
1600
1601
1 00
0 80
0 80
0 80
0 80
0 80
0 40
0 50
0 80
2 13 4
0 80
0 80
0 80
0 80
0 80
2 16 0
140
3 40
2 16 0
2 13 0
4 00
5 40
4 00
2 16 8
1 19 2
1 17 8
1 14 10
-------------
1 10 0
0 80
0 80
0 80
0 80
0 80
0 17 8½
0 17 8½
------Total,
Average price,
0 80
0 80
0 80
6 0 2½
0 10 05⁄12
-----
0 80
0 80
2 00
2 00
---------
3 40
2 16 0
2 13 0
4 00
4 12 0
4 12 0
--------Total,
Average price,
2 16 8
1 19 2
1 17 8
1 14 10
28 9 4
2 7 5⅓
PRICES OF THE QUARTER OF NINE BUSHELS OF THE BEST OR
HIGHEST PRICED WHEAT AT WINDSOR MARKET, ON LADY-DAY
AND MICHAELMAS, FROM 1595 TO 1764, BOTH INCLUSIVE; THE
PRICE OF EACH YEAR BEING THE MEDIUM BETWEEN THE
HIGHEST PRICES OF THOSE TWO MARKET-DAYS.
Wheat per Quarter.
Years.
L. s.
d.
1595
2 0
0
1596
2 8
0
1597
3 9
6
1598
2 16
8
1599
1 19
2
1600
1 17
8
1601
1 14
10
1602
1 9
4
1603
1 15
4
1604
1 10
8
1605
1 15
10
1606
1 13
0
1607
1 16
8
1608
2 16
8
1609
2 10
0
1610
1 15
10
1611
1 18
8
1612
2 2
4
1613
2 8
8
1614
2 1
8½
1615
1 18
8
1616
2 0
4
1617
2 8
8
1618
2 6
8
1619
1 15
4
1620
1 10
4
————————
26)54 0
6½
————————
2 1 69⁄13
Wheat per Quarter.
Years.
L. s. d.
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
————————
2 10 0
Wheat per Quarter.
Years.
L. s. d.
1637
2 13
0
1638
2 17
4
1639
1640
1641
1642[26]
1643[26]
1644[26]
1645[26]
1646
1647
1648
1649
1650
1651
1652
1653
1654
1655
1656
1657
1658
1659
1660
1661
1662
1663
1664
1665
1666
1667
1668
1669
1670
1671
2
2
2
0
0
0
0
2
3
4
4
3
3
2
1
1
1
2
2
3
3
2
3
3
2
2
2
1
1
2
2
2
2
4
4
8
0
0
0
0
8
13
5
0
16
13
9
15
6
13
3
6
5
6
16
10
14
17
0
9
16
16
0
4
1
2
10
8
0
0
0
0
0
0
0
0
0
8
4
6
6
0
4
0
8
0
0
6
0
0
0
6
4
0
0
0
4
8
0
1672
1673
1674
1675
1676
1677
1678
1679
1680
1681
1682
1683
1684
1685
1686
1687
1688
1689
1690
1691
1692
1693
1694
1695
1696
1697
1698
1699
1700
2 1
0
2 6
8
3 8
8
3 4
8
1 18
0
2 2
0
2 19
0
3 0
0
2 5
0
2 6
8
2 4
0
2 0
0
2 4
0
2 6
8
1 14
0
1 5
2
2 6
0
1 10
0
1 14
8
1 14
0
2 6
8
3 7
8
3 4
0
2 13
0
3 11
0
3 0
0
3 8
4
3 4
0
2 0
0
————————
60)153 1
8
————————
2 11 0½
Wheat per Quarter.
Years.
L. s.
d.
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
1730
1731
1732
1733
1734
1735
1736
1737
1738
1739
1740
1741
1742
1743
1744
1745
1746
1747
1748
1749
1750
1751
1752
1753
1754
1755
1756
1757
1758
1759
1760
1761
2
1
1
1
1
1
2
2
1
1
1
2
2
1
1
1
1
1
1
1
1
1
1
2
2
1
1
2
3
2
1
1
1
6
16
12
6
8
18
3
0
18
15
18
10
6
14
4
4
7
19
14
17
17
12
18
1
4
14
13
5
0
10
19
16
10
10
6
10
8
4
10
0
4
0
6
6
8
8
0
10
10
6
0
10
0
0
6
6
10
8
8
10
3
0
0
10
6
3
1762
1763
1764
1 19
0
2 0
9
2 6
9
————————
64)129 13
6
————————
2 0 618⁄64
Wheat per Quarter.
Years.
L. s.
d.
1731
1 12
10
1732
1 6
8
1733
1 8
4
1734
1 18
10
1735
2 3
0
1736
2 0
4
1737
1 18
0
1738
1 15
6
1739
1 18
6
1740
2 10
8
————————
10)18 12
8
————————
1 17 31⁄5
Wheat per Quarter.
Years.
L. s.
d.
1741
2 6
8
1742
1 14
0
1743
1 4
10
1744
1745
1746
1747
1748
1749
1750
1 4
10
1 7
6
1 19
0
1 14
10
1 17
0
1 17
0
1 12
6
————————
10)16 18
2
————————
1 13 94⁄5
BOOK II.
OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF
STOCK.
INTRODUCTION.
In that rude state of society, in which there is no division of labour, in which
exchanges are seldom made, and in which every man provides every thing for
himself, it is not necessary that any stock should be accumulated, or stored up
before-hand, in order to carry on the business of the society. Every man
endeavours to supply, by his own industry, his own occasional wants, as they
occur. When he is hungry, he goes to the forest to hunt; when his coat is worn
out, he clothes himself with the skin of the first large animal he kills; and when
his hut begins to go to ruin, he repairs it, as well as he can, with the trees and the
turf that are nearest it.
But when the division of labour has once been thoroughly introduced, the
produce of a man's own labour can supply but a very small part of his occasional
wants. The far greater part of them are supplied by the produce of other men's
labour, which he purchases with the produce, or, what is the same thing, with the
price of the produce, of his own. But this purchase cannot be made till such time
as the produce of his own labour has not only been completed, but sold. A stock
of goods of different kinds, therefore, must be stored up somewhere, sufficient to
maintain him, and to supply him with the materials and tools of his work, till
such time at least as both these events can be brought about. A weaver cannot
apply himself entirely to his peculiar business, unless there is before-hand stored
up somewhere, either in his own possession, or in that of some other person, a
stock sufficient to maintain him, and to supply him with the materials and tools
of his work, till he has not only completed, but sold his web. This accumulation
must evidently be previous to his applying his industry for so long a time to such
a peculiar business.
As the accumulation of stock must, in the nature of things, be previous to the
division of labour, so labour can be more and more subdivided in proportion
only as stock is previously more and more accumulated. The quantity of
materials which the same number of people can work up, increases in a great
proportion as labour comes to be more and more subdivided; and as the
operations of each workman are gradually reduced to a greater degree of
simplicity, a variety of new machines come to be invented for facilitating and
abridging these operations. As the division of labour advances, therefore, in
order to give constant employment to an equal number of workman, 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.
CHAP. I.
OF THE DIVISION OF STOCK.
When the stock which a man possesses is no more than sufficient to maintain
him for a few days or a few weeks, he seldom thinks of deriving any revenue
from it. He consumes it as sparingly as he can, and endeavours, by his labour, to
acquire something which may supply its place before it be consumed altogether.
His revenue is, in this case, derived from his labour only. This is the state of the
greater part of the labouring poor in all countries.
But when he possesses stock sufficient to maintain him for months or years,
he naturally endeavours to derive a revenue from the greater part of it, reserving
only so much for his immediate consumption as may maintain him till this
revenue begins to come in. His whole stock, therefore, is distinguished into two
parts. That part which he expects is to afford him this revenue is called his
capital. The other is that which supplies his immediate consumption, and which
consists either, first, in that portion of his whole stock which was originally
reserved for this purpose; or, secondly, in his revenue, from whatever source
derived, as it gradually comes in; or, thirdly, in such things as had been
purchased by either of these in former years, and which are not yet entirely
consumed, such as a stock of clothes, household furniture, and the like. In one or
other, or all of these three articles, consists the stock which men commonly
reserve for their own immediate consumption.
There are two different ways in which a capital may be employed so as to
yield a revenue or profit to its employer.
First, it may be employed in raising, manufacturing, or purchasing goods,
and selling them again with a profit. The capital employed in this manner yields
no revenue or profit to its employer, while it either remains in his possession, or
continues in the same shape. The goods of the merchant yield him no revenue or
profit till he sells them for money, and the money yields him as little till it is
again exchanged for goods. His capital is continually going from him in one
shape, and returning to him in another; and it is only by means of such
circulation, or successive 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, &c. which have been purchased by
their proper consumers, but which are not yet entirely consumed. The whole
stock of mere dwelling-houses, too, subsisting at any one time in the country,
make a part of this first portion. The stock that is laid out in a house, if it is to be
the 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,
workhouses, farm-houses, with all their necessary buildings, stables, granaries,
&c. 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 realised, 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, &c. 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, &c.
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, &c. The circulating capital consists,
in this manner, of the provisions, materials, and finished work of all kinds that
are in the hands of their respective dealers, and of the money that is necessary
for circulating and distributing them to those who are finally to use or to
consume them.
Of these four parts, three—provisions, materials, and finished work, are
either annually or in a longer or shorter period, regularly withdrawn from it, and
placed either in the fixed capital, or in the stock reserved for immediate
consumption.
Every fixed capital is both originally derived from, and requires to be
continually supported by, a circulating capital. All useful machines and
instruments of trade are originally derived from a circulating capital, which
furnishes the materials of which they are made, and the maintenance of the
workmen who make them. They require, too, a capital of the same kind to keep
them in constant repair.
No fixed capital can yield any revenue but by means of a circulating capital.
The most useful machines and instruments of trade will produce nothing,
without the circulating capital, which affords the materials they are employed
upon, and the maintenance of the workmen who employ them. Land, however
improved, will yield no revenue without a circulating capital, which maintains
the labourers who cultivate and collect its produce.
To maintain and augment the stock which may be reserved for immediate
consumption, is the sole end and purpose both of the fixed and circulating
capitals. It is this stock which feeds, clothes, and lodges the people. Their riches
or poverty 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 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.
CHAP 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 somebody.
Since this is the case, it has been observed, with regard to every particular
commodity, taken separately, it must be so with regard to all the commodities
which compose the whole annual produce of the land and labour of every
country, taken complexly. The whole price or exchangeable value of that annual
produce must resolve itself into the same three parts, and be parcelled out among
the different inhabitants of the country, either as the wages of their labour, the
profits of their 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, &c. 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, &c. are in the most perfect good order, the same number of
labourers and labouring cattle will raise a much greater produce, than in one of
equal extent and equally good ground, but not furnished with equal
conveniencies. In manufactures, the same number of hands, assisted with the
best machinery, will work up a much greater quantity of goods than with more
imperfect instruments of trade. The expense which is properly laid out upon a
fixed capital of any kind, is always repaid with great profit, and increases the
annual produce by a much greater value than that of the support which such
improvements require. This support, however, still requires a certain portion of
that produce. A certain quantity of materials, and the labour of a certain number
of workmen, both of which might have been immediately employed to augment
the food, clothing, and lodging, the subsistence and conveniencies of the society,
are thus diverted to another employment, highly advantageous indeed, but still
different from this one. It is upon this account that all such improvements in
mechanics, as enable the same number of workmen to perform an equal quantity
of work with cheaper and simpler machinery than had been usual before, are
always regarded as advantageous to every society. A certain quantity of
materials, and the labour of a certain number of workmen, which had before
been employed in supporting a more complex and expensive machinery, can
afterwards be applied to augment the quantity of work which that or any other
machinery is useful only for performing. The undertaker of some great
manufactory, who employs a thousand a-year in the maintenance of his
machinery, if he can reduce this expense to five hundred, will naturally employ
the other five hundred in purchasing an additional quantity of materials, to be
wrought up by an additional number of workmen. The quantity of that work,
therefore, which his machinery was useful only for performing, will naturally be
augmented, and with it all the advantage and conveniency which the society can
derive from that work.
