                                      1776

                         AN INQUIRY INTO THE NATURE AND

                        CAUSES OF THE WEALTH OF NATIONS

                                 by Adam Smith

                 INTRODUCTION AND PLAN OF THE WORK

    THE annual labour of every nation is the fund which originally
supplies it with all the necessaries and 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 as this produce, or what is purchased with it,
bears a greater or smaller proportion to the number of those who are
to consume it, the nation will be better or worse supplied with all
the necessaries and 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
judgment with which its labour is generally applied; and, secondly, by
the proportion between the number of those who are employed in
useful labour, and that of those who are not so employed. Whatever
be the soil, climate, or extent of territory of any particular nation,
the abundance or scantiness of its annual supply must, in that
particular situation, depend upon those two circumstances.

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

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

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

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

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

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

                            BOOK ONE

  OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS. OF LABOUR,

  AND OF THE ORDER ACCORDING TO WHICH ITS. PRODUCE IS NATURALLY

      DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE.

                            CHAPTER I

                    Of the Division of Labour

    THE greatest improvement in the productive powers of labour, and
the greater part of the skill, dexterity, and judgment with which it
is anywhere directed, or applied, seem to have been the effects of the
division of labour.

    The effects of the division of labour, in the general business
of society, will be more easily understood by considering in what
manner it operates in some particular manufactures. It is commonly
supposed to be carried furthest in some very trifling ones; not
perhaps that it really is carried further in them than in others of
more importance: but in those trifling manufactures which are destined
to supply the small wants of but a small number of people, the whole
number of workmen must necessarily be small; and those employed in
every different branch of the work can often be collected into the
same workhouse, and placed at once under the view of the spectator. In
those great manufactures, on the contrary, which are destined to
supply the great wants of the great body of the people, every
different branch of the work employs so great a number of workmen that
it is impossible to collect them all into the same workhouse. We can
seldom see more, at one time, than those employed in one single
branch. Though in such manufactures, therefore, the work may really be
divided into a much greater number of parts than in those of a more
trifling nature, the division is not near so obvious, and has
accordingly been much less observed.

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

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

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

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

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

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

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

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

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

                            CHAPTER II

  Of the Principle which gives occasion to the Division of Labour

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

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

    As it is by treaty, by barter, and by purchase that we obtain from
one another the greater part of those mutual good offices which we
stand in need of, so it is this same trucking disposition which
originally gives occasion to the division of labour. In a tribe of
hunters or shepherds a particular person makes bows and arrows, for
example, with more readiness and dexterity than any other. He
frequently exchanges them for cattle or for venison with his
companions; and he finds at last that he can in this manner get more
cattle and venison than if he himself went to the field to catch them.
From a regard to his own interest, therefore, the making of bows and
arrows grows to be his chief business, and he becomes a sort of
armourer. Another excels in making the frames and covers of their
little huts or movable houses. He is accustomed to be of use in this
way to his neighbours, who reward him in the same manner with cattle
and with venison, till at last he finds it his interest to dedicate
himself entirely to this employment, and to become a sort of
house-carpenter. In the same manner a third becomes a smith or a
brazier, a fourth a tanner or dresser of hides or skins, the principal
part of the nothing of savages. And thus the certainty of being able
to exchange all that surplus part of the produce of his own labour,
which is over and above his own consumption, for such parts of the
produce of other men's labour as he may have occasion for,
encourages every man to apply himself to a particular occupation,
and to cultivate and bring to perfection whatever talent or genius
he may possess for that particular species of business.

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

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

                            CHAPTER III

  That the Division of Labour is limited by the Extent of the Market

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

    There are some sorts of industry, even of the lowest kind, which
can be carried on nowhere but in a great town. A porter, for
example, can find employment and subsistence in no other place. A
village is by much too narrow a sphere for him; even an ordinary
market town is scarce large enough to afford him constant
occupation. In the lone houses and very small villages which are
scattered about in so desert a country as the Highlands of Scotland,
every farmer must be butcher, baker and brewer for his own family.
In such situations we can scarce expect to find even a smith, a
carpenter, or a mason, within less than twenty miles of another of the
same trade. The scattered families that live at eight or ten miles
distance from the nearest of them must learn to perform themselves a
great number of little pieces of work, for which, in more populous
countries, they would call in the assistance of those workmen. Country
workmen are almost everywhere obliged to apply themselves to all the
different branches of industry that have so much affinity to one
another as to be employed about the same sort of materials. A
country carpenter deals in every sort of work that is made of wood:
a country smith in every sort of work that is made of iron. The former
is not only a carpenter, but a joiner, a cabinet-maker, and even a
carver in wood, as well as a wheel-wright, a plough-wright, a cart and
waggon maker. The employments of the latter are still more various. It
is impossible there should be such a trade as even that of a nailer in
the remote and inland parts of the Highlands of Scotland. Such a
workman at the rate of a thousand nails a day, and three hundred
working days in the year, will make three hundred thousand nails in
the year. But in such a situation it would be impossible to dispose of
one thousand, that is, of one day's work in the year.

    As by means of water-carriage a more extensive market is opened to
every sort of industry than what land-carriage alone can afford it, so
it is upon the sea-coast, and along the banks of navigable rivers,
that industry of every kind naturally begins to subdivide and
improve itself, and it is frequently not till a long time after that
those improvements extend themselves to the inland parts of the
country. A broad-wheeled waggon, attended by two men, and drawn by
eight horses, in about six weeks' time carries and brings back between
London and Edinburgh near four ton weight of goods. In about the
same time a ship navigated by six or eight men, and sailing between
the ports of London and Leith, frequently carries and brings back
two hundred ton weight of goods. Six or eight men, therefore, by the
help of water-carriage, can carry and bring back in the same time
the same quantity of goods between London and Edinburgh, as fifty
broad-wheeled waggons, attended by a hundred men, and drawn by four
hundred horses. Upon two hundred tons of goods, therefore, carried
by the cheapest land-carriage from London to Edinburgh, there must
be charged the maintenance of a hundred men for three weeks, and
both the maintenance, and, what is nearly equal to the maintenance,
the wear and tear of four hundred horses as well as of fifty great
waggons. Whereas, upon the same quantity of goods carried by water,
there is to be charged only the maintenance of six or eight men, and
the wear and tear of a ship of two hundred tons burden, together
with the value of the superior risk, or the difference of the
insurance between land and water-carriage. Were there no other
communication between those two places, therefore, but by
land-carriage, as no goods could be transported from the one to the
other, except such whose price was very considerable in proportion
to their weight, they could carry on but a small part of that commerce
which at present subsists between them, and consequently could give
but a small part of that encouragement which they at present
mutually afford to each other's industry. There could be little or
no commerce of any kind between the distant parts of the world. What
goods could bear the expense of land-carriage between London and
Calcutta? Or if there were any so precious as to be able to support
this expense, with what safety could they be transported through the
territories of so many barbarous nations? Those two cities, however,
at present carry on a very considerable commerce with each other,
and by mutually affording a market, give a good deal of
encouragement to each other's industry.

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

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

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

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

    All the inland parts of Africa, and all that part of Asia which
lies any considerable way north of the Euxine and Caspian seas, the
ancient Scythia, the modern Tartary and Siberia, seem in all ages of
the world to have been in the same barbarous and 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
established, it is but a very small part of a man's wants which the
produce of his own labour can supply. He supplies the far greater part
of them by exchanging that surplus part of the produce of his own
labour, which is over and above his own consumption, for such parts of
the produce of other men's labour as he has occasion for. Every man
thus lives by exchanging, or becomes in some measure a merchant, and
the society itself grows to be what is properly a commercial society.

    But when the division of labour first began to take place, this
power of exchanging must frequently have been very much clogged and
embarrassed in its operations. One man, we shall suppose, has more
of a certain commodity than he himself has occasion for, while another
has less. The former consequently would be glad to dispose of, and the
latter to purchase, a part of this superfluity. But if this latter
should chance to have nothing that the former stands in need of, no
exchange can be made between them. The butcher has more meat in his
shop than he himself can consume, and the brewer and the baker would
each of them be willing to purchase a part of it. But they have
nothing to offer in exchange, except the different productions of
their respective trades, and the butcher is already provided with
all the bread and beer which he has immediate occasion for. No
exchange can, in this case, be made between them. He cannot be their
merchant, nor they his customers; and they are all of them thus
mutually less serviceable to one another. In order to avoid the
inconveniency of such situations, every prudent man in every period of
society, after the first establishment of the division of labour, must
naturally have endeavoured to manage his affairs in such a manner as
to have at alltimes by him, besides the peculiar produce of his own
industry, a certain quantity of some one commodity or other, such as
he imagined few people would be likely to refuse in exchange for the
produce of their industry.

    Many different commodities, it is probable, were successively both
thought of and employed for this purpose. In the rude ages of society,
cattle are said to have been the common instrument of commerce; and,
though they must have been a most inconvenient one, yet in old times
we find things were frequently valued according to the number of
cattle which had been given in exchange for them. The armour of
Diomede, says Homer, cost only nine oxen; but that of Glaucus cost
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, for a workman to carry
nails instead of money to the baker's shop or the alehouse.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                           CHAPTER V

          Of the Real and Nominal Price of Commodities,

        or their Price in Labour, and their Price in Money

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Though the real value of a corn rent, it is to be observed,
however, varies much less from century to century than that of a money
rent, it varies much more from year to year. The money price of
labour, as I shall endeavour to show hereafter, does not fluctuate
from year to year with the money price of corn, but seems to be
everywhere accommodated, not to the temporary or occasional, but to
the average or ordinary price of that necessary of life. The average
or ordinary price of corn again is regulated, as I shall likewise
endeavour to show hereafter, by the value of silver, by the richness
or barrenness of the mines which supply the market with that metal, or
by the quantity of labour which must be employed, and consequently
of corn which must be consumed, in order to bring any particular
quantity of silver from the mine to the market. But the value of
silver, though it sometimes varies greatly from century to century,
seldom varies much from year to year, but frequently continues the
same, or very nearly the same, for half a century or a century
together. The ordinary or average money price of corn, therefore, may,
during so long a period, continue the same or very nearly the same
too, and along with it the money price of labour, provided, at
least, the society continues, in other respects, in the same or nearly
in the same condition. In the 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 corn. By the quantities of labour we can,
with the greatest accuracy, estimate it both from century to century
and from year to year. From century to century, corn is a better
measure than silver, because, from century to century, equal
quantities of corn will command the same quantity of labour more
nearly than equal quantities of silver. From year to year, on the
contrary, silver is a better measure than corn, because equal
quantities of it will more nearly command the same quantity of labour.

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

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

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

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

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

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

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

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

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

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

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

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

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

    In the English mint a pound weight of gold is coined into
forty-four guineas and a half, which, at one-and-twenty shillings
the guinea, is equal to forty-six pounds fourteen shillings and
sixpence. An ounce of such gold coin, therefore, is worth L3 17s. 10
1/2d. in silver. In England no duty or seignorage is paid upon the
coinage, and he who carries a pound weight or an ounce weight of
standard gold bullion to the mint, gets back a pound weight or an
ounce weight of gold in coin, without any deduction. Three pounds
seventeen shillings and tenpence halfpenny an ounce, therefore, is
said to be the mint price of gold in England, or the quantity of
gold coin which the mint gives in return for standard gold bullion.

    Before the reformation of the gold coin, the price of standard
gold bullion in the market had for many years been upwards of L3
18s. sometimes L3 19s. and very frequently L4 an ounce; that sum, it
is probable, in the worn and degraded gold coin, seldom containing
more than an ounce of standard gold. Since the reformation of the gold
coin, the market price of standard gold bullion seldom exceeds L3 17s.
7d. an ounce. Before the reformation of the gold coin, the market
price was always more or less above the mint price. Since that
reformation, the market price has been constantly below the mint
price. But that market price is the same whether it is paid in gold or
in silver coin. The late reformation of the gold coin, therefore,
has raised not only the value of the gold coin, but likewise that of
the silver coin in proportion to gold bullion, and probably, too, in
proportion to all other commodities; through the price of the
greater part of other commodities being influenced by so many other
causes, the rise in the value either of gold or silver coin in
proportion to them may not be so distinct and sensible.

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

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

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

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

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

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

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

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

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

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

                            CHAPTER VI

        Of the Component Parts of the Price of Commodities

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                            CHAPTER VII

          Of the Natural and Market Price of Commodities

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                            CHAPTER VIII

                       Of the Wages of Labour

    THE produce of labour constitutes the natural 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 produced by a smaller quantity of
labour; and as the commodities produced by equal quantities of
labour would naturally in this state of things be exchanged for one
another, they would have been purchased likewise with the produce of a
smaller quantity.

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

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

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

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

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

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

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

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

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

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

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

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

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

    When in any country the demand for those who live by wages,
labourers, journeymen, servants of every kind, is continually
increasing; when every year furnishes employment for a greater
number than had been employed the year before, the workmen have no
occasion to combine in order to raise their wages. The scarcity of
hands occasions a competition among masters, who bid against one
another, in order to get workmen, and thus voluntarily break through
the natural combination of masters not to raise wages.

    The demand for those who live by wages, it is evident, cannot
increase but in proportion to the increase of the funds which are
destined for the payment of wages. These funds are of two kinds;
first, revenue which is over and above what is necessary for the
maintenance; and, secondly, the stock which is over and above what
is necessary for the employment of their masters.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    The contrary of this happens in a year of sudden and extraordinary
scarcity. The funds destined for employing industry are less than they
had been the year before. A considerable number of people are thrown
out of employment, who bid against one another, in order to get it,
which sometimes lowers both the real and the money price of labour. In
1740, a year of extraordinary scarcity, many people were willing to
work for bare subsistence. In the succeeding years of plenty, it was
more difficult to get labourers and servants.

    The scarcity of a dear year, by diminishing the demand for labour,
tends to lower its price, as the high price of provisions tends to
raise it. The plenty of a cheap year, on the contrary, by increasing
the demand, tends to raise the price of labour, as the cheapness of
provisions tends to lower it. In the ordinary variations of the
price of provisions those two opposite causes seem to counterbalance
one another, which is probably in part the reason why the wages of
labour are everywhere so much more steady and permanent than the price
of provisions.

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

                            CHAPTER IX

                      Of the Profits of Stock

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

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

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

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

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

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

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

    In Scotland, though the legal rate of interest is the same as in
England, the market rate is rather higher. People of the best credit
there seldom borrow under five per cent. Even private bankers in
Edinburgh give four per cent upon their promissory notes, of which
payment either in whole or in part may be demanded at pleasure.
Private bankers in London give no interest for the money which is
deposited with them. There are few trades which cannot be carried on
with a smaller stock in Scotland than in England. The common rate of
profit, therefore, must be somewhat greater. The wages of labour, it
has already been observed, are lower in Scotland than in England.
The country, too, is not only much poorer, but the steps by which it
advances to a better condition, for it is evidently advancing, seem to
be much slower and more tardy.

    The legal rate of interest in France has not, during the course of
the present century, been always regulated by the market rate. In 1720
interest was reduced from the twentieth to the fiftieth penny, or from
five to two per cent. In 1724 it was raised to the thirtieth penny, or
to 3 1/3 per cent. In 1725 it was again raised to the twentieth penny,
or to five per cent. In 1766, during the administration of Mr.
Laverdy, it was reduced to the twenty-fifth penny, or to four per
cent. The Abbe Terray raised it afterwards to the old rate of five per
cent. The supposed purpose of many of those violent reductions of
interest was to prepare the way for reducing that of the public debts;
a purpose which has sometimes been executed. France is perhaps in
the present times not so rich a country as England; and though the
legal rate of interest has in France frequently been lower than in
England, the market rate has generally been higher; for there, as in
other countries, they have several very safe and easy methods of
evading the law. The profits of trade, I have been assured by
British merchants who had traded in both countries, are higher in
France than in England; and it is no doubt upon this account that many
British subjects choose rather to employ their capitals in a country
where trade is in disgrace, than in one where it is highly
respected. The wages of labour are lower in France than in England.
When you go from Scotland to England, the difference which you may
remark between the dress and countenance of the common people in the
one country and in the other sufficiently indicates the difference
in their condition. The contrast is still greater when you return from
France. France, though no doubt a richer country than Scotland,
seems not to be going forward so fast. It is a common and even a
popular opinion in the country that it is going backwards; an
opinion which, apprehend, is ill founded even with regard to France,
but which nobody can possibly entertain with regard to Scotland, who
sees the country now, and who saw it twenty or thirty years ago.

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

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

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

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

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

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

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

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

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

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

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

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

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

                            CHAPTER X

        Of Wages and Profit in the different Employments

                       of Labour and Stock

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

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

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

                               PART 1

  Inequalities arising from the Nature of the Employments themselves

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

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

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

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

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

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

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

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

    Education in the ingenious arts and in the liberal professions
is still more tedious and expensive. The pecuniary recompense,
therefore, of painters and sculptors, of lawyers and physicians, ought
to be much more liberal; and it is so accordingly.

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

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

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

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

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

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

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

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

    The wages of goldsmiths and jewellers are everywhere superior to
those of many other workmen, not only of equal, but of much superior
ingenuity, on account of the precious materials with which they are
intrusted.

    We trust our health to the physician: our fortune and sometimes
our life and reputation to the lawyer and attorney. Such confidence
could not safely be reposed in people of a very mean or low condition.
Their reward must be such, therefore, as may give them that rank in
the society which so important a trust requires. The long time and the
great expense which must be laid out in their education, when combined
with this circumstance, necessarily enhance still further the price of
their labour.

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

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

    The probability that any particular person shall ever be qualified
for the employment to which he is educated is very different in
different occupations. In the greater part of mechanic trades, success
is almost certain; but very uncertain in the liberal professions.
Put your son apprentice to a shoemaker, there is little doubt of his
learning to make a pair of shoes; but send him to study the law, it is
at least twenty to one if ever he makes such proficiency as will
enable him to live by the business. In a perfectly fair lottery, those
who draw the prizes ought to gain all that is lost by those who draw
the blanks. In a profession where twenty fail for one that succeeds,
that one ought to gain all that should have been gained by the
unsuccessful twenty. The counsellor-at-law who, perhaps, at near forty
years of age, begins to make something by his profession, ought to
receive the retribution, not only of his own so tedious and
expensive education, but that of more than twenty others who are never
likely to make anything by it. How extravagant soever the fees of
counsellors-at-law may sometimes appear, their real retribution is
never equal to this. Compute in any particular place what is likely to
be annually gained, and what is likely to be annually spent, by all
the different workmen in any common trade, such as that of
shoemakers or weavers, and you will find that the former sum will
generally exceed the latter. But make the same computation with regard
to all the counsellors and students of law, in all the different
inns of court, and you will find that their annual gains bear but a
very small proportion to their annual expense, even though you rate
the former as high, and the latter as low, as can well be done. The
lottery of the law, therefore, is very far from being a perfectly fair
lottery; and that, as well as many other liberal and honourable
professions, 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 mediocrity,
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 discredit which attends the
employment of them as the means of subsistence. The exorbitant rewards
of players, opera-singers, opera-dancers, etc., are founded upon those
two principles; the rarity and beauty of the talents, and the
discredit of employing them in this manner. It seems absurd at first
sight that we should despise their persons and yet reward their
talents with the most profuse liberality. While we do the one,
however, we must of necessity do the other. Should the public
opinion or prejudice ever alter with regard to such occupations, their
pecuniary 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 anything 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 philosophers
and moralists of all ages. Their absurd presumption in their own
good fortune has been less taken notice of. It is, however, if
possible, still more universal. There is no man living who, when in
tolerable health and spirits, has not some share of it. The chance
of gain is by every man more or less overvalued, and the chance of
loss is by most men undervalued, and by scarce any man, who is in
tolerable health and spirits, valued more than it is worth.

    That the chance of gain is naturally overvalued, we may learn from
the universal success of lotteries. The world neither ever saw, nor
ever will see, a perfectly fair lottery; or one in which the whole
gain compensated the whole loss; because the undertaker could make
nothing by it. In the state lotteries the tickets are really not worth
the price which is paid by the original subscribers, and yet
commonly sell in the market for twenty, thirty, and sometimes forty
per cent advance. The vain 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 perfectly fair one than the
common state lotteries, there would not be the same demand for
tickets. In order to have a better chance for some of the great
prizes, some people purchase several tickets, and others, small
share in a still greater number. There is not, however, a more certain
proposition in mathematics than that the more tickets you adventure
upon, the more likely you are to be a loser. Adventure upon all the
tickets in the lottery, and you lose for certain; and the greater
the number of your tickets the nearer you approach to this certainty.

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

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

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

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

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

    In all the different employments of stock, the ordinary rate of
profit varies more or less with the certainty or uncertainty of the
returns. These are in general less uncertain in the inland than in the
foreign trade, and in some branches of foreign trade than in others;
in the trade to North America, for example, than in that to Jamaica.
The ordinary rate of profit always rises more or less with the risk.
It does not, however, seem to rise in proportion to it, or so as to
compensate it completely. Bankruptcies are most frequent in the most
hazardous trades. The most hazardous of all trades, that of a
smuggler, though when the adventure succeeds it is likewise the most
profitable, is the infallible road to bankruptcy. The presumptuous
hope of success seems to act here as upon all other occasions, and
to entice so many adventurers into those hazardous trades, that
their competition reduces 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, there is little or no
difference in the far greater part of the different employments of
stock; but a great deal in those of labour; and the ordinary profit of
stock, though it rises with the risk, does not always seem to rise
in proportion to it. It should follow from all this, that, in the same
society or neighbourhood, the average and ordinary rates of profit
in the different employments of stock should be more nearly upon a
level than the pecuniary wages of the different sorts of labour.
They are so accordingly. The difference between the earnings of a
common labourer and those of a well employed lawyer or physician, is
evidently much greater than that between the ordinary profits in any
two different branches of trade. The apparent difference, besides,
in the profits of different trades, is generally a deception arising
from our not always distinguishing what ought to be considered as
wages, from what ought to be considered as profit.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                            PART 2

             Inequalities by the Policy of Europe

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

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

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

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

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

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

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

    By the 5th of Elizabeth, commonly called the Statute of
Apprenticeship, it was enacted, that no person should for the future
exercise any trade, craft, or mystery at that time exercised in
England, unless he had previously served to it an apprenticeship of
seven years at least; and what before had been the bye law of many
particular corporations became in England the general and public law
of all trades carried on in market towns. For though the words of
the statute are very general, and seem plainly to include the whole
kingdom, by interpretation its operation has been limited to market
towns, it having been held that in country villages a person may
exercise several different trades, though he has not served a seven
years' apprenticeship to each, they being necessary for the
conveniency of the inhabitants, and the number of people frequently
not being sufficient to supply each with a particular set of hands.

    By a strict interpretation of the words, too, the operation of
this statute has been limited to those trades which were established
in England before the 5th of Elizabeth, and has never been extended to
such as have been introduced since that time. This limitation has
given occasion to several distinctions which, considered as rules of
police, appear as foolish as can well be imagined. It has been
adjudged, for example, that a coachmaker can neither himself make
nor employ journeymen to make his coach-wheels, but must buy them of a
master wheel-wright; this latter trade having been exercised in
England before the 5th of Elizabeth. But a wheelwright, though he
has never served an apprenticeship to a coachmaker, may either himself
make or employ journeyman to make coaches; the trade of a coachmaker
not being within the statute, because not exercised in England at
the time when it was made. The manufactures of Manchester, Birmingham,
and Wolverhampton, are many of them, upon this account, not within the
statute, not having been exercised in England before the 5th of
Elizabeth.

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

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

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

    The institution of long apprenticeships has no tendency to form
a 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. They who are soonest in a
condition to enjoy the sweets of it are likely soonest to conceive a
relish for it, and to acquire the early habit of industry. A young man
naturally conceives an aversion to labour when for a long time he
receives no benefit from it. The boys who are put out apprentices from
public charities are generally bound for more than the usual number of
years, and they generally turn out very idle and worthless.

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

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

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

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

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

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

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

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

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

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

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

    In Great Britain the superiority of the industry of the towns over
that of the country seems to have been greater formerly than in the
present times. The wages of country labour approach nearer to those of
manufacturing labour, and the profits of stock employed in agriculture
to those of trading and manufacturing stock, than they are said to
have done in the last century, or in the beginning of the present.
This change may be regarded as the necessary, though very late
consequence of the extraordinary encouragement given to the industry
of the towns. The stock accumulated in them comes in time to be so
great that it can no longer be employed with the ancient profit in
that species of industry which is peculiar to them. That industry
has its limits like every other; and the increase of stock, by
increasing the competition, necessarily reduces the profit. The
lowering of profit in the town forces out stock to the country, where,
by creating a new demand for country labour, it necessarily raises its
wages. It then spreads itself, if I may say so, over the face of the
land, and by being employed in agriculture is in part restored to
the country, at the expense of which, in a great measure, it had
originally been accumulated in the town. That everywhere in Europe the
greatest improvements of the country have been owing to such
overflowings of the stock originally accumulated in the towns, I shall
endeavour to show hereafter; and at the same time to demonstrate that,
though some countries have by this course attained to a considerable
degree of opulence, it is in itself necessarily slow, uncertain,
liable to be disturbed and interrupted by innumerable accidents, and
in every respect contrary to the order of nature and of reason. The
interests, prejudices, laws and customs, which have given occasion
to it, I shall endeavour to explain as fully and distinctly as I can
in the third and fourth books of this Inquiry.

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

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

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

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

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

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

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

    It has been considered as of so much importance that a proper
number of young people should be educated for certain professions,
that sometimes the public and sometimes the piety of private
founders have established many pensions, scholarships, exhibitions,
bursaries, etc., for this purpose, which draw many more people into
those trades than could otherwise pretend to follow them. In all
Christian countries, I believe, the education of the greater part of
churchmen is paid for in this manner. Very few of them are educated
altogether at their own expense. The long, tedious, and expensive
education, therefore, of those who are, will not always procure them a
suitable reward, the church being crowded with people who, in order to
get employment, are willing to accept of a much smaller 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 according to the contract which they may happen to
make with their respective superiors. Till after the middle of the
fourteenth century, five merks, containing about as much silver as ten
pounds of our present money, was in England the usual pay of a
curate or a stipendiary parish priest, as we find it regulated by
the decrees of several different national councils. At the same period
fourpence a day, containing the same quantity of silver as a
shilling of our present money, was declared to be the pay of a
master mason, and threepence a day, equal to ninepence of our
present money, that of a journeyman mason. The wages of both these
labourers, therefore, supposing them to have been constantly employed,
were much superior to those of the curate. The wages of the master
mason, supposing him to have been without employment one third of
the year, would have fully equalled them. By the 12th of Queen Anne,
c. 12, it is declared, "That whereas for want of sufficient
maintenance and encouragement to curates, the cures have in several
places been meanly supplied, the bishop is, therefore, empowered to
appoint by writing under his band and seal a sufficient certain
stipend or allowance, not exceeding fifty and not less than twenty
pounds a year." Forty pounds a year is reckoned at present very good
pay for a curate, and notwithstanding this Act of Parliament there are
many curacies under twenty pounds a year. There are journeymen
shoemakers in London who earn forty pounds a year, and there is scarce
an industrious workman of any kind in that metropolis who does not
earn more than twenty. This last sum indeed does not exceed what is
frequently earned by common labourers in many country parishes.
Whenever the law has attempted to regulate the wages of workmen, it
has always been rather to lower them than to raise them. But the law
has upon many occasions attempted to raise the wages of curates, and
for the dignity of the church, to oblige the rectors of parishes to
give them more than the wretched maintenance which they themselves
might be willing to accept of. And in both cases the law seems to have
been equally ineffectual, and has never either been able to raise
the wages of curates, or to sink those of labourers to the degree that
was intended; because it has never been able to hinder either the
one from being willing to accept of less than the legal allowance,
on account of the indigence of their situation and the multitude of
their competitors; or the other from receiving more, on account of the
contrary competition of those who expected to derive either profit
or pleasure from employing them.

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

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

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

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

    In ancient times, before any charities of this kind had been
established for the education of indigent people to the learned
professions, the rewards of eminent teachers appear to have been
much more considerable. Isocrates, in what is called his discourse
against the sophists, reproaches the teachers of his own times with
inconsistency. "They make the most magnificent promises to their
scholars," says he, "and undertake to teach them to be wise, to be
happy, and to be just, and in return for so important a service they
stipulate the paltry reward of four or five minae. They who teach
wisdom," continues he, ought certainly to be wise themselves; but if
any man were to sell such a bargain for such a price, he would be
convicted of the most evident folly." He certainly does not mean
here to exaggerate the reward, and we may be assured that it was not
less than he represents it. Four minae were equal to thirteen pounds
six shillings and eightpence: five minae to sixteen pounds thirteen
shillings and fourpence. Something not less than the largest of
those two sums, therefore, must at that time have been usually paid to
the most eminent teachers at Athens. Isocrates himself demanded ten
minae, or thirty-three pounds six shillings and eightpence, from
each scholar. When he taught at Athens, he is said to have had a
hundred scholars. I understand this to be the number whom he taught at
one time, or who attended what we could call one course of lectures, a
number which will not appear extraordinary from so great a city to
so famous a teacher, who taught, too, what was at that time the most
fashionable of all sciences, rhetoric. He must have made, therefore,
by each course of lectures, a thousand minae, or L3333 6s. 8d. A
thousand minae, accordingly, is said by Plutarch in another place,
to have been his Didactron, or usual price of teaching. Many other
eminent teachers in those times appear to have acquired great
fortunes. Gorgias made a present to the temple of Delphi of his own
statue in solid gold. We must not, I presume, suppose that it was as
large as the life. His way of living, as well as that of Hippias and
Protagoras, two other eminent teachers of those times, is
represented by Plato as splendid even to ostentation. Plato himself is
said to have lived with a good deal of magnificence. Aristotle,
after having been tutor to Alexander, and most munificently
rewarded, as it is universally agreed, both by him and his father
Philip, thought it worth while, notwithstanding, to return to
Athens, in order to resume the teaching of his school. Teachers of the
sciences were probably in those times less common than they came to be
in an age or two afterwards, when the competition had probably
somewhat reduced both the price of their labour and the admiration for
their persons. The most eminent of them, however, appear always to
have enjoyed a degree of consideration much superior to any of the
like profession in the present times. The Athenians sent Carneades the
Academic, and Diogenes the Stoic, upon a solemn embassy to Rome; and
though their city had then declined from its former grandeur, it was
still an independent and considerable republic. Carneades, too, was
a Babylonian by birth, and as there never was a people more jealous of
admitting foreigners to public offices than the Athenians, their
consideration for him must have been very great.

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

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

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

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

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

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

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

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

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

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

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

    This statute, therefore, rendered it almost impracticable for a
poor man to gain a new settlement in the old way, by forty days'
inhabitancy. But that it might not appear to preclude altogether the
common people of one parish from ever establishing themselves with
security in another, it appointed four other ways by which a
settlement might be gained without any notice delivered or
published. The first was, by being taxed to parish rates and paying
them; the second, by being elected into an annual parish office, and
serving in it a year; the third, by serving an apprenticeship in the
parish; the fourth, by being hired into service there for a year,
and continuing in the same service during the whole of it.

    Nobody can gain a settlement by either of the two first ways,
but by the public deed of the whole parish, who are too well aware
of the consequences to adopt any new-comer who has nothing but his
labour to support him, either by taxing him to parish rates, or by
electing him into a parish office.

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

    No independent workman, it is evident, whether labourer or
artificer, is likely to gain any new settlement either by
apprenticeship or by service. When such a person, therefore, carried
his industry to a new parish, he was liable to be removed, how healthy
and industrious soever, at the caprice of any churchwarden or
overseer, unless he either rented a tenement of ten pounds a year, a
thing impossible for one who has nothing but his labour to live by; or
could give such security for the discharge of the parish as two
justices of the peace should judge sufficient. What security they
shall require, indeed, is left altogether to their discretion; but
they cannot well require less than thirty pounds, it having been
enacted that the purchase even of a freehold estate of less than
thirty pounds' value shall not gain any person a settlement, as not
being sufficient for the discharge of the parish. But this is a
security which scarce any man who lives by labour can give; and much
greater security is frequently demanded.

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

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

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

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

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

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

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

    In ancient times, too, it was usual to attempt to regulate the
profits of merchants and other dealers, by rating the price both of
provisions and other goods. The assize of bread is, so far as I
know, the only remnant of this ancient usage. Where there is an
exclusive corporation, it may perhaps be proper to regulate the
price of the first necessary of life. But where there is none, the
competition will regulate it much better than any assize. The method
of fixing the assize of bread established by the 31st of George II
could not be put in practice in Scotland, on account of a defect in
the law; its execution depending upon the office of a clerk of the
market, which does not exist there. This defect was not remedied
till the 3rd of George III. The want of an assize occasioned no
sensible inconveniency, and the establishment of one, in the few
places where it has yet taken place, has produced no sensible
advantage. In the greater part of the towns of Scotland, however,
there is an incorporation of bakers who claim exclusive privileges,
though they are not very strictly guarded.

    The proportion between the different rates both of wages and
profit in the different employments of labour and stock, seems not
to be much affected, as has already been observed, by the riches or
poverty, the advancing, stationary, or declining state of the society.
Such revolutions in the public welfare, though they affect the general
rates both of wages and profit, must in the end affect them equally in
all different employments. The proportion between them, therefore,
must remain the same, and cannot well be altered, at least for any
considerable time, by any such revolutions.

                            CHAPTER XI

                       Of the Rent of Land

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

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

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

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

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

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

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

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

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

                             PART 1

        Of the Produce of Land which always affords Rent

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

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

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

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

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

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

    But the relative values of those two different species of food,
bread and butcher's meat, are very different in the different
periods of agriculture. In its rude beginnings, the unimproved
wilds, which then occupy the far greater part of the country, are
all abandoned to cattle. There is more butcher's meat than bread,
and bread, therefore, is the food for which there is the greatest
competition, and which consequently brings the greatest price. At
Buenos Ayres, we are told by Ulloa, four reals, one-and-twenty pence
halfpenny sterling, was, forty or fifty years ago, the ordinary
price of an ox, chosen from a herd of two or three hundred. He says
nothing of the price of bread, probably because he found nothing
remarkable about it. An ox there, he says, cost little more than the
labour of catching him. But corn can nowhere be raised without a great
deal of labour, and in a country which lies upon the river Plate, at
that time the direct road from Europe to the silver mines of Potosi,
the money price of labour could not be very cheap. It is otherwise
when cultivation is extended over the greater part of the country.
There is then more bread than butcher's meat. The competition
changes its direction, and the price of butcher's meat becomes greater
than the price of bread.

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

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

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

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

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

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

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

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

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

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

    The price paid by Prince Henry amounts to 3 3/4d. per pound weight
of the whole carcase, coarse and choice pieces taken together; and
at that rate the choice pieces could not have been sold by retail
for less than 4 1/2d. or 5d. the pound.

    In the Parliamentary inquiry in 1764, the witnesses stated the
price of the choice pieces of the best beef to be to the consumer
4d. and 4 1/4d. the pound; and the coarse pieces in general to be from
seven farthings to 2 1/2d. and this they said was in general one
halfpenny dearer than the same sort of pieces had usually been sold in
the month of March. But even this high price is still a good deal
cheaper than what we can well suppose the ordinary retail price to
have been the time of Prince Henry.

    During the twelve first years of the last century, the average
price of the best wheat at the Windsor market was L1 18s. 3 1/6d.
the quarter of nine Winchester bushels.

    But in the twelve years preceding 1764, including that year, the
average price of the same measure of the best wheat at the same market
was L2 1s. 9 1/2d.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                            PART 2

          Of the Produce of Land which sometimes does,

               and sometimes does not, afford Rent

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

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

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

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

    The materials of lodging cannot always be transported to so
great a distance as those of clothing, and do not so readily become an
object of foreign commerce. When they are superabundant in the country
which produces them, it frequently happens, even in the present
commercial state of the world, that they are of no value to the
landlord. A good stone quarry in the neighbourhood of London would
afford a considerable rent. In many parts of Scotland and Wales it
affords none. Barren timber for building is of great value in a
populous and well-cultivated country, and the land which produces it
affords a considerable rent. But in many parts of North America the
landlord would be much obliged to 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 Scotland to draw a rent from what never afforded any
before. The woods of Norway and of the coasts of the Baltic find a
market in many parts of Great Britain which they could not find at
home, and thereby afford some rent to their proprietors.

    Countries are populous not in proportion to the number of people
whom their produce can clothe and lodge, but in proportion to that
of those whom it can feed. When food is provided, it is easy to find
the necessary clothing and lodging. But though these are at hand, it
may often be difficult to find food. In some parts 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 principal objects of the greater part of
those wants and fancies. The rich man consumes no more food than his
poor neighbour. In quality it may be very different, and to select and
prepare it may require more labour and art; but in quantity it is very
nearly the same. But compare the spacious palace and great wardrobe of
the one with the hovel and the few rags of the other, and you will
be sensible that the difference between their clothing, lodging, and
household furniture is almost as great in quantity as it is in
quality. The desire of food is limited in every man by the narrow
capacity of the human stomach; but the desire of the 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 amusement
of those desires which cannot be satisfied, but seem to be
altogether endless. The poor, in order to obtain food, exert
themselves to gratify those fancies of the rich, and to obtain it more
certainly they vie with one another in the cheapness and perfection of
their work. The number of workmen increases with the increasing
quantity of food, or with the growing improvement and cultivation of
the lands; and as the nature of their business admits of the utmost
subdivisions of labour, the quantity of materials which they can
work up increases in a much greater proportion than their numbers.
Hence arises a demand for every sort of material which human invention
can employ, either usefully or ornamentally, in building, dress,
equipage, or household furniture; for the fossils and minerals
contained in the bowels of the earth; the precious metals, and the
precious stones.

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

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

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

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

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

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

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

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

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

    Whatever may be the price of wood, if that of coals is such that
the expense of a coal fire is nearly equal to that of a wood one, we
may be assured that at that place, and in these circumstances, the
price of coals is as high as it can be. It seems to be so in some of
the inland parts of England, particularly in Oxfordshire, where it
is usual, even in the fires of the common people, to mix coals and
wood together, and where the difference in the expense of those two
sorts of fuel cannot, therefore, be very great.

    Coals, in the coal countries, are everywhere much below this
highest price. If they were not, they could not bear the expense of
a distant carriage, either by land or by water. A small quantity
only could be sold, and the coal masters and coal proprietors find
it more for their interest to sell a great quantity at a price
somewhat above the lowest, than a small quantity at the highest. The
most fertile coal-mine, too, regulates the price of coals at all the
other mines in its neighbourhood. Both the proprietor and the
undertaker of the work find, the one that he can get a greater rent,
the other that he can get a greater profit, by somewhat underselling
all their neighbours. Their neighbours are soon obliged to sell at the
same price, though they cannot so well afford it, and though it always
diminishes, and sometimes takes away altogether both their rent and
their profit. Some works are abandoned altogether; others can afford
no rent, and can be wrought only by the proprietor.

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

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

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

    The price of coals in Westmoreland or Shropshire can have little
effect on their price at Newcastle; and their price in the Lionnois
can have none at all. The productions of such distant coal-mines can
never be brought into competition with one another. But the
productions of the most distant metallic mines frequently may, and
in fact commonly are. The price, therefore, of the coarse, and still
more that of the precious metals, at the most fertile mines in the
world, must necessarily more or less affect their price at every other
in it. The price of copper in Japan must have some influence upon
its price at the copper mines in Europe. The price of silver in
Peru, or the quantity either of labour or of other goods which it will
purchase there, must have some influence on its price, not only at the
silver mines of Europe, but at those of China. After the discovery
of the mines of Peru, the silver mines of Europe were, the greater
part of them, abandoned. The value of was so much reduced that their
produce could no longer pay the expense of working them, or replace,
with a profit, the food, clothes, lodging, and other necessaries which
were consumed in that operation. This was the case, too, with the
mines of Cuba and St. Domingo, and even with the ancient mines of
Peru, after the discovery of those of Potosi.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                             PART 3

  Of the Variations in the Proportion between the respective Values

    of that Sort of Produce which always affords Rent, and of that

       which sometimes does and sometimes does not afford Rent

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

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

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

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

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

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

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

    DIGRESSIONS CONCERNING THE VARIATIONS IN THE VALUE OF SILVER

         DURING THE COURSE OF THE FOUR LAST CENTURIES

                        FIRST PERIOD

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                        SECOND PERIOD

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

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

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

    From 1595 to 1620, both inclusive, the average price of the
quarter of nine bushels of the best wheat at Windsor market appears,
from the accounts of Eton College, to have been L2 1s. 6 3/4d. From
which sum, neglecting the fraction, and deducting a ninth, or 4s. 7
1\3d., the price of the quarter of eight bushels comes out to have
been L1 16s. 10 2/3d. And from this sum, neglecting likewise the
fraction, and deducting a ninth, or 4s. 1d., for the difference
between the price of the best wheat and that of the middle wheat,
the price of the middle wheat comes out to have been about L1 12s.
9d., or about six ounces and one-third of an ounce of silver.

    From 1621 to 1636, both inclusive, the average price of the same
measure of the best wheat at the same market appears, from the same
accounts, to have been L2 10s.; from which making the like
deductions as in the foregoing case, the average price of the
quarter of eight bushels of middle wheat comes out to have been L1
19s. 6d., or about seven ounces and two-thirds of an ounce of silver.

                        THIRD PERIOD

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

    From 1637 to 1700, both inclusive, being the sixty-four last years
of the last century, the average price of the quarter of nine
bushels of the best wheat at Windsor market appears, from the same
accounts, to have been L2 11s. O 1\3d., which is only 1s O 1\3d.
dearer than it had been during the sixteen years before. But in the
course of these sixty-four years there happened two events which
must have produced a much greater scarcity of corn than what the
course of the seasons would otherwise have occasioned, and which,
therefore, without supposing any further reduction in the value of
silver, will much more than account for this very small enhancement of
price.

    The first of these events was the civil war, which, by
discouraging tillage and interrupting commerce, must have raised the
price of corn much above what the course of the seasons would
otherwise have occasioned. It must have had this effect more or less
at all the different markets in the kingdom, but particularly at those
in the neighbourhood of London, which require to be supplied from
the greatest distance. In 1648, accordingly, the price of the best
wheat at Windsor market appears, from the same accounts, to have
been L4 5s., and in 1649 to have been L4 the quarter of nine
bushels. The excess of those two years above L2 10s. (the average
price of the sixteen years preceding 1637) is L3 5s.; which divided
among the sixty-four last years of the last century will alone very
nearly account for that small enhancement of price which seems to have
taken place in them. These, however, though the highest, are by no
means the only high prices which seem to have been occasioned by the
civil wars.

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

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

    In the course of the present century, the silver coin has not at
any time been more below its standard weight than it is at present.
But though very much defaced, its value has been kept up by that of
the gold coin for which it is exchanged. For though before the late
recoinage, the gold coin was a good deal defaced too, it was less so
than the silver. In 1695, on the contrary, the value of the silver
coin was not kept up by the gold coin; a guinea then commonly
exchanging for thirty shillings of the worn and clipt silver. Before
the late recoinage of the gold, the price of silver bullion was seldom
higher than five shillings and sevenpence an ounce, which is but
fivepence above the mint price. But in 1695, the common price of
silver bullion was six shillings and fivepence an ounce, which is
fifteenpence above the mint price. Even before the late recoinage of
the gold, therefore, the coin, gold and silver together, when compared
with silver bullion, was not supposed to be more than eight per cent
below its standard value. In 1695, on the contrary, it had been
supposed to be near five-and-twenty per cent below that value. But
in the beginning of the present century, that is, immediately after
the great recoinage in King William's time. the greater part of the
current silver coin must have been still nearer to its standard weight
than it is at present. In the course of the present century, too,
there has been no great public calamity, such as the civil war,
which could either discourage tillage, or interrupt the interior
commerce of the country. And though the bounty, which has taken
place through the greater part of this century, must always raise
the price of corn somewhat higher than it otherwise would be in the
actual state of tillage; yet as, in the course of this century, the
bounty has had full time to produce all the good effects commonly
imputed to it, to encourage tillage, and thereby to increase the
quantity of corn in the home market, it may, upon the principles of
a system which I shall explain and examine hereafter, be supposed to
have done something to lower the price of that commodity the one
way, as well as to raise it the other. It is by many people supposed
to have done more. In the sixty-four first years of the present
century accordingly the average price of the quarter of nine bushels
of the best wheat at Windsor market appears, by the accounts of Eton
College, to have been L2 os. 6 1/2d., which is about ten shillings and
sixpence, or more than five-and-twenty per cent, cheaper than it had
been during the sixty-four last years of the last century; and about
9s. 6d. cheaper than it had been during the sixteen years preceding
1636, when the discovery of the abundant mines of America may be
supposed to have produced its full effect; and about one shilling
cheaper than it had been in the twenty-six years preceding 1620,
before that discovery can well be supposed to have produced its full
effect. According to this account, the average price of middle
wheat, during these sixty-four first years of the present century,
comes out to have been about thirty-two shillings the quarter of eight
bushels.

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

    In 1687, the price of the quarter of nine bushels of the best
wheat at Windsor market was L1 5s. 2d. the lowest price at which it
had ever been from 1595.

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

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

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

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

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

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

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

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

    The high price of corn during these ten or twelve years past,
indeed, has occasioned a suspicion that the real value of silver still
continues to fall in the European market. This high price of corn,
however, seems evidently to have been the effect of the
extraordinary unfavourableness of the seasons, and ought therefore
to be regarded, not as a permanent, but as a transitory and occasional
event. The seasons for these ten or twelve years past have been
unfavourable through the greater part of Europe; and the disorders
of Poland have very much increased the scarcity in all those countries
which, in dear years, used to be supplied from that market. So long
a course of bad seasons, though not a very common event, is by no
means a singular one; and whoever has inquired much into the history
of the prices of corn in former times will be at no loss to
recollect several other examples of the same kind. Ten years of
extraordinary scarcity, besides, are not more wonderful than ten years
of extraordinary plenty. The low price of corn from 1741 to 1750, both
inclusive, may very well be set in opposition to its high price during
these last eight or ten years. From 1741 to 1750, the average price of
the quarter of nine bushels of the best wheat at Windsor market, it
appears from the accounts of Eton College, was only L1 13s. 9 1/2d.,
which is nearly 6s. 3d. below the average price of the sixty-four
first years of the present century. The average price of the quarter
of eight bushels of middle wheat comes out, according to this account,
to have been, during these ten years, only 51 6s. 8d.

    Between 1741 and 1750, however, the bounty must have hindered
the price of corn from falling so low in the home market as it
naturally would have done. During these ten years the quantity of
all sorts of grain exported, it appears from the custom-house books,
amounted to no less than eight millions twenty-nine thousand one
hundred and fifty-six quarters one bushel. The bounty paid for this
amounted to L1,514,962 17s. 4 1/2d. In 1749 accordingly, Mr. Pelham,
at that time Prime Minister, observed to the House of Commons that for
the three years preceding a very extraordinary sum had been paid as
bounty for the exportation of corn. He had good reason to make this
observation, and in the following year he might have had still better.
In that single year the bounty paid amounted to no less than
L324,176 10s. 6d. It is unnecessary to observe how much this forced
exportation must have raised the price of corn above what it otherwise
would have been in the home market.

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

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

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

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

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

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

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

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

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

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

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

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

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

    According to Mr. Meggens the annual importation of the precious
metals into Spain, at an average of six years, viz., from 1748 to
1753, both inclusive; and into Portugal, at an average of seven years,
viz., from 1747 to 1753, both inclusive, amounted in silver to
1,101,107 pounds weight; and in gold to 29,940 pounds weight. The
silver, at sixty-two shillings the pound Troy, amounts to L3,413,431
10s. sterling. The gold, at forty-four guineas and a half the pound
Troy, amounts to L2,333,446 14s. sterling. Both together amount to
L5,746,878 4s. sterling. The account of what was imported under
register he assures us is exact. He gives us the detail of the
particular places from which the gold and silver were brought, and
of the particular quantity of each metal, which, according to the
register, each of them afforded. He makes an allowance, too, for the
quantity of each metal which he supposes may have been smuggled. The
great experience of this judicious merchant renders his opinion of
considerable weight.

    According to the eloquent and, sometimes, well-informed author
of the Philosophical and Political History of the Establishment of the
Europeans in the two Indies, the annual importation of registered gold
and silver into Spain, at an average of eleven years, viz., from
1754 to 1764, both inclusive, amounted to 13,984,185 3/4 piastres of
ten reals. On account of what may have been smuggled, however, the
whole annual importation, he supposes, may have amounted to
seventeen millions of piastres, which, at 4s. 6d. the piastre, is
equal to L3,825,000 sterling. He gives the detail, too, of the
particular places from which the gold and silver were brought, and
of the particular quantities of each metal which, according to the
register, each of them afforded. He informs us, too, that if we were
to judge of the quantity of gold annually imported from the Brazils
into Lisbon by the amount of the tax paid to the King of Portugal,
which it seems is one-fifth of the standard metal, we might value it
at eighteen millions of cruzadoes, or forty-five millions of French
livres, equal to about two millions sterling. On account of what may
have been smuggled, however, we may safely, he says, add to the sum an
eighth more, or L250,000 sterling, so that the whole will amount to
L2,250,000 sterling. According to this account, therefore, the whole
annual importation of the precious metals into both Spain and Portugal
amounts to about L6,075,000 sterling.

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

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

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

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

    VARIATIONS IN THE PROPORTION BETWEEN THE RESPECTIVE VALUES

                     OF GOLD AND SILVER

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

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

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

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

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

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

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

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

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

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

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

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

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

    GROUNDS OF THE SUSPICION THAT THE VALUE OF SILVER STILL

                   CONTINUES TO DECREASE

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

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

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

    DIFFERENT EFFECTS OF THE PROGRESS OF IMPROVEMENT UPON THREE

                DIFFERENT SORTS OF RUDE PRODUCE

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

                         FIRST SORT

    The first sort of rude produce of which the price rises in the
progress of improvement is that which it is scarce in the power of
human industry to multiply at all. It consists in those things which
nature produces only in certain quantities, and which, being of a very
perishable nature, it is impossible to accumulate together the produce
of many different seasons. Such are the greater part of rare and
singular birds and fishes, many different sorts of game, almost all
wild-fowl, all birds of passage in particular, as well as many other
things. When wealth and the luxury which accompanies it increase,
the demand for these is likely to increase with them, and no effort of
human industry may be able to increase the supply much beyond what
it was before this increase of the demand. The quantity of such
commodities, therefore, remaining the same, or nearly the same,
while the competition to purchase them is continually increasing,
their price may rise to any degree of extravagance, and seems not to
be limited by any certain boundary. If woodcocks should become so
fashionable as to sell for twenty guineas apiece, no effort of human
industry could increase the number of those brought to market much
beyond what it is at present. The high price paid by the Romans, in
the time of their greatest grandeur, for rare birds and fishes, may in
this manner easily be accounted for. These prices were not the effects
of the low value of silver in those times, but of the high value of
such rarities and curiosities as human industry could not multiply
at pleasure. The real value of silver was higher at Rome, for some
time before and after the fall of the republic, than it is through the
greater part of Europe at present. Three sestertii, equal to about
sixpence sterling, was the price which the republic paid for the
modius or peck of the tithe wheat of Sicily. This price, however,
was probably below the average market price, the obligation to deliver
their wheat at this rate being considered as a tax upon the Sicilian
farmers. When the Romans, therefore, had occasion to order more corn
than the tithe of wheat amounted to, they were bound by capitulation
to pay for the surplus at the rate of four sestertii, or eightpence
sterling, the peck; and this had probably been reckoned the moderate
and reasonable, that is, the ordinary or average contract price of
those times; it is equal to about one-and-twenty shillings the
quarter. Eight-and-twenty shillings the quarter was, before the late
years of scarcity, the ordinary contract price of English wheat, which
in quality is inferior to the Sicilian, and generally sells for a
lower price in the European market. The value of silver, therefore, in
those ancient times, must have been to its value in the present as
three to four inversely; that is, three ounces of silver would then
have purchased the same quantity of labour and commodities which
four ounces will do at present. When we read in Pliny, therefore, that
Seius bought a white nightingale, as a present for the Empress
Agrippina, at a price of six thousand sestertii, equal to about
fifty pounds of our present money; and that Asinius Celer purchased
a surmullet at the price of eight thousand sestertii, equal to about
sixty-six pounds thirteen shillings and fourpence of our present
money, the extravagance of those prices, how much soever it may
surprise us, is apt, notwithstanding, to appear to us about
one-third less than it really was. Their real price, the quantity of
labour and subsistence which was given away for them, was about
one-third more than their nominal price is apt to express to us in the
present times. Seius gave for the nightingale the command of a
quantity of labour and subsistence equal to what L66 13s. 4d. would
purchase in the present times; and Asinius Celer gave for the
surmullet the command of a quantity equal to what L88 9 1/2d. would
purchase. What occasioned the extravagance of those high prices was,
not so much the abundance of silver as the abundance of labour and
subsistence of which those Romans had the disposal beyond what was
necessary for their own use. The quantity of silver of which they
had the disposal was a good deal less than what the command of the
same quantity of labour and subsistence would have procured to them in
the present times.

                        SECOND SORT

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

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

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

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

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

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

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

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

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

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

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

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

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

                         THIRD SORT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    CONCLUSION OF THE DIGRESSION CONCERNING THE VARIATIONS IN

                   THE VALUE OF SILVER

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

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

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

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

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

    As to the high price of corn during these last ten or twelve
years, it can be sufficiently accounted for from the badness of the
seasons, without supposing any degradation in the value of silver. The
opinion, therefore, that silver is continually sinking in its value,
seems not to be founded upon any good observations, either upon the
prices of corn, or upon those of other provisions.

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

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

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

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

       EFFECTS OF THE PROGRESS OF IMPROVEMENT UPON THE REAL

                     PRICE OF MANUFACTURES

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

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

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

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

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

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

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

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

    In 1643, being the 3rd of Edward IV, it was enacted that "no
servant in husbandry, nor common labourer, nor servant to any
artificer inhabiting out of a city or burgh shall use or wear in their
clothing any cloth above two shillings the broad yard." In the 3rd
of Edward IV, two shillings contained very nearly the same quantity of
silver as four of our present money. But the Yorkshire cloth which
is now sold at four shillings the yard is probably much superior to
any that was then made for the wearing of the very poorest order of
common servants. Even the money price of their clothing, therefore,
may, in proportion to the quality, be somewhat cheaper in the
present than it was in those ancient times. The real price is
certainly a good deal cheaper. Tenpence was then reckoned what is
called the moderate and reasonable price of a bushel of wheat. Two
shillings, therefore, was the price of two bushels and near two
pecks of wheat, which in the present times, at three shillings and
sixpence the bushel, would be worth eight shillings and ninepence. For
a yard of this cloth the poor servant must have parted with the
power of purchasing a quantity of subsistence equal to what eight
shillings and ninepence would purchase in the present times. This is a
sumptuary law too, restraining the luxury and extravagance of the
poor. Their clothing, therefore, had commonly been much more
expensive.

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

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

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

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

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

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

                  CONCLUSION OF THE CHAPTER

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

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

    That rise in the real price of those parts of the rude produce
of land, which is first the effect of extended improvement and
cultivation, and afterwards the cause of their being still further
extended, the rise in the price of cattle, for example, tends too to
raise the rent of land directly, and in a still greater proportion.
The real value of the landlord's share, his real command of the labour
of other people, not only rises with the real value of the produce,
but the proportion of his share to the whole produce rises with it.
That produce, after the rise in its real price, requires no more
labour to collect it than before. A smaller proportion of it will,
therefore, be sufficient to replace, with the ordinary profit, the
stock which employs that labour. A greater proportion of it must,
consequently, belong to the landlord.

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

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

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

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

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

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

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

               TABLES REFERRED TO IN CHAPTER 11, PART 3

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1202      -   12     -        -     -     -        1    16     -

1205      -   12     -        -    13     5        2     -     3

          -   13     4

          -   15     -

1223      -   12     -        -     -     -        1    16     -
1237      -    3     4        -     -     -        -    10     -
1243      -    2     -        -     -     -        -     6     -
1244      -    2     -        -     -     -        -     6     -
1246      -   16     -        -     -     -        2     8     -
1247      -   13     4        -     -     -        2     -     -
1257      1    4     -        -     -     -        3    12     -

1258      1    -     -        -    17     -        2    11     -

          -   15     -

          -   16     -

1270      4   16     -        5    12     -       16    16     -

          6    8     -

1286      -    2     8        -     9     4        1     8     -

          -   16     -

                                                 ---------------

                                        Total    L35     9     3

                                                 ---------------

                                Average Price     L2    19     1 1/4

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1287      -    3     4        -     -     -        -    10     -

1288      -    -     8        -     3     - 1/4    -     9     - 3/4

          -    1     -

          -    1     4

          -    1     6

          -    1     8

          -    2     -

          -    3     4

          -    9     4

1289      -   12     -        -    10     1 3/4    1    10     4 1/2

          -    6     -

          -    2     -

          -   10     8

          1    -     -

1290      -   16     -        -     -     -        2     8     -
1294      -   16     -        -     -     -        2     8     -
1302      -    4     -        -     -     -        -    12     -
1309      -    7     2        -     -     -        1     1     6
1315      1    -     -        -     -     -        3     -     -

1316      1    -     -        1    10     6        4    11     6

          1   10     -

          1   12     -

          2    -     -

1317      2    4     -        1    19     6        5    18     6

          -   14     -

          2   13     -

          4    -     -

          -    6     8

1336      -    2     -        -     -     -        -     6     -
1338      -    3     4        -     -     -        -    10     -

                                                 ---------------

                                        Total    L23     4    11 1/4

                                                 ---------------

                                Average Price     L1    18     8

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1339      -    9     -        -     -     -        1     7     -
1349      -    2     -        -     -     -        -     5     2
1359      1    6     8        -     -     -        3     2     2
1361      -    2     -        -     -     -        -     4     8
1363      -   15     -        -     -     -        1    15     -

1369      1    -     -        1     2     -        2     9     4

          1    4     -

1379      -    4     -        -     -     -        -     9     4
1387      -    2     -        -     -     -        -     4     8

1390      -   13     4        -    14     5        1    13     7

          -   14     -

          -   16     -

1401      -   16     -        -     -     -        1    17     4

1407      -    4     4 3/4    -     3    10        -     8    11

          -    3     4

1416      -   16     -        -     -     -        1    12     -

                                                 ---------------

                                        Total    L15     9     4

                                                 ---------------

                                Average Price     L1     5     9 1/3

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1423      -    8     -        -     -     -        -    16     -
1425      -    4     -        -     -     -        -     8     -
1434      1    6     8        -     -     -        2    13     4
1435      -    5     4        -     -     -        -    10     8

1439      1    -     -        1     3     4        2     6     8

          1    6     8

1440      1    4     -        -     -     -        2     8     -

1444      -    4     4        -     4     2        -     8     4

          -    4     -

1445      -    4     6        -     -     -        -     9     -
1447      -    8     -        -     -     -        -    16     -
1448      -    6     8        -     -     -        -    13     4
1449      -    5     -        -     -     -        -    10     -
1452      -    8     -        -     -     -        -    16     -

                                                 ---------------

                                        Total    L12    15     4

                                                 ---------------

                                Average Price     L1     1     3 1/2

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1453      -    5     4        -     -     -        -    10     8
1455      -    1     2        -     -     -        -     2     4
1457      -    7     8        -     -     -        -    15     4
1459      -    5     -        -     -     -        -    10     -
1460      -    8     -        -     -     -        -    16     -

1463      -    2     -        -     1    10        -     3     8

          -    1     8

1464      -    6     8        -     -     -        -    10     -
1486      1    4     -        -     -     -        1    17     -
1491      -   14     8        -     -     -        1     2     -
1494      -    4     -        -     -     -        -     6     -
1495      -    3     4        -     -     -        -     5     -
1497      1    -     -        -     -     -        1    11     -

                                                  --------------

                                        Total     L8     9     -

                                                  --------------

                                Average Price      -    14     1

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1499      -    4     -        -     -     -        -     6     -
1504      -    5     8        -     -     -        -     8     6
1521      1    -     -        -     -     -        1    10     -
1551      -    8     -        -     -     -        -     2     -
1553      -    8     -        -     -     -        -     8     -
1554      -    8     -        -     -     -        -     8     -
1555      -    8     -        -     -     -        -     8     -
1556      -    8     -        -     -     -        -     8     -

1557      -    4     -        -    17     8 1/2    -    17     8 1/2

          -    5     -

          -    8     -

          2   13     4

1558      -    8     -        -     -     -        -     8     -
1559      -    8     -        -     -     -        -     8     -
1560      -    8     -        -     -     -        -     8     -

                                                  --------------

                                        Total     L6     0     2 1/2

                                                  --------------

                                Average Price      -    10     - 5/12

           Price of the       Average of       The average Price

            Quarter of       the different       of each Year in
Years         Wheat            Prices of           Money of the

 XII        each Year        the same Year         present Times

          L    s.    d.       L.    s.    d.       L.    s.    d.

1561      -    8     -        -     -     -        -     8     -
1562      -    8     -        -     -     -        -     8     -

1574      2   16     -        2     -     -        2     -     -

          1    4     -

1587      3    4     -        -     -     -        3     4     -
1594      2   16     -        -     -     -        2    16     -
1595      2   13     -        -     -     -        2    13     -
1596      4    -     -        -     -     -        4     -     -

1597      5    4     -        4    12     -        4    12     -

          4    -     -

1598      2   16     8        -     -     -        2    16     8
1599      1   19     2        -     -     -        1    19     2
1600      1   17     8        -     -     -        1    17     8
1601      1   14    10        -     -     -        1    14    10

                                                 ---------------

                                        Total    L28     9     4

                                                 ---------------

                                Average Price     L2     7     5 1/3

   Prices of the Quarter of nine Bushels of the best or highest

  priced Wheat at Windsor Market, on Lady-day and Michaelmas, from

   1595 to 1764, both inclusive; the Price of each Year being the

     medium between the highest Prices of those Two Market Days.

   Years                            Years

                L.    s.    d.                   L.    s.    d.

    1595   -    2     0     0        1621   -    1    10     4

    1596   -    2     8     0        1622   -    2    18     8

    1597   -    3     9     6        1623   -    2    12     0

    1598   -    2    16     8        1624   -    2     8     0

    1599   -    1    19     2        1625   -    2    12     0

    1600   -    1    17     8        1626   -    2     9     4

    1601   -    1    14    10        1627   -    1    16     0

    1602   -    1     9     4        1628   -    1     8     0

    1603   -    1    15     4        1629   -    2     2     0

    1604   -    1    10     8        1630   -    2    15     8

    1605   -    1    15    10        1631   -    3     8     0

    1606   -    1    13     0        1632   -    2    13     4

    1607   -    1    16     8        1633   -    2    18     0

    1608   -    2    16     8        1634   -    2    16     0

    1609   -    2    10     0        1635   -    2    16     0

    1610   -    1    15    10        1636   -    2    16     8

    1611   -    1    18     8                   --------------

    1612   -    2     2     4               16) 40     0     0

    1613   -    2     8     8                   --------------

    1614   -    2     1     8 1/2               L2    10     0

    1615   -    1    18     8

    1616   -    2     0     4

    1617   -    2     8     8

    1618   -    2     6     8

    1619   -    1    15     4

    1620   -    1    10     4

               --------------

           26) 54     0     6 1/2

               --------------

               L2     1     6 9/12

                  Wheat per                        Wheat per

   Years           quarter          Years           quarter

                L.    s.    d.                   L.    s.    d.

    1637   -    2    13     0     Brought over  79    14    10

    1638   -    2    17     4        1671   -    2     2     0

    1639   -    2     4    10        1672   -    2     1     0

    1640   -    2     4     8        1673   -    2     6     8

    1641   -    2     8     0        1674   -    3     8     8

    1642   -    0     0     0*       1675   -    3     4     8

    1643   -    0     0     0        1676   -    1    18     0

    1644   -    0     0     0        1677   -    2     2     0

    1645   -    0     0     0        1678   -    2    19     0

    1646   -    2     8     0        1679   -    3     0     0

    1647   -    3    13     8        1680   -    2     5     0

    1648   -    4     5     0        1681   -    2     6     8

    1649   -    4     0     0        1682   -    2     4     0

    1650   -    3    16     8        1683   -    2     0     0

    1651   -    3    13     4        1684   -    2     4     0

    1652   -    2     9     6        1685   -    2     6     8

    1653   -    1    15     6        1686   -    1    14     0

    1654   -    1     6     0        1687   -    1     5     2

    1655   -    1    13     4        1688   -    2     6     0

    1656   -    2     3     0        1689   -    1    10     0

    1657   -    2     6     8        1690   -    1    14     8

    1658   -    3     5     0        1691   -    1    14     0

    1659   -    3     6     0        1692   -    2     6     8

    1660   -    2    16     6        1693   -    3     7     8

    1661   -    3    10     0        1694   -    3     4     0

    1662   -    3    14     0        1695   -    2    13     0

    1663   -    2    17     0        1696   -    3    11     0

    1664   -    2     0     6        1697   -    3     0     0

    1665   -    2     9     4        1698   -    3     8     4

    1666   -    1    16     0        1699   -    3     4     0

    1667   -    1    16     0        1700   -    2     0     0

    1668   -    2     0     0                  ---------------

    1669   -    2     4     4             60)  153     1     8

    1670   -    2     1     8                  ---------------

               --------------                   L2    11     0 1/3

  Carry over  L79    14    10

  *Wanting in the account. The year 1646 supplied by Bishop Fleetwood.

                  Wheat per                        Wheat per

   Years           quarter          Years           quarter

                L.    s.    d.                   L.    s.    d.

    1701   -    1    17     8     Brought over  69     8     8

    1702   -    1     9     6        1734   -    1    18    10

    1703   -    1    16     0        1735   -    2     3     0

    1704   -    2     6     6        1736   -    2     0     4

    1705   -    1    10     0        1737   -    1    18     0

    1706   -    1     6     0        1738   -    1    15     6

    1707   -    1     8     6        1739   -    1    18     6

    1708   -    2     1     6        1740   -    2    10     8

    1709   -    3    18     6        1741   -    2     6     8

    1710   -    3    18     0        1742   -    1    14     0

    1711   -    2    14     0        1743   -    1     4    10

    1712   -    2     6     4        1744   -    1     4    10

    1713   -    2    11     0        1745   -    1     7     6

    1714   -    2    10     4        1746   -    1    19     0

    1715   -    2     3     0        1747   -    1    14    10

    1716   -    2     8     0        1748   -    1    17     0

    1717   -    2     5     8        1749   -    1    17     0

    1718   -    1    18    10        1750   -    1    12     6

    1719   -    1    15     0        1751   -    1    18     6

    1720   -    1    17     0        1752   -    2     1    10

    1721   -    1    17     6        1753   -    2     4     8

    1722   -    1    16     0        1754   -    1    14     8

    1723   -    1    14     8        1755   -    1    13    10

    1724   -    1    17     0        1756   -    2     5     3

    1725   -    2     8     6        1757   -    3     0     0

    1726   -    2     6     0        1758   -    2    10     0

    1727   -    2     2     0        1759   -    1    19    10

    1728   -    2    14     6        1760   -    1    16     6

    1729   -    2     6    10        1761   -    1    10     3

    1730   -    1    16     6        1762   -    1    19     0

    1731   -    1    12    10        1763   -    2     0     9

    1732   -    1     6     8        1764   -    2     6     9

    1733   -    1     8     4                  ---------------

               --------------             64)  129    13     6

  Carry over  L69     8     8                  ---------------

                                                L2     0     6 9/32

   Years                            Years

                L.    s.    d.                   L.    s.    d.

    1731   -    1    12    10        1741   -    2     6     8

    1732   -    1     6     8        1742   -    1    14     0

    1733   -    1     8     4        1743   -    1     4    10

    1734   -    1    18    10        1744   -    1     4    10

    1735   -    2     3     0        1745   -    1     7     6

    1736   -    2     0     4        1746   -    1    19     0

    1737   -    1    18     0        1747   -    1    14    10

    1738   -    1    15     6        1748   -    1    17     0

    1739   -    1    18     6        1749   -    1    17     0

    1740   -    2    10     8        1750   -    1    12     6

               --------------                   --------------

          10)  18    12     8              10)  16    18     2

               --------------                  ---------------

               L1    17     3 1/5               L1    13     9 4/5

                         BOOK TWO

      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 somewhere, either in his own possession or in that of some other
person, a stock sufficient to maintain him, and to supply him with the
materials and tools of his work, till he has not only completed, but
sold his web. This accumulation must, evidently, be previous to his
applying his industry for so long a time to such a peculiar business.

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

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

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

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

                            CHAPTER I

                    Of the Division of Stock

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                            CHAPTER II

      Of Money considered as a particular Branch of the general

       Stock of the Society, or of the Expense of maintaining

                        the National Capital

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    Let us suppose, for example, that the whole circulating money of
some particular country amounted, at a particular time, to one million
sterling, that sum being then sufficient for circulating the whole
annual produce of their land and labour. Let us suppose, too, that
some time thereafter, different banks and bankers issued promissory
notes, payable to the bearer, to the extent of one million,
reserving in their different coffers two hundred thousand pounds for
answering occasional demands. There would remain, therefore, in
circulation, eight hundred thousand pounds in gold and silver, and a
million of bank notes, or eighteen hundred thousand pounds of paper
and money together. But the annual produce of the land and labour of
the country had before required only one million to circulate and
distribute it to its proper consumers, and that annual produce
cannot be immediately augmented by those operations of banking. One
million, therefore, will be sufficient to circulate it after them. The
goods to be bought and sold being precisely the same as before, the
same quantity of money will be sufficient for buying and selling them.
The channel of circulation, if I may be allowed such an expression,
will remain precisely the same as before. One million we have supposed
sufficient to fill that channel. Whatever, therefore, is poured into
it beyond this sum cannot run in it, but must overflow. One million
eight hundred thousand pounds are poured into it. Eight hundred
thousand pounds, therefore, must overflow, that sum being over and
above what can be employed in the circulation of the country. But
though this sum cannot be employed at home, it is too valuable to be
allowed to lie idle. It will, therefore, be sent abroad, in order to
seek that profitable employment which it cannot find at home. But
the paper cannot go abroad; because at a distance from the banks which
issue it, and from the country in which payment of it can be exacted
by law, it will not be received in common payments. Gold and silver,
therefore, to the amount of eight hundred thousand pounds will be sent
abroad, and the channel of home circulation will remain filled with
a million of paper, instead of 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
consumption, they may either, first, purchase such goods as are likely
to be consumed by idle people who produce nothing, such as foreign
wines, foreign silks, etc.; or, secondly, they may purchase an
additional stock of materials, tools, and provisions, in order to
maintain and employ an additional number of industrious people, who
reproduce, with a profit, the value of their annual consumption.

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

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

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

    When we compute the quantity of industry which the circulating
capital of any society can employ, we must always have regard to those
parts of it only which consist in provisions, materials, and
finished work: the other, which consists in money, and which serves
only to circulate those three, must always be deducted. In order to
put industry into motion, three things are requisite; materials to
work upon, tools to work with, and the wages or recompense 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 money, but in the money's worth; not in
the metal pieces, but in what can be got for them.

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

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

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

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

    The value of the silver money which circulated in Scotland
before the union, in 1707, and which, immediately after it, was
brought into the Bank of Scotland in order to be recoined, amounted to
L411,117 10s. 9d. sterling. No account has been got of the gold
coin; but it appears from the ancient accounts of the mint of
Scotland, that the value of the gold annually coined somewhat exceeded
that of the silver. There were a good many people, too, upon this
occasion, who, from a diffidence of repayment, did not bring their
silver into the Bank of Scotland: and there was, besides, some English
coin which was not called in. The whole value of the gold and
silver, therefore, which circulated in Scotland before the union,
cannot be estimated at less than a million sterling. It seems to
have constituted almost the whole circulation of that country; for
though the circulation of the Bank of Scotland, which had then no
rival, was considerable, it seems to have made but a very small part
of the whole. In the present times the whole circulation of Scotland
cannot be estimated at less than two millions, of which that part
which consists in gold and silver most probably does not amount to
half a million. But though the circulating gold and silver of Scotland
have suffered so great a diminution during this period, its real
riches and prosperity do not appear to have suffered any. Its
agriculture, manufactures, and trade, on the contrary, the annual
produce of its land and labour, have evidently been augmented.

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

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

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

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

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

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

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

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

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

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

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

    By issuing too great a quantity of paper, of which the excess
was continually returning, in order to be exchanged for gold and
silver, the Bank of England was for many years together obliged to
coin gold to the extent of between eight hundred thousand pounds and a
million a year; or at an average, about eight hundred and fifty
thousand pounds. For this great coinage the bank (in consequence of
the worn and degraded state into which the gold coin had fallen a
few years ago) was frequently obliged to purchase gold bullion at
the high price of four pounds an ounce, which it soon after issued
in coin at 53 17s. 10 1/2d. an ounce, losing in this manner between
two and a half and three per cent upon the coinage of so very large
a sum. Though the bank therefore paid no seignorage, though the
government was properly at the expense of the coinage, this liberality
of government did not prevent altogether the expense of the bank.

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

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

    The overtrading of some bold projectors in both parts of the
United Kingdom was the original cause of this excessive circulation of
paper money.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    The Bank of England is the greatest bank of circulation in Europe.
It was incorporated, in pursuance of an act of Parliament, by a
charter under the Great Seal, dated the 27th of July, 1694. It at that
time advanced to government the sum of one million two hundred
thousand pounds, for an annuity of one hundred thousand pounds; or for
L96,000 a year interest, at the rate of eight per cent, and L4000 a
year for the expense of management. The credit of the new
government, established by the Revolution, we may believe, must have
been very low, when it was obliged to borrow at so high an interest.

    In 1697 the bank was allowed to enlarge its capital stock by an
engraftment of L1,001,171 10s. Its whole capital stock therefore,
amounted at this time to L2,201,171 10s. This engraftment is said to
have been for the support of public credit. In 1696, tallies had
been at forty, and fifty, and sixty per cent discount, and bank
notes at twenty per cent. During the great recoinage of the silver,
which was going on at this time, the bank had thought proper to
discontinue the payment of its notes, which necessarily occasioned
their discredit.

    In pursuance of the 7th Anne, c. 7, the bank advanced and paid
into the exchequer the sum of L400,000; making in all the sum of
L1,600,000 which it had advanced upon its original annuity of
L96,000 interest and L4000 for expense of management. In 1708,
therefore, the credit of government was as good as that of private
persons, since it could borrow at six per cent interest the common
legal and market rate of those times. In pursuance of the same act,
the bank cancelled exchequer bills to the amount of L1,775,027 17s. 10
1/2d. at six per cent interest, and was at the same time allowed to
take in subscriptions for doubling its capital. In 1708, therefore,
the capital of the bank amounted to L4,402,343; and it had advanced to
government the sum of L3,375,027 17s. 10 1/2d.

    By a call of fifteen per cent in 1709, there was paid in and
made stock L656,204 Is. 9d.; and by another of ten per cent in 1710,
L501,448 12s. 11d. In consequence of those two calls, therefore, the
bank capital amounted to L5,559,995 14s. 8d.

    In pursuance of the 3rd George I, c. 8, the bank delivered up
two millions of exchequer bills to be cancelled. It had at this
time, therefore, advanced to government 17s. 10d. In pursuance of
the 8th George 1, c. 21, the bank purchased of the South Sea Company
stock to the amount of 14,000,000; and in 1722, in consequence of
the subscriptions which it had taken in for enabling it to make this
purchase, its capital stock was increased by L3,400,000. At this time,
therefore, the bank had advanced to the public L9,375,027 17s. 10
1/2d.; and its capital stock amounted only to L8,959,995 14s. 8d. It
was upon this occasion that the sum which the bank had advanced to the
public, and for which it received interest, began first to exceed
its capital stock, or the sum for which it paid a dividend to the
proprietors of bank stock; or, in other words, that the bank began
to have an undivided capital, over and above its divided one. It has
continued to have an undivided capital of the same kind ever since. In
1746, the bank had, upon different occasions, advanced to the public
L11,686,800 and its divided capital had been raised by different calls
and subscriptions to L10,780,000. The state of those two sums has
continued to be the same ever since. In pursuance of the 4th of George
III, c. 25, the bank agreed to pay to government for the renewal of
its charter L110,000 without interest or repayment. This sum,
therefore, did not increase either of those two other sums.

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

    The stability of the Bank of England is equal to that of the
British government. All that it has advanced to the public must be
lost before its creditors can sustain any loss. No other banking
company in England can be established by act of Parliament, or can
consist of more than six members. It acts, not only as an ordinary
bank, but as a great engine of state. It receives and pays the greater
part of the annuities which are due to the creditors of the public, it
circulates exchequer bills, and it advances to government the annual
amount of the land and malt taxes, which are frequently not paid up
till some years thereafter. In those different operations, its duty to
the public may sometimes have obliged it, without any fault of its
directors, to overstock the circulation with paper money. It
likewise discounts merchants' bills, and has, upon several different
occasions, supported the credit of the principal houses, not only of
England, but of Hamburg and Holland. Upon one occasion, in 1763, it is
said to have advanced for this purpose, in one week, about L1,600,000,
a great part of it in bullion. I do not, however, pretend to warrant
either the greatness of the sum, or the shortness of the time. Upon
other occasions, this great company has been reduced to the
necessity of paying in sixpences.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                            CHAPTER III

                  Of the Accumulation of Capital,

              or of Productive and Unproductive Labour

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

    The labour of some of the most respectable orders in the society
is, like that of menial servants, unproductive of any value, and
does not fix or realize itself in any permanent subject; or vendible
commodity, which endures after that labour is past, and for which an
equal quantity of labour could afterwards be procured. The
sovereign, for example, with all the officers both of justice and
war who serve under him, the whole army and navy, are unproductive
labourers. They are the servants of the public, and are maintained
by a part of the annual produce of the industry of other people.
Their service, how honourable, how useful, or how necessary soever,
produces nothing for which an equal quantity of service can
afterwards be procured. The protection, security, and defence of the
commonwealth, the effect of their labour this year will not purchase
its protection, security, and defence for the year to come. In the
same class must be ranked, some both of the gravest and most
important, and some of the most frivolous professions: churchmen,
lawyers, physicians, men of letters of all kinds; players, buffoons,
musicians, opera-singers, opera-dancers, etc. The labour of the
meanest of these has a certain value, regulated by the very same
principles which regulate that of every other sort of labour; and
that of the n oblest and most useful, 50 produces nothing which could
afterwards purchase or procure an equal quantity of labour. Like the
declamation of the actor, the harangue of the orator, or the tune of
the musician, the work of all of them perishes in the very instant of
its production.

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

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

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

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

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

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

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

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

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

    The proportion between those different funds necessarily
determines in every country the general character of the inhabitants
as to industry or idleness. We are more industrious than our
forefathers; because in the present times the funds destined for the
maintenance of industry are much greater in proportion to those
which are likely to be employed in the maintenance of idleness than
they were two or three centuries ago. Our ancestors were idle for want
of a sufficient encouragement to industry. It is better, says the
proverb, to play for nothing than to work for nothing. In mercantile
and manufacturing towns, where the inferior ranks of people are
chiefly maintained by the employment of capital, they are in general
industrious, sober, and thriving; as in many English, and in most
Dutch towns. In those towns which are principally supported by the
constant or occasional residence of a court, and in which the inferior
ranks of people are chiefly maintained by the spending of revenue,
they are in general idle, dissolute, and poor; as at Rome, Versailles,
Compiegne, and Fontainebleu. If you except Rouen and Bordeaux, there
is little trade or industry in any of the parliament towns of
France; and the inferior ranks of people, being elderly maintained
by the expense of the members of the courts of justice, and of those
who come to plead before them, are in general idle and poor. The great
trade of Rouen and Bordeaux seems to be altogether the effect of their
situation. Rouen is necessarily the entrepot of almost all the goods
which are brought either from foreign countries, or from the
maritime provinces of France, for the consumption of the great city of
Paris. Bordeaux is in the same manner the entrepot of the wines
which grow upon the banks of the Garonne, and of the rivers which
run into it, one of the richest wine countries in the world, and which
seems to produce the wine fittest for exportation, or best suited to
the taste of foreign nations. Such advantageous situations necessarily
attract a great capital by the great employment which they afford
it; and the employment of this capital is the cause of the industry of
those two cities. In the other parliament towns of France, very little
more capital seems to be employed than what is necessary for supplying
their own consumption; that is, little more than the smallest
capital which can be employed in them. The same thing may be said of
Paris, Madrid, and Vienna. Of those three cities, Paris is by far
the most industrious; but Paris itself is the principal market of
all the manufactures established at Paris, and its own consumption
is the principal object of all the trade which it carries on.
London, Lisbon, and Copenhagen, are, perhaps, the only three cities in
Europe which are both the constant residence of a court, and can at
the same time be considered as trading cities, or as cities which
trade not only for their own consumption, but for that of other cities
and countries. The situation of all the three is extremely
advantageous, and naturally fits them to be the entrepots of a great
part of the goods destined for the consumption of distant places. In a
city where a great revenue is spent, to employ with advantage a
capital for any other purpose than for supplying the consumption of
that city is probably more difficult than in one in which the inferior
ranks of people have no other maintenance but what they derive from
the employment of such a capital. The idleness of the greater part
of the people who are maintained by the expense of revenue corrupts,
it is probable, the industry of those who ought to be maintained by
the employment of capital, and renders it less advantageous to
employ a capital there than in other places. There was little trade or
industry in Edinburgh before the union. When the Scotch Parliament was
no longer to be assembled in it, when it ceased to be the necessary
residence of the principal nobility and gentry of Scotland, it
became a city of some trade and industry. It still continues, however,
to be the residence of the principal courts of justice in Scotland, of
the Boards of Customs and Excise, etc. A considerable revenue,
therefore, still continues to be spent in it. In trade and industry it
is much inferior to Glasgow, of which the inhabitants are chiefly
maintained by the employment of capital. The inhabitants of a large
village, it has sometimes been observed, after having made
considerable progress in manufactures, have become idle and poor in
consequence of a great lord having taken up his residence in their
neighbourhood.

    The proportion between capital and revenue, therefore, seems
everywhere to regulate the proportion between industry and idleness.
Wherever capital predominates, industry prevails: wherever revenue,
idleness. Every increase or diminution of capital, therefore,
naturally tends to increase or diminish the real quantity of industry,
the number of productive hands, and consequently the exchangeable
value of the annual produce of the land and labour of the country, the
real wealth and revenue of all its inhabitants.

    Capitals are increased by parsimony, and diminished by prodigality
and misconduct.

    Whatever a person saves from his revenue he adds to his capital,
and either employs it himself in maintaining an additional number of
productive hands, or enables some other person to do so, by lending it
to him for an interest, that is, for a share of the profits. As the
capital of an individual can be increased only by what he saves from
his annual revenue or his annual gains, so the capital of a society,
which is the same with that of all the individuals who compose it, can
be increased only in the same manner.

    Parsimony, and not industry, is the immediate cause of the
increase of capital. Industry, indeed, provides the subject which
parsimony accumulates. But whatever industry might acquire, if
parsimony did not save and store up, the capital would never be the
greater.

    Parsimony, by increasing the fund which is destined for the
maintenance of productive hands, tends to increase the number of those
hands whose labour adds to the value of the subject upon which it is
bestowed. It tends, therefore, to increase the exchangeable value of
the annual produce of the land and labour of the country. It puts into
motion an additional quantity of industry, which gives an additional
value to the annual produce.

    What is annually saved is as regularly consumed as what is
annually spent, and nearly in the same time too; but it is consumed by
a different set of people. That portion of his revenue which a rich
man annually spends is in most cases consumed by idle guests and
menial servants, who leave nothing behind them in return for their
consumption. That portion which he annually saves, as for the sake
of the profit it is immediately employed as a capital, is consumed
in the same manner, and nearly in the same time too, but by a
different set of people, by labourers, manufacturers, and
artificers, who reproduce with a profit the value of their annual
consumption. His revenue, we shall suppose, is paid him in money.
Had he spent the whole, the food, clothing, and lodging, which the
whole could have purchased, would have been distributed among the
former set of people. By saving a part of it, as that part is for
the sake of the profit immediately employed as a capital either by
himself or by some other person, the food, clothing, and lodging,
which may be purchased with it, are necessarily reserved for the
latter. The consumption is the same, but the consumers are different.

    By what a frugal man annually saves, he not only affords
maintenance to an additional number of productive hands, for that or
the ensuing year, but, like the founder of a public workhouse, he
establishes as it were a perpetual fund for the maintenance of an
equal number in all times to come. The perpetual allotment and
destination of this fund, indeed, is not always guarded by any
positive law, by any trust-right or deed of mortmain. It is always
guarded, however, by a very powerful principle, the plain and
evident interest of every individual to whom any share of it shall
ever belong. No part of it can ever afterwards be employed to maintain
any but productive hands without an evident loss to the person who
thus perverts it from its proper destination.

    The prodigal perverts it in this manner. By not confining his
expense within his income, he encroaches upon his capital. Like him
who perverts the revenues of some pious foundation to profane
purposes, he pays the wages of idleness with those funds which the
frugality of his forefathers had, as it were, consecrated to the
maintenance of industry. By diminishing the funds destined for the
employment of productive labour, he necessarily diminishes, so far
as it depends upon him, the quantity of that labour which adds a value
to the subject upon which it is bestowed, and, consequently, the value
of the annual produce of the land and labour of the whole country, the
real wealth and revenue of its inhabitants. If the prodigality of some
was not compensated by the frugality of others, the conduct of every
prodigal, by feeding the idle with the bread of the industrious, tends
not only to beggar himself, but to impoverish his country.

    Though the expense of the prodigal should be altogether in
home-made, and no part of it in foreign commodities, its effect upon
the productive funds of the society would still be the same. Every
year there would still be a certain quantity of food and clothing,
which ought to have maintained productive, employed in maintaining
unproductive hands. Every year, therefore, there would still be some
diminution in what would otherwise have been the value of the annual
produce of the land and labour of the country.

    This expense, it may be said indeed, not being in foreign goods,
and not occasioning any exportation of gold and silver, the same
quantity of money would remain in the country as before. But if the
quantity of food and clothing, which were thus consumed by
unproductive, had been distributed among productive hands, they
would have reproduced, together with a profit, the full value of their
consumption. The same quantity of money would in this case equally
have remained in the country, and there would besides have been a
reproduction of an equal value of consumable goods. There would have
been two values instead of one.

    The same quantity of money, besides, cannot long remain in any
country in which the value of the annual produce diminishes. The
sole use of money is to circulate consumable goods. By means of it,
provisions, materials, and finished work, are bought and sold, and
distributed to their proper consumers. The quantity of money,
therefore, which can be annually employed in any country must be
determined by the value of the consumable goods annually circulated
within it. These must consist either in the immediate produce of the
land and labour of the country itself, or in something which had been,
purchased with some part of that produce. Their value, therefore, must
diminish as the value of that produce diminishes, and along with it
the quantity of money which can be employed in circulating them. But
the money which by this annual diminution of produce is annually
thrown out of domestic circulation will not be allowed to lie idle.
The interest of whoever possesses it requires that it should be
employed. But having no employment at home, it will, in spite of all
laws and prohibitions, be sent abroad, and employed in purchasing
consumable goods which may be of some use at home. Its annual
exportation will in this manner continue for some time to add
something to the annual consumption of the country beyond the value of
its own annual produce. What in the days of its prosperity had been
saved from that annual produce, and employed in purchasing gold and
silver, will contribute for some little time to support its
consumption in adversity. The exportation of gold and silver is, in
this case, not the cause, but the effect of its declension, and may
even, for some little time, alleviate the misery of that declension.

    The quantity of money, on the contrary, must in every country
naturally increase as the value of the annual produce increases. The
value of the consumable goods annually circulated within the society
being greater will require a greater quantity of money to circulate
them. A part of the increased produce, therefore, will naturally be
employed in purchasing, wherever it is to be had, the additional
quantity of gold and silver necessary for circulating the rest. The
increase of those metals will in this case be the effect, not the
cause, of the public prosperity. Gold and silver are purchased
everywhere in the same manner. The food, clothing, and lodging, the
revenue and maintenance of all those whose labour or stock is employed
in bringing them from the mine to the market, is the price paid for
them in Peru as well as in England. The country which has this price
to pay will never be long without the quantity of those metals which
it has occasion for; and no country will ever long retain a quantity
which it has no occasion for.

    Whatever, therefore, we may imagine the real wealth and revenue of
a country to consist in, whether in the value of the annual produce of
its land and labour, as plain reason seems to dictate; or in the
quantity of the precious metals which circulate within it, as vulgar
prejudices suppose; in either view of the matter, every prodigal
appears to be a public enemy, and every frugal man a public
benefactor.

    The effects of misconduct are often the same as those of
prodigality. Every injudicious and unsuccessful project in
agriculture, mines, fisheries, trade, or manufactures, tends in the
same manner to diminish the funds destined for the maintenance of
productive labour. In every such project, though the capital is
consumed by productive hands only, yet, as by the injudicious manner
in which they are employed they do not reproduce the full value of
their consumption, there must always be some diminution in what
would otherwise have been the productive funds of the society.

    It can seldom happen, indeed, that the circumstances of a great
nation can be much affected either by the prodigality or misconduct of
individuals; the profusion or imprudence of some being always more
than compensated by the frugality and good conduct of others.

    With regard to profusion, the principle which prompts to expense
is the passion for present enjoyment; which, though sometimes
violent and very difficult to be restrained, is in general only
momentary and occasional. But the principle which prompts to save is
the desire of bettering our condition, a desire which, though
generally calm and dispassionate, comes with us from the womb, and
never leaves us till we go into the grave. In the whole interval which
separates those two moments, there is scarce perhaps a single
instant in which any man is so perfectly and completely satisfied with
his situation as to be without any wish of alteration or improvement
of any kind. An augmentation of fortune is the means by which the
greater part of men propose and wish to better their condition. It
is the means the most vulgar and the most obvious; and the most likely
way of augmenting their fortune is to save and accumulate some part of
what they acquire, either regularly and annually, or upon some
extraordinary occasions. Though the principle of expense, therefore,
prevails in almost all men upon some occasions, and in some men upon
almost all occasions, yet in the greater part of men, taking the whole
course of their life at an average, the principle of frugality seems
not only to predominate, but to predominate very greatly.

    With regard to misconduct, the number of prudent and successful
undertakings is everywhere much greater than that of injudicious and
unsuccessful ones. After all our complaints of the frequency of
bankruptcies, the unhappy men who fall into this misfortune make but a
very small part of the whole number engaged in trade, and all other
sorts of business; not much more perhaps than one in a thousand.
Bankruptcy is perhaps the greatest and most humiliating calamity which
can befall an innocent man. The greater part of men, therefore, are
sufficiently careful to avoid it. Some, indeed, do not avoid it; as
some do not avoid the gallows.

    Great nations are never impoverished by private, though they
sometimes are by public prodigality and misconduct. The whole, or
almost the whole public revenue, is in most countries employed in
maintaining unproductive hands. Such are the people who compose a
numerous and splendid court, a great ecclesiastical establishment,
great fleets and armies, who in time of peace produce nothing, and
in time of war acquire nothing which can compensate the expense of
maintaining them, even while the war lasts. Such people, as they
themselves produce nothing, are all maintained by the produce of other
men's labour. When multiplied, therefore, to an unnecessary number,
they may in a particular year consume so great a share of this
produce, as not to leave a sufficiency for maintaining the
productive labourers, who should reproduce it next year. The next
year's produce, therefore, will be less than that of the foregoing,
and if the same disorder should continue, that of the third year
will be still less than that of the second. Those unproductive
hands, who should be maintained by a part only of the spare revenue of
the people, may consume so great a share of their whole revenue, and
thereby oblige so great a number to encroach upon their capitals, upon
the funds destined for the maintenance of productive labour, that
all the frugality and good conduct of individuals may not be able to
compensate the waste and degradation of produce occasioned by this
violent and forced encroachment.

    This frugality and good conduct, however, is upon most
occasions, it appears from experience, sufficient to compensate, not
only the private prodigality and misconduct of individuals, but the
public extravagance of government. The uniform, constant, and
uninterrupted effort of every man to better his condition, the
principle from which public and national, as well as private
opulence is originally derived, is frequently powerful enough to
maintain the natural progress of things towards improvement, in
spite both of the extravagance of government and of the greatest
errors of administration. Like the unknown principle of animal life,
it frequently restores health and vigour to the constitution, in
spite, not only of the disease, but of the absurd prescriptions of the
doctor.

    The annual produce of the land and labour of any nation can be
increased in its value by no other means but by increasing either
the number of its productive labourers, or the productive powers of
those labourers who had before been employed. The number of its
productive labourers, it is evident, can never be much increased,
but in consequence of an increase of capital, or of the funds destined
for maintaining them. The productive powers of the same number of
labourers cannot be increased, but in consequence either of some
addition and improvement to those machines and instruments which
facilitate and abridge labour; or of a more proper division and
distribution of employment. In either case an additional capital is
almost always required. It is by means of an additional capital only
that the undertaker of any work can either provide his workmen with
better machinery or make a more proper distribution of employment
among them. When the work to be done consists of a number of parts, to
keep every man constantly employed in one way requires a much
greater capital than where every man is occasionally employed in every
different part of the work. When we compare, therefore, the state of a
nation at two different periods, and find, that the annual produce
of its land and labour is evidently greater at the latter than at
the former, that its lands are better cultivated, its manufactures
more numerous and more flourishing, and its trade more extensive, we
may be assured that its capital must have increased during the
interval between those two periods, and that more must have been added
to it by the good conduct of some than had been taken from it either
by the private misconduct of others or by the public extravagance of
government. But we shall find this to have been the case of almost all
nations, in all tolerably quiet and peaceable times, even of those who
have not enjoyed the most prudent and parsimonious governments. To
form a right judgment of it, indeed, we must compare the state of
the country at periods somewhat distant from one another. The progress
is frequently so gradual that, at near periods, the improvement is not
only not sensible, but from the declension either of certain
branches of industry, or of certain districts of the country, things
which sometimes happen though the country in general be in great
prosperity, there frequently arises a suspicion that the riches and
industry of the whole are decaying.

    The annual produce of the land and labour of England, for example,
is certainly much greater than it was, a little more than a century
ago, at the restoration of Charles II. Though, at present, few people,
I believe, doubt of this, yet during this period, five years have
seldom passed away in which some book or pamphlet has not been
published, written, too, with such abilities as to gain some authority
with the public, and pretending to demonstrate that the wealth of
the nation was fast declining, that the country was depopulated,
agriculture neglected, manufactures decaying, and trade undone. Nor
have these publications been all party pamphlets, the wretched
offspring of falsehood and venality. Many of them have been written by
very candid and very intelligent people, who wrote nothing but what
they believed, and for no other reason but because they believed it.

    The annual produce of the land and labour of England, again, was
certainly much greater at the Restoration, than we can suppose it to
have been about an hundred years before, at the accession of
Elizabeth. At this period, too, we have all reason to believe, the
country was much more advanced in improvement than it had been about a
century before, towards the close of the dissensions between the
houses of York and Lancaster. Even then it was, probably, in a
better condition than it had been at the Norman Conquest, and at the
Norman Conquest than during the confusion of the Saxon Heptarchy. Even
at this early period, it was certainly a more improved country than at
the invasion of Julius Caesar, when its inhabitants were nearly in the
same state with the savages in North America.

    In each of those periods, however, there was not only much private
and public profusion, many expensive and unnecessary wars, great
perversion of the annual produce from maintaining productive to
maintain unproductive hands; but sometimes, in the confusion of
civil discord, such absolute waste and destruction of stock, as
might be supposed, not only to retard, as it certainly did, the
natural accumulation of riches, but to have left the country, at the
end of the period, poorer than at the beginning. Thus, in the happiest
and most fortunate period of them all, that which has passed since the
Restoration, how many disorders and misfortunes have occurred,
which, could they have been foreseen, not only the impoverishment, but
the total ruin of the country would have been expected from them?
The fire and the plague of London, the two Dutch wars, the disorders
of the Revolution, the war in Ireland, the four expensive French
wars of 1688, 1702, 1742, and 1756, together with the two rebellions
of 1715 and 1745. In the course of the four French wars, the nation
has contracted more than a hundred and forty-five millions of debt,
over and above all the other extraordinary annual expense which they
occasioned, so that the whole cannot be computed at less than two
hundred millions. So great a share of the annual produce of the land
and labour of the country has, since the Revolution, been employed
upon different occasions in maintaining an extraordinary number of
unproductive hands. But had not those wars given this particular
direction to so large a capital, the greater part of it would
naturally have been employed in maintaining productive hands, whose
labour would have replaced, with a profit, the whole value of their
consumption. The value of the annual produce of the land and labour of
the country would have been considerably increased by it every year,
and every year's increase would have augmented still more that of
the following year. More houses would have been built, more lands
would have been improved, and those which had been improved before
would have been better cultivated, more manufactures would have been
established. and those which had been established before would have
been more extended; and to what height the real wealth and revenue
of the country might, by this time, have been raised, it is not
perhaps very easy even to imagine.

    But though the profusion of government must, undoubtedly, have
retarded the natural progress of England towards wealth and
improvement, it has not been able to stop it. The annual produce of
its land and labour is, undoubtedly, much greater at present than it
was either at the Restoration or at the Revolution. The capital,
therefore, annually employed in cultivating this land, and in
maintaining this labour, must likewise be much greater. In the midst
of all the exactions of government, this capital has been silently and
gradually accumulated by the private frugality and good conduct of
individuals, by their universal, continual, and uninterrupted effort
to better their own condition. It is this effort, protected by law and
allowed by liberty to exert itself in the manner that is most
advantageous, which has maintained the progress of England towards
opulence and improvement in almost all former times, and which, it
is to be hoped, will do so in all future times. England, however, as
it has never been blessed with a very parsimonious government, so
parsimony has at no time been the characteristical virtue of its
inhabitants. It is the highest impertinence and presumption,
therefore, in kings and ministers, to pretend to watch over the
economy of private people, and to restrain their expense, either by
sumptuary laws, or by prohibiting the importation of foreign luxuries.
They are themselves always, and without any exception, the greatest
spendthrifts in the society. Let them look well after their own
expense, and they may safely trust private people with theirs. If
their own extravagance does not ruin the state, that of their subjects
never will.

    As frugality increases and prodigality diminishes the public
capital, so the conduct of those whose expense just equals their
revenue, without either accumulating or encroaching, neither increases
nor diminishes it. Some modes of expense, however, seem to
contribute more to the growth of public opulence than others.

