Smith Wealth of Nations 01

THE WEALTH OF NATIONS
VOLUME ONE
^ 0
ADAM SMITH
LONDON: ]. M. DENT & SONS LTD.

NEW YORK: E. P. DUTTON & CO. INC.
INTRODUCTION
Buckle said oi The Wealth of Nations that it is “ the most
valuable contribution ever made by a single individual to
determine the true principles of government.” M'Culloch
thought The Wealth of Nations had “ exercised a power and
beneficent influence on the public opinion and legislation of the
civilised world, which has never been attained by any other
work.” Lord Mahon stated that "The Wealth of Nations not
only founded, but also almost completed political economy ”;
and Jean Baptiste Say said, “ Read Adam Smith as he deserves
to be read and you will perceive that before him no political
economy existed." On the other hand, John Ruskin is re
sponsible for the allusion to Adam Smith as “ the half-bred and
half-witted Scotchman who taught the deliberate blasphemy:
' Thou shalt hate the Lord, thy God, damn his laws and covet
his neighbour’s goods.’ ”
That these various statements involve gross exaggerations
needs scarcely to be pointed out. But it remains true none the
less that The Wealth of Nations has become one of the classics
of literature in general, as well as of the literature of economics
in particular. Before proceeding to consider the reasons for
this it may be wise to say a word about the author himself.
Adam Smith was bom in 1723 in the small town of Kirkcaldy,
Scotland, as the son of a minor government official. At the
age of three he was stolen by gypsies, but was fortunately
before long restored to his parents. At the age of fourteen
he was sent to college at Glasgow, and when seventeen entered
Balliol College, Oxford, as an exhibitioner. He remained at
the university six years, devoting himself to philosophy and
literature. After his graduation he dwelt for a period at home
in the prosecution of his studies, and in 1748 was appointed to
a lectureship on literature at Edinburgh, a position which
he secured through the influence of his friend, Lord Kames.
In 1751 he was made Professor of Literature at Glasgow, and
from 1752 on, he occupied the chair of Moral Philosophy.
It was during the ensuing decade that he worked out his.
vii
Introduction xi
solute classes back to a sense of primitive simplicity. Just
as the mercantilists had laid stress on the national element,
applying the principles of domestic economy to political life,
so, on the other hand, the Physiocrats represented the universal,
the cosmopolitan, the international view. In that confused
progeny of stoic philosophy and Roman law, as nurtured by the
continental jurists and philosophers, and known as the law
of nature, Rousseau found the life-blood of his contrat social,
the support of his revolutionary theories. And the same
misconception led Quesnay to formulate the laws of industrial
society as eternal and immutable truths, which it was the
function of man to expound, but which it would be utterly
impossible — or, if possible, utterly ruinous — to change or
tamper with. Laissez faire, laissez passer is the key which
unlocks all economic puzzles. The “ be quiet ” system, as
Bentham calls it, is the sole panacea for human ills, the only
hope of social regeneration. Give free play to the natural laws
of liberty and equalitjr, and prosperity will soon shine in all
its refulgence on the expanse of national life.
It is well known that Adam Smith owed much to the Physio
crats, and that he was for a time a disciple of Quesnay. But
these particular ideas of liberty were not derived from his
French friends. They were in the air in England, as well as
on the continent, and were shared by several of his English
predecessors. Although the abuses were in some respects not
so great in England as on the continent, England, like France,,
was in the toils of the Colonial system, and the dispute between
the mother country and the American colonies was fast coming
to a head. It is more than a mere coincidence that The Wealth
of Nations should have appeared in the same year that the
Declaration of Independence was signed. On all sides the con
ditions of English life also were fast outgrowing the swaddling
clothes of official omniscience and governmental sciolism.
In the town where Smith laboured there were numerous
protests by individuals and by societies against the policy of
the government. It is not surprising, then, that, after a careful
resumd of the shortcomings of the prevalent commercial
policy, Adam Smith should have concluded with this celebrated
passage: “ All systems, either of preference or restraint, there
fore, being thus completely taken away, the obvious and simple
system of natural liberty establishes itself of its own accord.
Every man, as soon as he does not violate the laws of justice,
is left perfectly free to pursue his own interests in his own
XII The Wealth of Nations
way, and to bring both his industry and his capital into com
petition with those of any other man or order of men.”
It is true, indeed, that Adam Smith was too broad-minded
to maintain this doctrine without any qualifications, for he
possessed a far truer historical spirit than many of his suc
cessors. He upholds, for instance, the Navigation Act of
Cromwell; he defends the necessity of export duties in certain
cases; he even maintains that the interests of individuals
“ in any particular branch of trade or manufacture are always
in some respects different from, and even opposite to, the
interests of the public.” Yet the general teaching of Adam
Smith was to emphasise the need of greater liberty, and it was
this teaching that made his book famous.
It may be asked, indeed: Was Adam Smith original ? The
answer is not a difficult one. It is, for instance, absurd to
state that Adam Smith was the first political economist.
People have speculated on economic questions for centuries,
and even in classic antiquity we find economic theories. Adam
Smith owed much both to his English and to his French pre
decessors. To mention only a few points; his arguments
against the Bullionists may be found in Mun; his conception
of labour as a measure of value in Petty; his theory of self-
interest in Mandeville, in Hume, and in Tucker; his doctrine,
of the advantages of a low rate of interest in Child and Massie;
his theory of natural law' in Locke and Hutcheson; his views
on the currency in Newton; his doctrines of credit in Davenant.
Even his famous four rules of taxation, for which he is justly
admired, and which, according to Mr. Francis Hirst, in his book
on Adam Smith, were “ new and startling,” are in reality to
be found almost word for word in some of his French prede
cessors. A German scholar has amused himself by printing
twenty pages of the deadly parallel, setting the passages from
The Wealth of Nations opposite those of the earlier eighteenth-
century writers. Above all, Adam Smith owes much to the
Physiocrats. We now know exactly the extent of his obliga
tions, for we are able to compare the economic views contained
in his lecture course of 1763 with those of The Wealth of
Nations in 1776. Adam Smith learned from the Physiocrats
several important things. In the first place, he borrowed
from them the emphasis laid upon consumption, or the interests
of the consumers, whereas the earlier writers had emphasised
primarily the interests of the producers. Secondly, the entire
theory of distribution, with a division of the produce into
XIV The Wealth of Nations
development, naturally preserved Adam Smith from these
errors. Smith’s thoughts were formed on the very threshold
of the industrial revolution. In 1758 James Brindley built
the first canal between Liverpool and Manchester. In 1769
the barber Arkwright rediscovered Wyatt’s method of roller-
spinning. In 1770 Hargreaves perfected the spinning jenny.
In 1776 Crompton patented his mule founded on the water
frame, and in 1765 Watt discovered the use of steam as a
motive power. England was fast losing her agricultural
characteristics and getting to be an industrial country. From
being an exporter of wheat she was becoming an importer
of wheat. Capitalist enterprise was in its first stage, and Adam
Smith was its earliest interpreter.
In the second place, Adam Smith had his eyes opened to the
shortcomings of the restrictive colonial policy by the discontent
in America. There had always been critics of the commercial
policy of England in its relations with the continental countries,
but these critics were largely confined to the Tory side. Adam
Smith’s significance in the history of political thought lies in
the fact, as Ashley has shown us, that he brought these more
liberal ideas over from the camp of the Tories to that of the
Whigs. The experiences that followed the independence of
America induced the Whig leaders before long to accept
Smith’s analysis, and gradually to embody its conclusions into
legislation. Adam Smith, like all great men, succeeded in
formulating what was soon to become the public opinion.
Not only was he the first to analyse the new system of industry
known as the domestic system, but he was also the first efiec-
tively to call attention to the changed commercial conditions
which rendered a continuance of the old colonial policy both
unnecessary and inadvisable. It was ultimately because Adam
Smith foresaw a little more clearly than his contemporaries
that he soon was to exercise so tremendous an influence.
This approach to an interpretation of Adam Smith also
enables us to understand in what respects The Wealth of
Nations responds to present-day needs. In a certain sense
indeed The Wealth of Nations is imperishable. Adam Smith
emphasised the ideas of liberty for the individual and of
cosmopolitanism in the relations among states. Those ideas
always retain their magic sway over the human mind. But
in some respects economic conditions have again changed
from those that existed when he wrote. What was necessary
in bis day was primarily a work of destruction. Adam Smith,
CONTENTS
VOLUME I
Introduction and Plan of the Work .....
BOOK I
Of the Causes of Improvement in the Productive Powers of
Labour, and of the Order according to which its Produce
IS NATURALLY DISTRIBUTED AMONG THE DIFFERENT RANKS OF
the People
CHAP.
I. Of the Division of Labour .......
II. Of the Principle which gives occasion to the Division of Labour
III. That the Division of Labour is limited by the Extent of the
Market .........
IV. Of the Origin and Use of Money ......
V. Of the Real and Nominal Price of Commodities, or their Price
in Labour, and their Price in Money .... 26
VI. Of the Component Parts of the Price of Commodities . . 41
VII. O. the Natural and Market Price of Commodities ... 48
VIII. Of the Wages of Labour •••••.. 57
IX. Of the Profits of Stock ....... 78
X. Of Wages and Profit in the different Employments of Labour
and Stock ......... 88
XI. Of the Rent of Land . . . . . , . . lao
BOOK II
Of the Nature, Accumulation, and Employment of Stock
Introduction ......... 241
I. Of the Division of Stock ....... 243
II. Of Money considered as a particular Branch of the general
Stock of the Society or of the Expense of maintaining the
National Capital ....... 250
III. Of the Accumulation of Capital, or of Productive and Unpro
ductive Labour ........ 294
IV. Of Stock lent at Interest ....... 3i3
V. Of the different Employment of Capitals . . . . 321
BOOK III
Of the different Progress of Opulence in different Nations
I. Of the Natural Progress of Opulence ..... 336
II. Of the Discouragement of Agriculture in the ancient State of
Europe after the Fall of the Roman Empire . . • 341
xvii
xviii Contents
CHAP. PAGE
III. Of the Rise and Progress of Cities and Towns after the Fall of
the Roman Empire ....... 352
IV. How the Commerce of the Towns contributed to the Improve
ment of the Country ....... 362
BOOK IV
Of Systems of Political Economy
Introduction ......... 375

I. Of the Principle of the Commercial, or Mercantile System . 375
II. Of Restraints upon the Importation from Foreign Countries of
such Goods as can be produced at Home . . .397
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 . . .416
VOLUME IT
BOOK IV.—Continued
IV. Of Drawbacks ......... 1
V. Of Bounties ......... 6
VI. Of Treaties of Commerce ..... . .43
VII. Of Colonies ......... 54
VIII. Conclusion of the Mercantile System ..... 137
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 ....... 156
BOOK V
Of the Revenue of the Sovereign or Commonwealth
I. Of the Expenses of the Sovereign or Commonwealth . . 182

II. Of the Sources of the General or Public Revenue of the Society 298
III. Of Public Debts.....................................................................389
Appendix ......... 431
Index , ..............................................................................435
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 1

supplies it with all the necessaries and conveniences 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 jfi_this.-,prQduce, 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 conveniences for which it
has occasion.
But this proportion must in every nation be regulated by two
different circumstances; first, by the skill, dexterity, and judg--
ment with which its labour is generally applied; and, secondly,
by_the proportion between the number of those who are em
ployed 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 conveniences of life, for himself,
or 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,
i
2 The Wealth of Nations Introduction and Plan of the Work 3
however, are so miserably poor that, from mere want, they are
the industry of towns, than to agriculture, the industry of the
frequently reduced, or, at least, think themselves reduced, to
country. The circumstances which seem to have introduced
the necessity sometimes of directly destroying, and sometimes
and established this policy are explained in the Third Book.
of abandoning their infants, their old people, and those afflicted
Though those different plans were, perhaps, first introduced
with lingering diseases, to perish with hunger, or to be devoured
by the private interests and prejudices of particular orders of
by wild beasts. Among civilised and thriving nations, on the
men, without any regard to, or foresight of, their consequences
contrary, though a great number of people do not labour at all,
upon the general welfare of the society; yet they have given
many of whom consume the produce of ten times, frequently
occasion to very different theories of political economy; of
of a hundred times more labour than the greater part of those
which some magnify the importance of that industry which is
who work; yet the produce of the whole labour of the society
carried on in towns, others of that which is carried on in the
is so great that all are often abundantly supplied, and a work
country. Those theories have had a considerable influence, not
man, even of the lowest and poorest order, if he is frugal and
only upon the opinions of men of learning, but upon the public
industrious, may enjoy a greater share of the necessaries and
conduct of princes and sovereign states. I have endeavoured,
conveniences of life than it is possible for any savage to acquire.
in the Fourth Book, to explain, as fully and distinctly as I can,
The causes of this improvement, in the productive powers
those different theories, and the principal effects which they
of labour, and the order, according to which its produce is
naturally distributed among the different ranks and con have produced in different ages and nations.
To explain in what has consisted the revenue of the great
ditions of men in the society, make the subject of the First
Book of this Inquiry. body of the people, or what has been the nature of those funds
which, in different ages and nations, have supplied their annual
Whatever be the actual state of the skill, dexterity, and
consumption, is the object of these Four first Books. The
judgment with which labour is applied in any nation, the
Fifth and last Book treats of the revenue of the sovereign, or
abundance or scantiness of its annual supply must depend,
commonwealth. In this book I have endeavoured to show,
during the continuance of that state, upon" the proportion
first, what are the necessary expenses of the sovereign, or
between the number of those who are annually employed in
commonwealth; which of those expenses ought to be defrayed
useful labour, and that of those who are not so employed. The
by the general contribution of the whole society; and which
number of useful and productive labourers, it will hereafter
of them by that of some particular part only, or of some parti
appear, is everywhere in proportion to the quantity of capital
stock which is employed in setting them to work, and to the cular members of it: secondly, what are the different methods
in which the whole society may be made to contribute towards
particular way in which it is so employed. The Second Book,
defraying the expenses incumbent on the whole society, ana
therefore,_ treats of the nature of capital stock, of the manner
what are the principal advantages and inconveniences of each
in which it is gradually accumulated, and of the different quan
of those methods: and, thirdly and lastly, what are the reasons
tities of labour which it puts into motion, according to the
different ways in which it is employed. and causes which have induced almost all modern governments
to mortgage some part of this revenue, or to contract debts,
Nations tolerably well advanced as to skill, dexterity, and
and what have been the effects of those debts upon the real
judgment, in the application of labour, have followed very
wealth, the annual produce of the land and labour of the
different plans in the general conduct or direction of it; and
those plans have not all been equally favourable to the great society,
ness of its produce. The policy of some nations has given f if- H f~r vy .s-*—*.-* <1 t J
extraordinary encouragement to the industry of the country;
that of others to the industry of towns. Scarce any nation has (T-i ‘-'1—v-«. $ iSjC ' S /r *
dealt equally and impartially with every sort of industry. Since