The expense of maintaining the fixed capital in a great country, may very
properly be compared to that of repairs in a private estate. The expense of repairs
may frequently be necessary for supporting the produce of the estate, and
consequently both the gross and the neat rent of the landlord. When by a more
proper direction, however, it can be diminished without occasioning any
diminution of produce, the gross rent remains at least the same as before, and the
neat rent is necessarily augmented.
But though the whole expense of maintaining the fixed capital is thus
necessarily excluded from the neat revenue of the society, it is not the same case
with that of maintaining the circulating capital. Of the four parts of which this
latter capital is composed, money, provisions, materials, and finished work, the
three last, it has already been observed, are regularly withdrawn from it, and
placed either in the fixed capital of the society, or in their stock reserved for
immediate consumption. Whatever portion of those consumable goods is not
employed in maintaining the former, goes all to the latter, and makes a part of
the neat revenue of the society. The maintenance of those three parts of the
circulating capital, therefore, withdraws no portion of the annual produce from
the neat revenue of the society, besides what is necessary for maintaining the
fixed capital.
The circulating capital of a society is in this respect different from that of an
individual. That of an individual is totally excluded from making any part of his
neat revenue, which must consist altogether in his profits. But though the
circulating capital of every individual makes a part of that of the society to
which he belongs, it is not upon that account totally excluded from making a part
likewise of their neat revenue. Though the whole goods in a merchant's shop
must by no means be placed in his own stock reserved for immediate
consumption, they may in that of other people, who, from a revenue derived
from other funds, may regularly replace their value to him, together with its
profits, without occasioning any diminution either of his capital or of theirs.
Money, therefore, is the only part of the circulating capital of a society, of
which the maintenance can occasion any diminution in their neat revenue.
The fixed capital, and that part of the circulating capital which consists in
money, so far as they affect the revenue of the society, bear a very great
resemblance to one another.
First, as those machines and instruments of trade, &c. 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, &c. 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, &c. 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 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, &c.; 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, is 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 these 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 may be assured that no class or order of men ever
does so; because, though the principles of common prudence do not always
govern the conduct of every individual, they always influence that of the
majority of every class or order. But the revenue of idle people, considered as a
class or order, cannot, in the smallest degree, be increased by those operations of
banking. Their expense in general, therefore, cannot be much increased by them,
though that of a few individuals among them may, and in reality sometimes is.
The demand of idle people, therefore, for foreign goods, being the same, or very
nearly the same as before, a very small part of the money which, being forced
abroad by those operations of banking, is employed in purchasing foreign goods
for home consumption, is likely to be employed in purchasing those for their
use. The greater part of it will naturally be destined for the employment of
industry, and not for the maintenance of idleness.
When we compute the quantity of industry which the circulating capital of
any society can employ, we must always have regard to those parts of it only
which consist in provisions, materials, and finished work; the other, which
consists in money, and which serves only to circulate those three, must always be
deducted. In order to put industry into motion, three things are requisite;
materials to work upon, tools to work with, and the wages or 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 fourfifths 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[27]. There were a good many people, too, upon this occasion, who,
from a diffidence of repayment, did not bring their silver into the Bank of
Scotland; and there was, besides, some English coin, which was not called in.
The whole value of the gold and silver, therefore, which circulated in Scotland
before the Union, cannot be estimated at less than a million sterling. It seems to
have constituted almost the whole circulation of that country; for though the
circulation of the Bank of Scotland, which had then no rival, was considerable, it
seems to have made but a very small part of the whole. In the present times, the
whole circulation of Scotland cannot be estimated at less than two millions, of
which that part which consists in gold and silver, most probably, does not
amount to half a million. But though the circulating gold and silver of Scotland
have suffered so great a diminution during this period, its real riches and
prosperity do not appear to have suffered any. Its agriculture, manufactures, and
trade, on the contrary, the annual produce of its land and labour, have evidently
been augmented.
It is chiefly by discounting bills of exchange, that is, by advancing money
upon them before they are due, that the greater part of banks and bankers issue
their promissory notes. They deduct always, upon whatever sum they advance,
the legal interest till the bill shall become due. The payment of the bill, when it
becomes due, replaces to the bank the value of what had been advanced, together
with a clear profit of the interest. The banker, who advances to the merchant
whose bill he discounts, not gold and silver, but his own promissory notes, has
the advantage of being able to discount to a greater amount by the whole value
of his promissory notes, which he finds, by experience, are commonly in
circulation. He is thereby enabled to make his clear gain of interest on so much a
larger sum.
The commerce of Scotland, which at present is not very great, was still more
inconsiderable when the two first banking companies were established; and
those companies would have had but little trade, had they confined their business
to the discounting of bills of exchange. They invented, therefore, another method
of issuing their promissory notes; by granting what they called cash accounts,
that is, by giving credit, to the extent of a certain sum (two or three thousand
pounds for example), to any individual who could procure two persons of
undoubted credit and good landed estate to become surety for him, that whatever
money should be advanced to him, within the sum for which the credit had been
given, should be repaid upon demand, together with the legal interest. Credits of
this kind are, I believe, commonly granted by banks and bankers in all different
parts of the world. But the easy terms upon which the Scotch banking companies
accept of repayment are, so far as I know, peculiar to them, and have, perhaps,
been the principal cause, both of the great trade of those companies, and of the
benefit which the country has received from it.
Whoever has a credit of this kind with one of those companies, and borrows
a thousand pounds upon it, for example, may repay this sum 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 may have borrowed of them; and thus almost the whole
money business of the country is transacted by means of them. Hence the great
trade of those companies.
By means of those cash accounts, every merchant can, without imprudence,
carry on a greater trade than he otherwise could do. If there are two merchants,
one in London and the other in Edinburgh, who employ equal stocks in the same
branch of trade, the Edinburgh merchant can, without imprudence, carry on a
greater trade, and give employment to a greater number of people, than the
London merchant. The London merchant must always keep by him a
considerable sum of money, either in his own coffers, or in those of his banker,
who gives him no interest for it, in order to answer the demands continually
coming upon him for payment of the goods which he purchases upon credit. Let
the ordinary amount of this sum be supposed five hundred pounds; the value of
the goods in his warehouse must always be less, by five hundred pounds, than it
would have been, had he not been obliged to keep such a sum unemployed. Let
us suppose that he generally disposes of his whole stock upon hand, or of goods
to the value of his whole stock upon hand, once in the year. By being obliged to
keep so great a sum unemployed, he must sell in a year five hundred pounds
worth less goods than he might otherwise have done. His annual profits must be
less by all that he could have made by the sale of five hundred pounds worth
more goods; and the number of people employed in preparing his goods for the
market must be less by all those that five hundred pounds more stock could have
employed. The merchant in Edinburgh, on the other hand, keeps no money
unemployed for answering such occasional demands. When they actually come
upon him, he satisfies them from his cash account with the bank, and gradually
replaces the sum borrowed with the money or paper which comes in from the
occasional sales of his goods. With the same stock, therefore, he can, without
imprudence, have at all times in his warehouse a larger quantity of goods than
the London merchant; and can thereby both make a greater profit himself, and
give constant employment to a greater number of industrious people who
prepare those goods for the market. Hence the great benefit which the country
has derived from this trade.
The facility of discounting bills of exchange, it may be thought, indeed,
gives the English merchants a conveniency equivalent to the cash accounts of the
Scotch merchants. But the Scotch merchants, it must be remembered, can
discount their bills of exchange as easily as the English merchants; and have,
besides, the additional conveniency of their cash accounts.
The whole paper money of every kind which can easily circulate in any
country, never can exceed the value of the gold and silver, of which it supplies
the place, or which (the commerce being supposed the same) would circulate
there, if there was no paper money. If twenty shilling notes, for example, are the
lowest paper money current in Scotland, the whole of that currency which can
easily circulate there, cannot exceed the sum of gold and silver which would be
necessary for transacting the annual exchanges of twenty shillings value and
upwards usually transacted within that country. Should the circulating paper at
any time exceed that sum, as the excess could neither be sent abroad nor be
employed in the circulation of the country, it must immediately return upon the
banks, to be exchanged for gold and silver. Many people would immediately
perceive that they had more of this paper than was necessary for transacting their
business at home; and as they could not send it abroad, they would immediately
demand payment 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,
&c. 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 (in
consequence of the worn and degraded state into which the gold coin had fallen
a few years ago) was frequently obliged to purchase gold bullion at the high
price of four pounds an ounce, which it soon after issued in coin at L.3 : 17 :
10½ 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, these 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 he 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 in 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 banks and bankers, who, when they have gone thus far, cannot,
consistently with their own interest and safety, go farther. A bank cannot,
consistently with its own interest, advance to a trader the whole, or even the
greater part of the circulating capital with which he trades; because, though that
capital is continually returning to him in the shape of money, and going from
him in the same shape, yet the whole of the returns is too distant from the whole
of the outgoings, and the sum of his the repayments could not equal the sum of
his advances within much 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, &c.; 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, &c.; 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
farm-houses, with all their necessary appendages of stables, granaries, &c. 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, mean very seldom return to the undertaker till after
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 lo 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.[28]
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
last bill was never really returned to the banks which advanced it, because,
before each bill became due, another bill was always drawn to somewhat a
greater amount than the bill which was soon to be paid: and the discounting of
this other bill was essentially necessary towards the payment of that which was
soon to be due. This payment, therefore, was altogether fictitious. The stream
which, by means of those circulating bills of exchange, had once been made to
run out from the coffers of the banks, was never replaced by any stream which
really run into them.
The paper which was issued upon those circulating bills of exchange
amounted, upon many occasions, to the whole fund destined for carrying on
some vast and extensive project of agriculture, commerce, or manufactures; and
not merely to that part of it which, had there been no paper money, the projector
would have been obliged to keep by him unemployed, and in ready money, for
answering occasional demands. The greater part of this paper was, consequently,
over and above the value of the gold and silver which would have circulated in
the country, had there been no paper money. It was over and above, therefore,
what the circulation of the country could easily absorb and employ, and upon
that account, immediately returned upon the banks, in order to be exchanged for
gold and silver, which they were to find as they could. It was a capital which
those projectors had very artfully contrived to draw from those banks, not only
without their knowledge or deliberate consent, but for some time, perhaps,
without their having the most distant suspicion that they had really advanced it.
When two people, who are continually drawing and redrawing upon one
another, discount their bills always with the same banker, he must immediately
discover what they are about, and see clearly that they are trading, not with any
capital of their own, but with the capital which he advances to them. But this
discovery is not altogether so easy when they discount their bills sometimes with
one banker, and sometimes with another, and when the 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 then 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 capita, 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 or 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 man, 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 entry 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 some 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 rain came, it fell so much the heavier both
upon them and upon their 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 longrun they must have ruined themselves as a mercantile company, though perhaps
not so soon as by the more expensive practice of drawing and redrawing. They
could still have made nothing by the interest of the paper, which, being over and
above what the circulation of the country could absorb and employ, returned
upon them in order to be exchanged for gold and silver, as fast as they issued it;
and for the payment of which they were themselves continually obliged to
borrow money. On the contrary, the whole expense of this borrowing, of
employing agents to look out for people who had money to lend, of negotiating
with those people, and of drawing the proper bond or assignment, must have
fallen upon them, and have been so much clear loss upon the balance of their
accounts. The project of replenishing their coffers in this manner may be
compared to that of a man who had a water-pond from which a stream was
continually running out, and into which no stream was continually running, but
who proposed to keep it always equally full, by employing a number of people
to go continually with buckets to a well at some miles distance, in order to bring
water to replenish it.