    The revenue of an individual may be spent either in things which
are consumed immediately, and in which one day's expense can neither
alleviate nor support that of another, or it may be spent in things
more durable, which can therefore be accumulated, and in which every
day's expense may, as he chooses, either alleviate or support and
heighten the effect of that of the following day. A man of fortune,
for example, may either spend his revenue in a profuse and sumptuous
table, and in maintaining a great number of menial servants, and a
multitude of dogs and horses; or contenting himself with a frugal
table and few attendants, he may lay out the greater part of it in
adorning his house or his country villa, in useful or ornamental
buildings, in useful or ornamental furniture, in collecting books,
statues, pictures; or in things more frivolous, jewels, baubles,
ingenious trinkets of different kinds; or, what is most trifling of
all, in amassing a great wardrobe of fine clothes, like the
favourite and minister of a great prince who died a few years ago.
Were two men of equal fortune to spend their revenue, the one
chiefly in the one way, the other in the other, the magnificence of
the person whose expense had been chiefly in durable commodities,
would be continually increasing, every day's expense contributing
something to support and heighten the effect of that of the
following day: that of the other, on the contrary, would be no greater
at the end of the period than at the beginning. The former, too,
would, at the end of the period, be the richer man of the two. He
would have a stock of goods of some kind or other, which, though it
might not be worth all that it cost, would always be worth
something. No trace or vestige of the expense of the latter would
remain, and the effects of ten or twenty years profusion would be as
completely annihilated as if they had never existed.

    As the one mode of expense is more favourable than the other to
the opulence of an individual, so is it likewise to that of a
nation. The houses, the furniture, the clothing of the rich, in a
little time, become useful to the inferior and middling ranks of
people. They are able to purchase them when their superiors grow weary
of them, and the general accommodation of the whole people is thus
gradually improved, when this mode of expense becomes universal
among men of fortune. In countries which have long been rich, you will
frequently find the inferior ranks of people in possession both of
houses and furniture perfectly good and entire, but of which neither
the one could have been built, nor the other have been made for
their use. What was formerly a seat of the family of Seymour is now an
inn upon the Bath road. The marriage-bed of James the First of Great
Britain, which his queen brought with her from Denmark as a present
fit for a sovereign to make to a sovereign, was, a few years ago,
the ornament of an alehouse at Dunfermline. In some ancient cities,
which either have been long stationary, or have gone somewhat to
decay, you will sometimes scarce find a single house which could
have been built for its present inhabitants. If you go into those
houses too, you will frequently find many excellent, though antiquated
pieces of furniture, which are still very fit for use, and which could
as little have been made for them. Noble palaces, magnificent
villas, great collections of books, statues, pictures and other
curiosities, are frequently both an ornament and an honour, not only
to the neighbourhood, but to the whole country to which they belong.
Versailles is an ornament and an honour to France, Stowe and Wilton to
England. Italy still continues to command some sort of veneration by
the number of monuments of this kind which it possesses, though the
wealth which produced them has decayed, and though the genius which
planned them seems to be extinguished, perhaps from not having the
same employment.

    The expense too, which is laid out in durable commodities, is
favourable, not only to accumulation, but to frugality. If a person
should at any time exceed in it, he can easily reform without exposing
himself to the censure of the public. To reduce very much the number
of his servants, to reform his table from great profusion to great
frugality, to lay down his equipage after he has once set it up, are
changes which cannot escape the observation of his neighbours, and
which are supposed to imply some acknowledgment of preceding bad
conduct. Few, therefore, of those who have once been so unfortunate as
to launch out too far into this sort of expense, have afterwards the
courage to reform, till ruin and bankruptcy oblige them. But if a
person has, at any time, been at too great an expense in building,
in furniture, in books or pictures, no imprudence can be inferred from
his changing his conduct. These are things in which further expense is
frequently rendered unnecessary by former expense; and when a person
stops short, he appears to do so, not because he has exceeded his
fortune, but because he has satisfied his fancy.

    The expense, besides, that is laid out in durable commodities
gives maintenance, commonly, to a greater number of people than that
which is employed in the most profuse hospitality. Of two or three
hundredweight of provisions, which may sometimes be served up at a
great festival, one half, perhaps, is thrown to the dunghill, and
there is always a great deal wasted and abused. But if the expense
of this entertainment had been employed in setting to work masons,
carpenters, upholsterers, mechanics, etc., a quantity of provisions,
of equal value, would have been distributed among a still greater
number of people who would have bought them in pennyworths and pound
weights, and not have lost or thrown away a single ounce of them. In
the one way, besides, this expense maintains productive, in the
other unproductive hands. In the one way, therefore, it increases,
in the other, it does not increase, the exchangeable value of the
annual produce of the land and labour of the country.

    I would not, however, by all this be understood to mean that the
one species of expense always betokens a more liberal or generous
spirit than the other. When a man of fortune spends his revenue
chiefly in hospitality, he shares the greater part of it with his
friends and companions; but when he employs it in purchasing such
durable commodities, he often spends the whole upon his own person,
and gives nothing to anybody without an equivalent. The latter species
of expense, therefore, especially when directed towards frivolous
objects, the little ornaments of dress and furniture, jewels,
trinkets, gewgaws, frequently indicates, not only a trifling, but a
base and selfish disposition. All that I mean is, that the one sort of
expense, as it always occasions some accumulation of valuable
commodities, as it is more favourable to private frugality, and,
consequently, to the increase of the public capital, and as it
maintains productive, rather than unproductive hands, conduces more
than the other to the growth of public opulence.

                            CHAPTER IV

                    Of Stock Lent at Interest

    THE stock which is lent at interest is always considered as a
capital by the lender. He expects that in due time it is to be
restored to him, and that in the meantime the borrower is to pay him a
certain annual rent for the use of it. The borrower may use it
either as a capital, or as a stock reserved for immediate consumption.
If he uses it as a capital, he employs it in the maintenance of
productive labourers, who reproduce the value with a profit. He can,
in this case, both restore the capital and pay the interest without
alienating or encroaching upon any other source of revenue. If he uses
it as a stock reserved for immediate consumption, he acts the part
of a prodigal, and dissipates in the maintenance of the idle what
was destined for the support of the industrious. He can, in this case,
neither restore the capital nor pay the interest without either
alienating or encroaching upon some other source of revenue, such as
the property or the rent of land.

    The stock which is lent at interest is, no doubt, occasionally
employed in both these ways, but in the former much more frequently
than in the latter. The man who borrows in order to spend will soon be
ruined, and he who lends to him will generally have occasion to repent
of his folly. To borrow or to lend for such a purpose, therefore, is
in all cases, where gross usury is out of the question, contrary to
the interest of both parties; and though it no doubt happens sometimes
that people do both the one and the other; yet, from the regard that
all men have for their own interest, we may be assured that it
cannot happen so very frequently as we are sometimes apt to imagine.
Ask any rich man of common prudence to which of the two sorts of
people he has lent the greater part of his stock, to those who, he
thinks, will employ it profitably, or to those who will spend it idly,
and he will laugh at you for proposing the question. Even among
borrowers, therefore, not the people in the world most famous for
frugality, the number of the frugal and industrious surpasses
considerably that of the prodigal and idle.

    The only people to whom stock is commonly lent, without their
being expected to make any very profitable use of it, are country
gentlemen who borrow upon mortgage. Even they scarce ever borrow
merely to spend. What they borrow, one may say, is commonly spent
before they borrow it. They have generally consumed so great a
quantity of goods, advanced to them upon credit by shopkeepers and
tradesmen, that they find it necessary to borrow at interest in
order to pay the debt. The capital borrowed replaces the capitals of
those shopkeepers and tradesmen, which the country gentlemen could not
have replaced from the rents of their estates. It is not properly
borrowed in order to be spent, but in order to replace a capital which
had been spent before.

    Almost all loans at interest are made in money, either of paper,
or of gold and silver. But what the borrower really wants, and what
the lender really supplies him with, is not the money, but the money's
worth, or the goods which it can purchase. If he wants it as a stock
for immediate consumption, it is those goods only which he can place
in that stock. If he wants it as a capital for employing industry,
it is from those goods only that the industrious can be furnished with
the tools, materials, and maintenance necessary for carrying on
their work. By means of the loan, the lender, as it were, assigns to
the borrower his right to a certain portion of the annual produce of
the land and labour of the country to be employed as the borrower
pleases.

    The quantity of stock, therefore, or, as it is commonly expressed,
of money which can be lent at interest in any country, is not
regulated by the value of the money, whether paper or coin, which
serves as the instrument of the different loans made in that
country, but by the value of that part of the annual produce which, as
soon as it comes either from the ground, or from the hands of the
productive labourers, is destined not only for replacing a capital,
but such a capital as the owner does not care to be at the trouble
of employing himself. As such capitals are commonly lent out and
paid back in money, they constitute what is called the monied
interest. It is distinct, not only from the landed, but from the
trading and manufacturing interests, as in these last the owners
themselves employ their own capitals. Even in the monied interest,
however, the money is, as it were, but the deed of assignment, which
conveys from one hand to another those capitals which the owners do
not care to employ themselves. Those capitals may be greater in almost
any proportion than the amount of the money which serves as the
instrument of their conveyance; the same pieces of money
successively serving for many different loans, as well as for many
different purchases. A, for example, lends to W a thousand pounds,
with which W immediately purchases of B a thousand pounds' worth of
goods. B having no occasion for the money himself, lends the identical
pieces to X, with which X immediately purchases of C another
thousand pounds' worth of goods. C in the same manner, and for the
same reason, lends them to Y, who again purchases goods with them of
D. In this manner the same pieces, either of coin or paper, may in the
course of a few days, serve as the instrument of three different
loans, and of three different purchases, each of which is, in value,
equal to the whole amount of those pieces. What the three monied men
A, B, and C assign to the three borrowers, W, X, Y, is the power of
making those purchases. In this power consist both the value and the
use of the loans. The stock lent by the three monied men is equal to
the value of the goods which can be purchased with it, and is three
times greater than that of the money with which the purchases are
made. Those loans however, may be all perfectly well secured, the
goods purchased by the different debtors being so employed as, in
due time, to bring back, with a profit, an equal value either of
coin or of paper. And as the same pieces of money can thus serve as
the instrument of different loans to three, or for the same reason, to
thirty times their value, so they may likewise successively serve as
the instrument of repayment.

    A capital lent at interest may, in this manner, be considered as
an assignment from the lender to the borrowers of a certain
considerable portion of the annual produce; upon condition that the
borrower in return shall, during the continuance of the loan, annually
assign to the lender a smaller portion, called the interest; and at
the end of it a portion equally considerable with that which had
originally been assigned to him, called the repayment. Though money,
either coin or paper, serves generally as the deed of assignment
both to the smaller and to the more considerable portion, it is itself
altogether different from what is assigned by it.

    In proportion as that share of the annual produce which, as soon
as it comes either from the ground, or from the hands of the
productive labourers, is destined for replacing a capital, increases
in any country, what is called the monied interest naturally increases
with it. The increase of those particular capitals from which the
owners wish to derive a revenue, without being at the trouble of
employing them themselves, naturally accompanies the general
increase of capitals; or, in other words, as stock increases, the
quantity of stock to be lent at interest grows gradually greater and
greater.

    As the quantity of stock to be lent at interest increases, the
interest, or the price which must be paid for the use of that stock,
necessarily diminishes, not only from those general causes which
make the market price of things commonly diminish as their quantity
increases, but from other causes which are peculiar to this particular
case. As capitals increase in any country, the profits which can be
made by employing them necessarily diminish. It becomes gradually more
and more difficult to find within the country a profitable method of
employing any new capital. There arises in consequence a competition
between different capitals, the owner of one endeavouring to get
possession of that employment which is occupied by another. But upon
most occasions he can hope to jostle that other out of this employment
by no other means but by dealing upon more reasonable terms. He must
not only sell what he deals in somewhat cheaper, but in order to get
it to sell, he must sometimes, too, buy it dearer. The demand for
productive labour, by the increase of the funds which are destined for
maintaining it, grows every day greater and greater. Labourers
easily find employment, but the owners of capitals find it difficult
to get labourers to employ. Their competition raises the wages of
labour and sinks the profits of stock. But when the profits which
can be made by the use of a capital are in this manner diminished,
as it were, at both ends, the price which can be paid for the use of
it, that is, the rate of interest, must necessarily be diminished with
them.

    Mr. Locke, Mr. Law, and Mr. Montesquieu, as well as many other
writers, seem to have imagined that the increase of the quantity of
gold and silver, in consequence of the discovery of the Spanish West
Indies, was the real cause of the lowering of the rate of interest
through the greater part of Europe. Those metals, they say, having
become of less value themselves, the use of any particular portion
of them necessarily became of less value too, and consequently the
price which could be paid for it. This notion, which at first sight
seems plausible, has been so fully exposed by Mr. Hume that it is,
perhaps, unnecessary to say anything more about it. The following very
short and plain argument, however, may serve to explain more
distinctly the fallacy which seems to have misled those gentlemen.

    Before the discovery of the Spanish West Indies, ten per cent
seems to have been the common rate of interest through the greater
part of Europe. It has since that time in different countries sunk
to six, five, four, and three per cent. Let us suppose that in every
particular country the value of silver has sunk precisely in the
same proportion as the rate of interest; and that in those
countries, for example, where interest has been reduced from ten to
five per cent, the same quantity of silver can now purchase just
half the quantity of goods which it could have purchased before.
This supposition will not, I believe, be found anywhere agreeable to
the truth, but it is the most favourable to the opinion which we are
going to examine; and even upon this supposition it is utterly
impossible that the lowering of the value of silver could have the
smallest tendency to lower the rate of interest. If a hundred pounds
are in those countries now of no more value than fifty pounds were
then, ten pounds must now be of no more value than five pounds were
then. Whatever were the causes which lowered the value of the capital,
the same must necessarily have lowered that of the interest, and
exactly in the same proportion. The proportion between the value of
the capital and that of the interest must have remained the same,
though the rate had been altered. By altering the rate, on the
contrary, the proportion between those two values is necessarily
altered. If a hundred pounds now are worth no more than fifty were
then, five pounds now can be worth no more than two pounds ten
shillings were then. By reducing the rate of interest, therefore, from
ten to five per cent, we give for the use of a capital, which is
supposed to be equal to one half of its former value, an interest
which is equal to one fourth only of the value of the former interest.

    Any increase in the quantity of silver, while that of the
commodities circulated by means of it remained the same, could have no
other effect than to diminish the value of that metal. The nominal
value of all sorts of goods would be greater, but their real value
would be precisely the same as before. They would be exchanged for a
greater number of pieces of silver; but the quantity of labour which
they could command, the number of people whom they could maintain
and employ, would be precisely the same. The capital of the country
would be the same, though a greater number of pieces might be
requisite for conveying any equal portion of it from one hand to
another. The deeds of assignment, like the conveyances of a verbose
attorney, would be more cumbersome, but the thing assigned would be
precisely the same as before, and could produce only the same effects.
The funds for maintaining productive labour being the same, the demand
for it would be the same. Its price or wages, therefore, though
nominally greater, would really be the same. They would be paid in a
greater number of pieces of silver; but they would purchase only the
same quantity of goods. The profits of stock would be the same both
nominally and really. The wages of labour are commonly computed by the
quantity of silver which is paid to the labourer. When that is
increased, therefore, his wages appear to be increased, though they
may sometimes be no greater than before. But the profits of stock
are not computed by the number of pieces of silver with which they are
paid, but by the proportion which those pieces bear to the whole
capital employed. Thus in a particular country five shillings a week
are said to be the common wages of labour, and ten per cent the common
profits of stock. But the whole capital of the country being the
same as before, the competition between the different capitals of
individuals into which it was divided would likewise be the same. They
would all trade with the same advantages and disadvantages. The common
proportion between capital and profit, therefore, would be the same,
and consequently the common interest of money; what can commonly be
given for the use of money being necessarily regulated by what can
commonly be made by the use of it.

    Any increase in the quantity of commodities annually circulated
within the country, while that of the money which circulated them
remained the same, would, on the contrary, produce many other
important effects, besides that of raising the value of the money. The
capital of the country, though it might nominally be the same, would
really be augmented. It might continue to be expressed by the same
quantity of money, but it would command a greater quantity of
labour. The quantity of productive labour which it could maintain
and employ would be increased, and consequently the demand for that
labour. Its wages would naturally rise with the demand, and yet
might appear to sink. They might be paid with a smaller quantity of
money, but that smaller quantity might purchase a greater quantity
of goods than a greater had done before. The profits of stock would be
diminished both really and in appearance. The whole capital of the
country being augmented, the competition between the different
capitals of which it was composed would naturally be augmented along
with it. The owners of those particular capitals would be obliged to
content themselves with a smaller proportion of the produce of that
labour which their respective capitals employed. The interest of
money, keeping pace always with the profits of stock, might, in this
manner, be greatly diminished, though the value of money, or the
quantity of goods which any particular sum could purchase, was greatly
augmented.

    In some countries the interest of money has been prohibited by
law. But as something can everywhere be made by the use of money,
something ought everywhere to be paid for the use of it. This
regulation, instead of preventing, has been found from experience to
increase the evil of usury; the debtor being obliged to pay, not
only for the use of the money, but for the risk which his creditor
runs by accepting a compensation for that use. He is obliged, if one
may say so, to insure his creditor from the penalties of usury.

    In countries where interest is permitted, the law, in order to
prevent the extortion of usury, generally fixes the highest rate which
can be taken without incurring a penalty. This rate ought always to be
somewhat above the lowest market price, or the price which is commonly
paid for the use of money by those who can give the most undoubted
security. If this legal rate should be fixed below the lowest market
rate, the effects of this fixation must be nearly the same as those of
a total prohibition of interest. The creditor will not lend his
money for less than the use of it is worth, and the debtor must pay
him for the risk which he runs by accepting the full value of that
use. If it is fixed precisely at the lowest market price, it ruins
with honest people, who respect the laws of their country, the
credit of all those who cannot give the very best security, and
obliges them to have recourse to exorbitant usurers. In a country,
such as Great Britain, where money is lent to government at three
per cent and to private people upon a good security at four and four
and a half, the present legal rate, five per cent, is perhaps as
proper as any.

    The legal rate, it is to be observed, though it ought to be
somewhat above, ought not to be much above the lowest market rate.
If the legal rate of interest in Great Britain, for example, was fixed
so high as eight or ten per cent, the greater part of the money
which was to be lent would be lent to prodigals and projectors, who
alone would be willing to give this high interest. Sober people, who
will give for the use of money no more than a part of what they are
likely to make by the use of it, would not venture into the
competition. A great part of the capital of the country would thus
be kept out of the hands which were most likely to make a profitable
and advantageous use of it, and thrown into those which were most
likely to waste and destroy it. Where the legal rate of interest, on
the contrary, is fixed but a very little above the lowest market rate,
sober people are universally preferred, as borrowers, to prodigals and
projectors. The person who lends money gets nearly as much interest
from the former as he dares to take from the latter, and his money
is much safer in the hands of the one set of people than in those of
the other. A great part of the capital of the country is thus thrown
into the hands in which it is most likely to be employed with
advantage.

    No law can reduce the common rate of interest below the lowest
ordinary market rate at the time when that law is made.
Notwithstanding the edict of 1766, by which the French king
attempted to reduce the rate of interest from five to four per cent,
money continued to be lent in France at five per cent, the law being
evaded in several different ways.

    The ordinary market price of land, it is to be observed, depends
everywhere upon the ordinary market rate of interest. The person who
has a capital from which he wishes to derive a revenue, without taking
the trouble to employ it himself, deliberates whether he should buy
land with it or lend it out at interest. The superior security of
land, together with some other advantages which almost everywhere
attend upon this species of property, will generally dispose him to
content himself with a smaller revenue from land than what he might
have by lending out his money at interest. These advantages are
sufficient to compensate a certain difference of revenue; but they
will compensate a certain difference only; and if the rent of land
should fall short of the interest of money by a greater difference,
nobody would buy land, which would soon reduce its ordinary price.
On the contrary, if the advantages should much more than compensate
the difference, everybody would buy land, which again would soon raise
its ordinary price. When interest was at ten per cent, land was
commonly sold for ten and twelve years' purchase. As interest sunk
to six, five, and four per cent, the price of land rose to twenty,
five-and-twenty, and thirty years' purchase. The market rate of
interest is higher in France than in England; and the common price
of land is lower. In England it commonly sells at thirty, in France at
twenty years' purchase.

                            CHAPTER V

              Of the Different Employment of Capitals

    THOUGH all capitals are destined for the maintenance of productive
labour only, yet the quantity of that labour which equal capitals
are capable of putting into motion varies extremely according to the
diversity of their employment; as does likewise the value which that
employment adds to the annual produce of the land and labour of the
country.

    A capital may be employed in four different ways: either, first,
in procuring the rude produce annually required for the use and
consumption of the society; or, secondly, in manufacturing and
preparing that rude produce for immediate use and consumption; or,
thirdly, in transporting either the rude or manufactured produce
from the places where they abound to those where they are wanted;
or, lastly, in dividing particular portions of either into such
small parcels as suit the occasional demands of those who want them.
In the first way are employed the capitals of all those who
undertake the improvement or cultivation of lands, mines, or
fisheries; in the second, those of all master manufacturers; in the
third, those of all wholesale merchants; and in the fourth, those of
all retailers. It is difficult to conceive that a capital should be
employed in any way which may not be classed under some one or other
of those four.

    Each of these four methods of employing a capital is essentially
necessary either to the existence or extension of the other three,
or to the general conveniency of the society.

    Unless a capital was employed in furnishing rude produce to a
certain degree of abundance, neither manufactures nor trade of any
kind could exist.

    Unless a capital was employed in manufacturing that part of the
rude produce which requires a good deal of preparation before it can
be fit for use and consumption, it either would never be produced,
because there could be no demand for it; or if it was produced
spontaneously, it would be of no value in exchange, and could add
nothing to the wealth of the society.

    Unless a capital was employed in transporting either the rude or
manufactured produce from the places where it abounds to those where
it is wanted, no more of either could be produced than was necessary
for the consumption of the neighbourhood. The capital of the
merchant exchanges the surplus produce of one place for that of
another, and thus encourages the industry and increases the enjoyments
of both.

    Unless a capital was employed in breaking and dividing certain
portions either of the rude or manufactured produce into such small
parcels as suit the occasional demands of those who want them, every
man would be obliged to purchase a greater quantity of the goods he
wanted than his immediate occasions required. If there was no such
trade as a butcher, for example, every man would be obliged to
purchase a whole ox or a whole sheep at a time. This would generally
be inconvenient to the rich, and much more so to the poor. If a poor
workman was obliged to purchase a month's or six months' provisions at
a time, a great part of the stock which he employs as a capital in the
instruments of his trade, or in the furniture of his shop, and which
yields him a revenue. he would be forced to place in that part of
his stock which is reserved for immediate consumption, and which
yields him no revenue. Nothing can be more convenient for such a
person than to be able to purchase his subsistence from day to day, or
even from hour to hour, as he wants it. He is thereby enabled to
employ almost his whole stock as a capital. He is thus enabled to
furnish work to a greater value, and the profit, which he makes by
it in this way, much more than compensates the additional price
which the profit of the retailer imposes upon the goods. The
prejudices of some political writers against shopkeepers and tradesmen
are altogether without foundation. So far is it from being necessary
either to tax them or to restrict their numbers that they can never be
multiplied so as to hurt the public, though they may so as to hurt one
another. The quantity of grocery goods, for example, which can be sold
in a particular town is limited by the demand of that town and its
neighbourhood. The capital, therefore, which can be employed in the
grocery trade cannot exceed what is sufficient to purchase that
quantity. If this capital is divided between two different grocers,
their competition will tend to make both of them sell cheaper than
if it were in the hands of one only; and if it were divided among
twenty, their competition would be just so much the greater, and the
chance of their combining together, in order to raise the price,
just so much the less. Their competition might perhaps ruin some of
themselves; but to take care of this is the business of the parties
concerned, and it may safely be trusted to their discretion. It can
never hurt either the consumer or the producer; on the contrary, it
must tend to make the retailers both sell cheaper and buy dearer
than if the whole trade was monopolized by one or two persons. Some of
them, perhaps, may sometimes decoy a weak customer to buy what he
has no occasion for. This evil, however, is of too little importance
to deserve the public attention, nor would it necessarily be prevented
by restricting their numbers. It is not the multitude of ale-houses,
to give the most suspicious example, that occasions a general
disposition to drunkenness among the common people; but that
disposition arising from other causes necessarily gives employment
to a multitude of ale-houses.

    The persons whose capitals are employed in any of those four
ways are themselves productive labourers. Their labour, when
properly directed, fixes and realizes itself in the subject or
vendible commodity upon which it is bestowed, and generally adds to
its price the value at least of their own maintenance and consumption.
The profits of the farmer, of the manufacturer, of the merchant, and
retailer, are all drawn from the price of the goods which the two
first produce, and the two last buy and sell. Equal capitals, however,
employed in each of those four different ways, will immediately put
into motion very different quantities of productive labour, and
augment, too, in very different proportions the value of the annual
produce of the land and labour of the society to which they belong.

    The capital of the retailer replaces, together with its profits,
that of the merchant of whom he purchases goods, and thereby enables
him to continue his business. The retailer himself is the only
productive labourer whom it immediately employs. In his profits
consists the whole value which its employment adds to the annual
produce of the land and labour of the society.

    The capital of the wholesale merchant replaces, together with
their profits, the capitals of the farmers and manufacturers of whom
he purchases the rude and manufactured produce which he deals in,
and thereby enables them to continue their respective trades. It is by
this service chiefly that he contributes indirectly to support the
productive labour of the society, and to increase the value of its
annual produce. His capital employs, too, the sailors and carriers who
transport his goods from one place to another, and it augments the
price of those goods by the value, not only of his profits, but of
their wages. This is all the productive labour which it immediately
puts into motion, and all the value which it immediately adds to the
annual produce. Its operation in both these respects is a good deal
superior to that of the capital of the retailer.

    Part of the capital of the master manufacturer is employed as a
fixed capital in the instruments of his trade, and replaces,
together with its profits, that of some other artificer of whom he
purchases them. Part of his circulating capital is employed in
purchasing materials, and replaces, with their profits, the capitals
of the farmers and miners of whom he purchases them. But a great
part of it is always, either annually, or in a much shorter period,
distributed among the different workmen whom he employs. It augments
the value of those materials by their wages, and by their matters'
profits upon the whole stock of wages, materials, and instruments of
trade employed in the business. It puts immediately into motion,
therefore, a much greater quantity of productive labour, and adds a
much greater value to the annual produce of the land and labour of the
society than an equal capital in the hands of any wholesale merchant.

    No equal capital puts into motion a greater quantity of productive
labour than that of the farmer. Not only his labouring servants, but
his labouring cattle, are productive labourers. In agriculture, too,
nature labours along with man; and though her labour costs no expense,
its produce has its value, as well as that of the most expensive
workmen. The most important operations of agriculture seem intended
not so much to increase, though they do that too, as to direct the
fertility of nature towards the production of the plants most
profitable to man. A field overgrown with briars and brambles may
frequently produce as great a quantity of vegetables as the best
cultivated vineyard or corn field. Planting and tillage frequently
regulate more than they animate the active fertility of nature; and
after all their labour, a great part of the work always remains to
be done by her. The labourers and labouring cattle, therefore,
employed in agriculture, not only occasion, like the workmen in
manufactures, the reproduction of a value equal to their own
consumption, or to the capital which employs them, together with its
owners' profits; but of a much greater value. Over and above the
capital of the farmer and all its profits, they regularly occasion the
reproduction of the rent of the landlord. This rent may be
considered as the produce of those powers of nature, the use of
which the landlord lends to the farmer. It is greater or smaller
according to the supposed extent of those powers, or in other words,
according to the supposed natural or improved fertility of the land.
It is the work of nature which remains after deducting or compensating
everything which can be regarded as the work of man. It is seldom less
than a fourth, and frequently more than a third of the whole
produce. No equal quantity of productive labour employed in
manufactures can ever occasion so great a reproduction. In them nature
does nothing; man does all; and the reproduction must always be in
proportion to the strength of the agents that occasion it. The capital
employed in agriculture, therefore, not only puts into motion a
greater quantity of productive labour than any equal capital
employed in manufactures, but in proportion, too, to the quantity of
productive labour which it employs, it adds a much greater value to
the annual produce of the land and labour of the country, to the
real wealth and revenue of its inhabitants. Of all the ways in which a
capital can be employed, it is by far the most advantageous to the
society.

    The capitals employed in the agriculture and in the retail trade
of any society must always reside within that society. Their
employment is confined almost to a precise spot, to the farm and to
the shop of the retailer. They must generally, too, though there are
some exceptions to this, belong to resident members of the society.

    The capital of a wholesale merchant, on the contrary, seems to
have no fixed or necessary residence anywhere, but may wander about
from place to place, according as it can either buy cheap or sell
dear.

    The capital of the manufacturer must no doubt reside where the
manufacture is carried on; but where this shall be is not always
necessarily determined. It may frequently be at a great distance
both from the place where the materials grow, and from that where
the complete manufacture is consumed. Lyons is very distant both
from the places which afford the materials of its manufactures, and
from those which consume them. The people of fashion in Sicily are
clothed in silks made in other countries, from the materials which
their own produces. Part of the wool of Spain is manufactured in Great
Britain, and some part of that cloth is afterwards sent back to Spain.

    Whether the merchant whose capital exports the surplus produce
of any society be a native or a foreigner is of very little
importance. If he is a foreigner, the number of their productive
labourers is necessarily less than if he had been a native by one
man only, and the value of their annual produce by the profits of that
one man. The sailors or carriers whom he employs may still belong
indifferently either to his country or to their country, or to some
third country, in the same manner as if he had been a native. The
capital of a foreigner gives a value to their surplus produce
equally with that of a native by exchanging it for something for which
there is a demand at home. It as effectually replaces the capital of
the person who produces that surplus, and as effectually enables him
to continue his business; the service by which the capital of a
wholesale merchant chiefly contributes to support the productive
labour, and to augment the value of the annual produce of the
society to which he belongs.

    It is of more consequence that the capital of the manufacturer
should reside within the country. It necessarily puts into motion a
greater quantity of productive labour, and adds a greater value to the
annual produce of the land and labour of the society. It may, however,
be very useful to the country, though it should not reside within
it. The capitals of the British manufacturers who work up the flax and
hemp annually imported from the coasts of the Baltic are surely very
useful to the countries which produce them. Those materials are a part
of the surplus produce of those countries which, unless it was
annually exchanged for something which is in demand there, would be of
no value, and would soon cease to be produced. The merchants who
export it replace the capitals of the people who produce it, and
thereby encourage them to continue the production; and the British
manufacturers replace the capitals of those merchants.

    A particular country, in the same manner as a particular person,
may frequently not have capital sufficient both to improve and
cultivate all its lands, to manufacture and prepare their whole rude
produce for immediate use and consumption, and to transport the
surplus part either of the rude or manufactured produce to those
distant markets where it can be exchanged for something for which
there is a demand at home. The inhabitants of many different parts
of Great Britain have not capital sufficient to improve and
cultivate all their lands. The wool of the southern counties of
Scotland is, a great part of it, after a long land carriage through
very bad roads, manufactured in Yorkshire, for want of capital to
manufacture it at home. There are many little manufacturing towns in
Great Britain, of which the inhabitants have not capital sufficient to
transport the produce of their own industry to those distant markets
where there is demand and consumption for it. If there are any
merchants among them, they are properly only the agents of wealthier
merchants who reside in some of the greater commercial cities.

    When the capital of any country is not sufficient for all those
three purposes, in proportion as a greater share of it is employed
in agriculture, the greater will be the quantity of productive
labour which it puts into motion within the country; as will
likewise be the value which its employment adds to the annual
produce of the land and labour of the society. After agriculture,
the capital employed in manufactures puts into motion the greatest
quantity of productive labour, and adds the greatest value to the
annual produce. That which is employed in the trade of exportation has
the least effect of any of the three.

    The country, indeed, which has not capital sufficient for all
those three purposes has not arrived at that degree of opulence for
which it seems naturally destined. To attempt, however, prematurely
and with an insufficient capital to do all the three is certainly
not the shortest way for a society, no more than it would be for an
individual, to acquire a sufficient one. The capital of all the
individuals of a nation has its limits in the same manner as that of a
single individual, and is capable of executing only certain
purposes. The capital of all the individuals of a nation is
increased in the same manner as that of a single individual by their
continually accumulating and adding to it whatever they save out of
their revenue. It is likely to increase the fastest, therefore, when
it is employed in the way that affords the greatest revenue to all the
inhabitants of the country, as they will thus be enabled to make the
greatest savings. But the revenue of all the inhabitants of the
country is necessarily in proportion to the value of the annual
produce of their land and labour.

    It has been the principal cause of the rapid progress of our
American colonies towards wealth and greatness that almost their whole
capitals have hitherto been employed in agriculture. They have no
manufactures, those household and courser manufactures excepted
which necessarily accompany the progress of agriculture, and which are
the work of the women and children in every private family. The
greater part both of the exportation and coasting trade of America
is carried on by the capitals of merchants who reside in Great
Britain. Even the stores and warehouses from which goods are
retailed in some provinces, particularly in Virginia and Maryland,
belong many of them to merchants who reside in the mother country, and
afford one of the few instances of the retail trade of a society being
carried on by the capitals of those who are not resident members of
it. Were the Americans, either by combination or by any other sort
of violence, to stop the importation of European manufactures, and, by
thus giving a monopoly to such of their own countrymen as could
manufacture the like goods, divert any considerable part of their
capital into this employment, they would retard instead of
accelerating the further increase in the value of their annual
produce, and would obstruct instead of promoting the progress of their
country towards real wealth and greatness. This would be still more
the case were they to attempt, in the same manner, to monopolize to
themselves their whole exportation trade.

    The course of human prosperity, indeed, seems scarce ever to
have been of so long continuance as to enable any great country to
acquire capital sufficient for all those three purposes; unless
perhaps, we give credit to the wonderful accounts of the wealth and
cultivation of China, of those of ancient Egypt, and of the ancient
state of Indostan. Even those three countries, the wealthiest,
according to all accounts, that ever were in the world, are chiefly
renowned for their superiority in agriculture and manufactures. They
do not appear to have been eminent for foreign trade. The ancient
Egyptians had a superstitious antipathy to the sea; a superstition
nearly of the same kind prevails among the Indians; and the Chinese
have never excelled in foreign commerce. The greater part of the
surplus produce of all those three countries seems to have been always
exported by foreigners, who gave in exchange for it something else for
which they found a demand there, frequently gold and silver.

    It is thus that the same capital will in any country put into
motion a greater or smaller quantity of productive labour, and add a
greater or smaller value to the annual produce of its land and labour,
according to the different proportions in which it is employed in
agriculture, manufactures, and wholesale trade. The difference, too,
is very great, according to the different sorts of wholesale trade
in which any part of it is employed.

    All wholesale trade, all buying in order to sell again by
wholesale, may be reduced to three different sorts. The home trade,
the foreign trade of consumption, and the carrying trade. The home
trade is employed in purchasing in one part of the same country, and
selling in another, the produce of the industry of that country. It
comprehends both the inland and the coasting trade. The foreign
trade of consumption is employed in purchasing foreign goods for
home consumption. The carrying trade is employed in transacting the
commerce of foreign countries, or in carrying the surplus produce of
one to another.

    The capital which is employed in purchasing in one part of the
country in order to sell in another the produce of the industry of
that country, generally replaces by every such operation two
distinct capitals that had both been employed in the agriculture or
manufactures of that country, and thereby enables them to continue
that employment. When it sends out from the residence of the
merchant a certain value of commodities, it generally brings back in
return at least an equal value of other commodities. When both are the
produce of domestic industry, it necessarily replaces by every such
operation two distinct capitals which had both been employed in
supporting productive labour, and thereby enables them to continue
that support. The capital which sends Scotch manufactures to London,
and brings back English corn and manufactures to Edinburgh,
necessarily replaces by every such operation, two British capitals
which had both been employed in the agriculture or manufactures of
Great Britain.

    The capital employed in purchasing foreign goods for home
consumption, when this purchase is made with the produce of domestic
industry, replaces too, by every such operation, two distinct
capitals; but one of them only is employed in supporting domestic
industry. The capital which sends British goods to Portugal, and
brings back Portuguese goods to Great Britain, replaces by every
such operation only one British capital. The other is a Portuguese
one. Though the returns, therefore, of the foreign trade of
consumption should be as quick as those of the home trade, the capital
employed in it will give but one half the encouragement to the
industry or productive labour of the country.

    But the returns of the foreign trade of consumption are very
seldom so quick as those of the home trade. The returns of the home
trade generally come in before the end of the year, and sometimes
three or four times in the year. The returns of the foreign trade of
consumption seldom come in before the end of the year, and sometimes
not till after two or three years. A capital, therefore, employed in
the home trade will sometimes make twelve operations, or be sent out
and returned twelve times, before a capital employed in the foreign
trade of consumption has made one. If the capitals are equal,
therefore, the one will give four-and-twenty times more
encouragement and support to the industry of the country than the
other.

    The foreign goods for home consumption may sometimes be purchased,
not with the produce of domestic industry, but with some other foreign
goods. These last, however, must have been purchased either
immediately with the produce of domestic industry, or with something
else that had been purchased with it; for, the case of war and
conquest excepted, foreign goods can ever be acquired but in
exchange for something that had been produced at home, either
immediately, or after two or more different exchanges. The effects,
therefore, of a capital employed in such a roundabout foreign trade of
consumption, are, in every respect, the same as those of one
employed in the most direct trade of the same kind, except that the
final returns are likely to be still more distant, as they must depend
upon the returns of two or three distinct foreign trades. If the
flax and hemp of Riga are purchased with the tobacco of Virginia,
which had been purchased with British manufactures, the merchant
must wait for the returns of two distinct foreign trades before he can
employ the same capital in re-purchasing a like quantity of British
manufactures. If the tobacco of Virginia had been purchased, not
with British manufactures, but with the sugar and rum of Jamaica which
had been purchased with those manufactures, he must wait for the
returns of three. If those two or three distinct foreign trades should
happen to be carried on by two or three distinct merchants, of whom
the second buys the goods imported by the first, and the third buys
those imported by the second, in order to export them again, each
merchant indeed will in this case receive the returns of his own
capital more quickly; but the final returns of the whole capital
employed in the trade will be just as slow as ever. Whether the
whole capital employed in such a round-about trade belong to one
merchant or to three can make no difference with regard to the
country, though it may with regard to the particular merchants.
Three times a greater capital must in both cases be employed in
order to exchange a certain value of British manufactures for a
certain quantity of flax and hemp than would have been necessary had
the manufactures and the flax and hemp been directly exchanged for one
another. The whole capital employed, therefore, in such a
round-about foreign trade of consumption will generally give less
encouragement and support to the productive labour of the country than
an equal capital employed in a more direct trade of the same kind.

    Whatever be the foreign commodity with which the foreign goods for
home consumption are purchased, it can occasion no essential
difference either in the nature of the trade, or in the
encouragement and support which it can give to the productive labour
of the country from which it is carried on. If they are purchased with
the gold of Brazil, for example, or with the silver of Peru, this gold
and silver, like the tobacco of Virginia, must have been purchased
with something that either was the produce of the industry of the
country, or that had been purchased with something else that was so.
So far, therefore, as the productive labour of the country is
concerned, the foreign trade of consumption which is carried on by
means of gold and silver has all the advantages and all the
inconveniences of any other equally round-about foreign trade of
consumption, and will replace just as fast or just as slow the capital
which is immediately employed in supporting that productive labour. It
seems even to have one advantage over any other equally roundabout
foreign trade. The transportation of those metals from one place to
another, on account of their small bulk and great value, is less
expensive than that of almost any other foreign goods of equal
value. Their freight is much less, and their insurance not greater;
and no goods, besides, are less liable to suffer by the carriage. An
equal quantity of foreign goods, therefore, may frequently be
purchased with a smaller quantity of the produce of domestic industry,
by the intervention of gold and silver, than by that of any other
foreign goods. The demand of the country may frequently, in this
manner, be supplied more completely and at a smaller expense than in
any other. Whether, by the continual exportation of those metals, a
trade of this kind is likely to impoverish the country from which it
is carried on, in any other way, I shall have occasion to examine at
great length hereafter.

    That part of the capital of any country which is employed in the
carrying trade is altogether withdrawn from supporting the
productive labour of that particular country, to support that of
some foreign countries. Though it may replace by every operation two
distinct capitals, yet neither of them belongs to that particular
country. The capital of the Dutch merchant, which carries the corn
of Poland to Portugal, and brings back the fruits and wines of
Portugal to Poland, replaces by every such operation two capitals,
neither of which had been employed in supporting the productive labour
of Holland; but one of them in supporting that of Poland, and the
other that of Portugal. The profits only return regularly to
Holland, and constitute the whole addition which this trade
necessarily makes to the annual produce of the land and labour of that
country. When, indeed, the carrying trade of any particular country is
carried on with the ships and sailors of that country, that part of
the capital employed in it which pays the freight is distributed
among, and puts into motion, a certain number of productive
labourers of that country. Almost all nations that have had any
considerable share of the carrying trade have, in fact, carried it
on in this manner. The trade itself has probably derived its name from
it, the people of such countries being the carriers to other
countries. It does not, however, seem essential to the nature of the
trade that it should be so. A Dutch merchant may, for example,
employ his capital in transacting the commerce of Poland and Portugal,
by carrying part of the surplus produce of the one to the other, not
in Dutch, but in British bottoms. It may be presumed that he
actually does so upon some particular occasions. It is upon this
account, however, that the carrying trade has been supposed peculiarly
advantageous to such a country as Great Britain, of which the
defence and security depend upon the number of its sailors and
shipping. But the same capital may employ as many sailors and
shipping, either in the foreign trade of consumption, or even in the
home trade, when carried on by coasting vessels, as it could in the
carrying trade. The number of sailors and shipping which any
particular capital can employ does not depend upon the nature of the
trade, but partly upon the bulk of the goods in proportion to their
value, and partly upon the distance of the ports between which they
are to be carried; chiefly upon the former of those two circumstances.
The coal trade from Newcastle to London, for example, employs more
shipping than all the carrying trade of England, though the ports
are at no great distance. To force, therefore, by extraordinary
encouragements, a larger share of the capital of any country into
the carrying trade than what would naturally go to it will not
always necessarily increase the shipping of that country.

    The capital, therefore, employed in the home trade of any
country will generally give encouragement and support to a greater
quantity of productive labour in that country, and increase the
value of its annual produce more than an equal capital employed in the
foreign trade of consumption: and the capital employed in this
latter trade has in both these respects a still greater advantage over
an equal capital employed in the carrying trade. The riches, and so
far as power depends upon riches, the power of every country must
always be in proportion to the value of its annual produce, the fund
from which all taxes must ultimately be paid. But the great object
of the political economy of every country is to increase the riches
and power of that country. It ought, therefore, to give no
preference nor superior encouragement to the foreign trade of
consumption above the home trade, nor to the carrying trade above
either of the other two. It ought neither to force nor to allure
into either of those two channels a greater share of the capital of
the country than what would naturally flow into them of its own
accord.

    When the produce of any particular branch of industry exceeds what
the demand of the country requires, the surplus must be sent abroad
and exchanged for something for which there is a demand at home.
Without such exportation a part of the productive labour of the
country must cease, and the value of its annual produce diminish.
The land and labour of Great Britain produce generally more corn,
woollens, and hardware than the demand of the home market requires.
The surplus part of them, therefore, must be sent abroad, and
exchanged for something for which there is a demand at home. It is
only by means of such exportation that this surplus can acquire a
value sufficient to compensate the labour and expense of producing it.
The neighbourhood of the sea-coast, and the banks of all navigable
rivers, are advantageous situations for industry, only because they
facilitate the exportation and exchange of such surplus produce for
something else which is more in demand there.

    When the foreign goods which are thus purchased with the surplus
produce of domestic industry exceed the demand of the home market, the
surplus part of them must be sent abroad again and exchanged for
something more in demand at home. About ninety-six thousand
hogsheads of tobacco are annually purchased in Virginia and Maryland
with a part of the surplus produce of British industry. But the demand
of Great Britain does not require, perhaps, more than fourteen
thousand. If the remaining eighty-two thousand, therefore, could not
be sent abroad and exchanged for something more in demand at home, the
importation of them must cease immediately, and with it the productive
labour of all those inhabitants of Great Britain, who are at present
employed in preparing the goods with which these eighty-two thousand
hogsheads are annually purchased. Those goods, which are part of the
produce of the land and labour of Great Britain, having no market at
home, and being deprived of that which they had abroad, must cease
to be produced. The most round-about foreign trade of consumption,
therefore may, upon some occasions, be as necessary for supporting the
productive labour of the country, and the value of its annual produce,
as the most direct.

    When the capital stock of any country is increased to such a
degree that it cannot be all employed in supplying the consumption and
supporting the productive labour of that particular country, the
surplus part of it naturally disgorges itself into the carrying trade,
and is employed in performing the same offices to other countries. The
carrying trade is the natural effect and symptom of great national
wealth; but it does not seem to be the natural cause of it. Those
statesmen who have been disposed to favour it with particular
encouragements seem to have mistaken the effect and symptom for the
cause. Holland, in proportion to the extent of the land and the number
of its inhabitants, by far the richest country in Europe, has,
accordingly, the greatest share of the carrying trade of Europe.
England, perhaps the second richest country of Europe, is likewise
supposed to have a considerable share of it; though what commonly
passes for the carrying trade of England will frequently, perhaps,
be found to be no more than a round-about foreign trade of
consumption. Such are, in a great measure, the trades which carry
the goods of the East and West Indies, and of America, to different
European markets. Those goods are generally purchased either
immediately with the produce of British industry, or with something
else which had been purchased with that produce, and the final returns
of those trades are generally used or consumed in Great Britain. The
trade which is carried on in British bottoms between the different
ports of the Mediterranean, and some trade of the same kind carried on
by British merchants between the different ports of India, make,
perhaps, the principal branches of what is properly the carrying trade
of Great Britain.

    The extent of the home trade and of the capital which can be
employed in it, is necessarily limited by the value of the surplus
produce of all those distant places within the country which have
occasion to exchange their respective productions with another: that
of the foreign trade of consumption, by the value of the surplus
produce of the whole country and of what can be purchased with it:
that of the carrying trade by the value of the surplus produce of
all the different countries in the world. Its possible extent,
therefore, is in a manner infinite in comparison of that of the
other two, and is capable of absorbing the greatest capitals.

    The consideration of his own private profit is the sole motive
which determines the owner of any capital to employ it either in
agriculture, in manufactures, or in some particular branch of the
wholesale or retail trade. The different quantities of productive
labour which it may put into motion, and the different values which it
may add to the annual, produce of the land and labour of the
society, according as it is employed in one or other of those
different ways, never enter into his thoughts. In countries,
therefore, where agriculture is the most profitable of all
employments, and farming and improving the most direct roads to a
splendid fortune, the capitals of individuals will naturally be
employed in the manner most advantageous to the whole society. The
profits of agriculture, however, seem to have no superiority over
those of other employments in any part of Europe. Projectors,
indeed, in every corner of it, have within these few years amused
the public with most magnificent accounts of the profits to be made by
the cultivation and improvement of land. Without entering into any
particular discussion of their calculations, a very simple observation
may satisfy us that the result of them must be false. We see every day
the most splendid fortunes that have been acquired in the course of
a single life by trade and manufacturers, frequently from a very small
capital, sometimes from no capital. A single instance of such a
fortune acquired by agriculture in the same time, and from such a
capital, has not, perhaps, occurred in Europe during the course of the
present century. In all the great countries of Europe, however, much
good land still remains uncultivated, and the greater part of what
is cultivated is far from being improved to the degree of which it
is capable. Agriculture, therefore, is almost everywhere capable of
absorbing a much greater capital than has ever yet been employed in
it. What circumstances in the policy of Europe have given the trades
which are carried on in towns so great an advantage over that which is
carried on in the country that private persons frequently find it more
for their advantage to employ their capitals in the most distant
carrying trades of Asia and America than in the improvement and
cultivation of the most fertile fields in their own neighbourhood, I
shall endeavour to explain at full length in the two following books.

                             BOOK THREE

     OF THE DIFFERENT PROGRESS OF OPULENCE IN DIFFERENT NATIONS

                 Of the Natural Progress of Opulence

    THE great commerce of every civilised society is that carried on
between the inhabitants of the town and those of the country. It
consists in the exchange of rude for manufactured produce, either
immediately, or by the intervention of money, or of some sort of paper
which represents money. The country supplies the town with the means
of subsistence and the materials of manufacture. The town repays
this supply by sending back a part of the manufactured produce to
the inhabitants of the country. The town, in which there neither is
nor can be any reproduction of substances, may very properly be said
to gain its whole wealth and subsistence from the country. We must
not, however, upon this account, imagine that the gain of the town
is the loss of the country. The gains of both are mutual and
reciprocal, and the division of labour is in this, as in all other
cases, advantageous to all the different persons employed in the
various occupations into which it is subdivided. The inhabitants of
the country purchase of the town a greater quantity of manufactured
goods, with the produce of a much smaller quantity of their own
labour, than they must have employed had they attempted to prepare
them themselves. The town affords a market for the surplus produce
of the country, or what is over and above the maintenance of the
cultivators, and it is there that the inhabitants of the country
exchange it for something else which is in demand among them. The
greater the number and revenue of the inhabitants of the town, the
more extensive is the market which it affords to those of the country;
and the more extensive that market, it is always the more advantageous
to a great number. The corn which grows within a mile of the town
sells there for the same price with that which comes from twenty miles
distance. But the price of the latter must generally not only pay
the expense of raising and bringing it to market, but afford, too, the
ordinary profits of agriculture to the farmer. The proprietors and
cultivators of the country, therefore, which lies in the neighbourhood
of the town, over and above the ordinary profits of agriculture, gain,
in the price of what they sell, the whole value of the carriage of the
like produce that is brought from more distant parts, and they 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 concerning the balance of
trade, it has never been pretended that either the country loses by
its commerce with the town, or the town by that with the country which
maintains it.

    As subsistence is, in the nature of things, prior to conveniency
and luxury, so the industry which procures the former must necessarily
be prior to that which ministers to the latter. The cultivation and
improvement of the country, therefore, which affords subsistence,
must, necessarily, be prior to the increase of the town, which
furnishes only the means of conveniency and luxury. It is the
surplus produce of the country only, or what is over and above the
maintenance of the cultivators, that constitutes the subsistence of
the town, which can therefore increase only with the increase of
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 occasioned considerable variations in the progress of
opulence in different ages and nations.

    That order of things which necessity imposes in general, though
not in every particular country, is, in every particular country,
promoted by the natural inclinations of man. If human institutions had
never thwarted those natural inclinations, the towns could nowhere
have increased beyond what the improvement and cultivation of the
territory in which they were situated could support; till such time,
at least, as the whole of that territory was completely cultivated and
improved. Upon equal, or nearly equal profits, most men will choose to
employ their capitals rather in the improvement and cultivation of
land than either in manufactures or in foreign trade. The man who
employs his capital in land has it more under his view and command,
and his fortune is much less liable to accidents than that of the
trader, who is obliged frequently to commit it, not only to the
winds and the waves, but to the more uncertain elements of human folly
and injustice, by giving great credits in distant countries to men
with whose character and situation he can seldom be thoroughly
acquainted. The capital of the landlord, on the contrary, which is
fixed in the improvement of his land, seems to be as well secured as
the nature of human affairs can admit of. The beauty of the country
besides, the pleasures of a country life, the tranquillity of mind
which it promises, and wherever the injustice of human laws does not
disturb it, the independency which it really affords, have charms that
more or less attract everybody; and as to cultivate the ground was the
original destination of man, so in every stage of his existence he
seems to retain a predilection for this primitive employment.

    Without the assistance of some artificers, indeed, the cultivation
of land cannot be carried on but with great inconveniency and
continual interruption. Smiths, carpenters, wheelwrights, and
ploughwrights, masons, and bricklayers, tanners, shoemakers, and
tailors are people whose service the farmer has frequent occasion for.
Such artificers, too, stand occasionally in need of the assistance
of one another; and as their residence is not, like that of the
farmer, necessarily tied down to a precise spot, they naturally settle
in the neighbourhood of one another, and thus form a small town or
village. The butcher, the brewer, and the baker soon join them,
together with many other artificers and retailers, necessary or useful
for supplying their occasional wants, and who contribute still further
to augment the town. The inhabitants of the town and those of the
country are mutually the servants of one another. The town is a
continual fair or market, to which the inhabitants of the country
resort in order to exchange their rude for manufactured produce. It is
this commerce which supplies the inhabitants of the town both with the
materials of their work, and the means of their subsistence. The
quantity of the finished work which they sell to the inhabitants of
the country necessarily regulates the quantity of the materials and
provisions which they buy. Neither their employment nor subsistence,
therefore, can augment but in proportion to the augmentation of the
demand from the country for finished work; and this demand can augment
only in proportion to the extension of improvement and cultivation.
Had human institutions, therefore, never disturbed the natural
course of things, the progressive wealth and increase of the towns
would, in every political society, be consequential, and in proportion
to the improvement and cultivation of the territory or country.

    In our North American colonies, where uncultivated land is still
to be had upon easy terms, no manufactures for distant sale have
ever yet been established in any of their towns. When an artificer has
acquired a little more stock than is necessary for carrying on his own
business in supplying the neighbouring country, he does not, in
North America, attempt to establish with it a manufacture for more
distant sale, but employs it in the purchase and improvement of
uncultivated land. From artificer he becomes planter, and neither
the large wages nor the easy subsistence which that country affords to
artificers can bribe him rather to work for other people than for
himself. He feels that an artificer is the servant of his customers,
from whom he derives his subsistence; but that a planter who
cultivates his own land, and derives his necessary subsistence from
the labour of his own family, is really a master, and independent of
all the world.

    In countries, on the contrary, where there is either no
uncultivated land, or none that can be had upon easy terms, every
artificer who has acquired more stock than he can employ in the
occasional jobs of the neighbourhood endeavours to prepare work for
more distant sale. The smith erects some sort of iron, the weaver some
sort of linen or woollen manufactory. Those different manufactures
come, in process of time, to be gradually subdivided, and thereby
improved and refined in a great variety of ways, which may easily be
conceived, and which it is therefore unnecessary to explain any
further.

    In seeking for employment to a capital, manufactures are, upon
equal or nearly equal profits, naturally preferred to foreign
commerce, for the same reason that agriculture is naturally
preferred to manufactures. As the capital of the landlord or farmer is
more secure than that of the manufacturer, so the capital of the
manufacturer, being at all times more within his view and command,
is more secure than that of the foreign merchant. In every period,
indeed, of every society, the surplus part both of the rude and
manufactured produce, or that for which there is no demand at home,
must be sent abroad in order to be exchanged for something for which
there is some demand at home. But whether the capital, which carries
this surplus produce abroad, be a foreign or a domestic one is of very
little importance. If the society has not acquired sufficient
capital both to cultivate all its lands, and to manufacture in the
completest manner the whole of its rude produce, there is even a
considerable advantage that rude produce should be exported by a
foreign capital, in order that the whole stock of the society may be
employed in more useful purposes. The wealth of ancient Egypt, that of
China and Indostan, sufficiently demonstrate that a nation may
attain a very high degree of opulence though the greater part of its
exportation trade be carried on by foreigners. The progress of our
North American and West Indian colonies would have been much less
rapid had no capital but what belonged to themselves been employed
in exporting their surplus produce.

    According to the natural course of things, therefore, the
greater part of the capital of every growing society is, first,
directed to agriculture, afterwards to manufactures, and last of all
to foreign commerce. This order of things is so very natural that in
every society that had any territory it has always, I believe, been in
some degree observed. Some of their lands must have been cultivated
before any considerable towns could be established, and some sort of
coarse industry of the manufacturing kind must have been carried on in
those towns, before they could well think of employing themselves in
foreign commerce.

    But though this natural order of things must have taken place in
some degree in every such society, it has, in all the modern states of
Europe, been, in many respects, entirely inverted. The foreign
commerce of some of their cities has introduced all their finer
manufactures, or such as were fit for distant sale; and manufactures
and foreign commerce together have given birth to the principal
improvements of agriculture. The manners and customs which the
nature of their original government introduced, and which remained
after that government was greatly altered, necessarily forced them
into this unnatural and retrograde order.

                           CHAPTER II

      Of the Discouragement of Agriculture in the ancient State

           of Europe after the Fall of the Roman Empire

    WHEN the German and Scythian nations overran the western provinces
of the Roman empire, the confusions which followed so great a
revolution lasted for several centuries. The rapine and violence which
the barbarians exercised against the ancient inhabitants interrupted
the commerce between the towns and the country. The towns were
deserted, and the country was left uncultivated, and the western
provinces of Europe, which had enjoyed a considerable degree of
opulence under the Roman empire, sunk into the lowest state of poverty
and barbarism. During the continuance of those confusions, the
chiefs and principal leaders of those nations acquired or usurped to
themselves the greater part of the lands of those countries. A great
part of them was uncultivated; but no part of them, whether cultivated
or uncultivated, was left without a proprietor. All of them were
engrossed, and the greater part by a few great proprietors.

    This original engrossing of uncultivated lands, though a great,
might have been but a transitory evil. They might soon have been
divided again, and broke into small parcels either by succession or by
alienation. The law of primogeniture hindered them from being
divided by succession: the introduction of entails prevented their
being broke into small parcels by alienation.

    When land, like movables, is considered as the means only of
subsistence and enjoyment, the natural law of succession divides it,
like them, among all the children of the family; of an of whom the
subsistence and enjoyment may be supposed equally dear to the
father. This natural law of succession accordingly took place among
the Romans, who made no more distinction between elder and younger,
between male and female, in the inheritance of lands than we do in the
distribution of movables. But when land was considered as the means,
not of subsistence merely, but of power and protection, it was thought
better that it should descend undivided to one. In those disorderly
times every great landlord was a sort of petty prince. His tenants
were his subjects. He was their judge, and in some respects their
legislator in peace, and their leader in war. He made war according to
his own discretion, frequently against his neighbours, and sometimes
against his sovereign. The security of a landed estate, therefore, the
protection which its owner could afford to those who dwelt on it,
depended upon its greatness. To divide it was to ruin it, and to
expose every part of it to be oppressed and swallowed up by the
incursions of its neighbours. The law of primogeniture, therefore,
came to take place, not immediately, indeed, but in process of time,
in the succession of landed estates, for the same reason that it has
generally taken place in that of monarchies, though not always at
their first institution. That the power, and consequently the security
of the monarchy, may not be weakened by division, it must descend
entire to one of the children. To which of them so important a
preference shall be given must be determined by some general rule,
founded not upon the doubtful distinctions of personal merit, but upon
some plain and evident difference which can admit of no dispute. Among
the children of the same family, there can be no indisputable
difference but that of sex, and that of age. The male sex is
universally preferred to the female; and when all other things are
equal, the elder everywhere takes place of the younger. Hence the
origin of the right of primogeniture, and of what is called lineal
succession.

    Laws frequently continue in force long after the circumstances
which first gave occasion to them, and which could alone render them
reasonable, are no more. In the present state of Europe, the
proprietor of a single acre of land is as perfectly secure of his
possession as the proprietor of a hundred thousand. The right of
primogeniture, however, still continues to be respected, and as of all
institutions it is the fittest to support the pride of family
distinctions, it is still likely to endure for many centuries. In
every other respect, nothing can be more contrary to the real interest
of a numerous family than a right which, in order to enrich one,
beggars all the rest of the children.

    Entails are the natural consequences of the law of
primogeniture. They were introduced to preserve a certain lineal
succession, of which the law of primogeniture first gave the idea, and
to hinder any part of the original estate from being carried out of
the proposed line either by gift, or devise, or alienation; either
by the folly, or by the misfortune of any of its successive owners.
They were altogether unknown to the Romans. Neither their
substitutions nor fideicommisses bear any resemblance to entails,
though some French lawyers have thought proper to dress the modern
institution in the language and garb of those ancient ones.

    When great landed estates were a sort of principalities, entails
might not be unreasonable. Like what are called the fundamental laws
of some monarchies, they might frequently hinder the security of
thousands from being endangered by the caprice or extravagance of
one man. But in the present state of Europe, when small as well as
great estates derive their security from the laws of their country,
nothing can be more completely absurd. They are founded upon the
most absurd of all suppositions, the supposition that every successive
generation of men have not an equal right to the earth, and to all
that it possesses; but that the property of the present generation
should be restrained and regulated according to the fancy of those who
died perhaps five hundred years ago. Entails, however, are still
respected through the greater part of Europe, in those countries
particularly in which noble birth is a necessary qualification for the
enjoyment either of civil or military honours. Entails are thought
necessary for maintaining this exclusive privilege of the nobility
to the great offices and honours of their country; and that order
having usurped one unjust advantage over the rest of their fellow
citizens, lest their poverty should render it ridiculous, it is
thought reasonable that they should have another. The common law of
England, indeed, is said to abhor perpetuities, and they are
accordingly more restricted there than in any other European monarchy;
though even England is not altogether without them. In Scotland more
than one-fifth, perhaps more than one-third, part of the whole lands
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
either equalled or exceeded his revenue, as it did very frequently, he
had no stock to employ in this manner. If he was an economist, he
generally found it more profitable to employ his annual savings in new
purchases than in the improvement of his old estate. To improve land
with profit, like all other commercial projects, requires an exact
attention to small savings and small gains, of which a man born to a
great fortune, even though naturally frugal, is very seldom capable.
The situation of such a person naturally disposes him to attend rather
to ornament which pleases his fancy than to profit for which he has so
little occasion. The elegance of his dress, of his equipage, of his
house, and household furniture, are objects which from his infancy
he has been accustomed to have some anxiety about. The turn of mind
which this habit naturally forms follows him when he comes to think of
the improvement of land. He embellishes perhaps four or five hundred
acres in the neighbourhood of his house, at ten times the expense
which the land is worth after all his improvements; and finds that
if he was to improve his whole estate in the same manner, and he has
little taste for any other, he would be a bankrupt before he had
finished the tenth part of it. There still remain in both parts of the
United Kingdom some great estates which have continued without
interruption in the hands of the same family since the times of feudal
anarchy. Compare the present condition of those estates with the
possessions of the small proprietors in their neighbourhood, and you
will require no other argument to convince you how unfavourable such
extensive property is to improvement.

    If little improvement was to be expected from such great
proprietors, still less was to be hoped for from those who occupied
the land under them. In the ancient state of Europe, the occupiers
of land were all tenants at will. They were all or almost all
slaves; but their slavery was of a milder kind than that known among
the ancient Greeks and Romans, or even in our West Indian colonies.
They were supposed to belong more directly to the land than to their
master. They could, therefore, be sold with it, but not separately.
They could marry, provided it was with the consent of their master;
and he could not afterwards dissolve the marriage by selling the man
and wife to different persons. If he maimed or murdered any of them,
he was liable to some penalty, though generally but to a small one.
They were not, however, capable of acquiring property. Whatever they
acquired was acquired to their master, and he could take it from
them at pleasure. Whatever cultivation and improvement could be
carried on by means of such slaves was properly carried on by their
master. It was at his expense. The seed, the cattle, and the
instruments of husbandry were all his. It was for his benefit. Such
slaves could acquire nothing but their daily maintenance. It was
properly the proprietor himself, therefore, that, in this case,
occupied his own lands, and cultivated them by his own bondmen. This
species of slavery still subsists in Russia, Poland, Hungary, Bohemia,
Moravia, and other parts of Germany. It is only in the western and
southwestern provinces of Europe that it has gradually been
abolished altogether.

    But if great improvements are seldom to be expected from great
proprietors, they are least of all to be expected when they employ
slaves for their workmen. The experience of all ages and nations, I
believe, demonstrates that the work done by slaves, though it
appears to cost only their maintenance, is in the end the dearest of
any. A person who can acquire no property, can have no other
interest but to eat as much, and to labour as little as possible.
Whatever work he does beyond what is sufficient to purchase his own
maintenance can be squeezed out of him by violence only, and not by
any interest of his own. In ancient Italy, how much the cultivation of
corn degenerated, how unprofitable it became to the master when it
fell under the management of slaves, is remarked by both Pliny and
Columella. In the time of Aristotle it had not been much better in
ancient Greece. Speaking of the ideal republic described in the laws
of Plato, to maintain five thousand idle men (the number of warriors
supposed necessary for its defence) together with their women and
servants, would require, he says, a territory of boundless extent
and fertility, like the plains of Babylon.

    The pride of man makes him love to domineer, and nothing mortifies
him so much as to be obliged to condescend to persuade his
inferiors. Wherever the law allows it, and the nature of the work
can afford it, therefore, he will generally prefer the service of
slaves to that of freemen. The planting of sugar and tobacco can
afford the expense of slave-cultivation. The raising of corn, it
seems, in the present times, cannot. In the English colonies, of which
the principal produce is corn, the far greater part of the work is
done by freemen. The late resolution of the Quakers in Pennsylvania to
set at liberty all their negro slaves may satisfy us that their number
cannot be very great. Had they made any considerable part of their
property, such a resolution could never have been agreed to. In our
sugar colonies, on the contrary, the whole work is done by slaves, and
in our tobacco colonies a very great part of it. The profits of a
sugar-plantation in any of our West Indian colonies are generally much
greater than those of any other cultivation that is known either in
Europe or America; and the profits of a tobacco plantation, though
inferior to those of sugar, are superior to those of corn, as has
already been observed. Both can afford the expense of
slave-cultivation, but sugar can afford it still better than
tobacco. The number of negroes accordingly is much greater, in
proportion to that of whites, in our sugar than in our tobacco
colonies.

    To the slave cultivators of ancient times gradually succeeded a
species of farmers known at present in France by the name of metayers.
They are called in Latin, Coloni partiarii. They have been so long
in disuse in England that at present I know no English name for
them. The proprietor furnished them with the seed, cattle, and
instruments of husbandry, the whole stock, in short, necessary for
cultivating the farm. The produce was divided equally between the
proprietor and the farmer, after setting aside what was judged
necessary for keeping up the stock, which was restored to the
proprietor when the farmer either quitted, or was turned out of the
farm.

    Land occupied by such tenants is properly cultivated at the
expense of the 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 property, and having a certain
proportion of the produce of the land, they have a plain interest that
the whole produce should be as great as possible, in order that
their own proportion may be so. A slave, on the contrary, who can
acquire nothing but his maintenance, consults his own ease by making
the land produce as little as possible over and above that
maintenance. It is probable that it was partly upon account of this
advantage, and partly upon account of the encroachments which the
sovereign, 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 of Rome claims great merit in it;
and it is certain that so early as the twelfth century, Alexander
III published a bull for the general emancipation of slaves. It seems,
however, to have been rather a pious exhortation than a law to which
exact obedience was required from the faithful. Slavery continued to
take place almost universally for several centuries afterwards, till
it was gradually abolished by the joint operation of the two interests
above mentioned, that of the proprietor on the one hand, and that of
the sovereign on the other. A villain enfranchised, and at the same
time allowed to continue in possession of the land, having no stock of
his own, could cultivate it only by means of what the landlord
advanced to him, and must, therefore, have been what the French called
a metayer.

    It could never, however, be the interest even of this last species
of cultivators to lay out, in the further improvement of the land, any
part of the little stock which they might save from their own share of
the produce, because the lord, who laid out nothing, was to get one
half of whatever it produced. The tithe, which is but a tenth of the
produce, is found to be a very great hindrance to improvement. A
tax, therefore, which amounted to one half must have been an effectual
bar to it. It might be the interest of a metayer to make the land
produce as much as could be brought out of it by means of the stock
furnished by the proprietor; but it could never be his interest to mix
any part of his own with it. In France, where five parts out of six of
the whole kingdom are said to be still occupied by this species of
cultivators, the proprietors complain that their metayers take every
opportunity of employing the master's cattle rather in carriage than
in cultivation; because in the one case they get the whole profits
to themselves, in the other they share them with their landlord.
This species of tenants still subsists in some parts of Scotland. They
are called steel-bow tenants. Those ancient English tenants, who are
said by Chief Baron Gilbert and Doctor Blackstone to have been
rather bailiffs of the landlord than farmers properly so called,
were probably of the same kind.

    To this species of tenancy succeeded, though by very slow degrees,
farmers properly so called, who cultivated the land with their own
stock, paying a rent certain to the landlord. When such farmers have a
lease for a term of years, they may sometimes find it for their
interest to lay out part of their capital in the further improvement
of the farm; because they may sometimes expect to recover it, with a
large profit, before the expiration of the lease. The possession
even of such farmers, however, was long extremely precarious, and
still is so in many parts of Europe. They could before the
expiration of their term be legally outed of their lease by a new
purchaser; in England, even by the fictitious action of a common
recovery. If they were turned out illegally by the violence of their
master, the action by which they obtained redress was extremely
imperfect. It did not always reinstate them in the possession of the
land, but gave them damages which never amounted to the real loss.
Even in England, the country perhaps of Europe where the yeomanry
has always been most respected, it was not till about the 14th of
Henry VII that the action of ejectment was invented, by which the
tenant recovers, not damages only but possession, and in which his
claim is not necessarily concluded by the uncertain decision of a
single assize. This action has been found so effectual a remedy
that, in the modern practice, when the landlord has occasion to sue
for the possession of the land, he seldom makes use of the actions
which properly belong to him as landlord, the Writ of Right or the
Writ of Entry, but sues in the name of his tenant by the Writ of
Ejectment. In England, therefore, the security of the tenant is
equal to that of the proprietor. In England, besides, a lease for life
of forty shillings a year value is a freehold, and entitles the lessee
to vote for a Member of Parliament; and as a great part of the
yeomanry have freeholds of this kind, the whole order becomes
respectable to their landlords on account of the political
consideration which this gives them. There is, I believe, nowhere in
Europe, except in England, any instance of the tenant building upon
the land of which he had no lease, and trusting that the honour of his
landlord would take no advantage of so important an improvement. Those
laws and customs so favourable to the yeomanry have perhaps
contributed more to the present grandeur of England than all their
boasted regulations of commerce taken together.

    The law which secures the longest leases against successors of
every kind is, so far as I know, peculiar to Great Britain. It was
introduced into Scotland so early as 1449, a law of James II. Its
beneficial influence, however, has been much obstructed by entails;
the heirs of entail being generally restrained from letting leases for
any long term of years, frequently for more than one year. A late
Act of Parliament has, in this respect, somewhat slackened their
fetters, though they are still by much too strait. In Scotland,
besides, as no leasehold gives a vote for a Member of Parliament,
the yeomanry are upon this account less respectable to their landlords
than in England.

    In other parts of Europe, after it was found convenient to
secure tenants both against heirs and purchasers, the term of their
security was still limited to a very short period; in France, for
example, to nine years from the commencement of the lease. It has in
that country, indeed, been lately extended to twenty-seven, a period
still too short to encourage the tenant to make the most important
improvements. The proprietors of land were anciently the legislators
of every part of Europe. The laws relating to land, therefore, were
all calculated for what they supposed the interest of the
proprietor. It was for his interest, they had imagined, that no
lease granted by any of his predecessors should hinder him from
enjoying, during a long term of years, the full value of his land.
Avarice and injustice are always short-sighted, and they did not
foresee how much this regulation must obstruct improvement, and
thereby hurt in the long-run the real interest of the landlord.

    The farmers too, besides paying the rent, were anciently, it was
supposed, bound to perform a great number of services to the landlord,
which were seldom either specified in the lease, or regulated by any
precise rule, but by the use and wont of the manor or barony. These
services, therefore, being almost entirely arbitrary, subjected the
tenant to many vexations. In Scotland the abolition of all services
not precisely stipulated in the lease has in the course of a few years
very much altered for the better the condition of the yeomanry of that
country.

    The public services to which the yeomanry were bound were not less
arbitrary than the private ones. To make and maintain the high
roads, a servitude which still subsists, I believe, everywhere, though
with different degrees of oppression in different countries, was not
the only one. When the king's troops, when his household or his
officers of any kind passed through any part of the country, the
yeomanry were bound to provide them with horses, carriages, and
provisions, at a price regulated by the purveyor. Great Britain is,
I believe, the only monarchy in Europe where the oppression of
purveyance has been entirely abolished. It still subsists in France
and Germany.

    The public taxes to which they were subject were as irregular
and oppressive as the services. The ancient lords, though extremely
unwilling to grant themselves any pecuniary aid to their sovereign,
easily allowed him to tallage, as they called it their tenants, and
had not knowledge enough to foresee how much this must in the end
affect their own revenue. The taille, as it still subsists in
France, may serve as an example of those ancient tallages. It is a tax
upon the supposed profits of the farmer, which they estimate by the
stock that he has upon the farm. It is his interest, therefore, to
appear to have as little as possible, and consequently to employ as
little as possible in its cultivation, and none in its improvement.
Should any stock happen to accumulate in the hands of a French farmer,
the taille is almost equal to a prohibition of its ever being employed
upon the land. This tax, besides, is supposed to dishonour whoever
is subject to it, and to degrade him below, not only the rank of a
gentleman, but that of a burgher, and whoever rents the lands of
another becomes subject to it. No gentleman, nor even any burgher
who has stock, will submit to this degradation. This tax, therefore,
not only hinders the stock which accumulates upon the land from
being employed in its improvement, but drives away an other stock from
it. The ancient tenths and fifteenths, so usual in England in former
times, seem, so far as they affected the land, to have been taxes of
the same nature with the taille.

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

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

                         CHAPTER III

         Of the Rise and Progress of Cities and Towns

               after the Fall of the Roman Empire

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    A taste for the finer and more improved manufactures was in this
manner introduced by foreign commerce into countries where no such
works were carried on. But when this taste became so general as to
occasion a considerable demand, the merchants, in order to save the
expense of carriage, naturally endeavoured to establish some
manufactures of the same kind in their own country. Hence the origin
of the first manufactures for distant sale that seem to have been
established in the western provinces of Europe after the fall of the
Roman empire. No large country, it must be observed, ever did or could
subsist without some sort of manufactures being carried on in it;
and when it is said of any such country that it has no manufactures,
it must always be understood of the finer and more improved or of such
as are fit for distant sale. In every large country both the
clothing and household furniture of the far greater part of the people
are the produce of their own industry. This is even more universally
the case in those poor countries which are commonly said to have no
manufactures than in those rich ones that are said to abound in
them. In the latter, you will generally find, both in the clothes
and household furniture of the lowest rank of people, a much greater
proportion of foreign productions than in the former.

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

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

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

                           CHAPTER IV

            How the Commerce of the Towns Contributed

                to the Improvement of the Country

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    A revolution of the greatest importance to the public happiness
was in this manner brought about by two different orders of people who
had not the least intention to serve the public. To gratify the most
childish vanity was the sole motive of the great proprietors. The
merchants and artificers, much less ridiculous, acted merely from a
view to their own interest, and in pursuit of their own pedlar
principle of turning a penny wherever a penny was to be got. Neither
of them had either knowledge or foresight of that great revolution
which the folly of the one, and the industry of the other, was
gradually bringing about.

    It is thus that through the greater part of Europe the commerce
and manufactures of cities, instead of being the effect, have been the
cause and occasion of the improvement and cultivation of the country.

    This order, however, being contrary to the natural course of
things, is necessarily both slow and uncertain. Compare the slow
progress of those European countries of which the wealth depends
very much upon their commerce and manufactures with the rapid advances
of our North American colonies, of which the wealth is founded
altogether in agriculture. Through the greater part of Europe the
number of inhabitants is not supposed to double in less than five
hundred years. In several of our North American colonies, it is
found to double in twenty or five-and-twenty years. In Europe, the law
of primogeniture and perpetuities of different kinds prevent the
division of great estates, and thereby hinder the multiplication of
small proprietors. A small proprietor, however, who knows every part
of his little territory, who views it with all the affection which
property, especially small property, naturally inspires, and who
upon that account takes pleasure not only in cultivating but in
adorning it, is generally of all improvers the most industrious, the
most intelligent, and the most successful. The same regulations,
besides, keep so much land out of the market that there are always
more capitals to buy than there is land to sell, so that what is
sold always sells at a monopoly price. The rent never pays the
interest of the purchase-money, and is, besides, burdened with repairs
and other occasional charges to which the interest of money is not
liable. To purchase land is everywhere in Europe a most unprofitable
employment of a small capital. For the sake of the superior
security, indeed, a man of moderate circumstances, when he retires
from business, will sometimes choose to lay out his little capital
in land. A man of profession too, whose revenue is derived from.
another source, often loves to secure his savings in the same way. But
a young man, who, instead of applying to trade or to some
profession, should employ a capital of two or three thousand pounds in
the purchase and cultivation of a small piece of land, might indeed
expect to live very happily, and very independently, but must bid
adieu forever to all hope of either great fortune or great
illustration, which by a different employment of his stock he might
have had the same chance of acquiring with other people. Such a person
too, though he cannot aspire at being a proprietor, will often disdain
to be a farmer. The small quantity of land, therefore, which is
brought to market, and the high price of what is brought thither,
prevents a great number of capitals from being employed in its
cultivation and improvement which would otherwise have taken that
direction. In North America, on the contrary, fifty or sixty pounds is
often found a sufficient stock to begin a plantation with. The
purchase and improvement of uncultivated land is there the most
profitable employment of the smallest as well as of the greatest
capitals, and the most direct road to all the fortune and illustration
which can be acquired in that country. Such land, indeed, is in
North America to be had almost for nothing, or at a price much below
the value of the natural produce- a thing impossible in Europe, or,
indeed, in any country where all lands have long been private
property. If landed estates, however, were divided equally among all
the children upon the death of any proprietor who left a numerous
family, the estate would generally be sold. So much land would come to
market that it could no longer sell at a monopoly price. The free rent
of the land would go nearer to pay the interest of the purchase-money,
and a small capital might be employed in purchasing land as profitably
as in any other way.

    England, on account of the natural fertility of the soil, of the
great extent of the sea-coast in proportion to that of the whole
country, and of the many navigable rivers which run through it and
afford the conveniency of water carriage to some of the most inland
parts of it, is perhaps as well fitted by nature as any large
country in Europe to be the seat of foreign commerce, of
manufactures for distant sale, and of all the improvements which these
can occasion. From the beginning of the reign of Elizabeth too, the
English legislature has been peculiarly attentive to the interests
of commerce and manufactures, and in reality there is no country in
Europe, Holland itself not excepted, of which the law is, upon the
whole, more favourable to this sort of industry. Commerce and
manufactures have accordingly been continually advancing during all
this period. The cultivation and improvement of the country has, no
doubt, been gradually advancing too; but it seems to have followed
slowly, and at a distance, the more rapid progress of commerce and
manufactures. The greater part of the country must probably have
been cultivated before the reign of Elizabeth; and a very great part
of it still remains uncultivated, and the cultivation of the far
greater part much inferior to what it might be. The law of England,
however, favours agriculture not only indirectly by the protection
of commerce, but by several direct encouragements. Except in times
of scarcity, the exportation of corn is not only free, but
encouraged by a bounty. In times of moderate plenty, the importation
of foreign corn is loaded with duties that amount to a prohibition.
The importation of live cattle, except from Ireland, is prohibited
at all times, and it is but of late that it was permitted from thence.
Those who cultivate the land, therefore, have a monopoly against their
countrymen for the two greatest and most important articles of land
produce, bread and butcher's meat. These encouragements, though at
bottom, perhaps, as I shall endeavour to show hereafter, altogether
illusory, sufficiently demonstrate at least the good intention of
the legislature to favour agriculture. But what is of much more
importance than all of them, the yeomanry of England are rendered as
secure, as independent, and as respectable as law can make them. No
country, therefore, in which the right of primogeniture takes place,
which pays tithes, and where perpetuities, though contrary to the
spirit of the law, are admitted in some cases, can give more
encouragement to agriculture than England. Such, however,
notwithstanding, is the state of its cultivation. What would it have
been had the law given no direct encouragement to agriculture
besides what arises indirectly from the progress of commerce, and
had left the yeomanry in the same condition as in most other countries
of Europe? It is now more than two hundred years since the beginning
of the reign of Elizabeth, a period as long as the course of human
prosperity usually endures.

    France seems to have had a considerable share of foreign
commerce near a century before England was distinguished as a
commercial country. The marine of France was considerable, according
to the notions of the times, before the expedition of Charles VIII
to Naples. The cultivation and improvement of France, however, is,
upon the whole, inferior to that of England. The law of the country
has never given the same direct encouragement to agriculture.

    The foreign commerce of Spain and Portugal to the other parts of
Europe, though chiefly carried on in foreign ships, is very
considerable. That to their colonies is carried on in their own, and
is much greater, on account of the great riches and extent of those
colonies. But it has never introduced any considerable manufactures
for distant sale into either of those countries, and the greater
part of both still remains uncultivated. The foreign commerce of
Portugal is of older standing than that of any great country in
Europe, except Italy.

    Italy is the only great country of Europe which seems to have been
cultivated and improved in every part by means of foreign commerce and
manufactures for distant sale. Before the invasion of Charles VIII,
Italy according to Guicciardin, was cultivated not less in the most
mountainous and barren parts of the country than in the plainest and
most fertile. The advantageous situation of the country, and the great
number of independent states which at that time subsisted in it,
probably contributed not a little to this general cultivation. It is
not impossible too, notwithstanding this general expression of one
of the most judicious and reserved of modern historians, that Italy
was not at that time better cultivated than England is at present.

    The capital, however, that is acquired to any country by
commerce and manufactures is all a very precarious and uncertain
possession till some part of it has been secured and realized in the
cultivation and improvement of its lands. A merchant, it has been said
very properly, is not necessarily the citizen of any particular
country. It is in a great measure indifferent to him from what place
he carries on his trade; and a very trifling disgust will make him
remove his capital, and together with it all the industry which it
supports, from one country to another. No part of it can be said to
belong to any particular country, till it has been spread as it were
over the face of that country, either in buildings or in the lasting
improvement of lands. No vestige now remains of the great wealth
said to have been possessed by the greater part of the Hans towns
except in the obscure histories of the thirteenth and fourteenth
centuries. It is even uncertain where some of them were situated or to
what towns in Europe the Latin names given to some of them belong. But
though the misfortunes of Italy in the end of the fifteenth and
beginning of the sixteenth centuries greatly diminished the commerce
and manufactures of the cities of Lombardy and Tuscany, those
countries still continue to be among the most populous and best
cultivated in Europe. The civil wars of Flanders, and the Spanish
government which succeeded them, chased away the great commerce of
Antwerp, Ghent, and Bruges. But Flanders still continues to be one
of the richest, best cultivated, and most populous provinces of
Europe. The ordinary revolutions of war and government easily dry up
the sources of that wealth which arises from commerce only. That which
arises from the more solid improvements of agriculture is much more
durable and cannot be destroyed but by those more violent
convulsions occasioned by the depredations of hostile and barbarous
nations continued for a century or two together, such as those that
happened for some time before and after the fall of the Roman empire
in the western provinces of Europe.

                          BOOK FOUR

               OF SYSTEMS OF POLITICAL ECONOMY

                         INTRODUCTION

    POLITICAL economy, considered as a branch of the science of a
statesman or legislator, proposes two distinct objects: first, to
provide a plentiful revenue or subsistence for the people, or more
properly to enable them to provide such a revenue or subsistence for
themselves; and secondly, to supply the state or commonwealth with a
revenue sufficient for the public services. It proposes to enrich both
the people and the sovereign.

    The different progress of opulence in different ages and nations
has given occasion to two different systems of political economy
with regard to enriching the people. The one may be called the
system of commerce, the other that of agriculture. I shall endeavour
to explain both as fully and distinctly as I can, and shall begin with
the system of commerce. It is the modern system, and is best
understood in our own country and in our own times.

                             CHAPTER I

      Of the Principle of the Commercial, or Mercantile System

    THAT wealth consists in money, or and silver, is a popular
notion which naturally arises from the double function of money, as
the instrument of commerce and as the measure of value. In consequence
of its being the instrument of commerce, when we have money we can
more readily obtain whatever else we have occasion for than by means
of any other commodity. The great affair, we always find, is to get
money. When that is obtained, there is no difficulty in making any
subsequent purchase. In consequence of its being the measure of value,
we estimate that of all other commodities by the quantity of money
which they will exchange for. We say of a rich man that he is worth
a great deal, and of a poor man that he is worth very little money.
A frugal man, or a man eager to be rich, is said to love money; and
a careless, a generous, or a profuse man, is said to be indifferent
about it. To grow rich is to get money; and wealth and money, in
short, are, in common language, considered as in every respect
synonymous.

    A rich country, in the same manner as a rich man, is supposed to
be a country abounding in money; and to heap up gold and saver 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 an unknown coast, used to be, if
there was any gold or silver to be found in the neighbourhood. By
the information which they received, they judged whether it was
worth while to make a settlement there, or if the country was worth
the conquering. Plano Carpino, a monk, sent ambassador from the King
of France to one of the sons of the famous Genghis 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 their own waste and extravagance, be in
great want of them the next. Money, on the contrary, is a steady
friend, which, though it may travel about from hand to hand, yet if it
can be kept from going out of the country, is not very liable to be
wasted and consumed. Gold and silver, therefore, are, according to
him, the most solid and substantial part of the 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.

    Others admit that if a nation could be separated from all the
world, it would be of no consequence how much, or how little money
circulated in it. The consumable goods which were circulated by
means of this money would only be exchanged for a greater or a smaller
number of pieces; but the real wealth or poverty of the country,
they allow, would depend altogether upon the abundance or scarcity
of those consumable goods. But it is otherwise, they think, with
countries which have connections with foreign nations, and which are
obliged to carry on foreign wars, and to maintain fleets and armies in
distant countries. This, they say, cannot be done but by sending
abroad money to pay them with; and a nation cannot send much money
abroad unless it has a good deal at home. Every such nation,
therefore, must endeavour in time of peace to accumulate gold and
silver that, when occasion requires, it may have wherewithal to
carry on foreign wars.

    In consequence of these popular notions, all the different nations
of Europe have studied, though to little purpose, every possible means
of accumulating gold and silver in their respective countries. Spain
and Portugal, the proprietors of the principal mines which supply
Europe with those metals, have either prohibited their exportation
under the severest penalties, or subjected it to a considerable
duty. The like prohibition seems anciently to have made a part of
the policy of most other European nations. It is even to be found,
where we should least of all expect to find it, in some old Scotch
acts of Parliament, which forbid under heavy penalties the carrying
gold or silver forth of the kingdom. The like policy anciently took
place both in France and England.

    When those countries became commercial, the merchants found this
prohibition, upon many occasions, extremely inconvenient. They could
frequently buy more advantageously with gold and silver than with
any other commodity the foreign goods which they wanted, either to
import into their own, or to carry to some other foreign country. They
remonstrated, therefore, against this prohibition as hurtful to trade.

    They represented, first, that the exportation of gold and silver
in order to purchase foreign goods, did not always diminish the
quantity of those metals in the kingdom. That, on the contrary, it
might frequently increase that quantity; because, if the consumption
of foreign goods was not thereby increased in the country, those goods
might be re-exported to foreign countries, and, being there sold for a
large profit, might bring back much more treasure than was
originally sent out to purchase them. Mr. Mun compares this
operation of foreign trade to the seed-time and harvest of
agriculture. "If we only behold," says he, "the actions of the
husbandman in the seed-time, when he casteth away much good corn
into the ground, we shall account him rather a madman than a
husbandman. But when we consider his labours in the harvest, which
is the end of his endeavours, we shall find the worth and plentiful
increase of his action."

    They represented, secondly, that this prohibition could not hinder
the exportation of gold and silver, which, on account of the smallness
of their bulk in proportion to their value, could easily be smuggled
abroad. That this exportation could only be prevented by a proper
attention to, what they called, the balance of trade. That when the
country exported to a greater value than it imported, a balance became
due to it from foreign nations, which was necessarily paid to it in
gold and silver, and thereby increased the quantity of those metals in
the kingdom. But that when it imported to a greater value than it
exported, a contrary balance became due to foreign nations, which
was necessarily paid to them in the same manner, and thereby
diminished that quantity. That in this case to prohibit the
exportation of those metals could not prevent it, but only, by
making it more dangerous, render it more expensive. That the
exchange was thereby turned more against the country which owed the
balance than it otherwise might have been; the merchant who
purchased a bill upon the foreign country being obliged to pay the
banker who sold it, not only for the natural risk, trouble, and
expense of sending the money thither, but for the extraordinary risk
arising from the prohibition. But that the more the exchange was
against any country, the more the balance of trade became
necessarily against it; the money of that country becoming necessarily
of so much less value in comparison with that of the country to
which the balance was due. That if the exchange between England and
Holland, for example, was five per cent against England, it would
require a hundred and five ounces of silver in England to purchase a
bill for a hundred ounces of silver in Holland: that a hundred and
five ounces of silver in England, therefore, would be worth only a
hundred ounces of silver in Holland, and would purchase only a
proportionable quantity of Dutch goods; but that a hundred ounces of
silver in Holland, on the contrary, would be worth a hundred and
five ounces in England, and would purchase a proportionable quantity
of English goods: that the English goods which were sold to Holland
would be sold so much cheaper; and the Dutch goods which were sold
to England so much dearer by the difference of the exchange; that
the one would draw so much less Dutch money to England, and the
other so much more English money to Holland, as this difference
amounted to: and that the balance of trade, therefore, would
necessarily be so much more against England, and would require a
greater balance of gold and silver to be exported to Holland.

    Those arguments were partly solid and partly sophistical. They
were solid so far as they asserted that the exportation of gold and
silver in trade might frequently be advantageous to the country.
They were solid, too, in asserting that no prohibition could prevent
their exportation when private people found any advantage in exporting
them. But they were sophistical in supposing that either to preserve
or to augment the quantity of those metals required more the attention
of government than to preserve or to augment the quantity of any other
useful commodities, which the freedom of trade, without any such
attention, never fails to supply in the proper quantity. They were
sophistical too, perhaps, in asserting that the high price of exchange
necessarily increased what they called the unfavourable balance of
trade, or occasioned the exportation of a greater quantity of gold and
silver. That high price, indeed, was extremely disadvantageous to
the merchants who had any money to pay in foreign countries. They paid
so much dearer for the bills which their bankers granted them upon
those countries. But though the risk arising from the prohibition
might occasion some extraordinary expense to the bankers, it would not
necessarily carry any more money out of the country. This expense
would generally be all laid out in the country, in smuggling the money
out of it, and could seldom occasion the exportation of a single
sixpence beyond the precise sum drawn for. The high price of
exchange too would naturally dispose the merchants to endeavour to
make their exports nearly balance their imports, in order that they
might have this high exchange to pay upon as small a sum as
possible. The high price of exchange, besides, must necessarily have
operated as a tax, in raising the price of foreign goods, and
thereby diminishing their consumption. It would tend, therefore, not
to increase but to diminish what they called the unfavourable
balance of trade, and consequently the exportation of gold and silver.

    Such as they were, however, those arguments convinced the people
to whom they were addressed. They were addressed by merchants to
parliaments and to the councils of princes, to nobles and to country
gentlemen, by those who were supposed to understand trade to those who
were conscious to themselves that they knew nothing about the
matter. That foreign trade enriched the country, experience
demonstrated to the nobles and country gentlemen as well as to the
merchants; but how, or in what manner, none of them well knew. The
merchants knew perfectly in what manner it enriched themselves. It was
their business to know it. But to know in what manner it enriched
the country was no part of their business. This subject never came
into their consideration but when they had occasion to apply to
their country for some change in the laws relating to foreign trade.
It then became necessary to say something about the beneficial effects
of foreign trade, and the manner in which those effects were
obstructed by the laws as they then stood. To the judges who were to
decide the business it appeared a most satisfactory account of the
matter, when they were told that foreign trade brought money into
the country, but that the laws in question hindered it from bringing
so much as it otherwise would do. Those arguments therefore produced
the wished-for effect. The prohibition of exporting gold and silver
was in France and England confined to the coin of those respective
countries. The exportation of foreign coin and of bullion was made
free. In Holland, and in some other places, this liberty was
extended even to the coin of the country. The attention of
government was turned away from guarding against the exportation of
gold and silver to watch over the balance of trade as the only cause
which could occasion any augmentation or diminution of those metals.
From one fruitless care it was turned away to another care much more
intricate, much more embarrassing, and just equally fruitless. The
title of Mun's book, England's Treasure in Foreign Trade, became a
fundamental maxim in the political economy, not of England only, but
of all other commercial countries. The inland or home trade, the
most important of all, the trade in which an equal capital affords the
greatest revenue, and creates the greatest employment to the people of
the country, was considered as subsidiary only to foreign trade. It
neither brought money into the country, it was said, nor carried any
out of it. The country, therefore, could never become either richer or
poorer by means of it, except so far as its prosperity or decay
might indirectly influence the state of foreign trade.

    A country that has no mines of its own must undoubtedly draw its
gold and silver from foreign countries in the same manner as one
that 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 government can prevent
their exportation. All the sanguinary laws of Spain and Portugal are
not able to keep their gold and silver at home. The continual
importations from Peru and Brazil exceed the effectual demand of those
countries, and sink the price of those metals there below that in
the neighbouring countries. If, on the contrary, in any particular
country their quantity fell short of the effectual demand, so as to
raise their price above that of the neighbouring countries, the
government would have no occasion to take any pains to import them. If
it were even to take pains to prevent their importation, it would
not be able to effectuate it. Those metals, when the Spartans had
got wherewithal to purchase them, broke through all the barriers which
the laws of Lycurgus opposed to their entrance into Lacedemon. All the
sanguinary laws of the customs are not able to prevent the importation
of the teas of the Dutch and Gottenburgh East India Companies, because
somewhat cheaper than those of the British company. A pound of tea,
however, is about a hundred times the bulk of one of the highest
prices, sixteen shillings, that is commonly paid for it in silver, and
more than two thousand times the bulk of the same price in gold, and
consequently just so many times more difficult to smuggle.

    It is partly owing to the easy transportation of gold and silver
from the places where they abound to those where they are wanted
that the price of those metals does not fluctuate continually like
that of the greater part of other commodities, which are hindered by
their bulk from shifting their situation when the market happens to be
either over or under-stocked with them. The. price of those metals,
indeed, is not altogether exempted from variation, but the changes
to which it is liable are generally slow, gradual and uniform. In
Europe, for example, it is supposed, without much foundation, perhaps,
that during the course of the present and preceding century they
have been constantly, but gradually, sinking in their value, on
account of the continual importations from the Spanish West Indies.
But to make any sudden change in the price of gold and silver, so as
to raise or lower at once, sensibly and remarkably, the money price of
all other commodities, requires such a revolution in commerce as
that occasioned by the discovery of America.

    If, notwithstanding all this, gold and silver should at any time
fall short in a country which has wherewithal to purchase them,
there are more expedients for supplying their place than that of
almost any other commodity. If the materials of manufacture are
wanted, industry must stop. If provisions are wanted, the people
must starve. But if money is wanted, barter will supply its place,
though with a good deal of inconveniency. Buying and selling upon
credit, and the different dealers compensating their credits with
one another, once a month or once a year, will supply it with less
inconveniency. A well-regulated paper money will supply it, not only
without any inconveniency, but, in some cases, with some advantages.
Upon every account, therefore, the attention of government never was
so unnecessarily employed as when directed to watch over the
preservation or increase of the quantity of money in any country.

    No complaint, however, is more common than that of a scarcity of
money. Money, like wine, must always be scarce with those who have
neither wherewithal to buy it nor credit to borrow it. Those who
have either will seldom be in want either of the money or of the
wine which they have occasion for. This complaint, however, of the
scarcity of money is not always confined to improvident
spendthrifts. It is sometimes general through a whole mercantile
town and the country in its neighbourhood. Overtrading is the common
cause of it. Sober men, whose projects have been disproportioned to
their capitals, are as likely to have neither wherewithal to buy money
nor credit to borrow it, as prodigals whose expense has been
disproportioned to their revenue. Before their projects can be brought
to bear, their stock is gone, and their credit with it. They run about
everywhere to borrow money, and everybody tells them that they have
none to lend. Even such general complaints of the scarcity of money do
not always prove that the usual number of gold and silver pieces are
not circulating in the country, but that many people want those pieces
who have nothing to give for them. When the profits of trade happen to
be greater than ordinary, overtrading becomes a general error both
among great and small dealers. They do not always send more money
abroad than usual, but they buy upon credit, both at home and
abroad, an unusual quantity of goods, which they send to some
distant market in hopes that the returns will come in before the
demand for payment. The demand comes before the returns, and they have
nothing at hand with which they can either purchase money, or give
solid security for borrowing. It is not any scarcity of gold and
silver, but the difficulty which such people find in borrowing, and
which their creditors find in getting payment, that occasions the
general complaint of the scarcity of money.

    It would be too ridiculous to go about seriously to prove that
wealth does not consist in money, or in gold and silver; but in what
money purchases, and is valuable only for purchasing. Money, no doubt,
makes always a part of the national capital; but it has already been
shown that it generally makes but a small part, and always the most
unprofitable part of it.

    It is not because wealth consists more essentially in money than
in goods that the merchant find it generally more easy to buy goods
with money than to buy money with goods; but because money is the
known and established instrument of commerce, for which everything
is readily given in exchange, but which is not always with equal
readiness to be got in exchange for everything. The greater part of
goods, besides, are more perishable than money, and he may
frequently sustain a much greater loss by keeping them. When his goods
are upon hand, too, he is more liable to such demands for money as
he may not be able to answer than when he has got their price in his
coffers. Over and above all this, his profit arises more directly from
selling than from buying, and he is upon all these accounts
generally much more anxious to exchange his goods for money than his
money for goods. But though a particular merchant, with abundance of
goods in his warehouse, may sometimes be ruined by not being able to
sell them in time, a nation or country is not liable to the same
accident. The whole capital of a merchant frequently consists in
perish, able goods destined for purchasing money. But it is but a very
small part of the annual produce of the land and labour of a country
which can ever be destined for purchasing gold and silver from their
neighbours. The far greater part is circulated and consumed among
themselves; and even of the surplus which is sent abroad, the
greater part is generally destined for the purchase of other foreign
goods. Though gold and silver, therefore, could not be had in exchange
for the goods destined to purchase them, the nation would not be
ruined. It might, indeed, suffer some loss and inconveniency, and be
forced upon some of those expedients which are necessary for supplying
the place of money. The annual produce of its land and labour,
however, would be the same, or very nearly the same, as usual, because
the same, or very nearly the same, consumable capital would be
employed in maintaining it. And though goods do not always draw
money so readily as money draws goods, in the long run they draw it
more necessarily than even it draws them. Goods can serve many other
purposes besides purchasing money, but money can serve no other
purpose besides purchasing goods. Money, therefore, necessarily runs
after goods, but goods do not always or necessarily run after money.
The man who buys does not always mean to sell again, but frequently to
use or to consume; whereas he who sells always means to buy again. The
one may frequently have done the whole, but the other can never have
done more than the one-half of his business. It is not for its own
sake that men desire money, but for the sake of what they can purchase
with it.