the downfall of the Roman empire, the policy of Europe has i > £ , S g
been more favourable to arts, manufactures, and commerce,
€
6 The Wealth of Nations
occasions, in every art, a proportionable increase of the produc
tive 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 em
ployed 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 return
ing 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 separa
tion of all the different branches of labour employed in agri
culture 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 excef 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 agri
culture, 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
The Wealth of Nations
trade it is not to do anything, but to observe everything; and
Of the Division of Labour ii
who, upon that account, are often capable of combining together gether the different drugs made use of by the dyer, which often
the powers of the most distant and dissimilar objects. In the come from the remotest corners of the world 1 What a variety
progress of society, philosophy or speculation becomes, like of labour, too, is necessary in order to produce the tools of the
every other employment, the principal or sole trade and occu meanest of those workmen! To say nothing of such compli
pation of a particular class of citizens. Like every other em cated machines as the ship of the sailor, the mill of the fuller,
ployment too, it is subdivided into a great number of different or even the loom of the weaver, let us consider only what a
branches, each of which affords occupation to a peculiar tribe variety of labour is requisite in order to form that very simple
or class of philosophers; and this subdivision of employment machine, the shears with which the shepherd clips the wool.
in philosophy, as well as in every other business, improves The miner, the builder of the furnace for smelting the ore, the
dexterity, and saves time. Each individual becomes more seller of the timber, the burner of the charcoal to be made use
expert in his own peculiar branch, more work is done upon the of in the smelting-house, the brick-maker, the brick-layer, the
whole, and the quantity of science is considerably increased by it. workmen who attend the furnace, the mill-wright, the forger,
It is the great multiplication of the productions of all the the smith, must all of them join their different arts in order to
different arts, in consequence of the division of labour, which produce them. Were we to examine, in the same manner, all
occasions, in a well-governed society, that universal opulence the different parts of his dress and household furniture, the
which extends itself to the lowest ranks of the people. Every coarse linen shirt which he wears next his skin, the shoes which
workman has a great quantity of his own work to dispose of cover his feet, the bed which he lies on, and all the different
beyond what he himself has occasion for; and every other parts which compose it, the kitchen-grate at which he prepares
workman being exactly in the same situation, he is enabled to his victuals, the coals which he makes use of for that purpose,
exchange a great quantity of his own goods for a great quantity, dug from the bowels of the earth, and brought to him perhaps
or, what comes to the same thing, for the price of a great by a long sea and a long land carriage, all the other utensils of
quantity of theirs. He supplies them abundantly with what his kitchen, all the furniture of his table, the knives and forks,
they have occasion for, and they accommodate him as amply the earthen or pewter plates upon which he serves up and
with what he has occasion for, and a general plenty diffuses divides his victuals, the different hands employed in preparing
itself through all the different ranks of the society. his bread and his beer, the glass window which lets in the heat
Observe the accommodation of the most common artificer or and the light, and keeps out the wind and the rain, with all the
day-labourer in a civilised and thriving country, and you will knowledge and art requisite for preparing that beautiful and
perceive that the number of people of whose industry a part, happy invention, without which these northern parts of the
though but a small part, has been employed in procuring world could scarce have afforded a very comfortable habitation,
him this accommodation, exceeds all computation. The woollen together with the tools of all the different workmen employed
coat, for example, which covers the day-labourer, as coarse and in producing those different conveniences; if we examine, I say,
rough as it may appear, is the produce of the joint labour of a all these things, and consider what a variety of labour is em
great multitude of workmen. The shepherd, the sorter of the ployed about each of them, we shall be sensible that, without
wool, the wool-comber or carder, the dyer, the scribbler, the the assistance and co-operation of many thousands, the very
spinner, the weaver, the fuller, the dresser, with many others, meanest person in a civilised country could not be provided,
must all join their different arts in order to complete even this even according to what we very falsely imagine the easy and
homely production. How many merchants and carriers, be simple manner in which he is commonly accommodated. Com
sides, must have been employed in transporting the materials pared, indeed, with the more extravagant luxury of the great,
from some of those workmen to others who often live in a very his accommodation must no doubt appear extremely simple and
distant part of the country 1 how much commerce and naviga easy; and yet it may be true, perhaps, that the accommodation
tion in particular, how many ship-builders, sailors, sail-makers, of a European prince does not always so much exceed that of
rope-makers, must have been employed in order to bring to- an industrious and frugal peasant as the accommodation of the
latter exceeds that of many an African king, the absolute master
of the lives and liberties ol ten thousand naked savages.
I2 The Wealth of Nations Principle of Division of Labour i3
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
CHAPTER II
creature. But man has almost constant occasion for the help
OF THE PRINCIPLE WHICH GIVES OCCASION TO THE of his brethren, and it is in vain for him to expect it from their
DIVISION OF LABOUR benevolence only. He will be more likely to prevail if he can
This division of labour, from which so many advantages are
interest their self-love in his favour, and show them that it is
for their own advantage to do for him what he requires of them.
derived, is not originally the effect of any human wisdom, which
Whoever offers to another a bargain of any kind, proposes to
foresees and intends that general opulence to which it gives
do this. Give me that which I want, and you shall have this
occasion. It is the necessary, though very slow and gradual
which you want, is the meaning of every such offer; and it is
consequence of a certain propensity in human nature which has
in this manner that we obtain from one another the far greater
in view no such extensive utility; the propensity to truck,
barter, and exchange one thing for another. 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
Whether this propensity be one of those original principles in
that we expect our dinner, but from their regard to their own
human nature of which no further account can be given; or
interest. We address ourselves, not to their humanity but to
whether, as seems more probable, it be the necessary conse
their self-love, and never talk to them of our own necessities
quence of the faculties of reason and speech, it belongs not to
but of their advantages. Nobody but a beggar chooses to
our present subject to inquire. It is common to all men, and
depend chiefly upon the benevolence of his fellow-citizens.
tp be found in no other race of animals^ which seem to know
Even a beggar does not depend upon it entirely. The charity
neither this nor any other species of contracts. Two grey
of well-disposed people, indeed, supplies him with the whole
hounds, in running down the same hare, have sometimes the
fund of his subsistence. But though this principle ultimately
appearance of acting in some sort of concert. Each turns her provides him with all the necessaries of life which he has occa
towards his companion, or endeavours to intercept her when his
sion for, it neither does nor can provide him with them as he
companion turns her towards himself. This, however, is not
has occasion for them. The greater part of his occasional wants
the effect of any contract, but of the accidental concurrence of are supplied in the same manner as those of other people, by
their passions in the same object at that particular time. No
treaty, by barter, and by purchase. With the money which
body ever saw a dog make a fair and deliberate exchange of one man gives him he purchases food. The old clothes which
one bone for another with another dog. Nobody ever saw one another bestows upon him he exchanges for other old clothes
animal by its gestures and natural cries signify to another, this
which suit him better, or for lodging, or for food, or for money,
is mine, that yours; I am willing to give this for that. When with which he can buy either food, clothes, or lodging, as he
an animal wants to obtain something either of a man or of
has occasion.
another animal, it has no other means of persuasion but to gain
As it is by treaty, by barter, and by purchase that we obtain
the favour of those whose service it requires. A puppy fawns from one another the greater part of those mutual good offices
upon its dam, and a spaniel endeavours by a thousand attrac which we stand in need of, so it is this same trucking disposition
tions to engage the attention of its master who is at dinner, which originally gives occasion to the division of labour. In a
when it wants to be fed by him. Man sometimes uses the same tribe of hunters or shepherds a particular person makes bows
arts with his brethren, and when he has no other means of and arrows, for example, with more readiness and dexterity
engaging them to act according to his inclinations, endeavours than any other. He frequently exchanges them for cattle or
by every servile and fawning attention to obtain their good for venison with his companions; and he finds at last that he
will. He has not time, however, to do this upon every occasion. can in this manner get more cattle and venison than if he
In civilised society he stands at all times in need of the co himself went to the field to catch them. From a regard to his
operation and assistance of great multitudes, while his whole own interest, therefore, the making of bows and arrows grows
life is scarce sufficient to gain the friendship of a few persons
14 The Wealth of Nations Limitation of Division of Labour I5
to be his chief business, and he becomes a sort of armourer. genius, than what, antecedent to custom and education, appears
Another excels in making the frames and covers of their little to take place among men. By nature a philosopher is not in
huts or movable houses. He is accustomed to be of use in this genius and disposition half so different from a street porter, as
way to his neighbours, who reward him in the same manner a mastiff is from a greyhound, or a greyhound from a spaniel,
with cattle and with venison, till at last he finds it his interest or this last from a shepherd’s dog. Those different tribes of
to dedicate himself entirely to this employment, and to become animals, however, though all of the same species, are of scarce
a sort of house-carpenter. In the same manner a third becomes any use to one another. The strength of the mastiff is not, in
a smith or a brazier, a fourth a tanner or dresser of hides or the least, supported either by the swiftness of the greyhound, or
skins, the principal part of the clothing of savages. And thus by the sagacity of the spaniel, or by the docility of the shep
the certainty of being able to exchange all that surplus part of herd’s dog. The effects of those different geniuses and talents,
the produce of his own labour, which is over and above his own for want of the power or disposition to barter and exchange,
consumption, for such parts of the produce of other men’s labour cannot be brought into a common stock, and do not in the
as he may have occasion for, encourages every man to apply least contribute to the better accommodation and conveniency
himself to a particular occupation, and to cultivate and bring of the species. Each animal is still obliged to support and
to perfection whatever talent or genius he may possess for that defend itself, separately and independently, and derives no sort
particular species of business. of advantage from that variety of talents with which nature has
The difference of natural talents in different men is, in reality, distinguished its fellows. Among men, on the contrary, the
much less than we are aware of; and the very different genius most dissimilar geniuses are of use to one another; the different
which appears to distinguish men of different professions, when produces of their respective talents, by the general disposition
grown up to maturity, is not upon many occasions so much the to truck, barter, and exchange, being brought, as it were, into
cause as the effect of the division of labour. The difference a common stock, where every man may purchase whatever part
between the most dissimilar characters, between a philosopher of the produce of other men’s talents he has occasion for.
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 play-fellows could perceive any CHAPTER HI
remarkable difference. About that age, or soon after, they
THAT THE DIVISION OF LABOUR IS LIMITED BY THE
come to be employed in very different occupations. The differ
EXTENT OF THE MARKET
ence of talents comes then to be taken notice of, and widens by
degrees, till at last the vanity of the philosopher is willing to As it is the power of exchanging that gives occasion to the
acknowledge scarce any resemblance. But without the dis division of labour, so the extent of this division must always be
position to truck, barter, and exchange, every man must have limited by the extent of that power, or, in other words, by the
procured to himself every necessary and conveniency of life extent of the market. When the market is very small, no
which he wanted. All must have had the same duties to per person can have any encouragement to dedicate himself entirely
form, and the same work to do, and there could have been no to one employment, for want of the power to exchange all that
such difference of employment as could alone give occasion to surplus part of the produce of his own labour, which is over
any great difference of talents. and above his own consumption, for such parts of the produce
As it is this disposition which forms that difference of talents, of other men’s labour as he has occasion for.
so remarkable among men of different professions, so it is this There are some sorts of industry, even of the lowest kind,
same disposition which renders that difference useful. Many which can be carried on nowhere but in a great town. A
tribes of animals acknowledged to be all of the same species porter, for example, can find employment and subsistence in no
derive from nature a much more remarkable distinction of other place. A village is by much too narrow a sphere for him;
X—B
The Origin and Use of Money 19
municating 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
uncivilised state in which we find them at present. The Sea of
Tartary is the frozen ocean which admits of no navigation, and
though some of the greatest rivers in the world run through
that country, they are at too great a distance from one another
to carry commerce and communication through the greater part
of it. There are in Africa none of those great inlets, such as
the Baltic and Adriatic seas in Europe, the Mediterranean and
Euxine seas in both Europe and Asia, and the gulfs of Arabia,
Persia, India, Bengal, and Siam, in Asia, to carry maritime
commerce into the interior parts of that great continent: and
the great rivers of Africa are at too great a distance from one
another to give occasion to any considerable inland navigation.
The commerce besides which any nation can carry on by means
of a river which does not break itself into any great number of
branches or canals, and which runs into another territory before
it reaches the sea, can never be very considerable; because it
is always in the power of the nations who possess that other
territory to obstruct the communication between the upper
country and the sea. The navigation of the Danube is of very
little use to the different states of Bavaria, Austria and Hungary,
in comparison of what it would be if any of them possessed
the whole of its course till it falls into the Black Sea,
CHAPTER IV
OF THE ORIGIN AND USE OF MONEY
When the division of labour has been once thoroughly estab

lished, it is but a very small part of a man’s wants which the
produce of his own labour can supply. ile...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 ex
changing, or becomes in some measure a merchant, and the
society itself grows to be what is properly a commercial society.
But when the division of labour first began to take place,
this power of exchanging must frequently have been very much
clogged and embarrassed in its operations. One man, we shall
suppose, has more of a certain commodity than he himself has
occasion for, while another has less. The fonner 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 instru
ment 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 an 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,
24 The Wealth of Nations The Origin and Use of Money 25
France, the French sou or shilling appears upon different occa object, and sometimes the power of purchasing other goods
sions to have contained five, twelve, twenty, and forty pennies. which the possession of that dbjecTconveys. The one may be
Among the ancient Saxons a shilling appears at one time to have called “ value..in use; ” the other, “ ya,l)?e \n fi&cfrange.” The
contained only five pennies, and it is not improbable that it may things which have the greatest value in use have frequently
have been as variable among them as among their neighbours, little or no value in exchange; and, on the contrary, those which
the ancient Franks. From the time of Charlemagne among the have the greatest value in exchange have frequently little or
French, and from that of William the Conqueror among the no value in use. Nothing is more useful than water: but it
English, the proportion between the pound, the shilling, and will purchase scarce anything; scarce anything can be had in
the penny, seems to have been uniformly the same as at present, exchange for it. A diamond, on the contrary, has scarce any
though the value of each has been very different. For in every value in use; but a very great quantity of other goods may
country of the world, I believe, the avarice and injustice of frequently be had in exchange for it.
princes and sovereign states, abusing the confidence of their In order to investigate the principles which regulate the
subjects, have by degrees diminished the real quantity of metal, exchangeable value of commodities, I shall endeavour to show,
which had been originally contained in their coins. The Roman First, what is the real measure of this exchangeable value;
As, in the latter ages of the Republic, was reduced to the or, wherein consists the real price of all commodities.
twenty-fourth part of its original value, and, instead of weighing Secondly, what are the different parts of which this real
a pound, came to weigh only half an ounce. The English pound price is composed or made up.
and penny contain at present about a third only; the Scots And, lastly, what are the different circumstances which some
pound and penny about a thirty-sixth; and the French pound times raise some or all of these different parts of price above,
and penny about a sixty-sixth part of their original value. By and sometimes sink them below their natural or ordinary rate;
means of those operations the princes and sovereign states which or, what are the causes which sometimes hinder the market
performed them were enabled, in appearance, to pay their debts price, that is, the actual price of commodities, from coinciding
and to fulfil their engagements with a smaller quantity of silver exactly with what may be called their natural price.
than would otherwise have been requisite. It was indeed in I shall endeavour to explain, as fully and distinctly as I can,
appearance only; for their creditors were really defrauded of a those three subjects in the three following chapters, for which I
part of what was due to them. All other debtors in the state must very earnestly entreat both the patience and attention of
were allowed the same privilege, and might pay with the same the reader: his patience in order to examine a detail which may
nominal sum of the new and debased coin whatever they had perhaps in some places appear unnecessarily tedious; and his
borrowed in the old. Such operations, therefore, have always attention in order to understand what may, perhaps, after the
proved favourable to the debtor, and ruinous to the creditor, fullest explication which I am capable of giving of it, appear
and have sometimes produced a greater and more universal still in some degree obscure. I am always willing to run some
revolution in the fortunes of private persons, than could have hazard of being tedious in order to be sure that I am per
been occasioned by a very great public calamity. spicuous ; and after taking the utmost pains that I can to be
It is in this manner that money has become in all civilised perspicuous, some obscurity may still appear to remain upon
nations the universal instrument of commerce, by the inter a subject in its own nature extremely abstracted.
vention of which goods of all kinds are bought and sold, or
exchanged for one another.
What are the rules which men naturally observe in exchang
ing them either for money or for one another, I shall now
proceed to examme. 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 mean
ings, and Sometimes expresses the utility of some particular
26 The Wealth of Nations The Price of Commodities 27
not necessarily convey to him either. The power which that
possession immediately and directly conveys to him, is the
CHAPTER V power of purchasing; a certain command over all the labour,
OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR THEIR or over all the produce of labour, which is then in the market.
PRICE IN LABOUR, AND THEIR PRICE IN MONEY His fortune is greater or less, precisely in proportion to the
extent of this power; or to the quantity either of other men’s
Every man is rich or poor according to the degree in which he labour, or, what is the same thing, of the produce of other men’s
can afford to enjoy the necessaries, conveniences, and amuse labour, which it enables him to purchase or command. The
ments of human life. But after the division of labour has once exchangeable value of everything must always be precisely
thoroughly taken place, it is but a very small part of these with equal to the extent of this power which it conveys to its owner.
which a man’s own labour can supply him. The far greater But though labour be the real measure of the exchangeable
part of them he must derive from the labour of other people, value of all commodities, it is not that by which their value is
and he must be rich or poor according to the quantity of that commonly estimated. It is often difficult to ascertain the pro
labour which he can command, or which he can afford to pur portion between two different quantities of labour. The time
chase. The value of any commodity, therefore, to the person spent in two different sorts of work will not always alone
who possesses it, and who means not to use or consume it determine this proportion. The difierent degrees of hardship
himself, but to exchange it for other commodities, is equal to endured, and of ingenuity exercised, must likewise be taken into
the quantity of labour which it enables him to purchase or account. There may be more labour in an hour’s hard work
command. Labour, therefore, is the real measure of the than in two hours’ easy business; or in an hour’s application to
exchangeable value of all commodities. a trade which it cost ten years’ labour to learn, than in a month’s
The real price of everything, what everything really costs to industry at an ordinary and obvious employment. But it is
the man who wants to acquire it, is the toil and trouble of not easy to find any accurate measure either of hardship or
acquiring it. What everything is really worth to the man who ingenuity. In exchanging, indeed, the difierent productions of
has acquired it, and who wants to dispose of it or exchange it difierent sorts of labour for one another, some allowance is
for something else, is the toil and trouble which it can save to commonly made for both. It is adjusted, however, not by any
himself, and which it can impose upon other people. What is accurate measure, but by the higgling and bargaining of the
bought with money or with goods is purchased by labour as market, according to that sort of rough equality which, though
much as what we acquire by the toil of our own body] That not exact, is sufficient for carrying on the business of common
money or those goods indeed save us this toil. They contain life.
3> C the value of a certain quantity of labour which we exchange for Every commodity, besides, is more frequently exchanged for,
what is supposed at the time to contain the value of an equal and thereby compared with, other commodities than with
+v't
quantity. Labour was the first price, the original purchase- labour. It is more natural, therefore, to estimate its exchange
money that was paid for all things. It was not by gold or by able value by the quantity of some other commodity than by
silver, but by labour, that all the wealth of the world was that of the labour which it can purchase. The greater part of
originally purchased; and its value, to those who possess it, and people, too, understand better what is meant by a quantity of a
who want to exchange it for some new' productions, is precisely particular commodity than by a quantity of labour. The one
equal to the quantity of labour which it can enable them to is a plain palpable object; the other an abstract notion, which,
purchase or command. though it can be made sufficiently intelligible, is not altogether
Wealth, as Mr. Hobbes, says, is power. But the person who so natural and obvious.
either acquires, or succeeds to a great fortune, does not neces But when barter ceases, and money has become the common
sarily acquire or succeed to any political power, either civil or instrument of commerce, every particular commodity is more
military. His fortune may, perhaps, afford him the means of frequently exchanged for money than for any other commodity.
acquiring both, but the mere possession of that fortune does The butcher seldom carries his beef or his mutton to the baker,
AiLI LIBRAtff' (/I ^ —A, .