But though this operation had proved not only practicable, but profitable to
the bank, as a mercantile company; yet the country could have derived no benefit
from it, but, on the contrary, must have suffered a very considerable loss by it.
This operation could not augment, in the smallest degree, the quantity of money
to be lent. It could only have erected this bank into a sort of general loan office
for the whole country. Those who wanted to borrow must have applied to this
bank, instead of applying to the private persons who had lent it their money. But
a bank which lends money, perhaps to five hundred different people, the greater
part of whom its directors can know very little about, is not likely to be more
judicious in the choice of its debtors than a private person who lends out his
money among a few people whom he knows, and in whose sober and frugal
conduct he thinks he has good reason to confide. The debtors of such a bank as
that whose conduct I have been giving some account of were likely, the greater
part of them, to be chimerical projectors, the drawers and 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 L.1,200,000 for an annuity of L.100,000, or for L.96,000 a-year, interest at the
rate of eight per cent. and L.4,000 a-year for the expense of management. The
credit of the new government, established by the Revolution, we may believe,
must have been very low, when it was obliged to borrow at so high an interest.
In 1697, the bank was allowed to enlarge its capital stock, by an ingraftment
of L.1,001,171 : 10s. Its whole capital stock, therefore, amounted at this time to
L.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.[29] 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 L.400,000; making in all the sum of L.1,600,000, which it
had advanced upon its original annuity of L.96,000 interest, and L.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 L.1,775,027 17s. 10½d. at six
per cent. interest, and was at the same time allowed to take in subscriptions for
doubling its capital. In 1708, therefore, the capital of the bank amounted to
L.4,402,343; and it had advanced to government the sum of L.3,375,027 : 17 :
10½.
By a call of fifteen per cent. in 1709, there was paid in, and made stock,
L.656,204 : 1 : 9d.; and by another of ten per cent. in 1710, L.501,448 : 12 : 11.
In consequence of those two calls, therefore, the bank capital amounted to
L.5,559,995 : 14 : 8.
In pursuance of the 3d 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 L.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 L.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 L.3,400,000.
At this time, therefore, the bank had advanced to the public L.9,375,027 17s.
10½d.; and its capital stock amounted only to L.8,959,995 : 14 : 8. 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 L.11,686,800, and
its divided capital had been raised by different calls and subscriptions to
L.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 L.110,000, without interest or repayment. This sum, therefore did not increase either of these 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 1768, it is said to
have advanced for this purpose, in one week, about L.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
must 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 Dædalian 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 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 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 everybody, will get it to be received without scruple when it is
issued for so small a sum as a sixpence. But the frequent bankruptcies to which
such beggarly bankers must be liable, may occasion a very considerable
inconveniency, and sometimes even a very great calamity, to many poor people
who had received their notes in payment.
It were better, perhaps, that no bank notes were issued in any part of the
kingdom for a smaller sum than £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 L.10 value; L.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 L.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 or 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 of the most despotical. The obligation of building party
walls, in order to prevent the communication of fire, is a violation of natural
liberty, exactly of the same kind with the regulations of the banking trade which
are here proposed.
A paper money, consisting in bank notes, issued by people of undoubted
credit, payable upon demand, without any condition, and, in fact, always readily
paid as soon as presented, is, in every respect, equal in value to gold and silver
money, since gold and silver money can at any time be had for it. Whatever is
either bought or sold for such paper, must necessarily be bought or sold as cheap
as it could have been for gold and silver.
The increase of paper money, it has been said, by augmenting the quantity,
and consequently diminishing the value, of the whole currency, necessarily
augments the money price of commodities. But as the quantity of gold and
silver, which is taken from the currency, is always equal to the quantity of paper
which is added to it, paper money does not necessarily increase the quantity of
the whole currency. From the beginning of the last century to the present time,
provisions never were cheaper in Scotland than in 1759, though, from the
circulation of ten and five shilling bank notes, there was then more paper money
in the country than at present. The proportion between the price of provisions in
Scotland and that in England is the same now as before the great multiplication
of banking companies in Scotland. Corn is, upon most occasions, fully as cheap
in England as in France, though there is a great deal of paper money in England,
and scarce any in France. In 1751 and 1752, when Mr Hume published his
Political Discourses, and soon after the great multiplication of paper money in
Scotland, there was a very sensible rise in the price of provisions, owing,
probably, to the badness of the seasons, and not to the multiplication of paper
money.
It would be otherwise, indeed, with a paper money, consisting in promissory
notes, of which the immediate payment depended, in any respect, either upon the
good will of those who issued them, or upon a condition which the holder of the
notes might not always have it in his power to fulfil, or of which the payment
was not exigible till after a certain number of years, and which, in the meantime,
bore no interest. Such a paper money would, no doubt, fall more or less below
the value of gold and silver, according as the difficulty or uncertainty of
obtaining immediate payment was supposed to be greater or less, or according to
the greater or less distance of time at which payment was exigible.
Some years ago the different banking companies of Scotland were in the
practice of inserting into their bank notes, what they called an optional clause; by
which they promised payment to the bearer, either as soon as the note should be
presented, or, in the option of the directors, six months after such presentment,
together with the legal interest for the said six months. The directors of some of
those banks sometimes took advantage of this optional clause, and sometimes
threatened those who demanded gold and silver in exchange for a considerable
number of their notes, that they would take advantage of it, unless such
demanders would content themselves with a part of what they demanded. The
promissory notes of those banking companies constituted, at that time, the far
greater part of the currency of Scotland, which this uncertainty of payment
necessarily degraded below the value of gold and silver money. During the
continuance of this abuse (which prevailed chiefly in 1762, 1763, and 1764),
while the exchange between London and Carlisle was at par, that between
London and Dumfries would sometimes be four per cent. against Dumfries,
though this town is not thirty miles distant from Carlisle. But at Carlisle, bills
were paid in gold and silver; whereas at Dumfries they were paid in Scotch bank
notes; and the uncertainty of getting those bank notes exchanged for gold and
silver coin, had thus degraded them four per cent. below the value of that coin.
The same act of parliament which suppressed ten and five shilling bank notes,
suppressed likewise this optional clause, and thereby restored the exchange
between England and Scotland to its natural rate, or to what the course of trade
and remittances might happen to make it.
In the paper currencies of Yorkshire, the payment of so small a sum as 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, L.100,
payable fifteen years hence, for example, in a country where interest is at six per
cent., is worth little more than L.40 ready money. To oblige a creditor, therefore,
to accept of this as full payment for a debt of L.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 L.100 sterling was occasionally considered an
equivalent, in some of the colonies, to L.130, and in others to so great a sum as
L.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 L.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.
CHAP. 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[30] labour.
Thus the labour of a manufacturer adds generally to the value of the materials
which he works upon, that of his own maintenance, and of his master's profit.
The labour of a menial servant, on the contrary, adds to the value of nothing.
Though the manufacturer has his wages advanced to him by his master, he in
reality costs him no expense, the value of those wages being generally restored,
together with a profit, in the improved value of the subject upon which his
labour is bestowed. But the maintenance of a menial servant never is restored. A
man grows rich by employing a multitude of manufacturers; he grows poor by
maintaining a multitude of menial servants. The labour of the latter, however,
has its value, and deserves its reward as well as that of the former. But the labour
of the manufacturer fixes and realizes itself in some particular subject or
vendible commodity, which lasts for some time at least after that labour is past.
It is, as it were, a certain quantity of labour stocked and stored up, to be
employed, if necessary, upon some other occasion. That subject, or, what is the
same thing, the price of that subject, can afterwards, if necessary, put into motion
a quantity of labour equal to that which had originally produced it. The labour of
the menial servant, on the contrary, does not fix or realize itself in any particular
subject or vendible commodity. His services generally perish in the very instant
of their performance, and seldom leave any trace 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, &c. 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 puppetshow, and so contribute his share towards maintaining one set of unproductive
labourers; or he may pay some taxes, and thus help to maintain another set, more
honourable and useful, indeed, but equally unproductive. No part of the annual
produce, however, which had been originally destined to replace a capital, is
ever directed towards maintaining unproductive hands, till after it has put into
motion its full complement of productive labour, or all that it could put into
motion in the way in which it was employed. The workman must have earned
his wages by work done, before he can employ any part of them in this manner.
That part, too, is generally but a small one. It is his spare revenue only, of which
productive labourers have seldom a great deal. They generally have some,
however; and in the payment of taxes, the greatness of their number may
compensate, in some measure, the smallness of their contribution. The rent of
land and the profits of stock are everywhere, therefore, the principal sources
from which unproductive hands derive their subsistence. These are the two sorts
of revenue of which the owners have generally most to spare. They might both
maintain indifferently, either productive or unproductive hands. They seem,
however, to have some predilection for the latter. The expense of a great lord
feeds generally more idle than industrious people. The rich merchant, though
with his capital he maintains industrious people only, yet by his expense, that is,
by the employment of his revenue, he feeds commonly the very same sort as the
great lord.
The proportion, therefore, between the productive and unproductive hands,
depends very much in every country upon the proportion between that part of the
annual produce, which, as soon as it comes either from the ground, or from the
hands of the productive labourers, is destined for replacing a capital, and that
which is destined for constituting a revenue, either as rent or as profit. This
proportion is very different in rich from what it is in poor countries.
Thus, at present, in the opulent countries of Europe, every large, frequently
the largest, portion of the produce of the land, is destined for replacing the
capital of the rich and independent farmer; the other for paying his profits, and
the rent of the landlord. But anciently, during the prevalency of the feudal
government, a very small portion of the produce was sufficient to replace the
capital employed in cultivation. It consisted commonly in a few wretched cattle,
maintained altogether by the spontaneous produce of uncultivated land, and
which might, therefore, be considered as a part of that spontaneous produce. It
generally, too, belonged to the landlord, and was by him advanced to the
occupiers of the land. All the rest of the produce properly belonged to him too,
either as rent for his land, or as profit upon this paltry capital. The occupiers of
land were generally bondmen, whose persons and effects were equally his
property. Those who were not bondmen were tenants at will; and though the rent
which they paid was often nominally little more than a quit-rent, it really
amounted to the whole produce of the land. Their lord could at all times
command their labour in peace and their service in war. Though they lived at a
distance from his house, they were equally dependent upon him as his retainers
who lived in it. But the whole produce of the land undoubtedly belongs to him,
who can dispose of the labour and service of all those whom it maintains. In the
present state of Europe, the share of the landlord seldom exceeds a third,
sometimes not a fourth part of the whole produce of the land. The rent of land,
however, in all the improved parts of the country, has been tripled and
quadrupled since those ancient times; and this third or fourth part of the annual
produce is, it seems, three or four times greater than the whole had been before.
In the progress of improvement, rent, though it increases in proportion to the
extent, diminishes in proportion to the produce of the land.
In the opulent countries of Europe, great capitals are at present employed in
trade and manufactures. In the ancient state, the little trade that was stirring, and
the few homely and coarse manufactures that were carried on, required but very
small capitals. These, however, must have yielded very large profits. The rate of
interest was nowhere less than ten per cent. and their profits must have been
sufficient to afford this great interest. At present, the rate of interest, in the
improved parts of Europe, is nowhere higher than six per cent.; and in some of
the most improved, it is so low as four, three, and two per cent. Though that part
of the revenue of the inhabitants which is derived from the profits of stock, is
always much greater in rich than in poor countries, it is because the stock is
much greater; in proportion to the stock, the profits are generally much less.
That part of the annual produce, therefore, which, as soon as it comes either
from the ground, or from the hands of the productive labourers, is destined for
replacing a capital, is not only much greater in rich than in poor countries, but
bears a much greater proportion to that which is immediately destined for
constituting a revenue either as rent or as profit. The funds destined for the
maintenance of productive labour are not only much greater in the former than in
the latter, but bear a much greater proportion to those which, though they may be
employed to maintain either productive or unproductive hands, have generally a
predilection for the latter.