    Consumable commodities, it is said, are soon destroyed; whereas
gold and silver are of a more durable nature, and, were it not for
this continual exportation, might be accumulated for ages together, to
the incredible augmentation of the real wealth of the country.
Nothing, therefore, it is pretended, can be more disadvantageous to
any country than the trade which consists in the exchange of such
lasting for such perishable commodities. We do not, however, reckon
that trade disadvantageous which consists in the exchange of the
hardware of England for the wines of France; and yet hardware is a
very durable commodity, and were it not for this continual exportation
might, too, be accumulated for ages together, to the incredible
augmentation of the pots and pans of the country. But it readily
occurs that the number of such utensils is in every country
necessarily limited by the use which there is for them; that it
would be absurd to have more pots and pans than were necessary for
cooking the victuals usually consumed there; and that if the
quantity of victuals were to increase, the number of pots and pans
would readily increase along with it, a part of the increased quantity
of victuals being employed in purchasing them, or in maintaining an
additional number of workmen whose business it was to make them. It
should as readily occur that the quantity of gold and silver is in
every country limited by the use which there is for those metals; that
their use consists in circulating commodities as coin, and in
affording a species of household furniture as plate; that the quantity
of coin in every country is regulated by the value of the
commodities which are to be circulated by it: increase that value, and
immediately a part of it will be sent abroad to purchase, wherever
it is to be had, the additional quantity of coin requisite for
circulating them: that the quantity of plate is regulated by the
number and wealth of those private families who choose to indulge
themselves in that sort of magnificence: increase the number and
wealth of such families, and a part of this increased wealth will most
probably be employed in purchasing, wherever it is to be found, an
additional quantity of plate: that to attempt to increase the wealth
of any country, either by introducing or by detaining in it an
unnecessary quantity of gold and silver, is as absurd as it would be
to attempt to increase the good cheer of private families by
obliging them to keep an unnecessary number of kitchen utensils. As
the expense of purchasing those unnecessary utensils would diminish
instead of increasing either the quantity of goodness of the family
provisions, so the expense of purchasing an unnecessary quantity of
gold and silver must, in every country, as necessarily diminish the
wealth which feeds, clothes, and lodges, which maintains and employs
the people. Gold and silver, whether in the shape of coin or of plate,
are utensils, it must be remembered, as much as the furniture of the
kitchen. Increase the use for them, increase the consumable
commodities which are to be circulated, managed, and prepared by means
of them, and you will infallibly increase the quantity; but if you
attempt, by extraordinary means, to increase the quantity, you will as
infallibly diminish the use and even the quantity too, which in
those metals can never be greater than what the use requires. Were
they ever to be accumulated beyond this quantity, their transportation
is so easy, and the loss which attends their lying idle and unemployed
so great, that no law could prevent their being immediately sent out
of the country.

    It is not always necessary to accumulate gold and silver in
order to enable a country to carry on foreign wars, and to maintain
fleets and armies in distant countries. Fleets and armies are
maintained, not with gold and silver, but with consumable goods. The
nation which, from the annual produce of its domestic industry, from
the annual revenue arising out of its lands, labour, and consumable
stock, has wherewithal to purchase those consumable goods in distant
countries, can maintain foreign wars there.

    A nation may purchase the pay and provisions of an army in a
distant country three different ways: by sending abroad either, first,
some part of its accumulated gold and silver, or, secondly, some
part of the annual produce of its manufactures; or, last of all,
some part of its annual rude produce.

    The gold and silver which can properly be considered as
accumulated or stored up in any country may be distinguished into
three parts: first, the circulating money; secondly, the plate of
private families; and, last of all, the money which may have been
collected by many years' parsimony, and laid up in the treasury of the
prince.

    It can seldom happen that much can be spared from the
circulating money of the country; because in that there can seldom
be much redundancy. The value of goods annually bought and sold in any
country requires a certain quantity of money to circulate and
distribute them to their proper consumers, and can give employment
to no more. The channel of circulation necessarily draws to itself a
sum sufficient to fill it, and never admits any more. Something,
however, is generally withdrawn from this channel in the case of
foreign war. By the great number of people who are maintained
abroad, fewer are maintained at home. Fewer goods are circulated
there, and less money becomes necessary to circulate them. An
extraordinary quantity of paper money, of some sort or other, such
as exchequer notes, navy bills, and bank bills in England, is
generally issued upon such occasions, and by supplying the place of
circulating gold and silver, gives an opportunity of sending a greater
quantity of it abroad. All this, however, could afford but a poor
resource for maintaining a foreign war of great expense and several
years duration.

    The melting down the plate of private families has upon every
occasion been found a still more insignificant one. The French, in the
beginning of the last war, did not derive so much advantage from
this expedient as to compensate the loss of the fashion.

    The accumulated treasures of the prince have, in former times,
afforded a much greater and more lasting resource. In the present
times, if you except the king of Prussia, to accumulate treasure seems
to be no part of the policy of European princes.

    The funds which maintained the foreign wars of the present
century, the most expensive perhaps which history records, seem to
have had little dependency upon the exportation either of the
circulating money, or of the plate of private families, or of the
treasure of the prince. The last French war cost Great Britain upwards
of ninety millions, including not only the seventy-five millions of
new debt that was contracted, but the additional two shillings in
the pound land-tax, and what was annually borrowed of the sinking
fund. More than two-thirds of this expense were laid out in distant
countries; in Germany, Portugal, America, in the ports of the
Mediterranean, in the East and West Indies. The kings of England had
no accumulated treasure. We never heard of any extraordinary
quantity of plate being melted down. The circulating gold and silver
of the country had not been supposed to exceed eighteen millions.
Since the late recoinage of the gold, however, it is believed to
have been a good deal under-rated. Let us suppose, therefore,
according to the most exaggerated computation which I remember to have
either seen or heard of, that, gold and silver together, it amounted
to thirty millions. Had the war been carried on by means of our money,
the whole of it must, even according to this computation, have been
sent out and returned again at least twice in a period of between
six and seven years. Should this be supposed, it would afford the most
decisive argument to demonstrate how unnecessary it is for
government to watch over the preservation of money, since upon this
supposition the whole money of the country must have gone from it
and returned to it again, two different times in so short a period,
without anybody's knowing anything of the matter. The channel of
circulation, however, never appeared more empty than usual during
any part of this period. Few people wanted money who had wherewithal
to pay for it. The profits of foreign trade, indeed, were greater than
usual during the whole war; but especially towards the end of it. This
occasioned, what it always occasions, a general overtrading in all the
parts of Great Britain; and this again occasioned the usual
complaint of the scarcity of money, which always follows
overtrading. Many people wanted it, who had neither wherewithal to buy
it, nor credit to borrow it; and because the debtors found it
difficult to borrow, the creditors found it difficult to get
payment. Gold and silver, however, were generally to be had for
their value, by those who had that value to give for them.

    The enormous expense of the late war, therefore, must have been
chiefly defrayed, not by the exportation of gold and silver, but by
that of British commodities of some kind or other. When the
government, or those who acted under them, contracted with a
merchant for a remittance to some foreign country, he would
naturally endeavour to pay his foreign correspondent, upon whom he had
granted a bill, by sending abroad rather commodities than gold and
silver. If the commodities of Great Britain were not in demand in that
country, he would endeavour to send them to some other country, in
which he could purchase a bill upon that country. The transportation
of commodities, when properly suited to the market, is always attended
with a considerable profit; whereas that of gold and silver is
scarce ever attended with any. When those metals are sent abroad in
order to purchase foreign commodities, the merchant's profit arises,
not from the purchase, but from the sale of the returns. But when they
are sent abroad merely to pay a debt, he gets no returns, and
consequently no profit. He naturally, therefore, exerts his
invention to find out a way of paying his foreign debts rather by
the exportation of commodities than by that of gold and silver. The
great quantity of British goods exported during the course of the late
war, without bringing back any returns, is accordingly remarked by the
author of The Present State of the Nation.

    Besides the three sorts of gold and silver above mentioned,
there is in all great commercial countries a good deal of bullion
alternately imported and exported for the purposes of foreign trade.
This bullion, as it circulates among different commercial countries in
the same manner as the national coin circulates in every particular
country, may be considered as the money of the great mercantile
republic. The national coin receives its movement and direction from
the commodities circulated within the precincts of each particular
country: the money of the mercantile republic, from those circulated
between different countries. Both are employed in facilitating
exchanges, the one between different individuals of the same, the
other between those of different nations. Part of this money of the
great mercantile republic may have been, and probably was, employed in
carrying on the late war. In time of a general war, it is natural to
suppose that a movement and direction should be impressed upon it,
different from what it usually follows in profound peace; that it
should circulate more about the seat of the war, and be more
employed in purchasing there, and in the neighbouring countries, the
pay and provisions of the different armies. But whatever part of
this money of the mercantile republic Great Britain may have
annually employed in this manner, it must have been annually
purchased, either with British commodities, or with something else
that had been purchased with them; which still brings us back to
commodities, to the annual produce of the land and labour of the
country, as the ultimate resources which enabled us to carry on the
war. It is natural indeed to suppose that so great an annual expense
must have been defrayed from a great annual produce. The expense of
1761, for example, amounted to more than nineteen millions. No
accumulation could have supported so great an annual profusion.
There is no annual produce even of gold and silver which could have
supported it. The whole gold and silver annually imported into both
Spain and Portugal, according to the best accounts, does not
commonly much exceed six millions sterling, which, in some years,
would scarce have paid four month's expense of the late war.

    The commodities most proper for being transported to distant
countries, in order to purchase there either the pay and provisions of
an army, or some part of the money of the mercantile republic to be
employed in purchasing them, seem to be the finer and more improved
manufactures; such as contain a great value in a small bulk, and
can, therefore, be exported to a great distance at little expense. A
country whose industry produces a great annual surplus of such
manufactures, which are usually exported to foreign countries, may
carry on for many years a very expensive foreign war without either
exporting any considerable quantity of gold and silver, or even having
any such quantity to export. A considerable part of the annual surplus
of its manufactures must, indeed, in this case be exported without
bringing back any returns to the country, though it does to the
merchant; the government purchasing of the merchant his bills upon
foreign countries, in order to purchase there the pay and provisions
of an army. Some part of this surplus, however, may still continue
to bring back a return. The manufacturers, during the war, will have a
double demand upon them, and be called upon, first, to work up goods
to be sent abroad, for paying the bills drawn upon foreign countries
for the pay and provisions of the army; and, secondly, to work up such
as are necessary for purchasing the common returns that had usually
been consumed in the country. In the midst of the most destructive
foreign war, therefore, the greater part of manufactures may
frequently flourish greatly; and, on the contrary, they may decline on
the return of the peace. They may flourish amidst the ruin of their
country, and begin to decay upon the return of its prosperity. The
different state of many different branches of the British manufactures
during the late war, and for some time after the peace, may serve as
an illustration of what has been just now said.

    No foreign war of great expense or duration could conveniently
be carried on by the exportation of the rude produce of the soil.
The expense of sending such a quantity of it to a foreign country as
might purchase the pay and provisions of an army would be too great.
Few countries produce much more rude produce than what is sufficient
for the subsistence of their own inhabitants. To send abroad any great
quantity of it, therefore, would be to send abroad a part of the
necessary subsistence of the people. It is otherwise with the
exportation of manufactures. The maintenance of the people employed in
them is kept at home, and only the surplus part of their work is
exported. Mr. Hume frequently takes notice of the inability of the
ancient kings of England to carry on, without interruption, any
foreign war of long duration. The English, in those days, had
nothing wherewithal to purchase the pay and provisions of their armies
in foreign countries, but either the rude produce of the soil, of
which no considerable part could be spared from the home
consumption, or a few manufactures of the coarsest kind, of which,
as well as of the rude produce, the transportation was too
expensive. This inability did not arise from the want of money, but of
the finer and more improved manufactures. Buying and selling was
transacted by means of money in England then as well as now. The
quantity of circulating money must have borne the same proportion to
the number and value of purchases and sales usually transacted at that
time, which it does to those transacted at present; or rather it
must have borne a greater proportion, because there was then no paper,
which now occupies a great part of the employment of gold and
silver. Among nations to whom commerce and manufactures are little
known, the sovereign, upon extraordinary occasions, can seldom draw
any considerable aid from his subjects, for reasons which shall be
explained hereafter. It is in such countries, therefore, that he
generally endeavours to accumulate a treasure, as the only resource
against such emergencies. Independent of this necessity, he is in such
a situation naturally disposed to the parsimony requisite for
accumulation. In that simple state, the expense even of a sovereign is
not directed by the vanity which delights in the gaudy finery of a
court, but is employed in bounty to his tenants, and hospitality to
his retainers. But bounty and hospitality very seldom lead to
extravagance; though vanity almost always does. Every Tartar chief,
accordingly, has a treasure. The treasures of Mazepa, chief of the
Cossacs in the Ukraine, the famous ally of Charles the XII, are said
to have been very great. The French kings of the Merovingian race
all had treasures. When they divided their kingdom among their
different children, they divided their treasure too. The Saxon
princes, and the first kings after the Conquest, seem likewise to have
accumulated treasures. The first exploit of every new reign was
commonly to seize the treasure of the preceding king, as the most
essential measure for securing the succession. The sovereigns of
improved and commercial countries are not under the same necessity
of accumulating treasures, because they can generally draw from
their subjects extraordinary aids upon extraordinary occasions. They
are likewise less disposed to do so. They naturally, perhaps
necessarily, follow the mode of the times, and their expense comes
to be regulated by the same extravagant vanity which directs that of
all the other great proprietors in their dominions. The
insignificant pageantry of their court becomes every day more
brilliant, and the expense of it not only prevents accumulation, but
frequently encroaches upon the funds destined for more necessary
expenses. What Dercyllidas said of the court of Persia may be
applied to that of several European princes, that he saw there much
splendour but little strength, and many servants but few soldiers.

    The importation of gold and silver is not the principal, much less
the sole benefit which a nation derives from its foreign trade.
Between whatever places foreign trade is carried on, they all of
them derive two distinct benefits from it. It carries out that surplus
part of the produce of their land and labour for which there is no
demand among them, and brings back in return for it something else for
which there is a demand. It gives a value to their superfluities, by
exchanging them for something else, which may satisfy a part of
their wants, and increase their enjoyments. By means of it the
narrowness of the home market does not hinder the division of labour
in any particular branch of art or manufacture from being carried to
the highest perfection. By opening a more extensive market for
whatever part of the produce of their labour may exceed the home
consumption, it encourages them to improve its productive powers,
and to augment its annual produce to the utmost, and thereby to
increase the real revenue and wealth of the society. These great and
important services foreign trade is continually occupied in performing
to all the different countries between which it is carried on. They
all derive great benefit from it, though that in which the merchant
resides generally derives the greatest, as he is generally more
employed in supplying the wants, and carrying out the superfluities of
his own, than of any other particular country. To import the gold
and silver which may be wanted into the countries which have no
mines is, no doubt, a part of the business of foreign commerce. It is,
however, a most insignificant part of it. A country which 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 discovery
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 improvement, 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,
as 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 about the 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 monopolized 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 from
which it was carried on; because, by the exportation of a part of
the returns to other European countries, it annually brought home a
much greater quantity of that metal than it carried out. Both the
objection and the reply are founded in the popular notion which I have
been just now examining. It is therefore unnecessary to say anything
further about either. By the annual exportation of silver to the
East Indies, plate is probably somewhat dearer in Europe than it
otherwise might have been; and coined silver probably purchases a
larger quantity both of labour and commodities. The former of these
two effects is a very small loss, the latter a very small advantage;
both too insignificant to deserve any part of the public attention.
The trade to the East Indies, by opening a market to the commodities
of Europe, or, what comes nearly to the same thing, to the gold and
silver which is purchased with those commodities, must necessarily
tend to increase the annual production of European commodities, and
consequently the real wealth and revenue of Europe. That it has
hitherto increased them so little is probably owing to the
restraints which it everywhere labours under.

    I thought it necessary, though at the hazard of being tedious,
to examine at full length this popular notion that wealth consists
in money, or in gold and silver. Money in common language, as I have
already observed, frequently signifies wealth, and this ambiguity of
expression has rendered this popular notion so familiar to us that
even they who are convinced of its absurdity are very apt to forget
their own principles, and in the course of their reasonings to take it
for granted as a certain and undeniable truth. Some of the best
English writers upon commerce set out with observing that the wealth
of a country consists, not in its gold and silver only, but in its
lands, houses, and consumable goods of all different kinds. In the
course of their reasonings, however, the lands, houses, and consumable
goods seem to slip out of their memory, and the strain of their
argument frequently supposes that all wealth consists in gold and
silver, and that to multiply those metals is the great object of
national industry and commerce.

    The two principles being established, however, that wealth
consisted in gold and silver, and that those metals could be brought
into a country which had no mines only by the balance of trade, or
by exporting to a greater value than it imported, it necessarily
became the great object of political economy to diminish as much as
possible the importation of foreign goods for home consumption, and to
increase as much as possible the exportation of the produce of
domestic industry. Its two great engines for enriching the country,
therefore, were restraints upon importation, and encouragements to
exportation.

    The restraints upon importation were of two kinds.

    First, restraints upon the importation of such foreign goods for
home consumption as could be produced at home, from whatever country
they were imported.

    Secondly, restraints upon the importation of goods of almost all
kinds from those particular countries with which the balance of
trade was supposed to be disadvantageous.

    Those different restraints consisted sometimes in high duties, and
sometimes in absolute prohibitions.

    Exportation was encouraged sometimes by drawbacks, sometimes by
bounties, sometimes by advantageous treaties of commerce with
foreign states, and sometimes by the establishment of colonies in
distant countries.

    Drawbacks were given upon two different occasions. When the home
manufactures were subject to any duty or excise, either the whole or a
part of it was frequently drawn back upon their exportation; and
when foreign goods liable to a duty were imported in order to be
exported again, either the whole or a part of this duty was
sometimes given back upon such exportation.

    Bounties were given for the encouragement either of some beginning
manufactures, or of such sorts of industry of other kinds as
supposed to deserve particular favour.

    By advantageous treaties of commerce, particular privileges were
procured in some foreign state for the goods and merchants of the
country, beyond what were granted to those other countries.

    By established establishment of colonies in distant countries, not
only particular privileges, but a monopoly was frequently procured for
the goods and merchants of the country which established them.

    The two sorts of restraints upon importation above-mentioned,
together with these four encouragements to exportation, constitute the
six principal means by which the commercial system proposes to
increase the quantity of gold and silver in any country by turning the
balance of trade in its favour. I shall consider each of them in a
particular chapter, and without taking much further notice of their
supposed tendency to bring money into the country, I shall examine
chiefly what are likely to be the effects of each of them upon the
annual produce of its industry. According as they tend either to
increase or diminish the value of this annual produce, they must
evidently tend either to increase or diminish the real wealth and
revenue of the country.

                            CHAPTER II

     Of Restraints upon the Importation from Foreign Countries

             of such Goods as can be produced at Home

    BY restraining, either by high duties or by absolute prohibitions,
the importation of such goods from foreign countries as can be
produced at home, the monopoly of the home market is more or less
secured to the domestic industry employed in producing them. Thus
the prohibition of importing either live cattle or salt provisions
from foreign countries secures to the graziers of Great Britain the
monopoly of the home market for butcher's meat. The high duties upon
the importation of corn, which in times of moderate plenty amount to a
prohibition, give a like advantage to the growers of that commodity.
The prohibition of the importation of foreign woollens is equally
favourable to the woollen manufacturers. The silk manufacture,
though altogether employed upon foreign materials, has lately obtained
the same advantage. The linen manufacture has not yet obtained it, but
is making great strides towards it. Many other sorts of
manufacturers have, in the same manner, obtained in Great Britain,
either altogether or very nearly, a monopoly against their countrymen.
The variety of goods of which the importation into Great Britain is
prohibited, either absolutely, or under certain circumstances, greatly
exceeds what can easily be suspected by those who are not well
acquainted with the laws of the customs.

    That this monopoly of the home market frequently gives great
encouragement to that particular species of industry which enjoys
it, and frequently turns towards that employment a greater share of
both the labour and stock of the society than would otherwise have
gone to it, cannot be doubted. But whether it tends either to increase
the general industry of the society, or to give it the most
advantageous direction, is not, perhaps, altogether so evident.

    The general industry of the society never can exceed what the
capital of the society can employ. As the number of workmen 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 industry 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
necessarily, 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 consumption. 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 Konigsberg
to Lisbon, and fruit and wine from Lisbon to Konigsberg, must
generally be the one half of it at Konigsberg 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 Konigsberg or Lisbon,
and it can only be some very particular circumstances which can make
him prefer the residence of Amsterdam. The uneasiness, however,
which he feels at being separated so far from his capital generally
determines him to bring part both of the Konigsberg goods which he
destines for the market of Lisbon, and of the Lisbon goods which he
destines for that of Konigsberg, to Amsterdam: and though this
necessarily subjects him to a double charge of loading and
unloading, as well as to the payment of some duties and customs, yet
for the sake of having some part of his capital always under his own
view and command, he willingly submits to this extraordinary charge;
and it is in this manner that every country which has any considerable
share of the carrying trade becomes always the emporium, or general
market, for the goods of all the different countries whose trade it
carries on. The merchant, in order to save a second loading and
unloading, endeavours always to sell in the home market as much of the
goods of all those different countries as he can, and thus, so far
as he can, to convert his carrying trade into a foreign trade of
consumption. A merchant, in the same manner, who is engaged in the
foreign trade of consumption, when he collects goods for foreign
markets, will always be glad, upon equal or nearly equal profits, to
sell as great a part of them at home as he can. He saves himself the
risk and trouble of exportation, when, so far as he can, he thus
converts his foreign trade of consumption into a home trade. Home is
in this manner the centre, if I may say so, round which the capitals
of the inhabitants of every country are continually circulating, and
towards which they are always tending, though by particular causes
they may sometimes be driven off and repelled from it towards more
distant employments. But a capital employed in the home trade, it
has already been shown, necessarily puts into motion a greater
quantity of domestic industry, and gives revenue and employment to a
greater number of the inhabitants of the country, than an equal
capital employed in the foreign trade of consumption: and one employed
in the foreign trade of consumption has the same advantage over an
equal capital employed in the carrying trade. Upon equal, or only
nearly equal profits, therefore, every individual naturally inclines
to employ his capital in the manner in which it is likely to afford
the greatest support to domestic industry, and to give revenue and
employment to the greatest number of people of his own country.

    Secondly, every individual who employs his capital in the
support of domestic industry, necessarily endeavours so to direct that
industry that its produce may be of the greatest possible value.

    The produce of industry is what it adds to the subject or
materials upon which it is employed. In proportion as the value of
this produce is great or small, so will likewise be the profits of the
employer. But it is only for the sake of profit that any man employs a
capital in the support of industry; and he will always, therefore,
endeavour to employ it in the support of that industry of which the
produce is likely to be of the greatest value, or to exchange for
the greatest quantity either of money or of other goods.

    But the annual revenue of every society is always precisely
equal to the exchangeable value of the whole annual produce of its
industry, or rather is precisely the same thing with that exchangeable
value. As every individual, therefore, endeavours as much as he can
both to employ his capital in the support of domestic industry, and so
to direct that industry that its produce may be of the greatest value;
every individual necessarily labours to render the annual revenue of
the society as great as he can. He generally, indeed, neither
intends to promote the public interest, nor knows how much he is
promoting it. By preferring the support of domestic to that of foreign
industry, he intends only his own security; and by directing that
industry in such a manner as its produce may be of the greatest value,
he intends only his own gain, and he is in this, as in many other
cases, led by an invisible hand to promote an end which was no part of
his intention. Nor is it always the worse for the society that it
was no part of it. By pursuing his own interest he frequently promotes
that of the society more effectually than when he really intends to
promote it. I have never known much good done by those who affected to
trade for the public good. It is an affectation, indeed, not very
common among merchants, and very few words need be employed in
dissuading them from it.

    What is the species of domestic industry which his capital can
employ, and of which the produce is likely to be of the greatest
value, every individual, it is evident, can, in his local situation,
judge much better than any statesman or lawgiver can do for him. The
statesman who should attempt to direct private people in what manner
they ought to employ their capitals would not only load himself with a
most unnecessary attention, but assume an authority which could safely
be trusted, not only to no single person, but to no council or
senate whatever, and which would nowhere be so dangerous as in the
hands of a man who had folly and presumption enough to fancy himself
fit to exercise it.

    To give the monopoly of the home market to the produce of domestic
industry, in any particular art or manufacture, is in some measure
to direct private people in what manner they ought to employ their
capitals, and must, in almost all cases, be either a useless or a
hurtful regulation. If the produce of domestic can be brought there as
cheap as that of foreign industry, the regulation is evidently
useless. If it cannot, it must generally be hurtful. It is the maxim
of every prudent master of a family never to attempt to make at home
what it will cost him more to make than to buy. The tailor does not
attempt to make his own shoes, but buys them of the shoemaker. The
shoemaker does not attempt to make his own clothes, but employs a
tailor. The farmer attempts to make neither the one nor the other, but
employs those different artificers. All of them find it for their
interest to employ their whole industry in a way in which they have
some advantage over their neighbours, and to purchase with a part of
its produce, or what is the same thing, with the price of a part of
it, whatever else they have occasion for.

    What is prudence in the conduct of every private family can scarce
be folly in that of a great kingdom. If a foreign country can supply
us with a commodity cheaper than we ourselves can make it, better
buy it of them with some part of the produce of our own industry
employed in a way in which we have some advantage. The general
industry of the country, being always in proportion to the capital
which employs it, will not thereby be diminished, no more than that of
the above-mentioned artificers; but only left to find out the way in
which it can be employed with the greatest advantage. It is
certainly not employed to the greatest advantage when it is thus
directed towards an object which it can buy cheaper than it can
make. The value of its annual produce is certainly more or less
diminished when it is thus turned away from producing commodities
evidently of more value than the commodity which it is directed to
produce. According to the supposition, that commodity could be
purchased from foreign countries cheaper than it can be made at
home. It could, therefore, have been purchased with a part only of the
commodities, or, what is the same thing, with a part only of the price
of the commodities, which the industry employed by an equal capital
would have produced at home, had it been left to follow its natural
course. The industry of the country, therefore, is thus turned away
from a more to a less advantageous employment, and the exchangeable
value of its annual produce, instead of being increased, according
to the intention of the lawgiver, must necessarily be diminished by
every such regulation.

    By means of such regulations, indeed, a particular manufacture may
sometimes be acquired sooner than it could have been otherwise, and
after a certain time may be made at home as cheap or cheaper than in
the foreign country. But though the industry of the society may be
thus carried with advantage into a particular channel sooner than it
could have been otherwise, it will by no means follow that the sum
total, either of its industry, or of its revenue, can ever be
augmented by any such regulation. The industry of the society can
augment only in proportion as its capital augments, and its capital
can augment only in proportion to what can be gradually saved out of
its revenue. But the immediate effect of every such regulation is to
diminish its revenue, and what diminishes its revenue is certainly not
very likely to augment its capital faster than it would have augmented
of its own accord had both capital and industry been left to find
out their natural employments.

    Though for want of such regulations the society should never
acquire the proposed manufacture, it would not, upon that account,
necessarily be the poorer in any one period of its duration. In
every period of its duration its whole capital and industry might
still have been employed, though upon different objects, in the manner
that was most advantageous at the time. In every period its revenue
might have been the greatest which its capital could afford, and
both capital and revenue might have been augmented with the greatest
possible rapidity.

    The natural advantages which one country has over another in
producing particular commodities are sometimes so great that it is
acknowledged by all the world to be in vain to struggle with them.
By means of glasses, hotbeds, and hot walls, very good grapes can be
raised in Scotland, and very good wine too can be made of them at
about thirty times the expense for which at least equally good can
be brought from foreign countries. Would it be a reasonable law to
prohibit the importation of all foreign wines merely to encourage
the making of claret and burgundy in Scotland? But if there would be a
manifest absurdity in turning towards any employment thirty times more
of the capital and industry of the country than would be necessary
to purchase from foreign countries an equal quantity of the
commodities wanted, there must be an absurdity, though not
altogether so glaring, yet exactly of the same kind, in turning
towards any such employment a thirtieth, or even a three-hundredth
part more of either. Whether the advantages which one country has over
another be natural or acquired is in this respect of no consequence.
As long as the one country has those advantages, and the other wants
them, it will always be more advantageous for the latter rather to buy
of the former than to make. It is an acquired advantage only, which
one artificer has over his neighbour, who exercises another trade; and
yet they both find it more advantageous to buy of one another than
to make what does not belong to their particular trades.

    Merchants and manufacturers are the people who derive the greatest
advantage from this monopoly of the home market. The prohibition of
the importation of foreign cattle, and of salt provisions, together
with the high duties upon foreign corn, which in times of moderate
plenty amount to a prohibition, are not near so advantageous to the
graziers and farmers of Great Britain as other regulations of the same
kind are to its merchants and manufacturers. Manufactures, those of
the finer kind especially, are more easily transported from one
country to another than corn or cattle. It is in the fetching and
carrying manufactures, accordingly, that foreign trade is chiefly
employed. In manufactures, a very small advantage will enable
foreigners to undersell our own workmen, even in the home market. It
will require a very great one to enable them to do so in the rude
produce of the soil. If the free importation of foreign manufactures
were permitted, several of the home manufactures would probably
suffer, and some of them, perhaps, go to ruin altogether, and a
considerable part of the stock and industry at present employed in
them would be forced to find out some other employment. But the freest
importation of the rude produce of the soil could have no such
effect upon the agriculture of the country.

    If the importation of foreign cattle, for example, were made
ever so free, so few could be imported that the grazing trade of Great
Britain could be little affected by it. Live cattle are, perhaps,
the only commodity of which the transportation is more expensive by
sea than by land. By land they carry themselves to market. By sea, not
only the cattle, but their food and their water too, must be carried
at no small expense and inconveniency. The short sea between Ireland
and Great Britain, indeed, renders the importation of Irish cattle
more easy. But though the free importation of them, which was lately
permitted only for a limited time, were rendered perpetual, it could
have no considerable effect upon the interest of the graziers of Great
Britain. Those parts of Great Britain which border upon the Irish
Sea are all grazing countries. Irish cattle could never be imported
for their use, but must be driven through those very extensive
countries, at no small expense and inconveniency, before they could
arrive at their proper market. Fat cattle could not be driven so
far. Lean cattle, therefore, only could be imported, and such
importation could interfere, not with the interest of the feeding or
fattening countries, to which, by reducing the price of lean cattle,
it would rather be advantageous, but with that of the breeding
countries only. The small number of Irish cattle imported since
their importation was permitted, together with the good price at which
lean cattle still continue to sell, seem to demonstrate that even
the breeding countries of Great Britain are never likely to be much
affected by the free importation of Irish cattle. The common people of
Ireland, indeed, are said to have sometimes opposed with violence
the exportation of their cattle. But if the exporters had found any
great advantage in continuing the trade, they could easily, when the
law was on their side, have conquered this mobbish opposition.

    Feeding and fattening countries, besides, must always be highly
improved, whereas breeding countries are generally uncultivated. The
high price of lean cattle, by augmenting the value of uncultivated
land, is like a bounty against improvement. To any country which was
highly improved throughout, it would be more advantageous to import
its lean cattle than to breed them. The province of Holland,
accordingly, is said to follow this maxim at present. The mountains of
Scotland, Wales, and Northumberland, indeed, are countries not capable
of much improvement, and seem destined by nature to be the breeding
countries of Great Britain. The freest importation of foreign cattle
could have no other effect than to hinder those breeding countries
from taking advantage of the increasing population and improvement
of the rest of the kingdom, from raising their price to an
exorbitant height, and from laying a real tax upon all the more
improved and cultivated parts of the country.

    The freest importation of salt provisions, in the same manner,
could have as little effect upon the interest of the graziers of Great
Britain as that of live cattle. Salt provisions are not only a very
bulky commodity, but when compared with fresh meat, they are a
commodity both of worse quality, and as they cost more labour and
expense, of higher price. They could never, therefore, come into
competition with the fresh meat, though they might with the salt
provisions of the country. They might be used for victualling ships
for distant voyages and such like uses, but could never make any
considerable part of the food of the people. The small quantity of
salt provisions imported from Ireland since their importation was
rendered free is an experimental proof that our graziers have
nothing to apprehend from it. It does not appear that the price of
butcher's meat has ever been sensibly affected by it.

    Even the free importation of foreign corn could very little affect
the interest of the farmers of Great Britain. Corn is a much more
bulky commodity than butcher's meat. A pound of wheat at a penny is as
dear as a pound of butcher's meat at fourpence. The small quantity
of foreign corn imported even in times of the greatest scarcity may
satisfy our farmers that they can have nothing to fear from the freest
importation. The average quantity imported, one year with another,
amounts only, according to the very well informed author of the tracts
upon the corn trade, to twenty-three thousand seven hundred and
twenty-eight quarters of all sorts of grain, and does not exceed the
five hundred and seventy-first part of the annual consumption. But
as the bounty upon corn occasions a greater exportation in years of
plenty, so it must of consequence occasion a greater importation in
years of scarcity than in the actual state of tillage would
otherwise take place. By means of it the plenty of one year does not
compensate the scarcity of another, and as the average quantity
exported is necessarily augmented by it, so must likewise, in the
actual state of tillage, the average quantity imported. If there
were no bounty, as less corn would be exported, so it is probable
that, one year with another, less would be imported than at present.
The corn-merchants, the fetchers and carriers of corn between Great
Britain and foreign countries would have much less employment, and
might suffer considerably; but the country gentlemen and farmers could
suffer very little. It is in the corn merchants accordingly, rather
than in the country gentlemen and farmers, that I have observed the
greatest anxiety for the renewal and continuation of the bounty.

    Country gentlemen and farmers are, to their great honour, of all
people, the least subject to the wretched spirit of monopoly. The
undertaker of a great manufactory is sometimes alarmed if another work
of the same kind is established within twenty miles of him. The
Dutch undertaker of the woollen manufacture at Abbeville stipulated
that no work of the same kind should be established within thirty
leagues of that city. Farmers and country gentlemen, on the
contrary, are generally disposed rather to promote than to obstruct
the cultivation and improvement of their neighbours' farms and
estates. They have no secrets such as those of the greater part of
manufacturers, but are generally rather fond of communicating to their
neighbours and of extending as far as possible any new practice
which they have found to be advantageous. Pius Questus, says old Cato,
stabilissimusque, minimeque invidiosus; minimeque male cogitantes
sunt, qui in eo studio occupati sunt. Country gentlemen and farmers,
dispersed in different parts of the country, cannot so easily
combine as merchants and manufacturers, who, being collected into
towns, and accustomed to that exclusive corporation spirit which
prevails in them, naturally endeavour to obtain against all their
countrymen the same exclusive privilege which they generally possess
against the inhabitants of their respective towns. They accordingly
seem to have been the original inventors of those restraints upon
the importation of foreign goods which secure to them the monopoly
of the home market. It was probably in imitation of them, and to put
themselves upon a level with those who, they found, were disposed to
oppress them, that the country gentlemen and farmers of Great
Britain in so far forgot the generosity which is natural to their
station as to demand the exclusive privilege of supplying their
countrymen with corn and butcher's meat. They did not perhaps take
time to consider how much less their interest could be affected by the
freedom of trade than that of the people whose example they followed.

    To prohibit by a perpetual law the importation of foreign corn and
cattle is in reality to enact that the population and industry of
the country shall at no time exceed what the rude produce of its own
soil can maintain.

    There seem, however, to be two cases in which it will generally be
advantageous to lay some burden upon foreign for the encouragement
of domestic industry.

    The first is, when some particular sort of industry is necessary
for the defence of the country. The defence of Great Britain, for
example, depends very much upon the number of its sailors and
shipping. The Act of Navigation, therefore, very properly endeavours
to give the sailors and shipping of Great Britain the monopoly of
the trade of their own country in some cases by absolute
prohibitions and in others by heavy burdens upon the shipping of
foreign countries. The following are the principal dispositions of
this Act.

    First, all ships, of which the owners and three-fourths of the
mariners are not British subjects, are prohibited, upon pain of
forfeiting ship and cargo, from trading to the British settlements and
plantations, or from being employed in the coasting trade of Great
Britain.

    Secondly, a great variety of the most bulky articles of
importation can be brought into Great Britain only, either in such
ships as are above described, or in ships of the country where those
goods are purchased, and of which the owners, masters, and
three-fourths of the mariners are of that particular country; and when
imported even in ships of this latter kind, they are subject to double
aliens' duty. If imported in ships of any other country, the penalty
is forfeiture of ship and goods. When this act was made, the Dutch
were, what they still are, the great carriers of Europe, and by this
regulation they were entirely excluded from being the carriers to
Great Britain, or from importing to us the goods of any other European
country.

    Thirdly, a great variety of the most bulky articles of importation
are prohibited from being imported, even in British ships, from any
country but that in which they are produced, under pains of forfeiting
ship and cargo. This regulation, too, was probably intended against
the Dutch. Holland was then, as now, the great emporium for all
European goods, and by this regulation British ships were hindered
from loading in Holland the goods of any other European country.

    Fourthly, salt fish of all kinds, whale-fins, whale-bone, oil, and
blubber, not caught by and cured on board British vessels, when
imported into Great Britain, are subjected to double aliens' duty. The
Dutch, as they are they the principal, were then the only fishers in
Europe that attempted to supply foreign nations with fish. By this
regulation, a very heavy burden was laid upon their supplying Great
Britain.

    When the Act of Navigation was made, though England and Holland
were not actually at war, the most violent animosity subsisted between
the two nations. It had begun during the government of the Long
Parliament, which first framed this act, and it broke out soon after
in the Dutch wars during that of the Protector and of Charles the
Second. It is not impossible, therefore, that some of the
regulations of this famous act may have proceeded from national
animosity. They are as wise, however, as if they had all been dictated
by the most deliberate wisdom. National animosity at that particular
time aimed at the very same object which the most deliberate wisdom
would have recommended, the diminution of the naval power of
Holland, the only naval power which could endanger the security of
England.

    The Act of Navigation is not favourable to foreign commerce, or to
the growth of that opulence which can arise from it. The interest of a
nation in its commercial relations to foreign nations is, like that of
a merchant with regard to the different people with whom he deals,
to buy as cheap and to sell as dear as possible. But it will be most
likely to buy cheap, when by the most perfect freedom of trade it
encourages all nations to bring to it the goods which it has
occasion to purchase; and, for the same reason, it will be most likely
to sell dear, when its markets are thus filled with the greatest
number of buyers. The Act of Navigation, it is true, lays no burden
upon foreign ships that come to export the produce of British
industry. Even the ancient aliens' duty, which used to be paid upon
all goods exported as well as imported, has, by several subsequent
acts, been taken off from the greater part of the articles of
exportation. But if foreigners, either by prohibitions or high duties,
are hindered from coming to sell, they cannot always afford to come to
buy; because coming without a cargo, they must lose the freight from
their own country to Great Britain. By diminishing the number of
sellers, therefore, we necessarily diminish that of buyers, and are
thus likely not only to buy foreign goods dearer, but to sell our
own cheaper, than if there was a more perfect freedom of trade. As
defence, however it is of much more importance than opulence, the
Act of Navigation is, perhaps, the wisest of all the commercial
regulations of England.

    The second case, in which it will generally be advantageous to lay
some burden upon foreign for the encouragement of domestic industry
is, when some tax is imposed at home upon the produce of the latter.
In this case, it seems reasonable that an equal tax should be
imposed upon the like produce of the former. This would not give the
monopoly of the home market to domestic industry, nor turn towards a
particular employment a greater share of the stock and labour of the
country than what would naturally go to it. It would only hinder any
part of what would naturally go to it from being turned away by the
tax into a less natural direction, and would leave the competition
between foreign and domestic industry, after the tax, as nearly as
possible upon the same footing as before it. In Great Britain, when
any such tax is laid upon the produce of domestic industry, it is
usual at the same time, in order to stop the clamorous complaints of
our merchants and manufacturers that they will be undersold at home,
to lay a much heavier duty upon the importation of all foreign goods
of the same kind.

    This second limitation of the freedom of trade according to some
people should, upon some occasions, be extended much farther than to
the precise foreign commodities which could come into competition with
those which had been taxed at home. When the necessaries of life
have been taxed any country, it becomes proper, they pretend, to tax
not only the like necessaries of life imported from other countries,
but all sorts of foreign goods which can come into competition with
anything that is the produce of domestic industry. Subsistence, they
say, becomes necessarily dearer in consequence of such taxes; and
the price of labour must always rise with the price of the
labourers' subsistence. Every commodity, therefore, which is the
produce of domestic industry, though not immediately taxed itself,
becomes dearer in consequence of such taxes, because the labour
which produces it becomes so. Such taxes, therefore, are really
equivalent, they say, to a tax upon every particular commodity
produced at home. In order to put domestic upon the same footing
with foreign industry, therefore, it becomes necessary, they think, to
lay some duty upon every foreign commodity equal to this enhancement
of the price of the home commodities with which it can come into
competition.

    Whether taxes upon the necessaries of life, such as those in Great
Britain upon soap, salt, leather, candles, etc., necessarily raise the
price of labour, and consequently that of all other commodities, I
shall consider hereafter when I come to treat of taxes. Supposing,
however, in the meantime, that they have this effect, and they have it
undoubtedly, this general enhancement of the price of all commodities,
in consequence of that of labour, is a case which differs in the two
following respects from that of a particular commodity of which the
price was enhanced by a particular tax immediately imposed upon it.

    First, it might always be known with great exactness how far the
price of such a commodity could be enhanced by such a tax: but how far
the general enhancement of the price of labour might affect that of
every different commodity about which labour was employed could
never be known with any tolerable exactness. It would be impossible,
therefore, to proportion with any tolerable exactness the tax upon
every foreign to this enhancement of the price of every home
commodity.

    Secondly, taxes upon the necessaries of life have nearly the
same effect upon the circumstances of the people as a poor soil and
a bad climate. Provisions are thereby rendered dearer in the same
manner as if it required extraordinary labour and expense to raise
them. As in the natural scarcity arising from soil and climate it
would be absurd to direct the people in what manner they ought to
employ their capitals and industry, so is it likewise in the
artificial scarcity arising from such taxes. To be left to
accommodate, as well as they could, their industry to their situation,
and to find out those employments in which, notwithstanding their
unfavourable circumstances, they might have some advantage either in
the home or in the foreign market, is what in both cases would
evidently be most for their advantage. To lay a new tax upon them,
because they are already overburdened with taxes, and because they
already pay too dear for the necessaries of life, to make them
likewise pay too dear for the greater part of other commodities, is
certainly a most absurd way of making amends.

    Such taxes, when they have grown up to a certain height, are a
curse equal to the barrenness of the earth and the inclemency of the
heavens; and yet it is in the richest and most industrious countries
that they have been most generally imposed. No other countries could
support so great a disorder. As the strongest bodies only can live and
enjoy health under an unwholesome regimen, so the nations only that in
every sort of industry have the greatest natural and acquired
advantages can subsist and prosper under such taxes. Holland is the
country in Europe in which they abound most, and which from peculiar
circumstances continues to prosper, not by means of them, as has
been most absurdly supposed, but in spite of them.

    As there are two cases in which it will generally be
advantageous to lay some burden upon foreign for the encouragement
of domestic industry, so there are two others in which it may
sometimes be a matter of deliberation; in the one, how far it is
proper to continue the free importation of certain foreign goods;
and in the other, how far, or in what manner, it may be proper to
restore that free importation after it has been for some time
interrupted.

    The case in which it may sometimes be a matter of deliberation how
far it is proper to continue the free importation of certain foreign
goods is, when some foreign nation restrains by high duties or
prohibitions the importation of some of our manufactures into their
country. Revenge in this case naturally dictates retaliation, and that
we should impose the like duties and prohibitions upon the importation
of some or all of their manufactures into ours. Nations,
accordingly, seldom fail to retaliate in this manner. The French
have been particularly forward to favour their own manufactures by
restraining the importation of such foreign goods as could come into
competition with them. In this consisted a great part of the policy of
Mr. Colbert, who, notwithstanding his great abilities, seems in this
case to have been imposed upon by the sophistry of merchants and
manufacturers, who are always demanding a monopoly against their
countrymen. It is at present the opinion of the most intelligent men
in France that his operations of this kind have not been beneficial to
his country. That minister, by the tariff of 1667, imposed very high
duties upon a great number of foreign manufactures. Upon his
refusing to moderate them in favour of the Dutch, they in 1671
prohibited the importation of the wines, brandies, and manufactures of
France. The war of 1672 seems to have been in part occasioned by
this commercial dispute. The peace of Nimeguen put an end to it in
1678 by moderating some of those duties in favour of the Dutch, who in
consequence took off their prohibition. It was about the same time
that the French and English began mutually to oppress each other's
industry by the like duties and prohibitions, of which the French,
however, seem to have set the first example. The spirit of hostility
which has subsisted between the two nations ever since has hitherto
hindered them from being moderated on either side. In 1697 the English
prohibited the importation of bonelace, the manufacture of Flanders.
The government of that country, at that time under the dominion of
Spain, prohibited in return the importation of English woollens. In
1700, the prohibition of importing bonelace into England was taken off
upon condition that the importance of English woollens into Flanders
should be put on the same footing as before.

    There may be good policy in retaliations of this kind, when
there is a probability that they will procure the repeal of the high
duties or prohibitions complained of. The recovery of a great
foreign market will generally more than compensate the transitory
inconveniency of paying dearer during a short time for some sorts of
goods. To judge whether such retaliations are likely to produce such
an effect does not, perhaps, belong so much to the science of a
legislator, whose deliberations ought to be governed by general
principles which are always the same, as to the skill of that
insidious and crafty animal, vulgarly called a statesman or
politician, whose councils are directed by the momentary
fluctuations of affairs. When there is no probability that any such
repeal can be procured, it seems a bad method of compensating the
injury done to certain classes of our people to do another injury
ourselves, not only to those classes, but to almost all the other
classes of them. When our neighbours prohibit some manufacture of
ours, we generally prohibit, not only the same, for that alone would
seldom affect them considerably, but some other manufacture of theirs.
This may no doubt give encouragement to some particular class of
workmen among ourselves, and by excluding some of their rivals, may
enable them to raise their price in the home market. Those workmen,
however, who suffered by our neighbours' prohibition will not be
benefited by ours. On the contrary, they and almost all the other
classes of our citizens will thereby be obliged to pay dearer than
before for certain goods. Every such law, therefore, imposes a real
tax upon the whole country, not in favour of that particular class
of workmen who were injured by our neighbours' prohibition, but of
some other class.

    The case in which it may sometimes be a matter of deliberation,
how far, or in what manner, it is proper to restore the free
importation of foreign goods, after it has been for some time
interrupted, is, when particular manufactures, by means of high duties
or prohibitions upon all foreign goods which can come into competition
with them, have been so far extended as to employ a great multitude of
hands. Humanity may in this case require that the freedom of trade
should be restored only by slow gradations, and with a good deal of
reserve and circumspection. Were those high duties and prohibitions
taken away all at once, cheaper foreign goods of the same kind might
be poured so fast into the home market as to deprive all at once
many thousands of our people of their ordinary employment and means of
subsistence. The disorder which this would occasion might no doubt
be very considerable. It would in all probability, however, be much
less than is commonly imagined, for the two following reasons:-

    First, all those manufactures, of which any part is commonly
exported to other European countries without a bounty, could be very
little affected by the freest importation of foreign goods. Such
manufactures must be sold as cheap abroad as any other foreign goods
of the same quality and kind, and consequently must be sold cheaper at
home. They would still, therefore, keep possession of the home market,
and though a capricious man of fashion might sometimes prefer
foreign wares, merely because they were foreign, to cheaper and better
goods of the same kind that were made at home, this folly could,
from the nature of things, extend to so few that it could make no
sensible impression upon the general employment of the people. But a
great part of all the different branches of our woollen manufacture,
of our tanned leather, and of our hardware, are annually exported to
other European countries without any bounty, and these are the
manufactures which employ the greatest number of hands. The silk,
perhaps, is the manufacture which would suffer the most by this
freedom of trade, and after it the linen, though the latter much
less than the former.

    Secondly, though a great number of people should, by thus
restoring the freedom of trade, be thrown all at once out of their
ordinary employment and common method of subsistence, it would by no
means follow that they would thereby be deprived either of
employment or subsistence. By the reduction of the army and navy at
the end of the late war, more than a hundred thousand soldiers and
seamen, a number equal to what is employed in the greatest
manufactures, were all at once thrown out of their ordinary
employment; but, though they no doubt suffered some inconveniency,
they were not thereby deprived of all employment and subsistence.
The greater part of the seamen, it is probable, gradually betook
themselves to the merchant-service as they could find occasion, and in
the meantime both they and the soldiers were absorbed in the great
mass of the people, and employed in a great variety of occupations.
Not only no great convulsion, but no sensible disorder arose from so
great a change in the situation of more than a hundred thousand men,
all accustomed to the use of arms, and many of them to rapine and
plunder. The number of vagrants was scarce anywhere sensibly increased
by it, even the wages of labour were not reduced by it in any
occupation, so far as I have been able to learn, except in that of
seamen in the merchant service. But if we compare together the
habits of a soldier and of any sort of manufacturer, we shall find
that those of the latter do not tend so much to disqualify him from
being employed in a new trade, as those of the former from being
employed in any. The manufacturer has always been accustomed to look
for his subsistence from his labour only: the soldier to expect it
from his pay. Application and industry have been familiar to the
one; idleness and dissipation to the other. But it is surely much
easier to change the direction of industry from one sort of labour
to another than to turn idleness and dissipation to any. To the
greater part of manufactures besides, it has already been observed,
there are other collateral manufactures of so similar a nature that
a workman can easily transfer his industry from one of them to
another. The greater part of such workmen too are occasionally
employed in country labour. The stock which employed them in a
particular manufacture before will still remain in the country to
employ an equal number of people in some other way. The capital of the
country remaining the same, the demand for labour will likewise be the
same, or very nearly the same, though it may be exerted in different
places and for different occupations. Soldiers and seamen, indeed,
when discharged from the king's service, are at liberty to exercise
any trade, within any town or place of Great Britain or Ireland. Let
the same natural liberty of exercising what species of industry they
please, be restored to all his Majesty's subjects, in the same
manner as to soldiers and seamen; that is, break down the exclusive
privileges of corporations, and repeal the Statute of
Apprenticeship, both which are real encroachments upon natural
liberty, and add to these the repeal of the Law of Settlements, so
that a poor workman, when thrown out of employment either in one trade
or in one place, may seek for it in another trade or in another
place without the fear either of a prosecution or of a removal, and
neither the public nor the individuals will suffer much more from
the occasional disbanding some particular classes of manufacturers
than from that of soldiers. Our manufacturers have no doubt great
merit with their country, but they cannot have more than those who
defend it with their blood, nor deserve to be treated with more
delicacy.

    To expect, indeed, that the freedom of trade should ever be
entirely restored in Great Britain is as absurd as to expect that an
Oceana or Utopia should ever be established in it. Not only the
prejudices of the public, but what is much more unconquerable, the
private interests of many individuals, irresistibly oppose it. Were
the officers of the army to oppose with the same zeal and unanimity
any reduction in the numbers of forces with which master manufacturers
set themselves against every law that is likely to increase the number
of their rivals in the home market; were the former to animate their
soldiers in the same manner as the latter enflame their workmen to
attack with violence and outrage the proposers of any such regulation,
to attempt to reduce the army would be as dangerous as it has now
become to attempt to diminish in any respect the monopoly which our
manufacturers have obtained against us. This monopoly has so much
increased the number of some particular tribes of them that, like an
overgrown standing army, they have become formidable to the
government, and upon many occasions intimidate the legislature. The
Member of Parliament who supports every proposal for strengthening
this monopoly is sure to acquire not only the reputation of
understanding trade, but great popularity and influence with an
order of men whose numbers and wealth render them of great importance.
If he opposes them, on the contrary, and still more if he has
authority enough to be able to thwart them, neither the most
acknowledged probity, nor the highest rank, nor the greatest public
services can protect him from the most infamous abuse and
detraction, from personal insults, nor sometimes from real danger,
arising from the insolent outrage of furious and disappointed
monopolists.

    The undertaker of a great manufacture, who, by the home markets
being suddenly laid open to the competition of foreigners, should be
obliged to abandon his trade, would no doubt suffer very considerably.
That part of his capital which had usually been employed in purchasing
materials and in paying his workmen might, without much difficulty,
perhaps, find another employment. But that part of it which was
fixed in workhouses, and in the instruments of trade, could scarce
be disposed of without considerable loss. The equitable regard,
therefore, to his interest requires that changes of this kind should
never be introduced suddenly, but slowly, gradually, and after a
very long warning. The legislature, were it possible that its
deliberations could be always directed, not by the clamorous
importunity of partial interests, but by an extensive view of the
general good, ought upon this very account, perhaps, to be
particularly careful neither to establish any new monopolies of this
kind, nor to extend further those which are already established. Every
such regulation introduces some degree of real disorder into the
constitution of the state, which it will be difficult afterwards to
cure without occasioning another disorder.

    How far it may be proper to impose taxes upon the importation of
foreign goods, in order not to prevent their importation but to
raise a revenue for government, I shall consider hereafter when I come
to treat of taxes. Taxes imposed with a view to prevent, or even to
diminish importation, are evidently as destructive of the revenue of
the customs as of the freedom of trade.

                          CHAPTER III

    Of the extraordinary Restraints upon the Importation of Goods

   of almost all kinds from those Countries with which the Balance

                is supposed to be disadvantageous

                             PART 1

         Of the Unreasonableness of those Restraints

      even upon the Principles of the Commercial System

    TO lay extraordinary restraints upon the those particular
countries with which the importation of goods of almost all kinds from
balance of trade is supposed to be disadvantageous, is the second
expedient by which the commercial system proposes to increase the
quantity of gold and silver. Thus in Great Britain, Silesia lawns
may be imported for home consumption upon paying certain duties. But
French cambrics and lawns are prohibited to be imported, except into
the port of London, there to be warehoused for exportation. Higher
duties are imposed upon the wines of France than upon those of
Portugal, or indeed of any other country. By what is called the impost
1692, a duty of five-and-twenty per cent of the rate or value was laid
upon all French goods; while the goods of other nations were, the
greater part of them, subjected to much lighter duties, seldom
exceeding five per cent. The wine, brandy, salt and vinegar of
France were indeed excepted; these commodities being subjected to
other heavy duties, either by other laws, or by particular clauses
of the same law. In 1696, a second duty of twenty-five per cent, the
first not having been thought a sufficient discouragement, was imposed
upon all French goods, except brandy; together with a new duty of
five-and-twenty pounds upon the ton of French wine, and another of
fifteen pounds upon the ton of French vinegar. French goods have never
been omitted in any of those general subsidies, or duties of five
per cent, which have been imposed upon all, or the greater part of the
goods enumerated in the book of rates. If we count the one-third and
two-third subsidies as making a complete subsidy between them, there
have been five of these general subsidies; so that before the
commencement of the present war seventy-five per cent may be
considered as the lowest duty to which the greater part of the goods
of the growth, produce, or manufacture of France were liable. But upon
the greater part of goods, those duties are equivalent to a
prohibition. The French in their turn have, I believe, treated our
goods and manufactures just as hardly; though I am not so well
acquainted with the particular hardships which they have imposed
upon them. Those mutual restraints have put an end to almost all
fair commerce between the two nations, and smugglers are now the
principal importers, either of British goods into France, or of French
goods into Great Britain. The principles which I have been examining
in the foregoing chapter took their origin from private interest and
the spirit of monopoly; those which I am going to examine in this,
from national prejudice and animosity. They are, accordingly, as might
well be expected, still more unreasonable. They are so, even upon
the principles of the commercial system.

    First, though it were certain that in the case of a free trade
between France and England, for example, the balance would be in
favour of France, it would by no means follow that such a trade
would be disadvantageous to England, or that the general balance of
its whole trade would thereby be turned more against it. If the
wines of France are better and cheaper than those of Portugal, or
its linens than those of Germany, it would be more advantageous for
Great Britain to purchase both the wine and the foreign linen which it
had occasion for of France than of Portugal and Germany. Though the
value of the annual importations from France would thereby be
greatly augmented, the value of the whole annual importations would be
diminished, in proportion as the French goods of the same quality were
cheaper than those of the other two countries. This would be the case,
even upon the supposition that the whole French goods imported were to
be consumed in Great Britain.

    But, secondly, a great part of them might be re-exported to
other countries, where, being sold with profit, they might bring
back a return equal in value, perhaps, to the prime cost of the
whole French goods imported. What has frequently been said of the East
India trade might possibly be true of the French; that though the
greater part of East India goods were bought with gold and silver, the
re-exportation of a part of them to other countries brought back
more gold and silver to that which carried on the trade than the prime
cost of the whole amounted to. One of the most important branches of
the Dutch trade, at present, consists in the carriage of French
goods to other European countries. Some part even of the French wine
drank in Great Britain is clandestinely imported from Holland and
Zeeland. If there was either a free trade between France and
England, or if French goods could be imported upon paying only the
same duties as those of other European nations, to be drawn back
upon exportation, England might have some share of a trade which is
found so advantageous to Holland.

    Thirdly, and lastly, there is no certain criterion by which we can
determine on which side what is called the balance between any two
countries lies, or which of them exports to the greatest value.
National prejudice and animosity, prompted always by the private
interest of particular traders, are the principles which generally
direct our judgment upon all questions concerning it. There are two
criterions, however, which have frequently been appealed to upon
such occasions, the customhouse books and the course of exchange.
The custom-house books, I think, it is now generally acknowledged, are
a very uncertain criterion, on account of the inaccuracy of the
valuation at which the greater part of goods are rated in them. The
course of exchange is, perhaps, almost equally so.

    When the exchange between two places, such as London and Paris, is
at par, it is said to be a sign that the debts due from London to
Paris are compensated by those due from Paris to London. On the
contrary, when a premium is paid at London for a bill upon Paris, it
is said to be a sign that the debts due from London to Paris are not
compensated by those due from Paris to London, but that a balance in
money must be sent out from the latter place; for the risk, trouble,
and expense of exporting which, the premium is both demanded and
given. But the ordinary state of debt and credit between those two
cities must necessarily be regulated, it is said, by the ordinary
course of their dealings with one another. When neither of them
imports from the other to a greater amount than it exports to that
other, the debts and credits of each may compensate one another. But
when one of them imports from the other to a greater value than it
exports to that other, the former necessarily becomes indebted to
the latter in a greater sum than the latter becomes indebted to it;
the debts and credits of each do not compensate one another, and money
must be sent out from that place of which the debts overbalance the
credits. The ordinary course of exchange, therefore, being an
indication of the ordinary state of debt and credit between two
places, must likewise be an indication of the ordinary course of their
exports and imports, as these necessarily regulate that state.

    But though the ordinary course of exchange should be allowed to be
a sufficient indication of the ordinary state of debt and credit
between any two places, it would not from thence follow that the
balance of trade was in favour of that place which had the ordinary
state of debt and credit in its favour. The ordinary state of debt and
credit between any two places is not always entirely regulated by
the ordinary course of their dealings with one another; but is often
influenced by that of the dealings of either with many other places.
If it is usual, for example, for the merchants of England to pay for
the goods which they buy of Hamburg, Danzig, Riga, etc., by bills upon
Holland, the ordinary state of debt and credit between England and
Holland will not be regulated entirely by the ordinary course of the
dealings of those two countries with one another, but will be
influenced by that of the dealings of England with those other places.
England may be obliged to send out every year money to Holland, though
its annual exports to that country may exceed very much the annual
value of its imports from thence; and though what is called the
balance of trade may be very much in favour of England.

    In the way, besides, in which the par of exchange has hitherto
been computed, the ordinary course of exchange can afford no
sufficient indication that the ordinary state of debt and credit is in
favour of that country which seems to have, or which is supposed to
have, the ordinary course of exchange in its favour: or, in other
words, the real exchange may be, and, in fact, often is so very
different from the computed one, that from the course of the latter no
certain conclusion can, upon many occasions, be drawn concerning
that of the former.

    When for a sum of money paid in England, containing, according
to the standard of the English mint, a certain number of ounces of
pure silver, you receive a bill for a sum of money to be paid in
France, containing, according to the standard of the French mint, an
equal number of ounces of pure silver, exchange is said to be at par
between England and France. When you pay more, you are supposed to
give a premium, and exchange is said to be against England and in
favour of France. When you pay less, you are supposed to get a
premium, and exchange is said to be against France and in favour of
England.

    But, first, we cannot always judge of the value of the current
money of different countries by the standard of their respective
mints. In some it is more, in others it is less worn, clipt, and
otherwise degenerated from that standard. But the value of the current
coin of every country, compared with that of any other country, is
in proportion not to the quantity of pure silver which it ought to
contain, but to that which it actually does contain. Before the
reformation of the silver coin in King William's time, exchange
between England and Holland, computed in the usual manner according to
the standard of their respective mints, was five-and-twenty per cent
against England. But the value of the current coin of England, as we
learn from Mr. Lowndes, was at that time rather more than
five-and-twenty per cent below its standard value. The real
exchange, therefore, may even at that time have been in favour of
England, notwithstanding the computed exchange was so much against it;
a smaller number of ounces of pure silver actually paid in England may
have purchased a bill for a greater number of ounces of pure silver to
be paid in Holland, and the man who was supposed to give may in
reality have got the premium. The French coin was, before the late
reformation of the English gold coin, much less worn than the English,
and was perhaps two or three per cent nearer its standard. If the
computed exchange with France, therefore, was not more than two or
three per cent against England, the real exchange might have been in
its favour. Since the reformation of the gold coin, the exchange has
been constantly in favour of England, and against France.

    Secondly, in some countries, the expense of coinage is defrayed by
the government; in others, it is defrayed by the private people who
carry their bullion to the mint, and the government even derives
some revenue from the coinage. In England, it is defrayed by the
government, and if you carry a pound weight of standard silver to
the mint, you get back sixty-two shillings, containing a pound
weight of the like standard silver. In France, a duty of eight per
cent is deducted for the coinage, which not only defrays the expense
of it, but affords a small revenue to the government. In England, as
the coinage costs nothing; the current coin can never be much more
valuable than the quantity of bullion which it actually contains. In
France, the workmanship, as you pay for it, adds to the value in the
same manner as to that of wrought plate. A sum of French money,
therefore, containing a certain weight of pure silver, is more
valuable than a sum of English money containing an equal weight of
pure silver, and must require more bullion, or other commodities, to
purchase it. Though the current coin of the two countries,
therefore, were equally near the standards of their respective
mints, a sum of English money could not well purchase a sum of
French money containing an equal number of ounces of pure silver,
nor consequently a bill upon France for such a sum. If for such a bill
no more additional money was paid than what was sufficient to
compensate the expense of the French coinage, the real exchange
might be at par between the two countries, their debts and credits
might mutually compensate one another, while the computed exchange was
considerably in favour of France. If less than this was paid, the real
exchange might be in favour of England, while the computed was in
favour of France.

    Thirdly, and lastly, in some places, as at Amsterdam, Hamburg,
Venice, etc., foreign bills of exchange are paid in what they call
bank money; while in others, as at London, Lisbon, Antwerp, Leghorn,
etc., they are paid in the common currency of the country. What is
called bank money is always of more value than the same nominal sum of
common currency. A thousand guilders in the Bank of Amsterdam, for
example, are of more value than a thousand guilders of Amsterdam
currency. The difference between them is called the agio of the
bank, which, at Amsterdam, is generally about five per cent. Supposing
the current money of the two countries equally near to the standard of
their respective mints, and that the one pays foreign bills in this
common currency, while the other pays them in bank money, it is
evident that the computed exchange may be in favour of that which pays
in bank money, though the real exchange should be in favour of that
which pays in current money; for the same reason that the computed
exchange may be in favour of that which pays in better money, or in
money nearer to its own standard, though the real exchange should be
in favour of that which pays in worse. The computed exchange, before
the late reformation of the gold coin, was generally against London
with Amsterdam, Hamburg, Venice, and, I believe, with all other places
which pay in what is called bank money. It will by no means follow,
however, that the real exchange was against it. Since the
reformation of the gold coin, it has been in favour of London even
with those places. The computed exchange has generally been in
favour of London with Lisbon, Antwerp, Leghorn, and, if you except
France, I believe, with most other parts of Europe that pay in
common currency; and it is not improbable that the real exchange was
so too.

  DIGRESSION CONCERNING BANKS OF DEPOSIT, PARTICULARLY CONCERNING

                      THAT OF AMSTERDAM

    The currency of a great state, such as France or England,
generally consists almost entirely of its own coin. Should this
currency, therefore, be at any time worn, clipt, or otherwise degraded
below its standard value, the state by a reformation of its coin can
effectually re-establish its currency. But the currency of a small
state, such as Genoa or Hamburg, can seldom consist altogether in
its own coin, but must be made up, in a great measure, of the coins of
all the neighbouring states with which its inhabitants have a
continual intercourse. Such a state, therefore, by reforming its coin,
will not always be able to reform its currency. If foreign bills of
exchange are paid in this currency, the uncertain value of any sum, of
what is in its own nature so uncertain, must render the exchange
always very much against such a state, its currency being, in all
foreign states, necessarily valued even below what it is worth.

    In order to remedy the inconvenience to which this disadvantageous
exchange must have subjected their merchants, such small states,
when they began to attend to the interest of trade, have frequently
enacted, that foreign bills of exchange of a certain value should be
paid not in common currency, but by an order upon, or by a transfer in
the books of a certain bank, established upon the credit, and under
the protection of the state; this bank being always obliged to pay, in
good and true money, exactly according to the standard of the state.
The banks of Venice, Genoa, Amsterdam, Hamburg, and Nuremberg, seem to
have been all originally established with this view, though some of
them may have afterwards been made subservient to other purposes.
The money of such banks being better than the common currency of the
country, necessarily bore an agio, which was greater or smaller
according as the currency was supposed to be more or less degraded
below the standard of the state. The agio of the Bank of Hamburg,
for example, which is said to be commonly about fourteen per cent is
the supposed difference between the good standard money of the
state, and the clipt, worn, and diminished currency poured into it
from all the neighbouring states.

    Before 1609 the great quantity of clipt and worn foreign coin,
which the extensive trade of Amsterdam brought from all parts of
Europe, reduced the value of its currency about nine per cent below
that of good money fresh from the mint. Such money no sooner
appeared than it was melted down or carried away, as it always is in
such circumstances. The merchants, with plenty of currency, could
not always find a sufficient quantity of good money to pay their bills
of exchange; and the value of those bills, in spite of several
regulations which were made to prevent it, became in a great measure
uncertain.

    In order to remedy these inconveniences, a bank was established in
1609 under the guarantee of the city. This bank received both
foreign coin, and the light and worn coin of the country at its real
intrinsic value in the good standard money of the country, deducting
only so much as was necessary for defraying the expense of coinage,
and the other necessary expense of management. For the value which
remained, after this small deduction was made, it gave a credit in its
books. This credit was called bank money, which, as it represented
money exactly according to the standard of the mint, was always of the
same real value, and intrinsically worth more than current money. It
was at the same time enacted, that all bills drawn upon or
negotiated at Amsterdam of the value of six hundred guilders and
upwards should be paid in bank money, which at once took away all
uncertainty in the value of those bills. Every merchant, in
consequence of this regulation, was obliged to keep an account with
the bank in order to pay his foreign bills of exchange, which
necessarily occasioned a certain demand for bank money.

    Bank money, over and above its intrinsic superiority to
currency, and the additional value which this demand necessarily gives
it, has likewise some other advantages. It is secure from fire,
robbery, and other accidents; the city of Amsterdam is bound for it;
it can be paid away by a simple transfer, without the trouble of
counting, or the risk of transporting it from one place to another. In
consequence of those different advantages, it seems from the beginning
to have borne agio, and it is generally believed that all the money
originally deposited in the bank was allowed to remain there, nobody
caring to demand payment of a debt which he could sell for a premium
in the market. By demanding payment of the bank, the owner of a bank
credit would lose this premium. As a shilling fresh from the mint will
buy no more goods in the market than one of our common worn shillings,
so the good and true money which might be brought from the coffers
of the bank into those of a private person, being mixed and confounded
with the common currency of the country, would be of no more value
than that currency from which it could no longer be readily
distinguished. While it remained in the coffers of the bank, its
superiority was known and ascertained. When it had come into those
of a private person, its superiority could not well be ascertained
without more trouble than perhaps the difference was worth. By being
brought from the coffers of the bank, besides, it lost all the other
advantages of bank money; its security, its easy and safe
transferability, its use in paying foreign bills of exchange. Over and
above all this, it could not be brought from those coffers, as it will
appear by and by, without previously paying for the keeping.

    Those deposits of coin, or those deposits which the bank was bound
to restore in coin, constituted the original capital of the bank, or
the whole value of what was represented by what is called bank
money. At present they are supposed to constitute but a very small
part of it. In order to facilitate the trade in bullion, the bank
has been for these many years in the practice of giving credit in
its books upon deposits of gold and silver bullion. This credit is
generally about five per cent below the mint price of such bullion.
The bank grants at the same time what is called a recipe or receipt,
entitling the person who makes the deposit, or the bearer, to take out
the bullion again at any time within six months, upon
re-transferring to the bank a quantity of bank money equal to that for
which credit had been given in its books when the deposit was made,
and upon paying one-fourth per cent for the keeping, if the deposit
was in silver; and one-half per cent if it was in gold; but at the
same time declaring that, in default of such payment, and upon the
expiration of this term, the deposit should belong to the bank at
the price at which it had been received, or for which credit had
been given in the transfer books. What is thus paid for the keeping of
the deposit may be considered as a sort of warehouse rent; and why
this warehouse rent should be so much dearer for gold than for silver,
several different reasons have been assigned. The fineness of gold, it
has been said, is more difficult to be ascertained than that of
silver. Frauds are more easily practised, and occasion a greater
loss in the more precious metal. Silver, besides, being the standard
metal, the state, it has been said, wishes to encourage more the
making of deposits of silver than those of gold.

    Deposits of bullion are most commonly made when the price is
somewhat lower than ordinary; and they are taken out again when it
happens to rise. In Holland the market price of bullion is generally
above the mint price, for the same reason that it was so in England
before the late reformation of the gold coin. The difference is said
to be commonly from about six to sixteen stivers upon the mark, or
eight ounces of silver of eleven parts fine and one part alloy. The
bank price, or the credit which the bank gives for deposits of such
silver (when made in foreign coin, of which the fineness is well known
and ascertained, such as Mexico dollars), is twenty-two guilders the
mark; the mint price is about twenty-three guilders, and the market
price is from twenty-three guilders six to twenty-three guilders
sixteen stivers, or from two to three per cent above the mint
price.* The proportions between the bank price, the mint price, and
the market price of gold bullion are nearly the same. A person can
generally sell his receipt for the difference between the mint price
of bullion and the market price. A receipt for bullion is almost
always worth something, and it very seldom happens, therefore, that
anybody suffers his receipt to expire, or allows his bullion to fall
to the bank at the price at which it had been received, either by
not taking it out before the end of the six months, or by neglecting
to pay the one-fourth or one-half per cent in order to obtain a new
receipt for another six months. This, however, though it happens
seldom, is said to happen sometimes, and more frequently with regard
to gold than with regard to silver, on account of the higher
warehouse-rent which is paid for the keeping of the more precious
metal.

  * The following are the prices at which the Bank of Amsterdam at
present (September, 1775) receives bullion and coin of different
kind:-

              SILVER

    Mexico dollars           Guilders B-22 per mark

    French crowns            Guilders B-22 per mark

    English silver coin      Guilders B-22 per mark

    Mexico dollars new coin             21 10

    Ducatoons                            3

    Rix dollars                          2 8

    Bar silver containing eleven-twelfths fine silver 21 per mark, and
in this proportion down to 1/4 fine, on which 5 guilders are given.

    Fine bars, 93 per mark.

              GOLD

    Portugal coin            B-310 per mark

    Guineas                  B-310 per mark

    Louis d'ors new          B-310 per mark

    Ditto old                  300

    New ducats                 4 19 8 per ducat

    Bar or ingot gold is received in proportion to its fineness
compared with the above foreign gold coin. Upon fine bars the bank
gives 340 per mark. In general, however, something more is given
upon coin of a known fineness, than upon gold and silver bars, of
which the fineness cannot be ascertained but by a process of melting
and assaying.

    The person who by making a deposit of bullion obtains both a
bank credit and receipt, pays his bills of exchange as they become due
with his bank credit; and either sells or keeps his receipt
according as he judges that the price of bullion is likely to rise
or to fall. The receipt and the bank credit seldom keep long together,
and there is no occasion that they should. The person who has a
receipt, and who wants to take out bullion, finds always plenty of
bank credits, or bank money to buy at the ordinary price; and the
person who has bank money, and wants to take out bullion, finds
receipts always in equal abundance.

    The owners of bank credits, and the holders of receipts,
constitute two different sorts of creditors against the bank. The
holder of a receipt cannot draw out the bullion for which it is
granted, without reassigning to the bank a sum of bank money equal
to the price at which the bullion had been received. If he has no bank
money of his own, he must purchase it of those who have it. The
owner of bank money cannot draw out bullion without producing to the
bank receipts for the quantity which he wants. If he has none of his
own, he must buy them of those who have them. The holder of a receipt,
when he purchases bank money, purchases the power of taking out a
quantity of bullion, of which the mint price is five per cent above
the bank price. The agio of five per cent therefore, which he commonly
pays for it, is paid not for an imaginary but for a real value. The
owner of bank money, when he purchases a receipt, purchases the
power of taking out a quantity of bullion of which the market price is
commonly from two to three per cent above the mint price. The price
which he pays for it, therefore, is paid likewise for a real value.
The price of the receipt, and the price of the bank money, compound or
make up between them the full value or price of the bullion.

    Upon deposits of the coin current in the country, the bank
grants receipts likewise as well as bank credits; but those receipts
are frequently of no value, and will bring no price in the market.
Upon ducatoons, for example, which in the currency pass for three
guilders three stivers each, the bank gives a credit of three guilders
only, or five per cent below their current value. It grants a
receipt likewise entitling the bearer to take out the number of
ducatoons deposited at any time within six months, upon paying
one-fourth per cent for the keeping. This receipt will frequently
bring no price in the market. Three guilders bank money generally sell
in the market for three guilders three stivers, the full value of
the ducatoons, if they were taken out of the bank; and before they can
be taken out, one-fourth per cent must be paid for the keeping,
which would be mere loss to the holder of the receipt. If the agio
of the bank, however, should at any time fall to three per cent such
receipts might bring some price in the market, and might sell for
one and three-fourths per cent. But the agio of the bank being now
generally about five per cent such receipts are frequently allowed
to expire, or as they express it, to fall to the bank. The receipts
which are given for deposits of gold ducats fall to it yet more
frequently, because a higher warehouse-rent, or one-half per cent must
be paid for the keeping of them before they can be taken out again.
The five per cent which the bank gains, when deposits either of coin
or bullion are allowed to fall to it, may be considered as the
warehouse-rent for the perpetual keeping of such deposits.

    The sum of bank money for which the receipts are expired must be
very considerable. It must comprehend the whole original capital of
the bank, which, it is generally supposed, has been allowed to
remain there from the time it was first deposited, nobody caring
either to renew his receipt or to take out his deposit, as, for the
reasons already assigned, neither the one nor the other could be
done without loss. But whatever may be the amount of this sum, the
proportion which it bears to the whole mass of bank money is
supposed to be very small. The Bank of Amsterdam has for these many
years past been the great warehouse of Europe for bullion, for which
the receipts are very seldom allowed to expire, or, as they express
it, to fall to the bank. far greater part of the bank money, or of the
credits upon the books of the bank, is supposed to have been
created, for these many years past, by such deposits which the dealers
in bullion are continually both making and withdrawing.

    No demand can be made upon the bank but by means of a recipe or
receipt. The smaller mass of bank money, for which the receipts are
expired, is mixed and confounded with the much greater mass for
which they are still in force; so that, though there may be a
considerable sum of bank money for which there are no receipts,
there is no specific sum or portion of it which may not at any time be
demanded by one. The bank cannot be debtor to two persons for the same
thing; and the owner of bank money who has no receipt cannot demand
payment of the bank till he buys one. In ordinary and quiet times,
he can find no difficulty in getting one to buy at the market price,
which generally corresponds with the price at which he can sell the
coin or bullion it entities him to take out of the bank.

    It might be otherwise during a public calamity; an invasion, for
example, such as that of the French in 1672. The owners of bank
money being then all eager to draw it out of the bank, in order to
have it their own keeping, the demand for receipts might raise their
price to an exorbitant height. The holders of them might form
expectations, and, instead of two or three per cent, demand half the
bank money for which credit had been given upon the deposits that
the receipts had respectively been granted for. The enemy, informed of
the constitution of the bank, might even buy them up, in order to
prevent the carrying away of the treasure. In such emergencies, the
bank, it is supposed, would break through its ordinary rule of
making payment only to the holders of receipts. The holders of
receipts, who had no bank money, must have received within two or
three per cent of the value of the deposit for which their
respective receipts had been granted. The bank, therefore, it is said,
would in this case make no scruple of paying, either with money or
bullion, the full value of what the owners of bank money who could get
no receipts were credited for in its books; paying at the same time
two or three per cent to such holders of receipts as had no bank
money, that being the whole value which in this state of things
could justly be supposed due to them.

    Even in ordinary and quiet times it is the interest of the holders
of receipts to depress the agio, in order either to buy bank money
(and consequently the bullion, which their receipts would then
enable them to take out of the bank) so much cheaper, or to sell their
receipts to those who have bank money, and who want to take out
bullion, so much dearer; the price of a receipt being generally
equal to the difference between the market price of bank money, and
that of the coin or bullion for which the receipt had been granted. It
is the interest of the owners of bank money, on the contrary, to raise
the agio, in order either to sell their bank money so much dearer,
or to buy a receipt so much cheaper. To prevent the stock-jobbing
tricks which those opposite interests might sometimes occasion, the
bank has of late years come to the resolution to sell at all times
bank money for currency, at five per cent agio, and to buy it in again
at four per cent agio. In consequence of this resolution, the agio can
never either rise above five or sink below four per cent, and the
proportion between the market price of bank and that of current
money is kept at all times very near to the proportion between their
intrinsic values. Before this resolution was taken, the market price
of bank money used sometimes to rise so high as nine per cent agio,
and sometimes to sink so low as par, according as opposite interests
happened to influence the market.

    The Bank of Amsterdam professes to lend out no part of what is
deposited with it, but, for every guilder for which it gives credit in
its books, to keep in its repositories the value of a guilder either
in money or bullion. That it keeps in its repositories all the money
or bullion for which there are receipts in force, for which it is at
all times liable to be called upon, and which, in reality, is
continually going from it and returning to it again, cannot well be
doubted. But whether it does so likewise with regard to that part of
its capital, for which the receipts are long ago expired, for which in
ordinary and quiet times it cannot be called upon, and which in
reality is very likely to remain with it for ever, or as long as the
States of the United Provinces subsist, may perhaps appear more
uncertain. At Amsterdam, however, no point of faith is better
established than that for every guilder, circulated as bank money,
there is a correspondent guilder in gold or silver to be found in
the treasure of the bank. The city is guarantee that it should be
so. The bank is under the direction of the four reigning
burgomasters who are changed every year. Each new set of
burgomasters visits the treasure, compares it with the books, receives
it upon oath, and delivers it over, with the same awful solemnity,
to the set which succeeds; and in that sober and religious country
oaths are not yet disregarded. A rotation of this kind seems alone a
sufficient security against any practices which cannot be avowed.
Amidst all the revolutions which faction has ever occasioned in the
government of Amsterdam, the prevailing party has at no time accused
their predecessors of infidelity in the administration of the bank. No
accusation could have affected more deeply the reputation and
fortune of the disgraced party, and if such an accusation could have
been supported, we may be assured that it would have been brought.
In 1672, when the French king was at Utrecht, the Bank of Amsterdam
paid so readily as left no doubt of the fidelity with which it had
observed its engagements. Some of the pieces which were then brought
from its repositories appeared to have been scorched with the fire
which happened in the town-house soon after the bank was
established. Those pieces, therefore, must have lain there from that
time.

    What may be the amount of the treasure in the bank is a question
which has long employed speculations of the curious. Nothing but
conjecture can be offered concerning it. It is generally reckoned that
there are about two thousand people who keep accounts with the bank,
and allowing them to have, one with another, the value of fifteen
hundred pounds sterling lying upon their respective accounts (a very
large allowance), the whole quantity of bank money, and consequently
of treasure in the bank, will amount to about three millions sterling,
or, at eleven guilders the pound sterling, thirty-three millions of
guilders- a great sum, and sufficient to carry on a very extensive
circulation, but vastly below the extravagant ideas which some
people have formed of this treasure.

    The city of Amsterdam derives a considerable revenue from the
bank. Besides what may be called the warehouse-rent above mentioned,
each person, upon first opening an account with the bank, pays a fee
of ten guilders; and for every new account three guilders three
stivers; for every transfer two stivers; and if the transfer is for
less than three hundred guilders, six stivers, in order to
discourage the multiplicity of small transactions. The person who
neglects to balance his account twice in the year forfeits twenty-five
guilders. The person who orders a transfer for more than is upon his
account, is obliged to pay three per cent for the sum overdrawn, and
his order is set aside into the bargain. The bank is supposed, too, to
make a considerable profit by the sale of the foreign coin or
bullion which sometimes falls to it by the expiring of receipts, and
which is always kept till it can be sold with advantage. It makes a
profit likewise by selling bank money at five per cent agio, and
buying it in at four. These different emoluments amount to a good deal
more than what is necessary for paying the salaries of officers, and
defraying the expense of management. What is paid for the keeping of
bullion upon receipts is alone supposed to amount to a neat annual
revenue of between one hundred and fifty thousand and two hundred
thousand guilders. Public utility, however, and not revenue, was the
original object of this institution. Its object was to relieve the
merchants from the inconvenience of a disadvantageous exchange. The
revenue which has arisen from it was unforeseen, and may be considered
as accidental. But it is now time to return from this long digression,
into which I have been insensibly led in endeavouring to explain the
reasons why the exchange between the countries which pay in what is
called bank money, and those which pay in common currency, should
generally appear to be in favour of the former and against the latter.
The former pay in a species of money of which the intrinsic value is
always the same, and exactly agreeable to the standard of their
respective mints; the latter is a species of money of which the
intrinsic value is continually varying, and is almost always more or
less below that standard.

                              PART 2

      Of the Unreasonableness of those extraordinary Restraints

                        upon other Principles

    IN the foregoing part of this chapter I have endeavoured to
show, even upon the principles of the commercial system, how
unnecessary it is to lay extraordinary restraints upon the importation
of goods from those countries with which the balance of trade is
supposed to be disadvantageous.

    Nothing, however, can be more absurd than this whole doctrine of
the balance of trade, upon which, not only these restraints, but
almost all the other regulations of commerce are founded. When two
places trade with one another, this doctrine supposes that, if the
balance be even, neither of them either loses or gains; but if it
leans in any degree to one side, that one of them loses and the
other gains in proportion to its declension from the exact
equilibrium. Both suppositions are false. A trade which is forced by
means of bounties and monopolies may be and commonly is
disadvantageous to the country in whose favour it is meant to be
established, as I shall endeavour to show hereafter. But that trade
which, without force or constraint, is naturally and regularly carried
on between any two places is always advantageous, though not always
equally so, to both.

    By advantage or gain, I understand not the increase of the
quantity of gold and silver, but that of the exchangeable value of the
annual produce of the land and labour of the country, or the
increase of the annual revenue of its inhabitants.

    If the balance be even, and if the trade between the two places
consist altogether in the exchange of their native commodities, they
will, upon most occasions, not only both gain, but they will gain
equally, or very near equally; each will in this case afford a
market for a part of the surplus produce of the other; each will
replace a capital which had been employed in raising and preparing for
the market this part of the surplus produce of the other, and which
had been distributed among, and given revenue and maintenance to a
certain number of its inhabitants. Some part of the inhabitants of
each, therefore, will indirectly derive their revenue and
maintenance from the other. As the commodities exchanged, too, are
supposed to be of equal value, so the two capitals employed in the
trade will, upon most occasions, be equal, or very nearly equal; and
both being employed in raising the native commodities of the two
countries, the revenue and maintenance which their distribution will
afford to the inhabitants of each will be equal, or very nearly equal.
This revenue and maintenance, thus mutually afforded, will be
greater or smaller in proportion to the extent of their dealings. If
these should annually amount to an hundred thousand pounds, for
example, or to a million on each side, each of them would afford an
annual revenue in the one case of an hundred thousand pounds, in the
other of a million, to the inhabitants of the other.

    If their trade should be of such a nature that one of them
exported to the other nothing but native commodities, while the
returns of that other consisted altogether in foreign goods; the
balance, in this case, would still be supposed even, commodities being
paid for with commodities. They would, in this case too, both gain,
but they would not gain equally; and the inhabitants of the country
which exported nothing but native commodities would derive the
greatest revenue from the trade. If England, for example, should
import from France nothing but the native commodities of that country,
and, not having such commodities of its own as were in demand there,
should annually repay them by sending thither a large quantity of
foreign goods, tobacco, we shall suppose, and East India goods; this
trade, though it would give some revenue to the inhabitants of both
countries, would give more to those of France than to those of
England. The whole French capital annually employed in it would
annually be distributed among the people of France. But that part of
the English capital only which was employed in producing the English
commodities with which those foreign goods were purchased would be
annually distributed among the people of England. The greater part
of it would replace the capitals which had been employed in
Virginia, Indostan, and China, and which had given revenue and
maintenance to the of those distant countries. If the capitals were
equal, or nearly equal, therefore this employment of the French
capital would augment much more the revenue of the people of France
than that of the English capital would the revenue of the people of
England. France would in this case carry on a direct foreign trade
of consumption with England; whereas England would carry on a
round-about trade of the same kind with France. The different
effects of a capital employed in the direct and of one employed in the
round-about foreign trade of consumption have already been fully
explained.

    There is not, probably, between any two countries a trade which
consists altogether in the exchange either of native commodities on
both sides, or of native commodities on one side and of foreign
goods on the other. Almost all countries exchange with one another
partly native and partly foreign goods. That country, however, in
whose cargoes there is the greatest proportion of native, and the
least of foreign goods, will always be the principal gainer.

    If it was not with tobacco and East India goods, but with gold and
silver, that England paid for the commodities annually imported from
France, the balance, in this case, would be supposed uneven,
commodities not being paid for with commodities, but with gold and
silver. The trade, however, would, in this case, as in the
foregoing, give some revenue to the inhabitants of both countries, but
more to those of France than to those of England. It would give some
revenue to those of England. The capital which had been employed in
producing the English goods that purchased this gold and silver, the
capital which had been distributed among, and given revenue to,
certain inhabitants of England, would thereby be replaced and
enabled to continue that employment. The whole capital of England
would no more be diminished by this exportation of gold and silver
than by the exportation of an equal value of any other goods. On the
contrary, it would in most cases be augmented. No goods are sent
abroad but those for which the demand is supposed to be greater abroad
than at home, and of which the returns consequently, it is expected,
will be of more value at home than the commodities exported. If the
tobacco which, in England, is worth only a hundred thousand pounds,
when sent to France will purchase wine which is, in England, worth a
hundred and ten thousand, this exchange will equally augment the
capital of England by ten thousand pounds. If a hundred thousand
pounds of English gold, in the same manner, purchase French wine
which, in England, is worth a hundred and ten thousand, this
exchange will equally augment the capital of England by ten thousand
pounds. As a merchant who has a hundred and ten thousand pounds
worth of wine in his cellar is a richer man than he who has only a
hundred thousand pounds worth of tobacco in his warehouse, so is he
likewise a richer man than he who has only a hundred thousand pounds
worth of gold in his coffers. He can put into motion a greater
quantity of industry, and give revenue, maintenance, and employment to
a greater number of people than either of the other two. But the
capital of the country is equal to the capitals of all its different
inhabitants, and the quantity of industry which can be annually
maintained in it is equal to what all those different capitals can
maintain. Both the capital of the country, therefore, and the quantity
of industry which can be annually maintained in it, must generally
be augmented by this exchange. It would, indeed, be more
advantageous for England that it could purchase the wines of France
with its own hardware and broadcloth than with either the tobacco of
Virginia or the gold and silver of Brazil and Peru. A direct foreign
trade of consumption is always more advantageous than a roundabout
one. But a round-about foreign trade of consumption, which is
carried on with gold and silver, does not seem to be less advantageous
than any other equally round-about one. Neither is a country which has
no mines more likely to be exhausted of gold and silver by this annual
exportation of those metals than one which does not grow tobacco by
the like annual exportation of that plant. As a country which has
wherewithal to buy tobacco will never be long in want of it, so
neither will one be long in want of gold and silver which has
wherewithal to purchase those metals.

    It is a losing trade, it is said, which a workman carries on
with the alehouse; and the trade which a manufacturing nation would
naturally carry on with a wine country may be considered as a trade of
the same nature. I answer, that the trade with the alehouse is not
necessarily a losing trade. In its own nature it is just as
advantageous as any other, though perhaps somewhat more liable to be
abused. The employment of a brewer, and even that of a retailer of
fermented liquors, are as necessary divisions of labour as any
other. It will generally be more advantageous for a workman to buy
of the brewer the quantity he has occasion for than to brew it
himself, and if he is a poor workman, it will generally be more
advantageous for him to buy it by little and little of the retailer
than a large quantity of the brewer. He may no doubt buy too much of
either, as he may of any other dealers in his neighbourhood, of the
butcher, if he is a glutton, or of the draper, if he affects to be a
beau among his companions. It is advantageous to the great body of
workmen, notwithstanding, that all these trades should be free, though
this freedom may be abused in all of them, and is more likely to be
so, perhaps, in some than in others. Though individuals, besides,
may sometimes ruin their fortunes by an excessive consumption of
fermented liquors, there seems to be no risk that a nation should do
so. Though in every country there are many people who spend upon
such liquors more than they can afford, there are always many more who
spend less. It deserves to be remarked too, that, if we consult
experience, the cheapness of wine seems to be a cause, not of
drunkenness, but of sobriety. The inhabitants of the wine countries
are in general the soberest people in Europe; witness the Spainards,
the Italians, and the inhabitants of the southern provinces of France.
People are seldom guilty of excess in what is their daily fare. Nobody
affects the character of liberality and good fellowship by being
profuse of a liquor which is as cheap as small beer. On the
contrary, in the countries which, either from excessive heat or
cold, produce no grapes, and where wine consequently is dear and a
rarity, drunkenness is a common vice, as among the northern nations,
and all those who live between the tropics, the negroes, for
example, on the coast of Guinea. When a French regiment comes from
some of the northern provinces of France, where wine is somewhat dear,
to be quartered in the southern, where it is very cheap, the soldiers,
I have frequently heard it observed are at first debauched by the
cheapness and novelty of good wine; but after a few months' residence,
the greater part of them become as sober as the rest of the
inhabitants. Were the duties upon foreign wines, and the excises
upon malt, beer, and ale to be taken away all at once, it might, in
the same manner, occasion in Great Britain a pretty general and
temporary drunkenness among the middling and inferior ranks of people,
which would probably be soon followed by a permanent and almost
universal sobriety. At present drunkenness is by no means the vice
of people of fashion, or of those who can easily afford the most
expensive liquors. A gentleman drunk with ale has scarce ever been
seen among us. The restraints upon the wine trade in Great Britain,
besides, do not so much seem calculated to hinder the people from
going, if I may say so, to the alehouse, as from going where they
can buy the best and cheapest liquor. They favour the wine trade of
Portugal, and discourage that of France. The Portugese, it is said,
indeed, are better customers for our manufactures than the French, and
should therefore be encouraged in preference to them. As they give
us their custom, it is pretended, we should give them ours. The
sneaking arts of underling tradesmen are thus erected into political
maxims for the conduct of a great empire: for it is the most underling
tradesmen only who make it a rule to employ chiefly their own
customers. A great trader purchases his goods always where they are
cheapest and best, without regard to any little interest of this kind.

    By such maxims as these, however, nations have been taught that
their interest consisted in beggaring all their neighbours. Each
nation has been made to look with an invidious eye upon the prosperity
of all the nations with which it trades, and to consider their gain as
its own loss. Commerce, which ought naturally to be, among nations, as
among individuals, a bond of union and friendship, has become the most
fertile source of discord and animosity. The capricious ambition of
kings and ministers has not, during the present and the preceding
century, been more fatal to the repose of Europe than the
impertinent jealousy of merchants and manufacturers. The violence
and injustice of the rulers of mankind is an ancient evil, for
which, I am afraid, the nature of human affairs can scarce admit of
a remedy. But the mean rapacity, the monopolizing spirit of
merchants and manufacturers, who neither are, nor ought to be, the
rulers of mankind, though it cannot perhaps be corrected may very
easily be prevented from disturbing the tranquillity of anybody but
themselves.

    That it was the spirit of monopoly which originally both
invented and propagated this doctrine cannot be doubted; and they
who first taught it were by no means such fools as they who believed
it. In every country it always is and must be the interest of the
great body of the people to buy whatever they want of those who sell
it cheapest. The proposition is so very manifest that it seems
ridiculous to take any pains to prove it; nor could it ever have
been called in question had not the interested sophistry of
merchants and manufacturers confounded the common sense of mankind.
Their interest is, in this respect, directly opposite to that of the
great body of the people. As it is the interest of the freemen of a
corporation to hinder the rest of the inhabitants from employing any
workmen but themselves, so it is the interest of the merchants and
manufacturers of every country to secure to themselves the monopoly of
the home market. Hence in Great Britain, and in most other European
countries, the extraordinary duties upon almost all goods imported
by alien merchants. Hence the high duties and prohibitions upon all
those foreign manufactures which can come into competition with our
own. Hence, too, the extraordinary restraints upon the importation
of almost all sorts of goods from those countries with which the
balance of trade is supposed to be disadvantageous; that is, from
those against whom national animosity happens to be most violently
inflamed.

    The wealth of a neighbouring nation, however, though dangerous
in war and politics, is certainly advantageous in trade. In a state of
hostility it may enable our enemies to maintain fleets and armies
superior to our own; but in a state of peace and commerce it must
likewise enable them to exchange with us to a greater value, and to
afford a better market, either for the immediate produce of our own
industry, or for whatever is purchased with that produce. As a rich
man is likely to be a better customer to the industrious people in his
neighbourhood than a poor, so is likewise a rich nation. A rich man,
indeed, who is himself a manufacturer, is a very dangerous neighbour
to all those who deal in the same way. All the rest of the
neighbourhood, however, by far the greatest number, profit by the good
market which his expense affords them. They even profit by his
underselling the poorer workmen who deal in the same way with him. The
manufacturers of a rich nation, in the same manner, may no doubt be
very dangerous rivals to those of their neighbours. This very
competition, however, is advantageous to the great body of the people,
who profit greatly besides by the good market which the great
expense of such a nation affords them in every other way. Private
people who want to make a fortune never think of retiring to the
remote and poor provinces of the country, but resort either to the
capital, or to some of the great commercial towns. They know that
where little wealth circulates there is little to be got, but that
where a great deal is in motion, some share of it may fall to them.
The same maxims which would in this manner direct the common sense
of one, or ten, or twenty individuals, should regulate the judgment of
one, or ten, or twenty millions, and should make a whole nation regard
the riches of its neighbours as a probable cause and occasion for
itself to acquire riches. A nation that would enrich itself by foreign
trade is certainly most likely to do so when its neighbours are all
rich, industrious, and commercial nations. A great nation surrounded
on all sides by wandering savages and poor barbarians might, no doubt,
acquire riches by the cultivation of its own lands, and by its own
interior commerce, but not by foreign trade. It seems to have been
in this manner that the ancient Egyptians and the modern Chinese
acquired their great wealth. The ancient Egyptians, it is said,
neglected foreign commerce, and the modern Chinese, it is known,
bold it in the utmost contempt, and scarce deign to afford it the
decent protection of the laws. The modern maxims of foreign
commerce, by aiming at the impoverishment of all our neighbours, so
far as they are capable of producing their intended effect, tend to
render that very commerce insignificant and contemptible.

    It is in consequence of these maxims that the commerce between
France and England has in both countries been subjected to so many
discouragements and restraints. If those two countries, however,
were to consider their real interest, without either mercantile
jealousy or national animosity, the commerce of France might be more
advantageous to Great Britain than that of any other country, and
for the same reason that of Great Britain to France. France is the
nearest neighbour to Great Britain. In the trade between the
southern coast of England and the northern and north-western coasts of
France, the returns might be expected, in the same manner as in the
inland trade, four, five, or six times in the year. The capital,
therefore, employed in this trade could in each of the two countries
keep in motion four, five, or six times the quantity of industry,
and afford employment and subsistence to four, five, or six times
the number of people, which an equal capital could do in the greater
part of the other branches of foreign trade. Between the parts of
France and Great Britain most remote from one another, the returns
might be expected, at least, once in the year, and even this trade
would so far be at least equally advantageous as the greater part of
the other branches of our foreign European trade. It would be, at
least, three times more advantageous than the boasted trade with our
North American colonies, in which the returns were seldom made in less
than three years, frequently not in less than four or five years.
France, besides, is supposed to contain twenty-four millions of
inhabitants. Our North American colonies were never supposed to
contain more than three millions; and France is a much richer
country than North America; though, on account of the more unequal
distribution of riches, there is much more poverty and beggary in
the one country than in the other. France, therefore, could afford a
market at least eight times more extensive, and, on account of the
superior frequency of the returns, four-and-twenty times more
advantageous than that which our North American colonies ever
afforded. The trade of Great Britain would be just as advantageous
to France, and, in proportion to the wealth, population, and proximity
of the respective countries, would have the same superiority over that
which France carries on with her own colonies. Such is the very
great difference between that trade, which the wisdom of both
nations has thought proper to discourage, and that which it has
favoured the most.

    But the very same circumstances which would have rendered an
open and free commerce between the two countries so advantageous to
both, have occasioned the principal obstructions to that commerce.
Being neighbours, they are necessarily enemies, and the wealth and
power of each becomes, upon that account, more formidable to the
other; and what would increase the advantage of national friendship
serves only to inflame the violence of national animosity. They are
both rich and industrious nations; and the merchants and manufacturers
of each dread the competition of the skill and activity of those of
the other. Mercantile jealousy is excited, and both inflames, and is
itself inflamed, by the violence of national animosity; and the
traders of both countries have announced, with all the passionate
confidence of interested falsehood, the certain ruin of each, in
consequence of that unfavourable balance of trade, which, they
pretend, would be the infallible effect of an unrestrained commerce
with the other.

    There is no commercial country in Europe of which the
approaching ruin has not frequently been foretold by the pretended
doctors of this system from an unfavourable balance of trade. After
all the anxiety, however, which they have excited about this, after
all the vain attempts of almost all trading nations to turn that
balance in their own favour and against their neighbours, it does
not appear that any one nation in Europe has been in any respect
impoverished by this cause. Every town and country, on the contrary,
in proportion as they have opened their ports to all nations,
instead of being ruined by this free trade, as the principles of the
commercial system would lead us to expect, have been enriched by it.
Though there are in Europe, indeed, a few towns which in some respects
deserve the name of free ports, there is no country which does so.
Holland, perhaps, approaches the nearest to this character of any
though still very remote from it; and Holland, it is acknowledged, not
only derives its whole wealth, but a great part of its necessary
subsistence, from foreign trade.