t i foot 4 i. tAy’,
or the brewer, in order to exchange them for bread or for beer; goods which he receives in return for it. Of these, indeed, it
but he carries them to the market, where he exchanges them may sometimes purchase a greater and sometimes a smaller
for money, and afterwards exchanges that money for bread and quantity; but it is their value which varies, not that of the
for beer. The quantity of money which he gets for them labour which purchases them. At all times and places that is
regulates, too, the quantity of bread and beer which he can after dear which it is difficult to come at, or which it costs much
wards purchase. It is more natural and obvious to him, there labour to acquire; and that cheap which is to be had easily, or
fore, to estimate their value by the quantity of money, the with very little labour. Labour alone, therefore, never varying
commodity for which he immediately exchanges them, than in its own value, is alone the ultimate and real standard by
by that of bread and beer, the commodities for which he can which the value of all commodities can at all times and places
exchange them only by the intervention of another commodity; be estimated and compared. It is their real price; money is
and rather to say that his butcher’s meat is worth threepence their nominal price only.
or fourpence a pound, than that it is worth three or four pounds But though equal quantities of labour are always of equal
of bread, or three or four quarts of small beer. Hence it comes value to the labourer, yet to the person who employs him they
to pass that the exchangeable value of every commodity is appear sometimes to be of greater and sometimes of smaller
more frequently estimated by the quantity of money, than by value. He purchases them sometimes with a greater and some
the quantity either of labour or of any other commodity which times with a smaller quantity of goods, and to him the price of
can be had in exchange for it. labour seems to vary like that of all other things. It appears
Gold and silver, however, like every other commodity, vary to him dear in the one case, and cheap in the other. In reality,
in their value, are sometimes cheaper and sometimes dearer, however, it is the goods which are cheap in the one case, and
sometimes of easier and sometimes of more difficult purchase. dear in the other.
The quantity of labour which any particular quantity of them In this popular sense, therefore, labour, like commodities,
can purchase or command, or the quantity of other goods which may be said to have a real and a nominal price. Its real price
it will exchange for, depends always upon the fertility or barren may be said to consist in the quantity of the necessaries and
ness of the mines which happen to be known about the time conveniences of life which are given for it; its nominal price,
when such exchanges are made. The discovery of the abundant in the quantity of money. The labourer is rich or poor, is well
mines of America reduced, in the sixteenth century, the value or ill rewarded, in proportion to the real, not to the nominal
of gold and silver in Europe to about a third of what it had price of his labour.
been before. As it cost less labour to bring those metals from The distinction between the real and the nominal price of
the mine to the market, so when they were brought thither they commodities and labour is not a matter of mere speculation,
could purchase or command less labour; and this revolution in but may sometimes be of considerable use in practice. The same
their value, though perhaps the greatest, is by no means the real price is always of the same value; but on account of the
only one of which history gives some account. But as a measure variations in the value of gold and silver, the same nominal
of quantity, such as the natural foot, fathom, or handful, which price is sometimes of very different values. When a landed
is continually varying in its own quantity, can never be an estate, therefore, is sold with a reservation of a perpetual rent,
accurate measure of the quantity of other things; so a com- if it is intended that this rent should always be of the same
i.tself . continually varying in its own "value, can value, it is of importance to the family in whose favour it is
never be an accurate measure of the value of other commodities. reserved that it should not consist in a particular sum of money.
Equal quantities of labour, at all times and places, may be said Its value would in this case be liable to variations of two
to be of equal value to the labourer. In his ordinary state of different kinds; first, to those which arise from the different
health, strength and spirits plfTthe ordinary degree of his skill quantities of gold and silver which are contained at different
and dexterity, he must always lay down the same portion of his times in coin of the same denomination; and, secondly, to those
®as6, his liberty, and Ks, happiness. The price which he pays which arise from the different values of equal quantities of gold
tettst always be the same, whatever may be the quantity of and silver at different times.
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 meantime 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
com. 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 com, 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.
natural that what is usually the produce of two days' or two The profits of stock, it may perhaps be thought, are only a
hours’ labour, should be worth double of what is usually the different name for the wages of a particular sort of labour,
produce of one day’s or one hour’s labour. the labour of inspection and direction. They are, however,
If the one species of labour should be more severe than the altogether different, are regulated by quite different principles,
other, some allowance will naturally be made for this superior and bear no proportion to the quantity, the hardship, or the
hardship; and the produce of one hour’s labour in the one way ingenuity of this supposed labour of inspection and direction.
may frequently exchange for that of two hours’ labour in the other. They are regulated altogether by the value of the stock employed,
Or if the one species of labour requires an uncommon degree and are greater or smaller in proportion to the extent of this
of dexterity and ingenuity, the esteem which men have for such stock. Let us suppose, for example, that in some particular
talents will naturally give a value to their produce, superior place, where the common annual profits of manufacturing stock
to what would be due to the time employed about it. Such are ten per cent., there are two different manufactures, in each
talents can seldom be acquired but in consequence of long of which twenty workmen are employed at the rate of fifteen
application, and the superior value of their produce may pounds a year each, or at the expense of three hundred a year
frequently be no more than a reasonable compensation for the in each manufactory. Let us suppose, too, that the coarse
time and labour which must be spent in acquiring them. In materials annually wrought up in the one cost only seven
the advanced state of society, allowances of this kind, for hundred pounds, while the finer materials in the other cost
superior hardship and superior skill, are commonly made in the seven thousand. The capital annually employed in the one
wages of labour; and something of the same kind must probably will in this case amount only to one thousand pounds; whereas
have taken place in its earliest and rudest period. that employed in the other will amount to seven thousand three
In this state of things, the whole produce of labour belongs hundred pounds. At the rate of ten per cent., therefore, the
to the labourer; and the quantity of labour commonly employed undertaker of the one will expect a yearly profit of about one
in acquiring or producing any commodity is the only circum hundred pounds only; while that of the other will expect about
stance which can regulate the quantity of labour which it ought seven hundred and thirty pounds. But though their profits
commonly to purchase, command, or exchange for. are so very different, their labour of inspection and direction
As soon as stock has accumulated in the hands of particular may be either altogether or very nearly the same. In many
persons, some of them will naturally employ it in setting to great works almost the whole labour of this kind is committed
work industrious people, whom they will supply with materials to some principal clerk. His wages properly express the value
and subsistence, in order to make a profit by the sale of their of this labour of inspection and direction. Though in settling
work, or by what their labour adds to the value of the materials. them some regard is had commonly, not only to his labour
In exchanging the complete manufacture either for money, for and skill, but to the trust which is reposed in him, yet they
labour, or for other goods, over and above what may be sufficient never bear any regular proportion to the capital of which he
to pay the price of the materials, and the wages of the workmen, oversees the management; and the owner of this capital, though
something must be given for the profits of the undertaker of the’ he is thus discharged of almost all labour, still expects that his
work who hazards his stock in this adventure. The value which profits should bear a regular proportion to his capital. In the
the workmen add to the materials, therefore, resolves itself in price of commodities, therefore, the profits of stock constitute
this case into two parts, of which the one pays their wages, the a component part altogether different from the wages of labour,
other the profits of their employer upon the whole stock of and regulated by quite different principles.
materials and wages which he advanced. He could have no In this state of things, the whole produce of labour does not
interest to employ them, unless he expected from the sale of always belong to the labourer. He must in most cases share it
their work something more than what was sufficient to replace with the owner of the stock which employs him. Neither is the
his stock to him; and he could have no interest to employ a quantity of labour commonly employed in acquiring or producing
great stock rather than a small one, unless his profits were to any commodity, the only circumstance which can regulate the
boar some proportion to the extent of his stock. quantity which it ought commonly to purchase, command, or
exchange for. An additional quantity, it is evident, must be diately or ultimately into the same three parts of rent, labour,
due for the profits of the stock which advanced the wages and and profit.
furnished the materials of that labour. In the price of flour or meal, we must add to the price of the
As soon as the land of any country has all become private corn, the profits of the miller, and the wages of his servants;
property, the landlords, like all other men, love to reap where in the price of bread, the profits of the baker, and the wages of
they never sowed, and demand a rent even for its natural his servants; and in the price of both, the labour of transport
produce. The wood of the forest, the grass of the field, and all ing the corn from the house of the farmer to that of the miller,
the natural fruits of the earth, which, when land was in common, and from that of the miller to that of the baker, together with
cost the labourer only the trouble of gathering them, come, even the profits of those who advance the wages of that labour.
to him, to have an additional price fixed upon them. He must The price of flax resolves itself into the same three parts as
then pay for the licence to gather them; and must give up to that of com. In the price of linen we must add to this price
the landlord a portion of what his labour either collects or the wages of the flax-dresser, of the spinner, of the weaver, of
produces. This portion, or, what comes to the same thing, the the bleacher, etc., together with the profits of their respective
price of this portion, constitutes the rent of land, and in the employers.
price of the greater part of commodities makes a third com As any particular commodity comes to be more manufac
ponent part. tured, that part of the price which resolves itself into wages and
The real value of all the different component parts of price, profit comes to be greater in proportion to that which resolves
it must be observed, is measured by the quantity of labour which itself into rent. In the progress of the manufacture, not only
they can, each of them, purchase or command. Labour measures the number of profits increase, but every subsequent profit is
the value not only of that part of price which resolves itself into greater than the foregoing; because the capital from which it
labour, but of that which resolves itself into rent, and of that is derived must always be greater. The capital which employs
which resolves itself into profit. the weavers, for example, must be greater than that which
In every society the price of every commodity finally resolves employs the spinners; because it not only replaces that capital
itself into some one or other, or all of those three parts; and in with its profits, but pays, besides, the wages of the weavers;
every improved society, all the three enter more or less, as and the profits must always bear some proportion to the capital.
component parts, into the price of the far greater part of com In the most improved societies, however, there are always
modities. a few commodities of which the price resolves itself into two
In the price of com, for example, one part pays the rent of parts only, the wages of labour, and the profits of stock; and
the landlord, another pays the wages or maintenance" b’F the a still smaller number, in which it consists altogether in the
labourers and labouring cattle employed in producing it, and wages of labour. In the price of sea-fish, for example, one part
the third pays the profit of the farmer. These three parts seem pays the labour of the fishermen, and the other the profits of
either immediately or ultimately to make up the whole price of the capital employed in the fishery. Rent very seldom makes
com. A fourth part, it may perhaps be thought, is necessary any part of it, though it does sometimes, as I shall show here
for replacing the stock of the farmer, or for compensating the after. It is otherwise, at least through the greater part of
wear and tear of his labouring cattle, and other instruments of Europe, in river fisheries. A salmon fishery pays a rent, and
husbandry. But it must be considered that the price of any rent, though it cannot well be called the rent of land, makes a
instrament of husbandry, such as a labouring horse, is itself part of the price of a salmon as well as wages and profit. In
made up of the same three parts; the rent of the land upon some parts of Scotland a few poor people make a trade of
which he is reared, the labour of tending and rearing him, and gathering, along the sea-shore, those little variegated stones
the profits of the farmer who advances both the rent of this commonly known by the name of Scotch Pebbles. The price
land, and the wages of this labour. Though the price of the which is paid to them by the stone-cutter is altogether the wages
com, therefore, may pay the price as well as the maintenance of their labour; neither rent nor profit make any part of jt.
of the horse, the whole price still resolves itself either imme But the whole price of any commodity must still finally
which the exchangeable value arises from labour only, rent and The commodity is then sold precisely for what it is worth, or
profit contributing largely to that of the far greater part of for what it really costs the person who brings it to market; for
them, so the annual produce of its labour will always be suffi though in common language what is called the prime cost of
cient to purchase or command a much greater quantity of any commodity does not comprehend the profit of the person
labour than what was employed in raising, preparing, and who is to sell it again, yet if he sell it at a price which does
bringing that produce to market. If the society were annually not allow him the ordinary rate of profit in his neighbourhood,
to employ all the labour which it can annually purchase, as the he is evidently a loser by the trade; since by employing his
quantity of labour would increase greatly every year, so the stock in some other way he might have made that profit. His
produce of every succeeding year would be of vastly greater profit, besides, is his revenue, the proper fund of his subsistence.
value than that of the foregoing. But there is no country in As, while he is preparing and bringing the goods to market, he
which the whole annual produce is employed in maintaining the advances to his workmen their wages, or their subsistence; so
industrious. The idle everywhere consume a great part of it; he advances to himself, in the same manner, his own subsistence,
and according to the difierent proportions in which it is annually which is generally suitable to the profit which he may reason
divided between those two different orders of people, its ordi ably expect from the sale of his goods. Unless they yield him
nary or average value must either annually increase, or diminish, this profit, therefore, they do not repay him what they may
or continue the same from one year to another, 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
CHAPTER VII considerable time; at least where there is perfect liberty, or
OF THE NATURAL AND MARKET PRICE OF COMMODITIES where he may change his trade as often as he pleases.
The actual price at which any commodity is commonly sold
There is in every society or neighbourhood an ordinary or is called its market price. It may either be above, or below,
average rate both of wages and profit in every different employ or exactly the same with its natural price.
ment of labour and stock. This rate is naturally regulated, as The market price of every particular commodity is regulated
I shall show hereafter, partly by the general circumstances of by the proportion between the quantity which is actually
the society, their riches or poverty, their advancing, stationary, brought to market, and the_demand of those who are willing to
or declining condition; and partly by the particular nature of pay the natural price of the commodity, or the whole value of
each employment. the rent, labour, and profit, which must be paid in order to
There is likewise in every society or neighbourhood an ordi bring it thither. Such people may be called the effectual de-
nary or average rate of rent, which is regulated too, as I shall manders, and their demand the effectual demand; since it may
show hereafter, partly by the general circumstances of the be sufficient to effectuate the bringing of the commodity to
society or neighbourhood in which the land is situated, and market. It is different from the absolute demand. A very
partly by the natural or improved fertility of the land. poor man may be said in some sense to have a demand for a
These ordinary or average rates may be called the natural coach and six; he might like to have it; but his demand is
rates of wages, profit, and rent, at the time and place in which not an effectual demand, as the commodity can never be
they commonly prevail. brought to market in order to satisfy it.
When the price of any commodity is neither more nor less When the quantity of any commodity which is brought to
than what is sufficient to pay the rent of the land, the wages of market falls short of the effectual demand, all those who are
the labour, and the profits of the stock employed in raising, willing to pay the whole value of the rent, wages, and profit,
preparing, and bringing it to market, according to their natural which must be paid in order to bring it thither, cannot be
rates, the commodity is then sold for what may be called its supplied with the quantity which they want. Rather than
natural price. want it altogether, some of them will be willing to give more.
The Wages of Labour 57
CHAPTER VIII
OF THE WAGES OF LABOUR
The produce of labour constitutes the natural recompense 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 pro
duced by a smaller quantity of labour; and as the commodities
produced by equal quantities of labour would naturally in this
state of things be exchanged for one another, they would have
been purchased likewise with the produce of a smaller quantity.
But though all things would have become cheaper in reality,
in appearance many things might have become dearer than
before, or have been exchanged for a greater quantity of other
goods. Let us suppose, for example, that in the greater part
of employments the productive powers of labour had been
improved to tenfold, or that a day’s labour could produce ten
times the quantity of work which it had done originally; but
that in a particular employment they had been improved only
to double, or that a day’s labour could produce only twice the
quantity of work which it had done before. In exchanging the
produce of a day’s labour in the greater part of employments
for that of a day’s labour in this particular one, ten times the
original quantity of work in them would purchase only twice
the original quantity in it. Any particular quantity in it,
therefore, a pound weight, for example, would appear to be
five times dearer than before. In reality, however, it would be
twice as cheap. Though it required five times the quantity of
other goods to purchase it, it would require only half the quantity
of labour either to purchase or to produce it. The acquisition,
therefore, would be twice as easy as before.
But this original state of things, in which the labourer enjoyed
the whole produce of his own labour, could not last beyond the
first introduction of the appropriation of land and the accumula
tion of stock. It was at an end, therefore, long before the
58 The Wealth of Nations The Wages of Labour 59
most considerable improvements were made in the productive
It is not, however, difficult to foresee which of the two parties
powers of labour, and it would be to no purpose to trace further
must, upon all ordinary occasions, have the advantage in the
what might have been its effects upon the recompense or wages
of labour. dispute, and force the other into a compliance with their terms.
The masters, being fewer in number, can combine much more
As soon as land becomes private property, the landlord
easily; and the law, besides, authorises, or at least does not
demands a share of almost all the produce which the labourer prohibit their combinations, while it prohibits those of the
can either raise, or collect from it. His rent makes the first workmen. We have no acts of parliament against combining
deduction from the produce of the labour which is employed to lower the price of work; but many against combining to
upon land.
raise it. In all such disputes the masters can hold out much
It seldom happens that the person who tills the ground has longer. A landlord, a farmer, a master manufacturer, a mer
wherewithal to maintain himself till he reaps the harvest. His chant, though they did not employ a single workman, could
maintenance is generally advanced to him from the stock of a generally live a year or two upon the stocks which they have
master, the farmer who employs him, and who would have no already acquired. Many workmen could not subsist a week,
interest to employ him, unless he was to share in the produce of few could subsist a month, and scarce any a year without
his labour, or unless his stock was to be replaced to him with a employment. In the long-run the workman may be as necessary
profit. This profit makes a second deduction from the produce to his master as his master is to him; but the necessity is not
of the labour which is employed upon land.
so immediate'.—---------———
The produce of almost all other labour is liable to the like We rarely hear, it has been said, of the combinations of
deduction of profit. In all arts and manufactures the greater masters, though frequently of those of workmen. But who
part of the workmen stand in need of a master to advance them ever imagines, upon this account, that masters rarely combine,
ThrmuteTrals of their workj and their wages and maintenance is as ignorant of the world as of the subject. Masters are always
till it be completed. He shares in the produce of their labour, and everywhere in a sort of tacit, but constant and uniform
or in the value which it adds to the materials upon which it is combination, not to raise the wages of labour above their actual
bestowed; and in this share consists his profit. rate. To violate this combination is everywhere a most un
It sometimes happens, indeed, that a single independent popular action, and a sort of reproach to a master among his
workman has stock sufficient both to purchase the materials neighbours and equals. We seldom, indeed, hear of this com
of his work, and to maintain himself till it be completed. .He is bination, because it is the usual, and one may say, the natural
both master and workman, and enjoys the whole produce of his state of things, which nobody ever hears of. Masters, too, some
own labour, or The whole value which it adds to the materials times enter’ into particular combinations to sink the wages of
upon which it is bestowed. It includes what are usually two labour even below this rate. These are always conducted with
distinct revenues, belonging to two distinct persons, the profits the utmost silence and secrecy, till the moment of execution,
of stock, and the wages of labour. and when the workmen yield, as they sometimes do, without
Such cases, however, are not very frequent, and in every part resistance, though severely felt by them, they are never heard
ofEurope” twenty workmen serve under a master for one that of by other people. Such combinations, however, are frequently
is independent; and the wages of labour are everywhere under resisted by a contrary defensive combination of the workmen;
stood to be, what they usually are, when the labourer is one who sometimes too, without any provocation of this kind,
person, and the owner of the stock which employs him another. combine of their own accord to raise the price of their labour.
What are the common wages of labour, depends everywhere Their usual pretences are, sometimes the high price of provisions;
upon the contract usually made between those two parties, sometimes the great profit which their masters make by their
whose interests are by no means the samel TEe^workmen work. But whether their combinations be offensive or defensive,
) desire to get as much, the masters to give as little as possible.
they are always abundantly heard of. In order to bring the
The former are disposed to combine in order to raise, the latter point to a speedy decision, they have always recourse to the
in order to lower the wages of labour. loudest clamour, and sometimes to the most shocking violence
6o The Wealth of Nations
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 combinations of servants, labourers, and
journeymen. The workmen, accordingly, very seldom derive
any advantage from the violence of those tumultuous combina
tions, 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 lo-west species of common
labourers must everywhere earn at least double their own
maintenance, in order that one with another they may be
enabled to bring up two children; the labour of the wife, on
account of her necessary attendance on the children, being
supposed no more than sufficient to provide for herself. But
one-half the children born, it is computed, die before the age of
manhood. The poorest labourers, therefore, according to this
account, must, one with another, attempt to rear at least four
children, in order that two may have an equal chance of living
to that age. But the necessary maintenance of four children,
it is supposed, may be nearly equal to that of one man. The
labour of an able-bodied slave, the same author adds, is computed
to be worth double his maintenance; and that of the meanest
labourer, he thinks, cannot be worth less than that of an able-
bodied slave. Thus far at least seems certain, that, in order to
bring up a family, the labour of the husband and wife together
must, even in the lowest species of common labour, be able to
earn something more than what is precisely necessary for their
6z The Wealth of Nations
continual increase, which occasions a rise in the wages of labour.
It is not, accordingly^ in the richest countries, but in the most
thriving, or in those which are growing rich the fastest, that the
wages of labour are highest. England is certainly, in the present
times, a much richer country than any part of North America.
The wages of labour, however, are much higher in North America
than in any part of England. In the province of New Yorlc,
common labourers earn1 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 six
pence 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 any
where in the mother country, its real price, the real command
of the necessaries and conveniertcies 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 inhabi
tants, 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 burthen, 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
1 This was written in 1773, before the commencement of the late dis
turbances.
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 care
less overseer. That destined for performing the same office
with regard to the free man, is managed by the free man him
self. 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 effect and
cause of the greatest public prosperity.
It deserves to be remarked, perhaps, that it is in thejpxo-
gressive state, while the society is advancing. to the further
acquisition, rather than when it has acquired its full comple
ment 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 propaga-
86 The Wealth of Nations^.!^^^
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 Mr.
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 more, 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 super
intend themselves the employment of their own stocks. It
would be necessary that almost every man should be a man of
business, or engage in some sort of trade. The province of
Holland seems to be approaching near to this state. It is there
unfashionable not to be a man of business. Necessity makes it
usual for almost every man to be so, and custom everywhere
regulates fashion. As it is ridiculous not to dress, so is it, in
some measure, not to be employed, like other people. As a man
of a civil profession seems awkward in a camp or a garrison,
and is even in some danger of being despised there, so does an
idle man among men of business.
The highest ordinary rate of profit may be such as, in the
price of the greater part of commodities, eats up the whole of
what should go to the rent of the land, and leaves only what is
sufficient to pay the labour of preparing and bringing them to
market, according to the lowest rate at which labour can any
where be paid, the bare subsistence of the labourer. The work-
88 The Wealth of Nations Wages and Profit 89
portion to this rise of profit. The employer of the flax-dressers really, or at least in the imaginations of men, make up for a
would in selling his flax require an additional five per cent, upon small pecuniary gain in some, and counterbalance a great one
the whole value of the materials and wages which he advanced in others; and partly from the policy of Europe, which nowhere
to his workmen. The employer of the spinners would require leaves things at perfect liberty.
an additional five per cent, both upon the advanced price of the The particular consideration of those circumstances and of
flax and upon the wages of the spinners. And the employer of that policy will divide this chapter into two parts.
the weavers would require a like five per cent, both upon the
advanced price of the linen yam and upon the wages of the PART 1
weavers. In raising the price of commodities the rise of wages Inequalities arising from the Nature of the Employments
operates in the same manner as simple interest does in the themselves
accumulation of debt. The rise of profit operates like com
pound interest. Our merchants and master-manufacturers The five following are the principal circumstances which, so far
complain much of the bad effects of high wages in raising the as I have been able to observe, make up for a small pecuniary
price, and thereby lessening the sale of their goods both at home gain in some employments, and counterbalance a great one
and abroad. They say nothing concerning the bad effects of in others: first, the agreeableness or disagreeableness of the
high profits. They are silent with regard to the pernicious employments themselves; secondly, the easiness and cheapness,
effects of their own gains. They complain only of those of or the difficulty and expense of learning them; thirdly, the
other people. 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.
CHAPTER X First, the wages of labour vary with the ease or hardship, the
cleanlines?or dirtiness, the honourableness or dishonourableness
OF WAGES AND PROFIT IN THE DIFFERENT EMPLOYMENTS of the employment. Thus in most places, take the year round,
OF LABOUR AND STOCK a joumeymari tailor earns less than a journeyman weaver. His
The whole of the advantages and disadvantages of the different work is much easier. A journeyman weaver earns less than a
employments of labour and stock must, in the same neighbour journeyman smith. His work is not always easier, but it is
hood, be either perfectly equal or continually tending to equality. much cleanlier. A journeyman blacksmith, though an artificer,
If in the same neighbourhood, there was any employment seldom earns so much in twelve hours as a collier, who is only
evidently either more or less advantageous than the rest, so a labourer, does in eight. His work is not quite so dirty, is less
many people would crowd into it in the one case, and so many dangerous, and is carried on in daylight, and above ground.
would desert it in the other, that its advantages would soon Honour makes a great part of the reward of all honourable
return to the level of other employments. This at least would professions. In point of pecuniary gain, all things considered,
be the case in a society where things were left to follow their they are generally under-recompensed, as I shall endeavour to
natural course, where there was perfect liberty, and where show by and by. Disgrace has the contrary effect. The trade
every man was perfectly free both to choose what occupation of a butcher is a brutal and an odious business; but it is in
he thought proper, and to change it as often as he thought most places more profitable than the greater part of common
proper. Every man’s interest would prompt him to seek the trades. The most detestable of all employments, that of public
advantageous, and to shun the disadvantageous employment. executioner, is, in proportion to the quantity of work done,
Pecuniary wages and profit, indeed, are everywhere in Europe better paid than any common trade whatever.
extremely different according to the different employments of Hunting and fishing, the most important employments of
labour and stock. But this difference arises partly from certain mankind in the rude state of society, become in its advanced
circumstances in the employments themselves, which, either state their most agreeable amusements, and they pursue for
90 The Wealth of Nations , , ■, Wages and Profit 91
pleasure what they once followed from necessity. In the by. The laws and customs of Europe, therefore, in order to
advanced state of society, therefore, they are all very poor qualify any person for exercising the one species of labour,
people who follow as a trade what other people pursue as a impose the necessity of an apprenticeship, though with different
pastime. Fishermen have been so since the time of Theocritus.1 degrees of rigour in different places. They leave the other free
A poacher is everywhere a very poor man in Great Britain. In and open to everybody. During the continuance of the ap
countries where the rigour of the law suffers no poachers, the prenticeship, the whole labour of the apprentice belongs to his
licensed hunter is not in a much better condition. The natural master. In the meantime he must, in many cases, be main
taste for those employments makes more people follow them tained by his parents or relations, and in almost all cases must
than can live comfortably by them, and the produce of their be clothed by them. Some money, too, is commonly given to
labour, in proportion to its quantity, comes always too cheap the master for teaching him his trade. They who cannot give
to market to afford anything but the most scanty subsistence money give time, or become bound for more than the usual
to the labourers. number of years; a consideration which, though it is not always
Disagreeableness and disgrace affect the profits of stock in advantageous to the master, on account of the usual idleness
the same manner as the wages of labour. The keeper of an inn of apprentices, is always disadvantageous to the apprentice.
or tavern, who is never master of his own house, and who is In country labour, on the contrary, the labourer, while he is
exposed to the brutality of every drunkard, exercises neither employed about the easier, learns the more difficult parts of
a very agreeable nor a very creditable business. But there is his business, and his own labour maintains him through all the
scarce any common trade in which a small stock yields so great different stages of his employment. It is reasonable, therefore,
a profit. that in Europe the wages of mechanics, artificers, and manu
Secondly, the wages of labour vary with the easiness and facturers, should be somewhat higher than those of common
cheapness, or the difficulty and expense of learning the busmess. labourers. They are so accordingly, and their superior gains
When any expensive machine is erected, the extraordinary make them in most places be considered as a superior rank of
work to be performed by it before it is worn out, it must be people. This superiority, however, is generally very small; the
expected, will replace the capital laid out upon it, with at least daily or weekly earnings of journeymen in the more common
the ordinary profits. A man educated at the expense of much sorts of manufactures, such as those of plain linen and woollen
labour and time to any of those employments which require cloth, computed at an average, are, in most places, very little
extraordinary dexterity and skill, may be compared to one of more than the day wages of common labourers. Their employ
those expensive machines. The work which he learns to ment, indeed, is more steady and uniform, and the superiority
perform, it must be expected, over and above the usual wages of their earnings, taking the whole year together, may be
of common labour, will replace to him the whole expense of his somewhat greater. It seems evidently, however, to be no
education, with at least the ordinary profits of an equally greater than what is sufficient to compensate the superior
valuable capital. It must do this, too, in a reasonable time, expense of their education.
regard being had to the very uncertain duration of human life, in Education in the ingenious arts and in the liberal professions
the same manner as to the more certain duration of the machine. is still more tedious and expensive. The pecuniary recompense,
The difference between the wages of skilled labour and those therefore, of painters and sculptors, of lawyers and physicians,
of common labour is founded upon this principle. ought to be much more liberal; and it is so accordingly.
.The policy of Europe considers the labour of all mechanics, The profits of stock seem to be very little affected by the
artificers, and manufacturers, as skilled labour; and that of all easiness or difficulty of learning the trade in which it is employed.
country labourers as common labour. It seems to suppose that All the different ways in which stock is commonly employed in
of the former to be of a more nice and delicate nature than that great towns seem, in reality, to be almost equally easy and
of the latter. It is so perhaps in some cases; but in the greater equally difficult to learn. One branch either of foreign or
part is it quite otherwise, as I shall endeavour to show by and domestic trade cannot well be a much more intricate business
1 See Idyllium xxi. than another.
Wages and Profit 95
therefore, is very far from being a perfectly fair lottery; and
that, as well as many other liberal and honourable professions,
are, 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 medio
crity, is the most decisive mark of what is called genius or
superior talents. The public admiration which attends upon
such distinguished abilities makes always a part of their
reward; a greater or smaller in proportion as it is higher or
lower in degree. It makes a considerable part of that reward
in the profession of physic; a still greater perhaps in that of