The proportion between those different funds necessarily determines in every
country the general character of the inhabitants as to industry or idleness. We are
more industrious than our forefathers, because, in the present times, the funds
destined for the maintenance of industry are much greater in proportion to those
which are likely to be employed in the maintenance of idleness, than they were
two or three centuries ago. Our ancestors were idle for want of a sufficient
encouragement to industry. It is better, says the proverb, to play for nothing, than
to work for nothing. In mercantile and manufacturing towns, where the inferior
ranks of people are chiefly maintained by the employment of capital, they are in
general industrious, sober, and thriving; as in many English, and in most Dutch
towns. In those towns which are principally supported by the constant or
occasional residence of a court, and in which the inferior ranks of people are
chiefly maintained by the spending of revenue, they are in general idle,
dissolute, and poor; as at Rome, Versailles, 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, &c. A considerable revenue,
therefore, still continues to be spent in it. In trade and industry, it is much
inferior to Glasgow, of which the inhabitants are chiefly maintained by the
employment of capital. The inhabitants of a large village, it has sometimes been
observed, after having made considerable progress in manufactures, have
become idle and poor, in consequence of a great lord's having taken up his
residence in their neighbourhood.
The proportion between capital and revenue, therefore, seems everywhere to
regulate the proportion between industry and idleness. Wherever capital
predominates, industry prevails; wherever revenue, idleness. Every increase or
diminution of capital, therefore, naturally tends to increase or diminish the real
quantity of industry, the number of productive hands, and consequently the
exchangeable value of the annual produce of the land and labour of the country,
the real wealth and revenue of all its inhabitants.
Capitals are increased by parsimony, and diminished by prodigality and
misconduct.
Whatever a person saves from his revenue he adds to his capital, and either
employs it himself in maintaining an additional number of productive hands, or
enables some other person to do so, by lending it to him for an interest, that is,
for a share of the profits. As the capital of an individual can be increased only by
what he saves from his annual revenue or his annual gains, so the capital of a
society, which is the same with that of all the individuals who compose it, can be
increased only in the same manner.
Parsimony, and not industry, is the immediate cause of the increase of
capital. Industry, indeed, provides the subject which parsimony accumulates; but
whatever industry might acquire, if parsimony did not save and store up, the
capital would never be the greater.
Parsimony, by increasing the fund which is destined for the maintenance of
productive hands, tends to increase the number of those hands whose labour
adds to the value of the subject upon which it is bestowed. It tends, therefore, to
increase the exchangeable value of the annual produce of the land and labour of
the country. It puts into motion an additional quantity of industry, which gives an
additional value to the annual produce.
What is annually saved, is as regularly consumed as what is annually spent,
and nearly in the same time too; but it is consumed by a different set of people.
That portion of his revenue which a rich man annually spends, is, in most cases,
consumed by idle guests and menial servants, who leave nothing behind them in
return for their consumption. That portion which he annually saves, as, for the
sake of the profit, it is immediately employed as a capital, is consumed in the
same manner, and nearly in the same time too, but by a different set of people:
by labourers, manufacturers, and artificers, who re-produce, 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 was not compensated by the frugality of
others, the conduct of every prodigal, by feeding the idle with the bread of the
industrious, tends not only to beggar himself, but to impoverish his country.
Though the expense of the prodigal should be altogether in home made, and
no part of it in foreign commodities, its effect upon the productive funds of the
society would still be the same. Every year there would still be a certain quantity
of food and clothing, which ought to have maintained productive, employed in
maintaining unproductive hands. Every year, therefore, there would still be some
diminution in what would otherwise have been the value of the annual produce
of the land and labour of the country.
This expense, it may be said, indeed, not being in foreign goods, and not
occasioning any exportation of gold and silver, the same quantity of money
would remain in the country as before. But if the quantity of food and clothing,
which were thus consumed by unproductive, had been distributed among
productive hands, they would have reproduced, together with a profit, the full
value of their consumption. The same quantity of money would, in this case,
equally have remained in the country, and there would, besides, have been a
reproduction of an equal value of consumable goods. There would have been
two values instead of one.
The same quantity of money, besides, cannot long remain in any country in
which the value of the annual produce diminishes. The sole use of money is to
circulate consumable goods. By means of it, provisions, materials, and finished
work, are bought and sold, and distributed to their proper consumers. The
quantity of money, therefore, which can be annually employed in any country,
must be determined by the value of the consumable goods annually circulated
within it. These must consist, either in the immediate produce of the land and
labour of the country itself, or in something which had been purchased with
some part of that produce. Their value, therefore, must diminish as the value of
that produce diminishes, and along with it the quantity of money which can be
employed in circulating them. But the money which, by this annual diminution
of produce, is annually thrown out of domestic circulation, will not be allowed to
lie idle. The interest of whoever possesses it requires that it should be employed;
but having no employment at home, it will, in spite of all laws and prohibitions,
be sent abroad, and employed in purchasing consumable goods, which may be of
some use at home. Its annual exportation will, in this manner, continue for some
time to add something to the annual consumption of the country beyond the
value of its own annual produce. What in the days of its prosperity had been
saved from that annual produce, and employed in purchasing gold and silver will
contribute, for some little time, to support its consumption in adversity. The
exportation of gold and silver is, in this case, not the cause, but the effect of its
declension, and may even, for some little time, alleviate the misery of that
declension.
The quantity of money, on the contrary, must in every country naturally
increase as the value of the annual produce increases. The value of the
consumable goods annually circulated within the society being greater, will
require a greater quantity of money to circulate them. A part of the increased
produce, therefore, will naturally be employed in purchasing, wherever it is to be
had, the additional quantity of gold and silver necessary for circulating the rest.
The increase of those metals will, in this case, be the effect, not the cause, of the
public prosperity. Gold and silver are purchased everywhere in the same manner.
The food, clothing, and lodging, the revenue and maintenance, of all those
whose labour or stock is employed in bringing them from the mine to the
market, is the price paid for them in Peru as well as in England. The country
which has this price to pay, will never be long without the quantity of those
metals which it has occasion for; and no country will ever long retain a quantity
which it has no occasion for.
Whatever, therefore, we may imagine the real wealth and revenue of a
country to consist in, whether in the value of the annual produce of its land and
labour, as plain reason seems to dictate, or in the quantity of the precious metals
which circulate within it, as vulgar prejudices suppose; in either view of the
matter, every prodigal appears to be a public enemy, and every frugal man a
public benefactor.
The effects of misconduct are often the same as those of prodigality. Every
injudicious and unsuccessful project in agriculture, mines, fisheries, trade, or
manufactures, tends in the same manner to diminish the funds destined for the
maintenance of productive labour. In every such project, though the capital is
consumed by productive hands only, yet as, by the injudicious manner in which
they are employed, they do not reproduce the full value of their consumption,
there must always be some diminution in what would otherwise have been the
productive funds of the society.
It can seldom happen, indeed, that the circumstances of a great nation can be
much affected either by the prodigality or misconduct of individuals; the
profusion or imprudence of some being always more than compensated by the
frugality and good conduct of others.
With regard to profusion, the principle which prompts to expense is the
passion for present enjoyment; which, though sometimes violent and very
difficult to be restrained, is in general only momentary 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 increasing 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 Cæsar,
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 he 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
L.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 L.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
year's increase would have augmented still more that of the following year. More
houses would have been built, more lands would have been improved, and those
which had been improved before would have been better cultivated; more
manufactures would have been established, and those which had been
established before would have been more extended; and to what height the real
wealth and revenue of the country might by this time have been raised, it is not
perhaps very easy even to imagine.
But though the profusion of government must undoubtedly have retarded the
natural progress of England towards wealth and improvement, it has not been
able to stop it. The annual produce of its land and labour is undoubtedly much
greater at present than it was either at the Restoration or at the Revolution. The
capital, therefore, annually employed in cultivating this land, and in maintaining
this labour, must likewise be much greater. In the midst of all the exactions of
government, this capital has been silently and gradually accumulated by the
private frugality and good conduct of individuals, by their universal, continual,
and uninterrupted effort to better their own condition. It is this effort, protected
by law, and allowed by liberty to exert itself in the manner that is most
advantageous, which has maintained the progress of England towards opulence
and improvement in almost all former times, and which, it is to be hoped, will do
so in all future times. England, however, as it has never been blessed with a very
parsimonious government, so parsimony has at no time been the 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 more durable, which can
therefore be accumulated, and in which every 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 must
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, &c. 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, gewgaws, frequently
indicates, not only a trifling, but a base and selfish disposition. All that I mean is,
that the one sort of expense, as it always occasions some accumulation of
valuable commodities, as it is more favourable to private frugality, and,
consequently, to the increase of the public capital, and as it maintains productive
rather than unproductive hands, conduces more than the other to the growth of
public opulence.
CHAP. 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 revenues 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 or 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 L.1000, with which W
immediately purchases of B L.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 L.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 borrower in return shall, during the
continuation 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
L.100 now are worth no more than L.50 were then, L.5 now can be worth no
more than L.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.
CHAP. 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 these 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 he 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 most suspicious example, that occasions a general disposition to
drunkenness among the common people; but that disposition, arising from other
causes, necessarily gives employment to a multitude of alehouses.
The persons whose capitals are employed in any of those four ways, are
themselves productive labourers. Their labour, when properly directed, fixes and
realizes itself in the subject or vendible commodity upon which it is bestowed,
and generally adds to its price the value at least of their own maintenance and
consumption. The profits of the farmer, of the manufacturer, of the merchant,
and retailer, are all drawn from the price of the goods which the two first
produce, and the two last buy and sell. Equal capitals, however, employed in
each of those four different ways, will immediately put into motion very
different quantities of productive labour; and augment, too, in very different
proportions, the value of the annual produce of the land and labour of the society
to which they belong.
The capital of the retailer replaces, together with its profits, that of the
merchant of whom he purchases goods, and thereby enables him to continue his
business. The retailer himself is the only productive labourer whom it
immediately employs. In his profit consists the whole value which its
employment adds to the annual produce of the land and labour of the society.
The capital of the wholesale merchant replaces, together with their profits,
the capitals of the farmers and manufacturers of whom he purchases the rude and
manufactured produce which he deals in, and thereby enables them to continue
their respective trades. It is by this service chiefly that he contributes indirectly
to support the productive labour of the society, and to increase the value of its
annual produce. His capital employs, too, the sailors and carriers who transport
his goods from one place to another; and it augments the price of those goods by
the value, not only of his profits, but of their wages. This is all the productive
labour which it immediately puts into motion, and all the value which it
immediately adds to the annual produce. Its operation in both these respects is a
good deal superior to that of the capital of the retailer.
Part of the capital of the master manufacturer is employed as a fixed capital
in the instruments of his trade, and replaces, together with its profits, that of
some other artificer of whom he purchases them. Part of his circulating capital is
employed in purchasing materials, and replaces, with their profits, the capitals of
the farmers and miners of whom he purchases them. But a great part of it is
always, either annually, or in a much shorter period, distributed among the
different workmen whom he employs. It augments the value of these 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 cost no expense, its produce has its value, as well as that of the
must 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 must 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 there, would be of no value, and would soon
cease to be produced. The merchants who export it, replace the capitals of the
people who produce it, and thereby encourage them to continue the production;
and the British manufacturers replace the capitals of those merchants.
A particular country, in the same manner as a particular person, may
frequently not have capital sufficient both to improve 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 of the
country, as they will thus be enabled to make the greatest savings. But the
revenue of all the inhabitants of the country is necessarily in proportion to the
value of the annual produce of their land and labour.
It has been the principal cause of the rapid progress of our American
colonies towards wealth and greatness, that almost their whole capitals have
hitherto been employed in agriculture. They have no manufactures, those
household and 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 enable any great country to acquire capital sufficient
for all those three purposes; unless, perhaps, we give credit to the wonderful
accounts of the wealth and cultivation of China, of those of ancient Egypt, and of
the ancient state of Indostan. Even those three countries, the wealthiest,
according to all accounts, that ever were in the world, are chiefly renowned for
their superiority in agriculture and manufactures. They do not appear to have
been eminent for foreign trade. The ancient Egyptians had a superstitious
antipathy to the sea; a superstition nearly of the same kind prevails among the
Indians; and the Chinese have never excelled in foreign commerce. The greater
part of the surplus produce of all those three countries seems to have been
always exported by foreigners, who gave in exchange for it something else, for
which they found a demand there, frequently gold and silver.