    There is another balance, indeed, which has already been
explained, very different from the balance of trade, and which,
according as it happens to be either favourable or unfavourable,
necessarily occasions the prosperity or decay of every nation. This is
the balance of the annual produce and consumption. If the exchangeable
value of the annual produce, it has already been observed, exceeds
that of the annual consumption, the capital of the society must
annually increase in proportion to this excess. The society in this
case lives within its revenue, and what is annually saved out of its
revenue is naturally added to its capital, and employed so as to
increase still further the annual produce. If the exchangeable value
of the annual produce, on the contrary, fail short of the annual
consumption, the capital of the society must annually decay in
proportion to this deficiency. The expense of the society in this case
exceeds its revenue, and necessarily encroaches upon its capital.
Its capital, therefore, must necessarily decay, and together with it
the exchangeable value of the annual produce of its industry.

    This balance of produce and consumption is entirely different from
what is called the balance of trade. It might take place in a nation
which had no foreign trade, but which was entirely separated from
all the world. It may take place in the whole globe of the earth, of
which the wealth, population, and improvement may be either
gradually increasing or gradually decaying.

    The balance of produce and consumption may be constantly in favour
of a nation, though what is called the balance of trade be generally
against it. A nation may import to a greater value than it exports for
half a century, perhaps, together; the gold and silver which comes
into it during an this time may be all immediately sent out of it; its
circulating coin may gradually decay, different sorts of paper money
being substituted in its place, and even the debts, too, which it
contracts in the principal nations with whom it deals, may be
gradually increasing; and yet its real wealth, the exchangeable
value of the annual produce of its lands and labour, may, during the
same period, have been increasing in a much greater proportion. The
state of our North American colonies, and of the trade which they
carried on with Great Britain, before the commencement of the
present disturbances, may serve as a proof that this is by no means an
impossible supposition.

                         CHAPTER IV

                        Of Drawbacks

    MERCHANTS and manufacturers are not contented with the monopoly of
the home market, but desire likewise the most extensive foreign sale
for their goods. Their country has no jurisdiction in foreign nations,
and therefore can seldom procure them any monopoly there. They are
generally obliged, therefore, to content themselves with petitioning
for certain encouragements to exportation.

    Of these encouragements what are called Drawbacks seem to be the
most reasonable. To allow the merchant to draw back upon
exportation, either the whole or a part of whatever excise or inland
duty is imposed upon domestic industry, can never occasion the
exportation of a greater quantity of goods than what would have been
exported had no duty been imposed. Such encouragements do not tend
to turn towards any particular employment a greater share of the
capital of the country than what would go to that employment of its
own accord, but only to hinder the duty from driving away any part
of that share to other employments. They tend not to overturn that
balance which naturally establishes itself among all the various
employments of the society; but to hinder it from being overturned
by the duty. They tend not to destroy, but to preserve what it is in
most cases advantageous to preserve, the natural division and
distribution of labour in the society.

    The same thing may be said of the drawbacks upon the
re-exportation of foreign goods imported, which in Great Britain
generally amount to by much the largest part of the duty upon
importation. By the second of the rules annexed to the Act of
Parliament which imposed what is now called the Old Subsidy, every
merchant, whether English or alien, was allowed to draw back half that
duty upon exportation; the English merchant, provided the
exportation took place within twelve months; the alien, provided it
took place within nine months. Wines, currants, and wrought silks were
the only goods which did not fall within this rule, having other and
more advantageous allowances. The duties imposed by this Act of
Parliament were at that time the only duties upon the importation of
foreign goods. The term within which this and all other drawbacks
could be claimed was afterwards (by the 7th George I, c. 21, sect. 10)
extended to three years.

    The duties which have been imposed since the Old Subsidy are,
the greater part of them, wholly drawn back upon exportation. This
general rule, however, is liable to a great number of exceptions,
and the doctrine of drawbacks has become a much less simple matter
than it was at their first institution.

    Upon the exportation of some foreign goods, of which it was
expected that the importation would greatly exceed what was
necessary for the home consumption, the whole duties are drawn back,
without retaining even half the Old Subsidy. Before the revolt of
our North American colonies, we had the monopoly of the tobacco of
Maryland and Virginia. We imported about ninety-six thousand
hogsheads, and the home consumption was not supposed to exceed
fourteen thousand. To facilitate the great exportation which was
necessary, in order to rid us of the rest, the whole duties were drawn
back, provided the exportation took place within three years.

    We still have, though not altogether, yet very nearly, the
monopoly of the sugars of our West Indian Islands. If sugars are
exported within a year, therefore, all the duties upon importation are
drawn back, and if exported within three years all the duties,
except half the Old Subsidy, which still continues to be retained upon
the exportation of the greater part of goods. Though the importation
of sugar exceeds, a good deal, what is necessary for the home
consumption, the excess is inconsiderable in comparison of what it
used to be in tobacco.

    Some goods, the particular objects of the jealousy of our own
manufacturers, are prohibited to be imported for home consumption.
They may, however, upon paying certain duties, be imported and
warehoused for exportation. But upon such exportation, no part of
these duties are drawn back. Our manufacturers are unwilling, it
seems, that even this restricted importation should be encouraged, and
are afraid lest some part of these goods should be stolen out of the
warehouse, and thus come into competition with their own. It is
under these regulations only that we can import wrought silks,
French cambrics and lawns, calicoes painted, printed, stained or dyed,
etc.

    We are unwilling even to be the carriers of French goods, and
choose rather to forego a profit to ourselves than to suffer those,
whom we consider as our enemies, to make any profit by our means.
Not only half the Old Subsidy, but the second twenty-five per cent, is
retained upon the exportation of all French goods.

    By the fourth of the rules annexed to the Old Subsidy, the
drawback allowed upon the exportation of all wines amounted to a great
deal more than half the duties which were, at that time, paid upon
their importation; and it seems, at that time, to have been the object
of the legislature to give somewhat more than ordinary encouragement
to the carrying trade in wine. Several of the other duties too,
which were imposed either at the same time, or subsequent to the Old
Subsidy- what is called the additional duty, the New Subsidy, the
One-third and Two-thirds Subsidies, the impost 1692, the coinage on
wine- were allowed to be wholly drawn back upon exportation. All those
duties, however, except the additional duty and impost 1692, being
paid down in ready money, upon importation, the interest of so large a
sum occasioned an expense, which made it unreasonable to expect any
profitable carrying trade in this article. Only a part, therefore,
of the duty called the impost on wine, and no part of the
twenty-five pounds the ton upon French wines, or of the duties imposed
in 1745, in 1763, and in 1778, were allowed to be drawn back upon
exportation. The two imposts of five per cent, imposed in 1779 and
1781, upon all the former duties of customs, being allowed to be
wholly drawn back upon the exportation of all other goods, were
likewise allowed to be drawn back upon that of wine. The last duty
that has been particularly imposed upon wine, that of 1780, is allowed
to be wholly drawn back, an indulgence which, when so many heavy
duties are retained, most probably could never occasion the
exportation of a single ton of wine. These rules take place with
regard to all places of lawful exportation, except the British
colonies in America.

    The 15th Charles II, c. 7, called An Act for the Encouragement
of Trade, had given Great Britain the monopoly of supplying the
colonies with all the commodities of the growth or manufacture of
Europe; and consequently with wines. In a country of so extensive a
coast as our North American and West Indian colonies, where our
authority was always so very slender, and where the inhabitants were
allowed to carry out, in their own ships, their non-enumerated
commodities, at first to all parts of Europe, and afterwards to all
parts of Europe south of Cape Finisterre, it is not very probable that
this monopoly could ever be much respected; and they probably, at
all times, found means of bringing back some cargo from the
countries to which they were allowed to carry out one. They seem,
however, to have found some difficulty in importing European wines
from the places of their growth, and they could not well import them
from Great Britain where they were loaded with many heavy duties, of
which a considerable part was not drawn back upon exportation. Maderia
wine, not being a European commodity, could be imported directly
into America and the West Indies, countries which, in all their
non-enumerated commodities, enjoyed a free trade to the island of
Maderia. These circumstances had probably introduced that general
taste for Maderia wine, which our officers found established in all
our colonies at the commencement of the war, which began in 1755,
and which they brought back with them to the mother country, where
that wine had not been much in fashion before. Upon the conclusion
of that war, in 1763 (by the 4th George III, c. 15, sect. 12), all the
duties, except L3 10s., were allowed to be drawn back upon the
exportation to the colonies of all wines, except French wines, to
the commerce and consumption of which national prejudice would allow
no sort of encouragement. The period between the granting of this
indulgence and the revolt of our North American colonies was
probably too short to admit of any considerable change in the
customs of those countries.

    The same act, which, in the drawback upon all wines, except French
wines, thus favoured the colonies so much more than other countries;
in those upon the greater part of other commodities favoured them much
less. Upon the exportation of the greater part of commodities to other
countries, half the old subsidy was drawn back. But this law enacted
that no part of that duty should be drawn back upon the exportation to
the colonies of any commodities, of the growth or manufacture either
of Europe or the East Indies, except wines, white calicoes, and
muslins.

    Drawbacks were, perhaps, originally granted for the
encouragement of the carrying trade, which, as the freight of the
ships is frequently paid by foreigners in money, was supposed to be
peculiarly fitted for bringing gold and silver into the country. But
though the carrying trade certainly deserves no peculiar
encouragement, though the motive of the institution was perhaps
abundantly foolish, the institution itself seems reasonable enough.
Such drawbacks cannot force into this trade a greater share of the
capital of the country than what would have gone to it of its own
accord had there been no duties upon importation. They only prevent
its being excluded altogether by those duties. The carrying trade,
though it deserves no preference, ought not to be precluded, but to be
left free like all other trades. It is a necessary resource for
those capitals which cannot find employment either in the
agriculture or in the manufactures of the country, either in its
home trade or in its foreign trade of consumption.

    The revenue of the customs, instead of suffering, profits from
such drawbacks by that part of the duty which is retained. If the
whole duties had been retained, the foreign goods upon which they
are paid could seldom have been exported, nor consequently imported,
for want of a market. The duties, therefore, of which a part is
retained would never have been paid.

    These reasons seem sufficiently to justify drawbacks, and would
justify them, though the whole duties, whether upon the produce of
domestic industry, or upon foreign goods, were always drawn back
upon exportation. The revenue of excise would in this case, indeed,
suffer a little, and that of the customs a good deal more; but the
natural balance of industry, the natural division and distribution
of labour, which is always more or less disturbed by such duties,
would be more nearly re-established by such a regulation.

    These reasons, however, will justify drawbacks only upon exporting
goods to those countries which are altogether foreign and independent,
not to those in which our merchants and manufacturers enjoy a
monopoly. A drawback, for example, upon the exportation of European
goods to our American colonies will not always occasion a greater
exportation than what would have taken place without it. By means of
the monopoly which our merchants and manufacturers enjoy there, the
same quantity might frequently, perhaps, be sent thither, though the
whole duties were retained. The drawback, therefore, may frequently be
pure loss to the revenue of excise and customs, without altering the
state of the trade, or rendering it in any respect more extensive. How
far such drawbacks can be justified, as a proper encouragement to
the industry of our colonies, or how far it is advantageous to the
mother country, that they should be exempted from taxes which are paid
by all the rest of their fellow subjects, will appear hereafter when I
come to treat the colonies.

    Drawbacks, however, it must always be understood, are useful
only in those cases in which the goods for the exportation of which
they are given are really exported to some foreign country; and not
clandestinely re-imported into our own. That some drawbacks,
particularly those upon tobacco, have frequently been abused in this
manner, and have given occasion to many frauds equally hurtful both to
the revenue and to the fair trader, is well known.

                         CHAPTER V

                        Of Bounties

    BOUNTIES upon exportation are, in Great Britain, frequently
petitioned for, and sometimes granted to the produce of particular
branches of domestic industry. By means of them our merchants and
manufacturers, it is pretended, will be enabled to sell their goods as
cheap, or cheaper than their rivals in the foreign market. A greater
quantity, it is said, will thus be exported, and the balance of
trade consequently turned more in favour of our own country. We cannot
give our workmen a monopoly in the foreign as we have done in the home
market. We cannot force foreigners to buy their goods as we have
done our own countrymen. The next best expedient, it has been thought,
therefore, is to pay them for buying. It is in this manner that the
mercantile system proposes to enrich the whole country, and to put
money into all our pockets by means of the balance of trade.

    Bounties, it is allowed, ought to be given to those branches of
trade only which cannot be carried on without them. But every branch
of trade in which the merchant can sell his goods for a price which
replaces to him, with the ordinary profits of stock, the whole capital
employed in preparing and sending them to market, can be carried on
without a bounty. Every such branch is evidently upon a level with all
the other branches of trade which are carried on without bounties, and
cannot therefore require one more than they. Those trades only require
bounties in which the merchant is obliged to sell his goods for a
price which does not replace to him his capital, together with the
ordinary profit; or in which he is obliged to sell them for less
than it really costs him to send them to market. The bounty is given
in order to make up this loss, and to encourage him to continue, or
perhaps to begin, a trade of which the expense is supposed to be
greater than the returns, of which every operation eats up a part of
the capital employed in it, and which is of such a nature that, if all
other trades resembled it, there would soon be no capital left in
the country.

    The trades, it is to be observed, which are carried on by means of
bounties, are the only ones which can be carried on between two
nations for any considerable time together, in such a manner as that
one of them shall always and regularly lose, or sell its goods for
less than it really costs to send them to market. But if the bounty
did not repay to the merchant what he would otherwise lose upon the
price of his goods, his own interest would soon oblige him to employ
his stock in another way, or to find out a trade in which the price of
the goods would replace to him, with the ordinary profit, the
capital employment in sending them to market. The effect of
bounties, like that of all the other expedients of the mercantile
system, can only be to force the trade of a country into a channel
much less advantageous than that in which it would naturally run of
its own accord.

    The ingenious and well-informed author of the tracts upon the corn
trade has shown very clearly that, since the bounty upon the
exportation of corn was first established, the price of the corn
exported, valued moderately enough, has exceeded that of the corn
imported, valued very high, by a much greater sum than the amount of
the whole bounties which have been paid during that period. This, he
imagines, upon the true principles of the mercantile system, is a
clear proof that this forced corn trade is beneficial to the nation;
the value of the exportation exceeding that of the importation by a
much greater sum than the whole extraordinary expense which the public
has been at in order to get it exported. He does not consider that
this extraordinary expense, or the bounty, is the smallest part of the
expense which the exportation of corn really costs the society. The
capital which the farmer employed in raising it must likewise be taken
into the account. Unless the price of the corn when sold in the
foreign markets replaces, not only the bounty, but this capital,
together with the ordinary profits of stock, the society is a loser by
the difference, or the national stock is so much diminished. But the
very reason for which it has been thought necessary to grant a
bounty is the supposed insufficiency of the price to do this.

    The average price of corn, it has been said, has fallen
considerably since the establishment of the bounty. That the average
price of corn began to fall somewhat towards the end of the last
century, and has continued to do so during the course of the
sixty-four first years of the present, I have already endeavoured to
show. But this event, supposing it to be as real as I believe it to
be, must have happened in spite of the bounty, and cannot possibly
have happened in consequence of it. It has happened in France, as well
as in England, though in France there was not only no bounty, but,
till 1764, the exportation of corn was subjected to a general
prohibition. This gradual fall in the average price of grain, it is
probable, therefore, is ultimately owing neither to the one regulation
nor to the other. but to that gradual and insensible rise in the
real value of silver, which, in the first book in this discourse, I
have endeavoured to show has taken place in the general market of
Europe during the course of the present century. It seems to be
altogether impossible that the bounty could ever contribute to lower
the price of grain.

    In years of plenty, it has already been observed, the bounty, by
occasioning an extraordinary exportation, necessarily keeps up the
price of corn in the home market above what it would naturally fall
to. To do so was the avowed purpose of the institution. In years of
scarcity, though the bounty is frequently suspended, yet the great
exportation which it occasions in years of plenty must frequently
hinder more or less the plenty of one year from relieving the scarcity
of another. Both in years of plenty and in years of scarcity,
therefore, the bounty necessarily tends to raise the money price of
corn somewhat higher than it otherwise would be in the home market.

    That, in the actual state of tillage, the bounty must
necessarily have this tendency will not, I apprehend, be disputed by
any reasonable person. But it has been thought by many people that
it tends to encourage tillage, and that in two different ways;
first, by opening a more extensive foreign market to the corn of the
farmer, it tends, they imagine, to increase the demand for, and
consequently the production of that commodity; and secondly, by
securing to him a better price than he could otherwise expect in the
actual state of tillage, it tends, they suppose, to encourage tillage.
This double encouragement must, they imagine, in a long period of
years, occasion such an increase in the production of corn as may
lower its price in the home market much more than the bounty can raise
it, in the actual state which tillage may, at the end of that
period, happen to be in.

    I answer, that whatever extension of the foreign market can be
occasioned by the bounty must, in every particular year, be altogether
at the expense of the home market; as every bushel of corn which is
exported by means of the bounty, and which would not have been
exported without the bounty, would have remained in the home market to
increase the consumption and to lower the price of that commodity. The
corn bounty, it is to be observed, as well as every other bounty
upon exportation, imposes two different taxes upon the people;
first, the tax which they are obliged to contribute in order to pay
the bounty; and secondly, the tax which arises from the advanced price
of the commodity in the home market, and which, as the whole body of
the people are purchasers of corn, must, in this particular commodity,
be paid by the whole body of the people. In this particular commodity,
therefore, this second tax is by much the heavier of the two. Let us
suppose that, taking one year with another, the bounty of five
shillings upon the exportation of the quarter of wheat raises the
price of that commodity in the home market only sixpence the bushel,
or four shillings the quarter, higher than it otherwise would have
been in the actual state of the crop. Even upon this very moderate
supposition, the great body of the people, over and above contributing
the tax which pays the bounty of five shillings upon every quarter
of wheat exported, must pay another of four shillings upon every
quarter which they themselves consume. But, according to the very well
informed author of the tracts upon the corn trade, the average
proportion of the corn exported to that consumed at home is not more
than that of one to thirty-one. For every five shillings, therefore,
which they contribute to the payment of the first tax, they must
contribute six pounds four shillings to the payment of the second.
So very heavy a tax upon the first necessary of life must either
reduce the subsistence of the labouring poor, or it must occasion some
augmentation in their pecuniary wages proportionable to that in the
pecuniary price of their subsistence. So far as it operates in the one
way, it must reduce the ability of the labouring poor to educate and
bring up their children, and must, so far, tend to restrain the
population of the country. So far as it operates in the other, it must
reduce the ability of the employers of the poor to employ so great a
number as they otherwise might do, and must, so far, tend to
restrain the industry of the country. The extraordinary exportation of
corn, therefore, occasioned by the bounty, not only, in every
particular year, diminishes the home, just as much as it extends the
foreign, market and consumption, but, by restraining the population
and industry of the country, its final tendency is to stunt and
restrain the gradual extension of the home market; and thereby, in the
long run, rather to diminish, than to augment, the whole market and
consumption of corn.

    This enhancement of the money price of corn, however, it has
been thought, by rendering that commodity more profitable to the
farmer, must necessarily encourage its production.

    I answer, that this might be the case if the effect of the
bounty was to raise the real price of corn, or to enable the farmer,
with an equal quantity of it, to maintain a greater number of
labourers in the same manner, whether liberal, moderate, or scanty,
that other labourers are commonly maintained in his neighbourhood. But
neither the bounty, it is evident, nor any other human institution can
have any such effect. It is not the real, but the nominal price of
corn, which can in any considerable degree be affected by the
bounty. And though the tax which that institution imposes upon the
whole body of the people may be very burdensome to those who pay it,
it is of very little advantage to those who receive it.

    The real effect of the bounty is not so much to raise the real
value of corn as to degrade the real value of silver, or to make an
equal quantity of it exchange for a smaller quantity, not only of
corn, but of all other homemade commodities: for the money price of
corn regulates that of all other home-made commodities.

    It regulates the money price of labour, which must always be
such as to enable the labourer to purchase a quantity of corn
sufficient to maintain him and his family either in the liberal,
moderate, or scanty manner in which the advancing, stationary, or
declining circumstances of the society oblige his employers to
maintain him.

    It regulates the money price of all the other parts of the rude
produce of land, which, in every period of improvement, must bear a
certain proportion to that of corn, though this proportion is
different in different periods. It regulates, for example, the money
price of grass and hay, of butcher's meat, of horses, and the
maintenance of horses, of land carriage consequently, or of the
greater part of the inland commerce of the country.

    By regulating the money price of all the other parts of the rude
produce of land, it regulates that of the materials of almost all
manufactures. By regulating the money price of labour, it regulates
that of manufacturing art and industry. And by regulating both, it
regulates that of the complete manufacture. The money price of labour,
and of everything that is the produce either of land or labour, must
necessarily either rise or fall in proportion to the money price of
corn.

    Though in consequence of the bounty, therefore, the farmer
should be enabled to sell his corn for four shillings a bushel instead
of three-and-sixpence, and to pay his landlord a money rent
proportionable to this rise in the money price of his produce, yet if,
in consequence of this rise in the price of corn, four shillings
will purchase no more homemade goods of any other kind than
three-and-sixpence would have done before, neither the circumstances
of the farmer nor those of the landlord will be much mended by this
change. The farmer will not be able to cultivate much better: the
landlord will not be able to live much better. In the purchase of
foreign commodities this enhancement in the price of corn may give
them some little advantage. In that of home-made commodities it can
give them none at all. And almost the whole expense of the farmer, and
the far greater part even of that of the landlord, is in homemade
commodities.

    That degradation in the value of silver which is the effect of the
fertility of the mines, and which operates equally, or very near
equally, through the greater part of the commercial world, is a matter
of very little consequence to any particular country. The consequent
rise of all money prices, though it does not make those who receive
them really richer, does make them really poorer. A service of plate
becomes really cheaper, and everything else remains precisely of the
same real value as before.

    But that degradation in the value of silver which, being the
effect either of the peculiar situation or of the political
institutions of a particular country, takes place only in that
country, is a matter of very great consequence, which, far from
tending to make anybody really richer, tends to make everybody
really poorer. The rise in the money price of all commodities, which
is in this case peculiar to that country, tends to discourage more
or less every sort of industry which is carried on within it, and to
enable foreign nations, by furnishing almost all sorts of goods for
a smaller quantity of silver than its own workmen can afford to do, to
undersell them, not only in the foreign, but even in the home market.

    It is the peculiar situation of Spain and Portugal as
proprietors of the mines to be the distributors of gold and silver
to all the other countries of Europe. Those metals ought naturally,
therefore, to be somewhat cheaper in Spain and Portugal than in any
other part of Europe. The difference, however, should be no more
than the amount of the freight and insurance; and, on account of the
great value and small bulk of those metals, their freight is no
great matter, and their insurance is the same as that of any other
goods of equal value. Spain and Portugal, therefore, could suffer very
little from their peculiar situation, if they did not aggravate its
disadvantages by their political institutions.

    Spain by taxing, and Portugal by prohibiting the exportation of
gold and silver, load that exportation with the expense of
smuggling, and raise the value of those metals in other countries so
much more above what it is in their own by the whole amount of this
expense. When you dam up a stream of water, as soon as the dam is full
as much water must run over the dam-head as if there was no dam at
all. The prohibition of exportation cannot detain a greater quantity
of gold and silver in Spain and Portugal than what they can afford
to employ, than what the annual produce of their land and labour
will allow them to employ, in coin, plate, gilding, and other
ornaments of gold and silver. When they have got this quantity the dam
is full, and the whole stream which flows in afterwards must run over.
The annual exportation of gold and silver from Spain and Portugal
accordingly is, by all accounts, notwithstanding these restraints,
very near equal to the whole annual importation. As the water,
however, must always be deeper behind the dam-head than before it,
so the quantity of gold and silver which these restraints detain in
Spain and Portugal must, in proportion to the annual produce of
their land and labour, be greater than what is to be found in other
countries. The higher and stronger the dam-head, the greater must be
the difference in the depth of water behind and before it. The
higher the tax, the higher the penalties with which the prohibition is
guarded, the more vigilant and severe the police which looks after the
execution of the law, the greater must be the difference in the
proportion of gold and silver to the annual produce of the land and
labour of Spain and Portugal, and to that of other countries. It is
said accordingly to be very considerable, and that you frequently find
there a profusion of plate in houses where there is nothing else which
would, in other countries, be thought suitable or correspondent to
this sort of magnificence. The cheapness of gold and silver, or what
is the same thing, the dearness of all commodities, which is the
necessary effect of this redundancy of the precious metals,
discourages both the agriculture and manufactures of Spain and
Portugal, and enables foreign nations to supply them with many sorts
of rude, and with almost all sorts of manufactured produce, for a
smaller quantity of gold and silver than what they themselves can
either raise or make them for at home. The tax and prohibition operate
in two different ways. They not only lower very much the value of
the precious metals in Spain and Portugal, but by detaining there a
certain quantity of those metals which would otherwise flow over other
countries, they keep up their value in those other countries
somewhat above what it otherwise would be, and thereby give those
countries a double advantage in their commerce with Spain and
Portugal. Open the flood-gates, and there will presently be less water
above, and more below, the dam-head, and it will soon come to a
level in both places. Remove the tax and the prohibition, and as the
quantity of gold and silver will diminish considerably in Spain and
Portugal, so it will increase somewhat in other countries, and the
value of those metals, their proportion to the annual produce of
land and labour, will soon come to a level, or very near to a level,
in all. The loss which Spain and Portugal could sustain by this
exportation of their gold and silver would be altogether nominal and
imaginary. The nominal value of their goods, and of the annual produce
of their land and labour, would fall, and would be expressed or
represented by a smaller quantity of silver than before; but their
real value would be the same as before, and would be sufficient to
maintain, command, and employ, the same quantity of labour. As the
nominal value of their goods would fall, the real value of what
remained of their gold and silver would rise, and a smaller quantity
of those metals would answer all the same purposes of commerce and
circulation which had employed a greater quantity before. The gold and
silver which would go abroad would not go abroad for nothing, but
would bring back an equal value of goods of some kind or another.
Those goods, too, would not be all matters of mere luxury and expense,
to be consumed by idle people who produce nothing in return for
their consumption. As the real wealth and revenue of idle people would
not be augmented by this extraordinary exportation of gold and silver,
so neither would their consumption be much augmented by it. Those
goods would, probably, the greater part of them, and certainly some
part of them, consist in materials, tools, and provisions, for the
employment and maintenance of industrious people, who would reproduce,
with a profit, the full value of their consumption. A part of the dead
stock of the society would thus be turned into active stock, and would
put into motion a greater quantity of industry than had been
employed before. The annual produce of their land and labour would
immediately be augmented a little, and in a few years would, probably,
be augmented a great deal; their industry being thus relieved from one
of the most oppressive burdens which it at present labours under.

    The bounty upon the exportation of corn necessarily operates
exactly in the same way as this absurd policy of Spain and Portugal.
Whatever be the actual state of tillage, it renders our corn
somewhat dearer in the home market than it otherwise would be in
that state, and somewhat cheaper in the foreign; and as the average
money price of corn regulates more or less that of all other
commodities, it lowers the value of silver considerably in the one,
and tends to raise it a little in the other. It enables foreigners,
the Dutch in particular, not only to eat our corn cheaper than they
otherwise could do, but sometimes to eat it cheaper than even our
own people can do upon the same occasions, as we are assured by an
excellent authority, that of Sir Matthew Decker. It hinders our own
workmen from furnishing their goods for so small a quantity of
silver as they otherwise might do; and enables the Dutch to furnish
theirs for a smaller. It tends to render our manufactures somewhat
dearer in every market, and theirs somewhat cheaper than they
otherwise would be, and consequently to give their industry a double
advantage over our own.

    The bounty, as it raises in the home market not so much the real
as the nominal price of our corn, as it augments, not the quantity
of labour which a certain quantity of corn can maintain and employ but
only the quantity of silver which it will exchange for, it discourages
our manufactures, without rendering any considerable service either to
our farmers or country gentlemen. It puts, indeed, a little more money
into the pockets of both, and it will perhaps be somewhat difficult to
persuade the greater part of them that this is not rendering them a
very considerable service. But if this money sinks in its value, in
the quantity of labour, provisions, and homemade commodities of all
different kinds which it is capable of purchasing as much as it
rises in its quantity, the service will be little more than nominal
and imaginary.

    There is, perhaps, but one set of men in the whole commonwealth to
whom the bounty either was or could be essentially serviceable.
These were the corn merchants, the exporters and importers of corn. In
years of plenty the bounty necessarily occasioned a greater
exportation than would otherwise have taken place; and by hindering
the plenty of one year from relieving the scarcity of another, it
occasioned in years of scarcity a greater importation than would
otherwise have been necessary. It increased the business of the corn
merchant in both; and in years of scarcity, it not only enabled him to
import a greater quantity, but to sell it for a better price, and
consequently with a greater profit than he could otherwise have
made, if the plenty of one year had not been more or less hindered
from relieving the scarcity of another. It is in this set of men,
accordingly, that I have observed the greatest zeal for the
continuance or renewal of the bounty.

    Our country gentlemen, when they imposed the high duties upon
the importation of foreign corn, which in times of moderate plenty
amount to a prohibition, and when they established the bounty, seem to
have imitated the conduct of our manufacturers. By the one
institution, they secured to themselves the monopoly of the home
market, and by the other they endeavoured to prevent that market
from ever being overstocked with their commodity. By both they
endeavoured to raise its real value, in the same manner as our
manufacturers had, by the like institutions, raised the real value
of many different sorts of manufactured goods. They did not perhaps
attend to the great and essential difference which nature has
established between corn and almost every other sort of goods. When,
either by the monopoly of the home market, or by a bounty upon
exportation, you enable our woollen or linen manufacturers to sell
their goods for somewhat a better price than they otherwise could
get for them, you raise, not only the nominal, but the real price of
those goods. You render them equivalent to a greater quantity of
labour and subsistence, you increase not only the nominal, but the
real profit, the real wealth and revenue of those manufacturers, and
you enable them either to live better themselves, or to employ a
greater quantity of labour in those particular manufactures. You
really encourage those manufactures, and direct towards them a greater
quantity of the industry of the country than what would probably go to
them of its own accord. But when by the like institutions you raise
the nominal or money-price of corn, you do not raise its real value.
You do not increase the real wealth, the real revenue either of our
farmers or country gentlemen. You do not encourage the growth of
corn because you do not enable them to maintain and employ more
labourers in raising it. The nature of things has stamped upon corn
a real value which cannot be altered by merely altering its money
price. No bounty upon exportation, no monopoly of the home market, can
raise that value. The freest competition cannot lower it. Through
the world in general that value is equal to the quantity of labour
which it can maintain, and in every particular place it is equal to
the quantity of labour which it can maintain in the way, whether
liberal, moderate, or scanty, in which labour is commonly maintained
in that place. Woollen or linen cloth are not the regulating
commodities by which the real value of all other commodities must be
finally measured and determined; corn is. The real value of every
other commodity is finally measured and determined by the proportion
which its average money price bears to the average money price of
corn. The real value of corn does not vary with those variations in
its average money price, which sometimes occur from one century to
another. It is the real value of silver which varies with them.

    Bounties upon the exportation of any homemade commodity are
liable, first to that general objection which may be made to all the
different expedients of the mercantile system; the objection of
forcing some part of the industry of the country into a channel less
advantageous than that in which it would run of its own accord: and,
secondly, to the particular objection of forcing it, not only into a
channel that is less advantageous, but into one that is actually
disadvantageous; the trade which cannot be carried on but by means
of a bounty being necessarily a losing trade. The bounty upon the
exportation of corn is liable to this further objection, that it can
in no respect promote the raising of that particular commodity of
which it was meant to encourage the production. When our country
gentlemen, therefore, demanded the establishment of the bounty, though
they acted in imitation of our merchants and manufacturers, they did
not act with that complete comprehension of their own interest which
commonly directs the conduct of those two other orders of people. They
loaded the public revenue with a very considerable expense; they
imposed a very heavy tax upon the whole body of the people; but they
did not, in any sensible degree, increase the real value of their
own commodity; and by lowering somewhat the real value of silver, they
discouraged in some degree, the general industry of the country,
and, instead of advancing, retarded more or less the improvement of
their own lands, which necessarily depends upon the general industry
of the country.

    To encourage the production of any commodity, a bounty upon
production, one should imagine, would have a more direct operation
than one upon exportation. It would, besides, impose only one tax upon
the people, that which they must contribute in order to pay the
bounty. Instead of raising, it would tend to lower the price of the
commodity in the home market; and thereby, instead of imposing a
second tax upon the people, it might, at least, in part, repay them
for what they had contributed to the first. Bounties upon
production, however, have been very rarely granted. The prejudices
established by the commercial system have taught us to believe that
national wealth arises more immediately from exportation than from
production. It has been more favoured accordingly, as the more
immediate means of bringing money into the country. Bounties upon
production, it has been said too, have been found by experience more
liable to frauds than those upon exportation. How far this is true,
I know not. That bounties upon exportation have been abused to many
fraudulent purposes is very well known. But it is not the interest
of merchants and manufacturers, the great inventors of all these
expedients, that the home market should be overstocked with their
goods, an event which a bounty upon production might sometimes
occasion. A bounty upon exportation, by enabling them to send abroad
the surplus part, and to keep up the price of what remains in the home
market, effectually prevents this. Of all the expedients of the
mercantile system, accordingly, it is the one of which they are the
fondest. I have known the different undertakers of some particular
works agree privately among themselves to give a bounty out of their
own pockets upon the exportation of a certain proportion of the
goods which they dealt in. This expedient succeeded so well that it
more than doubled the price of their goods in the home market,
notwithstanding a very considerable increase in the produce. The
operation of the bounty upon corn must have been wonderfully different
if it has lowered the money price of that commodity.

    Something like a bounty upon production, however, has been granted
upon some particular occasions. The tonnage bounties given to the
white-herring and whale fisheries may, perhaps, be considered as
somewhat of this nature. They tend directly, it may be supposed, to
render the goods cheaper in the home market than they otherwise
would be. In other respects their effects, it must be acknowledged,
are the same as those of bounties upon exportation. By means of them a
part of the capital of the country is employed in bringing goods to
market, of which the price does not repay the cost together with the
ordinary profits of stock.

    But though the tonnage bounties of those fisheries do not
contribute to the opulence of the nation, it may perhaps be thought
that they contribute to its defence by augmenting the number of its
sailors and shipping. This, it may be alleged, may sometimes be done
by means of such bounties at a much smaller expense than by keeping up
a great standing navy, if I may use such an expression, in the same
way as a standing army.

    Notwithstanding these favourable allegations, however, the
following considerations dispose me to believe that, in granting at
least one of these bounties, the legislature has been very grossly
imposed upon.

    First, the herring buss bounty seems too large.

    From the commencement of the winter fishing, 1771, to the end of
the winter fishing, 1781, the tonnage bounty upon the herring buss
fishery has been at thirty shillings the ton. During these eleven
years the whole number of barrels caught by the herring buss fishery
of Scotland amounted to 378,347. The herrings caught and cured at
sea are called sea-sticks. In order to render them what are called
merchantable herrings, it is necessary to repack them with an
additional quantity of salt; and in this case, it is reckoned that
three barrels of sea-sticks are usually repacked into two barrels of
merchantable herrings. The number of barrels of merchantable herrings,
therefore, caught during these eleven years will amount only,
according to this account, to 252,231 1/3. During these eleven years
the tonnage bounties paid amounted to L155,463 11s. or to 8s. 2
1/4d. upon every barrel of seasticks, and to 12s. 3 3/4d. upon every
barrel of merchantable herrings.

    The salt with which these herrings are cured is sometimes Scotch
and sometimes foreign salt, both which are delivered free of all
excise duty to the fish-curers. The excise duty upon Scotch salt is at
present 1s. 6d., that upon foreign salt 10s. the bushel. A barrel of
herrings is supposed to require about one bushel and one-fourth of a
bushel foreign salt. Two bushels are the supposed average of Scotch
salt. If the herrings are entered for exportation, no part of this
duty is paid up; if entered for home consumption, whether the herrings
were cured with foreign or with Scotch salt, only one shilling the
barrel is paid up. It was the old Scotch duty upon a bushel of salt,
the quantity which, at a low estimation, had been supposed necessary
for curing a barrel of herrings. In Scotland, foreign salt is very
little used for any other purpose but the curing of fish. But from the
5th April 1771 to the 5th April 1782, the quantity of foreign salt
imported amounted to 936,974 bushels, at eighty-four pounds the
bushel: the quantity of Scotch salt, delivered from the works to the
fish-curers, to no more than 168,226, at fifty-six pounds the bushel
only. It would appear, therefore, that it is principally foreign
salt that is used in the fisheries. Upon every barrel of herrings
exported there is, besides, a bounty of 2s. 8d., and more than
two-thirds of the buss caught herrings are exported. Put all these
things together and you will find that, during these eleven years,
every barrel of buss caught herrings, cured with Scotch salt when
exported, has cost government L1 7s. 5 3/4d.; and when entered for
home consumption 14s. 3 3/4d.; and that every barrel cured with
foreign salt, when exported, has cost government L1 7s. 5 3/4d.; and
when entered for home consumption L1. 3s. 9 3/4d. The price of a
barrel of good merchantable herrings runs from seventeen and
eighteen to four and five and twenty shillings, about a guinea at an
average.

    Secondly, the bounty to the white-herring fishery is a tonnage
bounty; and is proportioned to the burden of the ship, not to her
diligence or success in the fishery; and it has, I am afraid, been too
common for vessels to fit out for the sole purpose of catching, not
the fish, but the bounty. In the year 1759, when the bounty was at
fifty shillings the ton, the whole buss fishery of Scotland brought in
only four barrels of sea-sticks. In that year each barrel of
sea-sticks cost government in bounties alone L113 15s.; each barrel of
merchantable herrings L159 7s. 6d.

    Thirdly, the mode of fishing for which this tonnage bounty in
the white-herring fishery has been given (by busses or decked
vessels from twenty to eighty tons burthen), seems not so well adapted
to the situation of Scotland as to that of Holland, from the
practice of which country it appears to have been borrowed. Holland
lies at a great distance from the seas to which herrings are known
principally to resort, and can, therefore, carry on that fishery
only in decked vessels, which can carry water and provisions
sufficient for a voyage to a distant sea. But the Hebrides or
western islands, the islands of Shetland, and the northern and
northwestern coasts of Scotland, the countries in whose
neighbourhood the herring fishery is principally carried on, are
everywhere intersected by arms of the sea, which run up a considerable
way into the land, and which, in the language of the country, are
called sea-lochs. It is to these sea-lochs that the herrings
principally resort during the seasons in which they visit those
seas; for the visits of this and, I am assured, of many other sorts of
fish are not quite regular and constant. A boat fishery, therefore,
seems to be the mode of fishing best adapted to the peculiar situation
of Scotland, the fishers carrying the herrings on shore, as fast as
they are taken, to be either cured or consumed fresh. But the great
encouragement which a bounty of thirty shillings the ton gives to
the buss fishery is necessarily a discouragement to the boat
fishery, which, having no such bounty, cannot bring its cured fish
to market upon the same terms as the buss fishery. The boat fishery,
accordingly, which before the establishment of the buss bounty was
very considerable, and is said have employed a number of seamen not
inferior to what the buss fishery employs at present, is now gone
almost entirely to decay. Of the former extent, however, of this now
ruined and abandoned fishery, I must acknowledge that I cannot pretend
to speak with much precision. As no bounty was paid upon the outfit of
the boat fishery, no account was taken of it by the officers of the
customs or salt duties.

    Fourthly, in many parts of Scotland, during certain seasons of the
year, herrings make no inconsiderable part of the food of the
people. A bounty, which tended to lower their price in the home
market, might contribute a good deal to the relief of a great number
of our fellow-subjects, whose circumstances are by no means
affluent. But the herring buss bounty contributes to no such good
purpose. It has ruined the boat fishery, which is, by far, the best
adapted for the supply of the home market, and the additional bounty
of 2s. 8d. the barrel upon exportation carries the greater part,
more than two-thirds, of the produce of the buss fishery abroad.
Between thirty and forty years ago, before the establishment of the
buss bounty, fifteen shillings the barrel, I have been assured, was
the common price of white herrings. Between ten and fifteen years ago,
before the boat fishery was entirely ruined, the price is said to have
run from seventeen to twenty shillings the barrel. For these last five
years, it has, at an average, been at twenty-five shillings the
barrel. This high price, however, may have been owing to the real
scarcity of the herrings upon the coast of Scotland. I must observe,
too, that the cask or barrel, which is usually sold with the herrings,
and of which the price is included in all the foregoing prices, has,
since the commencement of the American war, risen to about double
its former price, or from about three shillings to about six
shillings. I must likewise observe that the accounts I have received
of the prices of former times have been by no means quite uniform
and consistent; and an old man of great accuracy and experience has
assured me that, more than fifty years ago, a guinea was the usual
price of a barrel of good merchantable herrings; and this, I
imagine, may still be looked upon as the average price. All
accounts, however, I think, agree that the price has not been
lowered in the home market in consequence of the buss bounty.

    When the undertakers of fisheries, after such liberal bounties
have been bestowed upon them, continue to sell their commodity at
the same, or even at a higher price than they were accustomed to do
before, it might be expected that their profits should be very
great; and it is not improbable that those of some individuals may
have been so. In general, however, I have every reason to believe they
have been quite otherwise. The usual effect of such bounties is to
encourage rash undertakers to adventure in a business which they do
not understand, and what they lose by their own negligence and
ignorance more than compensates all that they can gain by the utmost
liberality of government. In 1750, by the same act, which first gave
the bounty of thirty shillings the ton for the encouragement of the
white-herring fishery (the 23rd George II, c. 24), a joint-stock
company was erected, with a capital of five hundred thousand pounds,
to which the subscribers (over and above all other encouragements, the
tonnage bounty just now mentioned, the exportation bounty of two
shillings and eightpence the barrel, the delivery of both British
and foreign salt duty free) were, during the space of fourteen
years, for every hundred pounds which they subscribed and paid in to
the stock of the society, entitled to three pounds a year, to be
paid by the receiver-general of the customs in equal half-yearly
payments. Besides this great company, the residence of whose
governor and directors was to be in London, it was declared lawful
to erect different fishing-chambers in all the different outports of
the kingdom, provided a sum not less than ten thousand pounds was
subscribed into the capital of each, to be managed at its own risk,
and for its own profit and loss. The same annuity, and the same
encouragements of all kinds, were given to the trade of those inferior
chambers as to that of the great company. The subscription of the
great company was soon filled up, and several different
fishing-chambers were erected in the different outports of the
kingdom. In spite of all these encouragements, almost all those
different companies, both great and small, lost either the whole, or
the greater part of their capitals; scarce a vestige now remains of
any of them, and the white-herring fishery is now entirely, or
almost entirely, carried on by private adventurers.

    If any particular manufacture was necessary, indeed, for the
defence of the society, it might not always be prudent to depend
upon our neighbours for the supply; and if such manufacture could
not otherwise be supported at home, it might not be unreasonable
that all the other branches of industry should be taxed in order to
support it. The bounties upon the exportation of British-made
sailcloth and British-made gunpowder may, perhaps, both be
vindicated upon this principle.

    But though it can very seldom be reasonable to tax the industry of
the great body of the people in order to support that of some
particular class of manufacturers, yet in the wantonness of great
prosperity, when the public enjoys a greater revenue than it knows
well what to do with, to give such bounties to favourite
manufactures may, perhaps, be as natural as to incur any other idle
expense. In public as well as in private expenses, great wealth may,
perhaps, frequently be admitted as an apology for great folly. But
there must surely be something more than ordinary absurdity in
continuing such profusion in times of general difficulty and distress.

    What is called a bounty is sometimes no more than a drawback,
and consequently is not liable to the same objections as what is
properly a bounty. The bounty, for example, upon refined sugar
exported may be considered as a drawback of the duties upon the
brown and muscovado sugars from which it is made. The bounty upon
wrought silk exported, a drawback of the duties upon raw and thrown
silk imported. The bounty upon gunpowder exported, a drawback of the
duties upon brimstone and saltpetre imported. In the language of the
customs those allowances only are called drawbacks which are given
upon goods exported in the same form in which they are imported.
When that form has been so altered by manufacture of any kind as to
come under a new denomination, they are called bounties.

    Premiums given by the public to artists and manufacturers who
excel in their particular occupations are not liable to the same
objections as bounties. By encouraging extraordinary dexterity and
ingenuity, they serve to keep up the emulation of the workmen actually
employed in those respective occupations, and are not considerable
enough to turn towards any one of them a greater share of the
capital of the country than what would go to it of its own accord.
Their tendency is not to overturn the natural balance of
employments, but to render the work which is done in each as perfect
and complete as possible. The expense of premiums, besides, is very
trifling; that of bounties very great. The bounty upon corn alone
has sometimes cost the public in one year more than three hundred
thousand pounds.

      DIGRESSION CONCERNING THE CORN TRADE AND CORN LAWS

    I cannot conclude this chapter concerning bounties without
observing that the praises which have been bestowed upon the law which
establishes the bounty upon the exportation of corn, and upon that
system of regulations which is connected with it, are altogether
unmerited. A particular examination of the nature of the corn trade,
and of the principal British laws which relate to it. will
sufficiently demonstrate the truth of this assertion. The great
importance of this subject must justify the length of the digression.

    The trade of the corn merchant is composed of four different
branches, which, though they may sometimes be all carried on by the
same person, are in their own nature four separate and distinct
trades. These are, first, the trade of the inland dealer; secondly,
that of the merchant importer for home consumption; thirdly, that of
the merchant exporter of home produce for foreign consumption; and,
fourthly, that of the merchant carrier, or of the importer of corn
in order to export it again.

    I. The interest of the inland dealer, and that of the great body
of the people, how opposite soever they may at first sight appear,
are, even in years of the greatest scarcity, exactly the same. It is
his interest to raise the price of his corn as high as the real
scarcity of the season requires, and it can never be his interest to
raise it higher. By raising the price he discourages the
consumption, and puts everybody more or less, but particularly the
inferior ranks of people, upon thrift and good management. If, by
raising it too high, he discourages the consumption so much that the
supply of the season is likely to go beyond the consumption of the
season, and to last for some time after the next crop begins to come
in, he runs the hazard, not only of losing a considerable part of
his corn by natural causes, but of being obliged to sell what
remains of it for much less than what he might have had for it several
months before. If by not raising the price high enough he
discourages the consumption so little that the supply of the season is
likely to fall short of the consumption of the season, he not only
loses a part of the profit which he might otherwise have made, but
he exposes the people to suffer before the end of the season,
instead of the hardships of a dearth, the dreadful horrors of a
famine. It is the interest of the people that their daily, weekly, and
monthly consumption should be proportioned as exactly as possible to
the supply of the season. The interest of the inland corn dealer is
the same. By supplying them, as nearly as he can judge, in this
proportion, he is likely to sell all his corn for the highest price,
and with the greatest profit; and his knowledge of the state of the
crop, and of his daily, weekly, and monthly sales, enable him to
judge, with more or less accuracy, how far they really are supplied in
this manner. Without intending the interest of the people, he is
necessarily led, by a regard to his own interest, to treat them,
even in years of scarcity, pretty much in the same manner as the
prudent master of a vessel is sometimes obliged to treat his crew.
When he foresees that provisions are likely to run short, he puts them
upon short allowance. Though from excess of caution he should
sometimes do this without any real necessity, yet all the
inconveniences which his crew can thereby suffer are inconsiderable in
comparison of the danger, misery, and ruin to which they might
sometimes be exposed by a less provident conduct. Though from excess
of avarice, in the same manner, the inland corn merchant should
sometimes raise the price of his corn somewhat higher than the
scarcity of the season requires, yet all the inconveniences which
the people can suffer from this conduct, which effectually secures
them from a famine in the end of the season, are inconsiderable in
comparison of what they might have been exposed to by a more liberal
way of dealing in the beginning of it. The corn merchant himself is
likely to suffer the most by this excess of avarice; not only from the
indignation which it generally excites against him, but, though he
should escape the effects of this indignation, from the quantity of
corn which it necessarily leaves upon his hands in the end of the
season, and which, if the next season happens to prove favourable,
he must always sell for a much lower price than he might otherwise
have had.

    Were it possible, indeed, for one great company of merchants to
possess themselves of the whole crop of an extensive country, it
might, perhaps, be their interest to deal with it as the Dutch are
said to do with the spiceries of the Moluccas, to destroy or throw
away a considerable part of it in order to keep up the price of the
rest. But it is scarce possible, even by the violence of law, to
establish such an extensive monopoly with regard to corn; and,
wherever the law leaves the trade free, it is of all commodities the
least liable to be engrossed or monopolized by the force of a few
large capitals, which buy up the greater part of it. Not only its
value far exceeds what the capitals of a few private men are capable
of purchasing, but, supposing they were capable of purchasing it,
the manner in which it is produced renders this purchase
practicable. As in every civilised country it is the commodity of
which the annual consumption is the greatest, so a greater quantity of
industry is annually employed in producing corn than in producing
any other commodity. When it first comes from the ground, too, it is
necessarily divided among a greater number of owners than any other
commodity; and these owners can never be collected into one place like
a number of independent manufacturers, but are necessarily scattered
through all the different corners of the country. These first owners
either immediately supply the consumers in their own neighbourhood, or
they supply other inland dealers who supply those consumers. The
inland dealers in corn, therefore, including both the farmer and the
baker, are necessarily more numerous than the dealers in any other
commodity, and their dispersed situation renders it altogether
impossible for them to enter into any general combination. If in a
year of scarcity, therefore, any of them should find that he had a
good deal more corn upon hand than, at the current price, he could
hope to dispose of before the end of the season, he would never
think of keeping up this price to his own loss, and to the sole
benefit of his rivals and competitors, but would immediately lower it,
in order to get rid of his corn before the new crop began to come
in. The same motives, the same interests, which would thus regulate
the conduct of any one dealer, would regulate that of every other, and
oblige them all in general to sell their corn at the price which,
according to the best of their judgment, was most suitable to the
scarcity or plenty of the season.

    Whoever examines with attention the history of the dearths and
famines which have afflicted any part of Europe, during either the
course of the present or that of the two preceding centuries, of
several of which we have pretty exact accounts, will find, I
believe, that a dearth never has arisen from any combination among the
inland dealers in corn, nor from any other cause but a real
scarcity, occasioned sometimes perhaps, and in some particular places,
by the waste of war, but in by far the greatest number of cases by the
fault of the seasons; and that a famine has never arisen from any
other cause but the violence of government attempting, by improper
means, to remedy the inconveniences of a dearth.

    In an extensive corn country, between all the different parts of
which there is a free commerce and communication, the scarcity
occasioned by the most unfavourable seasons can never be so great as
to produce a famine; and the scantiest crop, if managed with frugality
and economy, will maintain through the year the same number of
people that are commonly fed on a more affluent manner by one of
moderate plenty. The seasons most unfavourable to the crop are those
of excessive drought or excessive rain. But as corn grows equally upon
high and low lands, upon grounds that are disposed to be too wet,
and upon those that are disposed to be too dry, either the drought
or the rain which is hurtful to one part of the country is
favourable to another; and though both in the wet and in the dry
season the crop is a good deal less than in one more properly
tempered, yet in both what is lost in one part of the country is in
some measure compensated by what is gained in the other. In rice
countries, where the crop not only requires a very moist soil, but
where in a certain period of its growing it must be laid under
water, the effects of a drought are much more dismal. Even in such
countries, however, the drought is, perhaps, scarce ever so
universal as necessarily to occasion a famine, if the government would
allow a free trade. The drought in Bengal, a few years ago, might
probably have occasioned a very great dearth. Some improper
regulations, some injudicious restraints imposed by the servants of
the East India Company upon the rice trade, contributed, perhaps, to
turn that dearth into a famine.

    When the government, in order to remedy the inconveniences of a
dearth, orders all the dealers to sell their corn at what it
supposes a reasonable price, it either hinders them from bringing it
to market, which may sometimes produce a famine even in the
beginning of the season; or if they bring it thither, it enables the
people, and thereby encourages them to consume it so fast as must
necessarily produce a famine before the end of the season. The
unlimited, unrestrained freedom of the corn trade, as it is the only
effectual preventative of the miseries of a famine, so it is the
best palliative of the inconveniences of a dearth; for the
inconveniences of a real scarcity cannot be remedied, they can only be
palliated. No trade deserves more the full protection of the law,
and no trade requires it so much, because no trade is so much
exposed to popular odium.

    In years of scarcity the inferior ranks of people impute their
distress to the avarice of the corn merchant, who becomes the object
of their hatred and indignation. Instead of making profit upon such
occasions, therefore, he is often in danger of being utterly ruined,
and of having his magazines plundered and destroyed by their violence.
It is in years of scarcity, however, when prices are high, that the
corn merchant expects to make his principal profit. He is generally in
contract with some farmers to furnish him for a certain number of
years with a certain quantity of corn at a certain price. This
contract price is settled according to what is supposed to be the
moderate and reasonable, that is, the ordinary or average price, which
before the late years of scarcity was commonly about
eight-and-twenty shillings for the quarter of wheat, and for that of
other grain in proportion. In years of scarcity, therefore, the corn
merchant buys a great part of his corn for the ordinary price, and
sells it for a much higher. That this extraordinary profit, however,
is no more than sufficient to put his trade upon a fair level with
other trades, and to compensate the many losses which he sustains upon
other occasions, both from the perishable nature of the commodity
itself, and from the frequent and unforeseen fluctuations of its
price, seems evident enough, from this single circumstance, that great
fortunes are as seldom made in this as in any other trade. The popular
odium, however, which attends it in years of scarcity, the only
years in which it can be very profitable, renders people of
character and fortune averse to enter into it. It is abandoned to an
inferior set of dealers; and millers, bakers, mealmen, and meal
factors, together with a number of wretched hucksters, are almost
the only middle people that, in the home market, come between the
grower and the consumer.

    The ancient policy of Europe, instead of discountenancing this
popular odium against a trade so beneficial to the public, seems, on
the contrary, to have authorized and encouraged it.

    By the 5th and 6th of Edward VI, c. 14, it was enacted that
whoever should buy any corn or grain with intent to sell it again,
should be reputed an unlawful engrosser, and should, for the first
fault, suffer two months' imprisonment, and forfeit the value of the
corn; for the second, suffer six months' imprisonment, and forfeit
double the value; and for the third, be set in the pillory, suffer
imprisonment during the king's pleasure, and forfeit all his goods and
chattels. The ancient policy of most other parts of Europe was no
better than that of England.

    Our ancestors seem to have imagined that the people would buy
their corn cheaper of the farmer than of the corn merchant, who,
they were afraid, would require, over and above the price which he
paid to the farmer, an exorbitant profit to himself. They endeavoured,
therefore, to annihilate his trade altogether. They even endeavoured
to hinder as much as possible any middle man of any kind from coming
in between the grower and the consumer; and this was the meaning of
the many restraints which they imposed upon the trade of those whom
they called kidders or carriers of corn, a trade which nobody was
allowed to exercise without a licence ascertaining his
qualifications as a man of probity and fair dealing. The authority
of three justices of the peace was, by the statute of Edward VI,
necessary in order to grant this licence. But even this restraint
was afterwards thought insufficient, and by a statute of Elizabeth the
privilege of granting it was confined to the quarter-sessions.

    The ancient policy of Europe endeavoured in this manner to
regulate agriculture, the great trade of the country, by maxims
quite different from those which it established with regard to
manufactures, the great trade of the towns. By leaving the farmer no
other customers but either the consumers or their immediate factors,
the kidders and carriers of corn, it endeavoured to force him to
exercise the trade, not only of a farmer, but of a corn merchant or
corn retailer. On the contrary, it in many cases prohibited the
manufacturer from exercising the trade of a shopkeeper, or from
selling his own goods by retail. It meant by the one law to promote
the general interest of the country, or to render corn cheap, without,
perhaps, its being well understood how this was to be done. By the
other it meant to promote that of a particular order of men, the
shopkeepers, who would be so much undersold by the manufacturer, it
was supposed, that their trade would be ruined if he was allowed to
retail at all.

    The manufacturer, however, though he had been allowed to keep a
shop, and to sell his own goods by retail, could not have undersold
the common shopkeeper. Whatever part of his capital he might have
placed in his shop, he must have withdrawn it from his manufacture. In
order to carry on his business on a level with that of other people,
as he must have had the profit of a manufacturer on the one part, so
he must have had that of a shopkeeper upon the other. Let us
suppose, for example, that in the particular town where he lived,
ten per cent was the ordinary profit both of manufacturing and
shopkeeping stock; he must in this case have charged upon every
piece of his own goods which he sold in his shop, a profit of twenty
per cent. When he carried them from his workhouse to his shop, he must
have valued them at the price for which he could have sold them to a
dealer or shopkeeper, who would have bought them by wholesale. If he
valued them lower, he lost a part of the profit of his manufacturing
capital. When again he sold them from his shop, unless he got the same
price at which a shopkeeper would have sold them, he lost a part of
the profit of his shopkeeping capital. Though he might appear,
therefore, to make a double profit upon the same piece of goods, yet
as these goods made successively a part of two distinct capitals, he
made but a single profit upon the whole capital employed about them;
and if he made less than his profit, he was a loser, or did not employ
his whole capital with the same advantage as the greater part of his
neighbours.

    What the manufacturer was prohibited to do, the farmer was in some
measure enjoined to do; to divide his capital between two different
employments; to keep one part of it in his granaries and stack yard,
for supplying the occasional demands of the market; and to employ
the other in the cultivation of his land. But as he could not afford
to employ the latter for less than the ordinary profits of farming
stock, so he could as little afford to employ the former for less than
the ordinary profits of mercantile stock. Whether the stock which
really carried on the business of the corn merchant belonged to the
person who was called a farmer, or to the person who was called a corn
merchant, an equal profit was in both cases requisite in order to
indemnify its owner for employing it in this manner; in order to put
his business upon a level with other trades, and in order to hinder
him from having an interest to change it as soon as possible for
some other. The farmer, therefore, who was thus forced to exercise the
trade of a corn merchant, could not afford to sell his corn cheaper
than any other corn merchant would have been obliged to do in the case
of a free competition.

    The dealer who can employ his whole stock in one single branch
of business has an advantage of the same kind with the workman who can
employ his whole labour in one single operation. As the latter
acquires a dexterity which enables him, with the same two hands, to
perform a much greater quantity of work; so the former acquires so
easy and ready a method of transacting his business, of buying and
disposing of his goods, that with the same capital he can transact a
much greater quantity of business. As the one can commonly afford
his work a good deal cheaper, so the other can commonly afford his
goods somewhat cheaper than if his stock and attention were both
employed about a greater variety of objects. The greater part of
manufacturers could not afford to retail their own goods so cheap as a
vigilant and active shopkeeper, whose sole business it was to buy them
at wholesale and to retail them again. The greater part of farmers
could still less afford to retail their own corn, to supply the
inhabitants of a town, at perhaps four or five miles distance from the
greater part of them, so cheap as a vigilant and active corn merchant,
whose sole business it was to purchase corn by wholesale, to collect
it into a great magazine, and to retail it again.

    The law which prohibited the manufacturer from exercising the
trade of a shopkeeper endeavoured to force this division in the
employment of stock to go on faster than it might otherwise have done.
The law which obliged the farmer to exercise the trade of a corn
merchant endeavoured to hinder it from going on so fast. Both laws
were evident violations of natural liberty, and therefore unjust;
and they were both, too, as impolitic as they were unjust. It is the
interest of every society that things of this kind should never either
be forced or obstructed. The man who employs either his labour or
his stock in a greater variety of ways than his situation renders
necessary can never hurt his neighbour by underselling him. He may
hurt himself, and he generally does so. Jack of all trades will
never be rich, says the proverb. But the law ought always to trust
people with the care of their own interest, as in their local
situations they must generally be able to judge better of it than
the legislator can do. The law, however, which obliged the farmer to
exercise the trade of a corn merchant was by far the most pernicious
of the two.

    It obstructed not only that division in the employment of stock
which is so advantageous to every society, but it obstructed
likewise the improvement and cultivation of the land. By obliging
the farmer to carry on two trades instead of one, it forced him to
divide his capital into two parts, of which one only could be employed
in cultivation. But if he had been at liberty to sell his whole crop
to a corn merchant as fast as he could thresh it out, his whole
capital might have returned immediately to the land, and have been
employed in buying more cattle, and hiring more servants, in order
to improve and cultivate it better. But by being obliged to sell his
corn by retail, he was obliged to keep a great part of his capital
in his granaries and stack yard through the year, and could not,
therefore, cultivate so well as with the same capital he might
otherwise have done. This law, therefore, necessarily obstructed the
improvement of the land, and, instead of tending to render corn
cheaper, must have tended to render it scarcer, and therefore
dearer, than it would otherwise have been.

    After the business of the farmer, that of the corn merchant is
in reality the trade which, if properly protected and encouraged,
would contribute the most to the raising of corn. It would support the
trade of the farmer in the same manner as the trade of the wholesale
dealer supports that of the manufacturer.

    The wholesale dealer, by affording a ready market to the
manufacturer, by taking his goods off his hand as fast as he can
make their price to him before he has made them, enables him to keep
his whole capital, and sometimes even more than his whole capital,
constantly employed in manufacturing, and consequently to
manufacture a much greater quantity of goods than if he was obliged to
dispose of them himself to the immediate consumers, or even to the
retailers. As the capital of the wholesale merchant, too, is generally
sufficient to replace that of many manufacturers, this intercourse
between him and them interests the owner of a large capital to support
the owners of a great number of small ones, and to assist them in
those losses and misfortunes which might otherwise prove ruinous to
them.

    An intercourse of the same kind universally established between
the farmers and the corn merchants would be attended with effects
equally beneficial to the farmers. They would be enabled to keep their
whole capitals, and even more than their whole capitals, constantly
employed in cultivation. In case of any of those accidents, to which
no trade is more liable than theirs, they would find in their ordinary
customer, the wealthy corn merchant, a person who had both an interest
to support them, and the ability to do it, and they would not, as at
present, be entirely dependent upon the forbearance of their landlord,
or the mercy of his steward. Were it possible, as perhaps it is not,
to establish this intercourse universally, and all at once, were it
possible to turn all at once the whole farming stock of the kingdom to
its proper business, the cultivation of land, withdrawing it from
every other employment into which any part of it may be at present
diverted, and were it possible, in order to support and assist upon
occasion the operations of this great stock, to provide all at once
another stock almost equally great, it is not perhaps very easy to
imagine how great, how extensive, and how sudden would be the
improvement which this change of circumstances would alone produce
upon the whole face of the country.

    The statute of Edward VI, therefore, by prohibiting as much as
possible any middle man from coming between the grower and the
consumer, endeavoured to annihilate a trade, of which the free
exercise is not only the best palliative of the inconveniences of a
dearth but the best preventative of that calamity: after the trade
of the farmer, no trade contributing so much to the growing of corn as
that of the corn merchant.

    The rigour of this law was afterwards softened by several
subsequent statutes, which successively permitted the engrossing of
corn when the price of wheat should not exceed twenty, twenty-four,
thirty-two, and forty shillings the quarter. At last, by the 15th of
Charles II, c. 7, the engrossing or buying of corn in order to sell it
again, as long as the price of wheat did not exceed forty-eight
shillings the quarter, and that of other grain in proportion, was
declared lawful to all persons not being forestallers, that is, not
selling again in the same market within three months. All the
freedom which the trade of the inland corn dealer has ever yet enjoyed
was bestowed upon it by this statute. The statute of the 12th of the
present king, which repeals almost all the other ancient laws
against engrossers and forestallers, does not repeal the
restrictions of this particular statute, which therefore still
continue in force.

    This statute, however, authorizes in some measure two very
absurd popular prejudices.

    First, it supposes that when the price of wheat has risen so
high as forty-eight shillings the quarter, and that of other grains in
proportion, corn is likely to be so engrossed as to hurt the people.
But from what has been already said, it seems evident enough that corn
can at no price be so engrossed by the inland dealers as to hurt the
people: and forty-eight shillings the quarter, besides, though it
may be considered as a very high price, yet in years of scarcity it is
a price which frequently takes place immediately after harvest, when
scarce any part of the new crop can be sold off, and when it is
impossible even for ignorance to suppose that any part of it can be so
engrossed as to hurt the people.

    Secondly, it supposes that there is a certain price at which
corn is likely to be forestalled, that is, bought up in order to be
sold again soon after in the same market, so as to hurt the people.
But if a merchant ever buys up corn, either going to a particular
market or in a particular market, in order to sell it again soon after
in the same market, it must be because he judges that the market
cannot be so liberally supplied through the whole season as upon
that particular occasion, and that the price, therefore, must soon
rise. If he judges wrong in this, and if the price does not rise, he
not only loses the whole profit of the stock which he employs in
this manner, but a part of the stock itself, by the expense and loss
which necessarily attend the storing and keeping of corn. He hurts
himself, therefore, much more essentially than he can hurt even the
particular people whom he may hinder from supplying themselves upon
that particular market day, because they may afterwards supply
themselves just as cheap upon any other market day. If he judges
right, instead of hurting the great body of the people, he renders
them a most important service. By making them feel the inconveniencies
of a dearth somewhat earlier than they otherwise might do, he prevents
their feeling them afterwards so severely as they certainly would
do, if the cheapness of price encouraged them to consume faster than
suited the real scarcity of the season. When the scarcity is real, the
best thing that can be done for the people is to divide the
inconveniencies of it as equally as possible through all the different
months, and weeks, and days of the year. The interest of the corn
merchant makes him study to do this as exactly as he can: and as no
other person can have either the same interest, or the same knowledge,
or the same abilities to do it so exactly as he, this most important
operation of commerce ought to be trusted entirely to him; or, in
other words, the corn trade, so far at least as concerns the supply of
the home market, ought to be left perfectly free.

    The popular fear of engrossing and forestalling may be compared to
the popular terrors and suspicions of witchcraft. The unfortunate
wretches accused of this latter crime were not more innocent of the
misfortunes imputed to them than those who have been accused of the
former. The law which put an end to all prosecutions against
witchcraft, which put it out of any man's power to gratify his own
malice by accusing his neighbour of that imaginary crime, seems
effectually to have put an end to those fears and suspicions by taking
away the great cause which encouraged and supported them. The law
which should restore entire freedom to the inland trade of corn
would probably prove as effectual to put an end to the popular fears
of engrossing and forestalling.

    The 15th of Charles II, c. 7, however, with all its imperfections,
has perhaps contributed more both to the plentiful supply of the
home market, and to the increase of tillage, than any other law in the
statute book. It is from this law that the inland corn trade has
derived all the liberty and protection which it has ever yet
enjoyed; and both the supply of the home market, and the interest of
tillage, are much more effectually promoted by the inland than
either by the importation or exportation trade.

    The proportion of the average quantity of all sorts of grain
imported into Great Britain to that of all sorts of grain consumed, it
has been computed by the author of the tracts upon the corn trade,
does not exceed that of one to five hundred and seventy. For supplying
the home market, therefore, the importance of the inland trade must be
to that of the importation trade as five hundred and seventy to one.

    The average quantity of all sorts of grain exported from Great
Britain does not, according to the same author, exceed the
one-and-thirtieth part of the annual produce. For the encouragement of
tillage, therefore, by providing a market for the home produce, the
importance of the inland trade must be to that of the exportation.

    I have no great faith in political arithmetic, computations. I
mention them only in order to show of how much less consequence, in
the opinion of the most judicious and experienced persons, the foreign
trade of corn is than the home trade. The great cheapness of corn in
the years immediately preceding the establishment of the bounty may
perhaps, with reason, be ascribed in some measure to the operation
of this statute of Charles II, which had been enacted about
five-and-twenty years before, and which had therefore full time to
produce its effect.

    A very few words will sufficiently explain all that I have to
say concerning the other three branches of the corn trade.

    II. The trade of the merchant importer of foreign corn for home
consumption evidently contributes to the immediate supply of the
home market, and must so far be immediately beneficial to the great
body of the people. It tends, indeed, to lower somewhat the average
money price of corn, but not to diminish its real value, or the
quantity of labour which it is capable of maintaining. If
importation was at all times free, our farmers and country gentlemen
would, probably, one year with another, get less money for their
corn than they do at present, when importation is at most times in
effect prohibited; but the money which they got would be of more
value, would buy more goods of all other kinds, and would employ
more labour. Their real wealth, their real revenue, therefore, would
be the same as at present, though it might be expressed by a smaller
quantity of silver; and they would neither be disabled nor discouraged
from cultivating corn as much as they do at present. On the
contrary, as the rise in the real value of silver, in consequence of
lowering the money price of corn, lowers somewhat the money price of
all other commodities, it gives the industry of the country, where
it takes place, some advantage in all foreign markets, and thereby
tends to encourage and increase that industry. But the extent of the
home market for corn must be in proportion to the general industry
of the country where it grows, or to the number of those who produce
something else, and therefore have something else, or what comes to
the same thing, the price of something else, to give in exchange for
corn. But in every country the home market, as it is the nearest and
most convenient, so is it likewise the greatest and most important
market for corn. That rise in the real value of silver, therefore,
which is the effect of lowering the average money price of corn, tends
to enlarge the greatest and most important market for corn, and
thereby to encourage, instead of discouraging, its growth.

    By the 22nd of Charles II, c. 13, the importation of wheat,
whenever the price in the home market did not exceed fifty-three
shillings and fourpence the quarter, was subjected to a duty of
sixteen shillings the quarter, and to a duty of eight shillings
whenever the price did not exceed four pounds. The former of these two
prices has, for more than a century past, taken place only in times of
very great scarcity; and the latter has, so far as I know, not taken
place at all. Yet, till wheat had risen above this latter price, it
was by this statute subjected to a very high duty; and, tin it had
risen above the former, to a duty which amounted to a prohibition. The
importation of other sorts of grain was restrained at rates, and by
duties, in proportion to the value of the grain, almost equally high.*
Subsequent laws still further increased those duties.

  * Before the 13th of the present king, the following were the duties
payable upon the importation of the different sorts of grain:-

      Grain            Duties                     Duties     Duties

  Beans to 28s. per qr. 19s. 10d. after till 40s.  16s. 8d.  then 12d.

  Barley to 28s.        19s. 10d.            32s.  16s.           12d.

    Malt is prohibited by the annual Malt-tax Bill.

  Oats to 16s.           5s. 10d. after                       9 1/2d.

  Pease to 40s.         16s. 10d. after                       9 3/4d.

  Rye to 36s.           19s. 10d. till       40s.  16s. 8d.  then 12d.

  Wheat to 44s.         21s. 10d. till   53s. 4d.  17s.      then  8s.

    till 4 l. and after that about 1s. 4d.

    Buckwheat to 32s. per qr. to pay 16s.

  These different duties were imposed, partly by the 92nd of Charles
II, in place of the Old Subsidy, partly by the New Subsidy, by the
One-third and Two-thirds Subsidy, and by the Subsidy, 1747.

    The distress which, in years of scarcity, the strict execution
of those laws might have brought upon the people, would probably
have been very great. But, upon such occasions, its execution was
generally suspended by temporary statutes, which permitted, for a
limited time, the importation of foreign corn. The necessity of
these temporary statutes sufficiently demonstrates the impropriety
of this general one.

    These restraints upon importation, though prior to the
establishment of the bounty, were dictated by the same spirit, by
the same principles, which afterwards enacted that regulation. How
hurtful soever in themselves, these or some other restraints upon
importation became necessary in consequence of that regulation. If,
when wheat was either below forty-eight shillings the quarter, or
not much above it, foreign corn could have been imported either duty
free, or upon paying only a small duty, it might have been exported
again, with the benefit of the bounty, to the great loss of the public
revenue, and to the entire perversion of the institution, of which the
object was to extend the market for the home growth, not that for
the growth of foreign countries.

    III. The trade of the merchant exporter of corn for foreign
consumption certainly does not contribute directly to the plentiful
supply of the home market. It does so, however, indirectly. From
whatever source this supply may be usually drawn, whether from home
growth or from foreign importation, unless more corn is either usually
grown, or usually imported into the country, than what is usually
consumed in it, the supply of the home market can never be very
plentiful. But unless the surplus can in all ordinary cases be
exported, the growers will be careful never to grow more, and the
importers never to import more, than what the bare consumption of
the home market requires. That market will very seldom be overstocked;
but it will generally be understocked, the people whose business it is
to supply it being generally afraid lest their goods should be left
upon their hands. The prohibition of exportation limits the
improvement and cultivation of the country to what the supply of its
own inhabitants requires. The freedom of exportation enables it to
extend cultivation for the supply of foreign nations.

    By the 12th of Charles II, c. 4, the exportation of corn was
permitted whenever the price of wheat did not exceed forty shillings
the quarter, and that of other grain in proportion. By the 15th of the
same prince, this liberty was extended till the price of wheat
exceeded forty-eight shillings the quarter; and by the 22nd, to all
higher prices. A poundage, indeed, was to be paid to the king upon
such exportation. But all grain was rated so low in the book of
rates that this poundage amounted only upon wheat to a shilling,
upon oats to fourpence, and upon all other grain to sixpence the
quarter. By the 1st of William and Mary, the act which established the
bounty, this small duty was virtually taken off whenever the price
of wheat did not exceed, forty-eight shillings the quarter; and by the
11th and l2th of William III, c. 20, it was expressly taken off at all
higher prices.

    The trade of the merchant exporter was, in this manner, not only
encouraged by a bounty, but rendered much more free than that of the
inland dealer. By the last of these statutes, corn could be
engrossed at any price for exportation, but it could not be
engrossed for inland sale except when the price did not exceed
forty-eight shillings the quarter. The interest of the inland
dealer, however, it has already been shown, can never be opposite to
that of the great body of the people. That of the merchant exporter
may, and in fact sometimes is. If, while his own country labours under
a dearth, a neighbouring country should be afflicted with a famine, it
might be his interest to carry corn to the latter country in such
quantities as might very much aggravate the calamities of the
dearth. The plentiful supply of the home market was not the direct
object of those statutes; but, under the pretence of encouraging
agriculture, to raise the money price of corn as high as possible, and
thereby to occasion, as much as possible, a constant dearth in the
home market. By the discouragement of importation, the supply of
that market, even in times of great scarcity, was confined to the home
growth; and by the encouragement of exportation, when the price was so
high as forty-eight shillings the quarter, that market was not, even
in times of considerable scarcity, allowed to enjoy the whole of
that growth. The temporary laws, prohibiting for a limited time the
exportation of corn, and taking off for a limited time the duties upon
its importation, expedients to which Great Britain has been obliged so
frequently to have recourse, sufficiently demonstrate the
impropriety of her general system. Had that system been good, she
would not so frequently have been reduced to the necessity of
departing from it.

    Were all nations to follow the liberal system of free
exportation and free importation, the different states into which a
great continent was divided would so far resemble the different
provinces of a great empire. As among the different provinces of a
great empire the freedom of the inland trade appears, both from reason
and experience, not only the best palliative of a dearth, but the most
effectual preventative of a famine; so would the freedom of the
exportation and importation trade be among the different states into
which a great continent was divided. The larger the continent, the
easier the communication through all the different parts of it, both
by land and by water, the less would any one particular part of it
ever be exposed to either of these calamities, the scarcity of any one
country being more likely to be relieved by the plenty of some
other. But very few countries have entirely adopted this liberal
system. The freedom of the corn trade is almost everywhere more or
less restrained, and, in many countries, is confined by such absurd
regulations as frequently aggravate the unavoidable misfortune of a
dearth into the dreadful calamity of a famine. The demand of such
countries for corn may frequently become so great and so urgent that a
small state in their neighbourhood, which happened at the same time to
be labouring under some degree of dearth, could not venture to
supply them without exposing itself to the like dreadful calamity. The
very bad policy of one country may thus render it in some measure
dangerous and imprudent to establish what would otherwise be the
best policy in another. The unlimited freedom of exportation, however,
would be much less dangerous in great states, in which the growth
being much greater, the supply could seldom be much affected by any
quantity of corn that was likely to be exported. In a Swiss canton, or
in some of the little states of Italy, it may perhaps sometimes be
necessary to restrain the exportation of corn. In such great countries
as France or England it scarce ever can. To hinder, besides, the
farmer from sending his goods at all times to the best market is
evidently to sacrifice the ordinary laws of justice to an idea of
public utility, to a sort of reasons of state; an act of legislative
authority which ought to be exercised only, which can be pardoned only
in cases of the most urgent necessity. The price at which the
exportation of corn is prohibited, if it is ever to be prohibited,
ought always to be a very high price.

    The laws concerning corn may everywhere be compared to the laws
concerning religion. The people feel themselves so much interested
in what relates either of their subsistence in this life, or to
their happiness in a life to come, that government must yield to their
prejudices, and, in order to preserve the public tranquillity,
establish that system which they approve of. It is upon this
account, perhaps, that we so seldom find a reasonable system
established with regard to either of those two capital objects.

    IV. The trade of the merchant carrier, or of the importer of
foreign corn in order to export it again, contributes to the plentiful
supply of the home market. It is not indeed the direct purpose of
his trade to sell his corn there. But he will generally be willing
to do so, and even for a good deal less money than he might expect
in a foreign market; because he saves in this manner the expense of
loading and unloading, of freight and insurance. The inhabitants of
the country which, by means of the carrying trade, becomes the
magazine and storehouse for the supply of other countries can very
seldom be in want themselves. Though the carrying trade might thus
contribute to reduce the average money price of corn in the home
market, it would not thereby lower its real value. It would only raise
somewhat the real value of silver.

    The carrying trade was in effect prohibited in Great Britain, upon
all ordinary occasions, by the high duties upon the importation of
foreign corn, of the greater part of which there was no drawback;
and upon extraordinary occasions, when a scarcity made it necessary to
suspend those duties by temporary statutes, exportation was always
prohibited. By this system of laws, therefore, the carrying trade
was in effect prohibited upon all occasions.

    That system of laws, therefore, which is connected with the
establishment of the bounty, seems to deserve no part of the praise
which has been bestowed upon it. The improvement and prosperity of
Great Britain, which has been so often ascribed to those laws, may
very easily be accounted for by other causes. That security which
the laws in Great Britain give to every man that he shall enjoy the
fruits of his own labour is alone sufficient to make any country
flourish, notwithstanding these and twenty other absurd regulations of
commerce; and this security was perfected by the revolution much about
the same time that the bounty was established. The natural effort of
every individual to better his own condition, when suffered to exert
itself with freedom and security is so powerful a principle that it is
alone, and without any assistance, not only capable of carrying on the
society to wealth and prosperity, but of surmounting a hundred
impertinent obstructions with which the folly of human laws too
often incumbers its operations; though the effect of these
obstructions is always more or less either to encroach upon its
freedom, or to diminish its security. In Great Britain industry is
perfectly secure; and though it is far from being perfectly free, it
is as free or freer than in any other part of Europe.

    Though the period of the greatest prosperity and improvement of
Great Britain has been posterior to that system of laws which is
connected with the bounty, we must not upon that account impute it
to those laws. It has been posterior likewise to the national debt.
But the national debt has most assuredly not been the cause of it.

    Though the system of laws which is connected with the bounty has
exactly the same tendency of tendency with the police of Spain and
Portugal, to lower somewhat the value of the precious metals in the
country where it takes place, yet Great Britain is certainly one of
the richest countries in Europe, while Spain and Portugal are
perhaps among the most beggarly. This difference of situation,
however, may easily be accounted for from two different causes. First,
the tax of Spain, the prohibition in Portugal of exporting gold and
silver, and the vigilant police which watches over the execution of
those laws, must, in two very poor countries, which between them
import annually upwards of six millions sterling, operate not only
more directly but much more forcibly in reducing the value of those
metals there than the corn laws can do in Great Britain. And,
secondly, this bad policy is not in those countries counterbalanced by
the general liberty and security of the people. Industry is there
neither free nor secure, and the civil and ecclesiastical
governments of both Spain and Portugal are such as would alone be
sufficient to perpetuate their present state of poverty, even though
their regulations of commerce were as wise as the greater part of them
are absurd and foolish.

    The 13th of the present king, c. 43, seems to have established a
new system with regard to the corn laws in many respects better than
the ancient one, but in one or two respects perhaps not quite so good.

    By this statute the high duties upon importations for home
consumption are taken off so soon as the price of middling wheat rises
to forty-eight shillings the quarter; that of middling rye, pease or
beans, to thirty-two shillings; that of barley to twenty-four
shillings; and that of oats to sixteen shillings; and instead of
them a small duty is imposed of only sixpence upon the quarter of
wheat, and upon that of other grain in proportion. With regard to
all these different sorts of grain, but particularly with regard to
wheat, the home market is thus opened to foreign supplies at prices
considerably lower than before.

    By the same statute the old bounty of five shillings upon the
exportation of wheat ceases so soon as the price rises to forty-four
shillings the quarter, instead of forty-eight, the price at which it
ceased before; that of two shillings and sixpence upon the exportation
of barley ceases so soon as the price rises to twenty-two shillings,
instead of twenty-four, the price at which it ceased before; that of
two shillings and sixpence upon the exportation of oatmeal ceases so
soon as the price rises to fourteen shillings, instead of fifteen, the
price at which it ceased before. The bounty upon rye is reduced from
three shillings and sixpence to three shillings, and it ceases so soon
as the price rises to twenty-eight shillings instead of thirty-two,
the price at which it ceased before. If bounties are as improper as
I have endeavoured to prove them to be, the sooner they cease, and the
lower they are, so much the better.

    The same statute permits, at the lowest prices, the importation of
corn, in order to be exported again duty free, provided it is in the
meantime lodged in a warehouse under the joint locks of the king and
the importer. This liberty, indeed, extends to no more than
twenty-five of the different ports of Great Britain. They are,
however, the principal ones, and there may not, perhaps, be warehouses
proper for this purpose in the greater part of the others.

    So far this law seems evidently an improvement upon the ancient
system.

    But by the same law a bounty of two shillings the quarter is given
for the exportation of oats whenever the price does not exceed
fourteen shillings. No bounty had ever been given before for the
exportation of this grain, no more than for that of pease or beans.

    By the same law, too, the exportation of wheat is prohibited so
soon as the price rises to forty-four shillings the quarter; that of
rye so soon as it rises to twenty-eight shillings; that of barley so
soon as it rises to twenty-two shillings; and that of oats so soon
as they rise to fourteen shillings. Those several prices seem all of
them a good deal too low, and there seems to be an impropriety,
besides, in prohibiting exportation altogether at those precise prices
at which that bounty, which was given in order to force it, is
withdrawn. The bounty ought certainly either to have been withdrawn at
a much lower price, or exportation ought to have been allowed at a
much higher.

    So far, therefore, this law seems to be inferior to the ancient
system. With all its imperfections, however, we may perhaps say of
it what was said of the laws of Solon, that, though not the best in
itself, it is the best which the interests, prejudices, and temper
of the times would admit of. It may perhaps in due time prepare the
way for a better.

                          CHAPTER VI

                   Of Treaties of Commerce

    WHEN a nation binds itself by treaty either to permit the entry of
certain goods from one foreign country which it prohibits from all
others, or to exempt the goods of one country from duties to which
it subjects those of all others, the country, or at least the
merchants and manufacturers of the country, whose commerce is so
favoured, must necessarily derive great advantage from the treaty.
Those merchants and manufacturers enjoy a sort of monopoly in the
country which is so indulgent to them. That country becomes a market
both more extensive and more advantageous for their goods: more
extensive, because the goods of other nations being either excluded or
subjected to heavier duties, it takes off a greater quantity of
theirs: more advantageous, because the merchants of the favoured
country, enjoying a sort of monopoly there, will often sell their
goods for a better price than if exposed to the free competition of
all other nations.

    Such treaties, however, though they may be advantageous to the
merchants and manufacturers of the favoured, are necessarily
disadvantageous to those of the favouring country. A monopoly is
thus granted against them to a foreign nation; and they must
frequently buy the foreign goods they have occasion for dearer than if
the free competition of other nations was admitted. That part of its
own produce with which such a nation purchases foreign goods must
consequently be sold cheaper, because when two things are exchanged
for one another, the cheapness of the one is a necessary
consequence, or rather the same thing with the dearness of the
other. The exchangeable value of its annual produce, therefore, is
likely to be diminished by every such treaty. This diminution,
however, can scarce amount to any positive loss, but only to a
lessening of the gain which it might otherwise make. Though it sells
its goods cheaper than it otherwise might do, it will not probably
sell them for less than they cost; nor, as in the case of bounties,
for a price which will not replace the capital employed in bringing
them to market, together with the ordinary profits of stock. The trade
could not go on long if it did. Even the favouring country, therefore,
may still gain by the trade, though less than if there was a free
competition.

    Some treaties of commerce, however, have been supposed
advantageous upon principles very different from these; and a
commercial country has sometimes granted a monopoly of this kind
against itself to certain goods of a foreign nation, because it
expected that in the whole commerce between them, it would annually
sell more than it would buy, and that a balance in gold and silver
would be annually returned to it. It is upon this principle that the
treaty of commerce between England and Portugal, concluded in 1703
by Mr. Methuen, has been so much commended. The following is a literal
translation of that treaty, which consists of three articles only.

                           ART. I.

    His sacred royal majesty of Portugal promises, both in his own
name, and that of his successors, to admit, for ever hereafter, into
Portugal, the woollen cloths, and the rest of the woollen manufactures
of the British, as was accustomed, till they were prohibited by the
law; nevertheless upon this condition:

                          ART. II.

    That is to say, that her sacred royal majesty of Great Britain
shall, in her own name, and that of her successors, be obliged, for
ever hereafter, to admit the wines of the growth of Portugal into
Britain; so that at no time, whether there shall be peace or war
between the kingdoms of Britain and France, anything more shall be
demanded for these wines by the name of custom or duty, or by
whatsoever other title, directly or indirectly, whether they shall
be imported into Great Britain in or hogsheads, or other casks, than
what shall be demanded for the like quantity or measure of French
wine, deducting or abating a third part of the custom or duty. But
if at any time this deduction or abatement of customs, which is to
be made as aforesaid, shall in any manner be attempted and prejudiced,
it shall be just and lawful for his sacred royal majesty of
Portugal, again to prohibit the woollen cloths, and the rest of the
British woollen manufactures.

                          ART. III.

    The most excellent lords the plenipotentiaries promise and take
upon themselves, that their above named masters shall ratify this
treaty; and within the space of two months the ratifications shall
be exchanged.

    By this treaty the crown of Portugal becomes bound to admit the
English woollens upon the same footing as before the prohibition; that
is, not to raise the duties which had been paid before that time.
But it does not become bound to admit them upon any better terms
than those of any other nation, of France or Holland for example.
The crown of Great Britain, on the contrary, becomes bound to admit
the wines of Portugal upon paying only two-thirds of the duty which is
paid for those of France, the wines most likely to come into
competition with them. So far this treaty, therefore, is evidently
advantageous to Portugal, and disadvantageous to Great Britain.

    It has been celebrated, however, as a masterpiece of the
commercial policy of England. Portugal receives annually from the
Brazils a greater quantity of gold than can be employed in its
domestic commerce, whether in the shape of coin or of plate. The
surplus is too valuable to be allowed to lie idle and locked up in
coffers, and as it can find no advantageous market at home, it must,
notwithstanding any prohibition, be sent abroad, and exchanged for
something for which there is a more advantageous market at home. A
large share of it comes annually to England, in return either for
English goods, or for those of other European nations that receive
their returns through England. Mr. Baretti was informed that the
weekly packet-boat from Lisbon brings, one week with another, more
than fifty thousand pounds in gold to England. The sum had probably
been exaggerated. It would amount to more than two millions six
hundred thousand pounds a year, which is more than the Brazils are
supposed to afford.

    Our merchants were some years ago out of humour with the crown
of Portugal. Some privileges which had been granted them, not by
treaty, but by the free grace of that crown, at the solicitation
indeed, it is probable, and in return for much greater favours,
defence and protection, from the crown of Great Britain had been
either infringed or revoked. The people, therefore, usually most
interested in celebrating the Portugal trade were then rather disposed
to represent it as less advantageous than it had commonly been
imagined. The far greater part, almost the whole, they pretended, of
this annual importation of gold, was not on account of Great
Britain, but of other European nations; the fruits and wines of
Portugal annually imported into Great Britain nearly compensating
the value of the British goods sent thither.

    Let us suppose, however, that the whole was on account of Great
Britain, and that it amounted to a still greater sum than Mr.
Baretti seems to imagine; this trade would not, upon that account,
be more advantageous than any other in which, for the same value
sent out, we received an equal value of consumable goods in return.

    It is but a very small part of this importation which, it can be
supposed, is employed as an annual addition either to the plate or
to the coin of the kingdom. The rest must all be sent abroad and
exchanged for consumable goods of some kind or other. But if those
consumable goods were purchased directly with the produce of English
industry, it would be more for the advantage of England than first
to purchase with that produce the gold of Portugal, and afterwards
to purchase with that gold those consumable goods. A direct foreign
trade of consumption is always more advantageous than a round-about
one; and to bring the same value of foreign goods to the home
market, requires a much smaller capital in the one way than in the
other. If a smaller share of its industry, therefore, had been
employed in producing goods fit for the Portugal market, and a greater
in producing those fit for the other markets, where those consumable
goods for which there is a demand in Great Britain are to be had, it
would have been more for the advantage of England. To procure both the
gold, which it wants for its own use, and the consumable goods, would,
in this way, employ a much smaller capital than at present. There
would be a spare capital, therefore, to be employed for other
purposes, in exciting an additional quantity of industry, and in
raising a greater annual produce.

    Though Britain were entirely excluded from the Portugal trade,
it could find very little difficulty in procuring all the annual
supplies of gold which it wants, either for the purposes of plate,
or of coin, or of foreign trade. Gold, like every other commodity,
is always somewhere or another to be got for its value by those who
have that value to give for it. The annual surplus of gold in
Portugal, besides, would still be sent abroad, and though not
carried away by Great Britain, would be carried away by some other
nation, which would be glad to sell it again for its price, in the
same manner as Great Britain does at present. In buying gold of
Portugal, indeed, we buy it at the first hand; whereas, in buying it
of any other nation, except Spain, we should buy it at the second, and
might pay somewhat dearer. This difference, however, would surely be
too insignificant to deserve the public attention.

    Almost all our gold, it is said, comes from Portugal. With other
nations the balance of trade is either against us, or not much in
our favour. But we should remember that the more gold we import from
one country, the less we must necessarily import from all others.
The effectual demand for gold, like that for every other commodity, is
in every country limited to a certain quantity. If nine-tenths of this
quantity are imported from one country, there remains a tenth only
to be imported from all others. The more gold besides that is annually
imported from some particular countries, over and above what is
requisite for plate and for coin, the more must necessarily be
exported to some others; and the more that most insignificant object
of modern policy, the balance of trade, appears to be in our favour
with some particular countries, the more it must necessarily appear to
be against us with many others.

    It was upon this silly notion, however, that England could not
subsist without the Portugal trade, that, towards the end of the
late war, France and Spain, without pretending either offence or
provocation, required the King of Portugal to exclude all British
ships from his ports, and for the security of this exclusion, to
receive into them French or Spanish garrisons. Had the king of
Portugal submitted to those ignominious terms which his brother-in-law
the king of Spain proposed to him, Britain would have been freed
from a much greater inconveniency than the loss of the Portugal trade,
the burden of supporting a very weak ally, so unprovided of everything
for his own defence that the whole power of England, had it been
directed to that single purpose, could scarce perhaps have defended
him for another campaign. The loss of the Portugal trade would, no
doubt, have occasioned a considerable embarrassment to the merchants
at that time engaged in it, who might not, perhaps, have found out,
for a year or two, any other equally advantageous method of
employing their capitals; and in this would probably have consisted
all the inconveniency which England could have suffered from this
notable piece of commercial policy.

    The great annual importation of gold and silver is neither for the
purpose of plate nor of coin, but of foreign trade. A round-about
foreign trade of consumption can be carried on more advantageously
by means of these metals than of almost any other goods. As they are
the universal instruments of commerce, they are more readily
received in return for all commodities than any other goods; and on
account of their small bulk and great value, it costs less to
transport them backward and forward from one place to another than
almost any other sort of merchandise, and they lose less of their
value by being so transported. Of all the commodities, therefore,
which are bought in one foreign country, for no other purpose but to
be sold or exchanged again for some other goods in another, there
are none so convenient as gold and silver. In facilitating all the
different round-about foreign trades of consumption which are
carried on in Great Britain consists the principal advantage of the
Portugal trade; and though it is not a capital advantage, it is no
doubt a considerable one.

    That any annual addition which, it can reasonably be supposed,
is made either to the plate or to the coin of the kingdom, could
require but a very small annual importation of gold and silver,
seems evident enough; and though we had no direct trade with Portugal,
this small quantity could always, somewhere or another, be very easily
got.

    Though the goldsmith's trade be very considerable in Great
Britain, the far. greater part of the new plate which they annually
sell is made from other old plate melted down; so that the addition
annually made to the whole plate of the kingdom cannot be very
great, and could require but a very small annual importation.

    It is the same case with the coin. Nobody imagines, I believe,
that even the greater part of the annual coinage, amounting, for ten
years together, before the late reformation of the gold coin, to
upwards of eight hundred thousand pounds a year in gold, was an annual
addition to the money before current in the kingdom. In a country
where the expense of the coinage is defrayed by the government, the
value of the coin, even when it contains its full standard weight of
gold and silver, can never be much greater than that of an equal
quantity of those metals uncoined; because it requires only the
trouble of going to the mint, and the delay perhaps of a few weeks, to
procure for any quantity of uncoined gold and silver an equal quantity
of those metals in coin. But, in every country, the greater part of
the current coin is almost always more or less worn, or otherwise
degenerated from its standard. In Great Britain it was, before the
late reformation, a good deal so, the gold being more than two per
cent and the silver more than eight per cent below its standard
weight. But if forty-four guineas and a half, containing their full
standard weight, a pound weight of gold, could purchase very little
more than a pound weight could of uncoined gold, forty-four guineas
and a half wanting a part of their weight could not purchase a pound
weight, and something was to be added in order to make up the
deficiency. The current price of gold bullion at market, therefore,
instead of being the same with the mint price, or L46 14s. 6d., was
then about L47 14s. and sometimes about L48. When the greater part
of the coin, however, was in this degenerate condition, forty-four
guineas and a half, fresh from the mint, would purchase no more
goods in the market than any other ordinary guineas, because when they
came into the coffers of the merchant, being confounded with other
money, they could not afterwards be distinguished without more trouble
than the difference was worth. Like other guineas they were worth no
more than L46 14s. 6d. If thrown into the melting pot, however, they
produced, without any sensible loss, a pound weight of standard
gold, which could be sold at any time for between L47 14s. and L48
either of gold or silver, as fit for all the purposes of coin as
that which had been melted down. There was an evident profit,
therefore, in melting down new coined money, and it was done so
instantaneously, that no precaution of government could prevent it.
The operations of the mint were, upon this account, somewhat like
the web of Penelope; the work that was done in the day was undone in
the night. The mint was employed, not so much in making daily
additions to the coin, as in replacing the very best part of it
which was daily melted down.

    Were the private people, who carry their gold and silver to the
mint, to pay themselves for the coinage, it would add to the value
of those metals in the same manner as the fashion does to that of
plate. Coined gold and silver would be more valuable than uncoined.
The seignorage, if it was not exorbitant, would add to the bullion the
whole value of the duty; because, the government having everywhere the
exclusive privilege of coining, no coin can come to market cheaper
than they think proper to afford it. If the duty was exorbitant
indeed, that is, if it was very much above the real value of the
labour and expense requisite for coinage, false coiners, both at
home and abroad, might be encouraged, by the great difference
between the value of bullion and that of coin, to pour in so great a
quantity of counterfeit money as might reduce the value of the
government money. In France, however, though the seignorage is eight
per cent, no sensible inconveniency of this kind is found to arise
from it. The dangers to which a false coiner is everywhere exposed, if
he lives in the country of which he counterfeits the coin, and to
which his agents or correspondents are exposed if he lives in a
foreign country, are by far too great to be incurred for the sake of a
profit of six or seven per cent.

    The seignorage in France raises the value of the coin higher
than in proportion to the quantity of pure gold which it contains.
Thus by the edict of January 1726, the mint price of fine gold of
twenty-four carats was fixed at seven hundred and forty livres nine
sous and one denier one-eleventh, the mark of eight Paris ounces.
The gold coin of France, making an allowance for the remedy of the
mint, contains twenty-one carats and three-fourths of fine gold, and
two carats one fourth of alloy. The mark of standard gold,
therefore, is worth no more than about six hundred and seventy-one
livres ten deniers. But in France this mark of standard gold is coined
into thirty Louis d'ors of twenty-four livres each, or into seven
hundred and twenty livres. The coinage, therefore, increases the value
of a mark of standard gold bullion, by the difference between six
hundred and seventy-one livres ten deniers, and seven hundred and
twenty livres; or by forty-eight livres nineteen sous and two deniers.

    A seignorage will, in many cases, take away altogether, and
will, in all cases, diminish the profit of melting down the new
coin. This profit always arises from the difference between the
quantity of bullion which the common currency ought to contain, and
that which it actually does contain. If this difference is less than
the seignorage, there will be loss instead of profit. If it is equal
to the seignorage, there will neither be profit nor loss. If it is
greater than the seignorage, there will indeed be some profit, but
less than if there was no seignorage. If, before the late
reformation of the gold coin, for example, there had been a seignorage
of five per cent upon the coinage, there would have been a loss of
three per cent upon the melting down of the gold coin. If the
seignorage had been two per cent there would have been neither
profit nor loss. If the seignorage had been one per cent there would
have been a profit, but of one per cent only instead of two per
cent. Wherever money is received by tale, therefore, and not by
weight, a seignorage is the most effectual preventative of the melting
down of the coin, and, for the same reason, of its exportation. It
is the best and heaviest pieces that are commonly either melted down
or exported; because it is upon such that the largest profits are
made.

    The law for encouragement of the coinage, by rendering it
duty-free, was first enacted during the reign of Charles II for a
limited time; and afterwards continued, by different prolongations,
till 1769, when it was rendered perpetual. The Bank of England, in
order to replenish their coffers with money, are frequently obliged to
carry bullion to the mint; and it was more for their interest, they
probably imagined, that the coinage should be at the expense of the
government than at their own. It was probably out of complaisance to
this great company that the government agreed to render this law
perpetual. Should the custom of weighing gold, however, come to be
disused, as it is very likely to be on account of its inconveniency;
should the gold coin of England come to be received by tale, as it was
before the late recoinage, this great company may, perhaps, find
that they have upon this, as upon some other occasions, mistaken their
own interest not a little.

    Before the late recoinage, when the gold currency of England was
two per cent below its standard weight, as there was no seignorage, it
was two per cent below the value of that quantity of standard gold
bullion which it ought to have contained. When this great company,
therefore, bought gold bullion in order to have it coined, they were
obliged to pay for it two per cent more than it was worth after
coinage. But if there had been a seignorage of two per cent upon the
coinage, the common gold currency, though two per cent below its
standard weight, would notwithstanding have been equal in value to the
quantity of standard gold which it ought to have contained; the
value of the fashion compensating in this case the diminution of the
weight. They would indeed have had the seignorage to pay, which
being two per cent, their loss upon the whole transaction would have
been two per cent exactly the same, but no greater than it actually
was.

    If the seignorage had been five per cent, and the gold currency
only two per cent below its standard weight, the bank would in this
case have gained three per cent upon the price of the bullion; but
as they would have had a seignorage of five per cent to pay upon the
coinage, their loss upon the whole transaction would, in the same
manner, have been exactly two per cent.