law; in poetry and philosophy it makes almost the whole.
There are some very agreeable and beautiful talents of which
the possession commands a certain sort of admiration; but of
which the exercise for the sake of gain is considered, whether
from reason or prejudice, as a sort of public prostitution. The
pecuniary recompense, therefore, of those who exercise them in
this manner must be sufficient, not only to pay for the time,
labour, and expense of acquiring the talents, but for the dis
credit which attends the employment of them as the means of
subsistence. The exorbitant rewards of players, opera-singers,
opera-dancers, etc., are founded upon those two principles; the
rarity and beauty of the talents, and the discredit of employing
them in this manner. It seems absurd at first sight that we
should despise their persons and yet reward their talents with
the most profuse liberality. While we do the one, however, we
must of necessity do the other. Should the public opinion or
prejudice ever alter with regard to such occupations, their
pecuniary recompense 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 is 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 overweening conceit which the greater part of men have
of their own abilities is an ancient evil remarked by the philo
sophers 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 hope 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 per
fectly 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 share in a still greater number.
There is not, however, a more certain proposition in mathe
matics than that the more tickets you adventure upon, the
more likely you are to be a loser. Adventure upon all the tickets
in the lottery, and you lose for certain; and the greater the
number of your tickets the nearer you approach to this certainty.
That the chance of loss is frequently under-valued, and scarce
ever valued more than it is worth, we may learn from a 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
Wages and Profit 99
The dangers and hairbreadth escapes of a life of adventures,
instead of disheartening young people, seem frequently to re
commend a trade to them. A tender mother, among the
inferior ranks of people, is often afraid to send her son to school
at a seaport town, lest the sight of the ships and the conversa
tion 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 disagree
able to us, and does not raise the wages of labour in any em
ployment. 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 their 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 disagreeable
ness, there is little or no difference in the far greater part of the
different employments of stock; but a great deal in those of
L* f
I IO The Wealth of Nations
too, a very small fine is sufficient to purchase the freedom of any
corporation. The weavers of linen and hempen cloth, the prin
cipal manufactures of the country, as well as all other artificers
subservient to them, wheel-makers, reel-makers, etc., may exer
cise their trades in any town corporate without paying any fine.
In all towns corporate all persons are free to sell butcher’s 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 cor
poration 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 tlhe
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 employ
ing 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 law-giver 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
inquire whether the workman had served a seven years’ appren
ticeship.
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 recompense of labour.
Wages and Profit 115
commonly possessed even by the common farmer; how con
temptuously 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 con
dition 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 under
standing, 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 corpora
tion spirit did not prevent it.
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 employ
ments 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 pro
fessions, that sometimes the public and sometimes the piety of
private founders have established many pensions, scholarships,
exhibitions, bursaries, etc., for this purpose, which draw many
more people into those trades than could otherwise pretend to
follow them. In all Christian countries, I believe, the education
of the greater part of churchmen is paid for in this manner.
Very few of them are educated altogether at their own expense.
The long, tedious, and expensive education, therefore, of those
who are, will not always procure them a suitable reward, the
church being crowded with people who, in order to get employ
ment, are willing to accept of a much smaller recompense 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 accord
ing 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
I 20 The Wealth of Nations Wages and Profit I21
in all Roman Catholic countries, the lottery of the church is educated at their own. The usual recompense, however, of
in reality much more advantageous than is necessary. The public and private teachers, small as it may appear, would un
example of the churches of Scotland, of Geneva, and of several doubtedly be less than it is, if the competition of those yet more
other protestant churches, may satisfy us that in so creditable indigent men of letters who write for bread was not taken out
a profession, in which education is so easily procured, the hopes of the market. Before the invention of the art of printing, a
of much more moderate benefices will draw a sufficient number scholar and a beggar seem to have been terms very nearly
of learned, decent, and respectable men into holy orders. synonymous. The different governors of the universities before
In professions in which there are no benefices, such as law that time appear to have often granted licences to their scholars
and physic, if an equal proportion of people were educated at to beg.
the public expense, the competition would soon be so great as In ancient times, before any charities of this kind had been
to sink very much their pecuniary reward. It might then not established for the education of indigent people to the learned
be worth any man’s while to educate his son to either of those professions, the rewards of eminent teachers appear to have
professions at his own expense. They would be entirely aban been much more considerable. Isocrates, in what is called his
doned to such as had been educated by those public charities, discourse against the sophists, reproaches the teachers of his
whose numbers and necessities would oblige them in general to own times with inconsistency. “ They make the most magni
content themselves with a very miserable recompense, to the ficent promises to their scholars, says he, and undertake to
entire degradation of the now respectable professions of law teach them to be wise, to be happy, and to be just, and in
and physic. return for so important a service they stipulate the paltry
That unprosperous race of men commonly called men of reward of four or five minae. They who teach wisdom, con
letters are pretty much in the situation which lawyers and tinues he, ought certainly to be wise themselves; but if any
physicians probably would be in upon the foregoing supposition. man were to sell such a bargain for such a price, he would be
In every part of Europe the greater part of them have been convicted of the most evident folly.” He certainly does not
educated for the church, but have been hindered by different mean here to exaggerate the reward, and we may be assured
reasons from entering into holy orders. They have generally, that it was not less than he represents it. Four mina; were
therefore, been educated at the public expense, and their equal to thirteen pounds six shillings and eightpence: five minse
numbers are everywhere so great as commonly to reduce the to sixteen pounds thirteen shillings and fourpence. Something
price of their labour to a very paltry recompense. not less than the largest of those two sums, therefore, must at
Before the invention of the art of printing, the only employ that time have been usually paid to the most eminent teachers
ment by which a man of letters could make anything by his at Athens. Isocrates himself demanded ten min*, or thirty-
talents was that of a public or private teacher, or by communi three pounds six shillings and eightpence, from each scholar.
cating to other people the curious and useful knowledge which When he taught at Athens, he is said to have had an hundred
he had acquired himself: and this is still surely a more honour scholars. I understand this to be the number whom he taught
able, a more useful, and in general even a more profitable at one time, or who attended what we would call one course of
employment than that other of writing for a bookseller, to lectures, a number which will not appear extraordinary from so
which the art of printing has given occasion. The time and great a city to so famous a teacher, who taught, too, what was
study, the genius, knowledge, and application requisite to at that time the most fashionable of all sciences, rhetoric. He
qualify an eminent teacher of the sciences, are at least equal to must have made, therefore, by each course of lectures, a thou
what is necessary for the greatest practitioners in law and sand minae, or £3333 6s. 8d. A thousand minae, accordingly,
physic. But the usual reward of the eminent teacher bears no is said by Plutarch in another place, to have been his Didactron,
proportion to that of the lawyer or physician; because the or usual price of teaching. Many other eminent teachers in
trade of the one is crowded with indigent people who have been those times appear to have acquired great fortunes. Gorgias
brought up to it at the public expense; whereas those of the made a present to the temple of Delphi of his own statue in
other two are encumbered with very few who have not been solid gold. We must not, I presume, suppose that it was as
Wages and Profit 123
hands: the other is in a declining state, and the superabun
large as the life. His way of living, as well as that of Hippias dance of hands is continually increasing. Those two manu
and Protagoras, two other eminent teachers of those times, is factures may sometimes be in the same town, and sometimes in
represented by Plato as splendid even to ostentation. Plato the same neighbourhood, without being able to lend the least
himself is said to have lived with a good deal of magnificence. assistance to one another. The statute of apprenticeship may
Aristotle, after having been tutor to Alexander, and most oppose it in the one case, and both that and an exclusive cor
munificently rewarded, as it is universally agreed, both by him poration in the other. In many different manufactures, how
and his father Philip, thought it worth while, notwithstanding, ever, the operations are so much alike, that the workmen could
to return to Athens, in order to resume the teaching of his easily change trades with one another, if those absurd laws did
school. Teachers of the sciences were probably in those times not hinder them. The arts of weaving plain linen and plain
less common than they came to be in an age or two afterwards, silk, for example, are almost entirely the same. That of weav
when the competition had probably somewhat reduced both the ing plain woollen is somewhat different; but the difference is so
price of their labour and the admiration for their persons. The insignificant that either a linen or a silk weaver might become
most eminent of them, however, appear always to have enjoyed a tolerable workman in a very few days. If any of those three
a degree of consideration much superior to any of the like capital manufactures, therefore, were decaying, the workmen
profession in the present times. The Athenians sent Cameades might find a resource in one of the other two which was in a
the academic, and Diogenes the stoic, upon a solemn embassy more prosperous condition; and their wages would neither rise
to Rome; and though their city had then declined from its too high in the thriving, nor sink too low in the decaying manu
former grandeur, it was still an independent and considerable facture. The linen manufacture indeed is, in England, by a
republic. Cameades, too, was a Babylonian by birth, and as particular statute, open to everybody; but as it is not much
there never was a people more jealous of admitting foreigners cultivated through the greater part of the country, it can afford
to public offices than the Athenians, their consideration for him no general resource to the workmen of other decaying manu
must have been very great. factures, who, wherever the statute of apprenticeship takes
This inequality is upon the whole, perhaps, rather advan place, have no other choice but either to come upon the parish,
tageous than hurtful to the public. It may somewhat degrade or to work as common labourers, for which, by their habits,
the profession of a public teacher; but the cheapness of literary they are much worse qualified than for any sort of manufacture
education is surely an advantage which greatly overbalances that bears any resemblance to their own. They generally,
this trifling inconveniency. The public, too, might derive still therefore, choose to come upon the parish.
greater benefit from it, if the constitution of those schools and Whatever obstructs the free circulation of labour from one
colleges, in which education is carried on, was more reasonable employment to another obstructs that of stock likewise; the
than it is at present through the greater part of Europe. quantity of stock which can be employed in any branch of
Thirdly, The policy of Europe, by obstructing the free circu business depending very much upon that of the labour which
lation of labour and stock both from employment to employ can be employed in it. Corporation laws, however, give less
ment, and from place to place, occasions in some cases a very obstruction to the free circulation of stock from one place to
inconvenient inequality in the whole of the advantages and another than to that of labour. It is everywhere much easier
disadvantages of their different employments. for a wealthy merchant to obtain the privilege of trading in a
The statute of apprenticeship obstracts the free circulation town corporate, than for a poor artificer to obtain that of
of labour from one employment to another, even in the same working in it.
place. The exclusive privileges of corporations obstruct it from The obstruction which corporation laws give to the free
one place to another, even in the same employment. circulation of labour is common, I believe, to every part of
It frequently happens that while high wages are given to the Europe. That which is given to it by the poor laws is, so far
workmen in one manufacture, those in another are obliged to as I know, peculiar to England. It consists in the difficulty
content themselves with bare subsistence. The one is in an which a poor man finds in obtaining a settlement, or even in
advancing state, and has, therefore, a continual demand for new
132 The Wealth of Nations The Rent of Land 133
Such parts only of the produce of land can commonly be quantity of labour, indeed, which it can purchase is not always
brought to market of which the ordinary price is sufficient to equal to what it could maintain, if managed in the most
replace the stock which must be employed in bringing them economical manner, on account of the high wages which are
thither, together with its ordinary profits. If the ordinary price sometimes given to labour. But it can always purchase such
is more than this, the surplus part of it will naturally go to the a quantity of labour as it can maintain, according to the rate
rent of the land. If it is not more, though the commodity may at which the sort of labour is commonly maintained in the
be brought to market, it can afford no rent to the landlord. neighbourhood.
Whether the price is or is not more depends upon the demand. But land, in almost any situation,produces a greater quantity
There are some parts of the produce of land for which the of food than what is sufficient to maintain all the labour necessary
demand must always be such as to afford a greater price than for bringing it to market in the most liberal way in which that
what is sufficient to bring them to market; and there are others labour is ever maintained. The surplus, too, is always more
for which it either may or may not be such as to afford this than sufficient to replace the stock which employed that labour,
greater price. The former must always afiord a rent to the together with its profits. Something, therefore, always remains
landlord. The latter sometimes may, and sometimes may not, for a rent to the landlord.
according to different circumstances. The most desert moors in Norway and Scotland produce
Rent, it is to be observed, therefore, enters into the com some sort of pasture for cattle, of which the milk and the
position of the price of commodities in a different way from increase are always more than sufficient, not only to maintain all
wages and profit. High or low wages and profit are the causes the labour necessary for tending them, and to pay the ordinary
of high or low price; high or low rent is the effect of it. It is profit to the farmer or owner of the herd or flock; but to afford
because high or low wages and profit must be paid, in order some small rent to the landlord. The rent increases in pro
to bring a particular commodity to market, that its price is portion to the goodness of the pasture. The same extent of
high or low. But it is because its price is high or low; a great ground not only maintains a greater number of cattle, but as
deal more, or very little more, or no more, than what is sufficient they are brought within a smaller compass, less labour becomes
to pay those wages and profit, that it afiords a high rent, or a requisite to tend them, and to collect their produce. The
low rent, or no rent at all. landlord gains both ways, by the increase of the produce and
The particular consideration, first, of those parts of the by the diminution of the labour which must be maintained
produce of land which always afford some rent; secondly, of out of it.
those which sometimes may and sometimes may not afford The rent of land not only varies with its fertility, whatever be
rent; and, thirdly, of the variations which, in the different its produce, but with its situation, whatever be its fertility.
periods of improvement, naturally take place in the relative Land in the neighbourhood of a town gives a greater rent than
value of those two different sorts of rude produce, when com land equally fertile in a distant part of the country. Though
pared both with one another and with manufactured com it may cost no more labour to cultivate the one than the other,
modities, will divide this chapter into three parts. 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
PART I 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
Of the Produce of Land which always affords Rent
profits, as has already been shown, is generally higher than in
As men, like all other animals, naturally multiply in proportion the neighbourhood of a large town. A smaller proportion of
to the means of their subsistence, food is always, more or less, this diminished surplus, therefore, must belong to the landlord.
in demand. It can always purchase or command a greater or Good roads, canals, and navigable rivers, by diminishing the
smaller quantity of labour, and somebody can always be found expense of carriage, put the remote parts of the country more
who is willing to do something in order to obtain it. The nearly upon a level with those in the neighbourhood of the town.
x nc rv cm oi i_iana 149
well-cultivated country, and the land which produces it affords
a considerable rent. But in many parts of North America the
landlord would be much obliged to anybody 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 Scot
land 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 pro
portion to that of those whom it can feed. When food is pro
vided, 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 even 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 and
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 prin
cipal 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 conveniences 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 amuse
ment of those desires which cannot he 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 im
provement 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
afiords 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 im
proved 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 circum
stances.
Whether a coal-mine, for example, can afford any rent
230 The Wealth of Nations The Rent of Land 231
The whole annual produce of the land and labour of every His condition leaves him no time to receive the necessary in
country, or what comes to the same thing, the whole price of formation, and his education and habits are commonly such as
that annual produce, naturally divides itself, it has already been to render him unfit to judge even though he was fully informed.
observed, into three parts; the rent of land, the wages of In the public deliberations, therefore, his voice is . little heard
labour, and the profits of stock; and constitutes a revenue to and less regarded, except upon some particular occasions, when
three different orders of people; to those who live by rent, to his clamour is animated, set on, and supported by his employers,
, those who live by wages, and to those who live by profit. These not for his, but their own particular purposes.
are the three great, original, and constituent orders of every His employers constitute the third order, that of those who
civilised society, from whose revenue that of every other order live by profit. It is the stock that is employed for the sake of
is ultimately derived. profit which puts into motion the greater part of the useful
The interest of the first of those three great orders, it appears labour of every society. The plans and projects of the em
from what has been just now said, is strictly and inseparably ployers of stock regulate and direct all the most important
connected with the general interest of the society. Whatever operations of labour, and profit is the end proposed by all those
either promotes or obstructs the one, necessarily promotes or plans and projects. But the rate of profit does not, like rent
obstructs the other. When the public deliberates concerning and wages, rise with the prosperity and fall with the declension
any regulation of commerce or police, the proprietors of land of the society. On the contrary, it is naturally low in rich and
never can mislead it, with a view to promote the interest of high in poor countries, and it is always highest in the countries
their own particular order; at least, if they have any tolerable which are going fastest to ruin. The interest of this third
knowledge of that interest. They are, indeed, too often defec order, therefore, has not the same connection with the general
tive in this tolerable knowledge. They are the only one of the interest of The society as that of the other two. Merchants and
three orders whose revenue costs them neither labour nor care, master manufacturers are, in this order, the two classes of people
but comes to them, as it were, of its own accord, and inde who commonly employ the largest capitals, and who by their
pendent of any plan or project of their own. That indolence, wealth draw to themselves the greatest share of the public con
which is the natural effect of the ease and security of their sideration. As during their whole lives they are engaged in
situation, renders them too often, not only ignorant, but in plans and projects, they have frequently more acuteness of
capable of that application of mind which is necessary in order understanding than the greater part of country gentlemen. As
to foresee and understand the consequences of any public their thoughts, however, are commonly exercised rather about
regulation. the interest of their own particular branch of business, than
The interest of the second order, that of those who live by about that of the society, their judgment, even when given with
wages, is as strictly connected with the interest of the society the greatest candour (which it has not been upon every occa
as that of the first. The wages of the labourer, it has already sion) is much more to be depended upon with regard to the
been shown, are never so high as when the demand for labour former of those two objects than with regard to the latter.
is continually rising, or when the quantity employed is every Their superiority oyer the country gentleman is not so much in
year increasing considerably. When this real wealth of the their knowledge of the public interest, as in their having a better
society becomes stationary, his wages are soon reduced to what knowledge of their own interest than he has of his. It is by
is barely enough to enable him to bring up a family, or to this superior knowledge of their own interest that they have
continue the race of labourers. When the society declines, they frequently imposed upon his generosity, and persuaded him to
fall even below this. The order of proprietors may, perhaps, give up both his own interest and that of the public, from a
gain more by the prosperity of the society than that of labourers: very simple but honest conviction that their interest, and not
but there is no order that suffers so cruelly from its decline. his, was the interest of the public. The interest of the dealers,
But though the interest of the labourer is strictly connected however, in any particular branch of trade or manufactures, is
with that of the society, he is incapable either of comprehending always in some respects different from, and even opposite to,
that interest or of understanding its connection with his own. 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 serve only 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 com
merce 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;
Tables Referred to on Pages 169, 182.
Years Price of the Quarter Average of the dif The average Price
of each Year in
XII. of Wheat each Year. ferent Prices of Money of the
the same Year. present Times.
£ ^ £ s- d- £ S‘ d-
— 12 — 1 16 —
— 12 —
1205 — 13 4 13 5
— is —
1223 — 12 — 1 16 —
1237 — 34 — 10 —
1243 — 6 —
1244 — 2 — — 6 —
1246 — 16 — 2 8 —
1247 — 13 4 2-------
1257 x 4 — 3 12 —
1258 — iS — — 17 — 2 11 —
— 16 —
4 16
1270 I i1!-]
6 8 5 12 — 16 16 —
1286 — 2 8 ( 1 8 —
— 16—i — 9 4
Total £35 9 3
Average Price £2 19 ij
-
-
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 everything for himself, it is not necessary that any
stock should be accumulated or stored up beforehand 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 beforehand stored up some
where, 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 hisTnaustfy“fdr stTIdfig a time to such
a peculiar business.
As the accumulation of stock must, in the nature of things,
241
242 The Wealth of Nations The Division of Stock 243
be previous to the division of labour, so labour can be more and general stock of the society. The stock which is accumulated
more subdivided in proportion only as stock is previously more into a capital, may either be employed by the person to whom
and more accumulated. The quantity of materials which the it belongs, or it may be lent to some other person. In the third
same number of people can work up, increases in a great pro and fourth chapters, I have endeavoured to examine the manner
portion as labour comes to be more and more subdivided; and in which it operates in both these situations. The fifth and last
as the operations of each workman are gradually reduced to a chapter treats of the different effects which the difierent employ
greater degree of simplicity, a variety of new machines come to ments of capital immediately produce upon the quantity both
be invented for facilitating and abridging those operations. As of national industry, and of the annual produce of land and
the division of labour advances, therefore, in order to give labour.
constant employment to an equal number of workmen, an
equal stock of provisions, and a greater stock of materials and
tools than what would have been necessary in a ruder state of
things, must be accumulated beforehand. But the number of CHAPTER I
workmen in every branch of business generally increases with OF THE DIVISION OF STOCK
the division of labour in that branch, or rather it is the increase
of their number which enables them to class and subdivide When the stock which a man possesses is no more than sufficient
themselves in this manner. to maintain him for a few days or a few weeks, he seldom thinks
As the accumulation of stock is previously necessary for of deriving any revenue from it. He consumes it as sparingly
carrying on Jhis great improvement in the productive', powers as he can, and endeavours by his labour to acquire something
of labour, so that accumulation naturally leads to this improve which may supply its place before it be consumed altogether.
ment. The person who employs his stock in maintaining His revenue is, in this case, derived from his labour only. This
labour, necessarily wishes to employ it in such a manner as to is the state of the greater part of the labouring poor in all
produce as great a quantity of work as possible. He endeavours, countries.
therefore, both to make among his workmen the most proper But when he possesses stock sufficient to maintain him for
distribution of employment, and to furnish them with the best months or years, he naturally endeavours to derive a revenue
machines which he can either invent or afford to purchase. from the greater part of it; reserving only so much for his
His abilities in both these respects are generally in proportion immediate consumption as may maintain him till this revenue
to the extent of his stock, or to the number of people whom it begins to come in. His whole stock, therefore, is distinguished
can employ. The quantity of industry, therefore, not only into two parts. That part which, he expects, is to afford him
increases in every country with the increase of the stock which this revenue, is called his capital. The other is that which
employs it, but, in consequence of that increase, the same supplies his immediate consumption; and which consists either,
quantity of industry produces a much greater quantity of work. first, in that portion of 1ris~wh61e stock which was originally
Such are in general the effects of the increase of stock upon reserved for this purpose; or, secondly, in his revenue, from
industry and its productive powers. whatever source derived, as it gradually comes in; or, thirdly,
In the following book I have endeavoured to explain the in such things as had been purchased by either of these in former
nature of stock, the effects of its accumulation into capitals years, and which are not yet entirely consumed; such as a stock
of different kinds, and the effects of the different employments of clothes, household furniture, and the like. In one, or other,
of those capitals. This book is divided into five chapters. In or all of these three articles, consists the stock which men
the first chapter, I have endeavoured to show what are the commonly reserve for their own immediate consumption.
different parts or branches into which the stock, either of an There are two different ways in which a capital may be
individual, or of a great society, naturally divides itself. In employed so as to yield a revenue or profit to its employer.
the second, I have endeavoured to explain the nature and First, it may be employed in raising, manufacturing, or
operation of money considered as a particular branch of the purchasing goods, and selling them again with a profit. The
capital employed in this manner yields no revenue or profit to it in his own possession, and of the other by parting with it.
its employer, while it either remains in his possession, or con The price or value of his labouring cattle is a fixed capital in
tinues in the same shape. The goods of the merchant yield him the same manner as that of the instruments of husbandry.
no revenue or profit till he sells them for money, and the money Their maintenance is a circulating capital in the same manner
yields him as little till it is again exchanged for goods. His as that of the labouring servants. The farmer makes his profit
capital is continually going from him in one shape, and returning by keeping the labouring cattle, and by parting with their
to him in another, and it is only by means of such circulation, maintenance. Both the price and the maintenance of the cattle
or successive exchanges, that it can yield him any profit. Such which are brought in and fattened, not for labour, but for sale,
capitals, therefore, may very properly be called circulating are a circulating capital. The farmer makes his profit by parting
capitals. with them. A flock of sheep or a herd of cattle that, in a
Secondly, it may be employed in the improvement of land, breeding country, is bought in, neither for labour, nor for sale,
in the purchase of useful machines and instruments of trade, or but in order to make a profit by their wool, by their milk, and
in such-like things as yield a revenue or profit without changing by their increase, is a fixed capital. The profit is made by
masters, or circulating any further. Such capitals, therefore, keeping them. Their maintenance is a circulating capital. The
may very properly be called fixed capitals. profit is made by parting with it; and it comes back with both
Different occupations require very different proportions its own profit and the profit upon the whole price of the cattle,
between the fixed and circulating capitals employed in them. in the price of the wool, the milk, and the increase. The whole
The capital of a merchant,'Tor example, is altogether a value of the seed, too, is properly a fixed capital. Though it goes
circulating capital. He has occasion for no machines or instru backwards and forwards between the ground and the granary,
ments of trade, unless his shop, or warehouse, be considered as it never changes masters, and therefore does not properly
such. circulate. The farmer makes his profit, not by its sale, but by
Some part of the capital of every master artificer or manu its increase.
facturer must be fixed in the instruments of his trade. This The general stock of any country or society is the same with
part, however, is very small in some, and very great in others. that of all its inhabitants or members, and therefore naturally
A master tailor requires no other instruments of trade but a divides itself into the same three portions, each of which has a
parcel of needles. Those of the master shoemaker are a little, distinct function or office.
though but a very little, more expensive. Those of the weaver The first is that portion which is reserved for immediate
rise a good deal above those of the shoemaker. The far greater consumption, and of which the characteristic is, that it affords
part of the capital of all such master artificers, however, is no revenue or profit. It consists in the stock of food, clothes,
circulated, either in the wages of their workmen, or in the price household furniture, etc., which have been purchased by their
of their materials, and repaid with a profit by the price of the proper consumers, but which are not yet entirely consumed.
work. The whole stock of mere dwelling-houses too, subsisting at any
In other works a much greater fixed capital is required. In one time in the country, make a part of this first portion. The
a great iron-work, for example, the furnace for melting the ore, stock that is laid out in a house, if it is to be the dwelling-house
the forge, the slitt-mill, are instruments of trade which cannot of the proprietor, ceases from that moment to serve in the
be erected without a very great expense. In coal-works and function of a capital, or to afford any revenue to its owner.
mines of every kind, the machinery necessary both for drawing A dwelling-house, as such, contributes nothing to the revenue
out the water and for other purposes is frequently still more of its inhabitant; and though it is, no doubt, extremely useful
expensive. to him, it is as his clothes and household furniture are useful to
That part of the capital of the farmer which is employed in him, which, however, make a part of his expense, and not of
the instruments of agriculture is a fixed, that which is employed his revenue. If it is to be let to a tenant for rent, as the house
in the wages and maintenance of his labouring servants, is a itself can produce nothing, the tenant must always pay the rent
circulating capital. He makes a profit of the one by keeping out of some other revenue which he derives either from labour.
K & a. — s C «‘'V' ^ ^
or stock, or land. Though a house, therefore, may yield a in the same light as those useful machines which facilitate and
revenue to its proprietor, and thereby serve in the function of a abridge labour, and by means of which an equal circulating
capital to him, it cannot yield any to the public, nor serve in capital can afford a much greater revenue to its employer.
the function of a capital to it, and the revenue of the whole body An improved farm is equally advantageous and more durable
of the people can never be in the smallest degree increased by than any of those machines, frequently requiring no other
it. Clothes, and household furniture, in the same manner, some repairs than the most profitable application of the farmer’s
times yield a revenue, and thereby serve in the function of a capital employed in cultivating it:
capital to particular persons. In countries where masquerades Fourthly, of the acquired and useful abilities of all the
are common, it is a trade to let out masquerade dresses for a inhabitants or members of the society. The acquisition of
night. Upholsterers frequently let furniture by the month or such talents, by the maintenance of the acquirer during his
by the year. Undertakers let the furniture of funerals by the education,study, or apprenticeship, always costs a real expense,
day and by the week. Many people let furnished houses, and which is a capital fixed and realised, as it were, in his person.
get a rent, not only for the use of the house, but for that of the Those talents, as they make a part of his fortune, so do they
furniture. The revenue, however, which is derived from such likewise of that of the society to which he belongs. The
things must always be ultimately drawn from some other source improved dexterity of a workman may be considered in the
of revenue. Of all parts of the stock, either of an individual, same light as a machine or instrument of trade which facilitates
or of a society, reserved for immediate consumption, what is and abridges labour, and which, though it costs a certain
laid out in houses is most slowly consumed. A stock of clothes expense, repays that expense with a profit.
may last several years: a stock of furniture half a century or The third and last of the three portions into which the general
a century: but a stock of houses, well built and properly taken stock' oTlhe' society naturally divides itself, is the circulating
care of, may last many centuries. Though the period of their capital; of which the characteristic is, that it affords a revenue
total consumption, however, is more distant, they are still as only by circulating or changing masters. It is composed like
really a stock reserved for immediate consumption as either wise of four parts:
clothes or household furniture. First, of the moneys by means of which all the other three
Thejsgjcond of the three portions into which the general stock are circulated arnTdlstributed to their proper consumers:
of the society divides itself, is the fixed capital, of which the Secondly, of the stock of provisions which are in the possession
characteristic is, that it affords a revenue or profit ^without of the butcher, the grazier, the farmer, the corn-merchant, the
circulating or changing masters. “It consists chiefly of the four brewer, etc., and from the sale of which they expect to derive
following articles: a profit:
First, of all useful machines and instruments of trade which Thirdly, of the materials, whether altogether rude, or more
facilitate and abridge labour: or less manufactured, of clothes, furniture, and building, which
Secondly, of all those profitable buildings which are the means are not yet made up into any of those three shapes, but which
of procuring a revenue, not only to their proprietor who lets remain in the hands of the growers, the manufacturers, the
them for a rent, but to the person who possesses them and pays mercers and drapers, the timber merchants, the carpenters and
that rent for them; such as shops, warehouses, workhouses, joiners, the brickmakers, etc.
farmhouses, with all their necessary buildings; stables, granaries, Fourthly, and lastly, of the work which is made up and
etc. These are very different from mere dwelling houses. They completed, but which is still inTheliands of the merchant or
are a sort of instruments of trade, and may be considered in manufacturer, and not yet disposed of or distributed to the