It is thus that the same capital will in any country put into motion a greater or
smaller quantity of productive labour, and add a greater or smaller value to the
annual produce of its land and labour, according to the different proportions in
which it is employed in agriculture, manufactures, and wholesale trade. The
difference, too, is very great, according to the different sorts of wholesale trade
in which any part of it is employed.
All wholesale trade, all buying in order to sell again by wholesale, may be
reduced to three different sorts: the home trade, the foreign trade of
consumption, and the carrying trade. The home trade is employed in purchasing
in one part of the same country, and selling in another, the produce of the
industry of that country. It comprehends both the inland and the coasting trade.
The foreign trade of consumption is employed in purchasing foreign goods for
home consumption. The carrying trade is employed in transacting the commerce
of foreign countries, or in carrying the surplus produce of one to another.
The capital which is employed in purchasing in one part of the country, in
order to sell in another, the produce of the industry of that country, generally
replaces, by every such operation, two distinct capitals, that had both been
employed in the agriculture or manufactures of that country, and thereby enables
them to continue that employment. When it sends out from the residence of the
merchant a certain value of commodities, it generally brings back in return at
least an equal value of other commodities. When both are the produce of
domestic industry, it necessarily replaces, by every such operation, two distinct
capitals, which had both been employed in supporting productive labour, and
thereby enables them to continue that support. The capital which sends Scotch
manufactures to London, and brings back English corn and manufactures to
Edinburgh, necessarily replaces, by every such operation, two British capitals,
which had both been employed in the agriculture or manufactures of Great
Britain.
The capital employed in purchasing foreign goods for home consumption,
when this purchase is made with the produce of domestic industry, replaces, too,
by every such operation, two distinct capitals; but one of them only is employed
in supporting domestic industry. The capital which sends British goods to
Portugal, and brings back Portuguese goods to Great Britain, replaces, by every
such operation, only one British capital. The other is a Portuguese one. Though
the returns, therefore, of the foreign trade of consumption, should be as quick as
those of the home trade, the capital employed in it will give but one half the
encouragement to the industry or productive labour of the country.
But the returns of the foreign trade of consumption are very seldom so quick
as those of the home trade. The returns of the home trade generally come in
before the end of the year, and sometimes three or four times in the year. The
returns of the foreign trade of consumption seldom come in before the end of the
year, and sometimes not till after two or three years. A capital, therefore,
employed in the home trade, will sometimes make twelve operations, or be sent
out and returned twelve times, before a capital employed in the foreign trade of
consumption has made one. If the capitals are equal, therefore, the one will give
four-and-twenty times more encouragement and support to the industry of the
country than the other.
The foreign goods for home consumption may sometimes be purchased, not
with the produce of domestic industry, but with some other foreign goods. These
last, however, must have been purchased, either immediately with the produce of
domestic industry, or with something else that had been purchased with it; for,
the case of war and conquest excepted, foreign goods can 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 inconveniences of any other equally round-about foreign trade of
consumption; and will replace, just as fast, or just as slow, the capital which is
immediately employed in supporting that productive labour. It seems even to
have one advantage over any other equally 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 may be presumed, that he actually does so upon
some particular occasions. It is upon this account, however, that the carrying
trade has been supposed peculiarly advantageous to such a country as Great
Britain, of which the defence and security depend upon the number of its sailors
and shipping. But the same capital may employ as many sailors and shipping,
either in the foreign trade of consumption, or even in the home trade, when
carried on by coasting vessels, as it could in the carrying trade. The number of
sailors and shipping which any particular capital can employ, does not depend
upon the nature of the trade, but partly upon the bulk of the goods, in proportion
to their value, and partly upon the distance of the ports between which they are
to be carried; chiefly upon the former of those two circumstances. The coal trade
from Newcastle to London, for example, employs more shipping than all the
carrying trade of England, though the ports are at no great distance. To force,
therefore, by extraordinary encouragements, a larger share of the capital of any
country into the carrying trade, than what would naturally go to it, will not
always necessarily increase the shipping of that country.
The capital, therefore, employed in the home trade of any country, will
generally give encouragement and support to a greater quantity of productive
labour in that country, and increase the value of its annual produce, more than an
equal capital employed in the foreign trade of consumption; and the capital
employed in this latter trade has, in both these respects, a still greater advantage
over an equal capital employed in the carrying trade. The riches, and so far as
power depends upon riches, the power of every country must always be in
proportion to the value of its annual produce, the fund from which all taxes must
ultimately be paid. But the great object of the political economy of every
country, is to increase the riches and power of that country. It ought, therefore, to
give no preference nor superior encouragement to the foreign trade of
consumption above the home trade, nor to the carrying trade above either of the
other two. It ought neither to force nor to allure into either of those two channels
a greater share of the capital of the country, than what would naturally flow into
them of its own accord.
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 acquire a value sufficient to
compensate the labour and expense of producing it. The neighbourhood of the
sea-coast, and the banks of all navigable rivers, are advantageous situations for
industry, only because they facilitate the exportation and exchange of such
surplus produce for something else which is more in demand there.
When the foreign goods which are thus purchased with the surplus produce
of domestic industry exceed the demand of the home market, the surplus part of
them must be sent abroad again, and exchanged for something more in demand
at home. About 96,000 hogsheads of tobacco are annually purchased in Virginia
and Maryland with a part of the surplus produce of British industry. But the
demand of Great Britain does not require, perhaps, more than 14,000. If the
remaining 82,000, therefore, could not be sent abroad, and exchanged for
something more in demand at home, the importation of them must cease
immediately, and with it the productive labour of all those inhabitants of Great
Britain who are at present employed in preparing the goods with which these
82,000 hogsheads are annually purchased. Those goods, which are part of the
produce of the land and labour of Great Britain, having no market at home, and
being deprived of that which they had abroad, must cease to be produced. The
most round-about foreign trade of consumption, therefore, may, upon some
occasions, be as necessary for supporting the productive labour of the country,
and the value of its annual produce, as the most direct.
When the capital stock of any country is increased to such a degree that it
cannot be all employed in supplying the consumption, and supporting the
productive labour of that particular country, the surplus part of it naturally
disgorges itself into the carrying trade, and is employed in performing the same
offices to other countries. The carrying trade is the natural effect and symptom of
great national wealth; but it does not seem to be the natural cause of it. Those
statesmen who have been disposed to favour it with particular encouragement,
seem to have mistaken the effect and symptom for the cause. Holland, in
proportion to the extent of the land and the number of its inhabitants, by far the
richest country in Europe, has accordingly the greatest share of the carrying
trade of Europe. England, perhaps the second richest country of Europe, is
likewise supposed to have a considerable share in it; though what commonly
passes for the carrying trade of England will frequently, perhaps, be found to be
no more than a round-about foreign trade of consumption. Such are, in a great
measure, the trades which carry the goods of the East and West Indies and of
America to the different European markets. Those goods are generally
purchased, either immediately with the produce of British industry, or with
something else which had been purchased with that produce, and the final
returns of those trades are generally used or consumed in Great Britain. The
trade which is carried on in British bottoms between the different ports of the
Mediterranean, and some trade of the same kind carried on by British merchants
between the different parts 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
CHAP. 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 how much the country is benefited by the commerce
of the town. Among all the absurd speculations that have been propagated
concerning the balance of trade, it has never been pretended that either the
country loses by its commerce with the town, or the town by that with the
country which maintains it.
As subsistence is, in the nature of things, prior to conveniency and luxury, so
the industry which procures the former, must necessarily be prior to that which
ministers to the latter. The cultivation and improvement of the country, therefore,
which affords subsistence, must, necessarily, be prior to the increase of the town,
which furnishes only the means of conveniency and luxury. It is the surplus
produce of the country only, or what is over and above the maintenance of the
cultivators, that constitutes the subsistence of the town, which can therefore
increase only with the increase of 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 or country.
In our North American colonies, where uncultivated land is still to be had
upon easy terms, no manufactures for distant sale have ever yet been established
in any of their towns. When an artificer has acquired a little more stock than is
necessary for carrying on his own business in supplying the neighbouring
country, he does not, in North America, attempt to establish with it a
manufacture for more distant sale, but employs it in the purchase and
improvement of uncultivated land. From artificer he becomes planter; and
neither the large wages nor the easy subsistence which that country affords to
artificers, can bribe him rather to work for other people than for himself. He
feels that an artificer is the servant of his customers, from whom he derives his
subsistence; but that a planter who cultivates his own land, and derives his
necessary subsistence from the labour of his own family, is really a master, and
independent of all the world.
In countries, on the contrary, where there is either no uncultivated land, or
none that can be had upon easy terms, every artificer who has acquired more
stock than he can employ in the occasional jobs of the neighbourhood,
endeavours to prepare work for more distant sale. The smith erects some sort of
iron, the weaver some sort of linen or woollen manufactory. Those different
manufactures come, in process of time, to be gradually subdivided, and thereby
improved and refined in a great variety of ways, which may easily be conceived,
and which it is therefore unnecessary to explain any further.
In seeking for employment to a capital, manufactures are, upon equal or
nearly equal profits, naturally preferred to foreign commerce, for the same
reason that agriculture is naturally preferred to manufactures. As the capital of
the landlord or farmer is more secure than that of the manufacturer, so the capital
of the manufacturer, being at all times more within his view and command, is
more secure than that of the foreign merchant. In every period, indeed, of every
society, the surplus part both of the rude and manufactured produce, or that for
which there is no demand at home, must be sent abroad, in order to be
exchanged for something for which there is some demand at home. But whether
the capital which carries this surplus produce abroad be a foreign or a domestic
one, is of very little importance. If the society has not acquired sufficient capital,
both to cultivate all its lands, and to manufacture in the completest manner the
whole of its rude produce, there is even a considerable advantage that the rude
produce should be exported by a foreign capital, in order that the whole stock of
the society may be employed in more useful purposes. The wealth of ancient
Egypt, that of China and Indostan, sufficiently demonstrate that a nation may
attain a very high degree of opulence, though the greater part of its exportation
trade be carried on by foreigners. The progress of our North American and West
Indian colonies, would have been much less rapid, had no capital but what
belonged to themselves been employed in exporting their surplus produce.
According to the natural course of things, therefore, the greater part of the
capital of every growing society is, first, directed to agriculture, afterwards to
manufactures, and, last of all, to foreign commerce. This order of things is so
very natural, that in every society that had any territory, it has always, I believe,
been in some degree observed. Some of their lands must have been cultivated
before any considerable towns could be established, and some sort of coarse
industry of the manufacturing kind must have been carried on in those towns,
before they could well think of employing themselves in foreign commerce.
But though this natural order of things must have taken place in some degree
in every such society, it has, in all the modern states of Europe, been in many
respects entirely inverted. The foreign commerce of some of their cities has
introduced all their finer manufactures, or such as were fit for distant sale; and
manufactures and foreign commerce together have given birth to the principal
improvements of agriculture. The manners and customs which the nature of their
original government introduced, and which remained after that government was
greatly altered, necessarily forced them into this unnatural and retrograde order.
CHAP. 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 differences
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 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 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 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 is 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 to
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 steelbow 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 twenty-seven, a
period still too short to encourage the tenant to make the most important
improvements. The proprietors of land were anciently the legislators of every
part of Europe. The laws relating to land, therefore, were all calculated for what
they supposed the interest of the proprietor. It was for his interest, they had
imagined, that no lease granted by any of his predecessors should hinder him
from enjoying, during a long term of years, the full value of his land. Avarice
and injustice are always short-sighted, and they did not foresee how much this
regulation must obstruct improvement, and thereby hurt, in the long-run, the real
interest of the landlord.