    If the seignorage had been only one per cent and the gold currency
two per cent below its standard weight, the bank would in this case
have lost only one per cent upon the price of the bullion; but as they
would likewise have had a seignorage of one per cent to pay, their
loss upon the whole transaction would have been exactly two per cent
in the same manner as in all other cases.

    If there was a reasonable seignorage, while at the same time the
coin contained its full standard weight, as it has done very nearly
since the last recoinage, whatever the bank might lose by the
seignorage, they would gain upon the price of the bullion; and
whatever they might gain upon the price of the bullion, they would
lose by the seignorage. They would neither lose nor gain, therefore,
upon the whole transaction, and they would in this, as in all the
foregoing cases, be exactly in the same situation as if there was no
seignorage.

    When the tax upon a commodity is so moderate as not to encourage
smuggling, the merchant who deals in it, though he advances, does
not properly pay the tax, as he gets it back in the price of the
commodity. The tax is finally paid by the last purchaser or
consumer. But money is a commodity with regard to which every man is a
merchant. Nobody buys it but in order to sell it again; and with
regard to it there is in ordinary cases no last purchaser or consumer.
When the tax upon coinage, therefore, is so moderate as not to
encourage false coining, though everybody advances the tax, nobody
finally pays it; because everybody gets it back in the advanced
value of the coin.

    A moderate seignorage, therefore, would not in any case augment
the expense of the bank, or of any other private persons who carry
their bullion to the mint in order to be coined, and the want of a
moderate seignorage does not in any case diminish it. Whether there is
or is not a seignorage, if the currency contains its full standard
weight, the coinage costs nothing to anybody, and if it is short of
that weight, the coinage must always cost the difference between the
quantity of bullion which ought to be contained in it, and that
which actually is contained in it.

    The government, therefore, when it defrays the expense of coinage,
not only incurs some small expense, but loses some small revenue which
it might get by a proper duty; and neither the bank nor any other
private persons are in the smallest degree benefited by this useless
piece of public generosity.

    The directors of the bank, however, would probably be unwilling to
agree to the imposition of a seignorage upon the authority of a
speculation which promises them no gain, but only pretends to insure
them from any loss. In the present state of the gold coin, and as long
as it continues to be received by weight, they certainly would gain
nothing by such a change. But if the custom of weighing the gold
coin should ever go into misuse, as it is very likely to do, and if
the gold coin should ever fall into the same state of degradation in
which it was before the late recoinage, the gain, or more properly the
savings of the bank, in consequence of the imposition of a seignorage,
would probably be very considerable. The Bank of England is the only
company which sends any considerable quantity of bullion to the
mint, and the burden of the annual coinage falls entirely, or almost
entirely, upon it. If this annual coinage had nothing to do but to
repair the unavoidable losses and necessary wear and tear of the coin,
it could seldom exceed fifty thousand or at most a hundred thousand
pounds. But when the coin is degraded below its standard weight, the
annual coinage must, besides this, fill up the large vacuities which
exportation and the melting pot are continually making in the
current coin. It was upon this account that during the ten or twelve
years immediately preceding the late reformation of the gold coin, the
annual coinage amounted at an average to more than eight hundred and
fifty thousand pounds. But if there had been a seignorage of four or
five per cent upon the gold coin, it would probably, even in the state
in which things then were, have put an effectual stop to the
business both of exportation and of the melting pot. The bank, instead
of losing every year about two and a half per cent upon the bullion
which was to be coined into more than eight hundred and fifty thousand
pounds, or incurring an annual loss of more than twenty-one thousand
two hundred and fifty pounds, would not probably have incurred the
tenth part of that loss.

    The revenue allotted by Parliament for defraying the expense of
the coinage is but fourteen thousand pounds a year, and the real
expense which it costs the government, or the fees of the officers
of the mint, do not upon ordinary occasions, I am assured, exceed
the half of that sum. The saving of so very small a sum, or even the
gaining of another which could not well be much larger, are objects
too inconsiderable, it may be thought, to deserve the serious
attention of government. But the saving of eighteen or twenty thousand
pounds a year in case of an event which is not improbable, which has
frequently happened before, and which is very likely to happen
again, is surely an object which well deserves the serious attention
even of so great a company as the Bank of England.

    Some of the foregoing reasonings and observations might perhaps
have been more properly placed in those chapters of the first book
which treat of the origin and use of money, and of the difference
between the real and the nominal price of commodities. But as the
law for the encouragement of coinage derives its origin from those
vulgar prejudices which have been introduced by the mercantile system,
I judged it more proper to reserve them for this chapter. Nothing
could be more agreeable to the spirit of that system than a sort of
bounty upon the production of money, the very thing which, it
supposes, constitutes the wealth of every nation. It is one of its
many admirable expedients for enriching the country.

                        CHAPTER VII

                        Of Colonies

                           PART 1

        Of the Motives for establishing new Colonies

    THE interest which occasioned the first settlement of the
different European colonies in America and the West Indies was not
altogether so plain and distinct as that which directed the
establishment of those of ancient Greece and Rome.

    All the different states of ancient Greece possessed, each of
them, but a very small territory, and when the people in any one of
them multiplied beyond what that territory could easily maintain, a
part of them were sent in quest of a new habitation in some remote and
distant part of the world; the warlike neighbours who surrounded
them on all sides, rendering it difficult for any of them to enlarge
very much its territory at home. The colonies of the Dorians
resorted chiefly to Italy and Sicily, which, in the times preceding
the foundation of Rome, were inhabited by barbarous and uncivilised
nations: those of the Ionians and Aeolians, the two other great tribes
of the Greeks, to Asia Minor and the islands of the Aegean Sea, of
which the inhabitants seem at that time to have been pretty much in
the same state as those of Sicily and Italy. The mother city, though
she considered the colony as a child, at all times entitled to great
favour and assistance, and owing in return much gratitude and respect,
yet considered it as an emancipated child over whom she pretended to
claim no direct authority or jurisdiction. The colony settled its
own form of government, enacted its own laws, elected its own
magistrates, and made peace or war with its neighbours as an
independent state, which had no occasion to wait for the approbation
or consent of the mother city. Nothing can be more plain and
distinct than the interest which directed every such establishment.

    Rome, like most of the other ancient republics, was originally
founded upon an Agrarian law which divided the public territory in a
certain proportion among the different citizens who composed the
state. The course of human affairs by marriage, by succession, and
by alienation, necessarily deranged this original division, and
frequently threw the lands, which had been allotted for the
maintenance of many different families, into the possession of a
single person. To remedy this disorder, for such it was supposed to
be, a law was made restricting the quantity of land which any
citizen could possess to five hundred jugera, about three hundred
and fifty English acres. This law, however, though we read of its
having been executed upon one or two occasions, was either neglected
or evaded, and the inequality of fortunes went on continually
increasing. The greater part of the citizens had no land, and
without it the manners and customs of those times rendered it
difficult for a freeman to maintain his independency. In the present
time, though a poor man has no land of his own, if he has a little
stock he may either farm the lands of another, or he may carry on some
little retail trade; and if he has no stock, he may find employment
either as a country labourer or as an artificer. But among the ancient
Romans the lands of the rich were all cultivated by slaves, who
wrought under an overseer who was likewise a slave; so that a poor
freeman had little chance of being employed either as a farmer or as a
labourer. All trades and manufactures too, even the retail trade, were
carried on by the slaves of the rich for the benefit of their masters,
whose wealth, authority, and protection made it difficult for a poor
freeman to maintain the competition against them. The citizens,
therefore, who had no land, had scarce any other means of
subsistence but the bounties of the candidates at the annual
elections. The tribunes, when they had a mind to animate the people
against the rich and the great, put them in mind of the ancient
division of lands, and represented that law which restricted this sort
of private property as the fundamental law of the republic. The people
became clamorous to get land, and the rich and the great, we may
believe, were perfectly determined not to give them any part of
theirs. To satisfy them in some measure therefore, they frequently
proposed to send out a new colony. But conquering Rome was, even
upon such occasions, under no necessity of turning out her citizens to
seek their fortune, if one may say so, through the wide world, without
knowing where they were to settle. She assigned them lands generally
in the conquered provinces of Italy, where, being within the dominions
of the republic, they could never form an independent state; but
were at best but a sort of corporation, which, though it had the power
of enacting bye-laws for its own government, was at all times
subject to the correction, jurisdiction, and legislative authority
of the mother city. The sending out a colony of this kind not only
gave some satisfaction to the people, but often established a sort
of garrison, too, in a newly conquered province, of which the
obedience might otherwise have been doubtful. A Roman colony
therefore, whether we consider the nature of the establishment
itself or the motives for making it, was altogether different from a
Greek one. The words accordingly, which in the original languages
denote those different establishments, have very different meanings.
The Latin word (Colonia) signifies simply a plantation. The Greek word
apoikia, on the contrary, signifies a separation of dwelling, a
departure from home, a going out of the house. But, though the Roman
colonies were in many respects different from the Greek ones, the
interest which prompted to establish them was equally plain and
distinct. Both institutions derived their origin either from
irresistible necessity, or from clear and evident utility.

    The establishment of the European colonies in America and the West
Indies arose from no necessity: and though the utility which has
resulted from them has been very great, it is not altogether so
clear and evident. It was not understood at their first establishment,
and was not the motive either of that establishment or of the
discoveries which gave occasion to it, and the nature, extent, and
limits of that utility are not, perhaps, well understood at this day.

    The Venetians, during the fourteenth and fifteenth centuries,
carried on a very advantageous commerce in spiceries, and other East
India goods, which they distributed among the other nations of Europe.
They purchased them chiefly in Egypt, at that time under the
dominion of the Mamelukes, the enemies of the Turks, of whom the
Venetians were the enemies; and this union of interest, assisted by
the money of Venice, formed such a connection as gave the Venetians
almost a monopoly of the trade.

    The great profits of the Venetians tempted the avidity of the
Portuguese. They had been endeavouring, during the course of the
fifteenth century, to find out by sea a way to the countries from
which the Moors brought them ivory and gold dust across the desert.
They discovered the Madeiras, the Canaries, the Azores, the Cape de
Verde Islands, the coast of Guinea, that of Loango, Congo, Angola, and
Benguela, and, finally, the Cape of Good Hope. They had long wished to
share in the profitable traffic of the Venetians, and this last
discovery opened to them a probable prospect of doing so. In 1497,
Vasco de Gama sailed from the port of Lisbon with a fleet of four
ships, and after a navigation of eleven months arrived upon the
coast of Indostan, and thus completed a course of discoveries which
had been pursued with great steadiness, and with very little
interruption, for nearly a century together.

    Some years before this, while the expectations of Europe were in
suspense about the projects of the Portuguese, of which the success
appeared yet to be doubtful, a Genoese pilot formed the yet more
daring project of sailing to the East Indies by the West. The
situation of those countries was at that time very imperfectly known
in Europe. The few European travellers who had been there had
magnified the distance, perhaps through simplicity and ignorance, what
was really very great appearing almost infinite to those who could not
measure it; or, perhaps, in order to increase somewhat more the
marvellous of their own adventures in visiting regions so immensely
remote from Europe. The longer the way was by the East, Columbus
very justly concluded, the shorter it would be by the West. He
proposed, therefore, to take that way, as both the shortest and the
surest, and he had the good fortune to convince Isabella of Castile of
the probability of his project. He sailed from the port of Palos in
August 1492, nearly five years before the expedition of Vasco de
Gama set out from Portugal, and, after a voyage of between two and
three months, discovered first some of the small Bahamas or Lucayan
islands, and afterwards the great island of St. Domingo.

    But the countries which Columbus discovered, either in this or
in any of his subsequent voyages, had no resemblance to those which he
had gone in quest of. Instead of the wealth, cultivation, and
populousness of China and Indostan, he found, in St. Domingo, and in
all the other parts of the new world which he ever visited, nothing
but a country quite covered with wood, uncultivated, and inhabited
only by some tribes of naked and miserable savages. He was not very
willing, however, to believe that they were not the same with some
of the countries described by Marco Polo, the first European who had
visited, or at least had left behind him, any description of China
or the East Indies; and a very slight resemblance, such as that
which he found between the name of Cibao, a mountain in St. Domingo,
and that of Cipango mentioned by Marco Polo, was frequently sufficient
to make him return to this favourite prepossession, though contrary to
the clearest evidence. In his letters to Ferdinand and Isabella he
called the countries which he had discovered the Indies. He
entertained no doubt but that they were the extremity of those which
had been described by Marco Polo, and that they were not very
distant from the Ganges, or from the countries which had been
conquered by Alexander. Even when at last convinced that they were
different, he still flattered himself that those rich countries were
at no great distance, and, in a subsequent voyage, accordingly, went
in quest of them along the coast of Terra Firma, and towards the
Isthmus of Darien.

    In consequence of this mistake of Columbus, the name of the Indies
has stuck to those unfortunate countries ever since; and when it was
at last clearly discovered that the new were altogether different from
the old Indies, the former were called the West, in
contradistinction to the latter, which were called the East Indies.

    It was of importance to Columbus, however, that the countries
which he had discovered, whatever they were, should be represented
to the court of Spain as of very great consequence; and, in what
constitutes the real riches of every country, the animal and vegetable
productions of the soil, there was at that time nothing which could
well justify such a representation of them.

    The Cori, something between a rat and a rabbit, and supposed by
Mr. Buffon to be the same with the Aperea of Brazil, was the largest
viviparous quadruped in St. Domingo. This species seems never to
have been very numerous, and the dogs and cats of the Spaniards are
said to have long ago almost entirely extirpated it, as well as some
other tribes of a still smaller size. These, however, together with
a pretty large lizard, called the ivana, or iguana, constituted the
principal part of the animal food which the land afforded.

    The vegetable food of the inhabitants, though from their want of
industry not very abundant, was not altogether so scanty. It consisted
in Indian corn, yams, potatoes, bananas, etc., plants which were
then altogether unknown in Europe, and which have never since been
very much esteemed in it, or supposed to yield a sustenance equal to
what is drawn from the common sorts of grain and pulse, which have
been cultivated in this part of the world time out of mind.

    The cotton plant, indeed, afforded the material of a very
important manufacture, and was at that time to Europeans undoubtedly
the most valuable of all the vegetable productions of those islands.
But though in the end of the fifteenth century the muslins and other
cotton goods of the East Indies were much esteemed in every part of
Europe, the cotton manufacture itself was not cultivated in any part
of it. Even this production, therefore, could not at that time
appear in the eyes of Europeans to be of very great consequence.

    Finding nothing either in the animals or vegetables of the newly
discovered countries which could justify a very advantageous
representation of them, Columbus turned his view towards their
minerals; and in the richness of the productions of this third
kingdom, he flattered himself he had found a full compensation for the
insignificancy of those of the other two. The little bits of gold with
which the inhabitants ornamented their dress, and which, he was
informed, they frequently found in the rivulets and torrents that fell
from the mountains, were sufficient to satisfy him that those
mountains abounded with the richest gold mines. St. Domingo,
therefore, was represented as a country abounding with gold, and, upon
that account, (according to the prejudices not only of the present
time, but of those times) an inexhaustible source of real wealth to
the crown and kingdom of Spain. When Columbus, upon his return from
his first voyage, was introduced with a sort of triumphal honours to
the sovereigns of Castile and Arragon, the principal productions of
the countries which he had discovered were carried in solemn
procession before him. The only valuable part of them consisted in
some little fillets, bracelets, and other ornaments of gold, and in
some bales of cotton. The rest were mere objects of vulgar wonder
and curiosity; some reeds of an extraordinary size, some birds of a
very beautiful plumage, and some stuffed skins of the huge alligator
and manati; all of which were preceded by six or seven of the wretched
natives, whose singular colour and appearance added greatly to the
novelty of the show.

    In consequence of the representations of Columbus, the council
of Castile determined to take possession of countries of which the
inhabitants were plainly incapable of defending themselves. The
pious purpose of converting them to Christianity sanctified the
injustice of the project. But the hope of finding treasures of gold
there was the sole motive which prompted him to undertake it; and to
give this motive the greater weight, it was proposed by Columbus
that the half of all the gold and silver that should be found there
should belong to the crown. This proposal was approved of by the
council.

    As long as the whole or the far greater part of the gold, which
the first adventurers imported into Europe, was got by so very easy
a method as the plundering of the defenceless natives, it was not
perhaps very difficult to pay even this heavy tax. But when the
natives were once fairly stripped of all that they had, which, in
St. Domingo, and in all the other countries discovered by Columbus,
was done completely in six or eight years, and when in order to find
more it had become necessary to dig for it in the mines, there was
no longer any possibility of paying this tax. The rigorous exaction of
it, accordingly, first occasioned, it is said, the total abandoning of
the mines of St. Domingo, which have never been wrought since. It
was soon reduced therefore to a third; then to a fifth; afterwards
to a tenth; and at last to a twentieth part of the gross produce of
the gold mines. The tax upon silver continued for a long time to be
a fifth of the gross produce. It was reduced to a tenth only in the
course of the present century. But the first adventurers do not appear
to have been much interested about silver. Nothing less precious
than gold seemed worthy of their attention.

    All the other enterprises of the Spaniards in the new world,
subsequent to those of Columbus, seem to have been prompted by the
same motive. It was the sacred thirst of gold that carried Oieda,
Nicuessa, and Vasco Nugnes de Balboa, to the Isthmus of Darien, that
carried Cortez to Mexico, and Almagro and Pizzarro to Chili and
Peru. When those adventurers arrived upon any unknown coast, their
first inquiry was always if there was any gold to be found there;
and according to the information which they received concerning this
particular, they determined either to quit the country or to settle in
it.

    Of all those expensive and uncertain projects, however, which
bring bankruptcy upon the greater part of the people who engage in
them, there is none perhaps more ruinous than the search after new
silver and gold mines. It is perhaps the most disadvantageous
lottery in the world, or the one in which the gain of those who draw
the prizes bears the least proportion to the loss of those who draw
the blanks: for though the prizes are few and the blanks many, the
common price of a ticket is the whole fortune of a very rich man.
Projects of mining, instead of replacing the capital employed in them,
together with the ordinary profits of stock, commonly absorb both
capital and profit. They are the projects, therefore, to which of
all others a prudent lawgiver, who desired to increase the capital
of his nation, would least choose to give any extraordinary
encouragement, or to turn towards them a greater share of that capital
than that would go to them of its own accord. Such in reality is the
absurd confidence which almost all men have in their own good
fortune that, wherever there is the least probability of success,
too great a share of it is apt to go to them of its own accord.

    But though the judgment of sober reason and experience
concerning such projects has always been extremely unfavourable,
that of human avidity has commonly been quite otherwise. The same
passion which has suggested to so many people the absurd idea of the
philosopher's stone, has suggested to others the equally absurd one of
immense rich mines of gold and silver. They did not consider that
the value of those metals has, in all ages and nations, arisen chiefly
from their scarcity, and that their scarcity has arisen from the
very small quantities of them which nature has anywhere deposited in
one place, from the hard and intractable substances with which she has
almost everywhere surrounded those small quantities, and
consequently from the labour and expense which are everywhere
necessary in order to penetrate to and get at them. They flattered
themselves that veins of those metals might in many places be found as
large and as abundant as those which are commonly found of lead, or
copper, or tin, or iron. The dream of Sir Walter Raleigh concerning
the golden city and country of Eldorado, may satisfy us that even wise
men are not always exempt from such strange delusions. More than a
hundred years after the death of that great man, the Jesuit Gumila was
still convinced of the reality of that wonderful country, and
expressed with great warmth, and I dare to say with great sincerity,
how happy he should be to carry the light of the gospel to a people
who could so well reward the pious labours of their missionary.

    In the countries first discovered by the Spaniards, no gold or
silver mines are at present known which are supposed to be worth the
working. The quantities of those metals which the first adventurers
are said to have found there had probably been very much magnified, as
well as the fertility of the mines which were wrought immediately
after the first discovery. What those adventurers were reported to
have found, however, was sufficient to inflame the avidity of all
their countrymen. Every Spaniard who sailed to America expected to
find an Eldorado. Fortune, too, did upon this what she has done upon
very few other occasions. She realized in some measure the extravagant
hopes of her votaries, and in the discovery and conquest of Mexico and
Peru (of which the one happened about thirty, the other about forty
years after the first expedition of Columbus), she presented them with
something not very unlike that profusion of the precious metals
which they sought for.

    A project of commerce to the East Indies, therefore, gave occasion
to the first discovery of the West. A project of conquest gave
occasion to all the establishments of the Spaniards in those newly
discovered countries. The motive which excited them to this conquest
was a project of gold and silver mines; and a course of accidents,
which no human wisdom could foresee, rendered this project much more
successful than the undertakers had any reasonable grounds for
expecting.

    The first adventurers of all the other nations of Europe who
attempted to make settlements in America were animated by the like
chimerical views; but they were not equally successful. It was more
than a hundred years after the first settlement of the Brazils
before any silver, gold, or diamond mines were discovered there. In
the English, French, Dutch, and Danish colonies, none have ever yet
been discovered; at least none that are at present supposed to be
worth the working. The first English settlers in North America,
however, offered a fifth of all the gold and silver which should be
found there to the king, as a motive for granting them their
patents. In the patents to Sir Walter Raleigh, to the London and
Plymouth Companies, to the Council of Plymouth, etc., this fifth was
accordingly reserved to the crown. To the expectation of finding
gold and silver mines, those first settlers, too, joined that of
discovering a northwest passage to the East Indies. They have hitherto
been disappointed in both.

                           PART 2

            Causes of Prosperity of New Colonies

    THE colony of a civilised nation which takes possession either
of a waste country, or of one so thinly inhabited that the natives
easily give place to the new settlers, advances more rapidly to wealth
and greatness than any other human society.

    The colonists carry out with them a knowledge of agriculture and
of other useful arts superior to what can grow up of its own accord in
the course of many centuries among savage and barbarous nations.
They carry out with them, too, the habit of subordination, some notion
of the regular government which takes place in their own country, of
the system of laws which support it, and of a regular administration
of justice; and they naturally establish something of the same kind in
the new settlement. But among savage and barbarous nations, the
natural progress of law and government is still slower than the
natural progress of arts, after law and government have been go far
established as is necessary for their protection. Every colonist
gets more land than he can possibly cultivate. He has no rent, and
scarce any taxes to pay. No landlord shares with him in its produce,
and the share of the sovereign is commonly but a trifle. He has
every motive to render as great as possible a produce, which is thus
to be almost entirely his own. But his land is commonly so extensive
that, with all his own industry, and with all the industry of other
people whom he can get to employ, he can seldom make it produce the
tenth part of what it is capable of producing. He is eager, therefore,
to collect labourers from all quarters, and to reward them with the
most liberal wages. But those liberal wages, joined to the plenty
and cheapness of land, soon make those labourers leave him, in order
to become landlords themselves, and to reward, with equal
liberality, other labourers, who soon leave them for the same reason
that they left their first master. The liberal reward of labour
encourages marriage. The children, during the tender years of infancy,
are well fed and properly taken care of, and when they are grown up,
the value of their labour greatly overpays their maintenance. When
arrived at maturity, the high price of labour, and the low price of
land, enable them to establish themselves in the same manner as
their fathers did before them.

    In other countries, rent and profit eat up wages, and the two
superior orders of people oppress the inferior one. But in new
colonies the interest of the two superior orders obliges them to treat
the inferior one with more generosity and humanity; at least where
that inferior one is not in a state of slavery. Waste lands of the
greatest natural fertility are to be had for a trifle. The increase of
revenue which the proprietor, who is always the undertaker, expects
from their improvement, constitutes his profit which in these
circumstances is commonly very great. But this great profit cannot
be made without employing the labour of other people in clearing and
cultivating the land; and the disproportion between the great extent
of the land and the small number of the people, which commonly takes
place in new colonies, makes it difficult for him to get this
labour. He does not, therefore, dispute about wages, but is willing to
employ labour at any price. The high wages of labour encourage
population. The cheapness and plenty of good land encourage
improvement, and enable the proprietor to pay those high wages. In
those wages consists almost the whole price of the land; and though
they are high considered as the wages of labour, they are low
considered as the price of what is so very valuable. What encourages
the progress of population and improvement encourages that of real
wealth and greatness.

    The progress of many of the ancient Greek colonies towards
wealth and greatness seems accordingly to have been very rapid. In the
course of a century or two, several of them appear to have rivalled,
and even to have surpassed their mother cities. Syracuse and
Agrigentum in Sicily, Tarentum and Locri in Italy, Ephesus and Miletus
in Lesser Asia, appear by all accounts to have been at least equal
to any of the cities of ancient Greece. Though posterior in their
establishment, yet all the arts of refinement, philosophy, poetry, and
eloquence seem to have been cultivated as early, and to have been
improved as highly in them as in any part of the mother country. The
schools of the two oldest Greek philosophers, those of Thales and
Pythagoras, were established, it is remarkable, not in ancient Greece,
but the one in an Asiatic, the other in an Italian colony. All those
colonies had established themselves in countries inhabited by savage
and barbarous nations, who easily gave place to the new settlers. They
had plenty of good land, and as they were altogether independent of
the mother city, they were at liberty to manage their own affairs in
the way that they judged was most suitable to their own interest.

    The history of the Roman colonies is by no means so brilliant.
Some of them, indeed, such as Florence, have in the course of many
ages, and after the fall of the mother city, grown up to be
considerable states. But the progress of no one of them seems ever
to have been very rapid. They were all established in conquered
provinces, which in most cases had been fully inhabited before. The
quantity of land assigned to each colonist was seldom very
considerable, and as the colony was not independent, they were not
always at liberty to manage their own affairs in the way they judged
was most suitable to their own interest.

    In the plenty of good land, the European colonies established in
America and the West Indies resemble, and even greatly surpass,
those of ancient Greece. In their dependency upon the mother state,
they resemble those of ancient Rome; but their great distance from
Europe has in all of them alleviated more or less the effects of
this dependency. Their situation has placed them less in the view
and less in the power of their mother country. In pursuing their
interest their own way, their conduct has, upon many occasions, been
overlooked, either because not known or not understood in Europe;
and upon some occasions it has been fairly suffered and submitted
to, because their distance rendered it difficult to restrain it.
Even the violent and arbitrary government of Spain has, upon many
occasions, been obliged to recall or soften the orders which had
been given for the government of her colonies for fear of a general
insurrection. The progress of all the European colonies in wealth,
population, and improvement, has accordingly been very great.

    The crown of Spain, by its share of the gold and silver, derived
some revenue from its colonies from the moment of their first
establishment. It was a revenue, too, of a nature to excite in human
avidity the most extravagant expectations of still greater riches. The
Spanish colonies, therefore, from the moment of their first
establishment, attracted very much the attention of their mother
country, while those of the other European nations were for a long
time in a great measure neglected. The former did not, perhaps, thrive
the better in consequence of this attention; nor the latter the
worse in consequence of this neglect. In proportion to the extent of
the country which they in some measure possess, the Spanish colonies
are considered as less populous and thriving than those of almost
any other European nation. The progress even of the Spanish
colonies, however, in population and improvement, has certainly been
very rapid and very great. The city of Lima, founded since the
conquest, is represented by Ulloa as containing fifty thousand
inhabitants near thirty years ago. Quito, which had been but a
miserable hamlet of Indians, is represented by the same author as in
his time equally populous. Gemelli Carreri, a pretended traveller,
it is said, indeed, but who seems everywhere to have written upon
extremely good information, represents the city of Mexico as
containing a hundred thousand inhabitants; a number which, in spite of
all the exaggerations of the Spanish writers, is, probably, more
than five times greater than what it contained in the time of
Montezuma. These numbers exceed greatly those of Boston, New York, and
Philadelphia, the three greatest cities of the English colonies.
Before the conquest of the Spaniards there were no cattle fit for
draught either in Mexico or Peru. The llama was their only beast of
burden, and its strength seems to have been a good deal inferior to
that of a common ass. The plough was unknown among them. They were
ignorant of the use of iron. They had no coined money, nor any
established instrument of commerce of any kind. Their commerce was
carried on by barter. A sort of wooden spade was their principal
instrument of agriculture. Sharp stones served them for knives and
hatchets to cut with; fish bones and the hard sinews of certain
animals served them for needles to sew with; and these seem to have
been their principal instruments of trade. In this state of things, it
seems impossible that either of those empires could have been so
much improved or so well cultivated as at present, when they are
plentifully furnished with all sorts of European cattle, and when
the use of iron, of the plough, and of many of the arts of Europe, has
been introduced among them. But the populousness of every country must
be in proportion to the degree of its improvement and cultivation.
In spite of the cruel destruction of the natives which followed the
conquest, these two great empires are, probably, more populous now
than they ever were before: and the people are surely very
different; for we must acknowledge, I apprehend, that the Spanish
creoles are in many respects superior to the ancient Indians.

    After the settlements of the Spaniards, that of the Portuguese
in Brazil is the oldest of any European nation in America. But as
for a long time after the first discovery neither gold nor silver
mines were found in it, and as it afforded, upon that account,
little or no revenue to the crown, it was for a long time in a great
measure neglected; and during this state of neglect it grew up to be a
great and powerful colony. While Portugal was under the dominion of
Spain, Brazil was attacked by the Dutch, who got possession of seven
of the fourteen provinces into which it is divided. They expected soon
to conquer the other seven, when Portugal recovered its independency
by the elevation of the family of Braganza to the throne. The Dutch
then, as enemies to the Spaniards, became friends to the Portuguese,
who were likewise the enemies of the Spaniards. They agreed,
therefore, to leave that part of Brazil, which they had not conquered,
to the King of Portugal, who agreed to leave that part which they
had conquered to them, as a matter not worth disputing about with such
good allies. But the Dutch government soon began to oppress the
Portuguese colonists, who, instead of amusing themselves with
complaints, took arms against their new masters, and by their own
valour and resolution, with the connivance, indeed, but without any
avowed assistance from the mother country, drove them out of Brazil.
The Dutch, therefore, finding it impossible to keep any part of the
country to themselves, were contented that it should be entirely
restored to the crown of Portugal. In this colony there are said to be
more than six hundred thousand people, either Portuguese or
descended from Portuguese, creoles, mulattoes, and a mixed race
between Portuguese and Brazilians. No one colony in America is
supposed to contain so great a number of people of European
extraction.

    Towards the end of the fifteenth, and during the greater part of
the sixteenth century, Spain and Portugal were the two great naval
powers upon the ocean; for though the commerce of Venice extended to
every part of Europe, its fleets had scarce ever sailed beyond the
Mediterranean. The Spaniards, in virtue of the first discovery,
claimed all America as their own; and though they could not hinder
so great a naval power as that of Portugal from settling in Brazil,
such was, at that time, the terror of their name, that the greater
part of the other nations of Europe were afraid to establish
themselves in any other part of that great continent. The French,
who attempted to settle in Florida, were all murdered by the
Spaniards. But the declension of the naval power of this latter
nation, in consequence of the defeat or miscarriage of what they
called their Invincible Armada, which happened towards the end of
the sixteenth century, put it out of their power to obstruct any
longer the settlements of the other European nations. In the course of
the seventeenth century, therefore, the English, French, Dutch, Danes,
and Swedes, all the great nations who had any ports upon the ocean,
attempted to make some settlements in the new world.

    The Swedes established themselves in New Jersey; and the number of
Swedish families still to be found there sufficiently demonstrates
that this colony was very likely to prosper had it been protected by
the mother country. But being neglected by Sweden, it was soon
swallowed up by the Dutch colony of New York, which again, in 1674,
fell under the dominion of the English.

    The small islands of St. Thomas and Santa Cruz are the only
countries in the new world that have ever been possessed By the Danes.
These little settlements, too, were under the government of an
exclusive company, which had the sole right, both of purchasing the
surplus produce of the colonists, and of supplying them with such
goods of other countries as they wanted, and which, therefore, both in
its purchases and sales, had not only the power of oppressing them,
but the greatest temptation to do so. The government of an exclusive
company of merchants is, perhaps, the worst of all governments for any
country whatever. It was not, however, able to stop altogether the
progress of these colonies, though it rendered it more slow and
languid. The late King of Denmark dissolved this company, and since
that time the prosperity of these colonies has been very great.

    The Dutch settlements in the West, as well as those in the East
Indies, were originally put under the government of an exclusive
company. The progress of some of them, therefore, though it has been
considerable, in comparison with that of almost any country that has
been long peopled and established, has been languid and slow in
comparison with that of the greater part of new colonies. The colony
of Surinam, though very considerable, is still inferior to the greater
part of the sugar colonies of the other European nations. The colony
of Nova Belgia, now divided into the two provinces of New York and New
Jersey, would probably have soon become considerable too, even
though it had remained under the government of the Dutch. The plenty
and cheapness of good land are such powerful causes of prosperity that
the very worst government is scarce capable of checking altogether the
efficacy of their operation. The great distance, too, from the
mother country would enable the colonists to evade more or less, by
smuggling, the monopoly which the company enjoyed against them. At
present the company allows all Dutch ships to trade to Surinam upon
paying two and a half per cent upon the value of their cargo for a
licence; and only reserves to itself exclusively the direct trade from
Africa to America, which consists almost entirely in the slave
trade. This relaxation in the exclusive privileges of the company is
probably the principal cause of that degree of prosperity which that
colony at present enjoys. Curacoa and Eustatia, the two principal
islands belonging to the Dutch, are free ports open to the ships of
all nations; and this freedom, in the midst of better colonies whose
ports are open to those of one nation only, has been the great cause
of the prosperity of those two barren islands.

    The French colony of Canada was, during the greater part of the
last century, and some part of the present, under the government of an
exclusive company. Under so unfavourable an administration its
progress was necessarily very slow in comparison with that of other
new colonies; but it became much more rapid when this company was
dissolved after the fall of what is called the Mississippi scheme.
When the English got possession of this country, they found in it near
double the number of inhabitants which Father Charlevoix had
assigned to it between twenty and thirty years before. That Jesuit had
travelled over the whole country, and had no inclination to
represent it as less considerable than it really was.

    The French colony of St. Domingo was established by pirates and
freebooters, who, for a long time, neither required the protection,
nor acknowledged the authority of France; and when that race of
banditti became so far citizens as to acknowledge this authority, it
was for a long time necessary to exercise it with very great
gentleness. During this period the population and improvement of
this colony increased very fast. Even the oppression of the
exclusive company, to which it was for some time subjected, with all
the other colonies of France, though it no doubt retarded, had not
been able to stop its progress altogether. The course of its
prosperity returned as soon as it was relieved from that oppression.
It is now the most important of the sugar colonies of the West Indies,
and its produce is said to be greater than that of all the English
sugar colonies put together. The other sugar colonies of France are in
general all very thriving.

    But there are no colonies of which the progress has been more
rapid than that of the English in North America.

    Plenty of good land, and liberty to manage their own affairs their
own way, seem to be the two great causes of the prosperity of all
new colonies.

    In the plenty of good land the English colonies of North
America, though no doubt very abundantly provided, are however
inferior to those of the Spaniards and Portuguese, and not superior to
some of those possessed by the French before the late war. But the
political institutions of the English colonies have been more
favourable to the improvement and cultivation of this land than
those of any of the other three nations.

    First, the engrossing of uncultivated land, though it has by no
means been prevented altogether, has been more restrained in the
English colonies than in any other. The colony law which imposes
upon every proprietor the obligation of improving and cultivating,
within a limited time, a certain proportion of his lands, and which in
case of failure, declares those neglected lands grantable to any other
person, though it has not, perhaps, been very strictly executed,
has, however, had some effect.

    Secondly, in Pennsylvania there is no right of primogeniture,
and lands, like movables, are divided equally among all the children
of the family. In three of the provinces of New England the oldest has
only a double share, as in the Mosaical law. Though in those
provinces, therefore, too great a quantity of land should sometimes be
engrossed by a particular individual, it is likely, in the course of a
generation or two, to be sufficiently divided again. In the other
English colonies, indeed, the right of primogeniture takes place, as
in the law of England. But in all the English colonies the tenure of
the lands, which are all held by free socage, facilitates
alienation, and the grantee of any extensive tract of land generally
finds it for his interest to alienate, as fast as he can, the
greater part of it, reserving only a small quit-rent. In the Spanish
and Portuguese colonies, what is called the right of Majorazzo takes
place in the succession of all those great estates to which any
title of honour is annexed. Such estates go all to one person, and are
in effect entailed and unalienable. The French colonies, indeed, are
subject to the custom of Paris, which, in the inheritance of land,
is much more favourable to the younger children than the law of
England. But in the French colonies, if any part of an estate, held by
the noble tenure of chivalry and homage, is alienated, it is, for a
limited time, subject to the right of redemption, either by the heir
of the superior or by the heir of the family; and all the largest
estates of the country are held by such noble tenures, which
necessarily embarrass alienation. But in a new colony a great
uncultivated estate is likely to be much more speedily divided by
alienation than by succession. The plenty and cheapness of good
land, it has already been observed, are the principal causes of the
rapid prosperity of new colonies. The engrossing of land, in effect,
destroys this plenty and cheapness. The engrossing of uncultivated
land, besides, is the greatest obstruction to its improvement. But the
labour that is employed in the improvement and cultivation of land
affords the greatest and most valuable produce to the society. The
produce of labour, in this case, pays not only its own wages, and
the profit of the stock which employs it, but the rent of the land too
upon which it is employed. The labour of the English colonists,
therefore, being more employed in the improvement and cultivation of
land, is likely to afford a greater and more valuable produce than
that of any of the other three nations, which, by the engrossing of
land, is more or less diverted towards other employments.

    Thirdly, the labour of the English colonists is not only likely to
afford a greater and more valuable produce, but, in consequence of the
moderation of their taxes, a greater proportion of this produce
belongs to themselves, which they may store up and employ in putting
into motion a still greater quantity of labour. The English
colonists have never yet contributed anything towards the defence of
the mother country, or towards the support of its civil government.
They themselves, on the contrary, have hitherto been defended almost
entirely at the expense of the mother country. But the expense of
fleets and armies is out of all proportion greater than the
necessary expense of civil government. The expense of their own
civil government has always been very moderate. It has generally
been confined to what was necessary for paying competent salaries to
the governor, to the judges, and to some other officers of police, and
for maintaining a few of the most useful public works. The expense
of the civil establishment of Massachusetts Bay, before the
commencement of the present disturbances, used to be but about L18,000
a year. That of New Hampshire and Rhode Island, L3500 each. That of
Connecticut, L4000. That of New York and Pennsylvania, L4500 each.
That of New Jersey, L1200. That of Virginia and South Carolina,
L8000 each. The civil establishments of Nova Scotia and Georgia are
partly supported by an annual grant of Parliament. But Nova Scotia
pays, besides, about L7000 a year towards the public expenses of the
colony; and Georgia about L2500 a year. All the different civil
establishments in North America, in short, exclusive of those of
Maryland and North Carolina, of which no exact account has been got,
did not, before the commencement of the present disturbances, cost the
inhabitants above L64,700 a year; an ever-memorable example at how
small an expense three millions of people may not only be governed,
but well governed. The most important part of the expense of
government, indeed, that of defence and protection, has constantly
fallen upon the mother country. The ceremonial, too, of the civil
government in the colonies, upon the reception of a new governor, upon
the opening of a new assembly, etc., though sufficiently decent, is
not accompanied with any expensive pomp or parade. Their
ecclesiastical government is conducted upon a plan equally frugal.
Tithes are unknown among them; and their clergy, who are far from
being numerous, are maintained either by moderate stipends, or by
the voluntary contributions of the people. The power of Spain and
Portugal, on the contrary, derives some support from the taxes
levied upon their colonies. France, indeed, has never drawn any
considerable revenue from its colonies, the taxes which it levies upon
them being generally spent among them. But the colony government of
all these three nations is conducted upon a much more expensive
ceremonial. The sums spent upon the reception of a new viceroy of
Peru, for example, have frequently been enormous. Such ceremonials are
not only real taxes paid by the rich colonists upon those particular
occasions, but they serve to introduce among them the habit of
vanity and expense upon all other occasions. They are not only very
grievous occasional taxes, but they contribute to establish
perpetual taxes of the same kind still more grievous; the ruinous
taxes of private luxury and extravagance. In the colonies of all those
three nations too, the ecclesiastical government is extremely
oppressive. Tithes take place in all of them, and are levied with
the utmost rigour in those of Spain and Portugal. All of them,
besides, are oppressed with a numerous race of mendicant friars, whose
beggary being not only licensed but consecrated by religion, is a most
grievous tax upon the poor people, who are most carefully taught
that it is a duty to give, and a very great sin to refuse them their
charity. Over and above all this, the clergy are, in all of them,
the greatest engrossers of land.

    Fourthly, in the disposal of their surplus produce, or of what
is over and above their own consumption, the English colonies have
been more favoured, and have been allowed a more extensive market,
than those of any other European nation. Every European nation has
endeavoured more or less to monopolise to itself the commerce of its
colonies, and, upon that account, has prohibited the ships of
foreign nations from trading to them, and has prohibited them from
importing European goods from any foreign nation. But the manner in
which this monopoly has been exercised in different nations has been
very different.

    Some nations have given up the whole commerce of their colonies to
an exclusive company, of whom the colonists were obliged to buy all
such European goods as they wanted, and to whom they were obliged to
sell the whole of their own surplus produce. It was the interest of
the company, therefore, not only to sell the former as dear, and to
buy the latter as cheap as possible, but to buy no more of the latter,
even at this low price than what they could dispose of for a very high
price in Europe. It was their interest, not only to degrade in all
cases the value of the surplus produce of the colony, but in many
cases to discourage and keep down the natural increase of its
quantity. Of all the expedients that can well be contrived to stunt
the natural growth of a new colony, that of an exclusive company is
undoubtedly the most effectual. This, however, has been the policy
of Holland, though their company, in the course of the present
century, has given up in many respects the exertion of their exclusive
privilege. This, too, was the policy of Denmark till the reign of
the late king. It has occasionally been the policy of France, and of
late, since 1755, after it had been abandoned by all other nations
on account of its absurdity, it has become the policy of Portugal with
regard at least to two of the principal provinces of Brazil,
Fernambuco and Marannon.

    Other nations, without establishing an exclusive company, have
confined the whole commerce of their colonies to a particular port
of the mother country, from whence no ship was allowed to sail, but
either in a fleet and at a particular season, or, if single, in
consequence of a particular licence, which in most cases was very well
paid for. This policy opened, indeed, the trade of the colonies to all
the natives of the mother country, provided they traded from the
proper port, at the proper season, and in the proper vessels. But as
all the different merchants, who joined their stocks in order to fit
out those licensed vessels, would find it for their interest to act in
concert, the trade which was carried on in this manner would
necessarily be conducted very nearly upon the same principles as
that of an exclusive company. The profit of those merchants would be
almost equally exorbitant and oppressive. The colonies would be ill
supplied, and would be obliged both to buy very dear, and to sell very
cheap. This, however, till within these few years, had always been the
policy of Spain, and the price of all European goods, accordingly,
is said to have been enormous in the Spanish West Indies. At Quito, we
are told by Ulloa, a pound of iron sold for about four and sixpence,
and a pound of steel for about six and ninepence sterling. But it is
chiefly in order to purchase European goods that the colonies part
with their own produce. The more, therefore, they pay for the one, the
less they really get for the other, and the dearness of the one is the
same thing with the cheapness of the other. The policy of Portugal
is in this respect the same as the ancient policy of Spain with regard
to all its colonies, except Fernambuco and Marannon, and with regard
to these it has lately adopted a still worse.

    Other nations leave the trade of their colonies free to all
their subjects who may carry it on from all the different ports of the
mother country, and who have occasion for no other licence than the
common despatches of the custom-house. In this case the number and
dispersed situation of the different traders renders it impossible for
them to enter into any general combination, and their competition is
sufficient to hinder them from making very exorbitant profits. Under
so liberal a policy the colonies are enabled both to sell their own
produce and to buy the goods of Europe at a reasonable price. But
since the dissolution of the Plymouth Company, when our colonies
were but in their infancy, this has always been the policy of England.
It has generally, too, been that of France, and has been uniformly
so since the dissolution of what, in England, is commonly called their
Mississippi Company. The profits of the trade, therefore, which France
and England carry on with their colonies, though no doubt somewhat
higher than if the competition was free to all other nations, are,
however, by no means exorbitant; and the price of European goods
accordingly is not extravagantly high in the greater part of the
colonies of either of those nations.

    In the exportation of their own surplus produce too, it is only
with regard to certain commodities that the colonies of Great
Britain are confined to the market of the mother country. These
commodities having been enumerated in the Act of Navigation and in
some other subsequent acts, have upon that account been called
enumerated commodities. The rest are called non-enumerated, and may be
exported directly to other countries provided it is in British or
Plantation ships, of which the owners and three-fourths of the
mariners are British subjects.

    Among the non-enumerated commodities are some of the most
important productions of America and the West Indies; grain of all
sorts, lumber, salt provisions, fish, sugar and rum.

    Grain is naturally the first and principal object of the culture
of all new colonies. By allowing them a very extensive market for
it, the law encourages them to extend this culture much beyond the
consumption of a thinly inhabited country, and thus to provide
beforehand an ample subsistence for a continually increasing
population.

    In a country quite covered with wood, where timber consequently is
of little or no value, the expense of clearing the ground is the
principal obstacle to improvement. By allowing the colonies a very
extensive market for their lumber, the law endeavours to facilitate
improvement by raising the price of a commodity which would
otherwise be of little value, and thereby enabling them to make some
profit of what would otherwise be a mere expense.

    In a country neither half-peopled nor half-cultivated, cattle
naturally multiply beyond the consumption of the inhabitants, and
are often upon that account of little or no value. But it is
necessary, it has already been shown, that the price of cattle
should bear a certain proportion to that of corn before the greater
part of the lands of any country can be improved. By allowing to
American cattle, in all shapes, dead or alive, a very extensive
market, the law endeavors to raise the value of a commodity of which
the high price is so very essential to improvement. The good effects
of this liberty, however, must be somewhat diminished by the 4th of
George III, c. 15, which puts hides and skins among the enumerated
commodities, and thereby tends to reduce the value of American cattle.

    To increase the shipping and naval power of Great Britain, by
the extension of the fisheries of our colonies, is an object which the
legislature seems to have had almost constantly in view. Those
fisheries, upon this account, have had all the encouragement which
freedom can give them, and they have flourished accordingly. The New
England fishery in particular was, before the late disturbances, one
of the most important, perhaps, in the world. The whale-fishery which,
notwithstanding an extravagant bounty, is in Great Britain carried
on to so little purpose that in the opinion of many people (which I do
not, however, pretend to warrant) the whole produce does not much
exceed the value of the bounties which are annually paid for it, is in
New England carried on without any bounty to a very great extent. Fish
is one of the principal articles with which the North Americans
trade to Spain, Portugal, and the Mediterranean.

    Sugar was originally an enumerated commodity which could be
exported only to Great Britain. But in 1731, upon a representation
of the sugar-planters, its exportation was permitted to all parts of
the world. The restrictions, however, with which this liberty was
granted, joined to the high price of sugar in Great Britain, have
rendered it, in a great measure, ineffectual. Great Britain and her
colonies still continue to be almost the sole market for all the sugar
produced in the British plantations. Their consumption increases so
fast that, though in consequence of the increasing improvement of
Jamaica, as well as of the Ceded Islands, the importation of sugar has
increased very greatly within these twenty years, the exportation to
foreign countries is said to be not much greater than before.

    Rum is a very important article in the trade which the Americans
carry on to the coast of Africa, from which they bring back negro
slaves in return.

    If the whole surplus produce of America in grain of all sorts,
in salt provisions and in fish, had been put into the enumeration, and
thereby forced into the market of Great Britain, it would have
interfered too much with the produce of the industry of our own
people. It was probably not so much from any regard to the interest of
America as from a jealousy of this interference that those important
commodities have not only been kept out of the enumeration, but that
the importation into Great Britain of all grain, except rice, and of
salt provisions, has, in the ordinary state of the law, been
prohibited.

    The non-enumerated commodities could originally be exported to all
parts of the world. Lumber and rice, having been once put into the
enumeration, when they were afterwards taken out of it, were confined,
as to the European market, to the countries that lie south of Cape
Finisterre. By the 6th of George III, c. 52, all non-enumerated
commodities were subjected to the like restriction. The parts of
Europe which lie south of Cape Finisterre are not manufacturing
countries, and we were less jealous of the colony ships carrying
home from them any manufactures which could interfere with our own.

    The enumerated commodities are of two sorts: first, such as are
either the peculiar produce of America, or as cannot be produced, or
at least are not produced, in the mother country. Of this kind are
molasses, coffee, cocoa-nuts, tobacco, pimento, ginger, whalefins, raw
silk, cotton-wool, beaver, and other peltry of America, indigo,
fustic, and other dyeing woods; secondly, such as are not the peculiar
produce of America, but which are and may be produced in the mother
country, though not in such quantities as to supply the greater part
of her demand, which is principally supplied from foreign countries.
Of this kind are all naval stores, masts, yards, and bowsprits, tar,
pitch, and turpentine, pig and bar iron, copper ore, hides and
skins, pot and pearl ashes. The largest importation of commodities
of the first kind could not discourage the growth or interfere with
the sale of any part of the produce of the mother country. By
confining them to the home market, our merchants, it was expected,
would not only be enabled to buy them cheaper in the plantations,
and consequently to sell them with a better profit at home, but to
establish between the plantations and foreign countries an
advantageous carrying trade, of which Great Britain was necessarily to
be the centre or emporium, as the European country into which those
commodities were first to be imported. The importation of
commodities of the second kind might be so managed too, it was
supposed, as to interfere, not with the sale of those of the same kind
which were produced at home, but with that of those which were
imported from foreign countries; because, by means of proper duties,
they might be rendered always somewhat dearer than the former, and yet
a good deal cheaper than the latter. By confining such commodities
to the home market, therefore, it was proposed to discourage the
produce, not of Great Britain, but of some foreign countries with
which the balance of trade was believed to be unfavourable to Great
Britain.

    The prohibition of exporting from the colonies, to any other
country but Great Britain, masts, yards, and bowsprits, tar, pitch,
and turpentine, naturally tended to lower the price of timber in the
colonies, and consequently to increase the expense of clearing their
lands, the principal obstacle to their improvement. But about the
beginning of the present century, in 1703, the pitch and tar company
of Sweden endeavoured to raise the price of their commodities to Great
Britain, by prohibiting their exportation, except in their own
ships, at their own price, and in such quantities as they thought
proper. In order to counteract this notable piece of mercantile
policy, and to render herself as much as possible independent, not
only of Sweden, but of all the other northern powers, Great Britain
gave a bounty upon the importation of naval stores from America, and
the effect of this bounty was to raise the price of timber in
America much more than the confinement to the home market could
lower it; and as both regulations were enacted at the same time, their
joint effect was rather to encourage than to discourage the clearing
of land in America.

    Though pig and bar iron too have been put among the enumerated
commodities, yet as, when imported from America, they were exempted
from considerable duties to which they are subject when imported
from any other country, the one part of the regulation contributes
more to encourage the erection of furnaces in America than the other
to discourage it. There is no manufacture which occasions so great a
consumption of wood as a furnace, or which can contribute so much to
the clearing of a country overgrown with it.

    The tendency of some of these regulations to raise the value of
timber in America, and thereby to facilitate the clearing of the land,
was neither, perhaps, intended nor understood by the legislature.
Though their beneficial effects, however, have been in this respect
accidental, they have not upon that account been less real.

    The most perfect freedom of trade is permitted between the British
colonies of America and the West Indies, both in the enumerated and in
the non-enumerated commodities. Those colonies are now become so
populous and thriving that each of them finds in some of the others
a great and extensive market for every part of its produce. All of
them taken together, they make a great internal market for the produce
of one another.

    The liberality of England, however, towards the trade of her
colonies has been confined chiefly to what concerns the market for
their produce, either in its rude state, or in what may be called
the very first stage of manufacture. The more advanced or more refined
manufactures even of the colony produce, the merchants and
manufacturers of Great Britain choose to reserve to themselves, and
have prevailed upon the legislature to prevent their establishment
in the colonies, sometimes by high duties, and sometimes by absolute
prohibitions.

    While, for example, Muskovado sugars from the British
plantations pay upon importation only 6s. 4d. the hundredweight; white
sugars pay L1 1s. 1d.; and refined, either double or single, in loaves
L4 2s. 5 8/20d. When those high duties were imposed, Great Britain was
the sole, and she still continues to be the principal market to
which the sugars of the British colonies could be exported. They
amounted, therefore, to a prohibition, at first of claying or refining
sugar for any foreign market, and at present of claying or refining it
for the market, which takes off, perhaps, more than nine-tenths of the
whole produce. The manufacture of claying or refining sugar
accordingly, though it has flourished in all the sugar colonies of
France, has been little cultivated in any of those of England except
for the market of the colonies themselves. While Grenada was in the
hands of the French there was a refinery of sugar, by claying at
least, upon almost every plantation. Since it fell into those of the
English, almost all works of this kind have been given tip, and
there are at present, October 1773, I am assured not above two or
three remaining in the island. At present, however, by an indulgence
of the custom-house, clayed or refined sugar, if reduced from loaves
into powder, is commonly imported as Muskovado.

    While Great Britain encourages in America the manufactures of
pig and bar iron, by exempting them from duties to which the like
commodities are subject when imported from any other country, she
imposes an absolute prohibition upon the erection of steel furnaces
and slitmills in any of her American plantations. She will not
suffer her colonists to work in those more refined manufactures even
for their own consumption; but insists upon their purchasing of her
merchants and manufacturers all goods of this kind which they have
occasion for.

    She prohibits the exportation from one province to another by
water, and even the carriage by land upon horseback or in a cart, of
hats, of wools and woollen goods, of the produce of America; a
regulation which effectually prevents the establishment of any
manufacture of such commodities for distant sale, and confines the
industry of her colonists in this way to such coarse and household
manufactures as a private family commonly makes for its own use or for
that of some of its neighbours in the same province.

    To prohibit a great people, however, from making all that they can
of every part of their own produce, or from employing their stock
and industry in the way that they judge most advantageous to
themselves, is a manifest violation of the most sacred rights of
mankind. Unjust, however, as such prohibitions may be, they have not
hitherto been very hurtful to the colonies. Land is still so cheap,
and, consequently, labour so dear among them, that they can import
from the mother country almost all the more refined or more advanced
manufactures cheaper than they could make for themselves. Though
they had not, therefore, been prohibited from establishing such
manufactures, yet in their present state of improvement a regard to
their own interest would, probably, have prevented them from doing so.
In their present state of improvement those prohibitions, perhaps,
without cramping their industry, or restraining it from any employment
to which it would have gone of its own accord, are only impertinent
badges of slavery imposed upon them, without any sufficient reason, by
the groundless jealousy of the merchants and manufacturers of the
mother country. In a more advanced state they might be really
oppressive and insupportable.

    Great Britain too, as she confines to her own market some of the
most important productions of the colonies, so in compensation she
gives to some of them an advantage in that market, sometimes by
imposing higher duties upon the like productions when imported from
other countries, and sometimes by giving bounties upon their
importation from the colonies. In the first way she gives an advantage
in the home market to the sugar, tobacco, and iron of her own
colonies, and in the second to their raw silk, to their hemp and flax,
to their indigo, to their naval stores, and to their building
timber. This second way of encouraging the colony produce by
bounties upon importation, is, so far as I have been able to learn,
peculiar to Great Britain. The first is not. Portugal does not content
herself with imposing higher duties upon the importation of tobacco
from any other country, but prohibits it under the severest penalties.

    With regard to the importation of goods from Europe, England has
likewise dealt more liberally with her colonies than any other nation.

    Great Britain allows a part, almost always the half, generally a
larger portion, and sometimes the whole of the duty which is paid upon
the importation of foreign goods, to be drawn back upon their
exportation to any foreign country. No independent foreign country, it
was easy to foresee, would receive them if they came to it loaded with
the heavy duties to which almost all foreign goods are subjected on
their importation into Great Britain. Unless, therefore, some part
of those duties was drawn back upon exportation, there was an end of
the carrying trade; a trade so much favoured by the mercantile system.

    Our colonies, however, are by no means independent foreign
countries; and Great Britain having assumed to herself the exclusive
right of supplying them with all goods from Europe, might have
forced them (in the same manner as other countries have done their
colonies) to receive such goods, loaded with all the same duties which
they paid in the mother country. But, on the contrary, till 1763,
the same drawbacks were paid upon the exportation of the greater
part of foreign goods to our colonies as to any independent foreign
country. In 1763, indeed, by the 4th of George III, c. 15, this
indulgence was a good deal abated, and it was enacted, "That no part
of the duty called the Old Subsidy should be drawn back for any
goods of the growth, production, or manufacture of Europe or the
East Indies, which should be exported from this kingdom to any British
colony or plantation in America; wines, white calicoes and muslins
excepted." Before this law, many different sorts of foreign goods
might have been bought cheaper in the plantations than in the mother
country; and some may still.

    Of the greater part of the regulations concerning the colony
trade, the merchants who carry it on, it must be observed, have been
the principal advisers. We must not wonder, therefore, if, in the
greater part of them, their interest has been more considered than
either that of the colonies or that of the mother country. In their
exclusive privilege of supplying the colonies with all the goods which
they wanted from Europe, and of purchasing all such parts of their
surplus produce as could not interfere with any of the trades which
they themselves carried on at home, the interest of the colonies was
sacrificed to the interest of those merchants. In allowing the same
drawbacks upon the re-exportation of the greater part of European
and East India goods to the colonies as upon their re-exportation to
any independent country, the interest of the mother country was
sacrificed to it, even according to the mercantile ideas of that
interest. It was for the interest of the merchants to pay as little as
possible for the foreign which they sent to the colonies, and,
consequently, to get back as much as possible of the duties which they
advanced upon their importation into Great Britain. They might thereby
be enabled to sell in the colonies either the same quantity of goods
with a greater profit, or a greater quantity with the same profit,
and, consequently, to gain something either in the one way or the
other. It was likewise for the interest of the colonies to get all
such goods as cheap and in as great abundance as possible. But this
might not always be for the interest of the mother country. She
might frequently suffer both in her revenue, by giving back a great
part of the duties which had been paid upon the importation of such
goods; and in her manufactures, by being undersold in the colony
market, in consequence of the easy terms upon which foreign
manufactures could be carried thither by means of those drawbacks. The
progress of the linen manufacture of Great Britain, it is commonly
said, has been a good deal retarded by the drawbacks upon the
re-exportation of German linen to the American colonies.

    But though the policy of Great Britain with regard to the trade of
her colonies has been dictated by the same mercantile spirit as that
of other nations, it has, however, upon the whole, been less illiberal
and oppressive than that of any of them.

    In everything, except their foreign trade, the liberty of the
English colonists to manage their own affairs their own way is
complete. It is in every respect equal to that of their
fellow-citizens at home, and is secured in the same manner, by an
assembly of the representatives of the people, who claim the sole
right of imposing taxes for the support of the colony government.
The authority of this assembly overawes the executive power, and
neither the meanest nor the most obnoxious colonist, as long as he
obeys the law, has anything to fear from the resentment, either of the
governor or of any other civil or military officer in the province.
The colony assemblies though, like the House of Commons in England,
are not always a very equal representation of the people, yet they
approach more nearly to that character; and as the executive power
either has not the means to corrupt them, or, on account of the
support which it receives from the mother country, is not under the
necessity of doing so, they are perhaps in general more influenced
by the inclinations of their constituents. The councils which, in
the colony legislatures, correspond to the House of Lords in Great
Britain, are not composed of an hereditary nobility. In some of the
colonies, as in three of the governments of New England, those
councils are not appointed by the king, but chosen by the
representatives of the people. In none of the English colonies is
there any hereditary nobility. In all of them, indeed, as in all other
free countries, the descendant of an old colony family is more
respected than an upstart of equal merit and fortune; but he is only
more respected, and he has no privileges by which he can be
troublesome to his neighbours. Before the commencement of the
present disturbances, the colony assemblies had not only the
legislative but a part of the executive power. In Connecticut and
Rhode Island, they elected the governor. In the other colonies they
appointed the revenue officers who collected the taxes imposed by
those respective assemblies, to whom those officers were immediately
responsible. There is more equality, therefore, among the English
colonists than among the inhabitants of the mother country. Their
manners are more republican, and their governments, those of three
of the provinces of New England in particular, have hitherto been more
republican too.

    The absolute governments of Spain, Portugal, and France, on the
contrary, take place in their colonies; and the discretionary powers
which such governments commonly delegate to all their inferior
officers are, on account of the great distance, naturally exercised
there with more than ordinary violence. Under all absolute governments
there is more liberty in the capital than in any other part of the
country. The sovereign himself can never have either interest or
inclination to pervert the order of justice, or to oppress the great
body of the people. In the capital his presence overawes more or
less all his inferior officers, who in the remoter provinces, from
whence the complaints of the people are less likely to reach him,
can exercise their tyranny with much more safety. But the European
colonies in America are more remote than the most distant provinces of
the greatest empires which had ever been known before. The
government of the English colonies is perhaps the only one which,
since the world began, could give perfect security to the
inhabitants of so very distant a province. The administration of the
French colonies, however, has always been conducted with more
gentleness and moderation than that of the Spanish and Portugese. This
superiority of conduct is suitable both to the character of the French
nation, and to what forms the character of every nation, the nature of
their government, which though arbitrary and violent in comparison
with that of Great Britain, is legal and free in comparison with those
of Spain and Portugal.

    It is in the progress of the North American colonies, however,
that the superiority of the English policy chiefly appears. The
progress of the sugar colonies of France has been at least equal,
perhaps superior, to that of the greater part of those of England, and
yet the sugar colonies of England enjoy a free government nearly of
the same kind with that which takes place in her colonies of North
America. But the sugar colonies of France are not discouraged, like
those of England, from refining their own sugar; and, what is of still
greater importance, the genius of their government naturally
introduces a better management of their negro slaves.

    In all European colonies the culture of the sugar-cane is
carried on by negro slaves. The constitution of those who have been
born in the temperate climate of Europe could not, it is supposed,
support the labour of digging the ground under the burning sun of
the West Indies; and the culture of the sugarcane, as it is managed at
present, is all hand labour, though, in the opinion of many, the drill
plough might be introduced into it with great advantage. But, as the
profit and success of the cultivation which is carried on by means
of cattle, depend very much upon the good management of those
cattle, so the profit and success of that which is carried on by
slaves must depend equally upon the good management of those slaves;
and in the good management of their slaves the French planters, I
think it is generally allowed, are superior to the English. The law,
so far as it gives some weak protection to the slave against the
violence of his master, is likely to be better executed in a colony
where the government is in a great measure arbitrary than in one where
it is altogether free. In every country where the unfortunate law of
slavery is established, the magistrate, when he protects the slave,
intermeddles in some measure in the management of the private property
of the master; and, in a free country, where the master is perhaps
either a member of the colony assembly, or an elector of such a
member, he dare not do this but with the greatest caution and
circumspection. The respect which he is obliged to pay to the master
renders it more difficult for him to protect the slave. But in a
country where the government is in a great measure arbitrary, where it
is usual for the magistrate to intermeddle even in the management of
the private property of individuals, and to send them, perhaps, a
lettre de cachet if they do not manage it according to his liking,
it is much easier for him to give some protection to the slave; and
common humanity naturally disposes him to do so. The protection of the
magistrate renders the slave less contemptible in the eyes of his
master, who is thereby induced to consider him with more regard, and
to treat him with more gentleness. Gentle usage renders the slave
not only more faithful, but more intelligent, and therefore, upon a
double account, more useful. He approaches more to the condition of
a free servant, and may possess some degree of integrity and
attachment to his master's interest, virtues which frequently belong
to free servants, but which never can belong to a slave who is treated
as slaves commonly are in countries where the master is perfectly free
and secure.

    That the condition of a slave is better under an arbitrary than
under a free government is, I believe, supported by the history of all
ages and nations. In the Roman history, the first time we read of
the magistrate interposing to protect the slave from the violence of
his master is under the emperors. When Vedius Pollio, in the
presence of Augustus, ordered one of his slaves, who had committed a
slight fault, to be cut into pieces and thrown into his fish pond in
order to feed his fishes, the emperor commanded him, with indignation,
to emancipate immediately, not only that slave, but all the others
that belonged to him. Under the republic no magistrate could have
had authority enough to protect the slave, much less to punish the
master.

    The stock, it is to be observed, which has improved the sugar
colonies of France, particularly the great colony of St. Domingo,
has been raised almost entirely from the gradual improvement and
cultivation of those colonies. It has been almost altogether the
produce of the soil and of the industry of the colonies, or, what
comes to the same thing, the price of that produce gradually
accumulated by good management, and employed in raising a still
greater produce. But the stock which has improved and cultivated the
sugar colonies of England has, a great part of it, been sent out
from England, and has by no means been altogether the produce of the
soil and industry of the colonists. The prosperity of the English
sugar colonies has been, in a great measure, owing to the great riches
of England, of which a part has overflowed, if one may say so, upon
those colonies. But the prosperity of the sugar colonies of France has
been entirely owing to the good conduct of the colonists, which must
therefore have had some superiority over that of the English; and this
superiority has been remarked in nothing so much as in the good
management of their slaves.

    Such have been the general outlines of the policy of the different
European nations with regard to their colonies.

    The policy of Europe, therefore, has very little to boast of,
either in the original establishment or, so far as concerns their
internal government, in the subsequent prosperity of the colonies of
America.

    Folly and injustice seem to have been the principles which
presided over and directed the first project of establishing those
colonies; the folly of hunting after gold and silver mines, and the
injustice of coveting the possession of a country whose harmless
natives, far from having ever injured the people of Europe, had
received the first adventurers with every mark of kindness and
hospitality.

    The adventurers, indeed, who formed some of the later
establishments, joined to the chimerical project of finding gold and
silver mines other motives more reasonable and more laudable; but even
these motives do very little honour to the policy of Europe.

    The English Puritans, restrained at home, fled for freedom to
America, and established there the four governments of New England.
The English Catholics, treated with much greater injustice,
established that of Maryland; the Quakers, that of Pennsylvania. The
Portuguese Jews, persecuted by the Inquisition, stripped of their
fortunes, and banished to Brazil, introduced by their example some
sort of order and industry among the transported felons and
strumpets by whom that colony was originally peopled, and taught
them the culture of the sugar-cane. Upon all these different occasions
it was not the wisdom and policy, but the disorder and injustice of
the European governments which peopled and cultivated America.

    In effectuating some of the most important of these
establishments, the different governments of Europe had as little
merit as in projecting them. The conquest of Mexico was the project,
not of the council of Spain, but of a governor of Cuba; and it was
effectuated by the spirit of the bold adventurer to whom it was
entrusted, in spite of everything which that governor, who soon
repented of having trusted such a person, could do to thwart it. The
conquerors of Chili and Peru, and of almost all the other Spanish
settlements upon the continent of America, carried out with them no
other public encouragement, but a general permission to make
settlements and conquests in the name of the king of Spain. Those
adventures were all at the private risk and expense of the
adventurers. The government of Spain contributed scarce anything to
any of them. That of England contributed as little towards
effectuating the establishment of some of its most important
colonies in North America.

    When those establishments were effectuated, and had become so
considerable as to attract the attention of the mother country, the
first regulations which she made with regard to them had always in
view to secure to herself the monopoly of their commerce; to confine
their market, and to enlarge her own at their expense, and,
consequently, rather to damp and discourage than to quicken and
forward the course of their prosperity. In the different ways in which
this monopoly has been exercised consists one of the most essential
differences in the policy of the different European nations with
regard to their colonies. The best of them all, that of England, is
only somewhat less illiberal and oppressive than that of any of the
rest.

    In what way, therefore, has the policy of Europe contributed
either to the first establishment, or to the present grandeur of the
colonies of America? In one way, and in one way only, it has
contributed a good deal. Magna virum Mater! It bred and formed the men
who were capable of achieving such great actions, and of laying the
foundation of so great an empire; and there is no other quarter of the
world of which the policy is capable of forming, or has ever
actually and in fact formed such men. The colonies owe to the policy
of Europe the education and great views of their active and
enterprising founders; and some of the greatest and most important
of them, so far as concerns their internal government, owe to it
scarce anything else.

                              PART 3

             Of the Advantages which Europe has derived

                   from the Discovery of America,

            and from that of a Passage to the East Indies

                      by the Cape of Good Hope

    SUCH are the advantages which the colonies of America have derived
from the policy of Europe.

    What are those which Europe has derived from the discovery and
colonization of America?

    Those advantages may be divided, first, into the general
advantages which Europe, considered as one great country, has
derived from those great events; and, secondly, into the particular
advantages which each colonizing country has derived from the colonies
which particularly belong to it, in consequence of the authority or
dominion which it exercises over them.

    The general advantages which Europe, considered as one great
country, has derived from the discovery and colonisation of America,
consist, first, in the increase of its enjoyments; and, secondly, in
the augmentation of its industry.

    The surplus produce of America, imported into Europe, furnishes
the inhabitants of this great continent with a variety of
commodities which they could not otherwise have possessed; some for
conveniency and use, some for pleasure, and some for ornament, and
thereby contributes to increase their enjoyments.

    The discovery and colonization of America, it will readily be
allowed, have contributed to augment the industry, first, of all the
countries which trade to it directly, such as Spain, Portugal, France,
and England; and, secondly, of all those which, without trading to
it directly, send, through the medium of other countries, goods to
it of their own produce; such as Austrian Flanders, and some provinces
of Germany, which, through the medium of the countries before
mentioned, send to it a considerable quantity of linen and other
goods. All such countries have evidently gained a more extensive
market for their surplus produce, and must consequently have been
encouraged to increase its quantity.

    But that those great events should likewise have contributed to
encourage the industry of countries, such as Hungary and Poland, which
may never, perhaps, have sent a single commodity of their own
produce to America, is not, perhaps, altogether so evident. That those
events have done so, however, cannot be doubted. Some part of the
produce of America is consumed in Hungary and Poland, and there is
some demand there for the sugar, chocolate, and tobacco of that new
quarter of the world. But those commodities must be purchased with
something which is either the produce of the industry of Hungary and
Poland, or with something which had been purchased with some part of
that produce. Those commodities of America are new values, new
equivalents, introduced into Hungary and Poland to be exchanged
there for the surplus produce of those countries. By being carried
thither they create a new and more extensive market for that surplus
produce. They raise its value, and thereby contribute to encourage its
increase. Though no part of it may ever be carried to America, it
may be carried to other countries which purchase it with a part of
their share of the surplus produce of America; and it may find a
market by means of the circulation of that trade which was
originally put into motion by the surplus produce of America.

    Those great events may even have contributed to increase the
enjoyments, and to augment the industry of countries which not only
never sent any commodities to America, but never received any from it.
Even such countries may have received a greater abundance of other
commodities from countries of which the surplus produce had been
augmented by means of the American trade. This greater abundance, as
it must necessarily have increased their enjoyments, so it must
likewise have augmented their industry. A greater number of new
equivalents of some kind or other must have been presented to them
to be exchanged for the surplus produce of that industry. A more
extensive market must have been created for that surplus produce so as
to raise its value, and thereby encourage its increase. The mass of
commodities annually thrown into the great circle of European
commerce, and by its various revolutions annually distributed among
all the different nations comprehended within it, must have been
augmented by the whole surplus produce of America. A greater share
of this greater mass, therefore, is likely to have fallen to each of
those nations, to have increased their enjoyments, and augmented their
industry.

    The exclusive trade of the mother countries tends to diminish, or,
at least, to keep down below what they would otherwise rise to, both
the enjoyments and industry of all those nations in general, and of
the American colonies in particular. It is a dead weight upon the
action of one of the great springs which puts into motion a great part
of the business of mankind. By rendering the colony produce dearer
in all other countries, it lessens its consumption, and thereby cramps
the industry of the colonies, and both the enjoyments and the industry
of all other countries, which both enjoy less when they pay more for
what they enjoy, and produce less when they get less for what they
produce. By rendering the produce of all other countries dearer in the
colonies, it cramps, in the same manner the industry of all other
countries, and both the enjoyments and the industry of the colonies.
It is a clog which, for the supposed benefit of some particular
countries, embarrasses the pleasures and encumbers the industry of all
other countries; but of the colonies more than of any other. It not
only excludes, as much as possible, all other countries from one
particular market; but it confines, as much as Possible, the
colonies to one particular market; and the difference is very great
between being excluded from one particular market, when all others are
open, and being confined to one particular market, when all others are
shut up. The surplus produce of the colonies, however, is the original
source of all that increase of enjoyments and industry which Europe
derives from the discovery and colonization of America; and the
exclusive trade of the mother countries tends to render this source
much less abundant than it otherwise would be.

    The particular advantages which each colonizing country derives
from the colonies which particularly belong to it are of two different
kinds; first, those common advantages which every empire derives
from the provinces subject to its dominion; and, secondly, those
peculiar advantages which are supposed to result from provinces of
so very peculiar a nature as the European colonies of America.

    The common advantages which every empire derives from the
provinces subject to its dominion consist, first, in the military
force which they furnish for its defence; and, secondly, in the
revenue which they furnish for the support of its civil government.
The Roman colones furnished occasionally both the one and the other.
The Greek colonies, sometimes, furnished a military force, but
seldom any revenue. They seldom acknowledged themselves subject to the
dominion of the mother city. They were generally her allies in war,
but very seldom her subjects in peace.

    The European colonies of America have never yet furnished any
military force for the defence of the mother country. Their military
force has never yet been sufficient for their own defence; and in
the different wars in which the mother countries have been engaged,
the defence of their colonies has generally occasioned a very
considerable distraction of the military force of those countries.
In this respect, therefore, all the European colonies have, without
exception, been a cause rather of weakness than of strength to their
respective mother countries.

    The colonies of Spain and Portugal only have contributed any
revenue towards the defence of the mother country, or the support of
her civil government. The taxes which have been levied upon those of
other European nations, upon those of England in particular, have
seldom been equal to the expense laid out upon them in time of
peace, and never sufficient to defray that which they occasioned in
time of war. Such colonies, therefore, have been a source of expense
and not of revenue to their respective mother countries.

    The advantages of such colonies to their respective mother
countries consist altogether in those peculiar advantages which are
supposed to result from provinces of so very peculiar a nature as
the European colonies of America; and the exclusive trade, it is
acknowledged, is the sole source of all those peculiar advantages.

    In consequence of this exclusive trade, all that part of the
surplus produce of the English colonies, for example, which consists
in what are called enumerated commodities, can be sent to no other
country but England. Other countries must afterwards buy it of her. It
must be cheaper therefore in England than it can be in any other
country, and must contribute more to increase the enjoyments of
England than those of any other country. It must likewise contribute
more to encourage her industry. For all those parts of her own surplus
produce which England exchanges for those enumerated commodities,
she must get a better price than any other countries can get for the
like parts of theirs, when they exchange them for the same
commodities. The manufacturers of England, for example, will
purchase a greater quantity of the sugar and tobacco of her own
colonies than the like manufactures of other countries can purchase of
that sugar and tobacco. So far, therefore, as the manufactures of
England and those of other countries are both to be exchanged for
the sugar and tobacco of the English colonies, this superiority of
price gives an encouragement to the former beyond what the latter
can in these circumstances enjoy. The exclusive trade of the colonies,
therefore, as it diminishes, or at least keeps down below what they
would otherwise rise to, both the enjoyments and the industry of the
countries which do not possess it; so it gives an evident advantage to
the countries which do possess it over those other countries.

    This advantage, however, will perhaps be found to be rather what
may be called a relative than an absolute advantage; and to give a
superiority to the country which enjoys it rather by depressing the
industry and produce of other countries than by raising those of
that particular country above what they would naturally rise to in the
case of a free trade.

    The tobacco of Maryland and Virginia, for example, by means of the
monopoly which England enjoys of it, certainly comes cheaper to
England than it can do to France, to whom England commonly sells a
considerable part of it. But had France, and all other European
countries been, at all times, allowed a free trade to Maryland and
Virginia, the tobacco of those colonies might, by this time, have come
cheaper than it actually does, not only to all those other
countries, but likewise to England. The produce of tobacco, in
consequence of a market so much more extensive than any which it has
hitherto enjoyed, might, and probably would, by this time, have been
so much increased as to reduce the profits of a tobacco plantation
to their natural level with those of a corn plantation, which, it is
supposed, they are still somewhat above. The price of tobacco might,
and probably would, by this time, have fallen somewhat lower than it
is at present. An equal quantity of the commodities either of
England or of those other countries might have purchased in Maryland
and Virginia a greater quantity of tobacco than it can do at
present, and consequently have been sold there for so much a better
price. So far as that weed, therefore, can, by its cheapness and
abundance, increase the enjoyments or augment the industry either of
England or of any other country, it would, probably, in the case of
a free trade, have produced both these effects in somewhat a greater
degree than it can do at present. England, indeed, would not in this
case have had any advantage over other countries. She might have
bought the tobacco of her colonies somewhat cheaper, and
consequently have sold some of her own commodities somewhat dearer
than she actually does. But she could neither have bought the one
cheaper nor sold the other dearer than any other country might have
done. She might, perhaps have gained an absolute, but she would
certainly have lost a relative advantage.

    In order, however, to obtain this relative advantage in the colony
trade, in order to execute the invidious and malignant project of
excluding as much as possible other nations from any share in it,
England, there are very probable reasons for believing, has not only
sacrificed a part of the absolute advantage which she, as well as
every other nation, might have derived from that trade, but has
subjected herself both to an absolute and to a relative disadvantage
in almost every other branch of trade.

    When, by the Act of Navigation, England assumed to herself the
monopoly of the colony trade, the foreign capitals which had before
been employed in it were necessarily withdrawn from it. The English
capital, which had before carried on but a part of it, was now to
carry on the whole. The capital which had before supplied the colonies
with but a part of the goods which they wanted from Europe was now all
that was employed to supply them with the whole. But it could not
supply them with the whole, and the goods with which it did supply
them were necessarily sold very dear. The capital which had before
bought but a part of the surplus produce of the colonies, was now
all that was employed to buy the whole. But it could not buy the whole
at anything near the old price, and, therefore, whatever it did buy it
necessarily bought very cheap. But in an employment of capital in
which the merchant sold very dear and bought very cheap, the profit
must have been very great, and much above the ordinary level of profit
in other branches of trade. This superiority of profit in the colony
trade could not fail to draw from other branches of trade a part of
the capital which had before been employed in them. But this revulsion
of capital, as it must have gradually increased the competition of
capitals in the colony trade, so it must have gradually diminished
that competition in all those other branches of trade; as it must have
gradually lowered the profits of the one, so it must have gradually
raised those of the other, till the profits of all came to a new
level, different from and somewhat higher than that at which they
had been before.

    This double effect of drawing capital from all other trades, and
of raising the rate of profit somewhat higher than it otherwise
would have been in all trades, was not only produced by this
monopoly upon its first establishment, but has continued to be
produced by it ever since.

    First, this monopoly has been continually drawing capital from all
other trades to be employed in that of the colonies.

    Though the wealth of Great Britain has increased very much since
the establishment of the Act of Navigation, it certainly has not
increased in the same proportion as that of the colonies. But the
foreign trade of every country naturally increases in proportion to
its wealth, its surplus produce in proportion to its whole produce;
and Great Britain having engrossed to herself almost the whole of what
may be called the foreign trade of the colonies, and her capital not
having increased in the same proportion as the extent of that trade,
she could not carry it on without continually withdrawing from other
branches of trade some part of the capital which had before been
employed in them as well as withholding from them a great deal more
which would otherwise have gone to them. Since the establishment of
the Act of Navigation, accordingly, the colony trade has been
continually increasing, while many other branches of foreign trade,
particularly of that to other parts of Europe, have been continually
decaying. Our manufactures for foreign sale, instead of being
suited, as before the Act of Navigation, to the neighbouring market of
Europe, or to the more distant one of the countries which lie round
the Mediterranean Sea, have, the greater part of them, been
accommodated to the still more distant one of the colonies, to the
market in which they have the monopoly rather than to that in which
they have many competitors. The causes of decay in other branches of
foreign trade, which, by Sir Matthew Decker and other writers, have
been sought for in the excess and improper mode of taxation, in the
high price of labour, in the increase of luxury, etc., may all be
found in the overgrowth of the colony trade. The mercantile capital of
Great Britain, though very great, yet not being infinite, and though
greatly increased since the Act of Navigation, yet not being increased
in the same proportion as the colony trade, that trade could not
possibly be carried on without withdrawing some part of that capital
from other branches of trade, nor consequently without some decay of
those other branches.

    England, it must be observed, was a great trading country, her
mercantile capital was very great and likely to become still greater
and greater every day, not only before the Act of Navigation had
established the monopoly of the colony trade, but before that trade
was very considerable. In the Dutch war, during the government of
Cromwell, her navy was superior to that of Holland; and in that
which broke out in the beginning of the reign of Charles II, it was at
last equal, perhaps superior, to the united navies of France and
Holland. Its superiority, perhaps, would scarce appear greater in
the present times; at least if the Dutch navy was to bear the same
proportion to the Dutch commerce now which it did then. But this great
naval power could not, in either of those wars, be owing to the Act of
Navigation. During the first of them the plan of that act had been but
just formed; and though before the breaking out of the second it had
been fully enacted by legal authority, yet no part of it could have
had time to produce any considerable effect, and least of all that
part which established the exclusive trade to the colonies. Both the
colonies and their trade were inconsiderable then in comparison of
what they are now. The island of Jamaica was an unwholesome desert,
little inhabited, and less cultivated. New York and New Jersey were in
the possession of the Dutch: the half of St. Christopher's in that
of the French. The island of Antigua, the two Carolinas, Pennsylvania,
Georgia, and Nova Scotia were not planted. Virginia, Maryland, and New
England were planted; and though they were very thriving colonies, yet
there was not, perhaps, at that time, either in Europe or America, a
single person who foresaw or even suspected the rapid progress which
they have since made in wealth, population, and improvement. The
island of Barbadoes, in short, was the only British colony of any
consequence of which the condition at that time bore any resemblance
to what it is at present. The trade of the colonies, of which England,
even for some time after the Act of Navigation, enjoyed but a part
(for the Act of Navigation was not very strictly executed till several
years after it was enacted), could not at that time be the cause of
the great trade of England, nor of the great naval power which was
supported by that trade. The trade which at that time supported that
great naval power was the trade of Europe, and of the countries
which lie round the Mediterranean Sea. But the share which Great
Britain at present enjoys of that trade could not support any such
great naval power. Had the growing trade of the colonies been left
free to all nations, whatever share of it might have fallen to Great
Britain, and a very considerable share would probably have fallen to
her, must have been all an addition to this great trade of which she
was before in possession. In consequence of the monopoly, the increase
of the colony trade has not so much occasioned an addition to the
trade which Great Britain had before as a total change in its
direction.

    Secondly, this monopoly has necessarily contributed to keep up the
rate of profit in all the different branches of British trade higher
than it naturally would have been had all nations been allowed a
free trade to the British colonies.

    The monopoly of the colony trade, as it necessarily drew towards
that trade a greater proportion of the capital of Great Britain than
what would have gone to it of its own accord; so by the expulsion of
all foreign capitals it necessarily reduced the whole quantity of
capital employed in that trade below what it naturally would have been
in the case of a free trade. But, by lessening the competition of
capitals in that branch of trade, it necessarily raised the rate of
profit in that branch. By lessening, too, the competition of British
capitals in all other branches of trade, it necessarily raised the
rate of British profit in all those other branches. Whatever may
have been, at any particular period, since the establishment of the
Act of Navigation, the state or extent of the mercantile capital of
Great Britain, the monopoly of the colony trade must, during the
continuance of that state, have raised the ordinary rate of British
profit higher than it otherwise would have been both in that and in
all the other branches of British trade. If, since the establishment
of the Act of Navigation, the ordinary rate of British profit has
fallen considerably, as it certainly has, it must have fallen still
lower, had not the monopoly established by that act contributed to
keep it up.

    But whatever raises in any country the ordinary rate of profit
higher than it otherwise would be, necessarily subjects that country
both to an absolute and to a relative disadvantage in every branch
of trade of which she has not the monopoly.

    It subjects her to an absolute disadvantage; because in such
branches of trade her merchants cannot get this greater profit without
selling dearer than they otherwise would do both the goods of
foreign countries which they import into their own, and the goods of
their own country which they export to foreign countries. Their own
country must both buy dearer and sell dearer; must both buy less and
sell less; must both enjoy less and produce less, than she otherwise
would do.

    It subjects her to a relative disadvantage; because in such
branches of trade it sets other countries which are not subject to the
same absolute disadvantage either more above her or less below her
than they otherwise would be. It enables them both to enjoy more and
to produce more in proportion to what she enjoys and produces. It
renders their superiority greater or their inferiority less than it
otherwise would be. By raising the price of her produce above what
it otherwise would be, it enables the merchants of other countries
to undersell her in foreign markets, and thereby to jostle her out
of almost all those branches of trade, of which she has not the
monopoly.

    Our merchants frequently complain of the high wages of British
labour as the cause of their manufactures being undersold in foreign
markets, but they are silent about the high profits of stock. They
complain of the extravagant gain of other people, but they say nothing
of their own. The high profits of British stock, however, may
contribute towards raising the price of British manufactures in many
cases as much, and in some perhaps more, than the high wages of
British labour.

    It is in this manner that the capital of Great Britain, one may
justly say, has partly been drawn and partly been driven from the
greater part of the different branches of trade of which she has not
the monopoly; from the trade of Europe in particular, and from that of
the countries which lie round the Mediterranean Sea.

    It has partly been drawn from those branches of trade by the
attraction of superior profit in the colony trade in consequence of
the continual increase of that trade, and of the continual
insufficiency of the capital which had carried it on one year to carry
it on the next.

    It has partly been driven from them by the advantage which the
high rate of profit, established in Great Britain, gives to other
countries in all the different branches of trade of which Great
Britain has not the monopoly.

    As the monopoly of the colony trade has drawn from those other
branches a part of the British capital which would otherwise have been
employed in them, so it has forced into them many foreign capitals
which would never have gone to them had they not been expelled from
the colony trade. In those other branches of trade it has diminished
the competition of British capital, and thereby raised the rate of
British profit higher than it otherwise would have been. On the
contrary, it has increased the competition of foreign capitals, and
thereby sunk the rate of foreign profit lower than it otherwise
would have been. Both in the one way and in the other it must
evidently have subjected Great Britain to a relative disadvantage in
all those other branches of trade.

    The colony trade, however, it may perhaps be said, is more
advantageous to Great Britain than any other; and the monopoly, by
forcing into that trade a greater proportion of the capital of Great
Britain than what would otherwise have gone to it, has turned that
capital into an employment more advantageous to the country than any
other which it could have found.

    The most advantageous employment of any capital to the country
to which it belongs is that which maintains there the greatest
quantity of productive labour, and increases the most the annual
produce of the land and labour of that country. But the quantity of
productive labour which any capital employed in the foreign trade of
consumption can maintain is exactly in proportion, it has been shown
in the second book, to the frequency of its returns. A capital of a
thousand pounds, for example, employed in a foreign trade of
consumption, of which the returns are made regularly once in the year,
can keep in constant employment, in the country to which it belongs, a
quantity of productive labour equal to what a thousand pounds can
maintain there for a year. If the returns are made twice or thrice
in the year, it can keep in constant employment a quantity of
productive labour equal to what two or three thousand pounds can
maintain there for a year. A foreign trade of consumption carried on
with a neighbouring country is, upon this account, in general more
advantageous than one carried on with a distant country; and for the
same reason a direct foreign trade of consumption, as it has
likewise been shown in the second book, is in general more
advantageous than a round-about one.

    But the monopoly of the colony trade, so far as it has operated
upon the employment of the capital of Great Britain, has in all
cases forced some part of it from a foreign trade of consumption
carried on with a neighbouring, to one carried on with a more
distant country, and in many cases from a direct foreign trade of
consumption to a round-about one.

    First, the monopoly of the colony trade has in all cases forced
some part of the capital of Great Britain from a foreign trade of
consumption carried on with a neighbouring to one carried on with a
more distant country.

    It has, in all cases, forced some part of that capital from the
trade with Europe, and with the countries which lie round the
Mediterranean Sea, to that with the more distant regions of America
and the West Indies, from which the returns are necessarily less
frequent, not only on account of the greater distance, but on
account of the peculiar circumstances of those countries. New
colonies, it has already been observed, are always understocked. Their
capital is always much less than what they could employ with great
profit and advantage in the improvement and cultivation of their land.
They have a constant demand, therefore, for more capital than they
have of their own; and, in order to supply the deficiency of their
own, they endeavour to borrow as much as they can of the mother
country, to whom they are, therefore, always in debt. The most
common way in which the colonists contract this debt is not by
borrowing upon bond of the rich people of the mother country, though
they sometimes do this too, but by running as much in arrear to
their correspondents, who supply them with goods from Europe, as those
correspondents will allow them. Their annual returns frequently do not
amount to more than a third, and sometimes not to so great a
proportion of what they owe. The whole capital, therefore, which their
correspondents advance to them is seldom returned to Britain in less
than three, and sometimes not in less than four or five years. But a
British capital of a thousand pounds, for example, which is returned
to Great Britain only once in five years, can keep in constant
employment only one-fifth part of the British industry which it
could maintain if the whole was returned once in the year; and,
instead of the quantity of industry which a thousand pounds could
maintain for a year, can keep in constant employment the quantity only
which two hundred pounds can maintain for a year. The planter, no
doubt, by the high price which he pays for the goods from Europe, by
the interest upon the bills which he grants at distant dates, and by
the commission upon the renewal of those which he grants at near
dates, makes up, and probably more than makes up, all the loss which
his correspondent can sustain by this delay. But though he may make up
the loss of his correspondent, he cannot make up that of Great
Britain. In a trade of which the returns are very distant, the
profit of the merchant may be as great or greater than in one in which
they are very frequent and near; but the advantage of the country in
which he resides, the quantity of productive labour constantly
maintained there, the annual produce of the land and labour must
always be much less. That the returns of the trade to America, and
still more those of that to the West Indies are, in general, not
only more distant but more irregular, and more uncertain too, than
those of the trade to any part of Europe, or even of the countries
which lie round the Mediterranean Sea, will readily be allowed, I
imagine, by everybody who has any experience of those different
branches of trade.

    Secondly, the monopoly of the colony trade has, in many cases,
forced some part of the capital of Great Britain from a direct foreign
trade of consumption into a round-about one.

    Among the enumerated commodities which can be sent to no other
market but Great Britain, there are several of which the quantity
exceeds very much the consumption of Great Britain, and of which a
part, therefore, must be exported to other countries. But this
cannot be done without forcing some part of the capital of Great
Britain into a round-about foreign trade of consumption. Maryland
and Virginia, for example, send annually to Great Britain upwards of
ninety-six thousand hogsheads of tobacco, and the consumption of Great
Britain is said not to exceed fourteen thousand. Upwards of eighty-two
thousand hogsheads, therefore, must be exported to other countries, to
France, to Holland, and to the countries which lie round the Baltic
and Mediterranean Seas. But that part of the capital of Great
Britain which brings those eighty-two thousand hogsheads to Great
Britain, which re-exports them from thence to those other countries,
and which brings back from those other countries to Great Britain
either goods or money in return, is employed in a round-about
foreign trade of consumption; and is necessarily forced into this
employment in order to dispose of this great surplus. If we would
compute in how many years the whole of this capital is likely to
come back to Great Britain, we must add to the distance of the
American returns that of the returns from those other countries. If,
in the direct foreign trade of consumption which we carry on with
America, the whole capital employed frequently does not come back in
less than three or four years, the whole capital employed in this
round-about one is not likely to come back in less than four or
five. If the one can keep in constant employment but a third or a
fourth part of the domestic industry which could be maintained by a
capital returned once in the year, the other can keep in constant
employment but a fourth or fifth part of that industry. At some of the
out-ports a credit is commonly given to those foreign correspondents
to whom they export their tobacco. At the port of London, indeed, it
is commonly sold for ready money. The rule is, Weigh and pay. At the
port of London, therefore, the final returns of the whole
round-about trade are more distant than the returns from America by
the time only which the goods may lie unsold in the warehouse;
where, however, they may sometimes lie long enough. But had not the
colonies been confined to the market of Great Britain for the sale
of their tobacco, very little more of it would probably have come to
us than what was necessary for the home consumption. The goods which
Great Britain purchases at present for her own consumption with the
great surplus of tobacco which she exports to other countries, she
would in this case probably have purchased with the immediate
produce of her own industry, or with some part of her own
manufactures. That produce, those manufactures, instead of being
almost entirely suited to one great market, as at present, would
probably have been fitted to a great number of smaller markets.
Instead of one great round-about foreign trade of consumption, Great
Britain would probably have carried on a great number of small
direct foreign trades of the same kind. On account of the frequency of
the returns, a part, and probably but a small part; perhaps not
above a third or a fourth of the capital which at present carries on
this great round-about trade might have been sufficient to carry on
all those small direct ones, might have kept in constant employment an
equal quantity of British industry, and have equally supported the
annual produce of the land and labour of Great Britain. All the
purposes of this trade being, in this manner, answered by a much
smaller capital, there would have been a large spare capital to
apply to other purposes: to improve the lands, to increase the
manufactures, and to extend the commerce of Great Britain; to come
into competition at least with the other British capitals employed
in all those different ways, to reduce the rate of profit in them all,
and thereby to give to Great Britain, in all of them, a superiority
over other countries still greater than what she at present enjoys.

    The monopoly of the colony trade, too, has forced some part of the
capital of Great Britain from all foreign trade of consumption to a
carrying trade; and consequently, from supporting more or less the
industry of Great Britain, to be employed altogether in supporting
partly that of the colonies and partly that of some other countries.

    The goods, for example, which are annually purchased with the
great surplus of eighty-two thousand hogsheads of tobacco annually
re-exported from Great Britain are not all consumed in Great
Britain. Part of them, linen from Germany and Holland, for example, is
returned to the colonies for their particular consumption. But that
part of the capital of Great Britain which buys the tobacco with which
this linen is afterwards bought is necessarily withdrawn from
supporting the industry of Great Britain, to be employed altogether in
supporting, partly that of the colonies, and partly that of the
particular countries who pay for this tobacco with the produce of
their own industry.

    The monopoly of the colony trade besides, by forcing towards it
a much greater proportion of the capital of Great Britain than what
would naturally have gone to it, seems to have broken altogether
that natural balance which would otherwise have taken place among
all the different branches of British industry. The industry of
Great Britain, instead of being accommodated to a great number of
small markets, has been principally suited to one great market. Her
commerce, instead of running in a great number of small channels,
has been taught to run principally in one great channel. But the whole
system of her industry and commerce has thereby been rendered less
secure, the whole state of her body politic less healthful than it
otherwise would have been. In her present condition, Great Britain
resembles one of those unwholesome bodies in which some of the vital
parts are overgrown, and which, upon that account, are liable to
many dangerous disorders scarce incident to those in which all the
parts are more properly proportioned. A small stop in that great
blood-vessel, which has been artificially swelled beyond its natural
dimensions, and through which an unnatural proportion of the
industry and commerce of the country has been forced to circulate,
is very likely to bring on the most dangerous disorders upon the whole
body politic. The expectation of a rupture with the colonies,
accordingly, has struck the people of Great Britain with more terror
than they ever felt for a Spanish armada, or a French invasion. It was
this terror, whether well or ill grounded, which rendered the repeal
of the Stamp Act, among the merchants at least, a popular measure.
In the total exclusion from the colony market, was it to last only for
a few years, the greater part of our merchants used to fancy that they
foresaw an entire stop to their trade; the greater part of our
master manufacturers, the entire ruin of their business; and the
greater part of our workmen, an end of their employment. A rupture
with any of our neighbours upon the continent, though likely, too,
to occasion some stop or interruption in the employments of some of
all these different orders of people, is foreseen, however, without
any such general emotion. The blood, of which the circulation is
stopped in some of the smaller vessels, easily disgorges itself into
the greater without occasioning any dangerous disorder; but, when it
is stopped in any of the greater vessels, convulsions, apoplexy, or
death, are the immediate and unavoidable consequences. If but one of
those overgrown manufactures, which, by means either of bounties or of
the monopoly of the home and colony markets, have been artificially
raised up to an unnatural height, finds some small stop or
interruption in its employment, it frequently occasions a mutiny and
disorder alarming to government, and embarrassing even to the
deliberations of the legislature. How great, therefore, would be the
disorder and confusion, it was thought, which must necessarily be
occasioned by a sudden and entire stop in the employment of so great a
proportion of our principal manufacturers.

    Some moderate and gradual relaxation of the laws which give to
Great Britain the exclusive trade to the colonies, till it is rendered
in a great measure free, seems to be the only expedient which can,
in all future times, deliver her from this danger, which can enable
her or even force her to withdraw some part of her capital from this
overgrown employment, and to turn it, though with less profit, towards
other employments; and which, by gradually diminishing one branch of
her industry and gradually increasing all the rest, can by degrees
restore all the different branches of it to that natural, healthful,
and proper proportion which perfect liberty necessarily establishes,
and which perfect liberty can alone preserve. To open the colony trade
all at once to all nations might not only occasion some transitory
inconveniency, but a great permanent loss to the greater part of those
whose industry or capital is at present engaged in it. The sudden loss
of the employment even of the ships which import the eighty-two
thousand hogsheads of tobacco, which are over and above the
consumption of Great Britain, might alone be felt very sensibly.
Such are the unfortunate effects of all the regulations of the
mercantile system! They not only introduce very dangerous disorders
into the state of the body politic, but disorders which it is often
difficult to remedy, without occasioning for a time at least, still
greater disorders. In what manner, therefore, the colony trade ought
gradually to be opened; what are the restraints which ought first, and
what are those which ought last to be taken away; or in what manner
the natural system of perfect liberty and justice ought gradually to
be restored, we must leave to the wisdom of future statesmen and
legislators to determine.

    Five different events, unforeseen and unthought of, have very
fortunately concurred to hinder Great Britain from feeling, so
sensibly as it was generally expected she would, the total exclusion
which has now taken place for more than a year (from the first of
December, 1774) from a very important branch of the colony trade, that
of the twelve associated provinces of North America. First, those
colonies, in preparing themselves for their non-importation agreement,
drained Great Britain completely of all the commodities which were fit
for their market; secondly, the extraordinary demand of the Spanish
Flota has, this year, drained Germany and the North of many
commodities, linen in particular, which used to come into competition,
even in the British market, with the manufactures of Great Britain;
thirdly, the peace between Russia and Turkey has occasioned an
extraordinary demand from the Turkey market, which, during the
distress of the country, and while a Russian fleet was cruising in the
Archipelago, had been very poorly supplied; fourthly, the demand of
the North of Europe for the manufactures of Great Britain has been
increasing from year to year for some time past; and fifthly, the late
partition and consequential pacification of Poland, by opening the
market of that great country, have this year added an extraordinary
demand from thence to the increasing demand of the North. These events
are all, except the fourth, in their nature transitory and accidental,
and the exclusion from so important a branch of the colony trade, if
unfortunately it should continue much longer, may still occasion
some degree of distress. This distress, however, as it will come on
gradually, will be felt much less severely than if it had come on
all at once; and, in the meantime, the industry and capital of the
country may find a new employment and direction, so as to prevent this
distress from ever rising to any considerable height.