the same light: proper consumers; such as the finished work which we frequently
Thirdly, of the improvements of land, of what has been find ready-made in the shops of the smith, the cabinet-maker,
profitably laid out in cTearing, draining, enclosing, manuring, the goldsmith, the jeweller, the china-merchant, etc. The
and reducing it into the condition most proper for tillage circulating capital consists in this manner, of the provisions,
and culture. An improved farm may very justly be regarded materials, and finished work of all kinds that are in the hands
j__413
of their respective dealers, and of the money that is necessary however, like all other things, be wasted and worn out at last,
for circulating and distributing them to those who are finally and sometimes, too, be either lost or sent abroad, and must,
to use or to consume them. therefore, require continual, though, no doubt, much smaller
Of these four parts, three—provisions, materials, and finished supplies.
work—are, either annually, or in a longer or shorter period, Land, mines, and fisheries, require all both a fixed and a
regularly withdrawn from it, and placed either in the fixed circulating capital to cultivate them; and their produce replaces
capital or in the stock reserved for immediate consumption. with a profit, not only those capitals, but all the others in the
Every fixed capital is both originally derived from, and society. Thus the farmer annually replaces to the manu
requires to be continually supported by a circulating capital. facturer the provisions which he had consumed and the materials
All useful machines and instruments of trade are originally which he had wrought up the year before; and the manufacturer
derived from a circulating capital, which furnishes the materials replaces to the farmer the finished work which he had wasted
of which they are made, and the maintenance of the workmen and worn out in the same time. This is the real exchange that
who make them. They require, too, a capital of the same kind is annually made between those two orders of people, though
to keep them in constant repair. it seldom happens that the rude produce of the one and the
No fixed capital can yield any revenue but by meaps. of a manufactured produce of the other, are directly bartered for one
circulating capital. The most useful machines and instruments another; because it seldom happens that the farmer sells his
of trade will produce nothing without the circulating capital com and his cattle, his flax and his wool, to the very same
which affords the materials they are employed upon, and the person of whom he chooses to purchase the clothes, furniture,
maintenance of the workmen who employ them. Land, how and instruments of trade which he wants. He sells, therefore,
ever improved, will yield no revenue without a circulating his rude produce for money, with which he can purchase, where-
capital, which maintains the labourers who cultivate and collect ever it is to be had, the manufactured produce he has occasion
its produce. for. Land even replaces, in part at least, the capitals with
To maintain and augment the stock which may be reserved which fisheries and mines are cultivated. It is the produce of
for immediate consumption is the sole end and purpose both of land which draws the fifth from the waters; and it is the
the fixed and circulating capitals. It is this stock which feeds, produce of the surface of the earth which extracts the minerals
clothes, and lodges the people. Their riches or poverty depends from its bowels.
upon the abundant or sparing supplies which those two capitals The produce of land, mines, and fisheries, when their natural
can afford to the stock reserved for immediate consumption. fertility is equal, is in proportion to the extent and proper
So great a part of the circulating capital being continually application of the capitals employed about them. When the
withdrawn from it, in order to be placed in the other two capitals are equal and equally well applied, it is in proportion
branches of the general stock of the society; it must in its turn to their natural fertility.
require continual supplies, without which it would soon cease In all countries where there is tolerable security, every man
to exist. These supplies are principally drawn from three of common understanding will endeavour to employ whatever
sources, the produce of land, of mines, and of fisheries. These stock he can command in procuring either present enjoyment
afford continual supplies of provisions and materials, of which or future profit. If it is employed in procuring present enjoy
part is afterwards wrought up into finished work, and by which ment, it is a stock reserved for immediate consumption. If it
are replaced the provisions, materials, and finished work con is employed in procuring future profit, it must procure this
tinually withdrawn from the circulating capital. From mines, profit either by staying with him, or by going from him. In
too, is drawn what is necessary for maintaining and augmenting the one case it is a fixed, in the other it is a circulating capital,
that part of it which consists in money. For though, in the A man must be perfectly crazy who, where there is tolerable
ordinary course of business, this part is not, like the other three, security, does not employ all the stock which he commands,
necessarily withdrawn from it, in order to be placed in the whether it be his own or borrowed of other people, in some one
other two branches of the general stock of the society, it must, or other of those three ways.
other people, whose subsistence, conveniencies, and amuse
ments, are augmented by the labour of those workmen.
The intention of the fixed capital is to increase the productive
powers of labour, or to enable the same number of labourers to
perform a much greater quantity of work. In a farm where
all the necessary buildings, fences, drains, communications, etc.,
are in the most perfect good order, the same number of labourers
and labouring cattle will raise a much greater produce than in
one of equal extent and equally good ground, but not furnished
with equal conveniencies. In manufactures the same number
of hands, assisted with the best machinery, will work up a much
greater quantity of goods than with more imperfect instruments
of trade. The expense which is properly laid out upon a fixed
capital of any kind, is always repaid with great profit, and
increases the annual produce by a much greater value than that
of the support which such improvements require. This support,
however, still requires a certain portion of that produce. A
certain quantity of materials, and the labour of a certain number
of workmen, both of which might have been immediately
employed to augment the food, clothing and lodging, the sub
sistence and conveniencies of the society, are thus diverted to
another employment, highly advantageous indeed, but still
difierent 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 mainten
ance 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
Money a Branch of the General Stock 259
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
the 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 an
addition to the net 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 con
sumption, they may either, first, purchase such goods as are
likely to be consumed by idle people who produce nothing,
such as foreign wines, foreign silks, etc.; or, secondly, they may
purchase an additional stock of materials, tools, and provisions,
in order to maintain and employ an additional number of indus
trious people, who re-produce, with a profit, the value of their
annual consumption.
So far as it is employed in the first way, it promotes prodi
gality, 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 con
sumption, the people who consume re-producing, with a profit,
the whole value of their annual consumption. The gross revenue
of the society, the annual produce of their land and labour, is
increased by the whole value which the labour of those work
men adds to the materials upon which they are employed; and
their net revenue by what remains of this value, after deduct
ing 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 parti
cular men may sometimes increase their expense very consider
ably 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 pur
chasing 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 circu
lating 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
« j> tc, /6 LA ^ - ^ * «A.^v.e 7
294 The Wealth of Nations Accumulation of Capital 295
and unconditional payment of such bank notes as soon as of the subject upon which his labour is bestowed. . But the
presented, their trade may, with safety to the public, be rendered maintenance of a menial servant never is restored. A man
in all other respects perfectly free. The late multiplication of grows rich by employing a multitude of manufacturers: he
banking companies in both parts of the united kingdom, an grows poor by maintaining a multitude of menial servants,
event by which many people have been much alarmed, instead The labour of the latter, however, has its value, and deserves
of diminishing, increases the security of the public. It obliges its reward as well as that of the former. But the labour of the
all of them to be more circumspect in their conduct, and, by manufacturer fixes and realises itself in some particular subject
not extending their currency beyond its due proportion to their or vendibTe'commodity, which lasts for some time at least after
cash, to guard themselves against those malicious runs which that labour is past. It is, as it were, a certain quantity of
the rivalship of so many competitors is always ready to bring labour stocked and stored up to be employed, if necessary, upon
upon them. It restrains the circulation of each particular some otheToccasion. That subject, or what is the same thing,
company within a narrower circle, and reduces their circulating the price of that subject, can afterwards, if necessary, put into
notes to a smaller number. By dividing the whole circulation motion a quantity of labour equal to that which had originally
into a greater number of parts, the failure of any one company, produced it. The labour of the menial servant, on the con
an accident which, in the course of things, must sometimes trary, does not fix or realise itself in any particular subject or
happen, becomes of less consequence to the public. This free vendible commodity. His services generally perish in the very
competition, too, obliges all bankers to be more liberal in their instant of their performance, and seldom leave any trace or
dealings with their customers, lest their rivals should carry value behind them for which an equal quantity of service could
them away. In general, if any branch of trade, or any division afterwards be procured.
of labour, be advantageous to the public, the freer and more The labour of some of the most respectable orders in the
general the competition, it will always be the more so'. society is, like that of menial servants, unproductive of any
value, and does not fix or realise 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
CHAPTER III of justice and war who serve under him, the whole army and
OF THE ACCUMULATION OF CAPITAL, OR OF PRODUCTIVE navy, are unproductive labourers. They are the servants of .
AND UNPRODUCTIVE LABOUR the public, and are~ maintained by a part of the annual produce
of the industry of other people. Their service, how honourable,
There is one sort of labour which adds to the value of the how useful, or how necessary soever, produces nothing for which
subject upon which it is bestowed: there is another which has an equal quantity of service can afterwards be procured. The
no such effect. The former, as it produces a value, may be protection, security, and defence of the commonwealth, the
called productive; the latter, unproductive 1 labour. Thus the effect of their labour this year will not purchase its protection,
labour of a manufacturer adds, generally, to the value of the security, and defence for the year to come. In the same class
materials which he works upon, that of his own maintenance, must be ranked, some both of the gravest and most important,
and of his master’s profit. The labour of a menial servant, on and some of the most frivolous professions: churchmen, lawyers,
the contrary, adds to the value of nothing. Though the manu physicians, men of letters of all kinds; players, buffoons,
facturer has his wages advanced to him by his master, he, in musieians,'opera singers, opera-dancers, etc. The labour of the
reality, costs him no expense, the value of those wages being meanest of these has a certain value, regulated by the very same
generally restored, together with a profit, in the improved value principles which regulate that of every other sort of labour; and
1 Some French authors of great learning and ingenuity have used those that of the noblest and most useful, produces nothing which
words in a different sense. In the last chapter oi the fourth book I shall could afterwards purchase or procure an equal quantity of
endeavour to show that their sense is an improper one.
labour. Like the declamation of the actor, the harangue of the
orator, or the tune of the musician, the work of all of them and after having served in the function of a capital to him, it
perishes in the very instant of its production. constitutes a revenue to them. Whenever he employs any part
Both productive and unproductive labourers, and those who of it in maintaining unproductive hands of any kind, that part
do not labour at all, are all equally maintained by the annual is, from that moment, withdrawn from his capital, and placed
produce of the land and labour of the country. This produce, in his stock reserved for immediate consumption.
how great soever, can never be infinite, but must have certain Unproductive labourers, and those who do not labour at all,
limits. According, therefore, as a smaller or greater proportion are all maintained by revenue; either, first, by that part of the
of it is in any one year employed in maintaining unproductive annual produce which is originally destined for constituting a
hands, the more in the one case and the less in the other will revenue to some particular persons, either as the rent of land or
remain for the productive, and the next year’s produce will be as the profits of stock; or, secondly, by that part which, though
greater or smaller accordingly whole annual produce, if originally destined for replacing a capital and for maintaining
we except the spontaneous productions of the earth, being the productive labourers only, yet when it comes into their hands
effect of productive labour. t __ sf. /-r e « j e..t whatever part of it is over and above their necessary subsistence
Though the whole annual produce of the land and labour of may be employed in maintaining indifferently either productive
every country is, no doubt, ultimately destined for supplying or unproductive hands. Thus, not only the great landlord or
the consumption of its inhabitants, and for procuring a revenue the rich merchant, but even the common workman, if his wages
to them, yet when it first comes either from the ground, or are considerable, may maintain a, menial servant; or he may
from the hands of the productive labourers, it naturally divides sometimes go to a play or a puppet-show, and so contribute his
itself into two parts. One of them, and frequently the largest, share towards maintaining one set of unproductive labourers;
is, in the first place, destined for replacing a capital, or for or he may pay some taxes, and thus help to maintain another
renewing the provisions, materials, and finished work, which set, more honourable and useful,,indeed, but equally-unproduc-
had been withdrawn from a capital; the other for constituting tive. No part of the annual produce, however, which had been
a revenue either to the owner of this capital, as the profit of his originally destined to replace a capital, is ever directed towards
stock, or to some other person, as the rent of his land. Thus, maintaining unproductive hands till after it has put into motion
of the produce of land, one part replaces the capital of the its full complement of productive labour, or all that it could
farmer; the other pays his profit and the rent of the landlord; put into motion in the way in which it was employed. The
and thus constitutes a revenue both to the owner of this capital, workman must have earned his wages by work done before he
as the profits of his stock; and to some other person, as the can employ any part of them in this manner. That part, too, is
rent of his land. Of the produce of a great manufactory, in the generally but a small one. It is his spare revenue only, of which
same manner, one part, and that always the largest, replaces productive labourers have seldom a great deal. They generally
the capital of the undertaker of the work; the other pays his have some, however; and in the payment of taxes the great
profit, and thus constitutes a revenue to the owner of this ness of their number may compensate, in some measure, the
capital. smallness of their contribution. The rent of land and the profits
That part of the annual produce of the land and labour of of stock are everywhere, therefore, the principal sources from
any country which replaces a capital never is immediately em which unproductive hands derive their subsistence. These are
ployed to maintain any but productive hands. It pays the the two sorts of revenue of which the owners have generally
wages of productive labour only. That which is immediately most to spare. They might both maintain indifferently either
destined for constituting a revenue, either as profit or as rent, productive or unproductive hands. They seem, however, to
may maintain indifferently either productive or unproductive have some predilection for the latter. The expense of a great
hands. lord feeds generally more idle than industrious people. The
Whatever part of his stock a man employs as a capital, he rich merchant, though with his capital he maintains industrious
always expects is to be replaced to him with a profit. He people only, yet by his expense, that is, by the employment of his
employs it, therefore, in maintaining productive hands only; revenue, he feeds commonly the very same sort as the great lord.
Accumulation of Capital 299
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 in
habitants 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 encourage
ment to industry. It is better, says the proverb, to play for
nothing than to work for nothing. In mercantile and manu
facturing 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 sup
ported 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, Compiegne, and Fontainebleau. If you
except Rouen and Bordeaux, there is little trade or industry in
any of the parliament towns of France; and the inferior ranks
the principal nobility and gentry of Scotland, it became a city
of people, being chiefly maintained by the expense of the members
of some trade and industry. It still continues, however, to be
of the courts of justice, and of those who come to plead before
the residence of the principal courts of justice in Scotland, of
them, are in general idle and poor. The great trade of Rouen
the boards of customs and excise, etc. A considerable revenue,
and Bordeaux seems to be altogether the effect of their situa
therefore, still continues to be spent in it. In trade and in
tion. Rouen is necessarily the entrepot of almost all the goods
dustry it is much inferior to Glasgow, of which the inhabitants
which are brought either from foreign countries, or from the
are chiefly maintained by the employment of capital. The
maritime provinces of France, for the consumption of the great
inhabitants of a large village, it has sometimes been observed,
city of Paris. Bordeaux is in the same manner the entrepot of
after having made considerable progress in manufactures, have
the wines which grow upon the banks of the Garonne, and of the
become idle and poor in consequence of a great lord having
rivers which run into it, one of the richest wine countries in the
taken up his residence in their neighbourhood.
world, and which seems to produce the wine fittest for exporta
The proportion between capital and revenue, therefore, seems
tion, or best suited to the taste of foreign nations. Such ad
everywhere to regulate the proportion between industry and
vantageous situations necessarily attract a great capital by the
idleness. Wherever capital predominates, industry prevails :
great employment which they afford it; and the employment
wherever revenue, idleness. Every increase or diminution of
of this capital is the cause of the industry of those two cities.
capital, therefore, naturally tends to increase or diminish the
In the other parliament towns of France, very little more capital
real quantity of industry, the number of productive hands, and
seems to be employed than what is necessary for supplying their
consequently the exchangeable value of the annual produce of
own consumption; that is, little more than the smallest capital the land and labour of the country, the real wealth and revenue
which can be employed in them. 1'he same thing may be said
of all its inhabitants.
of Paris, Madrid, and Vienna. Of those three cities, Paris is by
Capitals are increased by parsimony, and diminished by
far the most industrious; but Paris itself is the principal market
prodigality and misconduct.
of all the manufactures established at Paris, and its own con
Whatever a person saves from his revenue he adds to his
sumption is the principal object of all the trade which it carries
capital, and either employs it himself in maintaining an addi
on. London, Lisbon, and Copenhagen, are, perhaps, the only
tional number of productive hands, or enables some other person
three cities in Europe which are both the constant residence of
to do so, by lending it to him for an interest, that is, for a
a court, and can at the same time be considered as trading cities, share of the profits. As the capital of an individual can be
or as cities which trade not only for their own consumption,
increased only by what he saves from his annual revenue or his
but for that of other cities and countries. The situation of all
annual gains, so the capital of a society, which is the same with
the three is extremely advantageous, and naturally fits them to that of all the individuals who compose it, can be increased
be the entrepots of a great part of the goods destined for the only in the same manner.
consumption of distant places. In a city where a great revenue
Parsimony, and not rindustry, is the. immediate cause.of the
is spent, to employ with advantage a capital for any other
increase of capital.. Industry, indeed, provides the subject
purpose than for supplying the consumption of that city is
which parsimony accumulates. But whatever industry might
probably more difficult than in one in which the inferior ranks
acquire, if parsimony did not save and store up, the capital
of people have no other maintenance but what they derive from would never be the greater.
the employment of such a capital. The idleness of the greater
Parsimony, by increasing the fund which is destined for the
part of the people who are maintained by the expense of revenue
maintenance of productive hands, tends to increase the number
corrupts, it is probable, the industry of those who ought to be
of those hands whose labour adds to the value of the subject
maintained by the employment of capital, and renders it less
upon which it is bestowed. It tends, therefore, to increase the
advantageous to employ a capital there than in other places,
exchangeable value of the annual produce of the land and
There was little trade or industry in Edinburgh before the
labour of the country. It puts into motion an additional
union. When the Scotch parliament was no longer to be
assembled in it, when it ceased to be the necessary residence of
3°2 The Wealth of Nations Accumulation of Capital 303
quantity of industry, which gives an additional value to the quantity of that labour which adds a value to the subject upon
annual produce. which it is bestowed, and, consequently, the value of the annual
What is annually saved is as regularly consumed as what is produce of the land and labour of the whole country, the real
annually spent, and nearly in the same time too; but it is wealth and revenue of its inhabitants. If the prodigality of
consumed by a different set of people. That portion of his some was not compensated by the frugality of others, the
revenue which a rich man annually spends is in most cases conduct of every prodigal, by feeding the idle with the bread
consumed by idle guests and menial servants,,whojeave nothing of the industrious, tends not only to beggar himself, but to
behind them in return for their consumption. That portion impoverish his country.
which he annually saves, as for the sake of the profit it is Though the expense of the prodigal should be altogether in
immediately employed as a capital, is consumed in the same home-made, and no part of it in foreign commodities, its effect
manner, and nearly in the same time too, but by a different set upon the productive funds of the society would still be the same.
of people, by labourers, manufacturers, and artificers, who re Every year there would still be a certain quantity of food and
produce with a profit the value of their annual consumption. clothing, which ought to have maintained productive, employed
His revenue, we shall suppose, is paid him in money. Had he in maintaining unproductive hands. Every year, therefore,
spent the whole, the food, clothing, and lodging, which the there would still be some diminution in what would otherwise
whole could have purchased, would have been distributed have been the value of the annual produce of the land and
among the former set of people. By saving a part of it, as that labour of the country.
part is for the sake of the profit immediately employed as a This expense, it may be said indeed, not being in foreign
capital either by himself or by some other person, the food, goods, and not occasioning any exportation of gold and silver,
clothing, and lodging, which may be purchased with it, are the same quantity of money would remain in the country as
necessarily reserved for the latter. The consumption is the before. But if the quantity of food and clothing, which were
same,.but the consumers are different. thus consumed by unproductive, had been distributed among
"By what a frugal man annually saves, he not only affords productive hands, they would have reproduced, together with a
maintenance to an additional number of productive hands, for profit, the full value of their consumption. The same quantity
that or the ensuing year, but, like the founder of a public work- of money would in this case equally have remained in the
house, he establishes as it were a perpetual fund for the main country, and there would besides have been a reproduction of
tenance of an equal number in all times to come. The perpetual an equal value of consumable goods. There would have been
allotment and destination of this fund, indeed, is not always two values instead of one.
guarded by any positive law, by any trust-right or deed of The same quantity of money, besides, cannot long remain
mortmain. It is always guarded, however, by a very powerful in any country in which the value of the annual produce
principle, the plain and evident interest of every individual to diminishes. The sole use of money is to circulate consumable
whom any share of it shall ever belong. No part of it can ever goods. By means of it, provisions, materials, and finished work,
afterwards be employed to maintain any but productive hands are bought and sold, and distributed to their proper consumers^
without an evident loss to the person who thus perverts it from The quantity of money, therefore, which can be annually
its proper destination. employed in any country must be determined by the value of
The prodigal perverts it in this manner. By not confining his the consumable goods annually circulated within it. These
expense within his income, he encroaches upon his capital. must consist either in the immediate produce of the land and
Like him who perverts the revenues of some pious foundation labour of the country itself, or in something which had been
to profane purposes, he pays the wages of idleness with those purchased with some part of that produce. Their value, there
funds which the frugality of his forefathers had, as it were, con fore, must diminish as the value of that produce diminishes,
secrated to the maintenance of industry. By diminishing the and along with it the quantity of money which can be employed
funds destined for the employment of productive labour, he in circulating them. But the money which by this annual
necessarily diminishes, so far as it depends upon him, the diminution of produce is annually thrown out of domestic
circulation will not be allowed to lie idle. The interest of the capital is consumed by productive hands only, yet, as by
whoever possesses it requires that it should be employed. But the injudicious manner in which they are employed they do
having no employment at home, it will, in spite of all laws and not reproduce the full value of their consumption, there must
prohibitions, be sent abroad, and employed in purchasing con always be some diminution in what would otherwise have been
sumable goods which may be of some use at home. Its annual the productive funds of the society.
exportation will in this manner continue for some time to add It can seldom happen, indeed, that the circumstances of a
something to_ the annual consumption of the country beyond great nation can be much affected either by the prodigality
the value of its own annual produce. What in the days of its or misconduct of individuals; the profusion or imprudence of
prosperity^ had been saved from that annual produce, and some being always more than compensated by the frugality
employed in purchasing gold and silver, will contribute for some and good conduct of others.
little time to support its consumption in adversity. The ex With regard to profusion, the principle which prompts to
portation of gold and silver is, in this case, not the cause, but expense is the passion for present enjoyment; which, though '
the effect of its declension, and may even, for some little time, sometimes violent and very difficult to be restrained,.is in general
alleviate the misery of that declension. only momentary and occasional. But the principle which
The quantity of money, on the contrary, must in every country prompts to save is the desire of bettering our condition, a desire
naturally increase as the value of the annual produce increases. which, though generally calm and dispassionate, comes with us
The value of the consumable goods annually circulated within from the womb, and never leaves us till we go into the grave.
the society being greater will require a greater quantity of In the whole interval which separates those two moments,
money to circulate them. A part of the increased produce, there is scarce perhaps a single instant in which any man is
therefore, will naturally be employed in purchasing, wherever so perfectly and completely satisfied with his situation as to
it is to be had, the additional quantity of gold and silver neces be without any wish of alteration or improvement of any kind,
sary for circulating the rest. The increase of those metals will An augmentation of fortune is the means by which the greater
in this case be the effect, not the cause, of the public prosperity. part of men propose and wish to better their condition. It is
Gold and silver are purchased everywhere in the same manner. the means the most vulgar and the most obvious; and the most
The food, clothing, and lodging, the revenue and maintenance of likely way of augmenting their fortune is to save and accumu
all those whose labour or stock is employed in bringing them late some part of what they acquire, either regularly and
from the mine to the market, is the price paid for them in Peru annually, or upon some extraordinary occasions. Though the
as well as in England. The country which has this price to pay principle of expense, therefore, prevails in almost all men upon
will never be long without the quantity of those metals which some occasions, and in some men upon almost all occasions, yet
it has occasion for; and no country will ever long retain a in the greater part of men, taking the whole course of their life
quantity which it has no occasion for. at an average, the principle of frugality seems, not only to
Whatever, therefore, we may imagine the real wealth and predominate, but to predominate very greatly.
revenue of a country to consist in, whether in the value of the With regard to misconduct, the number of prudent and suc
annual produce of its land and labour, as plain reason seems to cessful undertakings is everywhere much greater than that of
dictate; or in the quantity of the precious metals which circulate injudicious and unsuccessful ones. After all our complaints of
within it, as vulgar prejudices suppose; in either view of the the frequency of bankruptcies, the unhappy men who fall into
matter, every prodigal appears to be a public enemy, and every this misfortune make but a very small part of the whole number
frugal man a public benefactor. engaged in trade, and all other sorts of business; not much
The effects of misconduct are often the same as those of more perhaps than one in a thousand. Bankruptcy is perhaps
prodigality. Every injudicious and unsuccessful project in the greatest and most humiliating calamity which can befall an
agriculture, mines, fisheries, trade, or manufactures, tends in innocent man. The greater part of men, therefore, are suffi
the same manner to diminish the funds destined for the main ciently careful to avoid it. Some, indeed, do not avoid it; as
tenance of productive labour. In every such project, though 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 arnues, 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 pro
ductive 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 en
croach 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, con
stant, and-uninterrupted effort of every man to better his con
dition, 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 toward im
provement, in spite both of the extravagance of government
and of the greatest errors of administration. Like the unknown
principle of animal life, it frequently restores health and vigour
to the constitution, in spite, not only of the disease, but of the
absurd prescriptions of the doctor.
The annual produce of the land and labour of any nation can
be increased in its value by no other means but by increasing
either the number of its productive labourers, or the productive
powers of those labourers who had before been employed. The
number of its productive labourers, it is evident, can never be
Accumulation of Capital 309
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 unpro
ductive 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 con
siderably 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 revolu
tion. 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 advan
tageous, 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. Eng
land, however, as it has never been blessed with a very parsi
monious government, so parsimony has at no time been the
characteristical virtue of its inhabitants. It is the highest im
pertinence and presumption, therefore, in kjngsjmd 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^them
selves always, and without any exception, the greatest spend
thrifts in the society. Let them look well after their own
310 The Wealth of Nations Accumulation of Capital 3 11
expense, and they may safely trust private people with theirs, in a little time, become useful to the inferior and middling ranks
If their own extravagance does not ruin the state, that of their
of people. They are able to purchase them when their superiors
subjects never will.
grow weary of them, and the general accommodation of the
As frugality increases and prodigality diminishes the public whole people is thus gradually improved, when this mode of
capital, so the conduct of those whose expense just equals their
expense becomes universal among men of fortune. In countries
revenue, without either accumulating or encroaching, neither which have long been rich, you will frequently find the inferior
increases nor diminishes it. Some modes of expense, however,
ranks of people in possession both of houses and furniture per
seem to contribute more to the growth of public opulence than fectly good and entire, but of which neither the one could have
others.
been built, nor the other have been made for their use. What
The revenue of an individual may be spent either in things
was formerly a seat of the family of Seymour is now an inn
which are consumed immediately, andin which one day’s
upon the Bath road. The marriage-bed of James the First of
expense can neither alleviate nor support that of another, or it
Great Britain, which his queen brought with her from Denmark
may be spent jn things_jnore_durable, yyhich can therefore be
accumutod^^S uTwhich ercry "day’s expense may, as he as a present fit for a sovereign to make to a sovereign, was, a
few years ago, the ornament of an alehouse at Dunfermline.
chooses, either alleviate or support and heighten the effect of
In some ancient cities, which either have been long stationary,
that of the following day. A man of fortune, for example, may
or have gone somewhat to decay, you will sometimes scarce find
either spend his revenue in a profuse and sumptuous table,, and a single house which could have been built for its present in
in maintaining a great number of menial servants, and a multi
habitants. If you go into those houses too, you will frequently
tude of dogs and horses;' or contenting himself with a frugal
find many excellent, though antiquated pieces of furniture,
table and few attendants, he may lay out the greater part of it
which are still very fit for use, and which could as little have
in adorning his house or his country villa, in useful or orna
been made for them. Noble palaces, magnificent villas, great
mental buildings, in useful or ornamental furniture, in collecting
collections of books, statues, pictures, and other curiosities, are
books, statues, pictures; or in things more frivolous, jewels, frequently both an ornament and an honour, not only to the
baubles, ingenious trinkets of different kinds; or, what is most neighbourhood, but to the whole country to which they belong.
trifling of all, in amassing a great wardrobe of fine clothes, like Versailles is an ornament and an honour to France, Stowe and
the favourite and minister of a great prince who died a few Wilton to England. Italy still continues to command some
years ago. Were two men of equal fortune to spend their
sort of veneration by the number of monuments of this kind
revenue, the one chiefly in the one way, the other in the other,
which it possesses, though the wealth which produced them has
the magnificence of the person whose expense had been chiefly decayed, and though the genius which planned them seems to
in (3u rable commodi t ies, would be continually increasing., every
be extinguished, perhaps from not having the same employment.
day’s expense contributing something to support and heighten
The expense too, which is laid out in durable commodities, is
the effect of that of the following day: that of the other, on the favourable, not only to accumulation, but to frugality. If a
contrary, would be no greater at the end of the period than at
person should at any time exceed in it, he can easily reform
the beginning. The former, too, would, at the end of the period,
without exposing himself to the censure of the public. To
be the richer man of the two. He would have a stock of goods
reduce very much the number of his servants, to reform his
of some kind or other, which, though it might not be worth all
table from great profusion to great frugality, to lay down his
1 that it cost, would always be worth something. No trace or equipage after he has once set it up, are changes which cannot
vestige of the expense of the latter would remain, and the escape the observation of his neighbours, and which are sup
effects of ten or twenty years profusion would be as completely posed to imply some acknowledgment of preceding bad conduct.
annihilated as if they had never existed.
Few, therefore, of those who have once been so unfortunate as
As the one mode of expense is more favourable than the
to launch out too far into this sort of expense, have afterwards
other to the opulence of an individual, so is it likewise to that
the courage to reform, till ruin and bankruptcy oblige them.
of a nation. The houses, the furniture, the clothing of the rich, But if a person has, at any time, been at too great an expense
T—*7. “t.1’
Different Employment of Capitals 321
CHAPTER V
OF THE DIFFERENT EMPLOYMENT OF CAPITALS
Though all capitals are destined for the maintenance of pro