The farmers, too, besides paying the rent, were anciently, it was supposed,
bound to perform a great number of services to the landlord, which were seldom
either specified in the lease, or regulated by any precise rule, but by the use and
wont of the manor or barony. These services, therefore, being almost entirely
arbitrary, subjected the tenant to many vexations. In Scotland the abolition of all
services not precisely stipulated in the lease, has, in the course of a few years,
very much altered for the better the condition of the yeomanry of that country.
The public services to which the yeomanry were bound, were not less
arbitrary than the private ones. To make and maintain the high roads, a servitude
which still subsists, I believe, everywhere, though with different degrees of
oppression in different countries, was not the only one. When the king's troops,
when his household, or his officers of any kind, passed through any part of the
country, the yeomanry were bound to provide them with horses, carriages, and
provisions, at a price regulated by the purveyor. Great Britain is, I believe, the
only monarchy in Europe where the oppression of purveyance has been entirely
abolished. It still subsists in France and Germany.
The public taxes, to which they were subject, were as irregular and
oppressive as the services. The ancient lords, though extremely unwilling to
grant, themselves, any pecuniary aid to their sovereign, easily allowed him to
tallage, as they called it, their tenants, and had not knowledge enough to foresee
how much this must, in the end, affect their own revenue. The taille, as it still
subsists in France, may serve as an example of those ancient tallages. It is a tax
upon the supposed profits of the farmer, which they estimate by the stock that he
has upon the farm. It is his interest, therefore, to appear to have as little as
possible, and consequently to employ as little as possible in its cultivation, and
none in its improvement. Should any stock happen to accumulate in the hands of
a French farmer, the taille is almost equal to a prohibition of its ever being
employed upon the land. This tax, besides, is supposed to dishonour whoever is
subject to it, and to degrade him below, not only the rank of a gentleman, but that
of a burgher; and whoever rents the lands of another becomes subject to it. No
gentleman, nor even any burgher, who has stock, will submit to this degradation.
This tax, therefore, not only hinders the stock which accumulates upon the land
from being employed in its improvement, but drives away all other stock from it.
The ancient tenths and fifteenths, so usual in England in former times, seem, so
far as they affected the land, to have been taxes of the same nature with the
taille.
Under all these discouragements, little improvement could be expected from
the occupiers of land. That order of people, with all the liberty and security
which law can give, must always improve under great disadvantage. The farmer,
compared with the proprietor, is as a merchant who trades with borrowed money,
compared with one who trades with his own. The stock of both may improve;
but that of the one, with only equal good conduct, must always improve more
slowly than that of the other, on account of the large share of the profits which is
consumed by the interest of the loan. The lands cultivated by the farmer must, in
the same manner, with only equal good conduct, be improved more slowly than
those cultivated by the proprietor, on account of the large share of the produce
which is consumed in the rent, and which, had the farmer been proprietor, he
might have employed in the further improvement of the land. The station of a
farmer, besides, is, from the nature of things, inferior to that of a proprietor.
Through the greater part of Europe, the yeomanry are regarded as an inferior
rank of people, even to the better sort of tradesmen and mechanics, and in all
parts of Europe to the great merchants and master manufacturers. It can seldom
happen, therefore, that a man of any considerable stock should quit the superior,
in order to place himself in an inferior station. Even in the present state of
Europe, therefore, little stock is likely to go from any other profession to the
improvement of land in the way of farming. More does, perhaps, in Great Britain
than in any other country, though even there the great stocks which are in some
places employed in farming, have generally been acquired by farming, the trade,
perhaps, in which, of all others, stock is commonly acquired most slowly. After
small proprietors, however, rich and great farmers are in every country the
principal improvers. There are more such, perhaps, in England than in any other
European monarchy. In the republican governments of Holland, and of Berne in
Switzerland, the farmers are said to be not inferior to those of England.
The ancient policy of Europe was, over and above all this, unfavourable to
the improvement and cultivation of land, whether carried on by the proprietor or
by the farmer; first, by the general prohibition of the exportation of corn, without
a special licence, which seems to have been a very universal regulation; and,
secondly, by the restraints which were laid upon the inland commerce, not only
of corn, but of almost every other part of the produce of the farm, by the absurd
laws against engrossers, 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.
CHAP. 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 dependents. 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.[31]
But how servile soever may have been originally the condition of the
inhabitants of the towns, it appears evidently, that they arrived at liberty and
independency much earlier than the occupiers of land in the country. That part of
the king's revenue which arose from such poll-taxes in any particular town, used
commonly to be let in farm, during a term of years, for a rent certain, sometimes
to the sheriff of the county, and sometimes to other persons. The burghers
themselves frequently got credit enough to be admitted to farm the revenues of
this sort which arose out of their own town, they becoming jointly and severally
answerable for the whole rent.[32] 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 became 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 towncouncil 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.[33]
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.[34] 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.[35]
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 these 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 of the far greater part of the people,
are the produce of their own industry. This is even more universally the case in
those poor countries which are commonly said to have no manufactures, than in
those rich ones that are said to abound in them. In the latter you will generally
find, both in the clothes and household furniture of the lowest rank of people, a
much greater proportion of foreign productions than in the former.
Those manufactures which are fit for distant sale, seem to have been
introduced into different countries in two different ways.
Sometimes they have been introduced in the manner above mentioned, by
the violent operation, if one may say so, of the stocks of particular merchants
and undertakers, who established them in imitation of some foreign
manufactures of the same kind. Such manufactures, therefore, are the offspring
of foreign commerce; and such seem to have been the ancient manufactures of
silks, velvets, and brocades, which flourished in Lucca during the thirteenth
century. They were banished from thence by the tyranny of one of Machiavel's
heroes, Castruccio Castracani. In 1810, nine hundred families were driven out of
Lucca, of whom thirty-one retired to Venice, and offered to introduce there the
silk manufacture.[36] Their offer was accepted, many privileges were conferred
upon them, and they began the manufacture with three hundred workmen. Such,
too, seem to have been the manufactures of fine cloths that anciently flourished
in Flanders, and which were introduced into England in the beginning of the
reign of Elizabeth, and such are the present silk manufactures of Lyons and
Spitalfields. Manufactures introduced in this manner are generally employed
upon foreign materials, being imitations of foreign manufactures. When the
Venetian manufacture was first established, the materials were all brought from
Sicily and the Levant. The more ancient manufacture of Lucca was likewise
carried on with foreign materials. The cultivation of mulberry trees, and the
breeding of silk-worms, seem not to have been common in the northern parts of
Italy before the sixteenth century. Those arts were not introduced into France till
the reign of Charles IX. The manufactures of Flanders were carried on chiefly
with Spanish and English wool. Spanish wool was the material, not of the first
woollen manufacture of England, but of the first that was fit for distant sale.
More than one half the materials of the Lyons manufacture is at this day foreign
silk; when it was first established, the whole, or very nearly the whole, was so.
No part of the materials of the Spitalfields manufacture is ever likely to be the
produce of England. The seat of such manufactures, as they are generally
introduced by the scheme and project of a few individuals, is sometimes
established in a maritime city, and sometimes in an inland town, according as
their interest, judgment, or caprice, happen to determine.
At other times, manufactures for distant sale grow up naturally, and as it
were of their own accord, by the gradual refinement of those household and
coarser manufactures which must at all times be carried on even in the poorest
and rudest countries. Such manufactures are generally employed upon the
materials which the country produces, and they seem frequently to have been
first refined and improved in such inland countries as were not, indeed, at a very
great, but at a considerable distance from the sea-coast, and sometimes even
from all water carriage. An inland country, naturally fertile and easily cultivated,
produces a great surplus of provisions beyond what is necessary for maintaining
the cultivators; and on account of the expense of land carriage, and
inconveniency of river navigation, it may frequently be difficult to send this
surplus abroad. Abundance, therefore, renders provisions cheap, and encourages
a great number of workmen to settle in the neighbourhood, who find that their
industry can there procure them more of the necessaries and conveniences of life
than in other places. They work up the materials of manufacture which the land
produces, and exchange their finished work, or, what is the same thing, the price
of it, for more materials and provisions. They give a new value to the surplus
part of the rude produce, by saving the expense of carrying it to the water-side,
or to some distant market; and they furnish the cultivators with something in
exchange for it, that is either useful or agreeable to them, upon easier terms than
they could have obtained it before. The cultivators get a better price for their
surplus produce, and can purchase cheaper other conveniences which they have
occasion for. They are thus both encouraged and enabled to increase this surplus
produce by a further improvement and better cultivation of the land; and as the
fertility of the land had given birth to the manufacture, so the progress of the
manufacture re-acts upon the land, and increases still further its fertility. The
manufacturers first supply the neighbourhood, and afterwards, as their work
improves and refines, more distant markets. For though neither the rude produce,
nor even the coarse manufacture, could, without the greatest difficulty, support
the expense of a considerable land-carriage, the refined and improved
manufacture easily may. In a small bulk it frequently contains the price of a great
quantity of rude produce. A piece of fine cloth, for example which weighs only
eighty pounds, contains in it the price, not only of eighty pounds weight of wool,
but sometimes of several thousand weight of corn, the maintenance of the
different working people, and of their immediate employers. The corn which
could with difficulty have been carried abroad in its own shape, is in this manner
virtually exported in that of the complete manufacture, and may easily be sent to
the remotest corners of the world. In this manner have grown up naturally, and,
as it were, of their own accord, the manufactures of Leeds, Halifax, Sheffield,
Birmingham, and Wolverhampton. Such manufactures are the offspring of
agriculture. In the modern history of Europe, their extension and improvement
have generally been posterior to those which were the offspring of foreign
commerce. England was noted for the manufacture of fine cloths made of
Spanish wool, more than a century before any of those which now flourish in the
places above mentioned were fit for foreign sale. The extension and
improvement of these last could not take place but in consequence of the
extension and improvement of agriculture, the last and greatest effect of foreign
commerce, and of the manufactures immediately introduced by it, and which I
shall now proceed to explain.
CHAP. 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 of his annual revenue. Whoever has had the fortune to live in a
mercantile town, situated in an unimproved country, must have frequently
observed how much more spirited the operations of merchants were in this way,
than those of mere country gentlemen. The habits, besides, of order, economy,
and attention, to which mercantile business naturally forms a merchant, render
him much fitter to execute, with profit and success, any project of improvement.
Thirdly, and lastly, commerce and manufactures gradually introduced order
and good government, and with them the liberty and security of individuals,
among the inhabitants of the country, who had before lived almost in a continual
state of war with their neighbours, and of servile dependency upon their
superiors. This, though it has been the least observed, is by far the most
important of all their effects. Mr Hume is the only writer who, so far as I know,
has hitherto taken notice of it.
In a country which has neither foreign commerce nor any of the finer
manufactures, a great proprietor, having nothing for which he can exchange the
greater part of the produce of his lands which is over and above the maintenance
of the cultivators, consumes the whole in rustic hospitality at home. If this
surplus produce is sufficient to maintain a hundred or a thousand men, he can
make use of it in no other way than by maintaining a hundred or a thousand men.
He is at all times, therefore, surrounded with a multitude of retainers and
dependents, 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 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
invited 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 in
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 any one. 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 byelaws 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 without 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 L.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 in 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 L.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 L.10,000 ayear can spend his whole revenue, and he generally does so, without directly
maintaining twenty people, or being able to command more than ten footmen,
not worth the commanding. Indirectly, perhaps, he maintains as great, or even a
greater number of people, than he could have done by the ancient method of
expense. For though the quantity of precious productions for which he
exchanges his whole revenue be very small, the number of workmen employed
in collecting and preparing it must necessarily have been very great. Its great
price generally arises from the wages of their labour, and the profits of all their
immediate employers. By paying that price, he indirectly pays all those wages
and profits, and thus indirectly contributes to the maintenance of all the
workmen and their employers. He generally contributes, however, but a very
small proportion to that of each; to a very few, perhaps, not a tenth, to many not
a hundredth, and to some not a thousandth, or even a ten thousandth part of their
whole annual maintenance. Though he contributes, therefore, to the maintenance
of them all, they are all more or less independent of him, because generally they
can all be maintained without him.