    The monopoly of the colony trade, therefore, so far as it has
turned towards that trade a greater proportion of the capital of Great
Britain than what would otherwise have gone to it, has in all cases
turned it, from a foreign trade of consumption with a neighbouring
into one with a more distant country; in many cases, from a direct
foreign trade of consumption into a round-about one; and in some
cases, from all foreign trade of consumption into a carrying trade. It
has in all cases, therefore, turned it from a direction in which it
would have maintained a greater quantity of productive labour into one
in which it can maintain a much smaller quantity. By suiting, besides,
to one particular market only so great a part of the industry and
commerce of Great Britain, it has rendered the whole state of that
industry and commerce more precarious and less secure than if their
produce had been accommodated to a greater variety of markets.

    We must carefully distinguish between the effects of the colony
trade and those of the monopoly of that trade. The former are always
and necessarily beneficial; the latter always and necessarily hurtful.
But the former are so beneficial that the colony trade, though subject
to a monopoly, and notwithstanding the hurtful effects of that
monopoly, is still upon the whole beneficial, and greatly
beneficial; though a good deal less so than it otherwise would be.

    The effect of the colony trade in its natural and free state is to
open a great, though distant, market for such parts of the produce
of British industry as may exceed the demand of the markets nearer
home, of those of Europe, and of the countries which lie round the
Mediterranean Sea. In its natural and free state, the colony trade,
without drawing from those markets any part of the produce which had
ever been sent to them, encourages Great Britain to increase the
surplus continually by continually presenting new equivalents to be
exchanged for it. In its natural and free state, the colony trade
tends to increase the quantity of productive labour in Great
Britain, but without altering in any respect the direction of that
which had been employed there before. In the natural and free state of
the colony trade, the competition of all other nations would hinder
the rate of profit from rising above the common level either in the
new market or in the new employment. The new market, without drawing
anything from the old one, would create, if one may say so, a new
produce for its own supply; and that new produce would constitute a
new capital for carrying on the new employment, which in the same
manner would draw nothing from the old one.

    The monopoly of the colony trade, on the contrary, by excluding
the competition of other nations, and thereby raising the rate of
profit both in the new market and in the new employment, draws produce
from the old market and capital from the old employment. To augment
our share of the colony trade beyond what it otherwise would be is the
avowed purpose of the monopoly. If our share of that trade were to
be no greater with than it would have been without the monopoly, there
could have been no reason for establishing the monopoly. But
whatever forces into a branch of trade of which the returns are slower
and more distant than those of the greater part of other trades, a
greater proportion of the capital of any country than what of its
own accord would go to that branch, necessarily renders the whole
quantity of productive labour annually maintained there, the whole
annual produce of the land and labour of that country, less than
they otherwise would be. It keeps down the revenue of the
inhabitants of that country below what it would naturally rise to, and
thereby diminishes their power of accumulation. It not only hinders,
at all times, their capital from maintaining so great a quantity of
productive labour as it would otherwise maintain, but it hinders it
from increasing so fast as it would otherwise increase, and
consequently from maintaining a still greater quantity of productive
labour.

    The natural good effects of the colony trade, however, more than
counterbalance to Great Britain the bad effects of the monopoly, so
that, monopoly and all together, that trade, even as it carried on
at present, is not only advantageous, but greatly advantageous. The
new market and the new employment which are opened by the colony trade
are of much greater extent than that portion of the old market and
of the old employment which is lost by the monopoly. The new produce
and the new capital which has been created, if one may say so, by
the colony trade, maintain in Great Britain a greater quantity of
productive labour than what can have been thrown out of employment
by the revulsion of capital from other trades of which the returns are
more frequent. If the colony trade, however, even as it is carried
on at present, is advantageous to Great Britain, it is not by means of
the monopoly, but in spite of the monopoly.

    It is rather for the manufactured than for the rude produce of
Europe that the colony trade opens a new market. Agriculture is the
proper business of all new colonies; a business which the cheapness of
land renders more advantageous than any other. They abound, therefore,
in the rude produce of land, and instead of importing it from other
countries, they have generally a large surplus to export. In new
colonies, agriculture either draws hands from all other employments,
or keeps them from going to any other employment. There are few
hands to spare for the necessary, and none for the ornamental
manufactures. The greater part of the manufactures of both kinds
they find it cheaper to purchase of other countries than to make for
themselves. It is chiefly by encouraging the manufactures of Europe
that the colony trade indirectly encourages its agriculture. The
manufactures of Europe, to whom that trade gives employment,
constitute a new market for the produce of the land; and the most
advantageous of all markets, the home market for the corn and
cattle, for the bread and butcher's meat of Europe, is thus greatly
extended by means of the trade to America.

    But that the monopoly of the trade of populous and thriving
colonies is not alone sufficient to establish, or even to maintain
manufactures in any country, the examples of Spain and Portugal
sufficiently demonstrate. Spain and Portugal were manufacturing
countries before they had any considerable colonies. Since they had
the richest and most fertile in the world, they have both ceased to be
so.

    In Spain and Portugal the bad effects of the monopoly,
aggravated by other causes, have perhaps nearly overbalanced the
natural good effects of the colony trade. These causes seem to be
other monopolies of different kinds; the degradation of the value of
gold and silver below what it is in most other countries; the
exclusion from foreign markets by improper taxes upon exportation, and
the narrowing of the home market, by still more improper taxes upon
the transportation of goods from one part of the country to another;
but above all, that irregular and partial administration of justice,
which often protects the rich and powerful debtor from the pursuit
of his injured creditor, and which makes the industrious part of the
nation afraid to prepare goods for the consumption of those haughty
and great men to whom they dare not refuse to sell upon credit, and
from they are altogether uncertain of repayment.

    In England, on the contrary, the natural good effects of the
colony trade, assisted by other causes, have in a great measure
conquered the bad effects of the monopoly. These causes seem to be:
the general liberty of trade, which, notwithstanding some
restraints, is at least equal, perhaps superior, to what it is in
any other country; the liberty of exporting, duty free, almost all
sorts of goods which are the produce of domestic industry to almost
any foreign country; and what perhaps is of still greater
importance, the unbounded liberty of transporting them from any one
part of our own country to any other without being obliged to give any
account to any public office, without being liable to question or
examination of any kind; but above all, that equal and impartial
administration of justice which renders the rights of the meanest
British subject respectable to the greatest, and which, by securing to
every man the fruits of his own industry, gives the greatest and
most effectual encouragement to every sort of industry.

    If the manufactures of Great Britain, however, have been advanced,
as they certainly have, by the colony trade, it has not been by
means of the monopoly of that trade but in spite of the monopoly.
The effect of the monopoly has been, not to augment the quantity,
but to alter the quality and shape of a part of the manufactures of
Great Britain, and to accommodate to a market, from which the
returns are slow and distant, what would otherwise have been
accommodated to one from which the returns are frequent and near.
Its effect has consequently been to turn a part of the capital of
Great Britain from an employment in which it would have maintained a
greater quantity of manufacturing industry to one in which it
maintains a much smaller, and thereby to diminish, instead of
increasing, the whole quantity of manufacturing industry maintained in
Great Britain.

    The monopoly of the colony trade, therefore, like all the other
mean and malignant expedients of the mercantile system, depresses
the industry of all other countries, but chiefly that of the colonies,
without in the least increasing, but on the contrary diminishing
that of the country in whose favour it is established.

    The monopoly hinders the capital of that country, whatever may
at any particular time be the extent of that capital, from maintaining
so great a quantity of productive labour as it would otherwise
maintain, and from affording so great a revenue to the industrious
inhabitants as it would otherwise afford. But as capital can be
increased only by savings from revenue, the monopoly, by hindering
it from affording so great a revenue as it would otherwise afford,
necessarily hinders it from increasing so fast as it would otherwise
increase, and consequently from maintaining a still greater quantity
of productive labour, and affording a still greater revenue to the
industrious inhabitants of that country. One great original source
of revenue, therefore, the wages of labour, the monopoly must
necessarily have rendered at all times less abundant than it otherwise
would have been.

    By raising the rate of mercantile profit, the monopoly discourages
the improvement of land. The profit of improvement depends upon the
difference between what the land actually produces, and what, by the
application of a certain capital, it can be made to produce. If this
difference affords a greater profit than what can be drawn from an
equal capital in any mercantile employment, the improvement of land
will draw capital from all mercantile employments. If the profit is
less, mercantile employments will draw capital from the improvement of
land. Whatever, therefore, raises the rate of mercantile profit,
either lessens the superiority or increases the inferiority of the
profit of improvement; and in the one case hinders capital from
going to improvement, and in the other draws capital from it. But by
discouraging improvement, the monopoly necessarily retards the natural
increase of another great original source of revenue, the rent of
land. By raising the rate of profit, too, the monopoly necessarily
keeps up the market rate of interest higher than it otherwise would
be. But the price of land in proportion to the rent which it
affords, the number of years purchase which is commonly paid for it,
necessarily falls as the rate of interest rises, and rises as the rate
of interest falls. The monopoly, therefore, hurts the interest of
the landlord two different ways, by retarding the natural increase,
first, of his rent, and secondly, of the price which he would get
for his land in proportion to the rent which it affords.

    The monopoly indeed raises the rate of mercantile profit, and
thereby augments somewhat the gain of our merchants. But as it
obstructs the natural increase of capital, it tends rather to diminish
than to increase the sum total of the revenue which the inhabitants of
the country derive from the profits of stock; a small profit upon a
great capital generally affording a greater revenue than a great
profit upon a small one. The monopoly raises the rate of profit, but
it hinders the sum of profit from rising so high as it otherwise would
do.

    All the original sources of revenue, the wages of labour, the rent
of land, and the profits of stock, the monopoly renders much less
abundant than they otherwise would be. To promote the little
interest of one little order of men in one country, it hurts the
interest of all other orders of men in that country, and of all men in
all other countries.

    It is solely by raising the ordinary rate of profit that the
monopoly either has proved or could prove advantageous to any one
particular order of men. But besides all the bad effects to the
country in general, which have already been mentioned as necessarily
resulting from a high rate of profit, there is one more fatal,
perhaps, than all these put together, but which, if we may judge
from experience, is inseparably connected with it. The high rate of
profit seems everywhere to destroy that parsimony which in other
circumstances is natural to the character of the merchant. When
profits are high that sober virtue seems to be superfluous and
expensive luxury to suit better the affluence of his situation. But
the owners of the great mercantile capitals are necessarily the
leaders and conductors of the whole industry of every nation, and
their example has a much greater influence upon the manners of the
whole industrious part of it than that of any other order of men. If
his employer is attentive and parsimonious, the workman is very likely
to be so too; but if the master is dissolute and disorderly, the
servant who shapes his work according to the pattern which his
master prescribes to him will shape his life too according to the
example which he sets him. Accumulation is thus prevented in the hands
of all those who are naturally the most disposed to accumulate, and
the funds destined for the maintenance of productive labour receive no
augmentation from the revenue of those who ought naturally to
augment them the most. The capital of the country, instead of
increasing, gradually dwindles away, and the quantity of productive
labour maintained in it grows every day less and less. Have the
exorbitant profits of the merchants of Cadiz and Lisbon augmented
the capital of Spain and Portugal? Have they alleviated the poverty,
have they promoted the industry of those two beggarly countries?
Such has been the tone of mercantile expense in those two trading
cities that those exorbitant profits, far from augmenting the
general capital of the country, seem scarce to have been sufficient to
keep up the capitals upon which they were made. Foreign capitals are
every day intruding themselves, if I may say so, more and more into
the trade of Cadiz and Lisbon. It is to expel those foreign capitals
from a trade which their own grows every day more and more
insufficient for carrying on that the Spaniards and Portuguese
endeavour every day to straighten more and more the galling bands of
their absurd monopoly. Compare the mercantile manners of Cadiz and
Lisbon with those of Amsterdam, and you will be sensible how
differently the conduct and character of merchants are affected by the
high and by the low profits of stock. The merchants of London, indeed,
have not yet generally become such magnificent lords as those of Cadiz
and Lisbon, but neither are they in general such attentive and
parsimonious burghers as those of Amsterdam. They are supposed,
however, many of them, to be a good deal richer than the greater
part of the former, and not quite so rich as many of the latter. But
the rate of their profit is commonly much lower than that of the
former, and a good deal higher than that of the latter. Light come,
light go, says the proverb; and the ordinary tone of expense seems
everywhere to be regulated, not so much according to the real
ability of spending, as to the supposed facility of getting money to
spend.

    It is thus that the single advantage which the monopoly procures
to a single order of men is in many different ways hurtful to the
general interest of the country.

    To found a great empire for the sole purpose of raising up a
people of customers may at first sight appear a project fit only for a
nation of shopkeepers. It is, however, a project altogether unfit
for a nation of shopkeepers; but extremely fit for a nation whose
government is influenced by shopkeepers. Such statesmen, and such
statesmen only, are capable of fancying that they will find some
advantage in employing the blood and treasure of their fellow-citizens
to found and maintain such an empire. Say to a shopkeeper, "Buy me a
good estate, and I shall always buy my clothes at your shop, even
though I should pay somewhat dearer than what I can have them for at
other shops"; and you will not find him very forward to embrace your
proposal. But should any other person buy you such an estate, the
shopkeeper would be much obliged to your benefactor if he would enjoin
you to buy all your clothes at his shop. England purchased for some of
her subjects, who found themselves uneasy at home, a great estate in a
distant country. The price, indeed, was very small, and instead of
thirty years' purchase, the ordinary price of land in the present
times, it amounted to little more than the expense of the different
equipments which made the first discovery, reconnoitred the coast, and
took a fictitious possession of the country. The land was good and
of great extent, and the cultivators having plenty of good ground to
work upon, and being for some time at liberty to sell their produce
where they pleased, became in the course of little more than thirty or
forty years (between 1620 and 1660) so numerous and thriving a
people that the shopkeepers and other traders of England wished to
secure to themselves the monopoly of their custom. Without pretending,
therefore, that they had paid any part, either of the original
purchase-money, or of the subsequent expense of improvement, they
petitioned the Parliament that the cultivators of America might for
the future be confined to their shop; first, for buying all the
goods which they wanted from Europe; and, secondly, for selling all
such parts of their own produce as those traders might find it
convenient to buy. For they did not find it convenient to buy every
part of it. Some parts of it imported into England might have
interfered with some of the trades which they themselves carried on at
home. Those particular parts of it, therefore, they were willing
that the colonists should sell where they could- the farther off the
better; and upon that account purposed that their market should be
confined to the countries south of Cape Finisterre. A clause in the
famous Act of Navigation established this truly shopkeeper proposal
into a law.

    The maintenance of this monopoly has hitherto been the
principal, or more properly perhaps the sole end and purpose of the
dominion which Great Britain assumes over her colonies. In the
exclusive trade, it is supposed, consists the great advantage of
provinces, which have never yet afforded either revenue or military
force for the support of the civil government, or the defence of the
mother country. The monopoly is the principal badge of their
dependency, and it is the sole fruit which has hitherto been
gathered from that dependency. Whatever expense Great Britain has
hitherto laid out in maintaining this dependency has really been
laid out in order to support this monopoly. The expense of the
ordinary peace establishment of the colonies amounted, before the
commencement of the present disturbances, to the pay of twenty
regiments of foot; to the expense of the artillery, stores, and
extraordinary provisions with which it was necessary to supply them;
and to the expense of a very considerable naval force which was
constantly kept up, in order to guard, from the smuggling vessels of
other nations, the immense coast of North America, and that of our
West Indian islands. The whole expense of this peace establishment was
a charge upon the revenue of Great Britain, and was, at the same time,
the smallest part of what the dominion of the colonies has cost the
mother country. If we would know the amount of the whole, we must
add to the annual expense of this peace establishment the interest
of the sums which, in consequence of her considering her colonies as
provinces subject to her dominion, Great Britain has upon different
occasions laid out upon their defence. We must add to it, in
particular, the whole expense of the late war, and a great part of
that of the war which preceded it. The late war was altogether a
colony quarrel, and the whole expense of it, in whatever part of the
world it may have been laid out, whether in Germany or the East
Indies, ought justly to be stated to the account of the colonies. It
amounted to more than ninety millions sterling, including not only the
new debt which was contracted, but the two shillings in the pound
additional land tax, and the sums which were every year borrowed
from the sinking fund. The Spanish war, which began in 1739, was
principally a colony quarrel. Its principal object was to prevent
the search of the colony ships which carried on a contraband trade
with the Spanish Main. This whole expense is, in reality, a bounty
which has been given in order to support a monopoly. The pretended
purpose of it was to encourage the manufactures, and to increase the
commerce of Great Britain. But its real effect has been to raise the
rate of mercantile profit, and to enable our merchants to turn into
a branch of trade, of which the returns are more slow and distant than
those of the greater part of other trades, a greater proportion of
their capital than they otherwise would have done; two events which,
if a bounty could have prevented, it might perhaps have been very well
worth while to give such a bounty.

    Under the present system of management, therefore, Great Britain
derives nothing but loss from the dominion which she assumes over
her colonies.

    To propose that Great Britain should voluntarily give up all
authority over her colonies, and leave them to elect their own
magistrates, to enact their own laws, and to make peace and war as
they might think proper, would be to propose such a measure as never
was, and never will be adopted, by any nation in the world. No
nation ever voluntarily gave up the dominion of any province, how
troublesome soever it might be to govern it, and how small soever
the revenue which it afforded might be in proportion to the expense
which it occasioned. Such sacrifices, though they might frequently
be agreeable to the interest, are always mortifying to the pride of
every nation, and what is perhaps of still greater consequence, they
are always contrary to the private interest of the governing part of
it, who would thereby be deprived of the disposal of many places of
trust and profit, of many opportunities of acquiring wealth and
distinction, which the possession of the most turbulent, and, to the
great body of the people, the most unprofitable province seldom
fails to afford. The most visionary enthusiast would scarce be capable
of proposing such a measure with any serious hopes at least of its
ever being adopted. If it was adopted, however, Great Britain would
not only be immediately freed from the whole annual expense of the
peace establishment of the colonies, but might settle with them such a
treaty of commerce as would effectually secure to her a free trade,
more advantageous to the great body of the people, though less so to
the merchants, than the monopoly which she at present enjoys. By
thus parting good friends, the natural affection of the colonies to
the mother country which, perhaps, our late dissensions have well nigh
extinguished, would quickly revive. It might dispose them not only
to respect, for whole centuries together, that treaty of commerce
which they had concluded with us at parting, but to favour us in war
as well as in trade, and, instead of turbulent and factious
subjects, to become our most faithful, affectionate, and generous
allies; and the same sort of parental affection on the one side, and
filial respect on the other, might revive between Great Britain and
her colonies, which used to subsist between those of ancient Greece
and the mother city from which they descended.

    In order to render any province advantageous to the empire to
which it belongs, it ought to afford, in time of peace, a revenue to
the public sufficient not only for defraying the whole expense of
its own peace establishment, but for contributing its proportion to
the support of the general government of the empire. Every province
necessarily contributes, more or less, to increase the expense of that
general government. If any particular province, therefore, does not
contribute its share towards defraying this expense, an unequal burden
must be thrown upon some other part of the empire. The extraordinary
revenue, too, which every province affords to the public in time of
war, ought, from parity of reason, to bear the same proportion to
the extraordinary revenue of the whole empire which its ordinary
revenue does in time of peace. That neither the ordinary nor
extraordinary revenue which Great Britain derives from her colonies,
bears this proportion to the whole revenue of the British empire, will
readily be allowed. The monopoly, it has been supposed, indeed, by
increasing the private revenue of the people of Great Britain, and
thereby enabling them to pay greater taxes, compensates the deficiency
of the public revenue of the colonies. But this monopoly, I have
endeavoured to show, though a very grievous tax upon the colonies, and
though it may increase the revenue of a particular order of men in
Great Britain, diminishes instead of increasing that of the great body
of the people; and consequently diminishes instead of increasing the
ability of the great body of the people to pay taxes. The men, too,
whose revenue the monopoly increases, constitute a particular order,
which it is both absolutely impossible to tax beyond the proportion of
other orders, and extremely impolitic even to attempt to tax beyond
that proportion, as I shall endeavour to show in the following book.
No particular resource, therefore, can be drawn from this particular
order.

    The colonies may be taxed either by their own assemblies, or by
the Parliament of Great Britain.

    That the colony assemblies can ever be so managed as to levy
upon their constituents a public revenue sufficient not only to
maintain at all times their own civil and military establishment,
but to pay their proper proportion of the expense of the general
government of the British empire seems not very probable. It was a
long time before even the Parliament of England, though placed
immediately under the eye of the sovereign, could be brought under
such a system of management, or could be rendered sufficiently liberal
in their grants for supporting the civil and military establishments
even of their own country. It was only by distributing among the
particular Members of Parliament a great part either of the offices,
or of the disposal of the offices arising from this civil and military
establishment, that such a system of management could be established
even with regard to the Parliament of England. But the distance of the
colony assemblies from the eye of the sovereign, their number, their
dispersed situation, and their various constitutions, would render
it very difficult to manage them in the same manner, even though the
sovereign had the same means of doing it; and those means are wanting.
It would be absolutely impossible to distribute among all the
leading members of all the colony assemblies such a share, either of
the offices or of the disposal of the offices arising from the general
government of the British empire, as to dispose them to give up
their popularity at home, and to tax their constituents for the
support of that general government, of which almost the whole
emoluments were to be divided among people who were strangers to them.
The unavoidable ignorance of administration, besides, concerning the
relative importance of the different members of those different
assemblies, the offences which must frequently be given, the
blunders which must constantly be committed in attempting to manage
them in this manner, seems to render such a system of management
altogether impracticable with regard to them.

    The colony assemblies, besides, cannot be supposed the proper
judges of what is necessary for the defence and support of the whole
empire. The care of that defence and support is not entrusted to them.
It is not their business, and they have no regular means of
information concerning it. The assembly of a province, like the vestry
of a parish, may judge very properly concerning the affairs of its own
particular district; but can have no proper means of judging
concerning those of the whole empire. It cannot even judge properly
concerning the proportion which its own province bears to the whole
empire; or concerning the relative degree of its wealth and importance
compared with the other provinces; because those other provinces are
not under the inspection and superintendency of the assembly of a
particular province. What is necessary for the defence and support
of the whole empire, and in what proportion each part ought to
contribute, can be judged of only by that assembly which inspects
and superintends the affairs of the whole empire.

    It has been proposed, accordingly, that the colonies should be
taxed by requisition, the Parliament of Great Britain determining
the sum which each colony ought to pay, and the provincial assembly
assessing and levying it in the way that suited best the circumstances
of the province. What concerned the whole empire would in this way
be determined by the assembly which inspects and superintends the
affairs of the whole empire; and the provincial affairs of each colony
might still be regulated by its own assembly. Though the colonies
should in this case have no representatives in the British Parliament,
yet, if we may judge by experience, there is no probability that the
Parliamentary requisition would be unreasonable. The Parliament of
England has not upon any occasion shown the smallest disposition to
overburden those parts of the empire which are not represented in
Parliament. The islands of Guernsey and Jersey, without any means of
resisting the authority of Parliament, are more lightly taxed than any
part of Great Britain. Parliament in attempting to exercise its
supposed right, whether well or ill grounded, of taxing the
colonies, has never hitherto demanded of them anything which even
approached to a just proportion to what was paid by their fellow
subjects at home. If the contribution of the colonies, besides, was to
rise or fall in proportion to the rise or fall of the land tax,
Parliament could not tax them without taxing at the same time its
own constituents, and the colonies might in this case be considered as
virtually represented in Parliament.

    Examples are not wanting of empires in which all the different
provinces are not taxed, if I may be allowed the expression, in one
mass; but in which the sovereign regulates the sum which each province
ought to pay, and in some provinces assesses and levies it as he
thinks proper; while in others, he leaves it to be assessed and levied
as the respective states of each province shall determine. In some
provinces of France, the king not only imposes what taxes he thinks
proper, but assesses and levies them in the way he thinks proper. From
others he demands a certain sum, but leaves it to the states of each
province to assess and levy that sum as they think proper. According
to the scheme of taxing by requisition, the Parliament of Great
Britain would stand nearly in the same situation towards the colony
assemblies as the King of France does towards the states of those
provinces which still enjoy the privilege of having states of their
own, the provinces of France which are supposed to be the best
governed.

    But though, according to this scheme, the colonies could have no
just reason to fear that their share of the public burdens should ever
exceed the proper proportion to that of their fellow-citizens at home;
Great Britain might have just reason to fear that it never would
amount to that proper proportion. The Parliament of Great Britain
has not for some time past had the same established authority in the
colonies, which the French king has in those provinces of France which
still enjoy the privilege of having states of their own. The colony
assemblies, if they were not very favourably disposed (and unless more
skilfully managed than they ever have been hitherto, they are not very
likely to be so) might still find many pretences for evading or
rejecting the most reasonable requisitions of Parliament. A French war
breaks out, we shall suppose; ten millions must immediately be
raised in order to defend the seat of the empire. This sum must be
borrowed upon the credit of some Parliamentary fund mortgaged for
paying the interest. Part of this fund Parliament proposes to raise by
a tax to be levied in Great Britain, and part of it by a requisition
to all the different colony assemblies of America and the West Indies.
Would people readily advance their money upon the credit of a fund,
which partly depended upon the good humour of all those assemblies,
far distant from the seat of the war, and sometimes, perhaps, thinking
themselves not much concerned in the event of it? Upon such a fund
no more money would probably be advanced than what the tax to be
levied in Great Britain might be supposed to answer for. The whole
burden of the debt contracted on account of the war would in this
manner fall, as it always has done hitherto, upon Great Britain;
upon a part of the empire, and not upon the whole empire. Great
Britain is, perhaps, since the world began, the only state which, as
it has extended its empire, has only increased its expense without
once augmenting its resources. Other states have generally disburdened
themselves upon their subject and subordinate provinces of the most
considerable part of the expense of defending the empire. Great
Britain has hitherto suffered her subject and subordinate provinces to
disburden themselves upon her of almost this whole expense. In order
to put Great Britain upon a footing of equality with her own colonies,
which the law has hitherto supposed to be subject and subordinate,
it seems necessary, upon the scheme of taxing them by Parliamentary
requisition, that Parliament should have some means of rendering its
requisitions immediately effectual, in case the colony assemblies
should attempt to evade or reject them; and what those means are, it
is not very easy to conceive, and it has not yet been explained.

    Should the Parliament of Great Britain, at the same time, be
ever fully established in the right of taxing the colonies, even
independent of the consent of their own assemblies, the importance
of those assemblies would from that moment be at an end, and with
it, that of all the leading men of British America. Men desire to have
some share in the management of public affairs chiefly on account of
the importance which it gives them. Upon the power which the greater
part of the leading men, the natural aristocracy of every country,
have of preserving or defending their respective importance, depends
the stability and duration of every system of free government. In
the attacks which those leading men are continually making upon the
importance of one another, and in the defence of their own, consists
the whole play of domestic faction and ambition. The leading men of
America, like those of all other countries, desire to preserve their
own importance. They feel, or imagine, that if their assemblies, which
they are fond of calling parliaments, and of considering as equal in
authority to the Parliament of Great Britain, should be so far
degraded as to become the humble ministers and executive officers of
that Parliament, the greater part of their own importance would be
at end. They have rejected, therefore, the proposal of being taxed
by Parliamentary requisition, and like other ambitious and
high-spirited men, have rather chosen to draw the sword in defence
of their own importance.

    Towards the declension of the Roman republic, the allies of
Rome, who had borne the principal burden of defending the state and
extending the empire, demanded to be admitted to all the privileges of
Roman citizens. Upon being refused, the social war broke out. During
the course of that war, Rome granted those privileges to the greater
part of them one by one, and in proportion as they detached themselves
from the general confederacy. The Parliament of Great Britain
insists upon taxing the colonies; and they refuse to be taxed by a
Parliament in which they are not represented. If to each colony, which
should detach itself from the general confederacy, Great Britain
should allow such a number of representatives as suited the proportion
of what is contributed to the public revenue of the empire, in
consequence of its being subjected to the same taxes, and in
compensation admitted to the same freedom of trade with its
fellow-subjects at home; the number of its representatives to be
augmented as the proportion of its contribution might afterwards
augment; a new method of acquiring importance, a new and more dazzling
object of ambition would be presented to the leading men of each
colony. Instead of piddling for the little prizes which are to be
found in what may be called the paltry raffle of colony faction;
they might then hope, from the presumption which men naturally have in
their own ability and good fortune, to draw some of the great prizes
which sometimes come from the wheel of the great state lottery of
British polities. Unless this or some other method is fallen upon, and
there seems to be none more obvious than this, of preserving the
importance and of gratifying the ambition of the leading men of
America, it is not very probable that they will ever voluntarily
submit to us; and we ought to consider that the blood which must be
shed in forcing them to do so is, every drop of it, blood either of
those who are, or of those whom we wish to have for our fellow
citizens. They are very weak who flatter themselves that, in the state
to which things have come, our colonies will be easily conquered by
force alone. The persons who now govern the resolutions of what they
call their Continental Congress, feel in themselves at this moment a
degree of importance which, perhaps, the greatest subjects in Europe
scarce feel. From shopkeepers, tradesmen, and attornies, they are
become statesmen and legislators, and are employed in contriving a new
form of government for an extensive empire, which, they flatter
themselves, will become, and which, indeed, seems very likely to
become, one of the greatest and most formidable that ever was in the
world. Five hundred different people, perhaps, who in different ways
act immediately under the Continental Congress; and five hundred
thousand, perhaps, who act under those five hundred, all feel in the
same manner a proportionable rise in their own importance. Almost
every individual of the governing party in America fills, at present
in his own fancy, a station superior, not only to what he had ever
filled before, but to what he had ever expected to fill; and unless
some new object of ambition is presented either to him or to his
leaders, if he has the ordinary spirit of a man, he will die in
defence of that station.

    It is a remark of the president Henaut, that we now read with
pleasure the account of many little transactions of the Ligue, which
when they happened were not perhaps considered as very important
pieces of news. But every man then, says he, fancied himself of some
importance; and the innumerable memoirs which have come down to us
from those times, were, the greater part of them, written by people
who took pleasure in recording and magnifying events in which, they
flattered themselves, they had been considerable actors. How
obstinately the city of Paris upon that occasion defended itself, what
a dreadful famine it supported rather than submit to the best and
afterwards to the most beloved of all the French kings, is well known.
The greater part of the citizens, or those who governed the greater
part of them, fought in defence of their own importance, which they
foresaw was to be at an end whenever the ancient government should
be re-established. Our colonies, unless they can be induced to consent
to a union, are very likely to defend themselves against the best of
all mother countries as obstinately as the city of Paris did against
one of the best of kings.

    The idea of representation was unknown in ancient times. When
the people of one state were admitted to the right of citizenship in
another, they had no other means of exercising that right but by
coming in a body to vote and deliberate with the people of that
other state. The admission of the greater part of the inhabitants of
Italy to the privileges of Roman citizens completely ruined the
Roman republic. It was no longer possible to distinguish between who
was and who was not a Roman citizen. No tribe could know its own
members. A rabble of any kind could be introduced into the
assemblies of the people, could drive out the real citizens, and
decide upon the affairs of the republic as if they themselves had been
such. But though America were to send fifty or sixty new
representatives to Parliament, the doorkeeper of the House of
Commons could not find any great difficulty in distinguishing
between who was and who was not a member. Though the Roman
constitution, therefore, was necessarily ruined by the union of Rome
with the allied states of Italy, there is not the least probability
that the British constitution would be hurt by the union of Great
Britain with her colonies. That constitution, on the contrary, would
be completed by it, and seems to be imperfect without it. The assembly
which deliberates and decides concerning the affairs of every part
of the empire, in order to be properly informed, ought certainly to
have representatives from every part of it That this union, however,
could be easily effectuated, or that difficulties and great
difficulties might not occur in the execution, I do not pretend. I
have yet heard of none, however, which appear insurmountable. The
principal perhaps arise, not from the nature of things, but from the
prejudices and opinions of the people both on this and on the other
side of the Atlantic.

    We, on this side of the water, are afraid lest the multitude of
American representatives should overturn the balance of the
constitution, and increase too much either the influence of the
crown on the one hand, or the force of the democracy on the other. But
if the number of American representatives were to be in proportion
to the produce of American taxation, the number of people to be
managed would increase exactly in proportion to the means of
managing them; and the means of managing to the number of people to be
managed. The monarchical and democratical parts of the constitution
would, after the union, stand exactly in the same degree of relative
force with regard to one another as they had done before.

    The people on the other side of the water are afraid lest their
distance from the seat of government might expose them to many
oppressions. But their representatives in Parliament, of which the
number ought from the first to be considerable, would easily be able
to protect them from all oppression. The distance could not much
weaken the dependency of the representative upon the constituent,
and the former would still feel that he owed his seat in Parliament,
and all the consequences which he derived from it, to the good will of
the latter. It would be the interest of the former, therefore, to
cultivate that good will by complaining, with all the authority of a
member of the legislature, of every outrage which any civil or
military officer might be guilty of in those remote parts of the
empire. The distance of America from the seat of government,
besides, the natives of that country might flatter themselves, with
some appearance of reason too, would not be of very long
continuance. Such has hitherto been the rapid progress of that country
in wealth, population, and improvement, that in the course of little
more than a century, perhaps, the produce of American might exceed
that of British taxation. The seat of the empire would then
naturally remove itself to that part of the empire which contributed
most to the general defence and support of the whole.

    The discovery of America, and that of a passage to the East Indies
by the Cape of Good Hope, are the two greatest and most important
events recorded in the history of mankind. Their consequences have
already been very great; but, in the short period of between two and
three centuries which has elapsed since these discoveries were made,
it is impossible that the whole extent of their consequences can
have been seen. What benefits or what misfortunes to mankind may
hereafter result from those great events, no human wisdom can foresee.
By uniting, in some measure, the most distant parts of the world, by
enabling them to relieve one another's wants, to increase one
another's enjoyments, and to encourage one another's industry, their
general tendency would seem to be beneficial. To the natives
however, both of the East and West Indies, all the commercial benefits
which can have resulted from those events have been sunk and lost in
the dreadful misfortunes which they have occasioned. These
misfortunes, however, seem to have arisen rather from accident than
from anything in the nature of those events themselves. At the
particular time when these discoveries were made, the superiority of
force happened to be so great on the side of the Europeans that they
were enabled to commit with impunity every sort of injustice in
those remote countries. Hereafter, perhaps, the natives of those
countries may grow stronger, or those of Europe may grow weaker, and
the inhabitants of all the different quarters of the world may
arrive at that equality of courage and force which, by inspiring
mutual fear, can alone overawe the injustice of independent nations
into some sort of respect for the rights of one another. But nothing
seems more likely to establish this equality of force than that mutual
communication of knowledge and of all sorts of improvements which an
extensive commerce from all countries to all countries naturally, or
rather necessarily, carries along with it.

    In the meantime one of the principal effects of those
discoveries has been to raise the mercantile system to a degree of
splendour and glory which it could never otherwise have attained to.
It is the object of that system to enrich a great nation rather by
trade and manufactures than by the improvement and cultivation of
land, rather by the industry of the towns than by that of the country.
But, in consequence of those discoveries, the commercial towns of
Europe, instead of being the manufacturers and carriers for but a very
small part of the world (that part of Europe which is washed by the
Atlantic Ocean, and the countries which lie round the Baltic and
Mediterranean seas), have now become the manufacturers for the
numerous and thriving cultivators of America, and the carriers, and in
some respects the manufacturers too, for almost all the different
nations of Asia, Africa, and America. Two new worlds have been
opened to their industry, each of them much greater and more extensive
than the old one, and the market of one of them growing still
greater and greater every day.

    The countries which possess the colonies of America, and which
trade directly to the East Indies, enjoy, indeed, the whole show and
splendour of this great commerce. Other countries, however,
notwithstanding all the invidious restraints by which it is meant to
exclude them, frequently enjoy a greater share of the real benefit
of it. The colonies of Spain and Portugal, for example, give more real
encouragement to the industry of other countries than to that of Spain
and Portugal. In the single article of linen alone the consumption
of those colonies amounts, it is said, but I do not pretend to warrant
the quantity, to more than three millions sterling a year. But this
great consumption is almost entirely supplied by France, Flanders,
Holland, and Germany. Spain and Portugal furnish but a small part of
it. The capital which supplies the colonies with this great quantity
of linen is annually distributed among, and furnishes a revenue to the
inhabitants of, those other countries. The profits of it only are
spent in Spain and Portugal, where they help to support the
sumptuous profusion of the merchants of Cadiz and Lisbon.

    Even the regulations by which each nation endeavours to secure
to itself the exclusive trade of its own colonies are frequently
more hurtful to the countries in favour of which they are
established than to those against which they are established. The
unjust oppression of the industry of other countries falls back, if
I may say so, upon the heads of the oppressors, and crushes their
industry more than it does that of those other countries. By those
regulations for example, the merchant of Hamburg must send the linen
which he destines for the American market to London, and he must bring
back from thence the tobacco which he destines for the German
market, because he can neither send the one directly to America nor
bring back the other directly from thence. By this restraint he is
probably obliged to sell the one somewhat cheaper, and to sell the one
somewhat cheaper, and to buy the other somewhat dearer than he
otherwise might have done; and his profits are probably somewhat
abridged by means of it. In this trade, however, between Hamburg and
London, he certainly receives the returns of his capital much more
quickly than he could possibly have done in the direct trade to
America, even though we should suppose, what is by no means the
case, that the payments of America were as punctual as those of
London. In the trade, therefore, to which those regulations confine
the merchant of Hamburg, his capital can keep in constant employment a
much greater quantity of German industry than it possibly could have
done in the trade from which he is excluded. Though the one
employment, therefore, may to him perhaps be less profitable than
the other, it cannot be less advantageous to his country. It is
quite otherwise with the employment into which the monopoly
naturally attracts, if I may say so, the capital of the London
merchant. That employment may, perhaps, be more profitable to him than
the greater part of other employments, but, on account of the slowness
of the returns, it cannot be more advantageous to his country.

    After all the unjust attempts, therefore, of every country in
Europe to engross to itself the whole advantage of the trade of its
own colonies, no country has yet been able to engross itself
anything but the expense of supporting in time of peace and of
defending in time of war the oppressive authority which it assumes
over them. The inconveniencies resulting from the possession of its
colonies, every country has engrossed to itself completely. The
advantages resulting from their trade it has been obliged to share
with many other countries.

    At first sight, no doubt, the monopoly of the great commerce of
America naturally seems to be an acquisition of the highest value.
To the undiscerning eye of giddy ambition, it naturally presents
itself amidst the confused scramble of politics and war as a very
dazzling object to fight for. The dazzling splendour of the object,
however, the immense greatness of the commerce, is the very quality
which renders the monopoly of it hurtful, or which makes one
employment, in its own nature necessarily less advantageous to the
country than the greater part of other employments, absorb a much
greater proportion of the capital of the country than what would
otherwise have gone to it.

    The mercantile stock of every country, it has been shown in the
second book, naturally seeks, if one may say so, the employment most
advantageous to that country. If it is employed in the carrying trade,
the country to which it belongs becomes the emporium of the goods of
all the countries whose trade that stock carries on. But the owner
of that stock necessarily wishes to dispose of as great a part of
those goods as he can at home. He thereby saves himself the trouble,
risk, and expense of exportation, and he will upon that account be
glad to sell them at home, not only for a much smaller price, but with
somewhat a smaller profit than he might expect to make by sending them
abroad. He naturally, therefore, endeavours as much as he can to
turn his carrying trade into a foreign trade of consumption. If his
stock, again, is employed in a foreign trade of consumption, he
will, for the same reason, be glad to dispose of at home as great a
part as he can of the home goods, which he collects in order to export
to some foreign market, and he will thus endeavour, as much as he can,
to turn his foreign trade of consumption into a home trade. The
mercantile stock of every country naturally courts in this manner
the near, and shuns the distant employment; naturally courts the
employment in which the returns are frequent, and shuns that in
which they are distant and slow; naturally courts the employment in
which it can maintain the greatest quantity of productive labour in
the country to which it belongs, or in which its owner resides, and
shuns that in which it can maintain there the smallest quantity. It
naturally courts the employment which in ordinary cases is most
advantageous, and shuns that which in ordinary cases is least
advantageous to that country.

    But if in any of those distant employments, which in ordinary
cases are less advantageous to the country, the profit should happen
to rise somewhat higher than what is sufficient to balance the natural
preference which is given to nearer employments, this superiority of
profit will draw stock from those nearer employments, till the profits
of all return to their proper level. This superiority of profit,
however, is a proof that, in the actual circumstances of the
society, those distant employments are somewhat understocked in
proportion to other employments, and that the stock of the society
is not distributed in the properest manner among all the different
employments carried on in it. It is a proof that something is either
bought cheaper or sold dearer than it ought to be, and that some
particular class of citizens is more or less oppressed either by
paying more or by getting less than what is suitable to that
equality which ought to take place, and which naturally does take
place among all the different classes of them. Though the same capital
never will maintain the same quantity of productive labour in a
distant as in a near employment, yet a distant employment may be as
necessary for the welfare of the society as a near one; the goods
which the distant employment deals in being necessary, perhaps, for
carrying on many of the nearer employments. But if the profits of
those who deal in such goods are above their proper level, those goods
will be sold dearer than they ought to be, or somewhat above their
natural price, and all those engaged in the nearer employments will be
more or less oppressed by this high price. Their interest,
therefore, in this case requires that some stock should be withdrawn
from those nearer employments, and turned towards that distant one, in
order to reduce its profits to their proper level, and the price of
the goods which it deals in to their natural price. In this
extraordinary case, the public interest requires that some stock
should be withdrawn from those employments which in ordinary cases are
more advantageous, and turned towards one which in ordinary cases is
less advantageous to the public; and in this extraordinary case the
natural interests and inclinations of men coincide as exactly with the
public interest as in all other ordinary cases, and lead them to
withdraw stock from the near, and to turn it towards the distant
employment.

    It is thus that the private interests and passions of
individuals naturally dispose them to turn their stocks towards the
employments which in ordinary cases are most advantageous to the
society. But if from this natural preference they should turn too much
of it towards those employments, the fall of profit in them and the
rise of it in all others immediately dispose them to alter this faulty
distribution. Without any intervention of law, therefore, the
private interests and passions of men naturally lead them to divide
and distribute the stock of every society among all the different
employments carried on in it as nearly as possible in the proportion
which is most agreeable to the interest of the whole society.

    All the different regulations of the mercantile system necessarily
derange more or less this natural and most advantageous distribution
of stock. But those which concern the trade to America and the East
Indies derange it perhaps more than any other, because the trade to
those two great continents absorbs a greater quantity of stock than
any two other branches of trade. The regulations, however, by which
this derangement is effected in those two different branches of
trade are not altogether the same. Monopoly is the great engine of
both; but it is a different sort of monopoly. Monopoly of one kind
or another, indeed, seems to be the sole engine of the mercantile
system.

    In the trade to America every nation endeavours to engross as much
as possible the whole market of its own colonies by fairly excluding
all other nations from any direct trade to them. During the greater
part of the sixteenth century, the Portuguese endeavoured to manage
the trade to the East Indies in the same manner, by claiming the
sole right of sailing in the Indian seas, on account of the merit of
having first found out the road to them. The Dutch still continue to
exclude all other European nations from any direct trade to their
spice islands. Monopolies of this kind are evidently established
against all other European nations, who are thereby not only
excluded from a trade to which it might be convenient for them to turn
some part of their stock, but are obliged to buy the goods which
that trade deals in somewhat dearer than if they could import them
themselves directly from the countries which produce them.

    But since the fall of the power of Portugal, no European nation
has claimed the exclusive right of sailing in the Indian seas, of
which the principal ports are now open to the ships of all European
nations. Except in Portugal, however, and within these few years in
France, the trade to the East Indies has in every European country
been subjected to an exclusive company. Monopolies of this kind are
properly established against the very nation which erects them. The
greater part of that nation are thereby not only excluded from a trade
to which it might be convenient for them to turn some part of their
stock, but are obliged to buy the goods which that trade deals
somewhat dearer than if it was open and free to all their
countrymen. Since the establishment of the English East India Company,
for example, the other inhabitants of England, over and above being
excluded from the trade, must have paid in the price of the East India
goods which they have consumed, not only for all the extraordinary
profits which the company may have made upon those goods in
consequence of their monopoly, but for all the extraordinary waste
which the fraud and abuse, inseparable from the management of the
affairs of so great a company, must necessarily have occasioned. The
absurdity of this second kind of monopoly, therefore, is much more
manifest than that of the first.

    Both these kinds of monopolies derange more or less the natural
distribution of the stock of the society; but they do not always
derange it in the same way.

    Monopolies of the first kind always attract to the particular
trade in which they are established a greater proportion of the
stock of the society than what would go to that trade of its own
accord.

    Monopolies of the second kind may sometimes attract stock
towards the particular trade in which they are established, and
sometimes repel it from that trade according to different
circumstances. In poor countries they naturally attract towards that
trade more stock than would otherwise go to it. In rich countries they
naturally repel from it a good deal of stock which would otherwise
go to it.

    Such poor countries as Sweden and Denmark, for example, would
probably have never sent a single ship to the East Indies had not
the trade been subjected to an exclusive company. The establishment of
such a company necessarily encourages adventurers. Their monopoly
secures them against all competitors in the home market, and they have
the same chance for foreign markets with the traders of other nations.
Their monopoly shows them the certainty of a great profit upon a
considerable quantity of goods, and the chance of a considerable
profit upon a great quantity. Without such extraordinary
encouragement, the poor traders of such poor countries would
probably never have thought of hazarding their small capitals in so
very distant and uncertain an adventure as the trade to the East
Indies must naturally have appeared to them.

    Such a rich country as Holland, on the contrary, would probably,
in the case of a free trade, send many more ships to the East Indies
than it actually does. The limited stock of the Dutch East India
Company probably repels from that trade many great mercantile capitals
which would otherwise go to it. The mercantile capital of Holland is
so great that it is, as it were, continually overflowing, sometimes
into the public funds of foreign countries, sometimes into loans to
private traders and adventurers of foreign countries, sometimes into
the most round-about foreign trades of consumption, and sometimes into
the carrying trade. All near employments being completely filled up,
all the capital which can be placed in them with any tolerable
profit being already placed in them, the capital of Holland
necessarily flows towards the most distant employments. The trade to
the East Indies, if it were altogether free, would probably absorb the
greater part of this redundant capital. The East Indies offer a market
for the manufactures of Europe and for the gold and silver as well
as for several other productions of America greater and more extensive
than both Europe and America put together.

    Every derangement of the natural distribution of stock is
necessarily hurtful to the society in which it takes place; whether it
be by repelling from a particular trade the stock which would
otherwise go to it, or by attracting towards a particular trade that
which would not otherwise come to it. If, without any exclusive
company, the trade of Holland to the East Indies would be greater than
it actually is, that country must suffer a considerable loss by part
of its capital being excluded from the employment most convenient
for that part. And in the same manner, if, without an exclusive
company, the trade of Sweden and Denmark to the East Indies would be
less than it actually is, or, what perhaps is more probable, would not
exist at all, those two countries must likewise suffer a
considerable loss by part of their capital being drawn into an
employment which must be more or less unsuitable to their present
circumstances. Better for them, perhaps, in their present
circumstances, to buy East India goods of other nations, even though
they should pay somewhat dearer, than to turn so great a part of their
small capital to so very distant a trade, in which the returns are
so very slow, in which that capital can maintain so small a quantity
of productive labour at home, where productive labour is so much
wanted, where so little is done, and where so much is to do.

    Though without an exclusive company, therefore, a particular
country should not be able to carry on any direct trade to the East
Indies, it will not from thence follow that such a company ought to be
established there, but only that such a country ought not in these
circumstances to trade directly to the East Indies. That such
companies are not in general necessary for carrying on the East
India trade is sufficiently demonstrated by the experience of the
Portuguese, who enjoyed almost the whole of it for more than a century
together without any exclusive company.

    No private merchant, it has been said, could well have capital
sufficient to maintain factors and agents in the different ports of
the East Indies, in order to provide goods for the ships which he
might occasionally send thither; and yet, unless he was able to do
this, the difficulty of finding a cargo might frequently make his
ships lose the season for returning, and the expense of so long a
delay would not only eat up the whole profit of the adventure, but
frequently occasion a very considerable loss. This argument,
however, if it proved anything at all, would prove that no one great
branch of trade could be carried on without an exclusive company,
which is contrary to the experience of all nations. There is no
great branch of trade in which the capital of any one private merchant
is sufficient for carrying on all the subordinate branches which
must be carried on, in order to carry on the principal one. But when a
nation is ripe for any great branch of trade, some merchants naturally
turn their capitals towards the principal, and some towards the
subordinate branches of it; and though all the different branches of
it are in this manner carried on, yet it very seldom happens that they
are all carried on by the capital of one private merchant. If a
nation, therefore, is ripe for the East India trade, a certain portion
of its capital will naturally divide itself among all the different
branches of that trade. Some of its merchants will find it for their
interest to reside in the East Indies, and to employ their capitals
there in providing goods for the ships which are to be sent out by
other merchants who reside in Europe. The settlements which
different European nations have obtained in the East Indies, if they
were taken from the exclusive companies to which they at present
belong and put under the immediate protection of the sovereign,
would render this residence both safe and easy, at least to the
merchants of the particular nations to whom those settlements
belong. If at any particular time that part of the capital of any
country which of its own accord tended and inclined, if I may say
so, towards the East India trade, was not sufficient for carrying on
all those different branches of it, it would be a proof that, at
that particular time, that country was not ripe for that trade, and
that it would do better to buy for some time, even at a higher
price, from other European nations, the East India goods it had
occasion for, than to import them itself directly from the East
Indies. What it might lose by the high price of those goods could
seldom be equal to the loss which it would sustain by the
distraction of a large portion of its capital from other employments
more necessary, or more useful, or more suitable to its
circumstances and situation, than a direct trade to the East Indies.

    Though the Europeans possess many considerable settlements both
upon the coast of Africa and in the East Indies, they have not yet
established in either of those countries such numerous and thriving
colonies as those in the islands and continent of America. Africa,
however, as well as several of the countries comprehended under the
general name of the East Indies, are inhabited by barbarous nations.
But those nations were by no means so weak and defenceless as the
miserable and helpless Americans; and in proportion to the natural
fertility of the countries which they inhabited, they were besides
much more populous. The most barbarous nations either of Africa or
of the East Indies were shepherds; even the Hottentots were so. But
the natives of every part of America, except Mexico and Peru, were
only hunters; and the difference is very great between the number of
shepherds and that of hunters whom the same extent of equally
fertile territory can maintain. In Africa and the East Indies,
therefore, it was more difficult to displace the natives, and to
extend the European plantations over the greater part of the lands
of the original inhabitants. The genius of exclusive companies,
besides, is unfavourable, it has already been observed, to the
growth of new colonies, and has probably been the principal cause of
the little progress which they have made in the East Indies. The
Portuguese carried on the trade both to Africa and the East Indies
without any exclusive companies, and their settlements at Congo,
Angola, and Benguela on the coast of Africa, and at Goa in the East
Indies, though much depressed by superstition and every sort of bad
government, yet bear some faint resemblance to the colonies of
America, and are partly inhabited by Portuguese who have been
established there for several generations. The Dutch settlements at
the Cape of Good Hope and at Batavia are at present the most
considerable colonies which the Europeans have established either in
Africa or in the East Indies, and both these settlements are
peculiarly fortunate in their situation. The Cape of Good Hope was
inhabited by a race of people almost as barbarous and quite as
incapable of defending themselves as the natives of America. It is
besides the halfway house, if one may say so, between Europe and the
East Indies, at which almost every European ship makes some stay, both
in going and returning. The supplying of those ships with every sort
of fresh provisions, with fruit and sometimes with wine, affords alone
a very extensive market for the surplus produce of the colonists. What
the Cape of Good Hope is between Europe and every part of the East
Indies, Batavia is between the principal countries of the East Indies.
It lies upon the most frequented road from Indostan to China and
Japan, and is nearly about midway upon that road. Almost all the
ships, too, that sail between Europe and China touch at Batavia; and
it is, over and above all this, the centre and principal mart of
what is called the country trade of the East Indies, not only of
that part of it which is carried on by Europeans, but of that which is
carried on by the native Indians; and vessels navigated by the
inhabitants of China and Japan, of Tonquin, Malacca, Cochin China, and
the island of Celebes, are frequently to be seen in its port. Such
advantageous situations have enabled those two colonies to surmount
all the obstacles which the oppressive genius of an exclusive
company may have occasionally opposed to their growth. They have
enabled Batavia to surmount the additional disadvantage of perhaps the
most unwholesome climate in the world.

    The English and Dutch companies, though they have established no
considerable colonies, except the two above mentioned, have both
made considerable conquests in the East Indies. But in the manner in
which they both govern their new subjects, the natural genius of an
exclusive company has shown itself most distinctly. In the spice
islands the Dutch are said to burn all the spiceries which a fertile
season produces beyond what they expect to dispose of in Europe with
such a profit as they think sufficient. In the islands where they have
no settlements, they give a premium to those who collect the young
blossoms and green leaves of the clove and nutmeg trees which
naturally grow there, but which the savage policy has now, it is said,
almost completely extirpated. Even in the islands where they have
settlements they have very much reduced, it is said, the number of
those trees. If the produce even of their own islands was much greater
than what suited their market, the natives, they suspect, might find
means to convey some part of it to other nations; and the best way,
they imagine, to secure their own monopoly is to take care that no
more shall grow than what they themselves carry to market. By
different arts of oppression they have reduced the population of
several of the Moluccas nearly to the number which is sufficient to
supply with fresh provisions and other necessaries of life their own
insignificant garrisons, and such of their ships as occasionally
come there for a cargo of spices. Under the government even of the
Portuguese, however, those islands are said to have been tolerably
well inhabited. The English company have not yet had time to establish
in Bengal so perfectly destructive a system. The plan of their
government, however, has had exactly the same tendency. It has not
been uncommon, I am well assured, for the chief, that is, the first
clerk of a factory, to order a peasant to plough up a rich field of
poppies and sow it with rice or some other grain. The pretence was, to
prevent a scarcity of provisions; but the real reason, to give the
chief an opportunity of selling at a better price a large quantity
of opium, which he happened then to have upon hand. Upon other
occasions the order has been reversed; and a rich field of rice or
other grain has been ploughed up, in order to make room for a
plantation of poppies; when the chief foresaw that extraordinary
profit was likely to be made by opium. The servants of the company
have upon several occasions attempted to establish in their own favour
the monopoly of some of the most important branches, not only of the
foreign, but of the inland trade of the country. Had they been allowed
to go on, it is impossible that they should not at some time or
another have attempted to restrain the production of the particular
articles of which they had thus usurped the monopoly, not only to
the quantity which they themselves could purchase, but to that which
they could expect to sell with such a profit as they might think
sufficient. In the course of the century or two, the policy of the
English company would in this manner have probably proved as
completely destructive as that of the Dutch.

    Nothing, however, can be more directly contrary to the real
interest of those companies, considered as the sovereigns of the
countries which they have conquered, than this destructive plan. In
almost all countries the revenue of the sovereign is drawn from that
of the people. The greater the revenue of the people, therefore, the
greater the annual produce of their land and labour, the more they can
afford to the sovereign. It is his interest, therefore, to increase as
much as possible that annual produce. But if this is the interest of
every sovereign, it is peculiarly so of one whose revenue, like that
of the sovereign of Bengal, arises chiefly from a land-rent. That rent
must necessarily be in proportion to the quantity and value of the
produce, and both the one and the other must depend upon the extent of
the market. The quantity will always be suited with more or less
exactness to the consumption of those who can afford to pay for it,
and the price which they will pay will always be in proportion to
the eagerness of their competition. It is the interest of such a
sovereign, therefore, to open the most extensive market for the
produce of his country, to allow the most perfect freedom of commerce,
in order to increase as much as possible the number and the
competition of buyers; and upon this account to abolish, not only
all monopolies, but all restraints upon the transportation of the home
produce from one part of the country to another, upon its
exportation to foreign countries, or upon the importation of goods
of any kind for which it can be exchanged. It is in this manner most
likely to increase both the quantity and value of that produce, and
consequently of his own share of it, or of his own revenue.

    But a company of merchants are, it seems, incapable of considering
themselves as sovereigns, even after they have become such. Trade,
or buying in order to sell again, they still consider as their
principal business, and by a strange absurdity regard the character of
the sovereign as but an appendix to that of the merchant, as something
which ought to be made subservient to it, or by means of which they
may be enabled to buy cheaper in India, and thereby to sell with a
better profit in Europe. They endeavour for this purpose to keep out
as much as possible all competitors from the market of the countries
which are subject to their government, and consequently to reduce,
at least, some part of the surplus produce of those countries to
what is barely sufficient for supplying their own demand, or to what
they can expect to sell in Europe with such a profit as they may think
reasonable. Their mercantile habits draw them in this manner, almost
necessarily, though perhaps insensibly, to prefer upon all ordinary
occasions the little and transitory profit of the monopolist to the
great and permanent revenue of the sovereign, and would gradually lead
them to treat the countries subject to their government nearly as
the Dutch treat the Moluceas. It is the interest of the East India
Company, considered as sovereigns, that the European goods which are
carried to their Indian dominions should be sold there as cheap as
possible; and that the Indian goods which are brought from thence
should bring there as good a price, or should be sold there as dear as
possible. But the reverse of this is their interest as merchants. As
sovereigns, their interest is exactly the same with that of the
country which they govern. As merchants their interest is directly
opposite to that interest.

    But if the genius of such a government, even as to what concerns
its direction in Europe, is in this manner essentially and perhaps
incurably faulty, that of its administration in India is still more
so. That administration is necessarily composed of a council of
merchants, a profession no doubt extremely respectable, but which in
no country in the world carries along with it that sort of authority
which naturally overawes the people, and without force commands
their willing obedience. Such a council can command obedience only
by the military force with which they are accompanied, and their
government is therefore necessarily military and despotical. Their
proper business, however, is that of merchants. It is to sell, upon
their masters' account, the European goods consigned to them, and to
buy in return Indian goods for the European market. It is to sell
the one as dear and to buy the other as cheap as possible, and
consequently to exclude as much as possible all rivals from the
particular market where they keep their shop. The genius of the
administration therefore, so far as concerns the trade of the company,
is the same as that of the direction. It tends to make government
subservient to the interest of monopoly, and consequently to stunt the
natural growth of some parts at least of the surplus produce of the
country to what is barely sufficient for answering the demand of the
company.

    All the members of the administration, besides, trade more or less
upon their own account, and it is in vain to prohibit them from
doing so. Nothing can be more completely foolish than to expect that
the clerks of a great counting-house at ten thousand miles distance,
and consequently almost quite out of sight, should, upon a simple
order from their masters, give up at once doing any sort of business
upon their own account, abandon for ever all hopes of making a
fortune, of which they have the means in their hands, and content
themselves with the moderate salaries which those masters allow
them, and which, moderate as they are, can seldom be augmented,
being commonly as large as the real profits of the company trade can
afford. In such circumstances, to prohibit the servants of the company
from trading upon their own account can have scarce any other effect
than to enable the superior servants, under pretence of executing
their masters' order, to oppress such of the inferior ones as have had
the misfortune to fall under their displeasure. The servants naturally
endeavour to establish the same monopoly in favour of their own
private trade as of the public trade of the company. If they are
suffered to act as they could wish, they will establish this
monopoly openly and directly, by fairly prohibiting all other people
from trading in the articles in which they choose to deal; and this,
perhaps, is the best and least oppressive way of establishing it.
But if by an order from Europe they are prohibited from doing this,
they will, notwithstanding, endeavour to establish a monopoly of the
same kind, secretly and indirectly, in a way that is much more
destructive to the country. They will employ the whole authority of
government, and pervert the administration of justice, in order to
harass and ruin those who interfere with them in any branch of
commerce, which by means of agents, either concealed, or at least
not publicly avowed, they may choose to carry on. But the private
trade of the servants will naturally extend to a much greater
variety of articles than the public trade of the company. The public
trade of the company extends no further than the trade with Europe,
and comprehends a part only of the foreign trade of the country. But
the private trade of the servants may extend to all the different
branches both of its inland and foreign trade. The monopoly of the
company can tend only to stunt the natural growth of that part of
the surplus produce which, in the case of a free trade, would be
exported to Europe. That of the servants tends to stunt the natural
growth of every part of the produce in which they choose to deal, of
what is destined for home consumption, as well as of what is
destined for exportation; and consequently to degrade the
cultivation of the whole country, and to reduce the number of its
inhabitants. It tends to reduce the quantity of every sort of produce,
even that of the necessaries of life, whenever the servants of the
company choose to deal in them, to what those servants can both afford
to buy and expect to sell with such a profit as pleases them.

    From the nature of their situation, too, the servants must be more
disposed to support with rigorous severity their own interest
against that of the country which they govern than their masters can
be to support theirs. The country belongs to their masters, who cannot
avoid having some regard for the interest of what belongs to them. But
it does not belong to the servants. The real interest of their
masters, if they were capable of understanding it, is the same with
that of the country, and it is from ignorance chiefly, and the
meanness of mercantile prejudice, that they ever oppress it. But the
real interest of the servants is by no means the same with that of the
country, and the most perfect information would not necessarily put an
end to their oppressions. The regulations accordingly which have
been sent out from Europe, though they have been frequently weak, have
upon most occasions been well-meaning. More intelligence and perhaps
less good-meaning has sometimes appeared in those established by the
servants in India. It is a very singular government in which every
member of the administration wishes to get out of the country, and
consequently to have done with the government as soon as he can, and
to whose interest, the day after he has left it and carried his
whole fortune with him, it is perfectly indifferent though the whole
country was swallowed up by an earthquake.

    I mean not, however, by anything which I have here said, to
throw any odious imputation upon the general character of the servants
of the East India Company, and much less upon that of any particular
persons. It is the system of government, the situation in which they
are placed, that I mean to censure, not the character of those who
have acted in it. They acted as their situation naturally directed,
and they who have clamoured the loudest against them would probably
not have acted better themselves. In war and negotiation, the councils
of Madras and Calcutta have upon several occasions conducted
themselves with a resolution and decisive wisdom which would have done
honour to the senate of Rome in the best days of that republic. The
members of those councils, however, had been bred to professions
very different from war and polities. But their situation alone,
without education, experience, or even example, seems to have formed
in them all at once the great qualities which it required, and to have
inspired them both with abilities and virtues which they themselves
could not well know that they possessed. If upon some occasions,
therefore, it has animated them to actions of magnanimity which
could not well have been expected from them, we should not wonder if
upon others it has prompted them to exploits of somewhat a different
nature.

    Such exclusive companies, therefore, are nuisances in every
respect; always more or less inconvenient to the countries in which
they are established, and destructive to those which have the
misfortune to fall under their government.

                           CHAPTER VIII

               Conclusion of the Mercantile System

    THOUGH the encouragement of exportation and the discouragement
of importation are the two great engines by which the mercantile
system proposes to enrich every country, yet with regard to some
particular commodities it seems to follow an opposite plan: to
discourage exportation and to encourage importation. Its ultimate
object, however, it pretends, is always the same, to enrich the
country by an advantageous balance of trade. It discourages the
exportation of the materials of manufacture, and of the instruments of
trade, in order to give our own workmen an advantage, and to enable
them to undersell those of other nations in all foreign markets; and
by restraining, in this manner, the exportation of a few
commodities, of no great price, it proposes to occasion a much greater
and more valuable exportation of others. It encourages the importation
of the materials of manufacture in order that our own people may be
enabled to work them up more cheaply, and thereby prevent a greater
and more valuable importation of the manufactured commodities. I do
not observe, at least in our Statute Book, any encouragement given
to the importation of the instruments of trade. When manufactures have
advanced to a certain pitch of greatness, the fabrication of the
instruments of trade becomes itself the object of a great number of
very important manufactures. To give any particular encouragement to
the importation of such instruments would interfere too much with
the interest of those manufactures. Such importation, therefore,
instead of being encouraged, has frequently been prohibited. Thus
the importation of wool cards, except from Ireland, or when brought in
as wreck or prize goods, was prohibited by the 3rd of Edward IV; which
prohibition was renewed by the 39th of Elizabeth, and has been
continued and rendered perpetual by subsequent laws.

    The importation of the materials of manufacture has sometimes been
encouraged by an exemption from the duties to which other goods are
subject, and sometimes by bounties.

    The importation of sheep's wool from several different
countries, of cotton wool from all countries, of undressed flax, of
the greater part of dyeing drugs, of the greater part of undressed
hides from Ireland or the British colonies, of sealskins from the
British Greenland fishery, of pig and bar iron from the British
colonies, as well as of several other materials of manufacture, has
been encouraged by an exemption from all duties, if properly entered
at the custom house. The private interest of our merchants and
manufacturers may, perhaps, have extorted from the legislature these
exemptions as well as the greater part of our other commercial
regulations. They are, however, perfectly just and reasonable, and if,
consistently with the necessities of the state, they could be extended
to all the other materials of manufacture, the public would
certainly be a gainer.

    The avidity of our great manufacturers, however, has in some cases
extended these exemptions a good deal beyond what can justly be
considered as the rude materials of their work. By the 24th George
III, c. 46, a small duty of only one penny the pound was imposed
upon the importation of foreign brown linen yam, instead of much
higher duties to which it had been subjected before, viz. of
sixpence the pound upon sail yarn, of one shilling the pound upon
all French and Dutch yarn, and of two pounds thirteen shillings and
fourpence upon the hundredweight of all spruce or Muscovia yarn. But
our manufacturers were not long satisfied with this reduction. By
the 29th of the same king, c. 15, the same law which gave a bounty
upon the exportation of British and Irish linen of which the price did
not exceed eighteenpence the yard, even this small duty upon the
importation of brown linen yarn was taken away. In the different
operations, however, which are necessary for the preparation of
linen yarn, a good deal more industry is employed than in the
subsequent operation of preparing linen cloth from linen yarn. To
say nothing of the industry of the flax-growers and flax-dressers,
three or four spinners, at least, are necessary in order to keep one
weaver in constant employment; and more than four-fifths of the
whole quantity of labour necessary for the preparation of linen
cloth is employed in that of linen yarn; but our spinners are poor
people, women commonly scattered about in all different parts of the
country, without support or protection. It is not by the sale of their
work, but by that of the complete work of the weavers, that our
great master manufacturers make their profits. As it is their interest
to sell the complete manufacture as dear, so is it to buy the
materials as cheap as possible. By extorting from the legislature
bounties upon the exportation of their own linen, high duties upon the
importation of all foreign linen, and a total prohibition of the
home consumption of some sorts of French linen, they endeavour to sell
their own goods as dear as possible. By encouraging the importation of
foreign linen yarn, and thereby bringing it into competition with that
which is made by our own people, they endeavour to buy the work of the
poor spinners as cheap as possible. They are as intent to keep down
the wages of their own weavers as the earnings of the poor spinners,
and it is by no means for the benefit of the workman that they
endeavour either to raise the price of the complete work or to lower
that of the rude materials. It is the industry which is carried on for
the benefit of the rich and the powerful that is principally
encouraged by our mercantile system. That which is carried on for
the benefit of the poor and the indigent is too often either neglected
or oppressed.

    Both the bounty upon the exportation of linen, and the exemption
from duty upon the importation of foreign yarn, which were granted
only for fifteen years, but continued by two different
prolongations, expire with the end of the session of Parliament
which shall immediately follow the 24th of June 1786.

    The encouragement given to the importation of the materials of
manufacture by bounties has been principally confined to such as
were imported from our American plantations.

    The first bounties of this kind were those granted about the
beginning of the present century upon the importation of naval
stores from America. Under this denomination were comprehended
timber fit for masts, yards, and bowsprits; hemp; tar, pitch, and
turpentine. The bounty, however, of one pound the ton upon
masting-timber, and that of six pounds the ton upon hemp, were
extended to such as should be imported into England from Scotland.
Both these bounties continued without any variation, at the same rate,
till they were severally allowed to expire; that upon hemp on the
1st of January 1741, and that upon masting-timber at the end of the
session of Parliament immediately following the 24th June 1781.

    The bounties upon the importation of tar, pitch, and turpentine
underwent, during their continuance, several alterations. Originally
that upon tar was four pounds the ton; that upon pitch the same; and
that upon turpentine, three pounds the ton. The bounty of four
pounds the ton upon tar was afterwards confined to such as had been
prepared in a particular manner; that upon other good, clean, and
merchantable tar was reduced to two pounds four shillings the ton. The
bounty upon pitch was likewise reduced to one pound; and that upon
turpentine to one pound ten shillings the ton.

    The second bounty upon the importation of any of the materials
of manufacture, according to the order of time, was that granted by
the 21st George II, c. 30, upon the importation of indigo from the
British plantations. When the plantation indigo was worth
three-fourths of the price of the best French indigo, it was by this
act entitled to a bounty of sixpence the pound. This bounty, which,
like most others, was granted only for a limited time, was continued
by several prolongations, but was reduced to fourpence the pound. It
was allowed to expire with the end of the session of Parliament
which followed the 25th March 1781.

    The third bounty of this kind was that granted (much about the
time that we were beginning sometimes to court and sometimes to
quarrel with our American colonies) by the 4th George III, c. 26, upon
the importation of hemp, or undressed flax, from the British
plantations. This bounty was granted for twenty-one years, from the
24th June 1764 to the 24th June 1785. For the first seven years it was
to be at the rate of eight pounds the ton, for the second at six
pounds, and for the third at four pounds. It was not extended to
Scotland, of which the climate (although hemp is sometimes raised
there in small quantities and of an inferior quality) is not very
fit for that produce. Such a bounty upon the importation of Scotch
flax into England would have been too great a discouragement to the
native produce of the southern part of the United Kingdom.

    The fourth bounty of this kind was that granted by the 5th
George III, c. 45, upon the importation of wood from America. It was
granted for nine years, from the 1st January 1766 to the 1st January
1775. During the first three years, it was to be for every hundred and
twenty good deals, at the rate of one pound, and for every load
containing fifty cubic feet of other squared timber at the rate of
twelve shillings. For the second three years, it was for deals to be
at. the rate of fifteen shillings, and for other squared timber at the
rate of eight shillings; and for the third three years, it was for
deals to be at the rate of ten shillings, and for other squared timber
at the rate of five shillings.

    The fifth bounty of this kind was that granted by the 9th George
III, c. 38, upon the importation of raw silk from the British
plantations. It was granted for twenty-one years, from the 1st January
1770 to the 1st January 1791. For the first seven years it was to be
at the rate of twenty-five pounds for every hundred pounds value;
for the second at twenty pounds; and for the third at fifteen
pounds. The management of the silk worm, and the preparation of
silk, requires so much hand labour, and labour is so very dear in
America that even this great bounty, I have been informed, was not
likely to produce any considerable effect.

    The sixth bounty of this kind was that granted by 2nd George
III, c. 50, for the importation of pipe, hogshead, and barrel staves
and heading from the British plantations. It was granted for nine
years, from 1st January 1772 to the 1st January 1781. For the first
three years it was for a certain quantity of each to be at the rate of
six pounds; for the second three years at four pounds; and for the
third three years at two pounds.

    The seventh and last bounty of this kind was that granted by the
19th George III, c. 37, upon the importation of hemp from Ireland.
It was granted in the same manner as that for the importation of
hemp and undressed flax from America, for twenty-one years, from the
24th June 1779 to the 24th June 1800. This term is divided,
likewise, into three periods of seven years each; and in each of those
periods the rate of the Irish bounty is the same with that of the
American. It does not, however, like the American bounty, extend to
the importation of undressed flax. It would have been too great a
discouragement to the cultivation of that plant in Great Britain. When
this last bounty was granted, the British and Irish legislatures
were not in much better humour with one another than the British and
American had been before. But this boon to Ireland, it is to be hoped,
has been granted under more fortunate auspices than all those to
America.

    The same commodities upon which we thus gave bounties when
imported from America were subjected to considerable duties when
imported from any other country. The interest of our American colonies
was regarded as the same with that of the mother country. Their wealth
was considered as our wealth. Whatever money was sent out to them,
it was said, came all back to us by the balance of trade, and we could
never become a farthing the poorer by any expense which we could lay
out upon them. They were our own in every respect, and it was an
expense laid out upon the improvement of our own property and for
the profitable employment of our own people. It is unnecessary, I
apprehend, at present to say anything further in order to expose the
folly of a system which fatal experience has now sufficiently exposed.
Had our American colonies really been a part of Great Britain, those
bounties might have been considered as bounties upon production, and
would still have been liable to all the objections to which such
bounties are liable, but to no other.

    The exportation of the materials of manufacture is sometimes
discouraged by absolute prohibitions, and sometimes by high duties.

    Our woollen manufacturers have been more successful than any other
class of workmen in persuading the legislature that the prosperity
of the nation depended upon the success and extension of their
particular business. They have not only obtained a monopoly against
the consumers by an absolute prohibition of importing woollen cloths
from any foreign country, but they have likewise obtained another
monopoly against the sheep farmers and growers of wool by a similar
prohibition of the exportation of live sheep and wool. The severity of
many of the laws which have been enacted for the security of the
revenue is very justly complained of, as imposing heavy penalties upon
actions which, antecedent to the statutes that declared them to be
crimes, had always been understood to be innocent. But the cruellest
of our revenue laws, I will venture to affirm, are mild and gentle
in comparison of some of those which the clamour of our merchants
and manufacturers has extorted from the legislature for the support of
their own absurd and oppressive monopolies. Like the laws of Draco,
these laws may be said to be all written in blood.

    By the 8th of Elizabeth, c. 3, the exporter of sheep, lambs, or
rams was for the first offence to forfeit all his goods for ever, to
suffer a year's imprisonment, and then to have his left hand cut off
in a market town upon a market day, to be there nailed up; and for the
second offence to be adjudged a felon, and to suffer death
accordingly. To prevent the breed of our sheep from being propagated
in foreign countries seems to have been the object of this law. By the
13th and 14th of Charles II, c. 18, the exportation of wool was made
felony, and the exporter subjected to the same penalties and
forfeitures as a felon.

    For the honour of the national humanity, it is to be hoped that
neither of these statutes were ever executed. The first of them,
however; so far as I know, has never been directly repealed, and
Serjeant Hawkins seems to consider it as still in force. It may
however, perhaps, be considered as virtually repealed by the 12th of
Charles II, c. 32, sect. 3, which, without expressly taking away the
penalties imposed by former statutes, imposes a new penalty, viz.,
that of twenty shillings for every sheep exported, or attempted to
be exported, together with the forfeiture of the sheep and of the
owner's share of the ship. The second of them was expressly repealed
by the 7th and 8th of William III, c. 28, sect. 4. By which it is
declared that, "Whereas the statute of the 13th and 14th of King
Charles II, made against the exportation of wool, among other things
in the said act mentioned, doth enact the same to be deemed felony; by
the severity of which penalty the prosecution of offenders hath not
been so effectually put in execution: Be it, therefore, enacted by the
authority aforesaid, that so much of the said act, which relates to
the making the said offence felony, be repealed and made void."

    The penalties, however, which are either imposed by this milder
statute, or which, though imposed by former statutes, are not repealed
by this one, are still sufficiently severe. Besides the forfeiture
of the goods, the exporter incurs the penalty of three shillings for
every pound weight of wool either exported or attempted to be
exported, that is about four or five times the value. Any merchant
or other person convicted of this offence is disabled from requiring
any debt or account belonging to him from any factor or other
person. Let his fortune be what it will, whether he is or is not
able to pay those heavy penalties, the law means to ruin him
completely. But as the morals of the great body of the people are
not yet so corrupt as those of the contrivers of this statute, I
have not heard that any advantage has ever been taken of this
clause. If the person convicted of this offence is not able to pay the
penalties within three months after judgment, he is to be
transported for seven years, and if he returns before the expiration
of that term, he is liable to the pains of felony, without benefit
of clergy. The owner of the ship, knowing this offence, forfeits all
his interest in the ship and furniture. The master and mariners,
knowing this offence, forfeit all their goods and chattels, and suffer
three months' imprisonment. By a subsequent statute the master suffers
six months' imprisonment.

    In order to prevent exportation, the whole inland commerce of wool
is laid under very burdensome and oppressive restrictions. It cannot
be packed in any box, barrel, cask, case, chest, or any other package,
but only in packs of leather or pack-cloth, on which must be marked on
the outside the words wool or yam, in large letters not less than
three inches long, on pain of forfeiting the same and the package, and
three shillings for every pound weight, to be paid by the owner or
packer. It cannot be loaden on any horse or cart, or carried by land
within five miles of the coast, but between sun-rising and
sun-setting, on pain of forfeiting the same, the horses and carriages.
The hundred next adjoining to the sea-coast, out of or through which
the wool is carried or exported, forfeits twenty pounds, if the wool
is under the value of ten pounds; and if of greater value, then treble
that value, together with treble costs, to be sued for within the
year. The execution to be against any two of the inhabitants, whom the
sessions must reimburse, by an assessment on the other inhabitants, as
in the cases of robbery. And if any person compounds with the
hundred for less than this penalty, he is to be imprisoned for five
years; and any other person may prosecute. These regulations take
place through the whole kingdom.

    But in the particular counties of Kent and Sussex, the
restrictions are still more troublesome. Every owner of wool within
ten miles of the sea-coast must given an account in writing, three
days after shearing to the next officer of the customs, of the
number of his fleeces, and of the places where they are lodged. And
before he removes any part of them he must give the like notice of the
number and weight of the fleeces, and of the name and abode of the
person to whom they are sold, and of the place to which it is intended
they should be carried. No person within fifteen miles of the sea,
in the said counties, can buy any wool before he enters into bond to
the king that no part of the wool which he shall so buy shall be
sold by him to any other person within fifteen miles of the sea. If
any wool is found carrying towards the sea-side in the said
counties, unless it has been entered and security given as
aforesaid, it is forfeited, and the offender also forfeits three
shillings for every pound weight. If any person lays any wool not
entered as aforesaid within fifteen miles of the sea, it must be
seized and forfeited; and if, after such seizure, any person claim the
same, he must give security to the Exchequer that if he is cast upon
trial he shall pay treble costs, besides all other penalties.

    When such restrictions are imposed upon the inland trade, the
coasting trade, we may believe, cannot be left very free. Every
owner of wool who carries or causes to be carried any wool to any port
or place on the seacoast, in order to be from thence transported by
sea to any other place or port on the coast, must first cause an entry
thereof to be made at the port from whence it is intended to be
conveyed, containing the weight, marks, and number of the packages,
before he brings the same within five miles of that port, on pain of
forfeiting the same, and also the horses, carts, and other
carriages; and also of suffering and forfeiting as by the other laws
in force against the exportation of wool. This law, however (1st
William III, c. 32), is so very indulgent as to declare that, "This
shall not hinder any person from carrying his wool home from the place
of shearing, though it be within five miles of the sea, provided
that in ten days after shearing, and before he remove the wool, he
do under his hand certify to the next officer of the customs, the true
number of fleeces, and where it is housed; and do not remove the same,
without certifying to such officer, under his hand, his intention so
to do, three days before." Bond must be given that the wool to be
carried coastways is to be landed at the particular port for which
it is entered outwards; and if any part of it is landed without the
presence of an officer, not only the forfeiture of the wool is
incurred as in other goods, but the usual additional penalty of
three shillings for every pound weight is likewise incurred.

    Our woollen manufactures, in order to justify their demand of such
extraordinary restrictions and regulations, confidently asserted
that English wool was of a peculiar quality, superior to that of any
other country; that the wool of other countries could not, without
some mixture of it, be wrought up into any tolerable manufacture; that
fine cloth could not be made without it; that England, therefore, if
the exportation of it could be totally prevented, could monopolize
to herself almost the whole woollen trade of the world; and thus,
having no rivals, could sell at what price she pleased, and in a short
time acquire the most incredible degree of wealth by the most
advantageous balance of trade. This doctrine, like most other
doctrines which are confidently asserted by any considerable number of
people, was, and still continues to be, most implicitly believed by
a much greater number- by almost all those who are either unacquainted
with the woollen trade, or who have not made particular inquiries.
It is, however, so perfectly false that English wool is in any respect
necessary for the making of fine cloth that it is altogether unfit for
it. Fine cloth is made altogether of Spanish wool. English wool cannot
be even so mixed with Spanish wool as to enter into the composition
without spoiling and degrading, in some degree, the fabric of the
cloth.

    It has been shown in the foregoing part of this work that the
effect of these regulations has been to depress the price of English
wool, not only below what it naturally would be in the present
times, but very much below what it actually was in the time of
Edward III. The price of Scots wool, when in consequence of the
union it became subject to the same regulations, is said to have
fallen about one half. It is observed by the very accurate and
intelligent author of the Memoirs of Wool, the Reverend Mr. John
Smith, that the price of the best English wool in England is generally
below what wool of a very inferior quality commonly sells for in the
market of Amsterdam. To depress the price of this commodity below what
may be called its natural and proper price was the avowed purpose of
those regulations; and there seems to be no doubt of their having
produced the effect that was expected from them.

    This reduction of price, it may perhaps be thought, by
discouraging the growing of wool, must have reduced very much the
annual produce of that commodity, though not below what it formerly
was, yet below what, in the present state of things, it probably would
have been, had it, in consequence of an open and free market, been
allowed to rise to the natural and proper price. I am, however,
disposed to believe that the quantity of the annual produce cannot
have been much, though it may perhaps have been a little, affected
by these regulations. The growing of wool is not the chief purpose for
which the sheep farmer employs his industry and stock. He expects
his profit not so much from the price of the fleece as from that of
the carcass; and the average or ordinary price of the latter must
even, in many cases, make up to him whatever deficiency there may be
in the average or ordinary price of the former. It has been observed
in the foregoing part of this work that, "Whatever regulations tend to
sink the price, either of wool or of raw hides, below what it
naturally would be, must, in an improved and cultivated country,
have some tendency to raise the price of butcher's meat. The price
both of the great and small cattle which are fed on improved and
cultivated land must be sufficient to pay the rent which the landlord,
and the profit which the farmer has reason to expect from improved and
cultivated land. If it is not, they will soon cease to feed them.
Whatever part of this price, therefore, is not paid by the wool and
the hide must be paid by the carcass. The less there is paid for the
one, the more must be paid for the other. In what manner this price is
to be divided upon the different parts of the beast is indifferent
to the landlords and farmers, provided it is all paid to them. In an
improved and cultivated country, therefore, their interest as
landlords and farmers cannot be much affected by such regulations,
though their interest as consumers may by the rise in the price of
provisions." According to this reasoning, therefore, this
degradation in the price of wool is not likely, in an improved and
cultivated country, to occasion any diminution in the annual produce
of that commodity, except so far as, by raising the price of mutton,
it may somewhat diminish the demand for, and consequently the
production of, that particular species of butcher's meat. Its
effect, however, even in this way, it is probable, is not very
considerable.

    But though its effect upon the quantity of the annual produce
may not have been very considerable, its effect upon the quality, it
may perhaps be thought, must necessarily have been very great. The
degradation in the quality of English wool, if not below what it was
in former times, yet below what it naturally would have been in the
present state of improvement and cultivation, must have been, it may
perhaps be supposed, very nearly in proportion to the degradation of
price. As the quality depends upon the breed, upon the pasture, and
upon the management and cleanliness of the sheep, during the whole
progress of the growth of the fleece, the attention to these
circumstances, it may naturally enough be imagined, can never be
greater than in proportion to the recompense which the price of the
fleece is likely to make for the labour and expense which that
attention requires. It happens, however, that the goodness of the
fleece depends, in a great measure, upon the health, growth, and
bulk of the animal; the same attention which is necessary for the
improvement of the carcase is, in some respects, sufficient for that
of the fleece. Notwithstanding the degradation of price, English
wool is said to have been improved considerably during the course even
of the present century. The improvement might perhaps have been
greater if the price had been better; but the lowness of price, though
it may have obstructed, yet certainly it has not altogether
prevented that improvement.

    The violence of these regulations, therefore, seems to have
affected neither the quantity nor the quality of the annual produce of
wool so much as it might have been expected to do (though I think it
probable that it may have affected the latter a good deal more than
the former); and the interest of the growers of wool, though it must
have been hurt in some degree, seems, upon the whole, to have been
much less hurt than could well have been imagined.

    These considerations, however, will not justify the absolute
prohibition of the exportation of wool. But they will fully justify
the imposition of a considerable tax upon that exportation.

    To hurt in any degree the interest of any one order of citizens,
for no other purpose but to promote that of some other, is evidently
contrary to that justice and equality of treatment which the sovereign
owes to all the different orders of his subjects. But the
prohibition certainly hurts, in some degree, the interest of the
growers of wool, for no other purpose but to promote that of the
manufacturers.

    Every different order of citizens is bound to contribute to the
support of the sovereign or commonwealth. A tax of five, or even of
ten shillings upon the exportation of every ton of wool would
produce a very considerable revenue to the sovereign. It would hurt
the interest of the growers somewhat less than the prohibition,
because it would not probably lower the price of wool quite so much.
It would afford a sufficient advantage to the manufacturer, because,
though he might not buy his wool altogether so cheap as under the
prohibition, he would still buy it, at least, five or ten shillings
cheaper than any foreign manufacturer could buy it, besides saving the
freight and insurance, which the other would be obliged to pay. It
is scarce possible to devise a tax which could produce any
considerable revenue to the sovereign, and at the same time occasion
so little inconveniency to anybody.

    The prohibition, notwithstanding all the penalties which guard it,
does not prevent the exportation of wool. It is exported, it is well
known, in great quantities. The great difference between the price
in the home and that in the foreign market presents such a
temptation to smuggling that all the rigour of the law cannot
prevent it. This illegal exportation is advantageous to nobody but the
smuggler. A legal exportation subject to a tax, by affording a revenue
to the sovereign, and thereby saving the imposition of some other,
perhaps, more burdensome and inconvenient taxes might prove
advantageous to all the different subjects of the state.

    The exportation of fuller's earth or fuller's clay, supposed to be
necessary for preparing and cleansing the woolen manufactures, has
been subjected to nearly the same penalties as the exportation of
wool. Even tobacco-pipe clay, though acknowledged to be different from
fuller's clay, yet, on account of their resemblance, and because
fuller's clay might sometimes be exported as tobacco-pipe clay, has
been laid under the same prohibitions and penalties.

    By the 13th and 14th of Charles II, c. 7, the exportation, not
only of raw hides, but of tanned leather, except in the shape of
boots, shoes, or slippers, was prohibited; and the law gave a monopoly
to our bootmakers and shoemakers, not only against our graziers, but
against our tanners. By subsequent statutes our tanners have got
themselves exempted from this monopoly upon paying a small tax of only
one shilling on the hundred-weight of tanned leather, weighing one
hundred and twelve pounds. They have obtained likewise the drawback of
two-thirds of the excise duties imposed upon their commodity even when
exported without further manufacture. All manufactures of leather
may be exported duty free; and the exporter is besides entitled to the
drawback of the whole duties of excise. Our graziers still continue
subject to the old monopoly. Graziers separated from one another,
and dispersed through all the different corners of the country,
cannot, without great difficulty, combine together for the purpose
either of imposing monopolies upon their fellow citizens, or of
exempting themselves from such as may have been imposed upon them by
other people. Manufacturers of all kinds, collected together in
numerous bodies in all great cities, easily can. Even the horns of
cattle are prohibited to be exported; and the two insignificant trades
of the horner and combmaker enjoy, in this respect, a monopoly against
the graziers.

    Restraints, either by prohibitions or by taxes, upon the
exportation of goods which are partially, but not completely
manufactured, are not peculiar to the manufacture of leather. As
long as anything remains to be done, in order to fit any commodity for
immediate use and consumption, our manufacturers think that they
themselves ought to have the doing of it. Woolen yarn and worsted
are prohibited to be exported under the same penalties as wool. Even
white cloths are subject to a duty upon exportation, and our dyers
have so far obtained a monopoly against our clothiers. Our clothiers
would probably have been able to defend themselves against it, but
it happens that the greater part of our principal clothiers are
themselves likewise dyers. Watch-cases, clockcases, and dial-plates
for clocks and watches have been prohibited to be exported. Our
clock-makers and watch-makers are, it seems, unwilling that the
price of this sort of workmanship should be raised upon them by the
competition of foreigners.

    By some old statutes of Edward M, Henry VIII, and Edward VI, the
exportation of all metals was prohibited. Lead and tin were alone
excepted probably on account of the great abundance of those metals,
in the exportation of which a considerable part of the trade of the
kingdom in those days consisted. For the encouragement of the mining
trade, the 5th of William and Mary, c. 17, exempted from the
prohibition iron, copper, and mundic metal made from British ore.
The exportation of all sorts of copper bars, foreign as well as
British, was afterwards permitted by the 9th and 10th of William
III, c. 26. The exportation of unmanufactured brass, of what is called
gun-metal, bell-metal, and shroff-metal, still continues to be
prohibited. Brass manufactures of all sorts may be exported duty free.

    The exportation of the materials of manufacture, where it is not
altogether prohibited, is in many cases subjected to considerable
duties.

    By the 8th George I, c. 15, the exportation of all goods, the
produce or manufacture of Great Britain, upon which any duties had
been imposed by former statutes, was rendered duty free. The following
goods, however, were excepted: alum, lead, lead ore, tin, tanned
leather, copperas, coals, wool cards, white woolen cloths, lapis
calaminaris, skins of all sorts, glue, coney hair or wool, hares'
wool, hair of all sorts, horses, and litharge of lead. If you expect
horses, all these are either materials of manufacture, or incomplete
manufactures (which may be considered as materials for still further
manufacture), or instruments of trade. This statute leaves them
subject to all the old duties which had ever been imposed upon them,
the old subsidy and one per cent outwards.

    By the same statute a great number of foreign drugs for dyers' use
are exempted from all duties upon importation. Each of them,
however, is afterwards subjected to a certain duty, not indeed a
very heavy one, upon exportation. Our dyers, it seems, while they
thought it for their interest to encourage the importation of those
drugs, by an exemption from all duties, thought it likewise for
their interest to throw some small discouragement upon their
exportation. The avidity, however, which suggested this notable
piece of mercantile ingenuity, most probably disappointed itself of
its object. It necessarily taught the importers to be more careful
than they might otherwise have been that their importation should
not exceed what was necessary for the supply of the home market. The
home market was at all times likely to be more scantily supplied;
the commodities were at all times likely to be somewhat dearer there
than they would have been had the exportation been rendered as free as
the importation.

    By the above-mentioned statute, gum senega, or gum arabic, being
among the enumerated dyeing drugs, might be imported duty free. They
were subjected, indeed, to a small poundage duty, amounting only to
threepence in the hundredweight upon their re-exportation. France
enjoyed, at that time, an exclusive trade to the country most
productive of those drugs, that which lies in the neighbourhood of the
Senegal; and the British market could not easily be supplied by the
immediate importation of them from the place of growth. By the 25th
George II, therefore, gum senega was allowed to be imported
(contrary to the general dispositions of the Act of Navigation) from
any part of Europe. As the law, however, did not mean to encourage
this species of trade, so contrary to the general principles of the
mercantile policy of England, it imposed a duty of ten shillings the
hundredweight upon such importation, and no part of this duty was to
be afterwards drawn back upon its exportation. The successful war
which began in 1755 gave Great Britain the same exclusive trade to
those countries which France had enjoyed before. Our manufacturers, as
soon as the peace was made, endeavoured to avail themselves of this
advantage, and to establish a monopoly in their own favour both
against the growers and against the importers of this commodity. By
the 5th George III, therefore, c. 37, the exportation of gum senega
from his Majesty's dominions in Africa was confined to Great
Britain, and was subjected to all the same restrictions,
regulations, forfeitures, and penalties as that of the enumerated
commodities of the British colonies in America and the West Indies.
Its importation, indeed, was subjected to a small duty of sixpence the
hundredweight, but its re-exportation was subjected to the enormous
duty of one pound ten shillings the hundredweight. It was the
intention of our manufacturers that the whole produce of those
countries should be imported into Great Britain, and, in order that
they themselves might be enabled to buy it at their own price, that no
part of it should be exported again but at such an expense as would
sufficiently discourage that exportation. Their avidity, however, upon
this, as well as upon many other occasions, disappointed itself of its
object. This enormous duty presented such a temptation to smuggling
that great quantities of this commodity were clandestinely exported,
probably to all the manufacturing countries of Europe, put
particularly to Holland, not only from Great Britain but from
Africa. Upon this account, by the 14th George III, c. 10, this duty
upon exportation was reduced to five shillings the hundredweight.

    In the book of rates, according to which the Old Subsidy was
levied, beaver skins were estimated at six shillings and eightpence
a piece, and the different subsidies and imposts, which before the
year 1722 had been laid upon their importation, amounted to
one-fifth part of the rate, or to sixteenpence upon each skin; all
of which, except half the Old Subsidy, amounting only to twopence, was
drawn back upon exportation. This duty upon the importation of so
important a material of manufacture had been thought too high, and
in the year 1722 the rate was reduced to two shillings and sixpence,
which reduced the duty upon importation to sixpence, and of this
only one half was to be drawn back upon exportation. The same
successful war put the country most productive of beaver under the
dominion of Great Britain, and beaver skins being among the enumerated
commodities, their exportation from America was consequently
confined to the market of Great Britain. Our manufacturers soon
bethought themselves of the advantage which they might make of this
circumstance, and in the year 1764 the duty upon the importation of
beaver-skin was reduced to one penny, but the duty upon exportation
was raised to sevenpence each skin, without any drawback of the duty
upon importation. By the same law, a duty of eighteenpence the pound
was imposed upon the exportation of beaverwool or wombs, without
making any alteration in the duty upon the importation of that
commodity, which, when imported by Britain and in British shipping,
amounted at that time to between fourpence and fivepence the piece.

    Coals may be considered both as a material of manufacture and as
an instrument of trade. Heavy duties, accordingly, have been imposed
upon their exportation, amounting at present (1783) to more than
five shillings the ton, or to more than fifteen shillings the
chaldron, Newcastle measures, which is in most cases more than the
original value of the commodity at the coal pit, or even at the
shipping port for exportation.

    The exportation, however, of the instruments of trade, properly so
called, is commonly restrained, not by high duties, but by absolute
prohibitions. Thus by the 7th and 8th of William III, c. 20, sect.
8, the exportation of frames or engines for knitting gloves or
stockings is prohibited under the penalty, not only of the
forfeiture of such frames or engines so exported, or attempted to be
exported, but of forty pounds, one half to the king, the other to
the person who shall inform or sue for the same. In the same manner,
by the 14th George III, c. 71, the exportation to foreign parts of any
utensils made use of in the cotton, linen, woollen, and silk
manufactures is prohibited under the penalty, not only of the
forfeiture of such utensils, but of two hundred pounds, to be paid
by the person who shall offend in this manner, and likewise of two
hundred pounds to be paid by the master of the ship who shall
knowingly suffer such utensils to be loaded on board his ship.

    When such heavy penalties were imposed upon the exportation of the
dead instruments of trade, it could not well be expected that the
living instrument, the artificer, should be allowed to go free.
Accordingly, by the 5th George I, c. 27, the person who shall be
convicted of enticing any artificer of, or in any of the
manufactures of Great Britain, to go into any foreign parts in order
to practise or teach his trade, is liable for the first offence to
be fined in any sum not exceeding one hundred pounds, and to three
months' imprisonment, and until the fine shall be paid; and for the
second offence, to be fined in any sum at the discretion of the court,
and to imprisonment for twelve months, and until the fine shall be
paid. By the 23rd George II, c. 13, this penalty is increased for
the first offence to five hundred pounds for every artificer so
enticed, and to twelve months' imprisonment, and until the fine
shall be paid; and for the second offence, to one thousand pounds, and
to two years' imprisonment, and until the fine shall be paid.

    By the former of those two statutes, upon proof that any person
has been enticing any artificer, or that any artificer has promised or
contracted to go into foreign parts for the purposes aforesaid, such
artificer may be obliged to give security at the discretion of the
court that he shall not go beyond the seas, and may be committed to
prison until he give such security.

    If any artificer has gone beyond the seas, and is exercising or
teaching his trade in any foreign country, upon warning being given to
him by any of his Majesty's ministers or consuls abroad, or by one
of his Majesty's Secretaries of State for the time being, if he does
not, within six months after such warning, return into this realm, and
from thenceforth abide and inhabit continually within the same, he
is from thenceforth declared incapable of taking any legacy devised to
him within this kingdom, or of being executor or administrator to
any person, or of taking any lands within this kingdom by descent,
device, or purchase. He likewise forfeits to the king all his lands,
goods, and chattels, is declared an alien in every respect, and is put
out of the king's protection.

    It is unnecessary, I imagine, to observe how contrary such
regulations are to the boasted liberty of the subject, of which we
affect to be so very jealous; but which, in this case, is so plainly
sacrificed to the futile interests of our merchants and manufacturers.

    The laudable motive of all these regulations is to extend our
own manufactures, not by their own improvement, but by the
depression of those of all our neighbours, and by putting an end, as
much as possible, to the troublesome competition of such odious and
disagreeable rivals. Our master manufacturers think it reasonable that
they themselves should have the monopoly of the ingenuity of all their
countrymen. Though by restraining, in some trades, the number of
apprentices which can be employed at one time, and by imposing the
necessity of a long apprenticeship in all trades, they endeavour,
all of them, to confine the knowledge of their respective
employments to as small a number as possible; they are unwilling,
however, that any part of this small number should go abroad to
instruct foreigners.

    Consumption is the sole end and purpose of all production; and the
interest of the producer ought to be attended to only so far as it may
be necessary for promoting that of the consumer. The maxim is so
perfectly self evident that it would be absurd to attempt to prove it.
But in the mercantile system the interest of the consumer is almost
constantly sacrificed to that of the producer; and it seems to
consider production, and not consumption, as the ultimate end and
object of all industry and commerce.

    In the restraints upon the importation of all foreign
commodities which can come into competition with those of our own
growth or manufacture, the interest of the home consumer is
evidently sacrificed to that of the producer. It is altogether for the
benefit of the latter that the former is obliged to pay that
enhancement of price which this monopoly almost always occasions.

    It is altogether for the benefit of the producer that bounties are
granted upon the exportation of some of his productions. The home
consumer is obliged to pay, first, the tax which is necessary for
paying the bounty, and secondly, the still greater tax which
necessarily arises from the enhancement of the price of the
commodity in the home market.

    By the famous treaty of commerce with Portugal, the consumer is
prevented by high duties from purchasing of a neighbouring country a
commodity which our own climate does not produce, but is obliged to
purchase it of a distant country, though it is acknowledged that the
commodity of the distant country is of a worse quality than that of
the near one. The home consumer is obliged to submit to this
inconveniency in order that the producer may import into the distant
country some of his productions upon more advantageous terms than he
would otherwise have been allowed to do. The consumer, too, is obliged
to pay whatever enhancement in the price if those very productions
this forced exportation may occasion in the home market.