ductive labour only, yet the quantity of that labour which
equal capitals are capable of putting into motion varies ex
tremely 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/ ihT procuring the rude produce annually required for the
use and consumption of the society; or, secondly, in manufac
turing 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 em
ployed the capitals of all those who undertake the improvement
or cultivation of lands, mines, or fisheries; in the second, those
of all master manufacturers; in the third, those of alfwholesale
merchants^ and in the fourth, those of all retailers." It is
difficult to conceive that a capital should be employed in any
way which may not be classed under some one or other of
those four.
Each of those four methods of employing a capital is essen
tially necessary either to the existence or extension of the other
three, or to the general conveniency of the society.
Unless a capital was employed in furnishing rude produce to
a certain degree of abundance, neither manufactures nor trade
of any kind could exist.
Unless a capital was employed in manufacturing that part of
the rude produce which requires a good deal of preparation
before it can be fit for use and consumption, it either would
never be produced, because there could be no demand for it;
or if it was produced spontaneously, it would be of no value in
exchange, and could add nothing to the wealth of the society.
Unless a capital was employed in transporting either the
rude or manufactured produce from the places where it abounds
to those where it is wanted, no more of either could be produced
than was necessary for the consumption of the neighbourhood.
Different Employment of Capitals 335
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.
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 pro
ductive labour which it may put mtblhbribhfahTtlie'dilerent
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 absorb
ing 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 m their own neighbourhood, I shall endeavour to explain
at full length in the two following books.
I—M
The Natural Progress of Opulence 337
must generally not only pay the expense of raising and bringing
it to market, but afford, too, the ordinary profits of agriculture
to the farmer. The proprietors and culivators 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 have, 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 concern
ing the balance of trade, it has never been pretended that either
the county 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 this 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 occa
sioned 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 inclina
tions, 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
338 The Wealth of Nations The Natural Progress of Opulence 339
who employs his capital in land has it more under his view and and cultivation. Had human institutions, therefore, never
command, and his fortune is much less liable to accidents than disturbed the natural course of things, the progressive wealth
that of the trader, who is obliged frequently to commit it, not and increase of the towns would, in every political society, be
only to the winds and the waves, but to the more uncertain consequential, and in proportion to the improvement and
elements of human folly and injustice, by giving great credits cultivation of the territory or country.
in distant countries to men with whose character and situation In our North American colonies, where uncultivated land is
he can seldom be thoroughly acquainted. The capital of the still to be had upon easy terms, no manufactures for distant
landlord, on the contrary, which is fixed in the improvement of sale have ever yet been established in any of their towns. When
his land, seems to be as well secured as the nature of human an artificer has acquired a little more stock than is necessary
affairs can admit of. The beauty of the country besides, the for carrying on his own business in supplying the neighbouring
pleasures of a country life, the tranquillity of mind which it country, he does not, in North America, attempt to establish
promises, and wherever the injustice of human laws does not with it a manufacture for more distant sale, but employs it in
disturb it, the independency which it really affords, have charms the purchase and improvement of uncultivated land. From
that more or less attract everybody; and as to. cultivate the artificer he becomes planter, and neither the large wages nor
ground was the original destination of man, so in every stage the easy subsistence which that country affords to artificers
of his existence he seems to retain a predilection for this primitive can bribe him rather to work for other people than for himself.
employment. He feels that an artificer is the servant of his. customers, from
Without the assistance of some artificers, indeed, the cultiva whom he derives his subsistence; but that a planter who
tion of land cannot be carried on but with great inconveniency cultivates his own land, and derives his necessary subsistence
and continual interruption. Smiths, carpenters, wheelwrights, froip the labour of his own family, is really a master, and
and ploughwrights, masons, and bricklayers, tanners, shoe independent of all the world.
makers, and tailors are people whose service the farmer has Iii countries, on the contrary, where there is either no un
frequent occasion for. Such artificers, too, stand occasionally cultivated land, or none that can be had upon easy terms, every
in need of the assistance of one another; and as their residence artificer who has acquired more stock than he can employ in
is not, like that of the farmer, necessarily tied down to a precise the occasional jobs of the neighbourhood endeavours to prepare
spot, they naturally settle in the neighbourhood of one another, work for more distant sale. The smith erects some sort of iron,
and thus form a small town or village. The butcher, the brewer, the weaver some sort of linen or woollen manufactory. Those
and the baker soon join them, together with many other different manufactures come, in process of time, to be gradually
artificers and retailers, necessary or useful for supplying their subdivided, and thereby improved and refined in a great variety
occasional wants, and who contribute still further to augment of ways, which may easily be conceived, and which it is there
the town. The inhabitants of the town and those of the country fore unnecessary to explain any further.
are mutually the servants of one another. The town is a con In seeking for employment to a capital, manufactures are,
tinual fair or market, to which the inhabitants of the country upon equal or nearly equal profits, naturally preferred to foreign
resort in order to exchange their rude for manufactured produce. commerce, for the same reason that agriculture is naturally
It is this commerce which supplies the inhabitants of the town preferred to manufactures. As the capital of the landlord or
both with the materials of their work, and the means of their farmer is more secure than that of the manufacturer, so the
subsistence. The quantity of the finished work which they sell capital of the manufacturer, being at ail times more within his
to the inhabitants of the country necessarily regulates the view and command, is more secure than that of the foreign
quantity of the materials and provisions which they buy. merchant. In every period, indeed, of every society, the
Neither their employment nor subsistence, therefore, can surplus part both of the rude and manufactured produce, or
augment but in proportion to the augmentation of the demand 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
from the country for finished work; and this demand can
augment only in proportion to the extension of improvement demand at home. But whether the capital, which carries this
<v.-'A' -
The Discouragement of Agriculture 343
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 esta tes were a sort of principalities, entails
might not be unreasonable. Like what are called the funda
mental 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 sujh
positions, the supposition that every successive generation of
men have not an equal right to the earth, and to all that it
possesses; but that the property of the present generation
should be restrained and regulated according to the fancy of
those who died perhaps five hundred years ago. Entails, how
ever, are still respected through the greater part of Europe, in
those countries particularly in which noble birth is a necessary
qualification for the enjoyment either of civil or military honours.
Entails are thought necessary for maintaining this exclusive
privilege of the nobility to the great offices and honours of their
country; and that order having usurped one unjust advantage
over the rest of their fellow-citizens, lest their poverty should
render it ridiculous, it is thought reasonable that they should
have another. The common law of England, indeed, is said
to abhor perpetuities, and they are accordingly more restricted
there than in any other European monarchy; though even
England is not altogether without them. In Scotland more
than one-fifth, perhaps more than one-third, part of the whole
lands of the country are at present supposed to be under strict
entail.
Great tracts of uncultivated land were, in this manner, not
only engrossed by particular families, but the possibility of
their being divided again was as much as possible precluded for
ever. It seldom happens, however, that a great proprietor is
a great improver. In the disorderly times which gave birth to
those barbarous institutions, the great proprietor was sufficiently
employed in defending his own territories, or in extending his
jurisdiction and authority over those of his neighbours. He
had no leisure to attend to the cultivation and improvement of
land. When the establishment of law and order afforded him
this leisure, he often wanted the inclination, and almost always
the requisite abilities. If the expense of his house and person
I—412
344 The Wealth of Nations The Discouragement of Agriculture 345
either equalled or exceeded his revenue, as it did very fre
quently, he had no stock to employ in this manner. If he was could take it from them at pleasure. Whatever cultivation and
an economist, he generally found it more profitable to employ improvement could be carried on by means of such slaves was
his annual savings in new purchases than in the improvement properly carried on by their master. It was at his expense.
of his old estate. To improve land with profit, like all other The seed, the cattle, and the instruments of husbandry were all
commercial projects, requires an exact attention to small savings his. It was for his benefit. Such slaves could acquire nothing
and small gains, of which a man born to a great fortune, even but their daily maintenance. It was properly the proprietor
though naturally frugal, is very seldom capable. The situation himself, therefote, that, in this case, occupied his own lands,
of such a person naturally disposes him to attend rather to and cultivated them by his own bondmen. This species of
ornament which pleases his fancy than to profit for which he slavery still subsists in Russia, Poland, Hungary, Bohemia,
has so little occasion. The elegance of his dress, of his equipage, Moravia, and other parts of Germany. It is only in the western
of his house, and household furniture, are objects which from and south-western provinces of Europe that it has gradually
his infancy he has been accustomed to have some anxiety about. been abolished altogether.
The turn of mind which this habit naturally forms follows him But if great improvements are seldom to be expected from
when he comes to think of the improvement of land. He great proprietors, they are least of all to be expected when they
embellishes perhaps four or five hundred acres in the neighbour employ slaves for their workmen. The experience of all ages
hood of his house, at ten times the expense which the land is and nations, I believe, demonstrates that the work done by
worth after all his improvements; and finds that if he was to slaves, though it appears to cost only their maintenance, is in
improve his whole estate in the same manner, and he has little the end the dearest of any. A person who can acquire no
taste for any other, he would be a bankrupt before he had property, can have no other interest but to eat as much, and to
finished the tenth part of it. There still remain in both parts labour as little as possible. Whatever work he does beyond
of the united kingdom some great estates which have continued what is sufficient to purchase his own maintenance can be
without interruption in the hands of the same family since the squeezed out of him by violence only, and not by any interest
times of feudal anarchy. Compare the present condition of of his own In ancient Italy, how much the cultivation of corn
those estates with the possessions of the small proprietors in degenerated, how unprofitable it became to the master when it
their neighbourhood, and you will require no other argument fell under the management of slaves, is remarked by both Pliny
to convince you how unfavourable such extensive property is and Columella. In the time of Aristotle it had not been much
to improvement. better in ancient Greece. Speaking of the ideal republic
If little improvement was to be expected from such great described in the laws of Plato, to maintain five thousand idle
proprietors, still less was to be hoped for from those who men (the number of warriors supposed necessary for its defence)
occupied the land under them. In the ancient state of Europe, together with their women and servants, would require, he says,
the occupiers of land were all tenants at will. They were all or a territory of boundless extent and fertility, like the plains of
almost all slaves; but their slavery was of a milder kind than Babylon.
that known among the ancient Greeks and Romans, or even in The pride of man makes him love .to domineer, and nothing
our West Indian colonies. They were supposed to belong more mortifies him so much as to be obliged to condescend to persuade
directly to the land than to their master. They could, there his inferiors. Wherever the law allows it, and the nature of
fore, be sold with it, but not separately. They could marry, the work can afford it, therefore, he will generally prefer the
provided it was with the consent of their master; and he could service of slaves to that of freemen. The planting of sugar
not afterwards dissolve the marriage by selling the man and wife and tobacco can afford the expense of slave-cultivation. The
to different persons. If he maimed or murdered any of them, raising of corn, it seems, in the present times, cannot. In the
he was liable to some penalty, though generally but to a small English colonies, of which the principal produce is corn, the far
one. They were not, however, capable of acquiring property* greater part of the work is done by freemen. The late resolution
Whatever they acauired was acquired to their master, and he of the Quakers in Pennsylvania to set at liberty all their negro
slaves may satisfy us that their number cannot be very great.
j Ca <6 '{..■f &*% /.^.-t- '1 fat /