When the great proprietors of land spend their rents in maintaining their
tenants and retainers, each of them maintains entirely all his own tenants and all
his own retainers. But when they spend them in maintaining tradesmen and
artificers, they may, all of them taken together, perhaps maintain as great, or, on
account of the waste which attends rustic hospitality, a greater number of people
than before. Each of them, however, taken singly, contributes often but a very
small share to the maintenance of any individual of this greater number. Each
tradesman or artificer derives his subsistence from the employment, not of one,
but of a hundred or a thousand different customers. Though in some measure
obliged to them all, therefore, he is not absolutely dependent upon any one of
them.
The personal expense of the great proprietors having in this manner
gradually increased, it was impossible that the number of their retainers should
not as gradually diminish, till they were at last dismissed altogether. The same
cause gradually led them to dismiss the unnecessary part of their tenants. Farms
were enlarged, and the occupiers of land, notwithstanding the complaints of
depopulation, reduced to the number necessary for cultivating it, according to
the imperfect state of cultivation and improvement in those times. By the
removal of the unnecessary mouths, and by exacting from the farmer the full
value of the farm, a greater surplus, or, what is the same thing, the price of a
greater surplus, was obtained for the proprietor, which the merchants and
manufacturers soon furnished him with a method of spending upon his own
person, in the same manner as he had done the rest. The cause continuing to
operate, he was desirous to raise his rents above what his lands, in the actual
state of their improvement, could afford. His tenants could agree to this upon one
condition only, that they should be secured in their possession for such a term of
years as might give them time to recover, with profit, whatever they should lay
out in the further improvement of the land. The expensive vanity of the landlord
made him willing to accept of this condition; and hence the origin of long leases.
Even a tenant at will, who pays the full value of the land, is not altogether
dependent upon the landlord. The pecuniary advantages which they receive from
one another are mutual and equal, and such a tenant will expose neither his life
nor his fortune in the service of the proprietor. But if he has a lease for a long
term of years, he is altogether independent; and his landlord must not expect
from him even the most trifling service, beyond what is either expressly
stipulated in the lease, or imposed upon him by the common and known law of
the country.
The tenants having in this manner become independent, and the retainers
being dismissed, the great proprietors were no longer capable of interrupting the
regular execution of justice, or of disturbing the peace of the country. Having
sold their birth-right, not like Esau, for a mess of pottage in time of hunger and
necessity, but, in the wantonness of plenty, for trinkets and baubles, fitter to be
the playthings of children than the serious pursuits of men, they became as
insignificant as any substantial burgher or tradesmen in a city. A regular
government was established in the country as well as in the city, nobody having
sufficient power to disturb its operations in the one, any more than in the other.
It does not, perhaps, relate to the present subject, but I cannot help remarking
it, that very old families, such as have possessed some considerable estate from
father to son for many successive generations, are very rare in commercial
countries. In countries which have little commerce, on the contrary, such as
Wales, or the Highlands of Scotland, they are very common. The Arabian
histories seem to be all full of genealogies; and there is a history written by a
Tartar Khan, which has been translated into several European languages, and
which contains scarce any thing else; a proof that ancient families are very
common among those nations. In countries where a rich man can spend his
revenue in no other way than by maintaining as many people as it can maintain,
he is apt to run out, and his benevolence, it seems, is seldom so violent as to
attempt to maintain more than he can afford. But where he can spend the greatest
revenue upon his own person, he frequently has no bounds to his expense,
because he frequently has no bounds to his vanity, or to his affection for his own
person. In commercial countries, therefore, riches, in spite of the most violent
regulations of law to prevent their dissipation, very seldom remain long in the
same family. Among simple nations, on the contrary, they frequently do, without
any regulations of law; for among nations of shepherds, such as the Tartars and
Arabs, the consumable nature of their property necessarily renders all such
regulations impossible.
A revolution of the greatest importance to the public happiness, was in this
manner brought about by two different orders of people, who had not the least
intention to serve the public. To gratify the most childish vanity was the sole
motive of the great proprietors. The merchants and artificers, much less
ridiculous, acted merely from a view to their own interest, and in pursuit of their
own pedlar principle of turning a penny wherever a penny was to be got. Neither
of them had either knowledge or foresight of that great revolution which the
folly of the one, and the industry of the other, was gradually bringing about.
It was thus, that, through the greater part of Europe, the commerce and
manufactures of cities, instead of being the effect, have been the cause and
occasion of the improvement and cultivation of the country.
This order, however, being contrary to the natural course of things, is
necessarily both slow and uncertain. Compare the slow progress of those
European countries of which the wealth depends very much upon their
commerce and manufactures, with the rapid advances of our North American
colonies, of which the wealth is founded altogether in agriculture. Through the
greater part of Europe, the number of inhabitants is not supposed to double in
less than five hundred years. In several of our North American colonies, it is
found to double in twenty or five-and-twenty years. In Europe, the law of
primogeniture, and perpetuities of different kinds, prevent the division of great
estates, and thereby hinder the multiplication of small proprietors. A small
proprietor, however, who knows every part of his little territory, views it with all
the affection which property, especially small property, naturally inspires, and
who upon that account takes pleasure, not only in cultivating, but in adorning it,
is generally of all improvers the most industrious, the most intelligent, and the
most successful. The same regulations, besides, keep so much land out of the
market, that there are always more capitals to buy than there is land to sell, so
that what is sold always sells at a monopoly price. The rent never pays the
interest of the purchase money, and is, besides, burdened with repairs and other
occasional charges, to which the interest of money is not liable. To purchase
land, is, everywhere in Europe, a most unprofitable employment of a small
capital. For the sake of the superior security, indeed, a man of moderate
circumstances, when he retires from business, will sometimes choose to lay out
his little capital in land. A man of profession, too, whose revenue is derived from
another source, often loves to secure his savings in the same way. But a young
man, who, instead of applying to trade or to some profession, should employ a
capital of two or three thousand pounds in the purchase and cultivation of a
small piece of land, might indeed expect to live very happily and very
independently, but must bid adieu for ever to all hope of either great fortune or
great illustration, which, by a different employment of his stock, he might have
had the same chance of acquiring with other people. Such a person, too, though
he cannot aspire at being a proprietor, will often disdain to be a farmer. The
small quantity of land, therefore, which is brought to market, and the high price
of what is brought thither, prevents a great number of capitals from being
employed in its cultivation and improvement, which would otherwise have taken
that direction. In North America, on the contrary, fifty or sixty pounds is often
found a sufficient stock to begin a plantation with. The purchase and
improvement of uncultivated land is there the most profitable employment of the
smallest as well as of the greatest capitals, and the most direct road to all the
fortune and illustration which can be acquired in that country. Such land, indeed,
is in North America to be had almost for nothing, or at a price much below the
value of the natural produce; a thing impossible in Europe, or indeed in any
country where all lands have long been private property. If landed estates,
however, were divided equally among all the children, upon the death of any
proprietor who left a numerous family, the estate would generally be sold. So
much land would come to market, that it could no longer sell at a monopoly
price. The free rent of the land would go no nearer to pay the interest of the
purchase-money, and a small capital might be employed in purchasing land as
profitable as in any other way.
England, on account of the natural fertility of the soil, of the great extent of
the sea-coast in proportion to that of the whole country, and of the many
navigable rivers which run through it, and afford the conveniency of water
carriage to some of the most inland parts of it, is perhaps as well fitted by nature
as any large country in Europe to be the seat of foreign commerce, of
manufactures for distant sale, and of all the improvements which these can
occasion. From the beginning of the reign of Elizabeth, too, the English
legislature has been peculiarly attentive to the interest of commerce and
manufactures, and in reality there is no country in Europe, Holland itself not
excepted, of which the law is, upon the whole, more favourable to this sort of
industry. Commerce and manufactures have accordingly been continually
advancing during all this period. The cultivation and improvement of the country
has, no doubt, been gradually advancing too; but it seems to have followed
slowly, and at a distance, the more rapid progress of commerce and
manufactures. The greater part of the country must probably have been
cultivated before the reign of Elizabeth; and a very great part of it still remains
uncultivated, and the cultivation of the far greater part much inferior to what it
might be. The law of England, however, favours agriculture, not only indirectly,
by the protection of commerce, but by several direct encouragements. Except in
times of scarcity, the exportation of corn is not only free, but encouraged by a
bounty. In times of moderate plenty, the importation of foreign corn is loaded
with duties that amount to a prohibition. The importation of live cattle, except
from Ireland, is prohibited at all times; and it is but of late that it was permitted
from thence. Those who cultivate the land, therefore, have a monopoly against
their countrymen for the two greatest and most important articles of land
produce, bread and butcher's meat. These encouragements, though at bottom,
perhaps, as I shall endeavour to show hereafter, altogether illusory, sufficiently
demonstrate at least the good intention of the legislature to favour agriculture.
But what is of much more importance than all of them, the yeomanry of England
are rendered as secure, as independent, and as respectable, as law can make
them. No country, therefore, in which the right of primogeniture takes place,
which pays tithes, and where perpetuities, though contrary to the spirit of the
law, are admitted in some cases, can give more encouragement to agriculture
than England. Such, however, notwithstanding, is the state of its cultivation.
What would it have been, had the law given no direct encouragement to
agriculture besides what arises indirectly from the progress of commerce, and
had left the yeomanry in the same condition as in most other countries of
Europe? It is now more than two hundred years since the beginning of the reign
of Elizabeth, a period as long as the course of human prosperity usually endures.
France seems to have had a considerable share of foreign commerce, near a
century before England was distinguished as a commercial country. The marine
of France was considerable, according to the notions of the times, before the
expedition of Charles VIII. to Naples. The cultivation and improvement of
France, however, is, upon the whole, inferior to that of England. The law of the
country has never given the same direct encouragement to agriculture.
The foreign commerce of Spain and Portugal to the other parts of Europe,
though chiefly carried on in foreign ships, is very considerable. That to their
colonies is carried on in their own, and is much greater, on account of the great
riches and extent of those colonies. But it has never introduced any considerable
manufactures for distant sale into either of those countries, and the greater part
of both still remains uncultivated. The foreign commerce of Portugal is of older
standing than that of any great country in Europe, except Italy.
Italy is the only great country of Europe which seems to have been cultivated
and improved in every part, by means of foreign commerce and manufactures
for distant sale. Before the invasion of Charles VIII., Italy, according to
Guicciardini, was cultivated not less in the most mountainous and barren parts of
the country, than in the plainest and most fertile. The advantageous situation of
the country, and the great number of independent states which at that time
subsisted in it, probably contributed not a little to this general cultivation. It is
not impossible, too, notwithstanding this general expression of one of the most
judicious and reserved of modern historians, that Italy was not at that time better
cultivated than England is at present.
The capital, however, that is acquired to any country by commerce and
manufactures, is always a very precarious and uncertain possession, till some
part of it has been secured and realized in the cultivation and improvement of its
lands. A merchant, it has been said very properly, is not necessarily the citizen of
any particular country. It is in a great measure indifferent to him from what place
he carries on his trade; and a very trifling disgust will make him remove his
capital, and, together with it, all the industry which it supports, from one country
to another. No part of it can be said to belong to any particular country, till it has
been spread, as it were, over the face of that country, either in buildings, or in the
lasting improvement of lands. No vestige now remains of the great wealth said to
have been possessed by the greater part of the Hanse Towns, except in the
obscure histories of the thirteenth and fourteenth centuries. It is even uncertain
where some of them were situated, or to what towns in Europe the Latin names
given to some of them belong. But though the misfortunes of Italy, in the end of
the fifteenth and beginning of the sixteenth centuries, greatly diminished the
commerce and manufactures of the cities of Lombardy and Tuscany, those
countries still continue to be among the most populous and best cultivated in
Europe. The civil wars of Flanders, and the Spanish government which
succeeded them, chased away the great commerce of Antwerp, Ghent, and
Bruges. But Flanders still continues to be one of the richest, best cultivated, and
most populous provinces of Europe. The ordinary revolutions of war and
government easily dry up the sources of that wealth which arises from commerce
only. That which arises from the more solid improvements of agriculture is much
more durable, and cannot be destroyed but by those more violent convulsions
occasioned by the depredations of hostile and barbarous nations continued for a
century or two together; such as those that happened for some time before and
after the fall of the Roman empire in the western provinces of Europe.