    But in the system of laws which has been established for the
management of our American and West Indian colonies, the interest of
the home consumer has been sacrificed to that of the producer with a
more extravagant profusion than in all our other commercial
regulations. A great empire has been established for the sole
purpose of raising up a nation of customers who should be obliged to
buy from the shops of our different producers all the goods with which
these could supply them. For the sake of that little enhancement of
price which this monopoly might afford our producers, the home
consumers have been burdened with the whole expense of maintaining and
defending that empire. For this purpose, and for this purpose only, in
the two last wars, more than two hundred millions have been spent, and
a new debt of more than a hundred and seventy millions has been
contracted over and above all that had been expended for the same
purpose in former wars. The interest of this debt alone is not only
greater than the whole extraordinary profit which it ever could be
pretended was made by the monopoly of the colony trade, but than the
whole value of that trade, or than the whole value of the goods
which at an average have been annually exported to the colonies.

    It cannot be very difficult to determine who have been the
contrivers of this whole mercantile system; not the consumers, we
may believe, whose interest has been entirely neglected; but the
producers, whose interest has been so carefully attended to; and among
this latter class our merchants and manufacturers have been by far the
principal architects. In the mercantile regulations, which have been
taken notice of in this chapter, the interest of our manufacturers has
been most peculiarly attended to; and the interest, not so much of the
consumers, as that of some other sets of producers, has been
sacrificed to it.

                             CHAPTER IX

                     Of the Agricultural Systems,

       or of those Systems of Political Economy which represent

        the Produce of Land as either the sole or the principal

             Source of the Revenue and Wealth every Country

    THE agricultural systems of political economy will not require
so long an explanation as that which I have thought it necessary to
bestow upon the mercantile or commercial system.

    That system which represents the produce of land as the sole
source of the revenue and wealth of every country has, so far as I
know, never been adopted by any nation, and it at present exists
only in the speculations of a few men of great learning and
ingenuity in France. It would not, surely, be worth while to examine
at great length the errors of a system which never has done, and
probably never will do, any harm in any part of the world. I shall
endeavour to explain, however, as distinctly as I can, the great
outlines of this very ingenious system.

    Mr. Colbert, the famous minister of Louis XIV, was a man of
probity, of great industry and knowledge of detail, of great
experience and acuteness in the examination of public accounts, and of
abilities, in short, every way fitted for introducing method and
good order into the collection and expenditure of the public
revenue. That minister had unfortunately embraced all the prejudices
of the mercantile system, in its nature and essence a system of
restraint and regulation, and such as could scarce fail to be
agreeable to a laborious and plodding man of business, who had been
accustomed to regulate the different departments of public offices,
and to establish the necessary checks and controls for confining
each to its proper sphere. The industry and commerce of a great
country he endeavoured to regulate upon the same model as the
departments of a public office; and instead of allowing every man to
pursue his own interest in his own way, upon the liberal plan of
equality, liberty, and justice, he bestowed upon certain branches of
industry extraordinary privileges, while he laid others under as
extraordinary restraints. He was not only disposed, like other
European ministers, to encourage more the industry of the towns than
that of the country; but, in order to support the industry of the
towns, he was willing even to depress and keep down that of the
country. In order to render provisions cheap to the inhabitants of the
towns, and thereby to encourage manufactures and foreign commerce,
he prohibited altogether the exportation of corn, and thus excluded
the inhabitants of the country from every foreign market for by far
the most important part of the produce of their industry. This
prohibition, joined to the restraints imposed by the ancient
provincial laws of France upon the transportation of corn from one
province to another, and to the arbitrary and degrading taxes which
are levied upon the cultivators in almost all the provinces,
discouraged and kept down the agriculture of that country very much
below the state to which it would naturally have risen in so very
fertile a soil and so very happy a climate. This state of
discouragement and depression was felt more or less in every different
part of the country, and many different inquiries were set on foot
concerning the causes of it. One of those causes appeared to be the
preference given, by the institutions of Mr. Colbert, to the
industry of the towns above that of the country.

    If the rod be bent too much one way, says the proverb, in order to
make it straight you must bend it as much the other. The French
philosophers, who have proposed the system which represents
agriculture as the sole source of the revenue and wealth of every
country, seem to have adopted this proverbial maxim; and as in the
plan of Mr. Colbert the industry of the towns was certainly overvalued
in comparison with that of the country; so in their system it seems to
be as certainly undervalued.

    The different orders of people who have ever been supposed to
contribute in any respect towards the annual produce of the land and
labour of the country, they divide into three classes. The first is
the class of the proprietors of land. The second is the class of the
cultivators, of farmers and country labourers, whom they honour with
the peculiar appellation of the productive class. The third is the
class of artificers, manufacturers, and merchants, whom they endeavour
to degrade by the humiliating appellation of the barren or
unproductive class.

    The class of proprietors contributes to the annual produce by
the expense which they may occasionally lay out upon the improvement
of the land, upon the buildings, drains, enclosures, and other
ameliorations, which they may either make or maintain upon it, and
by means of which the cultivators are enabled, with the same
capital, to raise a greater produce, and consequently to pay a greater
rent. This advanced rent may be considered as the interest or profit
due to the proprietor upon the expense or capital which he thus
employs in the improvement of his land. Such expenses are in this
system called ground expenses (depenses foncieres.)

    The cultivators or farmers contribute to the annual produce by
what are in this system called the original and annual expenses
(depenses primitives et depenses annuelles) which they lay out upon
the cultivation of the land. The original expenses consist in the
instruments of husbandry, in the stock of cattle, in the seed, and
in the maintenance of the farmer's family, servants, and cattle during
at least a great part of the first year of his occupancy, or till he
can receive some return from the land. The annual expenses consist
in the seed, in the wear and tear of the instruments of husbandry, and
in the annual maintenance of the farmer's servants and cattle, and
of his family too, so far as any part of them can be considered as
servants employed in cultivation. That part of the produce of the land
which remains to him after paying the rent ought to be sufficient,
first, to replace to him within a reasonable time, at least during the
term of his occupancy, the whole of his original expenses, together
with the ordinary profits of stock; and, secondly, to replace to him
annually the whole of his annual expenses, together likewise with
the ordering profits of stock. Those two sorts of expenses are two
capitals which the farmer employs in cultivation; and unless they
are regularly restored to him, together with a reasonable profit, he
cannot carry on his employment upon a level with other employments;
but, from a regard to his own interest, must desert it as soon as
possible and seek some other. That part of the produce of the land
which is thus necessary for enabling the farmer to continue his
business ought to be considered as a fund sacred to cultivation,
which, if the landlord violates, he necessarily reduces the produce of
his own land, and in a few years not only disables the farmer from
paying this racked rent, but from paying the reasonable rent which
he might otherwise have got for his land. The rent which properly
belongs to the landlord is no more than the net produce which
remains after paying in the completest manner all the necessary
expenses which must be previously laid out in order to raise the gross
or the whole produce. It is because the labour of the cultivators,
over and above paying completely all those necessary expenses, affords
a net produce of this kind that this class of people are in this
system peculiarly distinguished by the honourable appellation of the
productive class. Their original and annual expenses are for the
same reason called, in this system, productive expenses, because, over
and above replacing their own value, they occasion the annual
reproduction of this net produce.

    The ground expenses, as they are called, or what the landlord lays
out upon the improvement of his land, are in this system, too,
honoured with the appellation of productive expenses. Till the whole
of those expenses, together with the ordinary profits of stock, have
been completely repaid to him by the advanced rent which he gets
from his land, that advanced rent ought to be regarded as sacred and
inviolable, both by the church and by the king; ought to be subject
neither to tithe nor to taxation. If it is otherwise, by
discouraging the improvement of land the church discourages the future
increase of her own tithes, and the king the future increase of his
own taxes. As in a well-ordered state of things, therefore, those
ground expenses, over and above reproducing in the completest manner
their own value, occasion likewise after a certain time a reproduction
of a net produce, they are in this system considered as productive
expenses.

    The ground expenses of the landlord, however, together with the
original and the annual expenses of the farmer, are the only three
sorts of expenses which in this system are considered as productive.
All other expenses and all other orders of people, even those who in
the common apprehensions of men are regarded as the most productive,
are in this account of things represented as altogether barren and
unproductive.

    Artificers and manufacturers in particular, whose industry, in the
common apprehensions of men, increases so much the value of the rude
produce of land, are in this system represented as a class of people
altogether barren and unproductive. Their labour, it is said, replaces
only the stock which employs them, together with its ordinary profits.
That stock consists in the materials, tools, and wages advanced to
them by their employer; and is the fund destined for their
employment and maintenance. Its profits are the fund destined for
the maintenance of their employer. Their employer, as he advances to
them the stock of materials, tools, and wages necessary for their
employment, so he advances to himself what is necessary for his own
maintenance, and this maintenance he generally proportions to the
profit which he expects to make by the price of their work. Unless its
price repays to him the maintenance which he advances to himself, as
well as the materials, tools, and wages which he advances to his
workmen, it evidently does not repay to him the whole expense which he
lays out upon it. The profits of manufacturing stock therefore are
not, like the rent of land, a net produce which remains after
completely repaying the whole expense which must be laid out in
order to obtain them. The stock of the farmer yields him a profit as
well as that of the master manufacturer; and it yields a rent likewise
to another person, which that of the master manufacturer does not. The
expense, therefore, laid out in employing and maintaining artificers
and manufacturers does no more than continue, if one may say so, the
existence of its own value, and does not produce any new value. It
is therefore altogether a barren and unproductive expense. The
expense, on the contrary, laid out in employing farmers and country
labourers, over and above continuing the existence of its own value,
produces a new value, the rent of the landlord. It is therefore a
productive expense.

    Mercantile stock is equally barren and unproductive with
manufacturing stock. It only continues the existence of its own value,
without producing any new value. Its profits are only the repayment of
the maintenance which its employer advances to himself during the time
that he employs it, or till he receives the returns of it. They are
only the repayment of a part of the expense which must be laid out
in employing it.

    The labour of artificers and manufacturers never adds anything
to the value of the whole annual amount of the rude produce of the
land. It adds, indeed, greatly to the value of some particular parts
of it. But the consumption which in the meantime it occasions of other
parts is precisely equal to the value which it adds to those parts; so
that the value of the whole amount is not, at any one moment of
time, in the least augmented by it. The person who works the lace of a
pair of fine ruffles, for example, will sometimes raise the value of
perhaps a pennyworth of flax to thirty pounds sterling. But though
at first sight he appears thereby to multiply the value of a part of
the rude produce about seven thousand and two hundred times, he in
reality adds nothing to the value of the whole annual amount of the
rude produce. The working of that lace costs him perhaps two years'
labour. The thirty pounds which he gets for it when it is finished
is no more than the repayment of the subsistence which he advances
to himself during the two years that he is employed about it. The
value which, by every day's, month's, or year's labour, he adds to the
flax does no more than replace the value of his own consumption during
that day, month, or year. At no moment of time, therefore, does he add
anything to the value of the whole annual amount of the rude produce
of the land: the portion of that produce which he is continually
consuming being always equal to the value which he is continually
producing. The extreme poverty of the greater part of the persons
employed in this expensive though trifling manufacture may satisfy
us that the price of their work does not in ordinary cases exceed
the value of their subsistence. It is otherwise with the work of
farmers and country labourers. The rent of the landlord is a value
which, in ordinary cases, it is continually producing, over and
above replacing, in the most complete manner, the whole consumption,
the whole expense laid out upon the employment and maintenance both of
the workmen and of their employer.

    Artificers, manufacturers, and merchants can augment the revenue
and wealth of their society by parsimony only; or, as it in this
system, by privation, that is, by depriving themselves a part of the
funds destined for their own subsistence. They annually reproduce
nothing but those funds. Unless, therefore, they annually save some
part of them, unless they annually deprive themselves of the enjoyment
of some part of them, the revenue and wealth of their society can
never be in the smallest degree augmented by means of their
industry. Farmers and country labourers, on the contrary, may enjoy
completely the whole funds destined for their own subsistence, and yet
augment at the same time the revenue and wealth of their society. Over
and above what is destined for their own subsistence, their industry
annually affords a net produce, of which the augmentation
necessarily augments the revenue and wealth of their society.
Nations therefore which, like France or England, consist in a great
measure of proprietors and cultivators can be enriched by industry and
enjoyment. Nations, on the contrary, which, like Holland and
Hamburg, are composed chiefly of merchants, artificers, and
manufacturers can grow rich only through parsimony and privation. As
the interest of nations so differently circumstanced is very
different, so is likewise the common character of the people: in those
of the former kind, liberality, frankness and good fellowship
naturally make a part of that common character: in the latter,
narrowness, meanness, and a selfish disposition, averse to all
social pleasure and enjoyment.

    The unproductive class, that of merchants, artificers, and
manufacturers, is maintained and employed altogether at the expense of
the two other classes, of that of proprietors, and of that of
cultivators. They furnish it both with the materials of its work and
with the fund of its subsistence, with the corn and cattle which it
consumes while it is employed about that work. The proprietors and
cultivators finally pay both the wages of all the workmen of the
unproductive class, and of the profits of all their employers. Those
workmen and their employers are properly the servants of the
proprietors and cultivators. They are only servants who work without
doors, as menial servants work within. Both the one and the other,
however, are equally maintained at the expense of the same masters.
The labour of both is equally unproductive. It adds nothing to the
value of the sum total of the rude produce of the land. Instead of
increasing the value of that sum total, it is a charge and expense
which must be paid out of it.

    The unproductive class, however, is not only useful, but greatly
useful to the other two classes. By means of the industry of
merchants, artificers, and manufacturers, the proprietors and
cultivators can purchase both the foreign goods and the manufactured
produce of their own country which they have occasion for with the
produce of a much smaller quantity of their own labour than what
they would be obliged to employ if they were to attempt, in an awkward
and unskilful manner, either to import the one or to make the other
for their own use. By means of the unproductive class, the cultivators
are delivered from many cares which would otherwise distract their
attention from the cultivation of land. The superiority of produce,
which, in consequence of this undivided attention, they are enabled to
raise, is fully sufficient to pay the whole expense which the
maintenance and employment of the unproductive class costs either
the proprietors or themselves. The industry of merchants,
artificers, and manufacturers, though in its own nature altogether
unproductive, yet contributes in this manner indirectly to increase
the produce of the land. It increases the productive powers of
productive labour by leaving it at liberty to confine itself to its
proper employment, the cultivation of land; and the plough goes
frequently the easier and the better by means of the labour of the man
whose business is most remote from the plough.

    It can never be the interest of the proprietors and cultivators to
restrain or to discourage in any respect the industry of merchants,
artificers, and manufacturers. The greater the liberty which this
unproductive class enjoys, the greater will be the competition in
all the different trades which compose it, and the cheaper will the
other two classes be supplied, both with foreign goods and with the
manufactured produce of their own country.

    It can never be the interest of the unproductive class to
oppress the other two classes. It is the surplus produce of the
land, or what remains after deducting the maintenance, first, of the
cultivators, and afterwards of the proprietors, that maintains and
employs the unproductive class. The greater this surplus the greater
must likewise be the maintenance and employment of that class. The
establishment of perfect justice, of perfect liberty, and of perfect
equality is the very simple secret which most effectually secures
the highest degree of prosperity to all the three classes.

    The merchants, artificers, and manufacturers of those mercantile
states which, like Holland and Hamburg, consist chiefly of this
unproductive class, are in the same manner maintained and employed
altogether at the expense of the proprietors and cultivators of
land. The only difference is, that those proprietors and cultivators
are, the greater part of them, placed at a most inconvenient
distance from the merchants, artificers, and manufacturers whom they
supply with the materials of their work and the fund of their
subsistences- the inhabitants of other countries and the subjects of
other governments.

    Such mercantile states, however, are not only useful, but
greatly useful to the inhabitants of those other countries. They
fill up, in some measure, a very important void, and supply the
place of the merchants, artificers, and manufacturers whom the
inhabitants of those countries ought to find at home, but whom, from
some defect in their policy, they do not find at home.

    It can never be the interest of those landed nations, if I may
call them so, to discourage or distress the industry of such
mercantile states by imposing high duties upon their trade or upon the
commodities which they furnish. Such duties, by rendering those
commodities dearer, could serve only to sink the real value of the
surplus produce of their own land, with which, or, what comes to the
same thing, with the price of which those commodities are purchased.
Such duties could serve only to discourage the increase of that
surplus produce, and consequently the improvement and cultivation of
their own land. The most effectual expedient, on the contrary, for
raising the value of that surplus produce, for encouraging its
increase, and consequently the improvement and cultivation of their
own land would be to allow the most perfect freedom to the trade of
all such mercantile nations.

    This perfect freedom of trade would even be the most effectual
expedient for supplying them, in due time, with all the artificers,
manufacturers, and merchants whom they wanted at home, and for filling
up in the properest and most advantageous manner that very important
void which they felt there.

    The continual increase of the surplus produce of their land would,
in due time, create a greater capital than what could be employed with
the ordinary rate of profit in the improvement and cultivation of
land; and the surplus part of it would naturally turn itself to the
employment of artificers and manufacturers at home. But those
artificers and manufacturers, finding at home both the materials of
their work and the fund of their subsistence, might immediately even
with much less art and skill be able to work as cheap as the like
artificers and manufacturers of such mercantile states who had both to
bring from a great distance. Even though, from want of art and
skill, they might not for some time be able to work as cheap, yet,
finding a market at home, they might be able to sell their work
there as cheap as that of the artificers and manufacturers of such
mercantile states, which could not be brought to that market but
from so great a distance; and as their art and skill improved, they
would soon be able to sell it cheaper. The artificers and
manufacturers of such mercantile states, therefore, would
immediately be rivalled in the market of those landed nations, and
soon after undersold and jostled out of it altogether. The cheapness
of the manufactures of those landed nations, in consequence of the
gradual improvements of art and skill, would, in due time, extend
their sale beyond the home market, and carry them to many foreign
markets, from which they would in the same manner gradually jostle out
many of the manufacturers of such mercantile nations.

    This continual increase both of the rude and manufactured
produce of those landed nations would in due time create a greater
capital than could, with the ordinary rate of profit, be employed
either in agriculture or in manufactures. The surplus of this
capital would naturally turn itself to foreign trade, and be
employed in exporting to foreign countries such parts of the rude
and manufactured produce of its own country as exceeded the demand
of the home market. In the exportation of the produce of their own
country, the merchants of a landed nation would have an advantage of
the same kind over those of mercantile nations which its artificers
and manufacturers had over the artificers and manufacturers of such
nations; the advantage of finding at home that cargo and those
stores and provisions which the others were obliged to seek for at a
distance. With inferior art and skill in navigation, therefore, they
would be able to sell that cargo as cheap in foreign markets as the
merchants of such mercantile nations; and with equal art and skill
they would be able to sell it cheaper. They would soon, therefore,
rival those mercantile nations in this branch of foreign trade, and in
due time would jostle them out of it altogether.

    According to this liberal and generous system, therefore, the most
advantageous method in which a landed nation can raise up
artificers, manufacturers, and merchants of its own is to grant the
most perfect freedom of trade to the artificers, manufacturers, and
merchants of all other nations. It thereby raises the value of the
surplus produce of its own land, of which the continual increase
gradually establishes a fund, which in due time necessarily raises
up all the artificers, manufacturers, and merchants whom it has
occasion for.

    When a landed nation, on the contrary, oppresses either by high
duties or by prohibitions the trade of foreign nations, it necessarily
hurts its own interest in two different ways. First, by raising the
price of all foreign goods and of all sorts of manufactures, it
necessarily sinks the real value of the surplus produce of its own
land, with which, or, what comes to the same thing, with the price
of which it purchases those foreign goods and manufactures.
Secondly, by giving a sort of monopoly of the home market to its own
merchants, artificers, and manufacturers, it raises the rate of
mercantile and manufacturing profit in proportion to that of
agricultural profit, and consequently either draws from agriculture
a part of the capital which had before been employed in it, or hinders
from going to it a part of what would otherwise have gone to it.
This policy, therefore, discourages agriculture in two different ways;
first, by sinking the real value of its produce, and thereby
lowering the rate of its profit; and, secondly, by raising the rate of
profit in all other employments. Agriculture is rendered less
advantageous, and trade and manufactures more advantageous than they
otherwise would be; and every man is tempted by his own interest to
turn, as much as he can, both his capital and his industry from the
former to the latter employments.

    Though, by this oppressive policy, a landed nation should be
able to raise up artificers, manufacturers, and merchants of its own
somewhat sooner than it could do by the freedom of trade a matter,
however, which is not a little doubtful- yet it would raise them up,
if one may say so, prematurely, and before it was perfectly ripe for
them. By raising up too hastily one species of industry, it would
depress another more valuable species of industry. By raising up too
hastily a species of industry which only replaces the stock which
employs it, together with the ordinary profit, it would depress a
species of industry which, over and above replacing that stock with
its profit, affords likewise a net produce, a free rent to the
landlord. It would depress productive labour, by encouraging too
hastily that labour which is altogether barren and unproductive.

    In what manner, according to this system, the sum total of the
annual produce of the land is distributed among the three classes
above mentioned, and in what manner the labour of the unproductive
class does no more than replace the value of its own consumption,
without increasing in any respect the value of that sum total, is
represented by Mr. Quesnai, the very ingenious and profound author
of this system, in some arithmetical formularies. The first of these
formularies, which by way of eminence he peculiarly distinguishes by
the name of the Economical Table, represents the manner in which he
supposes the distribution takes place in a state of the most perfect
liberty and therefore of the highest prosperity- in a state where
the annual produce is such as to afford the greatest possible net
produce, and where each class enjoys its proper share of the whole
annual produce. Some subsequent formularies represent the manner in
which he supposes this distribution is made in different states of
restraint and regulation; in which either the class of proprietors
or the barren and unproductive class is more favoured than the class
of cultivators, and in which either the one or the other encroaches
more or less upon the share which ought properly to belong to this
productive class. Every such encroachment, every violation of that
natural distribution, which the most perfect liberty would
establish, must, according to this system, necessarily degrade more or
less, from one year to another, the value and sum total of the
annual produce, and must necessarily occasion a gradual declension
in the real wealth and revenue of the society; a declension of which
the progress must be quicker or slower, according to the degree of
this encroachment, according as that natural distribution which the
most perfect liberty would establish is more or less violated. Those
subsequent formularies represent the different degrees of declension
which, according to this system, correspond to the different degrees
in which this natural distribution is violated.

    Some speculative physicians seem to have imagined that the
health of the human body could be preserved only by a certain
precise regimen of diet and exercise, of which every, the smallest,
violation necessarily occasioned some degree of disease or disorder
proportioned to the degree of the violation. Experience, however,
would seem to show that the human body frequently preserves, to all
appearances at least, the most perfect state of health under a vast
variety of different regimens; even under some which are generally
believed to be very far from being perfectly wholesome. But the
healthful state of the human body, it would seem, contains in itself
some unknown principle of preservation, capable either of preventing
or of correcting, in many respects, the bad effects even of a very
faulty regimen. Mr. Quesnai, who was himself a physician, and a very
speculative physician, seems to have entertained a notion of the
same kind concerning the political body, and to have imagined that
it would thrive and prosper only under a certain precise regimen,
the exact regimen of perfect liberty and perfect justice. He seems not
to have considered that, in the political body, the natural effort
which every man is continually making to better his own condition is a
principle of preservation capable of preventing and correcting, in
many respects, the bad effects of a political economy, in some degree,
both partial and oppressive. Such a political economy, though it no
doubt retards more or less, is not always capable of stopping
altogether the natural progress of a nation towards wealth and
prosperity, and still less of making it go backwards. If a nation
could not prosper without the enjoyment of perfect liberty and perfect
justice, there is not in the world a nation which could ever have
prospered. In the political body, however, the wisdom of nature has
fortunately made ample provision for remedying many of the bad effects
of the folly and injustice of man, in the same manner as it has done
in the natural body for remedying those of his sloth and intemperance.

    The capital error of this system, however, seems to lie in its
representing the class of artificers, manufacturers, and merchants
as altogether barren and unproductive. The following observations
may serve to show the impropriety of this representation.

    First, this class, it is acknowledged, reproduces annually the
value of its own annual consumption, and continues, at least, the
existence of the stock or capital which maintains and employs it.
But upon this account alone the denomination of barren or unproductive
should seem to be very improperly applied to it. We should not call
a marriage barren or unproductive though it produced only a son and
a daughter, to replace the father and mother, and though it did not
increase the number of the human species, but only continued it as
it was before. Farmers and country labourers, indeed, over and above
the stock which maintains and employs them, reproduce annually a net
produce, a free rent to the landlord. As a marriage which affords
three children is certainly more productive than one which affords
only two; so the labour of farmers and country labourers is
certainly more productive than that of merchants, artificers, and
manufacturers. The superior produce of the one class, however, does
not render the other barren or unproductive.

    Secondly, it seems, upon this account, altogether improper to
consider artificers, manufacturers, and merchants in the same light as
menial servants. The labour of menial servants does not continue the
existence of the fund which maintains and employs them. Their
maintenance and employment is altogether at the expense of their
masters, and the work which they perform is not of a nature to repay
that expense. That work consists in services which perish generally in
the very instant of their performance, and does not fix or realize
itself in any vendible commodity which can replace the value of
their wages and maintenance. The labour, on the contrary, of
artificers, manufacturers, and merchants naturally does fix and
realize itself in some such vendible commodity. It is upon this
account that, in the chapter in which I treat of productive and
unproductive labour, I have classed artificers, manufacturers, and
merchants among the productive labourers, and menial servants among
the barren or unproductive.

    Thirdly, it seems upon every supposition improper to say that
the labour of artificers, manufacturers, and merchants does not
increase the real revenue of the society. Though we should suppose,
for example, as it seems to be supposed in this system, that the value
of the daily, monthly, and yearly consumption of this class was
exactly equal to that of its daily, monthly, and yearly production,
yet it would not from thence follow that its labour added nothing to
the real revenue, to the real value of the annual produce of the
land and labour of the society. An artificer, for example, who, in the
first six months after harvest, executes ten pounds' worth of work,
though he should in the same time consume ten pounds' worth of corn
and other necessaries, yet really adds the value of ten pounds to
the annual produce of the land and labour of the society. While he has
been consuming a half-yearly revenue of ten pounds' worth of corn
and other necessaries, he has produced an equal value of work
capable of purchasing, either to himself or some other person, an
equal half-yearly revenue. The value, therefore, of what has been
consumed and produced during these six months is equal, not to ten,
but to twenty pounds. It is possible, indeed, that no more than ten
pounds' worth of this value may ever have existed at any one moment of
time. But if the ten pounds' worth of corn and other necessaties,
which were consumed by the artificer, had been consumed by a soldier
or by a menial servant, the value of that part of the annual produce
which existed at the end of the six months would have been ten
pounds less than it actually is in consequence of the labour of the
artificer. Though the value of what the artificer produces, therefore,
should not at any one moment of time be supposed greater than the
value he consumes, yet at every moment of time the actually existing
value of goods in the market is, in consequence of what he produces,
greater than it otherwise would be.

    When the patrons of this system assert that the consumption of
artificers, manufacturers, and merchants is equal to the value of what
they produce, they probably mean no more than that their revenue, or
the fund destined for their consumption, is equal to it. But if they
had expressed themselves more accurately, and only asserted that the
revenue of this class was equal to the value of what they produced, it
might readily have occurred to the reader that what would naturally be
saved out of this revenue must necessarily increase more or less the
real wealth of the society. In order, therefore, to make out something
like an argument, it was necessary that they should express themselves
as they have done; and this argument, even supposing things actually
were as it seems to presume them to be, turns out to be a very
inconclusive one.

    Fourthly, farmers and country labourers can no more augment,
without parsimony, the real revenue, the annual produce of the land
and labour of their society, than artificers, manufacturers, and
merchants. The annual produce of the land and labour of any society
can be augmented only in two ways; either, first, by some
improvement in the productive powers of the useful labour actually
maintained within it; or, secondly, by some increase in the quantity
of that labour.

    The improvement in the productive powers of useful labour
depend, first, upon the improvement in the ability of the workman;
and, secondly, upon that of the machinery with which he works. But the
labour of artificers and manufacturers, as it is capable of being more
subdivided, and the labour of each workman reduced to a greater
simplicity of operation than that of farmers and country labourers, so
it is likewise capable of both these sorts of improvements in a much
higher degree. In this respect, therefore, the class of cultivators
can have no sort of advantage over that of artificers and
manufacturers.

    The increase in the quantity of useful labour actually employed
within any society must depend altogether upon the increase of the
capital which employs it; and the increase of that capital again
must be exactly equal to the amount of the savings from the revenue,
either of the particular persons who manage and direct the
employment of that capital, or of some other persons who lend it to
them. If merchants, artificers, and manufacturers are, as this
system seems to suppose, naturally more inclined to parsimony and
saving than proprietors and cultivators, they are, so far, more likely
to augment the quantity of useful labour employed within their
society, and consequently to increase its real revenue, the annual
produce of its land and labour.

    Fifthly and lastly, though the revenue of the inhabitants of every
country was supposed to consist altogether, as this system seems to
suppose, in the quantity of subsistence which their industry could
procure to them; yet, even upon this supposition, the revenue of a
trading and manufacturing country must, other things being equal,
always be much greater than that of one without trade or manufactures.
By means of trade and manufactures, a greater quantity of
subsistence can be annually imported into a particular country than
what its own lands, in the actual state of their cultivation, could
afford. The inhabitants of a town, though they frequently possess no
lands of their own, yet draw to themselves by their industry such a
quantity of the rude produce of the lands of other people as
supplies them, not only with the materials of their work, but with the
fund of their subsistence. What a town always is with regard to the
country in its neighbourhood, one independent state or country may
frequently be with regard to other independent states or countries. It
is thus that Holland draws a great part of its subsistence from
other countries; live cattle from Holstein and Jutland, and corn
from almost all the different countries of Europe. A small quantity of
manufactured produce purchases a great quantity of rude produce. A
trading and manufacturing country, therefore, naturally purchases with
a small part of its manufactured produce a great part of the rude
produce of other countries; while, on the contrary, a country
without trade and manufactures is generally obliged to purchase, at
the expense of a great part of its rude produce, a very small part
of the manufactured produce of other countries. The one exports what
can subsist and accommodate but a very few, and imports the
subsistence and accommodation of a great number. The other exports the
accommodation and subsistence of a great number, and imports that of a
very few only. The inhabitants of the one must always enjoy a much
greater quantity of subsistence than what their own lands, in the
actual state of their cultivation, could afford. The inhabitants of
the other must always enjoy a much smaller quantity.

    This system, however, with all its imperfections is, perhaps,
the nearest approximation to the truth that has yet been published
upon the subject of political economy, and is upon that account well
worth the consideration of every man who wishes to examine with
attention the principles of that very important science. Though in
representing the labour which is employed upon land as the only
productive labour, the notions which it inculcates are perhaps too
narrow and confined; yet in representing the wealth of nations as
consisting, not in the unconsumable riches of money, but in the
consumable goods annually reproduced by the labour of the society, and
in representing perfect liberty as the only effectual expedient for
rendering this annual reproduction the greatest possible, its doctrine
seems to be in every respect as just as it is generous and liberal.
Its followers are very numerous; and as men are fond of paradoxes, and
of appearing to understand what surpasses the comprehension of
ordinary people, the paradox which it maintains, concerning the
unproductive nature of manufacturing labour, has not perhaps
contributed a little to increase the number of its admirers. They have
for some years past made a pretty considerable sect, distinguished
in the French republic of letters by the name of The Economists. Their
works have certainly been of some service to their country; not only
by bringing into general discussion many subjects which had never been
well examined before, but by influencing in some measure the public
administration in favour of agriculture. It has been in consequence of
their representations, accordingly, that the agriculture of France has
been delivered from several of the oppressions which it before
laboured under. The term during which such a lease can be granted,
as will be valid against every future purchaser or proprietor of the
land, has been prolonged from nine to twenty-seven years. The
ancient provincial restraints upon the transportation of corn from one
province of the kingdom to another have been entirely taken away,
and the liberty of exporting it to all foreign countries has been
established as the common law of the kingdom in all ordinary cases.
This sect, in their works, which are very numerous, and which treat
not only of what is properly called Political Economy, or of the
nature and causes of the wealth of nations, but of every other
branch of the system of civil government, all follow implicitly and
without any sensible variation, the doctrine of Mr. Quesnai. There
is upon this account little variety in the greater part of their
works. The most distinct and best connected account of this doctrine
is to be found in a little book written by Mr. Mercier de la
Riviere, some time intendant of Martinico, entitled, The Natural and
Essential Order of Political Societies. The admiration of this whole
sect for their master, who was himself a man of the greatest modesty
and simplicity, is not inferior to that of any of the ancient
philosophers for the founders of their respective systems. "There have
been, since the world began," says a very diligent and respectable
author, the Marquis de Mirabeau, "three great inventions which have
principally given stability to political societies, independent of
many other inventions which have enriched and adorned them. The
first is the invention of writing, which alone gives human nature
the power of transmitting, without alteration, its laws, its
contracts, its annals, and its discoveries. The second is the
invention of money, which binds together all the relations between
civilised societies. The third is the Economical Table, the result
of the other two, which completes them both by perfecting their
object; the great discovery of our age, but of which our posterity
will reap the benefit."

    As the political economy of the nations of modern Europe has
been more favourable to manufactures and foreign trade, the industry
of the towns, than to agriculture, the industry of the country; so
that of other nations has followed a different plan, and has been more
favourable to agriculture than to manufactures and foreign trade.

    The policy of China favours agriculture more than all other
employments. In China the condition of a labourer is said to be as
much superior to that of an artificer as in most parts of Europe
that of an artificer is to that of a labourer. In China, the great
ambition of every man is to get possession of some little bit of land,
either in property or in lease; and leases are there said to be
granted upon very moderate terms, and to be sufficiently secured to
the lessees. The Chinese have little respect for foreign trade. Your
beggarly commerce! was the language in which the Mandarins of Pekin
used to talk to Mr. de Lange, the Russian envoy, concerning it. Except
with Japan, the Chinese carry on, themselves, and in their own
bottoms, little or no foreign trade; and it is only into one or two
ports of their kingdom that they even admit the ships of foreign
nations. Foreign trade therefore is, in China, every way confined
within a much narrower circle than that to which it would naturally
extend itself, if more freedom was allowed to it, either in their
own ships, or in those of foreign nations.

    Manufactures, as in a small bulk they frequently contain a great
value, and can upon that account be transported at less expense from
one country to another than most parts of rude produce, are, in almost
all countries, the principal support of foreign trade. In countries,
besides, less extensive and less favourably circumstanced for inferior
commerce than China, they generally require the support of foreign
trade. Without an extensive foreign market they could not well
flourish, either in countries so moderately extensive as to afford but
a narrow home market or in countries where the communication between
one province and another was so difficult as to render it impossible
for the goods of any particular place to enjoy the whole of that
home market which the country could afford. The perfection of
manufacturing industry, it must be remembered, depends altogether upon
the division of labour; and the degree to which the division of labour
can be introduced into any manufacture is necessarily regulated, it
has already been shown, by the extent of the market. But the great
extent of the empire of China, the vast multitude of its
inhabitants, the variety of climate, and consequently of productions
in its different provinces, and the easy communication by means of
water carriage between the greater part of them, render the home
market of that country of so great extent as to be alone sufficient to
support very great manufactures, and to admit of very considerable
subdivisions of labour. The home market of China is, perhaps, in
extent, not much inferior to the market of all the different countries
of Europe put together. A more extensive foreign trade, however, which
to this great home market added the foreign market of all the rest
of the world- especially if any considerable part of this trade was
carried on in Chinese ships- could scarce fail to increase very much
the manufactures of China, and to improve very much the productive
powers of its manufacturing industry. By a more extensive
navigation, the Chinese would naturally learn the art of using and
constructing themselves all the different machines made use of in
other countries, as well as the other improvements of art and industry
which are practised in all the different parts of the world. Upon
their present plan they have little opportunity except that of the
Japanese.

    The policy of ancient Egypt too, and that of the Gentoo government
of Indostan, seem to have favoured agriculture more than all other
employments.

    Both in ancient Egypt and Indostan the whole body of the people
was divided into different castes or tribes, each of which was
confined, from father to son, to a particular employment or class of
employments. The son of a priest was necessarily a priest; the son
of a soldier, a soldier; the son of a labourer, a labourer; the son of
a weaver, a weaver; the son of a tailor, a tailor, etc. In both
countries, the caste of the priests held the highest rank, and that of
the soldiers the next; and in both countries, the caste of the farmers
and labourers was superior to the castes of merchants and
manufacturers.

    The government of both countries was particularly attentive to the
interest of agriculture. The works constructed by the ancient
sovereigns of Egypt for the proper distribution of the waters of the
Nile were famous in antiquity; and the ruined remains of some of
them are still the admiration of travellers. Those of the same kind
which were constructed by the ancient sovereigns of Indostan for the
proper distribution of the waters of the Ganges as well as of many
other rivers, though they have been less celebrated, seem to have been
equally great. Both countries, accordingly, though subject
occasionally to dearths, have been famous for their great fertility.
Though both were extremely populous, yet, in years of moderate plenty,
they were both able to export great quantities of grain to their
neighbours.

    The ancient Egyptians had a superstitious aversion to the sea; and
as the Gentoo religion does not permit its followers to light a
fire, nor consequently to dress any victuals upon the water, it in
effect prohibits them from all distant sea voyages. Both the Egyptians
and Indians must have depended almost altogether upon the navigation
of other nations for the exportation of their surplus produce; and
this dependency, as it must have confined the market, so it must
have discouraged the increase of this surplus produce. It must have
discouraged, too, the increase of the manufactured produce more than
that of the rude produce. Manufactures require a much more extensive
market than the most important parts of the rude produce of the
land. A single shoemaker will make more than three hundred pairs of
shoes in the year; and his own family will not, perhaps, wear out
six pairs. Unless therefore he has the custom of at least fifty such
families as his own, he cannot dispose of the whole produce of his own
labour. The most numerous class of artificers will seldom, in a
large country, make more than one in fifty or one in a hundred of
the whole number of families contained in it. But in such large
countries as France and England, the number of people employed in
agriculture has by some authors been computed at a half, by others
at a third, and by no author that I know of, at less than a fifth of
the whole inhabitants of the country. But as the produce of the
agriculture of both France and England is, the far greater part of it,
consumed at home, each person employed in it must, according to
these computations, require little more than the custom of one, two,
or at most, of four such families as his own in order to dispose of
the whole produce of his own labour. Agriculture, therefore, can
support itself under the discouragement of a confined market much
better than manufactures. In both ancient Egypt and Indostan,
indeed, the confinement of the foreign market was in some measure
compensated by the conveniency of many inland navigations, which
opened, in the most advantageous manner, the whole extent of the
home market to every part of the produce of every different district
of those countries. The great extent of Indostan, too, rendered the
home market of that country very great, and sufficient to support a
great variety of manufactures. But the small extent of ancient
Egypt, which was never equal to England, must at all times have
rendered the home market of that country too narrow for supporting any
great variety of manufactures. Bengal, accordingly, the province of
Indostan, which commonly exports the greatest quantity of rice, has
always been more remarkable for the exportation of a great variety
of manufactures than for that of its grain. Ancient Egypt, on the
contrary, though it exported some manufactures, fine linen in
particular, as well as some other goods, was always most distinguished
for its great exportation of grain. It was long the granary of the
Roman empire.

    The sovereigns of China, of ancient Egypt, and of the different
kingdoms into which Indostan has at different times been divided, have
always derived the whole, or by far the most considerable part, of
their revenue from some sort of land tax or land rent. This land tax
or land rent, like the tithe in Europe, consisted in a certain
proportion, a fifth, it is said, of the produce of the land, which was
either delivered in kind, or paid in money, according to a certain
valuation, and which therefore varied from year to year according to
all the variations of the produce. It was natural therefore that the
sovereigns of those countries should be particularly attentive to
the interests of agriculture, upon the prosperity or declension of
which immediately depended the yearly increase or diminution of
their own revenue.

    The policy of the ancient republics of Greece, and that of Rome,
though it honoured agriculture more than manufactures or foreign
trade, yet seems rather to have discouraged the latter employments
than to have given any direct or intentional encouragement to the
former. In several of the ancient states of Greece, foreign trade
was prohibited altogether; and in several others the employments of
artificers and manufacturers were considered as hurtful to the
strength and agility of the human body, as rendering it incapable of
those habits which their military and gymnastic exercises
endeavoured to form in it, and as thereby disqualifying it more or
less for undergoing the fatigues and encountering the dangers of
war. Such occupations were considered as fit only for slaves, and
the free citizens of the state were prohibited from exercising them.
Even in those states where no such prohibition took place, as in
Rome and Athens, the great body of the people were in effect
excluded from all the trades which are, now commonly exercised by
the lower sort of the inhabitants of towns. Such trades were, at
Athens and Rome, all occupied by the slaves of the rich, who exercised
them for the benefit of their masters, whose wealth, power, and
protection made it almost impossible for a poor freeman to find a
market for his work, when it came into competition with that of the
slaves of the rich. Slaves, however, are very seldom inventive; and
all the most important improvements, either in machinery, or in the
arrangement and distribution of work which facilitate and abridge
labour, have been the discoveries of freemen. Should a slave propose
any improvement of this kind, his master would be very apt to consider
the proposal as the suggestion of laziness, and a desire to save his
own labour at the master's expense. The poor slave, instead of reward,
would probably meet with much abuse, perhaps with some punishment.
In the manufactures carried on by slaves, therefore, more labour
must generally have been employed to execute the same quantity of work
than in those carried on by freemen. The work of the former must, upon
that account, generally have been dearer than that of the latter.
The Hungarian mines, it is remarked by Mr. Montesquieu, though not
richer, have always been wrought with less expense, and therefore with
more profit, than the Turkish mines in their neighbourhood. The
Turkish mines are wrought by slaves; and the arms of those slaves
are the only machines which the Turks have ever thought of
employing. The Hungarian mines are wrought by freemen, who employ a
great deal of machinery, by which they facilitate and abridge their
own labour. From the very little that is known about the price of
manufactures in the times of the Greeks and Romans, it would appear
that those of the finer sort were excessively dear. Silk sold for
its weight in gold. It was not, indeed, in those times a European
manufacture; and as it was all brought from the East Indies, the
distance of the carriage may in some measure account for the greatness
of price. The price, however, which a lady, it is said, would
sometimes pay for a piece of very fine linen, seems to have been
equally extravagant; and as linen was always either a European, or
at farthest, an Egyptian manufacture, this high price can be accounted
for only by the great expense of the labour which must have been
employed about it, and the expense of this labour again could arise
from nothing but the awkwardness of the machinery which it made use
of. The price of fine woollens too, though not quite so extravagant,
seems however to have been much above that of the present times.
Some cloths, we are told by Pliny, dyed in a particular manner, cost a
hundred denarii, or three pounds six shillings and eightpence the
pound weight. Others dyed in another manner cost a thousand denarii
the pound weight, or thirty-three pounds six shillings and eightpence.
The Roman pound, it must be remembered, contained only twelve of our
avoirdupois ounces. This high price, indeed, seems to have been
principally owing to the dye. But had not the cloths themselves been
much dearer than any which are made in the present times, so very
expensive a dye would not probably have been bestowed upon them. The
disproportion would have been too great between the value of the
accessory and that of the principal. The price mentioned by the same
author of some Triclinaria, a sort of woollen pillows or cushions made
use of to lean upon as they reclined upon their couches at table,
passes all credibility; some of them being said to have cost more than
thirty thousand, others more than three hundred thousand pounds.
This high price, too, is not said to have arisen from the dye. In
the dress of the people of fashion of both sexes there seems to have
been much less variety, it is observed by Doctor Arbuthnot, in ancient
than in modern times; and the very little variety which we find in
that of the ancient statues confirms his observation. He infers from
this that their dress must upon the whole have been cheaper than ours;
but the conclusion does not seem to follow. When the expense of
fashionable dress is very great, the variety must be very small. But
when, by the improvements in the productive powers of manufacturing
art and industry, the expense of any one dress comes to be very
moderate, the variety will naturally be very great. The rich, not
being able to distinguish themselves by the expense of any one
dress, will naturally endeavour to do so by the multitude and
variety of their dresses.

    The greatest and most important branch of the commerce of every
nation, it has already been observed, is that which is carried on
between the inhabitants of the town and those of the country. The
inhabitants of the town draw from the country the rude produce which
constitutes both the materials of their work and the fund of their
subsistence; and they pay for this rude produce by sending back to the
country a certain portion of it manufactured and prepared for
immediate use. The trade which is carried on between these two
different sets of people consists ultimately in a certain quantity
of rude produce exchanged for a certain quantity of manufactured
produce. The dearer the latter, therefore, the cheaper the former; and
whatever tends in any country to raise the price of manufactured
produce tends to lower that of the rude produce of the land, and
thereby to discourage agriculture. The smaller the quantity of
manufactured produce which in any given quantity of rude produce,
or, what comes to the same thing, which the price of any given
quantity of rude produce is capable of purchasing, the smaller the
exchangeable value of that given quantity of rude produce, the smaller
the encouragement which either the landlord has to increase its
quantity by improving or the farmer by cultivating the land. Whatever,
besides, tends to diminish in any country the number of artificers and
manufacturers, tends to diminish the home market, the most important
of all markets for the rude produce of the land, and thereby still
further to discourage agriculture.

    Those systems, therefore, which, preferring agriculture to all
other employments, in order to promote it, impose restraints upon
manufactures and foreign trade, act contrary to the very end which
they propose, and indirectly discourage that very species of
industry which they mean to promote. They are so far, perhaps, more
inconsistent than even the mercantile system. That system, by
encouraging manufactures and foreign trade more than agriculture,
turns a certain portion of the capital of the society from
supporting a more advantageous, to support a less advantageous species
of industry. But still it really and in the end encourages that
species of industry which it means to promote. Those agricultural
systems, on the contrary, really and in the end discourage their own
favourite species of industry.

    It is thus that every system which endeavours, either by
extraordinary encouragements to draw towards a particular species of
industry a greater share of the capital of the society than what would
naturally go to it, or, by extraordinary restraints, force from a
particular species of industry some share of the capital which would
otherwise be employed in it, is in reality subversive of the great
purpose which it means to promote. It retards, instead of
accelerating, the progress of the society towards real wealth and
greatness; and diminishes, instead of increasing, the real value of
the annual produce of its land and labour.

    All systems either of preference or of restraint, therefore, being
thus completely taken away, the obvious and simple system of natural
liberty establishes itself of its own accord. Every man, as long as he
does not violate the laws of justice, is left perfectly free to pursue
his own interest his own way, and to bring both his industry and
capital into competition with those of any other man, or order of men.
The sovereign is completely discharged from a duty, in the
attempting to perform which he must always be exposed to innumerable
delusions, and for the proper performance of which no human wisdom
or knowledge could ever be sufficient; the duty of superintending
the industry of private people, and of directing it towards the
employments most suitable to the interest of the society. According to
the system of natural liberty, the sovereign has only three duties
to attend to; three duties of great importance, indeed, but plain
and intelligible to common understandings: first, the duty of
protecting the society from violence and invasion of other independent
societies; secondly, the duty of protecting, as far as possible, every
member of the society from the injustice or oppression of every
other member of it, or the duty of establishing an exact
administration of justice; and, thirdly, the duty of erecting and
maintaining certain public works and certain public institutions which
it can never be for the interest of any individual, or small number of
individuals, to erect and maintain; because the profit could never
repay the expense to any individual or small number of individuals,
though it may frequently do much more than repay it to a great
society.

    The proper performance of those several duties of the sovereign
necessarily supposes a certain expense; and this expense again
necessarily requires a certain revenue to support it. In the following
book, therefore, I shall endeavour to explain, first, what are the
necessary expenses of the sovereign or commonwealth; and which of
those expenses ought to be defrayed by the general contribution of the
whole society; and which of them by that of some particular part only,
or of some particular members of the society; secondly, what are the
different methods in which the whole society may be made to contribute
towards defraying the expenses incumbent on the whole society, and
what are the principal advantages and inconveniences of each of
those methods; and thirdly, what are the reasons and causes which have
induced almost all modern governments to mortgage some part of this
revenue, or to contract debts, and what have been the effects of those
debts upon the real wealth, the annual produce of the land and
labour of the society. The following book, therefore, will naturally
be divided into three chapters.

                         BOOK FIVE

       OF THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH

                          CHAPTER I

       Of the Expenses of the Sovereign or Commonwealth

                           PART 1

                 Of the Expense of Defence

    THE first duty of the sovereign, that of protecting the society
from the violence and invasion of other independent societies, can
be performed only by means of a military force. But the expense both
of preparing this military force in time of peace, and of employing it
in time of war, is very different in the different states of
society, in the different periods of improvement.

    Among nations of hunters, the lowest and rudest state of
society, such as we find it among the native tribes of North
America, every man is a warrior as well as a hunter. When he goes to
war, either to defend his society or to revenge the injuries which
have been done to it by other societies, he maintains himself by his
own labour in the same manner as when he lives at home. His society,
for in this state of things there is properly neither sovereign nor
commonwealth, is at no sort of expense, either to prepare him for
the field, or to maintain him while he is in it.

    Among nations of shepherds, a more advanced state of society, such
as we find it among the Tartars and Arabs, every man is, in the same
manner, a warrior. Such nations have commonly no fixed habitation, but
live either in tents or in a sort of covered waggons which are
easily transported from place to place. The whole tribe or nation
changes its situation according to the different seasons of the
year, as well as according to other accidents. When its herds and
flocks have consumed the forage of one part of the country, it removes
to another, and from that to a third. In the dry season it comes
down to the banks of the rivers; in the wet season it retires to the
upper country. When such a nation goes to war, the warriors will not
trust their herds and flocks to the feeble defence of their old men,
their women and children; and their old men, their women and children,
will not be left behind without defence and without subsistence. The
whole nation, besides, being accustomed to a wandering life, even in
time of peace, easily takes the field in time of war. Whether it
marches as an army, or moves about as a company of herdsmen, the way
of life is nearly the same, though the object proposed by it be very
different. They all go to war together, therefore, and every one
does as well as he can. Among the Tartars, even the women have been
frequently known to engage in battle. If they conquer, whatever
belongs to the hostile tribe is the recompense of the victory. But
if they are vanquished, all is lost, and not only their herds and
flocks, but their women and children, become the booty of the
conqueror. Even the greater part of those who survive the action are
obliged to submit to him for the sake of immediate subsistence. The
rest are commonly dissipated and dispersed in the desert.

    The ordinary life, the ordinary exercises of a Tartar or Arab,
prepare him sufficiently for war. Running, wrestling,
cudgel-playing, throwing the javelin, drawing the bow, etc., are the
common pastimes of those who live in the open air, and are all of them
the images of war. When a Tartar or Arab actually goes to war, he is
maintained by his own herds and flocks which he carries with him in
the same manner as in peace. His chief or sovereign, for those nations
have all chiefs or sovereigns, is at no sort of expense in preparing
him for the field; and when he is in it the chance of plunder is the
only pay which he either expects or requires.

    An army of hunters can seldom exceed two or three hundred men. The
precarious subsistence which the chase affords could seldom allow a
greater number to keep together for any considerable time. An army
of shepherds, on the contrary, may sometimes amount to two or three
hundred thousand. As long as nothing stops their progress, as long
as they can go on from one district, of which they have consumed the
forage, to another which is yet entire, there seems to be scarce any
limit to the number who can march on together. A nation of hunters can
never be formidable to the civilised nations in their neighbourhood. A
nation of shepherds may. Nothing can be more contemptible than an
Indian war in North America. Nothing, on the contrary, can be more
dreadful than Tartar invasion has frequently been in Asia. The
judgment of Thucydides, that both Europe and Asia could not resist the
Scythians united, has been verified by the experience of all ages. The
inhabitants of the extensive but defenceless plains of Scythia or
Tartary have been frequently united under the dominion of the chief of
some conquering horde or clan, and the havoc and devastation of Asia
have always signalized their union. The inhabitants of the
inhospitable deserts of Arabia, the other great nation of shepherds,
have never been united but once; under Mahomet and his immediate
successors. Their union, which was more the effect of religious
enthusiasm than of conquest, was signalized in the same manner. If the
hunting nations of America should ever become shepherds, their
neighbourhood would be much more dangerous to the European colonies
than it is at present.

    In a yet more advanced state of society, among those nations of
husbandmen who have little foreign commerce, and no other manufactures
but those coarse and household ones which almost every private
family prepares for its own use, every man, in the same manner, either
is a warrior or easily becomes such. They who live by agriculture
generally pass the whole day in the open air, exposed to all the
inclemencies of the seasons. The hardiness of their ordinary life
prepares them for the fatigues of war, to some of which their
necessary occupations bear a great analogy. The necessary occupation
of a ditcher prepares him to work in the trenches, and to fortify a
camp as well as to enclose a field. The ordinary pastimes of such
husbandmen are the same as those of shepherds, and are in the same
manner the images of war. But as husbandmen have less leisure than
shepherds, they are not so frequently employed in those pastimes. They
are soldiers, but soldiers not quite so much masters of their
exercise. Such as they are, however, it seldom costs the sovereign
or commonwealth any expense to prepare them for the field.

    Agriculture, even in its rudest and lowest state, supposes a
settlement: some sort of fixed habitation which cannot be abandoned
without great loss. When a nation of mere husbandmen, therefore,
goes to war, the whole people cannot take the field together. The
old men, the women and children, at least, must remain at home to take
care of the habitation. All the men of the military age, however,
may take the field, and, in small nations of this kind, have
frequently done so. In every nation the men of the military age are
supposed to amount to about a fourth or a fifth part of the whole body
of the people. If the campaign, should begin after seed-time, and
end before harvest, both the husbandman and his principal labourers
can be spared from the farm without much loss. He trusts that the work
which must be done in the meantime can be well enough executed by
the old men, the women, and the children. He is not unwilling,
therefore, to serve without pay during a short campaign, and it
frequently costs the sovereign or commonwealth as little to maintain
him in the field as to prepare him for it. The citizens of all the
different states of ancient Greece seem to have served in this
manner till after the second Persian war; and the people of
Peloponnesus till after the Peloponnesian war. The Peloponnesians,
Thucydides observes, generally left the field in the summer, and
returned home to reap the harvest. The Roman people under their kings,
and during the first ages of the republic, served in the same
manner. It was not till the siege of Veii that they who stayed at home
began to contribute something towards maintaining those who went to
war. In the European monarchies, which were founded upon the ruins
of the Roman empire, both before and for some time after the
establishment of what is properly called the feudal law, the great
lords, with all their immediate dependents, used to serve the crown at
their own expense. In the field, in the same manner as at home, they
maintained themselves by their own revenue, and not by any stipend
or pay which they received from the king upon that particular
occasion.

    In a more advanced state of society, two different causes
contribute to render it altogether impossible that they who take the
field should maintain themselves at their own expense. Those two
causes are, the progress of manufactures, and the improvement in the
art of war.

    Though a husbandman should be employed in an expedition,
provided it begins after seed-time and ends before harvest, the
interruption of his business will not always occasion any considerable
diminution of his revenue. Without the intervention of his labour,
nature does herself the greater part of the work which remains to be
done. But the moment that an artificer, a smith, a carpenter, or a
weaver, for example, quits his workhouse, the sole source of his
revenue is completely dried up. Nature does nothing for him, he does
all for himself. When he takes the field, therefore, in defence of the
public, as he has no revenue to maintain himself, he must
necessarily be maintained by the public. But in a country of which a
great part of the inhabitants are artificers and manufacturers, a
great part of the people who go to war must be drawn from those
classes, and must therefore be maintained by the public as long as
they are employed in its service.

    When the art of war, too, has gradually grown up to be a very
intricate and complicated science, when the event of war ceases to
be determined, as in the first ages of society, by a single
irregular skirmish or battle, but when the contest is generally spun
out through several different campaigns, each of which lasts during
the greater part of the year, it becomes universally necessary that
the public should maintain those who serve the public in war, at least
while they are employed in that service. Whatever in time of peace
might be the ordinary occupation of those who go to war, so very
tedious and expensive a service would otherwise be far too heavy a
burden upon them. After the second Persian war, accordingly, the
armies of Athens seem to have been generally composed of mercenary
troops, consisting, indeed, partly of citizens, but partly too of
foreigners, and all of them equally hired and paid at the expense of
the state. From the time of the siege of Veii, the armies of Rome
received pay for their service during the time which they remained
in the field. Under the feudal governments the military service both
of the great lords and of their immediate dependants was, after a
certain period, universally exchanged for a payment in money, which
was employed to maintain those who served in their stead.

    The number of those who can go to war, in proportion to the
whole number of the people, is necessarily much smaller in a civilised
than in a rude state of society. In a civilised society, as the
soldiers are maintained altogether by the labour of those who are
not soldiers, the number of the former can never exceed what the
latter can maintain, over and above maintaining, in a manner
suitable to their respective stations, both themselves and the other
officers of government and law whom they are obliged to maintain. In
the little agrarian states of ancient Greece, a fourth or a fifth part
of the whole body of the people considered themselves as soldiers, and
would sometimes, it is said, take a field. Among the civilised nations
of modern Europe, it is commonly computed that not more than
one-hundredth part of the inhabitants in any country can be employed
as soldiers without ruin to the country which pays the expenses of
their service.

    The expense of preparing the army for the field seems not to
have become considerable in any nation till long after that of
maintaining it in the field had devolved entirely upon the sovereign
or commonwealth. In all the different republics of ancient Greece,
to learn his military exercises was a necessary part of education
imposed by the state upon every free citizen. In every city there
seems to have been a public field, in which, under the protection of
the public magistrate, the young people were taught their different
exercises by different masters. In this very simple institution
consisted the whole expense which any Grecian state seems ever to have
been at in preparing its citizens for war. In ancient Rome the
exercises of the Campus Martius answered the same purpose with those
of the Gymnasium in ancient Greece. Under the feudal governments,
the many public ordinances that the citizens of every district
should practise archery as well as several other military exercises
were intended for promoting the same purpose, but do not seem to
have promoted it so well. Either from want of interest in the officers
entrusted with the execution of those ordinances, or from some other
cause, they appear to have been universally neglected; and in the
progress of all those governments, military exercises seem to have
gone gradually into disuse among the great body of the people.

    In the republics of ancient Greece and Rome, during the whole
period of their existence, and under the feudal governments for a
considerable time after their first establishment, the trade of a
soldier was not a separate, distinct trade, which constituted the sole
or principal occupation of a particular class of citizens. Every
subject of the state, whatever might be the ordinary trade or
occupation by which he gained his livelihood, considered himself, upon
all ordinary occasions, as fit likewise to exercise the trade of a
soldier, and upon many extraordinary occasions as bound to exercise
it.

    The art of war, however, as it is certainly the noblest of all
arts, so in the progress of improvement it necessarily becomes one
of the most complicated among them. The state of the mechanical, as
well as of some other arts, with which it is necessarily connected,
determines the degree of perfection to which it is capable of being
carried at any particular time. But in order to carry it to this
degree of perfection, it is necessary that it should become the sole
or principal occupation of a particular class of citizens, and the
division of labour is as necessary for the improvement of this, as
of every other art. Into other arts the division of labour is
naturally introduced by the prudence of individuals, who find that
they promote their private interest better by confining themselves
to a particular trade than by exercising a great number. But it is the
wisdom of the state only which can render the trade of a soldier a
particular trade separate and distinct from all others. A private
citizen who, in time of profound peace, and without any particular
encouragement from the public, should spend the greater part of his
time in military exercises, might, no doubt, both improve himself very
much in them, and amuse himself very well; but he certainly would
not promote his own interest. It is the wisdom of the state only which
can render it for his interest to give up the greater part of his time
to this peculiar occupation: and states have not always had this
wisdom, even when their circumstances had become such that the
preservation of their existence required that they should have it.

    A shepherd has a great deal of leisure; a husbandman, in the
rude state of husbandry, has some; an artificer or manufacturer has
none at all. The first may, without any loss, employ a great deal of
his time in martial exercises; the second may employ some part of
it; but the last cannot employ a single hour in them without some
loss, and his attention to his own interest naturally leads him to
neglect them altogether. These improvements in husbandry too, which
the progress of arts and manufactures necessarily introduces, leave
the husbandman as little leisure as the artificer. Military
exercises come to be as much neglected by the inhabitants of the
country as by those of the town, and the great body of the people
becomes altogether unwarlike. That wealth, at the same time, which
always follows the improvements of agriculture and manufactures, and
which in reality is no more than the accumulated produce of those
improvements, provokes the invasion of all their neighbours. An
industrious, and upon that account a wealthy nation, is of all nations
the most likely to be attacked; and unless the state takes some new
measures for the public defence, the natural habits of the people
render them altogether incapable of defending themselves.

    In these circumstances there seem to be but two methods by which
the state can make any tolerable provision for the public defence.

    It may either, first, by means of a very rigorous police, and in
spite of the whole bent of the interest, genius, and inclinations of
the people, enforce the practice of military exercises, and oblige
either all the citizens of the military age, or a certain number of
them, to join in some measure the trade of a soldier to whatever other
trade or profession they may happen to carry on.

    Or, secondly, by maintaining and employing a certain number of
citizens in the constant practice of military exercises, it may render
the trade of a soldier a particular trade, separate and distinct
from all others.

    If the state has recourse to the first of those two expedients,
its military force is said to consist in a militia; if to the
second, it is said to consist in a standing army. The practice of
military exercises is the sole or principal occupation of the soldiers
of a standing army, and the maintenance or pay which the state affords
them is the principal and ordinary fund of their subsistence. The
practice of military exercises is only the occasional occupation of
the soldiers of a militia, and they derive the principal and
ordinary fund of their subsistence from some other occupation. In a
militia, the character of the labourer, artificer, or tradesman,
predominates over that of the soldier; in a standing army, that of the
soldier predominates over every other character: and in this
distinction seems to consist the essential difference between those
two different species of military force.

    Militias have been of several different kinds. In some countries
the citizens destined for defending the states seem to have been
exercised only, without being, if I may say so, regimented; that is,
without being divided into separate and distinct bodies of troops,
each of which performed its exercises under its own proper and
permanent officers. In the republics of ancient Greece and Rome,
each citizen, as long as he remained at home, seems to have
practised his exercises either separately and independently, or with
such of his equals as he liked best, and not to have been attached
to any particular body of troops till he was actually called upon to
take the field. In other countries, the militia has not only been
exercised, but regimented. In England, in Switzerland, and, I believe,
in every other country of modern Europe where any imperfect military
force of this kind has been established, every militiaman is, even
in time of peace, attached to a particular body of troops, which
performs its exercises under its own proper and permanent officers.

    Before the invention of firearms, that army was superior in
which the soldiers had, each individually, the greatest skill and
dexterity in the use of their arms. Strength and agility of body
were of the highest consequence, and commonly determined the state
of battles. But this skill and dexterity in the use of their arms
could be acquired only, in the same manner as fencing is at present,
by practising, not in great bodies, but each man separately, in a
particular school, under a particular master, or with his own
particular equals and companions. Since the invention of firearms,
strength and agility of body, or even extraordinary dexterity and
skill in the use of arms, though they are far from being of no
consequence, are, however, of less consequence. The nature of the
weapon, though it by no means puts the awkward upon a level with the
skilful, puts him more nearly so than he ever was before. All the
dexterity and skill, it is supposed, which are necessary for using it,
can be well enough acquired by practising in great bodies.

    Regularity, order, and prompt obedience to command are qualities
which, in modern armies, are of more importance towards determining
the fate of battles than the dexterity and skill of the soldiers in
the use of their arms. But the noise of firearms, the smoke, and the
invisible death to which every man feels himself every moment
exposed as soon as he comes within cannon-shot, and frequently a
long time before the battle can be well said to be engaged, must
render it very difficult to maintain any considerable degree of this
regularity, order, and prompt obedience, even in the beginning of a
modern battle. In an ancient battle there was no noise but what
arose from the human voice; there was no smoke, there was no invisible
cause of wounds or death. Every man, till some mortal weapon
actually did approach him, saw clearly that no such weapon was near
him. In these circumstances, and among troops who had some
confidence in their own skill and dexterity in the use of their
arms, it must have been a good deal less difficult to preserve some
degree regularity and order, not only in the beginning, but through
the whole progress of an ancient battle, and till one of the two
armies was fairly defeated. But the habits of regularity, order, and
prompt obedience to command can be acquired only by troops which are
exercised in great bodies.

    A militia, however, in whatever manner it may be either
disciplined or exercised, must always be much inferior to a
well-disciplined and well-exercised standing army.

    The soldiers who are exercised only once a week, or once a
month, can never be so expert in the use of their arms as those who
are exercised every day, or every other day; and though this
circumstance may not be of so much consequence in modern as it was
in ancient times, yet the acknowledged superiority of the Prussian
troops, owing, it is said, very much to their superior expertness in
their exercise, may satisfy us that it is, even at this day, of very
considerable consequence.

    The soldiers who are bound to obey their officer only once a
week or once a month, and who are at all other times at liberty to
manage their own affairs their own way, without being in any respect
accountable to him, can never be under the same awe in his presence,
can never have the same disposition to ready obedience, with those
whose whole life and conduct are every day directed by him, and who
every day even rise and go to bed, or at least retire to their
quarters, according to his orders. In what is called discipline, or in
the habit of ready obedience, a militia must always be still more
inferior to a standing army than it may sometimes be in what is called
the manual exercise, or in the management and use of its arms. But
in modern war the habit of ready and instant obedience is of much
greater consequence than a considerable superiority in the
management of arms.

    Those militias which, like the Tartar or Arab militia, go to war
under the same chieftains whom they are accustomed to obey in peace
are by far the best. In respect for their officers, in the habit of
ready obedience, they approach nearest to standing armies. The
highland militia, when it served under its own chieftains, had some
advantage of the same kind. As the highlanders, however, were not
wandering, but stationary shepherds, as they had all a fixed
habitation, and were not, in peaceable times, accustomed to follow
their chieftain from place to place, so in time of war they were
less willing to follow him to any considerable distance, or to
continue for any long time in the field. When they had acquired any
booty they were eager to return home, and his authority was seldom
sufficient to detain them. In point of obedience they were always much
inferior to what is reported of the Tartars and Arabs. As the
highlanders too, from their stationary life, spend less of their
time in the open air, they were always less accustomed to military
exercises, and were less expert in the use of their arms than the
Tartars and Arabs are said to be.

    A militia of any kind, it must be observed, however, which has
served for several successive campaigns in the field, becomes in every
respect a standing army. The soldiers are every day exercised in the
use of their arms, and, being constantly under the command of their
officers, are habituated to the same prompt obedience which takes
place in standing armies. What they were before they took the field is
of little importance. They necessarily become in every respect a
standing army after they have passed a few campaigns in it. Should the
war in America drag out through another campaign, the American militia
may become in every respect a match for that standing army of which
the valour appeared, in the last war, at least not inferior to that of
the hardiest veterans of France and Spain.

    This distinction being well understood, the history of all ages,
it will be found, bears testimony to the irresistible superiority
which a well-regulated standing army has over a militia.

    One of the first standing armies of which we have any distinct
account, in any well authenticated history, is that of Philip of
Macedon. His frequent wars with the Thracians, Illyrians, Thessalians,
and some of the Greek cities in the neighbourhood of Macedon,
gradually formed his troops, which in the beginning were probably
militia, to the exact discipline of a standing army. When he was at
peace, which he was very seldom, and never for any long time together,
he was careful not to disband that army. It vanquished and subdued,
after a long and violent struggle, indeed, the gallant and well
exercised militias of the principal republics of ancient Greece, and
afterwards, with very little struggle, the effeminate and
ill-exercised militia of the great Persian empire. The fall of the
Greek republics and of the Persian empire was the effect of the
irresistible superiority which a standing army has over every sort
of militia. It is the first great revolution in the affairs of mankind
of which history has preserved any distinct or circumstantial account.

    The fall of Carthage, and the consequent elevation of Rome, is the
second. All the varieties in the fortune of those two famous republics
may very well be accounted for from the same cause.

    From the end of the first to the beginning of the second
Carthaginian war the armies of Carthage were continually in the field,
and employed under three great generals, who succeeded one another
in the command: Hamilcar, his son-in-law Hasdrubal, and his son
Hannibal; first in chastising their own rebellious slaves,
afterwards in subduing the revolted nations of Africa, and, lastly, in
conquering the great kingdom of Spain. The army which Hannibal led
from Spain into Italy must necessarily, in those different wars,
have been gradually formed to the exact discipline of a standing army.
The Romans, in the meantime, though they had not been altogether at
peace, yet they had not, during this period, been engaged in any war
of very great consequence, and their military discipline, it is
generally said, was a good deal relaxed. The Roman armies which
Hannibal encountered at Trebia, Thrasymenus, and Cannae were militia
opposed to a standing army. This circumstance, it is probable,
contributed more than any other to determine the fate of those
battles.

    The standing army which Hannibal left behind him in Spain had
the like superiority over the militia which the Romans sent to
oppose it, and in a few years, under the command of his brother, the
younger Hasdrubal, expelled them almost entirely from that country.

    Hannibal was ill supplied from home. The Roman militia, being
continually in the field, became in the progress of the war a well
disciplined and well-exercised standing army, and the superiority of
Hannibal grew every day less and less. Hasdrubal judged it necessary
to lead the whole, or almost the whole of the standing army which he
commanded in Spain, to the assistance of his brother in Italy. In this
march he is said to have been misled by his guides, and in a country
which he did not know, was surprised and attacked by another
standing army, in every respect equal or superior to his own, and
was entirely defeated.

    When Hasdrubal had left Spain, the great Scipio found nothing to
oppose him but a militia inferior to his own. He conquered and subdued
that militia, and, in the course of the war, his own militia
necessarily became a well-disciplined and well-exercised standing
army. That standing army was afterwards carried to Africa, where it
found nothing but a militia to oppose it. In order to defend
Carthage it became necessary to recall the standing army of
Hannibal. The disheartened and frequently defeated African militia
joined it, and, at the battle of Zama, composed the greater part of
the troops of Hannibal. The event of that day determined the fate of
the two rival republics.

    From the end of the second Carthaginian war till the fall of the
Roman republic, the armies of Rome were in every respect standing
armies. The standing army of Macedon made some resistance to their
arms. In the height of their grandeur it cost them two great wars, and
three great battles, to subdue that little kingdom, of which the
conquest would probably have been still more difficult had it not been
for the cowardice of its last king. The militias of all the
civilised nations of the ancient world, of Greece, of Syria, and of
Egypt, made but a feeble resistance to the standing armies of Rome.
The militias of some barbarous nations defended themselves much
better. The Scythian or Tartar militia, which Mithridates drew from
the countries north of the Euxine and Caspian seas, were the most
formidable enemies whom the Romans had to encounter after the second
Carthaginian war. The Parthian and German militias, too, were always
respectable, and upon several occasions gained very considerable
advantages over the Roman armies. In general, however, and when the
Roman armies were well commanded, they appear to have been very much
superior; and if the Romans did not pursue the final conquest either
of Parthia or Germany, it was probably because they judged that it was
not worth while to add those two barbarous countries to an empire
which was already too large. The ancient Parthians appear to have been
a nation of Scythian or Tartar extraction, and to have always retained
a good deal of the manners of their ancestors. The ancient Germans
were, like the Scythians or Tartars, a nation of wandering
shepherds, who went to war under the same chiefs whom they were
accustomed to follow in peace. Their militia was exactly of the same
kind with that of the Scythians or Tartars, from whom, too, they
were probably descended.

    Many different causes contributed to relax the discipline of the
Roman armies. Its extreme severity was, perhaps, one of those
causes. In the days of their grandeur, when no enemy appeared
capable of opposing them, their heavy armour was laid aside as
unnecessarily burdensome, their labourious exercises were neglected as
unnecessarily toilsome. Under the Roman emperors, besides, the
standing armies of Rome, those particularly which guarded the German
and Pannonian frontiers, became dangerous to their masters, against
whom they used frequently to set up their own generals. In order to
render them less formidable, according to some authors, Dioclesian,
according to others, Constantine, first withdrew them from the
frontier, where they had always before been encamped in great
bodies, generally of two or three legions each, and dispersed them
in small bodies through the different provincial towns, from whence
they were scarce ever removed but when it became necessary to repel an
invasion. Small bodies of soldiers quartered, in trading and
manufacturing towns, and seldom removed from those quarters, became
themselves tradesmen, artificers, and manufacturers. The civil came to
predominate over the military character, and the standing armies of
Rome gradually degenerated into a corrupt, neglected, and
undisciplined militia, incapable of resisting the attack of the German
and Scythian militias, which soon afterwards invaded the western
empire. It was only by hiring the militia of some of those nations
to oppose to that of others that the emperors were for some time
able to defend themselves. The fall of the western empire is the third
great revolution in the affairs of mankind of which ancient history
has preserved any distinct or circumstantial account. It was brought
about by the irresistible superiority which the militia of a barbarous
has over that of a civilised nation; which the militia of a nation
of shepherds has over that of a nation of husbandmen, artificers,
and manufacturers. The victories which have been gained by militias
have generally been, not over standing armies, but over other militias
in exercise and discipline inferior to themselves. Such were the
victories which the Greek militia gained over that of the Persian
empire; and such too were those which in later times the Swiss militia
gained over that of the Austrians and Burgundians.

    The military force of the German and Scythian nations who
established themselves upon the ruins of the western empire
continued for some time to be of the same kind in their new
settlements as it had been in their original country. It was a militia
of shepherds and husbandmen, which, in time of war, took the field
under the command of the same chieftains whom it was accustomed to
obey in peace. It was, therefore, tolerably well exercised, and
tolerably well disciplined. As arts and industry advanced, however,
the authority of the chieftains gradually decayed, and the great
body of the people had less time to spare for military exercises. Both
the discipline and the exercise of the feudal militia, therefore, went
gradually to ruin, and standing armies were gradually introduced to
supply the place of it. When the expedient of a standing army,
besides, had once been adopted by one civilised nation, it became
necessary that all its neighbours should follow their example. They
soon found that their safety depended upon their doing so, and that
their own militia was altogether incapable of resisting the attack
of such an army.

    The soldiers of a standing army, though they may never have seen
an enemy, yet have frequently appeared to possess all the courage of
veteran troops and the very moment that they took the field to have
been fit to face the hardiest and most experienced veterans. In
1756, when the Russian army marched into Poland, the valour of the
Russian soldiers did not appear inferior to that of the Prussians,
at that time supposed to be the hardiest and most experienced veterans
in Europe. The Russian empire, however, had enjoyed a profound peace
for near twenty years before, and could at that time have very few
soldiers who had ever seen an enemy. When the Spanish war broke out in
1739, England had enjoyed a profound peace for about
eight-and-twenty years. The valour of her soldiers, however, far
from being corrupted by that long peace, was never more
distinguished than in the attempt upon Carthagena, the first
unfortunate exploit of that unfortunate war. In a long peace the
generals, perhaps, may sometimes forget their skill; but, where a
well-regulated standing army has been kept up, the soldiers seem never
to forget their valour.

    When a civilised nation depends for its defence upon a militia, it
is at all times exposed to be conquered by any barbarous nation
which happens to be in its neighbourhood. The frequent conquests of
all the civilised countries in Asia by the Tartars sufficiently
demonstrates the natural superiority which the militia of a
barbarous has over that of a civilised nation. A well-regulated
standing army is superior to every militia. Such an army, as it can
best be maintained by an opulent and civilised nation, so it can alone
defend such a nation against the invasion of a poor and barbarous
neighbour. It is only by means of a standing army, therefore, that the
civilization of any country can be perpetuated, or even preserved
for any considerable time.

    As it is only by means of a well-regulated standing army that a
civilised country can be defended, so it is only by means of it that a
barbarous country can be suddenly and tolerably civilised. A
standing army establishes, with an irresistible force, the law of
the sovereign through the remotest provinces of the empire, and
maintains some degree of regular government in countries which could
not otherwise admit of any. Whoever examines, with attention, the
improvements which Peter the Great introduced into the Russian empire,
will find that they almost all resolve themselves into the
establishment of a well regulated standing army. It is the
instrument which executes and maintains all his other regulations.
That degree of order and internal peace which that empire has ever
since enjoyed is altogether owing to the influence of that army.

    Men of republican principles have been jealous of a standing
army as dangerous to liberty. It certainly is so wherever the interest
of the general and that of the principal officers are not
necessarily connected with the support of the constitution of the
state. The standing army of Caesar destroyed the Roman republic. The
standing army of Cromwell turned the Long Parliament out of doors. But
where the sovereign is himself the general, and the principal nobility
and gentry of the country the chief officers of the army, where the
military force is placed under the command of those who have the
greatest interest in the support of the civil authority, because
they have themselves the greatest share of that authority, a
standing army can never be dangerous to liberty. On the contrary, it
may in some cases be favourable to liberty. The security which it
gives to the sovereign renders unnecessary that troublesome
jealousy, which, in some modern republics, seems to watch over the
minutest actions, and to be at all times ready to disturb the peace of
every citizen. Where the security of the magistrate, though
supported by the principal people of the country, is endangered by
every popular discontent; where a small tumult is capable of
bringing about in a few hours a great revolution, the whole
authority of government must be employed to suppress and punish
every murmur and complaint against it. To a sovereign, on the
contrary, who feels himself supported, not only by the natural
aristocracy of the country, but by a well-regulated standing army, the
rudest, the most groundless, and the most licentious remonstrances can
give little disturbance. He can safely pardon or neglect them, and his
consciousness of his own superiority naturally disposes him to do
so. That degree of liberty which approaches to licentiousness can be
tolerated only in countries where the sovereign is secured by a
well-regulated standing army. It is in such countries only that the
public safety does not require that the sovereign should be trusted
with any discretionary power for suppressing even the impertinent
wantonness of this licentious liberty.

    The first duty of the sovereign, therefore, that of defending
the society from the violence and injustice of other independent
societies, grows gradually more and more expensive as the society
advances in civilization. The military force of the society, which
originally cost the sovereign no expense either in time of peace or in
time of war, must, in the progress of improvement, first be maintained
by him in time of war, and afterwards even in time of peace.

    The great change introduced into the art of war by the invention
of firearms has enhanced still further both the expense of
exercising and disciplining any particular number of soldiers in
time of peace, and that of employing them in time of war. Both their
arms and their ammunition are become more expensive. A musket is a
more expensive machine than a javelin or a bow and arrows; a cannon or
a mortar than a balista or a catapulta. The powder which is spent in a
modern review is lost irrecoverably, and occasions a very considerable
expense. The javeline and arrows which were thrown or shot in an
ancient one could easily be picked up again, and were besides of
very little value. The cannon and the mortar are not only much dearer,
but much heavier machines than the balista or catapulta, and require a
greater expense, not only to prepare them for the field, but to
carry them to it. As the superiority of the modern artillery too
over that of the ancients is very great, it has become much more
difficult, and consequently much more expensive, to fortify a town
so as to resist even for a few weeks the attack of that superior
artillery. In modern times many different causes contribute to
render the defence of the society more expensive. The unavoidable
effects of the natural progress of improvement have, in this
respect, been a good deal enhanced by a great revolution in the art of
war, to which a mere accident, the invention of gunpowder, seems to
have given occasion.

    In modern war the great expense of firearms gives an evident
advantage to the nation which can best afford that expense, and
consequently to an opulent and civilised over a poor and barbarous
nation. In ancient times the opulent and civilised found it
difficult to defend themselves against the poor and barbarous nations.
In modern times the poor and barbarous find it difficult to defend
themselves against the opulent and civilised. The invention of
firearms, an invention which at first sight appears to be so
pernicious, is certainly favourable both to the permanency and to
the extension of civilization.

                            PART 2

                 Of the Expense of Justice

    THE second duty of the sovereign, that of protecting, as far as
possible, every member of the society from the injustice or oppression
of every other member of it, or the duty of establishing an exact
administration of justice, requires, too, very different degrees of
expense in the different periods of society.

    Among nations of hunters, as there is scarce any property, or at
least none that exceeds the value of two or three days' labour, so
there is seldom any established magistrate or any regular
administration of justice. Men who have no property can injure one
another only in their persons or reputations. But when one man
kills, wounds, beats, or defames another, though he to whom the injury
is done suffers, he who does it receives no benefit. It is otherwise
with the injuries to property. The benefit of the person who does
the injury is often equal to the loss of him who suffers it. Envy,
malice, or resentment are the only passions which can prompt one man
to injure another in his person or reputation. But the greater part of
men are not very frequently under the influence of those passions, and
the very worst of men are so only occasionally. As their gratification
too, how agreeable soever it may be to certain characters, is not
attended with any real or permanent advantage, it is in the greater
part of men commonly restrained by prudential considerations. Men
may live together in society with some tolerable degree of security,
though there is no civil magistrate to protect them from the injustice
of those passions. But avarice and ambition in the rich, in the poor
the hatred of labour and the love of present ease and enjoyment, are
the passions which prompt to invade property, passions much more
steady in their operation, and much more universal in their influence.
Wherever there is great property there is great inequality. For one
very rich man there must be at least five hundred poor, and the
affluence of the few supposes the indigence of the many. The affluence
of the rich excites the indignation of the poor, who are often both
driven by want, and prompted by envy, to invade his possessions. It is
only under the shelter of the civil magistrate that the owner of
that valuable property, which is acquired by the labour of many years,
or perhaps of many successive generations, can sleep a single night in
security. He is at all times surrounded by unknown enemies, whom,
though he never provoked, he can never appease, and from whose
injustice he can be protected only by the powerful arm of the civil
magistrate continually held up to chastise it. The acquisition of
valuable and extensive property, therefore, necessarily requires the
establishment of civil government. Where there is no property, or at
least none that exceeds the value of two or three days' labour,
civil government is not so necessary.

    Civil government supposes a certain subordination. But as the
necessity of civil government gradually grows up with the
acquisition of valuable property, so the principal causes which
naturally introduce subordination gradually grow up with the growth of
that valuable property.

    The causes or circumstances which naturally introduce
subordination, or which naturally, and antecedent to any civil
institution, give some men some superiority over the greater part of
their brethren, seem to be four in number.

    The first of those causes or circumstances is the superiority of
personal qualifications, of strength, beauty, and agility of body;
of wisdom and virtue, of prudence, justice, fortitude, and
moderation of mind. The qualifications of the body, unless supported
by those of the mind, can give little authority in any period of
society. He is a very strong man, who, by mere strength of body, can
force two weak ones to obey him. The qualifications of the mind can
alone give a very great authority. They are, however, invisible
qualities; always disputable, and generally disputed. No society,
whether barbarous or civilised, has ever found it convenient to settle
the rules of precedency of rank and subordination according to those
invisible qualities; but according to something that is more plain and
palpable.

    The second of those causes or circumstances is the superiority
of age. An old man, provided his age is not so far advanced as to give
suspicion of dotage, is everywhere more respected than a young man
of equal rank, fortune, and abilities. Among nations of hunters,
such as the native tribes of North America, age is the sole foundation
of rank and precedency. Among them, father is the appellation of a
superior; brother, of an equal; and son, of an inferior. In the most
opulent and civilised nations, age regulates rank among those who
are in every other respect equal, and among whom, therefore, there
is nothing else to regulate it. Among brothers and among sisters,
the eldest always takes place; and in the succession of the paternal
estate everything which cannot be divided, but must go entire to one
person, such as a title of honour, is in most cases given to the
eldest. Age is a plain and palpable quality which admits of no
dispute.

    The third of those causes or circumstances is the superiority of
fortune. The authority of riches, however, though great in every age
of society, is perhaps greatest in the rudest age of society which
admits of any considerable inequality of fortune. A Tartar chief,
the increase of whose herds and stocks is sufficient to maintain a
thousand men, cannot well employ that increase in any other way than
in maintaining a thousand men. The rude state of his society does
not afford him any manufactured produce, any trinkets or baubles of
any kind, for which he can exchange that part of his rude produce
which is over and above his own consumption. The thousand men whom
he thus maintains, depending entirely upon him for their
subsistence, must both obey his orders in war, and submit to his
jurisdiction in peace. He is necessarily both their general and
their judge, and his chieftainship is the necessary effect of the
superiority of his fortune. In an opulent and civilised society, a man
may possess a much greater fortune and yet not be able to command a
dozen people. Though the produce of his estate may be sufficient to
maintain, and may perhaps actually maintain, more than a thousand
people, yet as those people pay for everything which they get from
him, as he gives scarce anything to anybody but in exchange for an
equivalent, there is scarce anybody who considers himself as
entirely dependent upon him, and his authority extends only over a few
menial servants. The authority of fortune, however, is very great even
in an opulent and civilised society. That it is much greater than that
either of age or of personal qualities has been the constant complaint
of every period of society which admitted of any considerable
inequality of fortune. The first period of society, that of hunters,
admits of no such inequality. Universal poverty establishes their
universal equality, and the superiority either of age or of personal
qualities are the feeble but the sole foundations of authority and
subordination. There is therefore little or no authority or
subordination in this period of society. The second period of society,
that of shepherds, admits of very great inequalities of fortune, and
there is no period in which the superiority of fortune gives so
great authority to those who possess it. There is no period
accordingly in which authority and subordination are more perfectly
established. The authority of an Arabian sherif is very great; that of
a Tartar khan altogether despotical.

    The fourth of those causes or circumstances is the superiority
of birth. Superiority of birth supposes an ancient superiority of
fortune in the family of the person who claims it. All families are
equally ancient; and the ancestors of the prince, though they may be
better known, cannot well be more numerous than those of the beggar.
Antiquity of family means everywhere the antiquity either of wealth,
or of that greatness which is commonly either founded upon wealth,
or accompanied with it. Upstart greatness is everywhere less respected
than ancient greatness. The hatred of usurpers, the love of the family
of an ancient monarch, are, in a great measure, founded upon the
contempt which men naturally have for the former, and upon their
veneration for the latter. As a military officer submits without
reluctance to the authority of a superior by whom he has always been
commanded, but cannot bear that his inferior should be set over his
head, so men easily submit to a family to whom they and their
ancestors have always submitted; but are fired with indignation when
another family, in whom they had never acknowledged any such
superiority, assumes a dominion over them.

    The distinction of birth, being subsequent to the inequality of
fortune, can have no place in nations of hunters, among whom all
men, being equal in fortune, must likewise be very nearly equal in
birth. The son of a wise and brave man may, indeed, even among them,
be somewhat more respected than a man of equal merit who has the
misfortune to be the son of a fool or a coward. The difference,
however, will not be very great; and there never was, I believe, a
great family in the world whose illustration was entirely derived from
the inheritance of wisdom and virtue.

    The distinction of birth not only may, but always does take
place among nations of shepherds. Such nations are always strangers to
every sort of luxury, and great wealth can scarce ever be dissipated
among them by improvident profusion. There are no nations
accordingly who abound more in families revered and honoured on
account of their descent from a long race of great and illustrious
ancestors, because there are no nations among whom wealth is likely to
continue longer in the same families.

    Birth and fortune are evidently the two circumstances which
principally set one man above another. They are the two great
sources of personal distinction, and are therefore the principal
causes which naturally establish authority and subordination among
men. Among nations of shepherds both those causes operate with their
full force. The great shepherd or herdsman, respected on account of
his great wealth, and of the great number of those who depend upon him
for subsistence, and revered on account of the nobleness of his birth,
and of the immemorial antiquity of his illustrious family, has a
natural authority over all the inferior shepherds or herdsmen of his
horde or clan. He can command the united force of a greater number
of people than any of them. His military power is greater than that of
any of them. In time of war they are all of them naturally disposed to
muster themselves under his banner, rather than under that of any
other person, and his birth and fortune thus naturally procure to
him some sort of executive power. By commanding, too, the united force
of a greater number of people than any of them, he is best able to
compel any one of them who may have injured another to compensate
the wrong. He is the person, therefore, to whom all those who are
too weak to defend themselves naturally look up for protection. It
is to him that they naturally complain of the injuries which they
imagine have been done to them, and his interposition in such cases is
more easily submitted to, even by the person complained of, than
that of any other person would be. His birth and fortune thus
naturally procure him some sort of judicial authority.

    It is in the age of shepherds, in the second period of society,
that the inequality of fortune first begins to take place, and
introduces among men a degree of authority and subordination which
could not possibly exist before. It thereby introduces some degree
of that civil government which is indispensably necessary for its
own preservation: and it seems to do this naturally, and even
independent of the consideration of that necessity. The
consideration of that necessity comes no doubt afterwards to
contribute very much to maintain and secure that authority and
subordination. The rich, in particular, are necessarily interested
to support that order of things which can alone secure them in the
possession of their own advantages. Men of inferior wealth combine
to defend those of superior wealth in the possession of their
property, in order that men of superior wealth may combine to defend
them in the possession of theirs. All the inferior shepherds and
herdsmen feel that the security of their own herds and flocks
depends upon the security of those of the great shepherd or
herdsman; that the maintenance of their lesser authority depends
upon that of his greater authority, and that upon their
subordination to him depends his power of keeping their inferiors in
subordination to them. They constitute a sort of little nobility,
who feel themselves interested to defend the property and to support
the authority of their own little sovereign in order that he may be
able to defend their property and to support their authority. Civil
government, so far as it is instituted for the security of property,
is in reality instituted for the defence of the rich against the poor,
or of those who have some property against those who have none at all.

    The judicial authority of such a sovereign, however, far from
being a cause of expense, was for a long time a source of revenue to
him. The persons who applied to him for justice were always willing to
pay for it, and a present never failed to accompany a petition.
After the authority of the sovereign, too, was thoroughly established,
the person found guilty, over and above the satisfaction which he
was obliged to make to the party, was likewise forced to pay an
amercement to the sovereign. He had given trouble, he had disturbed,
he had broke the peace of his lord the king, and for those offences an
amercement was thought due. In the Tartar governments of Asia, in
the governments of Europe which were founded by the German and
Scythian nations who overturned the Roman empire, the administration
of justice was a considerable source of revenue, both to the sovereign
and to all the lesser chiefs or lords who exercised under him any
particular jurisdiction, either over some particular tribe or clan, or
over some particular territory or district. Originally both the
sovereign and the inferior chiefs used to exercise this jurisdiction
in their own persons. Afterwards they universally found it
convenient to delegate it to some substitute, bailiff, or judge.
This substitute, however, was still obliged to account to his
principal or constituent for the profits of the jurisdiction.
Whoever reads the instructions which were given to the judges of the
circuit in the time of Henry II will see clearly that those judges
were a sort of itinerant factors, sent round the country for the
purpose of levying certain branches of the king's revenue. In those
days the administration of justice not only afforded a certain revenue
to the sovereign, but to procure this revenue seems to have been one
of the principal advantages which he proposed to obtain by the
administration of justice.

    This scheme of making the administration of justice subservient to
the purposes of revenue could scarce fail to be productive of
several very gross abuses. The person who applied for justice with a
large present in his hand was likely to get something more than
justice; while he who applied for it with a small one was likely to
get something less. Justice, too, might frequently be delayed in order
that this present might be repeated. The amercement, besides, of the
person complained of, might frequently suggest a very strong reason
for finding him in the wrong, even when he had not really been so.
That such abuses were far from being uncommon the ancient history of
every country in Europe bears witness.

    When the sovereign or chief exercised his judicial authority in
his own person, how much soever he might abuse it, it must have been
scarce possible to get any redress, because there could seldom be
anybody powerful enough to call him to account. When he exercised it
by a bailiff, indeed, redress might sometimes be had. If it was for
his own benefit only that the bailiff had been guilty of any act of
injustice, the sovereign himself might not always be unwilling to
punish him, or to oblige him to repair the wrong. But if it was for
the benefit of his sovereign, if it was in order to make court to
the person who appointed him and who might prefer him, that he had
committed any act of oppression, redress would upon most occasions
be as impossible as if the sovereign had committed it himself. In
all barbarous governments, accordingly, in all those ancient
governments of Europe in particular which were founded upon the
ruins of the Roman empire, the administration of justice appears for a
long time to have been extremely corrupt, far from being quite equal
and impartial even under the best monarchs, and altogether
profligate under the worst.

    Among nations of shepherds, where the sovereign or chief is only
the greatest shepherd or herdsman of the horde or clan, he is
maintained in the same manner as any of his vassals or subjects, by
the increase of his own herds or flocks. Among those nations of
husbandmen who are but just come out of the shepherd state, and who
are not much advanced beyond that state, such as the Greek tribes
appear to have been about the time of the Trojan war, and our German
and Scythian ancestors when they first settled upon the ruins of the
western empire, the sovereign or chief is, in the same manner, only
the greatest landlord of the country, and is maintained, in the same
manner as any other landlord, by a revenue derived from his own
private estate, or from what, in modern Europe, was called the demesne
of the crown. His subjects, upon ordinary occasions, contributed
nothing to his support, except when, in order to protect them from the
oppression of some of their fellow-subjects, they stand in need of his
authority. The presents which they make him upon such occasions
constitute the whole ordinary revenue, the whole of the emoluments
which, except perhaps upon some very extraordinary emergencies, he
derives from his dominion over them. When Agamemnon, in Homer,
offers to Achilles for his friendship the sovereignty of seven Greek
cities, the sole advantage which he mentions as likely to be derived
from it was that the people would honour him with presents. As long as
such presents, as long as the emoluments of justice, or what may be
called the fees of court, constituted in this manner the whole
ordinary revenue which the sovereign derived from his sovereignty,
it could not well be expected, it could not even decently be proposed,
that he should give them up altogether. It might, and it frequently
was proposed, that he should regulate and ascertain them. But after
they had been so regulated and ascertained, how to hinder a person who
was all-powerful from extending them beyond those regulations was
still very difficult, not to say impossible. During the continuance of
this state of things, therefore, the corruption of justice,
naturally resulting from the arbitrary and uncertain nature of those
presents, scarce admitted of any effectual remedy.

    But when from different causes, chiefly from the continually
increasing expenses of defending the nation against the invasion of
other nations, the private estate of the sovereign had become
altogether insufficient for defraying the expense of the
sovereignty, and when it had become necessary that the people
should, for their own security, contribute towards this expense by
taxes of different kinds, it seems to have been very commonly
stipulated that no present for the administration of justice should,
under any pretence, be accepted either by the sovereign, or by his
bailiffs and substitutes, the judges. Those presents, it seems to have
been supposed, could more easily be abolished altogether than
effectually regulated and ascertained. Fixed salaries were appointed
to the judges, which were supposed to compensate to them the loss of
whatever might have been their share of the ancient emoluments of
justice, as the taxes more than compensated to the sovereign the
loss of his. Justice was then said to be administered gratis.

    Justice, however, never was in reality administered gratis in
any country. Lawyers and attorneys, at least, must always be paid by
the parties; and, if they were not, they would perform their duty
still worse than they actually perform it. The fees annually paid to
lawyers and attorneys amount, in every court, to a much greater sum
than the salaries of the judges. The circumstance of those salaries
being paid by the crown can nowhere much diminish the necessary
expense of a law-suit. But it was not so much to diminish the expense,
as to prevent the corruption of justice, that the judges were
prohibited from receiving any present or fee from the parties.

    The office of judge is in itself so very honourable that men are
willing to accept of it, though accompanied with very small
emoluments. The inferior office of justice of peace, though attended
with a good deal of trouble, and in most cases with no emoluments at
all, is an object of ambition to the greater part of our country
gentlemen. The salaries of all the different judges, high and low,
together with the whole expense of the administration and execution of
justice, even where it is not managed with very good economy, makes,
in any civilised country, but a very inconsiderable part of the
whole expense of government.

    The whole expense of justice, too, might easily be defrayed by the
fees of court; and, without exposing the administration of justice
to any real hazard of corruption, the public revenue might thus be
discharged from a certain, though, perhaps, but a small incumbrance.
It is difficult to regulate the fees of court effectually where a
person so powerful as the sovereign is to share in them, and to derive
any considerable part of his revenue from them. It is very easy
where the judge is the principal person who can reap any benefit
from them. The law can very easily oblige the judge to respect the
regulation, though it might not always be able to make the sovereign
respect it. Where the fees of court are precisely regulated and
ascertained, where they are paid all at once, at a certain period of
every process, into the hands of a cashier or receiver, to be by him
distributed in certain known proportions among the different judges
after the process is decided, and not till it is decided, there
seems to be no more danger of corruption than where such fees are
prohibited altogether. Those fees, without occasioning any
considerable increase in the expense of a lawsuit, might be rendered
fully sufficient for defraying the whole expense of justice. By not
being paid to the judges till the process was determined, they might
be some incitement to the diligence of the court in examining and
deciding it. In courts which consisted of a considerable number of
judges, by proportioning the share of each judge to the number of
hours and days which he had employed in examining the process,
either in the court or in a committee by order of the court, those
fees might give some encouragement to the diligence of each particular
judge. Public services are never better performed than when their
reward comes only in consequence of their being performed, and is
proportioned to the diligence employed in performing them. In the
different parliaments of France, the fees of court (called epices
and vacations) constitute the far greater part of the emoluments of
the judges. After all deductions are made, the net salary paid by
the crown to a counsellor or judge in the Parliament of Toulouse, in
rank and dignity the second parliament of the kingdom, amounts only to
a hundred and fifty livres, about six pounds eleven shillings sterling
a year. About seven years ago that sum was in the same place the
ordinary yearly wages of a common footman. The distribution of those
epices, too, is according to the diligence of the judges. A diligent
judge gains a comfortable, though moderate, revenue by his office:
an idle one gets little more than his salary. Those Parliaments are
perhaps, in many respects, not very convenient courts of justice;
but they have never been accused, they seem never even to have been
suspected, of corruption.

    The fees of court seem originally to have been the principal
support of the different courts of justice in England. Each court
endeavoured to draw to itself as much business as it could, and was,
upon that account, willing to take cognisance of many suits which were
not originally intended to fall under its jurisdiction. The Court of
King's Bench, instituted for the trial of criminal causes only, took
cognisance of civil suits; the plaintiff pretending that the
defendant, in not doing him justice, had been guilty of some
trespass or misdemeanour. The Court of Exchequer, instituted for the
levying of the king's revenue, and for enforcing the payment of such
debts only as were due to the king, took cognisance of all other
contract debts; the plaintiff alleging that he could not pay the
king because the defendant would not pay him. In consequence of such
fictions it came, in many cases, to depend altogether upon the parties
before what court they would choose to have their cause tried; and
each court endeavoured, by superior dispatch and impartiality, to draw
to itself as many causes as it could. The present admirable
constitution of the courts of justice in England was, perhaps,
originally in a great measure formed by this emulation which anciently
took place between their respective judges; each judge endeavouring to
give, in his own court, the speediest and most effectual remedy
which the law would admit for every sort of injustice. Originally
the courts of law gave damages only for breach of contract. The
Court of Chancery, as a court of conscience, first took upon it to
enforce the specific performance of agreements. When the breach of
contract consisted in the non-payment of money, the damage sustained
could be compensated in no other way than by ordering payment, which
was equivalent to a specific performance of the agreement. In such
cases, therefore, the remedy of the courts of law was sufficient. It
was not so in others. When the tenant sued his lord for having
unjustly outed him of his lease, the damages which he recovered were
by no means equivalent to the possession of the land. Such causes,
therefore, for some time, went all to the Court of Chancery, to the no
small loss of the courts of law. It was to draw back such causes to
themselves that the courts of law are said to have invented the
artificial and fictitious Writ of Ejectment, the most effectual remedy
for an unjust outer or dispossession of land.