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 com, 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 proprietor as much as that occupied by slaves.
There is, however, one very essential difference between them.
Such tenants, being freemen, are capable of acquiring,,prop^ty,
amTHavmg 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 main
tenance, 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 sove
reign, always jealous of the great lords, gradually encouraged
their villains to make upon their authority, and which seem at
last 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
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 modem
system, and is best understood in our own country and in our
own times.
CHAPTER I
OF THE PRINCIPLE OF THE COMMERCIAL, OR MERCANTILE
SYSTEM
That wealth consists in money, or in gold and silver, is a popular
notion which naturally arises from the double function of money,
as the instrument of commerce and as the measure of value.
In consequence of its being the instrument of commerce, when
we have money we can more readily obtain whatever else we
have occasion for than by means of any other commodity. The
great affair, we always find, is to get money. When that is
obtained, there is no difficulty in making any subsequent
purchase. In consequence of its being the measure of value,
i—'!:n 4J2 375
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 un
known 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
movable goods. All other movable 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.
Mqneyj_qn the contrary, is a steady friend, which, though it
may travel about from hand to hand, yet iFit 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 movable wealth of
a nation, and to multiply those metals ought, he thinks, upon
that account, to be the great object of its political economy.
Principle of the Commercial System 381
A country that has no mines of its own must undoubtedly
draw its gold and silver from foreign countries in the same
manner as one that has no vineyards of its own must draw its
wines. It does not seem necessary, however, that the attention
of government should be more turned towards the one than
towards the other object. A country that has wherewithal to
buy wine will always get the wine which it has occasion for;
and a country that has wherewithal to buy gold and silver will
never be in want of those metals. They are to be bought for
a certain price like all other commodities, and as they are the
price of all other commodities, so all other commodities are the
price of those metals. We trust with perfect security that the
freedom of trade, without any attention of government, will
always supply us with the wine which we have occasion for:
and we may trust with equal security that it will always supply
us with all the gold and silver which we can afford to purchase
or to employ, either in circulating our commodities, or in other
uses.
The quantity of every commodity which human industry
can either purchase or produce naturally regulates itself in
every country according to the effectual demand, or according
to the demand of those who are willing to pay the whole rent,
labour, and profits which must be paid in order to prepare and
bring it to market. But no commodities regulate themselves
more easily or more exactly according to this effectual demand
than gold and silver; because, on account of the small bulk
and great value of those metals, no commodities can be more
easily transported from one place to another, from the places
where they are cheap to those where they are dear, from the
places where they exceed to those where they fall short of this
effectual demand. If there were in England, for example, an
effectual demand for an additional quantity of gold, a packet-
boat could bring from Lisbon, or from wherever else it was to be
had, fifty tons of gold, which could be coined into more than
five millions of guineas. But if there were an effectual demand
for grain to the same value, to import it would require, at five
guineas a ton, a million of tons of shipping, or a thousand ships
of a thousand tons each. The navy of England would not be
sufficient.
When the quantity of gold and silver imported into any
country exceeds the effectual demand, no vigilance of govern
ment can prevent their exportation. All the sanguinary laws
of Spain and Portugal are not able to keep their gold and silver
Principle of the Commercial System 393
carried on foreign trade merely upon this account could scarce
have occasion to freight a ship in a century.
It is not by the importation of gold and silver that the dis
covery of America has enriched Europe. By the abundance of
the American mines, those metals have become cheaper. A
service of plate can now be purchased for about a third part
of the corn, or a third part of the labour, which it would have
cost in the fifteenth century. With the same annual expense
of labour and commodities, Europe can annually purchase
about three times the quantity of plate which it could have
purchased at that time. But when a commodity comes to be
sold for a third part of what had been its usual price, not only
those who purchased it before can purchase three times their
former quantity, but it is brought down to the level of a much
greater number of purchasers, perhaps to more than ten, perhaps
to more than twenty times the former number. So that there
may be in Europe at present not only more than three times,
but more than twenty or thirty times the quantity of plate
which would have been in it, even in its present state of improve
ment, had the discovery of the American mines never been
made. So far Europe has, no doubt, gained a real conveniency,
though surely a very trifling one. The cheapness of gold and
silver renders those metals rather less fit for the purposes of
money than they were before. In order to make the same
purchases, we must load ourselves with a greater quantity of
them, and carry about a shilling in our pocket where a groat
would have done before. It is difficult to say which is most
trifling, this inconveniency or the opposite conveniency. Neither
the one nor the other could have made any very essential change
in the state of Europe. The discovery of America, however,
certainly made a most essential one. By opening a new and
inexhaustible market to all the commodities of Europe, it .gave-,
occasion to new divisions of labour and improvements of art,
which, in the narrow circle of the ancient commerce, could never
have taken place for want of a market to take off the greater
part of their produce. The productive powers of labour were
improved, and its produce increased in all the different countries
of Europe, and together with it the real revenue and wealth of
the inhabitants. The commodities of Europe were almost all
new to America, and many of those of America were new to
Europe. A new set of exchanges, therefore, began to take place
which had never been thought of before, and which should
naturally have proved as advantageous to the new, a.s it certainly
did to the old continent. The savage injustice of the Europeans
rendered an event, which ought to have been beneficial to
all, ruinous and destructive to several of those unfortunate
countries.
The discovery of a passage to the East Indies by the Cape of
Good Hope, which happened much abouFthe'same time, opened
perhaps a still more extensive range to foreign commerce than
even that of America, notwithstanding the greater distance.
There were but two nations in America in any respect superior to
savages, and these were destroyed almost as soon as discovered.
The rest were mere savages. But the empires of China, Indostan,
Japan, as well as several others in the East Indies, without having
richer mines of gold or silver, were in every other respect much
richer, better cultivated, and more advanced in all arts and
manufactures than either Mexico or Peru, even though we should
credit, what plainly deserves no credit, the exaggerated accounts
of the Spanish writers concerning the ancient state of those
empires. But rich and civilised nations can always exchange
to a much greater value with one another than with savages and
barbarians. Europe, however, has hitherto derived much less
advantage from its commerce with the East Indies than from
that with America. The Portuguese monopolised the East
India trade to themselves for about a century, and it was only
indirectly and through them that the other nations of Europe
could either send out or receive any goods from that country.
When the Dutch, in the beginning of the last century, began
to encroach upon them, they vested their whole East India
commerce in an exclusive company. The English, French,
Swedes, and Danes have all followed their example, so that no
great nation in Europe has ever yet had the benefit of a free
commerce to the East Indies. No other reason need be assigned
why it has never been so advantageous as the trade to America,
which, between almost every nation of Europe and its own
colonies, is free to all its subjects. The exclusive privileges of
those East India companies, their great riches, the great favour
and protection which these have procured them from their
respective governments, have excited much envy against them.
This envy has frequently represented their trade as altogether
pernicious, on account of the great quantities of silver which
it every year exports from the countries from which it is carried
on. The parties concerned have replied that their trade, by
this continual exportation of silver, might indeed tend to
impoverish Europe in general, but not the particular country
39B The Wealtn of Nations
the capital of the society can employ. As the number of work
men that can be kept in employment by any particular person
must bear a certain proportion to his capital, so the number of
those that can be continually employed by all the members of
a great society must bear a certain proportion to the whole
capital of that society, and never can exceed that proportion.
No regulation of commerce can increase the quantity of in
dustry in any society beyond what its capital can maintain.
It can only divert a part of it into a direction into which it
might not otherwise have gone; and it is by no means certain
that this artificial direction is likely to be more advantageous
to the society than that into which it would have gone of
its own accord.
Every individual is continually exerting himself to find out
the most advantageous employment for whatever capital he can
command. It is his own advantage, indeed, and not that of
the society, which he has in view. But the study of his own
advantage naturally, or rather psp^miily, leads him to prefer
that employment which is most advantageous to the society.
First, every individual endeavours to employ his capital as
near home as he can, and consequently as much as he can in
the support of domestic industry; provided always that he can
thereby obtain the ordinary, or not a great deal less than the
ordinary profits of stock.
Thus, upon equal or nearly equal profits, every wholesale
merchant naturally prefers the home trade to the foreign trade
of consumption, and the foreign trade of consumption to the
carrying trade. In the home trade his capital is never so long
out of his sight as it frequently is in the foreign trade of con
sumption. He can know better the character and situation of
the persons whom he trusts, and if he should happen to be
deceived, he knows better the laws of the country from which he
must seek redress. In the carrying trade, the capital of the
merchant is, as it were, divided between two foreign countries,
and no part of it is ever necessarily brought home, or placed
under his own immediate view and command. The capital
which an Amsterdam merchant employs in carrying corn from
Konnigsberg to Lisbon, and fruit and wine from Lisbon to
Konnigsberg, must generally be the one-half of it at Konnigs
berg and the other half at Lisbon. No part of it need ever
come to Amsterdam. The natural residence of such a merchant
should either be at Konnigsberg or Lisbon, and it can only be
some very particular circumstances which can make him prefer
W j