BOOK IV.
OF SYSTEMS OF POLITICAL ECONOMY.
INTRODUCTION.
Political economy, considered as a branch of the science of a statesman or
legislator, proposes two distinct objects; first, to provide a plentiful revenue or
subsistence for the people, or, more properly, to enable them to provide such a
revenue or subsistence for themselves; and secondly, to supply the state or
commonwealth with a revenue sufficient for the public services. It proposes to
enrich both the people and the sovereign.
The different progress of opulence in different ages and nations, has given
occasion to two different systems of political economy, with regard to enriching
the people. The one may be called the system of commerce, the other that of
agriculture. I shall endeavour to explain both as fully and distinctly as I can, and
shall begin with the system of commerce. It is the modern system, and is best
understood in our own country and in our own times.
CHAP. I.
OF THE PRINCIPLE OF THE COMMERCIAL OR MERCANTILE
SYSTEM.
That wealth consists in money, or in gold and silver, is a popular notion
which naturally arises from the double function of money, as the instrument of
commerce, and as the measure of value. In consequence of its being the
instrument of commerce, when we have money we can more readily obtain
whatever else we have occasion for, than by means of any other commodity. The
great affair, we always find, is to get money. When that is obtained, there is no
difficulty in making any subsequent purchase. In consequence of its being the
measure of value, we estimate that of all other commodities by the quantity of
money which they will exchange for. We say of a rich man, that he is worth a
great deal, and of a poor man, that he is worth very little money. A frugal man, or
a man eager to be rich, is said to love money; and a careless, a generous, or a
profuse man, is said to be indifferent about it. To grow rich is to get money; and
wealth and money, in short, are, in common language, considered as in every
respect synonymous.
A rich country, in the same manner as a rich man, is supposed to be a country
abounding in money; and to heap up gold and silver in any country is supposed
to be the readiest way to enrich it. For some time after the discovery of America,
the first inquiry of the Spaniards, when they arrived upon any unknown coast,
used to be, if there was any gold or silver to be found in the neighbourhood? By
the information which they received, they judged whether it was worth while to
make a settlement there, or if the country was worth the conquering. Plano
Carpino, a monk sent ambassador from the king of France to one of the sons of
the famous Gengis Khan, says, that the Tartars used frequently to ask him, if
there was plenty of sheep and oxen in the kingdom of France? Their inquiry had
the same object with that of the Spaniards. They wanted to know if the country
was rich enough to be worth the conquering. Among the Tartars, as among all
other nations of shepherds, who are generally ignorant of the use of money,
cattle are the instruments of commerce and the measures of value. Wealth,
therefore, according to them, consisted in cattle, as, according to the Spaniards,
it consisted in gold and silver. Of the two, the Tartar notion, perhaps, was the
nearest to the truth.
Mr Locke remarks a distinction between money and other moveable goods.
All other moveable goods, he says, are of so consumable a nature, that the
wealth which consists in them cannot be much depended on; and a nation which
abounds in them one year may, without any exportation, but merely by their own
waste and extravagance, be in great want of them the next. Money, on the
contrary, is a steady friend, which, though it may travel about from hand to hand,
yet if it can be kept from going out of the country, is not very liable to be wasted
and consumed. Gold and silver, therefore, are, according to him, the most solid
and substantial part of the moveable wealth of a nation; and to multiply those
metals ought, he thinks, upon that account, to be the great object of its political
economy.
Others admit, that if a nation could be separated from all the world, it would
be of no consequence how much or how little money circulated in it. The
consumable goods, which were circulated by means of this money, would only
be exchanged for a greater or a smaller number of pieces; but the real wealth or
poverty of the country, they allow, would depend altogether upon the abundance
or scarcity of those consumable goods. But it is otherwise, they think, with
countries which have connections with foreign nations, and which are obliged to
carry on foreign wars, and to maintain fleets and armies in distant countries.
This, they say, cannot be done, but by sending abroad money to pay them with;
and a nation cannot send much money abroad, unless it has a good deal at home.
Every such nation, therefore, must endeavour, in time of peace, to accumulate
gold and silver, that when occasion requires, it may have wherewithal to carry on
foreign wars.
In consequence of these popular notions, all the different nations of Europe
have studied, though to little purpose, every possible means of accumulating
gold and silver in their respective countries. Spain and Portugal, the proprietors
of the principal mines which supply Europe with those metals, have either
prohibited their exportation under the severest penalties, or subjected it to a
considerable duty. The like prohibition seems anciently to have made a part of
the policy of most other European nations. It is even to be found, where we
should least of all expect to find it, in some old Scotch acts of Parliament, which
forbid, under heavy penalties, the carrying gold or silver forth of the kingdom.
The like policy anciently took place both in France and England.
When those countries became commercial, the merchants found this
prohibition, upon many occasions, extremely inconvenient. They could
frequently buy more advantageously with gold and silver, than with any other
commodity, the foreign goods which they wanted, either to import into their
own, or to carry to some other foreign country. They remonstrated, therefore,
against this prohibition as hurtful to trade.
They represented, first, that the exportation of gold and silver, in order to
purchase foreign goods, did not always diminish the quantity of those metals in
the kingdom; that, on the contrary, it might frequently increase the quantity;
because, if the consumption of foreign goods was not thereby increased in the
country, those goods might be re-exported to foreign countries, and being there
sold for a large profit, might bring back much more treasure than was originally
sent out to purchase them. Mr Mun compares this operation of foreign trade to
the seed-time and harvest of agriculture. 'If we only behold,' says he, 'the actions
of the husbandman in the seed-time, when he casteth away much good corn into
the ground, we shall account him rather a madman than a husbandman. But
when we consider his labours in the harvest, which is the end of his endeavours,
we shall find the worth and plentiful increase of his actions.'
They represented, secondly, that this prohibition could not hinder the
exportation of gold and silver, which, on account of the smallness of their bulk in
proportion to their value, could easily be smuggled abroad. That this exportation
could only be prevented by a proper attention to what they called the balance of
trade. That when the country exported to a greater value than it imported, a
balance became due to it from foreign nations, which was necessarily paid to it
in gold and silver, and thereby increased the quantity of those metals in the
kingdom. But that when it imported to a greater value than it exported, a
contrary balance became due to foreign nations, which was necessarily paid to
them in the same manner, and thereby diminished that quantity: that in this case,
to prohibit the exportation of those metals, could not prevent it, but only, by
making it more dangerous, render it more expensive: that the exchange was
thereby turned more against the country which owed the balance, than it
otherwise might have been; the merchant who purchased a bill upon the foreign
country being obliged to pay the banker who sold it, not only for the natural risk,
trouble, and expense of sending the money thither, but for the extraordinary risk
arising from the prohibition; but that the more the exchange was against any
country, the more the balance of trade became necessarily against it; the money
of that country becoming necessarily of so much less value, in comparison with
that of the country to which the balance was due. That if the exchange between
England and Holland, for example, was five per cent. against England, it would
require 105 ounces of silver in England to purchase a bill for 100 ounces of
silver in Holland: that 105 ounces of silver in England, therefore, would be
worth only 100 ounces of silver in Holland, and would purchase only a
proportionable quantity of Dutch goods; but that 100 ounces of silver in Holland,
on the contrary, would be worth 105 ounces in England, and would purchase a
proportionable quantity of English goods; that the English goods which were
sold to Holland would be sold so much cheaper, and the Dutch goods which
were sold to England so much dearer, by the difference of the exchange: that the
one would draw so much less Dutch money to England, and the other so much
more English money to Holland, as this difference amounted to: and that the
balance of trade, therefore, would necessarily be so much more against England,
and would require a greater balance of gold and silver be exported to Holland.
Those arguments were partly solid and some partly sophistical. They were
solid, so far as they asserted that the exportation of gold and silver in trade might
frequently be advantageous to the country. They were solid, too, in asserting that
no prohibition could prevent their exportation, when private people found any
advantage in exporting them. But they were sophistical, in supposing, that either
to preserve or to augment the quantity of those metals required more the
attention of government, than to preserve or to augment the quantity of any other
useful commodities, which the freedom of trade, without any such attention,
never fails to supply in the proper quantity. They were sophistical, too, perhaps,
in asserting that the high price of exchange necessarily increased what they
called the unfavourable balance of trade, or occasioned the exportation of a
greater quantity of gold and silver. That high price, indeed, was extremely
disadvantageous to the merchants who had any money to pay in foreign
countries. They paid so much dearer for the bills which their bankers granted
them upon those countries. But though the risk arising from the prohibition
might occasion some extraordinary expense to the bankers, it would not
necessarily carry any more money out of the country. This expense would
generally be all laid out in the country, in smuggling the money out of it, and
could seldom occasion the exportation of a single sixpence beyond the precise
sum drawn for. The high price of exchange, too, would naturally dispose the
merchants to endeavour to make their exports nearly balance their imports, in
order that they might have this high exchange to pay upon as small a sum as
possible. The high price of exchange, besides, must necessarily have operated as
a tax, in raising the price of foreign goods, and thereby diminishing their
consumption. It would tend, therefore, not to increase, but to diminish, what they
called the unfavourable balance of trade, and consequently the exportation of
gold and silver.
Such as they were, however, those arguments convinced the people to whom
they were addressed. They were addressed by merchants to parliaments and to
the councils of princes, to nobles, and to country gentlemen; by those who were
supposed to understand trade, to those who were conscious to themselves that
they knew nothing about the matter. That foreign trade enriched the country,
experience demonstrated to the nobles and country gentlemen, as well as to the
merchants; but how, or in what manner, none of them well knew. The merchants
knew perfectly in what manner it enriched themselves, it was their business to
know it. But to know in what manner it enriched the country, was no part of their
business. The subject never came into their consideration, but when they had
occasion to apply to their country for some change in the laws relating to foreign
trade. It then became necessary to say something about the beneficial effects of
foreign trade, and the manner in which those effects were obstructed by the laws
as they then stood. To the judges who were to decide the business, it appeared a
most satisfactory account of the matter, when they were told that foreign trade
brought money into the country, but that the laws in question hindered it from
bringing so much as it otherwise would do. Those arguments, therefore,
produced the wished-for effect. The prohibition of exporting gold and silver was,
in France and England, confined to the coin of those respective countries. The
exportation of foreign coin and of bullion was made free. In Holland, and in
some other places, this liberty was extended even to the coin of the country. The
attention of government was turned away from guarding against the exportation
of gold and silver, to watch over the balance of trade, as the only cause which
could occasion any augmentation or diminution of these metals. From one
fruitless care, it was turned away to another care much more intricate, much
more embarrassing, and just equally fruitless. The title of Mun's book, England's
Treasure in Foreign Trade, became a fundamental maxim in the political
economy, not of England only, but of all other commercial countries. The inland
or home trade, the most important of all, the trade in which an equal capital
affords the greatest revenue, and creates the greatest employment to the people
of the country, was considered as subsidiary only to foreign trade. It neither
brought money into the country, it was said, nor carried any out of it. The
country, therefore, could never become either richer or poorer by means of it,
except so far as its prosperity or decay might indirectly influence the state of
foreign trade.
A country that has no mines of its own, must undoubtedly draw its gold and
silver from foreign countries, in the same manner as one that