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THE WEALTH OF NATIONS

LONDON: ]. M. DENT & SONS LTD.

Introduction ......... 375

I. Of the Expenses of the Sovereign or Commonwealth . . 182

NATURE AND CAUSES OF THE

INTRODUCTION AND PLAN OF THE WORK

The annual labour of every nation is the fund which originally 1

dealt equally and impartially with every sort of industry. Since

When the division of labour has been once thoroughly estab

AiLI LIBRAtff' (/I ^ —A, .

The produce of labour constitutes the natural recompense or

Tables Referred to on Pages 169, 182.

In that rude state of society in which there is no division of

Though all capitals are destined for the maintenance of pro

346 The Wealth of Nations

Political economy, considered as a .branch of the science of

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Smith Wealth of Nations 01

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Smith Wealth of Nations 01

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Smith Wealth of Nations 01

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THE WEALTH OF NATIONS

LONDON: ]. M. DENT & SONS LTD.

Introduction ......... 375

I. Of the Expenses of the Sovereign or Commonwealth . . 182

NATURE AND CAUSES OF THE

INTRODUCTION AND PLAN OF THE WORK

The annual labour of every nation is the fund which originally 1

dealt equally and impartially with every sort of industry. Since

When the division of labour has been once thoroughly estab­

AiLI LIBRAtff' (/I ^ —A, .

The produce of labour constitutes the natural recompense or

Tables Referred to on Pages 169, 182.

In that rude state of society in which there is no division of

Though all capitals are destined for the maintenance of pro­

346 The Wealth of Nations

Political economy, considered as a .branch of the science of

You might also like

When the division of labour has been once thoroughly estab

Though all capitals are destined for the maintenance of pro