    A stamp-duty upon the law proceedings of each particular court, to
be levied by that court, and applied towards the maintenance of the
judges and other officers belonging to it, might, in the same
manner, afford revenue sufficient for defraying the expense of the
administration of justice, without bringing any burden upon the
general revenue of the society. The judges indeed might, in this case,
be under the temptation of multiplying unnecessarily the proceedings
upon every cause, in order to increase, as much as possible, the
produce of such a stamp-duty. It has been the custom in modern
Europe to regulate, upon most occasions, the payment of the
attorneys and clerks of court according to the number of pages which
they had occasion to write; the court, however, requiring that each
page should contain so many lines, and each line so many words. In
order to increase their payment, the attorneys and clerks have
contrived to multiply words beyond all necessity, to the corruption of
the law language of, I believe, every court of justice in Europe. A
like temptation might perhaps occasion a like corruption in the form
of law proceedings.

    But whether the administration of justice be so contrived as to
defray its own expense, or whether the judges be maintained by fixed
salaries paid to them from some other fund, it does not seem necessary
that the person or persons entrusted with the executive power should
be charged with the management of that fund, or with the payment of
those salaries. That fund might arise from the rent of landed estates,
the management of each estate being entrusted to the particular
court which was to be maintained by it. That fund might arise even
from the interest of a sum of money, the lending out of which might,
in the same manner, be entrusted to the court which was to be
maintained by it. A part, though indeed but a small part, of the
salary of the judges of the Court of Session in Scotland arises from
the interest of a sum of money. The necessary instability of such a
fund seems, however, to render it an improper one for the
maintenance of an institution which ought to last for ever.

    The separation of the judicial from the executive power seems
originally to have arisen from the increasing business of the society,
in consequence of its increasing improvement. The administration of
justice became so laborious and so complicated a duty as to require
the undivided attention of the persons to whom it was entrusted. The
person entrusted with the executive power not having leisure to attend
to the decision of private causes himself, a deputy was appointed to
decide them in his stead. In the progress of the Roman greatness,
the consul was too much occupied with the political affairs of the
state to attend to the administration of justice. A praetor,
therefore, was appointed to administer it in his stead. In the
progress of the European monarchies which were founded upon the
ruins of the Roman empire, the sovereigns and the great lords came
universally to consider the administration of justice as an office
both too laborious and too ignoble for them to execute in their own
persons. They universally, therefore, discharged themselves of it by
appointing a deputy, bailiff, or judge.

    When the judicial is united to the executive power, it is scarce
possible that justice should not frequently be sacrificed to what is
vulgarly called polities. The persons entrusted with the great
interests of the state may, even without any corrupt views,
sometimes imagine it necessary to sacrifice to those interests the
rights of a private man. But upon the impartial administration of
justice depends the liberty of every individual, the sense which he
has of his own security. In order to make every individual feel
himself perfectly secure in the possession of every right which
belongs to him, it is not only necessary that the judicial should be
separated from the executive power, but that it should be rendered
as much as possible independent of that power. The judge should not be
liable to be removed from his office according to the caprice of
that power. The regular the good-will or even upon the good economy
payment of his salary should not depend upon of that power.

                            PART 3

      Of the Expense of Public Works and Public Institutions

    THE third and last duty of the sovereign or commonwealth is that
of erecting and maintaining those public institutions and those public
works, which, though they may be in the highest degree advantageous to
a great society, are, however, of such a nature that the profit
could never repay the expense to any individual or small number of
individuals, and which it therefore cannot be expected that any
individual or small number of individuals should erect or maintain.
The performance of this duty requires, too, very different degrees
of expense in the different periods of society.

    After the public institutions and public works necessary for the
defence of the society, and for the administration of justice, both of
which have already been mentioned, the other works and institutions of
this kind are chiefly those for facilitating the commerce of the
society, and those for promoting the instruction of the people. The
institutions for instruction are of two kinds: those for the education
of youth, and those for the instruction of people of all ages. The
consideration of the manner in which the expense of those different
sorts of public, works and institutions may be most properly
defrayed will divide this third part of the present chapter into three
different articles.

                           ARTICLE 1

     Of the Public Works and Institutions for facilitating the

                    Commerce of the Society

     And, first, of those which are necessary for facilitating

                      Commerce in general.

    That the erection and maintenance of the public works which
facilitate the commerce of any country, such as good roads, bridges,
navigable canals, harbours, etc., must require very different
degrees of expense in the different periods of society is evident
without any proof. The expense of making and maintaining the public
roads of any country must evidently increase with the annual produce
of the land and labour of that country, or with the quantity and
weight of the goods which it becomes necessary to fetch and carry upon
those roads. The strength of a bridge must be suited to the number and
weight of the carriages which are likely to pass over it. The depth
and the supply of water for a navigable canal must be proportioned
to the number and tonnage of the lighters which are likely to carry
goods upon it; the extent of a harbour to the number of the shipping
which are likely to take shelter in it.

    It does not seem necessary that the expense of those public
works should be defrayed from that public revenue, as it is commonly
called, of which the collection and application is in most countries
assigned to the executive power. The greater part of such public works
may easily be so managed as to afford a particular revenue
sufficient for defraying their own expense, without bringing any
burden upon the general revenue of the society.

    A highway, a bridge, a navigable canal, for example, may in most
cases be both made and maintained by a small toll upon the carriages
which make use of them: a harbour, by a moderate port-duty upon the
tonnage of the shipping which load or unload in it. The coinage,
another institution for facilitating commerce, in many countries,
not only defrays its own expense, but affords a small revenue or
seignorage to the sovereign. The post-office, another institution
for the same purpose, over and above defraying its own expense,
affords in almost all countries a very considerable revenue to the
sovereign.

    When the carriages which pass over a highway or a bridge, and
the lighters which sail upon a navigable canal, pay toll in proportion
to their weight or their tonnage, they pay for the maintenance of
those public works exactly in proportion to the wear and tear which
they occasion of them. It seems scarce possible to invent a more
equitable way of maintaining such works. This tax or toll too,
though it is advanced by the carrier, is finally paid by the consumer,
to whom it must always be charged in the price of the goods. As the
expense of carriage, however, is very much reduced by means of such
public works, the goods, notwithstanding the toll come cheaper to
the consumer than the; could otherwise have done; their price not
being so much raised by the toll as it is lowered by the cheapness
of the carriage. The person who finally pays this tax, therefore,
gains by the application more than he loses by the payment of it.
His payment is exactly in proportion to his gain. It is in reality
no more than a part of that gain which he is obliged to give up in
order to get the rest. It seems impossible to imagine a more equitable
method of raising a tax.

    When the toll upon carriages of luxury upon coaches, post-chaises,
etc., is made somewhat higher in proportion to their weight than
upon carriages of necessary use, such as carts, waggons, etc., the
indolence and vanity of the rich is made to contribute in a very
easy manner to the relief of the poor, by rendering cheaper the
transportation of heavy goods to all the different parts of the
country.

    When high roads, bridges, canals, etc., are in this manner made
and supported by the commerce which is carried on by means of them,
they can be made only where that commerce requires them, and
consequently where it is proper to make them. Their expenses too,
their grandeur and magnificence, must be suited to what that
commerce can afford to pay. They must be made consequently as it is
proper to make them. A magnificent high road cannot be made through
a desert country where there is little or no commerce, or merely
because it happens to lead to the country villa of the intendant of
the province, or to that of some great lord to whom the intendant
finds it convenient to make his court. A great bridge cannot be thrown
over a river at a place where nobody passes, or merely to embellish
the view from the windows of a neighbouring palace: things which
sometimes happen in countries where works of this kind are carried
on by any other revenue than that which they themselves are capable of
affording.

    In several different parts of Europe the ton or lock-duty upon a
canal is the property of private persons, whose private interest
obliges them to keep up the canal. If it is not kept in tolerable
order, the navigation necessarily ceases altogether, and along with it
the whole profit which they can make by the tolls. If those tolls were
put under the management of commissioners, who had themselves no
interest in them, they might be less attentive to the maintenance of
the works which produced them. The canal of Languedoc cost the King of
France and the province upwards of thirteen millions of livres,
which (at twenty-eight livres the mark of silver, the value of
French money in the end of the last century) amounted to upwards of
nine hundred thousand pounds sterling. When that great work was
finished, the most likely method, it was found, of keeping it in
constant repair was to make a present of the tolls to Riquet the
engineer, who planned and conducted the work. Those tolls constitute
at present a very large estate to the different branches of the family
of that gentleman, who have, therefore, a great interest to keep the
work in constant repair. But had those tolls been put under the
management of commissioners, who had no such interest, they might
perhaps have been dissipated in ornamental and unnecessary expenses,
while the most essential parts of the work were allowed to go to ruin.

    The tolls for the maintenance of a high road cannot with any
safety be made the property of private persons. A high road, though
entirely neglected, does not become altogether impassable, though a
canal does. The proprietors of the tolls upon a high road,
therefore, might neglect altogether the repair of the road, and yet
continue to levy very nearly the same tolls. It is proper,
therefore, that the tolls for the maintenance of such a work should be
put under the management of commissioners or trustees.

    In Great Britain, the abuses which the trustees have committed
in the management of those tolls have in many cases been very justly
complained of. At many turnpikes, it has been said, the money levied
is more than double of what is necessary for executing, in the
completest manner, the work which is often executed in very slovenly
manner, and sometimes not executed at all. The system of repairing the
high roads by tolls of this kind, it must be observed, is not of
very long standing. We should not wonder, therefore, if it has not yet
been brought to that degree of perfection of which it seems capable.
If mean and improper persons are frequently appointed trustees, and if
proper courts of inspection and account have not yet been
established for controlling their conduct, and for reducing the
tolls to what is barely sufficient for executing the work to be done
by them, the recency of the institution both accounts and apologizes
for those defects, of which, by the wisdom of Parliament, the
greater part may in due time be gradually remedied.

    The money levied at the different turnpikes in Great Britain is
supposed to exceed so much what is necessary for repairing the
roads, that the savings, which, with proper economy, might be made
from it, have been considered, even by some ministers, as a very great
resource which might at some time or another be applied to the
exigencies of the state. Government, it has been said, by taking the
management of the turnpikes into its own hands, and by employing the
soldiers, who would work for a very small addition to their pay, could
keep the roads in good order at a much less expense than it can be
done by trustees, who have no other workmen to employ but such as
derive their whole subsistence from their wages. A great revenue, half
a million perhaps,* it has been pretended, might in this manner be
gained without laying any new burden upon the people; and the turnpike
roads might be made to contribute to the general expense of the state,
in the same manner as the post office does at present.

  * Since publishing the two first editions of this book, I have got
good reasons to believe that all the turnpike tolls levied in Great
Britain do not produce a net revenue that amounts to half a million; a
sum which, under the management of Government, would not be sufficient
to keep in repair five of the principal roads in the kingdom.

    That a considerable revenue might be gained in this manner I
have no doubt, though probably not near so much as the projectors of
this plan have supposed. The plan itself, however, seems liable to
several very important objections.

    First, if the tolls which are levied at the turnpikes should
ever be considered as one of the resources for supplying the
exigencies of the state, they would certainly be augmented as those
exigencies were supposed to require. According to the policy of
Great Britain, therefore, they would probably be augmented very
fast. The facility with which a great revenue could be drawn from them
would probably encourage administration to recur very frequently to
this resource. Though it may, perhaps, be more than doubtful whether
half a million could by any economy be saved out of the present tolls,
it can scarce be doubted but that a million might be saved out of them
if they were doubled: and perhaps two millions if they were
tripled.* This great revenue, too, might be levied without the
appointment of a single new officer to collect and receive it. But the
turnpike tolls being continually augmented in this manner, instead
of facilitating the inland commerce of the country as at present,
would soon become a very great incumbrance upon it. The expense of
transporting all heavy goods from one part of the country to another
would soon be so much increased, the market for all such goods,
consequently, would soon be so much narrowed, that their production
would be in a great measure discouraged, and the most important
branches of the domestic industry of the country annihilated
altogether.

  * I have now good reasons to believe that all these conjectural sums
are by much too large.

    Secondly, a tax upon carriages in proportion to their weight,
though a very equal tax when applied to the sole purpose of
repairing the roads, is a very unequal one when applied to any other
purpose, or to supply the common exigencies of the state. When it is
applied to the sole purpose above mentioned, each carriage is supposed
to pay exactly for the wear and tear which that carriage occasions
of the roads. But when it is applied to any other purpose, each
carriage is supposed to pay for more than that wear and tear, and
contributes to the supply of some other exigency of the state. But
as the turnpike toll raises the price of goods in proportion to
their weight, and not to their value, it is chiefly paid by the
consumers of coarse and bulky, not by those of precious and light,
commodities. Whatever exigency of the state therefore this tax might
be intended to supply, that exigency would be chiefly supplied at
the expense of the poor, not the rich; at the expense of those who are
least able to supply it, not of those who are most able.

    Thirdly, if government should at any time neglect the reparation
of the high roads, it would be still more difficult than it is at
present to compel the proper application of any part of the turnpike
tolls. A large revenue might thus be levied upon the people without
any part of it being applied to the only purpose to which a revenue
levied in this manner ought ever to be applied. If the meanness and
poverty of the trustees of turnpike roads render it sometimes
difficult at present to oblige them to repair their wrong, their
wealth and greatness would render it ten times more so in the case
which is here supposed.

    In France, the funds destined for the reparation of high roads are
under the immediate direction of the executive power. Those funds
consist partly in a certain number of days' labour which the country
people are in most parts of Europe obliged to give to the reparation
of the highways, and partly in such a portion of the general revenue
of the state as the king chooses to spare from his other expenses.

    By the ancient law of France, as well as by that of most other
parts of Europe, the labour of the country people was under the
direction of a local or provincial magistracy, which had no
immediate dependency upon the king's council. But by the present
practice both the labour of the people, and whatever other fund the
king may choose to assign for the reparation of the high roads in
any particular province or generality, are entirely under the
management of the intendant; an officer who is appointed and removed
by the king's council, and who receives his orders from it, and is
in constant correspondence with it. In the progress of despotism the
authority of the executive power gradually absorbs that of every other
power in the state, and assumes to itself the management of every
branch of revenue which is destined for any public purpose. In France,
however, the great post-roads, the roads which make the
communication between the principal towns of the kingdom, are in
general kept in good order, and in some provinces are even a good deal
superior to the greater part of the turnpike roads of England. But
what we call the cross-roads, that is, the far greater part of the
roads in the country, are entirely neglected, and are in many places
absolutely impassable for any heavy carriage. In some places it is
even dangerous to travel on horseback, and mules are the only
conveyances which can safely be trusted. The proud minister of an
ostentatious court may frequently take pleasure in executing a work of
splendour and magnificence, such as a great highway, which is
frequently seen by the principal nobility, whose applauses not only
flatter his vanity, but even contribute to support his interest at
court. But to execute a great number of little works, in which nothing
that can be done can make any great appearance, or excite the smallest
degree of admiration in any traveller, and which, in short, have
nothing to recommend them but their extreme utility, is a business
which appears in every respect too mean and paltry to merit the
attention of so great a magistrate. Under such an administration,
therefore, such works are almost always entirely neglected.

    In China, and in several other governments of Asia, the
executive power charges itself both with the reparation of the high
roads and with the maintenance of the navigable canals. In the
instructions which are given to the governor of each province, those
objects, it is said, are constantly recommended to him, and the
judgment which the court forms of his conduct is very much regulated
by the attention which he appears to have paid to this part of his
instructions. This branch of public police accordingly is said to be
very much attended to in all those countries, but particularly in
China, where the high roads, and still more the navigable canals, it
is pretended, exceed very much everything of the same kind which is
known in Europe. The accounts of those works, however, which have been
transmitted to Europe, have generally been drawn up by weak and
wondering travellers; frequently by stupid and lying missionaries.
If they had been examined by more intelligent eyes, and if the
accounts of them had been reported by more faithful witnesses, they
would not, perhaps, appear to be so wonderful. The account which
Bernier gives of some works of this kind in Indostan falls very much
short of what had been reported of them by other travellers, more
disposed to the marvellous than he was. It may too, perhaps, be in
those countries, as in France, where the great roads, the great
communications which are likely to be the subjects of conversation
at the court and in the capital, are attended to, and all the rest
neglected. In China, besides, in Indostan, and in several other
governments of Asia, the revenue of the sovereign arises almost
altogether from a land tax or land rent, which rises or falls with the
rise and fall of the annual produce of the land. The great interest of
the sovereign, therefore, his revenue, is in such countries
necessarily and immediately connected with the cultivation of the
land, with the greatness of its produce, and with the value of its
produce. But in order to render that produce both as great and as
valuable as possible, it is necessary to procure to it as extensive
a market as possible, and consequently to establish the freest, the
easiest, and the least expensive communication between all the
different parts of the country; which can be done only by means of the
best roads and the best navigable canals. But the revenue of the
sovereign does not, in any part of Europe, arise chiefly from a land
tax or land rent. In all the great kingdoms of Europe, perhaps, the
greater part of it may ultimately depend upon the produce of the land:
but that dependency is neither so immediate, nor so evident. In
Europe, therefore, the sovereign does not feel himself so directly
called upon to promote the increase, both in quantity and value, of
the produce of the land, or, by maintaining good roads and canals,
to provide the most extensive market for that produce. Though it
should be true, therefore, what I apprehend is not a little
doubtful, that in some parts of Asia this department of the public
police is very properly managed by the executive power, there is not
the least probability that, during the present state of things, it
could be tolerably managed by that power in any part of Europe.

    Even those public works which are of such a nature that they
cannot afford any revenue for maintaining themselves, but of which the
conveniency is nearly confined to some particular place or district,
are always better maintained by a local or provincial revenue, under
the management of a local or provincial administration, than by the
general revenue of the state, of which the executive power must always
have the management. Were the streets of London to be lighted and
paved at the expense of the treasury, is there any probability that
they would be so well lighted and paved as they are at present, or
even at so small an expense? The expense, besides, instead of being
raised by a local tax upon the inhabitants of each particular
street, parish, or district in London, would, in this case, be
defrayed out of the general revenue of the state, and would
consequently be raised by a tax upon all the inhabitants of the
kingdom, of whom the greater part derive no sort of benefit from the
lighting and paving of the streets of London.

    The abuses which sometimes creep into the local and provincial
administration of a local and provincial revenue, how enormous
soever they may appear, are in reality, however, almost always very
trifling in comparison of those which commonly take place in the
administration and expenditure of the revenue of a great empire.
They are, besides, much more easily corrected. Under the local or
provincial administration of the justices of the peace in Great
Britain, the six days' labour which the country people are obliged
to give to the reparation of the highways is not always perhaps very
judiciously applied, but it is scarce ever exacted with any
circumstances of cruelty or oppression. In France, under the
administration of the intendants, the application is not always more
judicious, and the exaction is frequently the most cruel and
oppressive. Such Corvees, as they are called, make one of the
principal instruments of tyranny by which those officers chastise
any parish or communaute which has had the misfortune to fall under
their displeasure.

    Of the Public Works and Institutions which are necessary for

           facilitating particular Branches of Commerce.

    The object of the public works and institutions above mentioned is
to facilitate commerce in general. But in order to facilitate some
particular branches of it, particular institutions are necessary,
which again require a particular and extraordinary expense.

    Some particular branches of commerce, which are carried on with
barbarous and uncivilised nations, require extraordinary protection.
An ordinary store or counting-house could give little security to
the goods of the merchants who trade to the western coast of Africa.
To defend them from the barbarous natives, it is necessary that the
place where they are deposited should be, in some measure,
fortified. The disorders in the government of Indostan have been
supposed to render a like precaution necessary even among that mild
and gentle people; and it was under pretence of securing their persons
and property from violence that both the English and French East India
Companies were allowed to erect the first forts which they possessed
in that country. Among other nations, whose vigorous government will
suffer no strangers to possess any fortified place within their
territory, it may be necessary to maintain some ambassador,
minister, or counsel, who may both decide, according to their own
customs, the differences arising among his own countrymen, and, in
their disputes with the natives, may, by means of his public
character, interfere with more authority, and afford them a more
powerful protection, than they could expect from any private man.
The interests of commerce have frequently made it necessary to
maintain ministers in foreign countries where the purposes, either
of war or alliance, would not have required any. The commerce of the
Turkey Company first occasioned the establishment of an ordinary
ambassador at Constantinople. The first English embassies to Russia
arose altogether from commercial interests. The constant
interference which those interests necessarily occasioned between
the subjects of the different states of Europe, has probably
introduced the custom of keeping, in all neighbouring countries,
ambassadors or ministers constantly resident even in the time of
peace. This custom, unknown to ancient times, seems not to be older
than the end of the fifteenth or beginning of the sixteenth century;
that is, than the time when commerce first began to extend itself to
the greater part of the nations of Europe, and when they first began
to attend to its interests.

    It seems not unreasonable that the extraordinary expense which the
protection of any particular branch of commerce may occasion should be
defrayed by a moderate tax upon that particular branch; by a
moderate fine, for example, to be paid by the traders when they
first enter into it, or, what is more equal, by a particular duty of
so much per cent upon the goods which they either import into, or
export out of, the particular countries with which it is carried on.
The protection of trade in general, from pirates and freebooters, is
said to have given occasion to the first institution of the duties
of customs. But, if it was thought reasonable to lay a general tax
upon trade, in order to defray the expense of protecting trade in
general, it should seem equally reasonable to lay a particular tax
upon a particular branch of trade, in order to defray the
extraordinary expense of protecting that branch.

    The protection of trade in general has always been considered as
essential to the defence of the commonwealth, and, upon that
account, a necessary part of the duty of the executive power. The
collection and application of the general duties of customs,
therefore, have always been left to that power. But the protection
of any particular branch of trade is a part of the general
protection of trade; a part, therefore, of the duty of that power; and
if nations always acted consistently, the particular duties levied for
the purposes of such particular protection should always have been
left equally to its disposal. But in this respect, as well as in
many others, nations have not always acted consistently; and in the
greater part of the commercial states of Europe, particular
companies of merchants have had the address to persuade the
legislature to entrust to them the performance of this part of the
duty of the sovereign, together with all the powers which are
necessarily connected with it.

    These companies, though they may, perhaps, have been useful for
the first introduction of some branches of commerce, by making, at
their own expense, an experiment which the state might not think it
prudent to make, have in the long run proved, universally, either
burdensome or useless, and have either mismanaged or confined the
trade.

    When those companies do not trade upon a joint stock, but are
obliged to admit any person, properly qualified, upon paying a certain
fine, and agreeing to submit to the regulations of the company, each
member trading upon his own stock, and at his own risk, they are
called regulated companies. When they trade upon a joint stock, each
member sharing in the common profit or loss in proportion to his share
in this stock, they are called joint stock companies. Such
companies, whether regulated or joint stock, sometimes have, and
sometimes have not, exclusive privileges.

    Regulated companies resemble, in every respect, the corporations
of trades so common in the cities and towns of all the different
countries of Europe, and are a sort of enlarged monopolies of the same
kind. As no inhabitant of a town can exercise an incorporated trade
without first obtaining his freedom in the corporation, so in most
cases no subject of the state can lawfully carry on any branch of
foreign trade, for which a regulated company is established, without
first becoming a member of that company. The monopoly is more or
less strict according as the terms of admission are more or less
difficult; and according as the directors of the company have more
or less authority, or have it more or less in their power to manage in
such a manner as to confine the greater part of the trade to
themselves and their particular friends. In the most ancient regulated
companies the privileges of apprenticeship were the same as in other
corporations, and entitled the person who had served his time to a
member of the company to become himself a member, either without
paying any fine, or upon paying a much smaller one than what was
exacted of other people. The usual corporation spirit, wherever the
law does not restrain it, prevails in all regulated companies. When
they have been allowed to act according to their natural genius,
they have always, in order to confine the competition to as small a
number of persons as possible, endeavoured to subject the trade to
many burden some regulations. When the law has restrained them from
doing this, they have become altogether useless and insignificant.

    The regulated companies for foreign commerce which at present
subsist in Great Britain are the ancient merchant adventurers'
company, now commonly called the Hamburg Company, the Russia
Company, the Eastland Company, the Turkey Company, and the African
Company.

    The terms of admission into the Hamburg Company are now said to be
quite easy, and the directors either have it not their power to
subject the trade to any burdensome restraint or regulations, or, at
least, have not of late exercised that power. It has not always been
so. About the middle of the last century, the fine for admission was
fifty, and at one time one hundred pounds, and the conduct of the
company was said to be extremely oppressive. In 1643, in 1645, and
in 1661, the clothiers and free traders of the West of England
complained of them to Parliament as of monopolists who confined the
trade and oppressed the manufactures of the country. Though those
complaints produced an Act of Parliament, they had probably
intimidated the company so far as to oblige them to reform their
conduct. Since that time, at least, there has been no complaints
against them. By the 10th and 11th of William III, c. 6, the fine
for admission into the Russia Company was reduced to five pounds;
and by the 25th of Charles II, c. 7, that for admission into the
Eastland Company to forty shillings, while, at the same time,
Sweden, Denmark, and Norway, all the countries on the north side of
the Baltic, were exempted from their exclusive charter. The conduct of
those companies had probably given occasion to those two Acts of
Parliament. Before that time, Sir Josiah Child had represented both
these and the Hamburg Company as extremely oppressive, and imputed
to their bad management the low state of the trade which we at that
time carried on to the countries comprehended within their
respective charters. But though such companies may not, in the present
times, be very oppressive, they are certainly altogether useless. To
be merely useless, indeed, is perhaps the highest eulogy which can
ever justly be bestowed upon a regulated company; and all the three
companies above mentioned seem, in their present state, to deserve
this eulogy.

    The fine for admission into the Turkey Company was formerly
twenty-five pounds for all persons under twenty-six years of age,
and fifty pounds for all persons above that age. Nobody but mere
merchants could be admitted; a restriction which excluded all
shopkeepers and retailers. By a bye-law, no British manufactures could
be exported to Turkey but in the general ships of the company; and
as those ships sailed always from the port of London, this restriction
confined the trade to that expensive port, and the traders to those
who lived in London and in its neighbourhood. By another bye-law, no
person living within twenty miles of London, and not free of the city,
could be admitted a member; another restriction which, joined to the
foregoing, necessarily excluded all but the freemen of London. As
the time for the loading and sailing of those general ships depended
altogether upon the directors, they could easily fill them with
their own goods and those of their particular friends, to the
exclusion of others, who, they might pretend, had made their proposals
too late. In this state of things, therefore, this company was in
every respect a strict and oppressive monopoly. Those abuses gave
occasion to the act of the 26th of George II, c. 18, reducing the fine
for admission to twenty pounds for all persons, without any
distinction of ages, or any restriction, either to mere merchants,
or to the freemen of London; and granting to all such persons the
liberty of exporting, from all the ports of Great Britain to any
port in Turkey, all British goods of which the exportation was not
prohibited; and of importing from thence all Turkish goods of which
the importation was not prohibited, upon paying both the general
duties of customs, and the particular duties assessed for defraying
the necessary expenses of the company; and submitting, at the same
time, to the lawful authority of the British ambassador and consuls
resident in Turkey, and to the bye laws of the company duly enacted.
To prevent any oppression by those bye-laws, it was by the same act
ordained, that if any seven members of the company conceived
themselves aggrieved by any bye-law which should be enacted after
the passing of this act, they might appeal to the Board of Trade and
Plantations (to the authority of which a committee of the Privy
Council has now succeeded), provided such appeal was brought within
twelve months after the bye-law was enacted; and that if any seven
members conceived themselves aggrieved by any bye-law which had been
enacted before the passing of this act, they might bring a like
appeal, provided it was within twelve months after the day on which
this act was to take place. The experience of one year, however, may
not always be sufficient to discover to all the members of a great
company, the pernicious tendency of a particular bye-law; and if
several of them should afterwards discover it, neither the Board of
Trade, nor the committee of council, can afford them any redress.
The object, besides, of the greater part of the bye-laws of all
regulated companies, as well as of all other corporations, is not so
much to oppress those who are already members, as to discourage others
from becoming so; which may be done, not only by a high fine, but by
many other contrivances. The constant view of such companies is always
to raise the rate of their own profit as high as they can; to keep the
market, both for the goods which they export, and for those which they
import, as much understocked as they can: which can be done only by
restraining the competition, or by discouraging new adventurers from
entering into the trade. A fine even of twenty pounds, besides, though
it may not perhaps be sufficient to discourage any man from entering
into the Turkey trade with an intention to continue in it, may be
enough to discourage a speculative merchant from hazarding a single
adventure in it. In all trades, the regular established traders,
even though not incorporated, naturally combine to raise profits,
which are noway so likely to be kept, at all times, down to their
proper level, as by the occasional competition of speculative
adventure. The Turkey trade, though in some measure laid open by
this Act of Parliament, is still considered by many people as very far
from being altogether free. The Turkey Company contribute to
maintain an ambassador and two or three consuls, who, like other
public ministers, ought to be maintained altogether by the state,
and the trade laid open to all his Majesty's subjects. The different
taxes levied by the company, for this and other corporation
purposes, might afford avenue much more than sufficient to enable
the state to maintain such ministers.

    Regulated companies, it was observed by Sir Josiah Child, though
they had frequently supported public ministers, had never maintained
any forts or garrisons in the countries to which they traded;
whereas joint stock companies frequently had. And in reality the
former seem to be much more unfit for this sort of service than the
latter. First, the directors of a regulated company have no particular
interest in the prosperity of the general trade of the company for the
sake of which such forts and garrisons are maintained. The decay of
that general trade may even frequently contribute to the advantage
of their own private trade; as by diminishing the number of their
competitors it may enable them both to buy cheaper, and to sell
dearer. The directors of a joint stock company, on the contrary,
having only their share in the profits which are made upon the
common stock committed to their management, have no private trade of
their own of which the interest can be separated from that of the
general trade of the company. Their private interest is connected with
the prosperity of the general trade of the company, and with the
maintenance of the forts and garrisons which are necessary for its
defence. They are more likely, therefore, to have that continual and
careful attention which that maintenance necessarily requires.
Secondly, the directors of a joint stock company have always the
management of a large capital, the joint stock of the company, a
part of which they may frequently employ, with propriety, in building,
repairing, and maintaining such necessary forts and garrisons. But the
directors of a regulated company, having the management of no common
capital, have no other fund to employ in this way but the casual
revenue arising from the admission fines, and from the corporation
duties imposed upon the trade of the company. Though they had the same
interest, therefore, to attend to the maintenance of such forts and
garrisons, they can seldom have the same ability to render that
attention effectual. The maintenance of a public minister requiring
scarce any attention, and but a moderate and limited expense, is a
business much more suitable both to the temper and abilities of a
regulated company.

    Long after the time of Sir Josiah Child, however, in 1750, a
regulated company was established, the present company of merchants
trading to Africa, which was expressly charged at first with the
maintenance of all the British forts and garrisons that lie between
Cape Blanc and the Cape of Good Hope, and afterwards with that of
those only which lie between Cape Rouge and the Cape of Good Hope. The
act which establishes this company (the 23rd of George II, c. 3) seems
to have had two distinct objects in view; first, to restrain
effectually the oppressive and monopolizing spirit which is natural to
the directors of a regulated company; and secondly, to force them,
as much as possible, to give an attention, which is not natural to
them, towards the maintenance of forts and garrisons.

    For the first of these purposes the fine for admission is
limited to forty shillings. The company is prohibited from trading
in their corporate capacity, or upon a joint stock; from borrowing
money upon common seal, or from laying any restraints upon the trade
which may be carried on freely from all places, and by all persons
being British subjects, and paying the fine. The government is in a
committee of nine persons who meet at London, but who are chosen
annually by the freemen of the company at London, Bristol, and
Liverpool; three from each place. No committee-man can be continued in
office for more than three years together. Any committee-man might
be removed by the Board of Trade and Plantations, now by a committee
council, after being heard in his own defence. The committee are
forbid to export negroes from Africa, or to import any African goods
into Great Britain. But as they are charged with the maintenance of
forts and garrisons, they may, for that purpose, export from Great
Britain to Africa goods and stores of different kinds. Out of the
monies which they shall receive from the company, they are allowed a
sum not exceeding eight hundred pounds for the salaries of their
clerks and agents at London, Bristol, and Liverpool, the house rent of
their office at London, and all other expenses of management,
commission, and agency in England. What remains of this sum, after
defraying these different expenses, they may divide among
themselves, as compensation for their trouble, in what manner they
think proper. By this constitution, it might have been expected that
the spirit of monopoly would have been effectually restrained, and the
first of these purposes sufficiently answered. It would seem, however,
that it had not. Though by the 4th of George III, c. 20, the fort of
Senegal, with all its dependencies, had been vested in the company
of merchants trading to Africa, yet in the year following (by the
5th of George III, c. 44) not only Senegal and its dependencies, but
the whole coast from the port of Sallee, in south Barbary, to Cape
Rouge, was exempted from the jurisdiction of that company, was
vested in the crown, and the trade to it declared free to all his
Majesty's subjects. The company had been suspected of restraining
the trade, and of establishing some sort of improper monopoly. It is
not, however, very easy to conceive how, under the regulations of
the 23rd of George II, they could do so. In the printed debates of the
House of Commons, not always the most authentic records of truth, I
observe, however, that they have been accused of this. The members
of the committee of nine, being all merchants, and the governors and
factors, in their different forts and settlements, being all dependent
upon them, it is not unlikely that the latter might have given
peculiar attention to the consignments and commissions of the former
which would establish a real monopoly.

    For the second of these, purposes, the maintenance of the forts
and garrisons, an annual sum has been allotted to them by
Parliament, generally about L13,000. For the proper application of
this sum, the committee is obliged to account annually to the Cursitor
Baron of Exchequer; which account is afterwards to be laid before
Parliament. But Parliament, which gives so little attention to the
application of millions, is not likely to give much to that of L13,000
a year; and the Cursitor Baron of Exchequer, from his profession and
education, is not likely to be profoundly skilled in the proper
expense of forts and garrisons. The captains of his Majesty's navy,
indeed, or any other commissioned officers appointed by the Board of
Admiralty, may inquire into the condition of the forts and
garrisons, and report their observations to that board. But that board
seems to have no direct jurisdiction over the committee, nor any
authority to correct those whose conduct it may thus inquire into; and
the captains of his Majesty's navy, besides, are not supposed to be
always deeply learned in the science of fortification. Removal from an
office which can be enjoyed only for the term of three years, and of
which the lawful emoluments, even during that term, are so very small,
seems to be the utmost punishment to which any committee-man is liable
for any fault, except direct malversation, or embezzlement, either
of the public money, or of that of the company; and the fear of that
punishment can never be a motive of sufficient weight to force a
continual and careful attention to a business to which he has no other
interest to attend. The committee are accused of having sent out
bricks and stones from England for the reparation of Cape Coast Castle
on the coast of Guinea, a business for which Parliament had several
times granted an extraordinary sum of money. These bricks and stones
too, which had thus been sent upon so long a voyage, were said to have
been of so bad a quality that it was necessary to rebuild from the
foundation the walls which had been repaired with them. The forts
and garrisons which lie north of Cape Rouge are not only maintained at
the expense of the state, but are under the immediate government of
the executive power; and why those which lie south of that Cape, and
which are, in part at least, maintained at the expense of the state,
should be under a different government, it seems not very easy even to
imagine a good reason. The protection of the Mediterranean trade was
the original purpose of pretence of the garrisons of Gibraltar and
Minorca, and the maintenance and government of those garrisons has
always been, very properly, committed, not to the Turkey Company,
but to the executive power. In the extent of its dominion consists, in
a great measure, the pride and dignity of that power; and it is not
very likely to fail in attention to what is necessary for the
defence of that dominion. The garrisons at Gibraltar and Minorca,
accordingly, have never been neglected; though Minorca has been
twice taken, and is now probably lost for ever, that disaster was
never even imputed to any neglect in the executive power. I would not,
however, be understood to insinuate that either of those expensive
garrisons was ever, even in the smallest degree, necessary for the
purpose for which they were originally dismembered from the Spanish
monarchy. That dismemberment, perhaps, never served any other real
purpose than to alienate from England her natural ally the King of
Spain, and to unite the two principal branches of the house of Bourbon
in a much stricter and more permanent alliance than the ties of
blood could ever have united them.

    Joint stock companies, established by Royal Charter or by Act of
Parliament, differ in several respects, not only from regulated
companies, but from private copartneries.

    First, in a private copartnery, no partner, without the consent of
the company, can transfer his share to another person, or introduce
a new member into the company. Each member, however, may, upon
proper warning, withdraw from the copartnery, and demand payment
from them of his share of the common stock. In a joint stock
company, on the contrary, no member can demand payment of his share
from the company; but each member can, without their consent, transfer
his share to another person, and thereby introduce a new member. The
value of a share in a joint stock is always the price which it will
bring in the market; and this may be either greater or less, in any
proportion, than the sum which its owner stands credited for in the
stock of the company.

    Secondly, in a private copartnery, each partner is bound for the
debts contracted by the company to the whole extent of his fortune. In
a joint stock company, on the contrary, each partner is bound only
to the extent of his share.

    The trade of a joint stock company is always managed by a court of
directors. This court, indeed, is frequently subject, in many
respects, to the control of a general court of proprietors. But the
greater part of those proprietors seldom pretend to understand
anything of the business of the company, and when the spirit of
faction happens not to prevail among them, give themselves no
trouble about it, but receive contentedly such half-yearly or yearly
dividend as the directors think proper to make to them. This total
exemption from trouble and from risk, beyond a limited sum, encourages
many people to become adventurers in joint stock companies, who would,
upon no account, hazard their fortunes in any private copartnery. Such
companies, therefore, commonly draw to themselves much greater
stocks than any private copartnery can boast of. The trading stock
of the South Sea Company, at one time, amounted to upwards of
thirty-three millions eight hundred thousand pounds. The divided
capital of the Bank of England amounts, at present, to ten millions
seven hundred and eighty thousand pounds. The directors of such
companies, however, being the managers rather of other people's
money than of their own, it cannot well be expected that they should
watch over it with the same anxious vigilance with which the
partners in a private copartnery frequently watch over their own. Like
the stewards of a rich man, they are apt to consider attention to
small matters as not for their master's honour, and very easily give
themselves a dispensation from having it. Negligence and profusion,
therefore, must always prevail, more or less, in the management of the
affairs of such a company. It is upon this account that joint stock
companies for foreign trade have seldom been able to maintain the
competition against private adventurers. They have, accordingly,
very seldom succeeded without an exclusive privilege, and frequently
have not succeeded with one. Without an exclusive privilege they
have commonly mismanaged the trade. With an exclusive privilege they
have both mismanaged and confined it.

    The Royal African Company, the predecessors of the present African
Company, had an exclusive privilege by charter, but as that charter
had not been confirmed by Act of Parliament, the trade, in consequence
of the Declaration of Rights, was, soon after the revolution, laid
open to all his Majesty's subjects. The Hudson's Bay Company are, as
to their legal rights, in the same situation as the Royal African
Company. Their exclusive charter has not been confirmed by Act of
Parliament. The South Sea Company, as long as they continued to be a
trading company, had an exclusive privilege confirmed by Act of
Parliament; as have likewise the present United Company of Merchants
trading to the East Indies.

    The Royal African Company soon found that they could not
maintain the competition against private adventurers, whom,
notwithstanding the Declaration of Rights, they continued for some
time to call interlopers, and to persecute as such. In 1698,
however, the private adventurers were subjected to a duty of ten per
cent upon almost all the different branches of their trade, to be
employed by the company in the maintenance of their forts and
garrisons But, notwithstanding this heavy tax, the company were
still unable to maintain the competition. Their stock and credit
gradually declined. In 1712, their debts had become so great that a
particular Act of Parliament was thought necessary, both for their
security and for that of their creditors. It was enacted that the
resolution of two-thirds of these creditors in number and value should
bind the rest, both with regard to the time which should be allowed to
the company for the payment of their debts, and with regard to any
other agreement which it might be thought proper to make with them
concerning those debts. In 1730, their affairs were in so great
disorder that they were altogether incapable of maintaining their
forts and garrisons, the sole purpose and pretext of their
institution. From that year, till their final dissolution, the
Parliament judged it necessary to allow the annual sum of ten thousand
pounds for that purpose. In 1732, after having been for many years
losers by the trade of carrying negroes to the West Indies, they at
last resolved to give it up altogether; to sell to the private traders
to America the negroes which they purchased upon the coast; and to
employ their servants in a trade to the inland parts of Africa for
gold dust, elephants' teeth, dyeing drugs, etc. But their success in
this more confined trade was not greater than in their former
extensive one. Their affairs continued to go gradually to decline,
till at last, being in every respect a bankrupt company, they were
dissolved by Act of Parliament, and their forts and garrisons vested
in the present regulated company of merchants trading to Africa.
Before the erection of the Royal African Company, there had been three
other joint stock companies successively established, one after
another, for the African trade. They were all equally unsuccessful.
They all, however, had exclusive charters, which, though not confirmed
by Act of Parliament, were in those days supposed to convey a real
exclusive privilege.

    The Hudson's Bay Company, before their misfortunes in the late
war, had been much more fortunate than the Royal African Company.
Their necessary expense is much smaller. The whole number of people
whom they maintain in their different settlements and habitations,
which they have honoured with the name of forts, is said not to exceed
a hundred and twenty persons. This number, however, is sufficient to
prepare beforehand the cargo of furs and other goods necessary for
loading their ships, which, on account of the ice, can seldom remain
above six or eight weeks in those seas. This advantage of having a
cargo ready prepared could not for several years be acquired by
private adventurers, and without it there seems to be no possibility
of trading to Hudson's Bay. The moderate capital of the company,
which, it is said, does not exceed one hundred and ten thousand
pounds, may besides be sufficient to enable them to engross the whole,
or almost the whole, trade and surplus produce of the miserable,
though extensive country, comprehended within their charter. No
private adventurers, accordingly, have ever attempted to trade to that
country in competition with them. This company, therefore, have always
enjoyed an exclusive trade in fact, though they may have no right to
it in law. Over and above all this, the moderate capital of this
company is said to be divided among a very small number of
proprietors. But a joint stock company, consisting of a small number
of proprietors, with a moderate capital, approaches very nearly to the
nature of a private copartnery, and may be capable of nearly the
same degree of vigilance and attention. It is not to be wondered at,
therefore, if, in consequence of these different advantages, the
Hudson's Bay Company had, before the late war, been able to carry on
their trade with a considerable degree of success. It does not seem
probable, however, that their profits ever approached to what the late
Mr. Dobbs imagined them. A much more sober and judicious writer, Mr.
Anderson, author of The Historical and Chronological Deduction of
Commerce, very justly observes that, upon examining the accounts of
which Mr. Dobbs himself was given for several years together of
their exports and imports, and upon making proper allowances for their
extraordinary risk and expense, it does not appear that their
profits deserve to be envied, or that they can much, if at all, exceed
the ordinary profits of trade.

    The South Sea Company never had any forts or garrisons to
maintain, and therefore were entirely exempted from one great
expense to which other joint stock companies for foreign trade are
subject. But they had an immense capital divided among an immense
number of proprietors. It was naturally to be expected, therefore,
that folly, negligence, and profusion should prevail in the whole
management of their affairs. The knavery and extravagance of their
stock-jobbing projects are sufficiently known, and the explication
of them would be foreign to the present subject. Their mercantile
projects were not much better conducted. The first trade which they
engaged in was that of supplying the Spanish West Indies with negroes,
of which (in consequence of what was called the Assiento contract
granted them by the Treaty of Utrecht) they had the exclusive
privilege. But as it was not expected that much profit could be made
by this trade, both the Portuguese and French companies, who had
enjoyed it upon the same terms before them, having been ruined by
it, they were allowed, as compensation, to send annually a ship of a
certain burden to trade directly to the Spanish West Indies. Of the
ten voyages which this annual ship was allowed to make, they are
said to have gained considerably by one, that of the Royal Caroline in
1731, and to have been losers, more or less, by almost all the rest.
Their ill success was imputed, by their factors and agents, to the
extortion and oppression of the Spanish government; but was,
perhaps, principally owing to the profusion and depredations of
those very factors and agents, some of whom are said to have
acquired great fortunes even in one year. In 1734, the company
petitioned the king that they might be allowed to dispose of the trade
and tonnage of their annual ship, on account of the little profit
which they made by it, and to accept such equivalent as they could
obtain from the of Spain.

    In 1724, this company had undertaken the whale-fishery. Of this,
indeed, they had no monopoly; but as long as they carried it on, no
other British subjects appear to have engaged in it. Of the eight
voyages which their ships made to Greenland, they were gainers by one,
and losers by all the rest. After their eighth and last voyage, when
they had sold their ships, stores, and utensils, they found that their
whole loss, upon this branch, capital and interest included,
amounted to upwards of two hundred and thirty-seven thousand pounds.

    In 1722, this company petitioned the Parliament to be allowed to
divide their immense capital of more than thirty-three millions
eight hundred thousand pounds, the whole of which had been lent to
government, into two equal parts: The one half, or upwards of
sixteen millions nine hundred thousand pounds, to be put upon the same
footing with other government annuities, and not to be subject to
the debts contracted, or losses incurred, by the directors of the
company in the prosecution of their mercantile projects; the other
half to remain, as before, a trading stock, and to be subject to those
debts and losses. The petition was too reasonable not to be granted.
In 1733, they again petitioned the Parliament that three-fourths of
their trading stock might be turned into annuity stock, and only
one-fourth remain as trading stock, or exposed to the hazards
arising from the bad management of their directors. Both their annuity
and trading stocks had, by this time, been reduced more than two
millions each by several different payments from government; so that
this fourth amounted only to L3,662,784 8s. 6d. In 1748, all the
demands of the company upon the King of Spain, in consequence of the
Assiento contract, were, by the Treaty of Aix-la-Chapelle, given up
for what was supposed an equivalent. An end was put to their trade
with the Spanish West Indies, the remainder of their trading stock was
turned into an annuity stock, and the company ceased in every
respect to be a trading company.

    It ought to be observed that in the trade which the South Sea
Company carried on by means of their annual ship, the only trade by
which it ever was expected that they could make any considerable
profit, they were not without competitors, either in the foreign or in
the home market. At Carthagena, Porto Bello, and La Vera Cruz, they
had to encounter the competition of the Spanish merchants, who brought
from Cadiz, to those markets, European goods of the same kind with the
outward cargo of their ship; and in England they had to encounter that
of the English merchants, who imported from Cadiz goods of the Spanish
West Indies of the same kind with the inward cargo. The goods both
of the Spanish and English merchants, indeed, were, perhaps, subject
to higher duties. But the loss occasioned by the negligence,
profusion, and malversation of the servants of the company had
probably been a tax much heavier than all those duties. That a joint
stock company should be able to carry on successfully any branch of
foreign trade, when private adventurers can come into any sort of open
and fair competition with them, seems contrary to all experience.

    The old English East India Company was established in 1600 by a
charter from Queen Elizabeth. In the first twelve voyages which they
fitted out for India, they appear to have traded as a regulated
company, with separate stocks, though only in the general ships of the
company. In 1612, they united into a joint stock. Their charter was
exclusive, and though not confirmed by Act of Parliament, was in those
days supposed to convey a real exclusive privilege. For many years,
therefore, they were not much disturbed by interlopers. Their capital,
which never exceeded seven hundred and forty-four thousand pounds, and
of which fifty pounds was a share, was not so exorbitant, nor their
dealings so extensive, as to afford either a pretext for gross
negligence and profusion, or a cover to gross malversation.
Notwithstanding some extraordinary losses, occasioned partly by the
malice of the Dutch East India Company, and partly by other accidents,
they carried on for many years a successful trade. But in process of
time, when the principles of liberty were better understood, it became
every day more and more doubtful how far a Royal Charter, not
confirmed by Act of Parliament, could convey an exclusive privilege.
Upon this question the decisions of the courts of justice were not
uniform, but varied with the authority of government and the humours
of the times. Interlopers multiplied upon them, and towards the end of
the reign of Charles II, through the whole of that of James II and
during a part of that of William III, reduced them to great
distress. In 1698, a proposal was made to Parliament of advancing
two millions to government at eight per cent, provided the subscribers
were erected into a new East India Company with exclusive
privileges. The old East India Company offered seven hundred
thousand pounds, nearly the amount of their capital, at four per
cent upon the same conditions. But such was at that time the state
of public credit, that it was more convenient for government to borrow
two millions at eight per cent than seven hundred thousand pounds at
four. The proposal of the new subscribers was accepted, and a new East
India Company established in consequence. The old East India
Company, however, had a right to continue their trade till 1701.
They had, at the same time, in the name of their treasurer,
subscribed, very artfully, three hundred and fifteen thousand pounds
into the stock of the new. By a negligence in the expression of the
Act of Parliament which vested the East India trade in the subscribers
to this loan of two millions, it did not appear evident that they were
all obliged to unite into a joint stock. A few private traders,
whose subscriptions amounted only to seven thousand two hundred
pounds, insisted upon the privilege of trading separately upon their
own stocks and at their own risk. The old East India Company had a
right to a separate trade upon their old stock till 1701; and they had
likewise, both before and after that period, a right, like that of
other private traders, to a separate trade upon the three hundred
and fifteen thousand pounds which they had subscribed into the stock
of the new company. The competition of the two companies with the
private traders, and with one another, is said to have well-nigh
ruined both. Upon a subsequent occasion, in 1730, when a proposal
was made to Parliament for putting the trade under the management of a
regulated company, and thereby laying it in some measure open, the
East India Company, in opposition to this proposal, represented in
very strong terms what had been, at this time, the miserable
effects, as they thought them, of this competition. In India, they
said, it raised the price of goods so high that they were not worth
the buying; and in England, by overstocking the market, it sunk
their price so low that no profit could be made by them. That by a
more plentiful supply, to the great advantage and conveniency of the
public, it must have reduced, very much, the price of Indian goods
in the English market, cannot well be doubted; but that it should have
raised very much their price in the Indian market seems not very
probable, as all the extraordinary demand which that competition could
occasion must have been but as a drop of water in the immense ocean of
Indian Commerce. The increase of demand, besides, though in the
beginning it may sometimes raise the price of goods, never fails to
lower it in the run. It encourages production, and thereby increases
the competition of the producers, who, in order to undersell one
another, have recourse to new divisions of labour and new improvements
of art which might never otherwise have been thought of. The miserable
effects of which the company complained were the cheapness of
consumption and the encouragement given to production, precisely the
two effects which it is the great business of political economy to
promote. The competition, however, of which they gave this doleful
account, had not been allowed to be of long continuance. In 1702,
the two companies were, in some measure, united by an indenture
tripartite, to which the queen was the third party; and in 1708,
they were, by Act of Parliament, perfectly consolidated into one
company by their present name of the The United Company of Merchants
trading to the East Indies. Into this act it was thought worth while
to insert a clause allowing the separate traders to continue their
trade till Michaelmas 1711, but at the same time empowering the
directors, upon three years' notice, to redeem their little capital of
seven thousand two hundred pounds, and thereby to convert the whole
stock of the company into a joint stock. By the same act, the
capital of the company, in consequence of a new loan to government,
was augmented from two millions to three millions two hundred thousand
pounds. In 1743, the company advanced another million to government.
But this million being raised, not by a call upon the proprietors, but
by selling annuities and contracting bond-debts, it did not augment
the stock upon which the proprietors could claim a dividend. It
augmented, however, their trading stock, it being equally liable
with the other three millions two hundred thousand pounds to the
losses sustained, and debts contracted, by the company in
prosecution of their mercantile projects. From 1708, or at least
from 1711, this company, being delivered from all competitors, and
fully established in the monopoly of the English commerce to the
East Indies, carried on a successful trade, and from their profits
made annually a moderate dividend to their proprietors. During the
French war, which began in 1741, the ambition of Mr. Dupleix, the
French governor of Pondicherry, involved them in the wars of the
Carnatic, and in the politics of the Indian princes. After many signal
successes, and equally signal losses, they at last lost Madras, at
that time their principal settlement in India. It was restored to them
by the Treaty of Aix-la-Chapelle; and about this time the spirit of
war and conquest seems to have taken possession of their servants in
India, and never since to have left them. During the French war, which
began in 1755, their arms partook of the general good fortune of those
of Great Britain. They defended Madras, took Pondicherry, recovered
Calcutta, and acquired the revenues of a rich and extensive territory,
amounting, it was then said, to upwards of three millions a year. They
remained for several years in quiet possession of this revenue: but in
1767, administration laid claim to their territorial acquisitions, and
the revenue arising from them, as of right belonging to the crown; and
the company, in compensation for this claim, agreed to pay the
government four hundred thousand pounds a year. They had before this
gradually augmented their dividend from about six to ten per cent;
that is, upon their capital of three millions two hundred thousand
pounds they had increased it by a hundred and twenty-eight thousand
pounds, or had raised it from one hundred and ninety-two thousand to
three hundred and twenty thousand pounds a year. They were
attempting about this time to raise it still further, to twelve and
a half per cent, which would have made their annual payments to
their proprietors equal to what they had agreed to pay annually to
government, or to four hundred thousand pounds a year.

    But during the two years in which their agreement with
government was to take place, they were restrained from any further
increase of dividend by two successive Acts of Parliament, of which
the object was to enable them to make a speedier progress in the
payment of their debts, which were at this time estimated at upwards
of six or seven millions sterling. In 1769, they renewed their
agreement with government for five years more, and stipulated that
during the course of that period they should be allowed gradually to
increase their dividend to twelve and a half per cent; never
increasing it, however, more than one per cent in one year. This
increase of dividend, therefore, when it had risen to its utmost
height, could augment their annual payments, to their proprietors
and government together, but by six hundred and eight thousand
pounds beyond what they had been before their late territorial
acquisitions. What the gross revenue of those territorial acquisitions
was supposed to amount to has already been mentioned; and by an
account brought by the Cruttenden East Indiaman in 1768, the net
revenue, clear of all deductions and military charges, was stated at
two millions forty-eight thousand seven hundred and forty-seven
pounds. They were said at the same time to possess another revenue,
arising partly from lands, but chiefly from the customs established at
their different settlements, amounting to four hundred and thirty-nine
thousand pounds. The profits of their trade too, according to the
evidence of their chairman before the House of Commons, amounted at
this time to at least four hundred thousand pounds a year, according
to that of their accountant, to at least five hundred thousand;
according to the lowest account, at least equal to the highest
dividend that was to be paid to their proprietors. So great a
revenue might certainly have afforded an augmentation of six hundred
and eight thousand pounds in their annual payments, and at the same
time have left a large sinking fund sufficient for the speedy
reduction of their debts. In 1773, however, their debts, instead of
being reduced, were augmented by an arrear to the treasury in the
payment of the four hundred thousand pounds, by another to the
custom-house for duties unpaid, by a large debt to the bank for
money borrowed, and by a fourth for bills drawn upon them from
India, and wantonly accepted, to the amount of upwards of twelve
hundred thousand pounds. The distress which these accumulated claims
brought upon them, obliged them not only to reduce all at once their
dividend to six per cent, but to throw themselves upon the mercy of
government, and to supplicate, first, a release from further payment
of the stipulated four hundred thousand pounds a year; and,
secondly, a loan of fourteen hundred thousand, to save them from
immediate bankruptcy. The great increase of their fortune had, it
seems, only served to furnish their servants with a pretext for
greater profusion, and a cover for greater malversation, than in
proportion even to that increase of fortune. The conduct of their
servants in India, and the general state of their affairs both in
India and in Europe, became the subject of a Parliamentary inquiry, in
consequence of which several very important alternations were made
in the constitution of their government, both at home and abroad. In
India their principal settlements of Madras, Bombay, and Calcutta,
which had before been altogether independent of one another, were
subjected to a governor-general, assisted by a council of four
assessors, Parliament assuming to itself the first nomination of
this governor and council who were to reside at Calcutta; that city
having now become, what Madras was before, the most important of the
English settlements in India. The Court of the Mayor of Calcutta,
originally instituted for the trial of mercantile causes which arose
in city and neighbourhood, had gradually extended its jurisdiction
with the extension of the empire. It was now reduced and confined to
the original purpose of its institution. Instead of it a new supreme
court of judicature was established, consisting of a chief justice and
three judges to be appointed by the crown. In Europe, the
qualification necessary to entitle a proprietor to vote at their
general courts was raised from five hundred pounds, the original price
of a share in the stock of the company, to a thousand pounds. In order
to vote upon this qualification too, it was declared necessary that he
should have possessed it, if acquired by his own purchase, and not
by inheritance, for at least one year, instead of six months, the term
requisite before. The court of twenty-four directors had before been
chosen annually; but it was now enacted that each director should, for
the future, be chosen for four years; six of them, however, to go
out of office by rotation every year, and not to be capable of being
re-chosen at the election of the six new directors for the ensuing
year. In consequence of these alterations, the courts, both of the
proprietors and directors, it was expected, would be likely to act
with more dignity and steadiness than they had usually done before.
But it seems impossible, by any alterations, to render those courts,
in any respect, fit to govern, or even to share in the government of a
great empire; because the greater part of their members must always
have too little interest in the prosperity of that empire to give
any serious attention to what may promote it. Frequently a man of
great, sometimes even a man of small fortune, is willing to purchase a
thousand pounds' share in India stock merely for the influence which
he expects to acquire by a vote in the court of proprietors. It
gives him a share, though not in the plunder, yet in the appointment
of the plunderers of India; the court of directors, though they make
that appointment, being necessarily more or less under the influence
of the proprietors, who not only elect those directors, but
sometimes overrule the appointments of their servants in India.
Provided he can enjoy this influence for a few years, and thereby
provide for a certain number of his friends, he frequently cares
little about the dividend, or even about the value of the stock upon
which his vote is founded. About the prosperity of the great empire,
in the government of which that vote gives him a share, he seldom
cares at all. No other sovereigns ever were, or, from the nature of
things, ever could be, so perfectly indifferent about the happiness or
misery of their subjects, the improvement or waste of their dominions,
the glory or disgrace of their administration, as, from irresistible
moral causes, the greater part of the proprietors of such a mercantile
company are, and necessarily must be. This indifference, too, was more
likely to be increased than diminished by some of the new
regulations which were made in consequence of the Parliamentary
inquiry. By a resolution of the House of Commons, for example, it
was declared, that when the fourteen hundred thousand pounds lent to
the company by government should be paid, and their bond-debts be
reduced to fifteen hundred thousand pounds, they might then, and not
till then, divide eight per cent upon their capital; and that whatever
remained of their revenues and net profits at home should be divided
into four parts; three of them to be paid into the exchequer for the
use of the public, and the fourth to be reserved as a fund either
for the further reduction of their bond-debts, or for the discharge of
other contingent exigencies which the company might labour under.
But if the company were bad stewards, and bad sovereigns, when the
whole of their net revenue and profits belonged to themselves, and
were at their own disposal, they were surely not likely to be better
when three-fourths of them were to belong to other people, and the
other fourth, though to be laid out for the benefit of the company,
yet to be so under the inspection and with the approbation of other
people.

    It might be more agreeable to the company that their own
servants and dependants should have either the pleasure of wasting
or the profit of embezzling whatever surplus might remain after paying
the proposed dividend of eight per cent than that it should come
into the hands of a set of people with whom those resolutions could
scarce fail to set them, in some measure, at variance. The interest of
those servants and dependants might so far predominate in the court of
proprietors as sometimes to dispose it to support the authors of
depredations which had been committed in direct violation of its own
authority. With the majority of proprietors, the support even of the
authority of their own court might sometimes be a matter of less
consequence than the support of those who had set that authority at
defiance.

    The regulations of 1773, accordingly, did not put an end to the
disorders of the company's government in India. Notwithstanding
that, during a momentary fit of good conduct, they had at one time
collected into the treasury of Calcutta more than three millions
sterling; notwithstanding that they had afterwards extended, either
their dominion, or their depredations, over a vast accession of some
of the richest and most fertile countries in India, all was wasted and
destroyed. They found themselves altogether unprepared to stop or
resist the incursion of Hyder Ali; and, in consequence of those
disorders, the company is now (1784) in greater distress than ever;
and, in order to prevent immediate bankruptcy, is once more reduced to
supplicate the assistance of government. Different plans have been
proposed by the different parties in Parliament for the better
management of its affairs. And all those plans seem to agree
insupposing, what was indeed always abundantly evident, that it is
altogether unfit to govern its territorial possessions. Even the
company itself seems to be convinced of its own incapacity so far, and
seems, upon that account, willing to give them up to government.

    With the right of possessing forts and garrisons in distant and
barbarous countries is necessarily connected the right of making peace
and war in those countries. The joint stock companies which have had
the one right have constantly exercised the other, and have frequently
had it expressly conferred upon them. How unjustly, how
capriciously, how cruelly they have commonly exercised it, is too well
known from recent experience.

    When a company of merchants undertake, at their own risk and
expense, to establish a new trade with some remote and barbarous
nation, it may not be unreasonable to incorporate them into a joint
stock company, and to grant them, in case of their success, a monopoly
of the trade for a certain number of years. It is the easiest and most
natural way in which the state can recompense them for hazarding a
dangerous and expensive experiment, of which the public is
afterwards to reap the benefit. A temporary monopoly of this kind
may be vindicated upon the same principles upon which a like
monopoly of a new machine is granted to its inventor, and that of a
new book to its author. But upon the expiration of the term, the
monopoly ought certainly to determine; the forts and garrisons, if
it was found necessary to establish any, to be taken into the hands of
government, their value to be paid to the company, and the trade to be
laid open to all the subjects of the state. By a perpetual monopoly,
all the other subjects of the state are taxed very absurdly in two
different ways: first, by the high price of goods, which, in the
case of a free trade, they could buy much cheaper; and, secondly, by
their total exclusion from a branch of business which it might be both
convenient and profitable for many of them to carry on. It is for
the most worthless of all purposes, too, that they are taxed in this
manner. It is merely to enable the company to support the
negligence, profusion, and malversation of their own servants, whose
disorderly conduct seldom allows the dividend of the company to exceed
the ordinary rate of profit in trades which are altogether free, and
very frequently makes it fall even a good deal short of that rate.
Without a monopoly, however, a joint stock company, it would appear
from experience, cannot long carry on any branch of foreign trade.
To buy in one market, in order to sell, with profit, in another,
when there are many competitors in both, to watch over, not only the
occasional variations in the demand, but the much greater and more
frequent variations in the competition, or in the supply which that
demand is likely to get from other people, and to suit with
dexterity and judgment both the quantity and quality of each
assortment of goods to all these circumstances, is a species of
warfare of which the operations are continually changing, and which
can scarce ever be conducted successfully without such an
unremitting exertion of vigilance and attention as cannot long be
expected from the directors of a joint stock company. The East India
Company, upon the redemption of their funds, and the expiration of
their exclusive privilege, have right, by Act of Parliament, to
continue a corporation with a joint stock, and to trade in their
corporate capacity to the East Indies in common with the rest of their
fellow-subjects. But in this situation, the superior vigilance and
attention of private adventurers would, in all probability, soon
make them weary of the trade.

    An eminent French author, of great knowledge in matters of
political economy, the Abbe Morellet, gives a list of fifty-five joint
stock companies for foreign trade which have been established in
different parts of Europe since the year 1600, and which, according to
him, have all failed from mismanagement, notwithstanding they had
exclusive privileges. He has been misinformed with regard to the
history of two or three of them, which were not joint stock
companies and have not failed. But, in compensation, there have been
several joint stock companies which have failed, and which he has
omitted.

    The only trades which it seems possible for a joint stock
company to carry on successfully without an exclusive privilege are
those of which all the operations are capable of being reduced to what
is called a Routine, or to such a uniformity of method as admits of
little or no variation. Of this kind is, first, the banking trade;
secondly, the trade of insurance from fire, and from sea risk and
capture in time of war; thirdly, the trade of making and maintaining a
navigable cut or canal; and, fourthly, the similar trade of bringing
water for the supply of a great city.

    Though the principles of the banking trade may appear somewhat
abstruse, the practice is capable of being reduced to strict rules. To
depart upon any occasion from those rules, in consequence of some
flattering speculation of extraordinary gain, is almost always
extremely dangerous, and frequently fatal, to the banking company
which attempts it. But the constitution of joint stock companies
renders them in general more tenacious of established rules than any
private copartnery. Such companies, therefore, seem extremely well
fitted for this trade. The principal banking companies in Europe,
accordingly, are joint stock companies, many of which manage their
trade very successfully without any exclusive privilege. The Bank of
England has no other exclusive privilege except that no other
banking company in England shall consist of more than six persons. The
two banks of Edinburgh are joint stock companies without any exclusive
privilege.

    The value of the risk, either from fire, or from loss by sea, or
by capture, though it cannot, perhaps, be calculated very exactly,
admits, however, of such a gross estimation as renders it, in some
degree, reducible to strict rule and method. The trade of insurance,
therefore, may be carried on successfully by a joint stock company
without any exclusive privilege. Neither the London Assurance nor
the Royal Exchange Assurance companies have any such privilege.

    When a navigable cut or canal has been once made, the management
of it becomes quite simple and easy, and it is reducible to strict
rule and method. Even the making of it is so as it may be contracted
for with undertakers at so much a mile, and so much a lock. The same
thing may be said of a canal, an aqueduct, or a great pipe for
bringing water to supply a great city. Such undertakings, therefore,
may be, and accordingly frequently are, very successfully managed by
joint stock companies without any exclusive privilege.

    To establish a joint stock company, however, for any
undertaking, merely because such a company might be capable of
managing it successfully; or to exempt a particular set of dealers
from some of the general laws which take place with regard to all
their neighbours, merely because they might be capable of thriving
if they had such an exemption, would certainly not be reasonable. To
render such an establishment perfectly reasonable, with the
circumstance of being reducible to strict rule and method, two other
circumstances ought to concur. First, it ought to appear with the
clearest evidence that the undertaking is of greater and more
general utility than the greater part of common trades; and
secondly, that it requires a greater capital than can easily be
collected into a private copartnery. If a moderate capital were
sufficient, the great utility of the undertaking would not be a
sufficient reason for establishing a joint stock company; because,
in this case, the demand for what it was to produce would readily
and easily be supplied by private adventures. In the four trades above
mentioned, both those circumstances concur.

    The great and general utility of the banking trade when
prudently managed has been fully explained in the second, book of this
Inquiry. But a public bank which is to support public credit, and upon
particular emergencies to advance to government the whole produce of a
tax, to the amount, perhaps, of several millions, a year or two before
it comes in, requires a greater capital than can easily be collected
into any private copartnery.

    The trade of insurance gives great security to the fortunes of
private people, and by dividing among a great many that loss which
would ruin an individual, makes it fall light and easy upon the
whole society. In order to give this security, however, it is
necessary that the insurers should have a very large capital. Before
the establishment of the two joint stock companies for insurance in
London, a list, it is said, was laid before the attorney-general of
one hundred and fifty private insurers who had failed in the course of
a few years.

    That navigable cuts and canals, and the works which are
sometimes necessary for supplying a great city with water, are of
great and general utility, while at the same time they frequently
require a greater expense than suits the fortunes of private people,
is sufficiently obvious.

    Except the four trades above mentioned, I have not been able to
recollect any other in which all the three circumstances requisite for
rendering reasonable the establishment of a joint stock company
concur. The English copper company of London, the lead smelting
company, the glass grinding company, have not even the pretext of
any great or singular utility in the object which they pursue; nor
does the pursuit of that object seem to require any expense unsuitable
to the fortunes of many private men. Whether the trade which those
companies carry on is reducible to such strict rule and method as to
render it fit for the management of a joint stock company, or
whether they have any reason to boast of their extraordinary
profits, I do not pretend to know. The mine-adventurers' company has
been long ago bankrupt. A share in the stock of the British Linen
Company of Edinburgh sells, at present, very much below par, though
less so that it did some years ago. The joint stock companies which
are established for the public-spirited purpose of promoting some
particular manufacture, over and above managing their own affairs ill,
to the dimunition of the general stock of the society, can in other
respects scarce ever fail to do more harm than good. Notwithstanding
the most upright intentions, the unavoidable partiality of their
directors to particular branches of the manufacture of which the
undertakers mislead and impose upon them is a real discouragement to
the rest, and necessarily breaks, more or less, that natural
proportion which would otherwise establish itself between judicious
industry and profit, and which, to the general industry of the
country, is of all encouragements the greatest and the most effectual.

                             ARTICLE II

     Of the Expense of the Institutions for the Education of Youth

    The institutions for the education of the youth may, in the same
manner, furnish a revenue sufficient for defraying their own
expense. The fee or honorary which the scholar pays to the master
naturally constitutes a revenue of this kind.

    Even where the reward of the master does not arise altogether from
this natural revenue, it still is not necessary that it should be
derived from that general revenue of the society, of which the
collection and application is, in most countries, assigned to the
executive power. Through the greater part of Europe, accordingly,
the endowment of schools and colleges makes either no charge upon that
general revenue, or but a very small one. It everywhere arises chiefly
from some local or provincial revenue, from the rent of some landed
estate, or from the interest of some sum of money allotted and put
under the management of trustees for this particular purpose,
sometimes by the sovereign himself, and sometimes by some private
donor.

    Have those public endowments contributed in general to promote the
end of their institution? Have they contributed to encourage the
diligence and to improve the abilities of the teachers? Have they
directed the course of education towards objects more useful, both
to the individual and to the public, than those to which it would
naturally have gone of its own accord? It should not seem very
difficult to give at least a probable answer to each of those
questions.

    In every profession, the exertion of the greater part of those who
exercise it is always in proportion to the necessity they are under of
making that exertion. This necessity is greatest with those to whom
the emoluments of their profession are the only source from which they
expect their fortune, or even their ordinary revenue and
subsistence. In order to acquire this fortune, or even to get this
subsistence, they must, in the course of a year, execute a certain
quantity of work of a known value; and, where the competition is free,
the rivalship of competitors, who are all endeavouring to justle one
another out of employment, obliges every man to endeavour to execute
his work with a certain degree of exactness. The greatness of the
objects which are to be acquired by success in some particular
professions may, no doubt, sometimes animate the exertion of a few men
of extraordinary spirit and ambition. Great objects, however, are
evidently not necessary in order to occasion the greatest exertions.
Rivalship and emulation render excellency, even in mean professions,
an object of ambition, and frequently occasion the very greatest
exertions. Great objects, on the contrary, alone and unsupported by
the necessity of application, have seldom been sufficient to
occasion any considerable exertion. In England, success in the
profession of the law leads to some very great objects of ambition;
and yet how few men, born to easy fortunes, have ever in this
country been eminent in that profession!

    The endowments of schools and colleges have necessarily diminished
more or less the necessity of application in the teachers. Their
subsistence, so far as it arises from their salaries, is evidently
derived from a fund altogether independent of their success and
reputation in their particular professions.

    In some universities the salary makes but a part, and frequently
but a small part, of the emoluments of the teacher, of which the
greater part arises from the honoraries or fees of his pupils. The
necessity of application, though always more or less diminished, is
not in this case entirely taken away. Reputation in his profession
is still of some importance to him, and he still has some dependency
upon the affection, gratitude, and favourable report of those who have
attended upon his instructions; and these favourable sentiments he
is likely to gain in no way so well as by deserving them, that is,
by the abilities and diligence with which he discharges every part
of his duty.

    In other universities the teacher is prohibited from receiving any
honorary or fee from his pupils, and his salary constitutes the
whole of the revenue which he derives from his office. His interest
is, in this case, set as directly in opposition to his duty as it is
possible to set it. It is the interest of every man to live as much at
his ease as he can; and if his emoluments are to be precisely the
same, whether he does or does not perform some very laborious duty, it
is certainly his interest, at least as interest is vulgarly
understood, either to neglect it altogether, or, if he is subject to
some authority which will not suffer him to do this, to perform it
in as careless and slovenly a manner as that authority will permit. If
he is naturally active and a lover of labour, it is his interest to
employ that activity in any way from which he can derive some
advantage, rather than in the performance of his duty, from which he
can derive none.

    If the authority to which he is subject resides in the body
corporate, the college, or university, of which he himself is a
member, and which the greater part of the other members are, like
himself, persons who either are or ought to be teachers, they are
likely to make a common cause, to be all very indulgent to one
another, and every man to consent that his neighbour may neglect his
duty, provided he himself is allowed to neglect his own. In the
university of Oxford, the greater part of the public professors
have, for these many years, given up altogether even the pretence of
teaching.

    If the authority to which he is subject resides, not so much in
the body corporate of which he is a member, as in some other
extraneous persons- in the bishop of the diocese, for example; in
the governor of the province; or, perhaps, in some minister of state
it is not indeed in this case very likely that he will be suffered
to neglect his duty altogether. All that such superiors, however,
can force him to do, is to attend upon his pupils a certain number
of hours, that is, to give a certain number of lectures in the week or
in the year. What those lectures shall be must still depend upon the
diligence of the teacher; and that diligence is likely to be
proportioned to the motives which he has for exerting it. An
extraneous jurisdiction of this kind, besides, is liable to be
exercised both ignorantly and capriciously. In its nature it is
arbitrary and discretionary, and the persons who exercise it,
neither attending upon the lectures of the teacher themselves, nor
perhaps understanding the sciences which it is his business to
teach, are seldom capable of exercising it with judgment. From the
insolence of office, too, they are frequently indifferent how they
exercise it, and are very apt to censure or deprive him of his
office wantonly, and without any just cause. The person subject to
such jurisdiction is necessarily degraded by it, and, instead of being
one of the most respectable, is rendered one of the meanest and most
contemptible persons in the society. It is by powerful protection only
that he can effectually guard himself against the bad usage to which
he is at all times exposed; and this protection he is most likely to
gain, not by ability or diligence in his profession, but by
obsequiousness to the will of his superiors, and by being ready, at
all times, to sacrifice to that will the rights, the interest, and the
honour of the body corporate of which he is a member. Whoever has
attended for any considerable time to the administration of a French
university must have had occasion to remark the effects which
naturally result from an arbitrary and extraneous jurisdiction of this
kind.

    Whatever forces a certain number of students to any college or
university, independent of the merit or reputation of the teachers,
tends more or less to diminish the necessity of that merit or
reputation.

    The privileges of graduates in arts, in law, physic, and divinity,
when they can be obtained only by residing a certain number of years
in certain universities, necessarily force a certain number of
students to such universities, independent of the merit or
reputation of the teachers. The privileges of graduates are a sort
of statutes of apprenticeship, which have contributed to the
improvement of education, just as the other statutes of apprenticeship
have to that of arts, and manufactures.

    The charitable foundations of scholarships, exhibitions,
bursaries, etc., necessarily attach a certain number of students to
certain colleges, independent altogether of the merit of those
particular colleges. Were the students upon such charitable
foundations left free to choose what college they liked best, such
liberty might perhaps contribute to excite some emulation among
different colleges. A regulation, on the contrary, which prohibited
even the independent members of every particular college from
leaving it and going to any other, without leave first asked and
obtained of that which they meant to abandon, would tend very much
to extinguish that emulation.

    If in each college the tutor or teacher, who was to instruct
each student in all arts and sciences, should not be voluntarily
chosen by the student, but appointed by the head of the college; and
if, in case of neglect, inability, or bad usage, the student should
not be allowed to change him for another, without leave first asked
and obtained, such a regulation would not only tend very much to
extinguish all emulation among the different tutors of the same
college, but to diminish very much in all of them the necessity of
diligence and of attention to their respective pupils. Such
teachers, though very well paid by their students, might be as much
disposed to neglect them as those who are not paid by them at all,
or who have no other recompense but their salary.

    If the teacher happens to be a man of sense, it must be an
unpleasant thing to him to be conscious, while he is lecturing his
students, that he is either speaking or reading nonsense, or what is
very little better than nonsense. It must, too, be unpleasant to him
to observe that the greater part of his students desert his
lectures, or perhaps attend upon them with plain enough marks of
neglect, contempt, and derision. If he is obliged, therefore, to
give a certain number of lectures, these motives alone, without any
other interest, might dispose him to take some pains to give tolerably
good ones. Several different expedients, however, may be fallen upon
which will effectually blunt the edge of all those incitements to
diligence. The teacher, instead of explaining to his pupils himself
the science in which he proposes to instruct them, may read some
book upon it; and if this book is written in a foreign and dead
language, by interpreting it to them into their own; or, what would
give him still less trouble, by making them interpret it to him, and
by now and then making an occasional remark upon it, he may flatter
himself that he is giving a lecture. The slightest degree of knowledge
and application will enable him to do this without exposing himself to
contempt or derision, or saying anything that is really foolish,
absurd, or ridiculous. The discipline of the college, at the same
time, may enable him to force all his pupils to the most regular
attendance upon this sham lecture, and to maintain the most decent and
respectful behaviour during the whole time of the performance.

    The discipline of colleges and universities is in general
contrived, not for the benefit of the students, but for the
interest, or more properly speaking, for the ease of the masters.
Its object is, in all cases, to maintain the authority of the
master, and whether he neglects or performs his duty, to oblige the
students in all cases to behave to him, as if he performed it with the
greatest diligence and ability. It seems to presume perfect wisdom and
virtue in the one order, and the greatest weakness and folly in the
other. Where the masters, however, really perform their duty, there
are no examples, I believe, that the greater part of the students ever
neglect theirs. No discipline is ever requisite to force attendance
upon lectures which are really worth the attending, as is well known
wherever any such lectures are given. Force and restraint may, no
doubt, be in some degree requisite in order to oblige children, or
very young boys, to attend to those parts of education which it is
thought necessary for them to acquire during that early period of
life; but after twelve or thirteen years of age, provided the master
does his duty, force or restraint can scarce ever be necessary to
carry on any part of education. Such is the generosity of the
greater part of young men, that, so far from being disposed to neglect
or despise the instructions of their master, provided he shows some
serious intention of being of use to them, they are generally inclined
to pardon a great deal of incorrectness in the performance of his
duty, and sometimes even to conceal from the public a good deal of
gross negligence.

    Those parts of education, it is to be observed, for the teaching
of which there are no public institutions, are generally the best
taught. When a young man goes to a fencing or a dancing school, he
does not indeed always learn to fence or to dance very well; but he
seldom fails of learning to fence or to dance. The good effects of the
riding school are not commonly so evident. The expense of a riding
school is so great, that in most places it is a public institution.
The three most essential parts of literary education, to read,
write, and account, it still continues to be more common to acquire in
private than in public schools; and it very seldom happens that
anybody fails of acquiring them to the degree in which it is necessary
to acquire them.

    In England the public schools are much less corrupted than the
universities. In the schools the youth are taught, or at least may
be taught, Greek and Latin; that is, everything which the masters
pretend to teach, or which, it is expected, they should teach. In
the universities the youth neither are taught, nor always can find any
proper means of being taught, the sciences which it is the business of
those incorporated bodies to teach. The reward of the schoolmaster
in most cases depends principally, in some cases almost entirely, upon
the fees or honoraries of his scholars. Schools have no exclusive
privileges. In order to obtain the honours of graduation, it is not
necessary that a person should bring a certificate of his having
studied a certain number of years at a public school. If upon
examination he appears to understand what is taught there, no
questions are asked about the place where he learnt it.

    The parts of education which are commonly taught in
universities, it may, perhaps, be said are not very well taught. But
had it not been for those institutions they would not have been
commonly taught at all, and both the individual and the public would
have suffered a good deal from the want of those important parts of
education.

    The present universities of Europe were originally, the greater
part of them, ecclesiastical corporations, instituted for the
education of churchmen. They were founded by the authority of the
Pope, and were so entirely under his immediate protection, that
their members, whether masters or students, had all of them what was
then called the benefit of clergy, that is, were exempted from the
civil jurisdiction of the countries in which their respective
universities were situated, and were amenable only to the
ecclesiastical tribunals. What was taught in the greater part of those
universities was suitable to the end of their institution, either
theology, or something that was merely preparatory to theology.

    When Christianity was first established by law, a corrupted
Latin had become the common language of all the western parts of
Europe. The service of the church accordingly, and the translation
of the Bible which was read in churches, were both in that corrupted
Latin; that is, in the common language of the country. After the
irruption of the barbarous nations who overturned the Roman empire,
Latin gradually ceased to be the language of any part of Europe. But
the reverence of the people naturally preserves the established
forms and ceremonies of religion long after the circumstances which
first introduced and rendered them reasonable are no more. Though
Latin, therefore, was no longer understood anywhere by the great
body of the people, the whole service of the church still continued to
be performed in that language. Two different languages were thus
established in Europe, in the same manner as in ancient Egypt; a
language of the priests, and a language of the people; a sacred and
a profane; a learned and an unlearned language. But it was necessary
that the priests should understand something of that sacred and
learned language in which they were to officiate; and the study of the
Latin language therefore made, from the beginning, an essential part
of university education.

    It was not so with that either of the Greek or of the Hebrew
language. The infallible decrees of the church had pronounced the
Latin translation of the Bible, commonly called the Latin Vulgate,
to have been equally dictated by divine inspiration, and therefore
of equal authority with the Greek and Hebrew originals. The
knowledge of those two languages, therefore, not being indispensably
requisite to a churchman, the study of them did not for a long time
make a necessary part of the common course of university education.
There are some Spanish universities, I am assured, in which the
study of the Greek language has never yet made any part of that
course. The first reformers found the Greek text of the New Testament,
and even the Hebrew text of the Old, more favorable to their
opinions than the Vulgate translation, which, as might naturally be
supposed, had been gradually accommodated to support the doctrines
of the Catholic Church. They set themselves, therefore, to expose
the many errors of that translation, which the Roman Catholic clergy
were thus put under the necessity of defending or explaining. But this
could not well be done without some knowledge of the original
languages, of which the study was therefore gradually introduced
into the greater part of universities, both of those which embraced,
and of those which rejected, the doctrines of the Reformation. The
Greek language was connected with every part of that classical
learning which, though at first principally cultivated by Catholics
and Italians, happened to come into fashion much about the same time
that the doctrines of the Reformation were set on foot. In the greater
part of universities, therefore, that language was taught previous
to the study of philosophy, and as soon as the student had made some
progress in the Latin. The Hebrew language having no connection with
classical learning, and, except the Holy Scriptures, being the
language of not a single book in any esteem, the study of it did not
commonly commence till after that of philosophy, and when the
student had entered upon the study of theology.

    Originally the first rudiments both of the Greek and Latin
languages were taught in universities, and in some universities they
still continue to be so. In others it is expected that the student
should have previously acquired at least the rudiments of one or
both of those languages, of which the study continues to make
everywhere a very considerable part of university education.

    The ancient Greek philosophy was divided into three great
branches; physics, or natural philosophy; ethics, or moral philosophy;
and logic. This general division seems perfectly agreeable to the
nature of things.

    The great phenomena of nature- the revolutions of the heavenly
bodies, eclipses, comets; thunder, lightning, and other
extraordinary meteors; the generation, the life, growth, and
dissolution of plants and animals- are objects which, as they
necessarily excite the wonder, so they naturally call forth the
curiosity, of mankind to inquire into their causes. Superstition first
attempted to satisfy this curiosity, by referring all those
wonderful appearances to the immediate agency of the gods.
Philosophy afterwards endeavoured to account for them from more
familiar causes, or from such as mankind were better acquainted
with, than the agency of the gods. As those great phenomena are the
first objects of human curiosity, so the science which pretends to
explain them must naturally have been the first branch of philosophy
that was cultivated. The first philosophers, accordingly, of whom
history has preserved any account, appear to have been natural
philosophers.

    In every age and country of the world men must have attended to
the characters, designs, and actions of one another, and many
reputable rules and maxims for the conduct of human life must have
been laid down and approved of by common consent. As soon as writing
came into fashion, wise men, or those who fancied themselves such,
would naturally endeavour to increase the number of those
established and respected maxims, and to express their own sense of
what was either proper or improper conduct, sometimes in the more
artificial form of apologues, like what are called the fables of
Aesop; and sometimes in the more simple one of apophthegms, or wise
sayings, like the Proverbs of Solomon, the verses of Theognis and
Phocyllides, and some part of the works of Hesiod. They might continue
in this manner for a long time merely to multiply the number of
those maxims of prudence and morality, without even attempting to
arrange them in any very distinct or methodical order, much less to
connect them together by one or more general principles from which
they were all deducible, like effects from their natural causes. The
beauty of a systematical arrangement of different observations
connected by a few common principles was first seen in the rude essays
of those ancient times towards a system of natural philosophy.
Something of the same kind was afterwards attempted in morals. The
maxims of common life were arranged in some methodical order, and
connected together by a few common principles, in the same manner as
they had attempted to arrange and connect the phenomena of nature. The
science which pretends to investigate and explain those connecting
principles is what is properly called moral philosophy.

    Different authors gave different systems both of natural and moral
philosophy. But the arguments by which they supported those
different systems, for from being always demonstrations, were
frequently at best but very slender probabilities, and sometimes
mere sophisms, which had no other foundation but the inaccuracy and
ambiguity of common language. Speculative systems have in all ages
of the world been adopted for reasons too frivolous to have determined
the judgment of any man of common sense in a matter of the smallest
pecuniary interest. Gross sophistry has scarce ever had any
influence upon the opinions of mankind, except in matters of
philosophy and speculation; and in these it has frequently had the
greatest. The patrons of each system of natural and moral philosophy
naturally endeavoured to expose the weakness of the arguments
adduced to support the systems which were opposite to their own. In
examining those arguments, they were necessarily led to consider the
difference between a probable and a demonstrative argument, between
a fallacious and a conclusive one: and Logic, or the science of the
general principles of good and bad reasoning, necessarily arose out of
the observations which a scrutiny of this kind gave occasion to.
Though in its origin posterior both to physics and to ethics, it was
commonly taught, not indeed in all, but in the greater part of the
ancient schools of philosophy, previously to either of those sciences.
The student, it seems to have been thought, to understand well the
difference between good and bad reasoning before he was led to
reason upon subjects of so great importance.

    This ancient division of philosophy into three parts was in the
greater part of the universities of Europe changed for another into
five.

    In the ancient philosophy, whatever was taught concerning the
nature either of the human mind or of the Deity, made a part of the
system of physics. Those beings, in whatever their essence might be
supposed to consist, were parts of the great system of the universe,
and parts, too, productive of the most important effects. Whatever
human reason could either conclude or conjecture concerning them,
made, as it were, two chapters, though no doubt two very important
ones, of the science which pretended to give an account of the
origin and revolutions of the great system of the universe. But in the
universities of Europe, where philosophy was taught only as
subservient to theology, it was natural to dwell longer upon these two
chapters than upon any other of the science. They were gradually
more and more extended, and were divided into many inferior
chapters, till at last the doctrine of spirits, of which so little can
be known, came to take up as much room in the system of philosophy
as the doctrine of bodies, of which so much can be known. The
doctrines concerning those two subjects were considered as making
two distinct sciences. What are called Metaphysics or Pneumatics
were set in opposition to Physics, and were cultivated not only as the
more sublime, but, for the purposes of a particular profession, as the
more useful science of the two. The proper subject of experiment and
observation, a subject in which a careful attention is capable of
making so many useful discoveries, was almost entirely neglected.
The subject in which, after a few very simple and almost obvious
truths, the most careful attention can discover nothing but
obscurity and uncertainty, and can consequently produce nothing but
subtleties and sophisms, was greatly cultivated.

    When those two sciences had thus been set in opposition to one
another, the comparison between them naturally gave birth to a
third, to what was called Ontology, or the science which treated of
the qualities and attributes which were common to both the subjects of
the other two sciences. But if subtleties and sophisms composed the
greater part of the Metaphysics or Pneumatics of the schools, they
composed the whole of this cobweb science of Ontology, which was
likewise sometimes called Metaphysics.

    Wherein consisted the happiness and perfection of a man,
considered not only as an individual, but as the member of a family,
of a state, and of the great society of mankind, was the object
which the ancient moral philosophy proposed to investigate. In that
philosophy the duties of human life were treated as subservient to the
happiness and perfection of human life. But when moral, as well as
natural philosophy, came to be taught only as subservient to theology,
the duties of human life were treated of as chiefly subservient to the
happiness of a life to come. In the ancient philosophy the
perfection of virtue was represented as necessarily productive, to the
person who possessed it, of the most perfect happiness in this life.
In the modern philosophy it was frequently represented as generally,
or rather as almost always, inconsistent with any degree of
happiness in this life; and heaven was to be earned only by penance
and mortification, by the austerities and abasement of a monk; not
by the liberal, generous, and spirited conduct of a man. Casuistry and
an ascetic morality made up, in most cases, the greater part of the
moral philosophy of the schools. By far the most important of all
the different branches of philosophy became in this manner by far
the most corrupted.

    Such, therefore, was the common course of philosophical
education in the greater part of the universities in Europe. Logic was
taught first: Ontology came in the second place: Pneumatology,
comprehending the doctrine concerning the nature of the human soul and
of the Deity, in the third: in the fourth followed a debased system of
moral philosophy which was considered as immediately connected with
the doctrines of Pneumatology, with the immortality of the human soul,
and with the rewards and punishments which, from the justice of the
Deity, were to be expected in a life to come: a short and
superficial system of Physics usually concluded the course.

    The alterations which the universities of Europe thus introduced
into the ancient course of philosophy were all meant for the education
of ecclesiastics, and to render it a more proper introduction to the
study of theology. But the additional quantity of subtlety and
sophistry, the casuistry and the ascetic morality which those
alterations introduced into it, certainly did not render it more
proper for the education of gentlemen or men of the world, or more
likely either to improve the understanding, or to mend the heart.

    This course of philosophy is what still continues to be taught
in the greater part of the universities of Europe, with more or less
diligence, according as the constitution of each particular university
happens to render diligence more or less necessary to the teachers. In
some of the richest and best endowed universities, the tutors
content themselves with teaching a few unconnected shreds and
parcels of this corrupted course; and even these they commonly teach
very negligently and superficially.

    The improvements which, in modern times, have been made in several
different branches of philosophy have not, the greater part of them,
been made in universities, though some no doubt have. The greater part
of universities have not even been very forward to adopt those
improvements after they were made; and several of those learned
societies have chosen to remain, for a long time, the sanctuaries in
which exploded systems and obsolete prejudices found shelter and
protection after they had been hunted out of every other corner of the
world. In general, the richest and best endowed universities have been
the slowest in adopting those improvements, and the most averse to
permit any considerable change in the established plan of education.
Those improvements were more easily introduced into some of the poorer
universities, in which the teachers, depending upon their reputation
for the greater part of their subsistence, were obliged to pay more
attention to the current opinions of the world.

    But though the public schools and universities of Europe were
originally intended only for the education of a particular profession,
that of churchmen; and though they were not always very diligent in
instructing their pupils even in the sciences which were supposed
necessary for that profession, yet they gradually drew to themselves
the education of almost all other people, particularly of almost all
gentlemen and men of fortune. No better method, it seems, could be
fallen upon of spending, with any advantage, the long interval between
infancy and that period of life at which men begin to apply in good
earnest to the real business of the world, the business which is to
employ them during the remainder of their days. The greater part of
what is taught in schools and universities, however, does not seem
to be the most proper preparation for that business.

    In England it becomes every day more and more the custom to send
young people to travel in foreign countries immediately upon their
leaving school, and without sending them to any university. Our
young people, it is said, generally return home much improved by their
travels. A young man who goes abroad at seventeen or eighteen, and
returns home at one and twenty, returns three or four years older than
he was when he went abroad; and at that age it is very difficult not
to improve a good deal in three or four years. In the course of his
travels he generally acquires some knowledge of one or two foreign
languages; a knowledge, however, which is seldom sufficient to
enable him either to speak or write them with propriety. In other
respects he commonly returns home more conceited, more unprincipled,
more dissipated, and more incapable of any serious application
either to study or to business than he could well have become in so
short a time had he lived at home. By travelling so very young, by
spending in the most frivolous dissipation the most precious years
of his life, at a distance from the inspection and control of his
parents and relations, every useful habit which the earlier parts of
his education might have had some tendency to form in him, instead
of being riveted and confirmed, is almost necessarily either
weakened or effaced. Nothing but the discredit into which the
universities are allowing themselves to fall could ever have brought
into repute so very absurd a practice as that of travelling at this
early period of life. By sending his son abroad, a father delivers
himself at least for some time, from so disagreeable an object as that
of a son unemployed, neglected, and going to ruin before his eyes.

    Such have been the effects of some of the modern institutions
for education.

    Different plans and different institutions for education seem to
have taken place in other ages and nations.

    In the republics of ancient Greece, every free citizen was
instructed, under the direction of the public magistrate, in gymnastic
exercises and in music. By gymnastic exercises it was intended to
harden his body, to sharpen his courage, and to prepare him for the
fatigues and dangers of war; and as the Greek militia was, by all
accounts, one of the best that ever was in the world, this part of
their public education must have answered completely the purpose for
which it was intended. By the other part, music, it was proposed, at
least by the philosophers and historians who have given us an
account of those institutions, to humanize the mind, to soften the
temper, and to dispose it for performing all the social and moral
duties both of public and private life.

    In ancient Rome the exercises of the Campus Martius answered the
purpose as those of the Gymnasium in ancient Greece, and they seem
to have answered it equally well. But among the Romans there was
nothing which corresponded to the musical education of the Greeks. The
morals of the Romans, however, both in private and public life, seem
to have been not only equal, but, upon the whole, a good deal superior
to those of the Greeks. That they were superior in private life, we
have the express testimony of Polybius and of Dionysius of
Halicarnassus, two authors well acquainted with both nations; and
the whole tenor if the Greek and Roman history bears witness to the
superiority of the public morals of the Romans. The good temper and
moderation of contending factions seems to be the most essential
circumstances in the public morals of a free people. But the
factions of the Greeks were almost always violent and sanguinary;
whereas, till the time of the Gracchi, no blood had ever been shed
in any Roman faction; and from the time of the Gracchi the Roman
republic may be considered as in reality dissolved. Notwithstanding,
therefore, the very respectable authority of Plato, Aristotle, and
Polybius, and notwithstanding the very ingenious reasons by which
Mr. Montesquieu endeavours to support that authority, it seems
probable that the musical education of the Greeks had no great
effect in mending their morals, since, without any such education,
those of the Romans were upon the whole superior. The respect of those
ancient sages for the institutions of their ancestors had probably
disposed them to find much political wisdom in what was, perhaps,
merely an ancient custom, continued without interruption from the
earliest period of those societies to the times in which they had
arrived at a considerable degree of refinement. Music and dancing
are the great amusements of almost all barbarous nations, and the
great accomplishments which are supposed to fit any man for
entertaining his society. It is so at this day among the negroes on
the coast of Africa. It was so among the ancient Celts, among the
ancient Scandinavians, and, as we may learn from Homer, among the
ancient Greeks in the times preceding the Trojan war. When the Greek
tribes had formed themselves into little republics, it was natural
that the study of those accomplishments should, for a long time,
make a part of the public and common education of the people.

    The masters who instructed the young people, either in music or in
military exercises, do not seem to have been paid, or even appointed
by the state, either in Rome or even in Athens, the Greek republic
of whose laws and customs we are the best informed. The state required
that every free citizen should fit himself for defending it in war,
and should, upon that account, learn his military exercises. But it
left him to learn them of such masters as he could find, and it
seems to have advanced nothing for this purpose but a public field
or place of exercise in which he should practise and perform them.

    In the early ages both of the Greek and Roman republics, the other
parts of education seem to have consisted in learning to read,
write, and account according to the arithmetic of the times. These
accomplishments the richer citizens seem frequently to have acquired
at home by the assistance of some domestic pedagogue, who was
generally either a slave or a freed-man; and the poorer citizens, in
the schools of such masters as made a trade of teaching for hire. Such
parts of education, however, were abandoned altogether to the care
of the parents or guardians of each individual. It does not appear
that the state ever assumed any inspection or direction of them. By
a law of Solon, indeed, the children were acquitted from maintaining
those parents in their old age who had neglected to instruct them in
some profitable trade or business.

    In the progress of refinement, when philosophy and rhetoric came
into fashion, the better sort of people used to send their children to
the schools of philosophers and rhetoricians, in order to be
instructed in these fashionable sciences. But those schools were not
supported by the public. They were for a long time barely tolerated by
it. The demand for philosophy and rhetoric was for a long time so
small that the first professed teachers of either could not find
constant employment in any one city, but were obliged to travel
about from place to place. In this manner lived Zeno of Elea,
Protagoras, Gorgias, Hippias, and many others. As the demand
increased, the schools both of philosophy and rhetoric became
stationary; first in Athens, and afterwards in several other cities.
The state, however, seems never to have encouraged them further than
by assigning some of them a particular place to teach in, which was
sometimes done, too, by private donors. The state seems to have
assigned the Academy to Plato, the Lyceum to Aristotle, and the
Portico to Zeno of Citta, the founder of the Stoics. But Epicurus
bequeathed his gardens to his own school. Till about the time of
Marcus Antonius, however, no teacher appears to have had any salary
from the public, or to have had any other emoluments but what arose
from the honoraries or fees of his scholars. The bounty which that
philosophical emperor, as we learn from Lucian, bestowed upon one of
the teachers of philosophy, probably lasted no longer than his own
life. There was nothing equivalent to the privileges of graduation,
and to have attended any of those schools was not necessary, in
order to be permitted to practise any particular trade or
profession. If the opinion of their own utility could not draw
scholars to them, the law neither forced anybody to go to them nor
rewarded anybody for having gone to them. The teachers had no
jurisdiction over their pupils, nor any other authority besides that
natural authority, which superior virtue and abilities never fail to
procure from young people towards those who are entrusted with any
part of their education.

    At Rome, the study of the civil law made a part of the
education, not of the greater part of the citizens, but of some
particular families. The young people, however, who wished to
acquire knowledge in the law, had no public school to go to, and had
no other method of studying it than by frequenting the company of such
of their relations and friends as were supposed to understand it. It
is perhaps worth while to remark, that though the Laws of the Twelve
Tables were, many of them, copied from those of some ancient Greek
republics, yet law never seems to have grown up to be a science in any
republic of ancient Greece. In Rome it became a science very early,
and gave a considerable degree of illustration to those citizens who
had the reputation of understanding it. In the republics of ancient
Greece, particularly in Athens, the ordinary courts of justice
consisted of numerous, and therefore disorderly, bodies of people, who
frequently decided almost at random, or as clamour, faction, and party
spirit happened to determine. The ignominy of an unjust decision, when
it was to be divided among five hundred, a thousand, or fifteen
hundred people (for some of their courts were so very numerous), could
not fall very heavy upon any individual. At Rome, on the contrary, the
principal courts of justice consisted either of a single judge or of a
small number of judges, whose characters, especially as they
deliberated always in public, could not fail to be very much
affected by any rash or unjust decision. In doubtful cases such
courts, from their anxiety to avoid blame, would naturally endeavour
to shelter themselves under the example or precedent of the judges who
had sat before them, either in the same or in some other court. This
attention to practice and precedent necessarily formed the Roman law
into that regular and orderly system in which it has been delivered
down to us; and the like attention has had the like effects upon the
laws of every other country where such attention has taken place.
The superiority of character in the Romans over that of the Greeks, so
much remarked by Polybius and Dionysius of Halicarnassus, was probably
more owing to the better constitution of their courts of justice
than to any of the circumstances to which those authors ascribe it.
The Romans are said to have been particularly distinguished for
their superior respect to an oath. But the people who were
accustomed to make oath only before some diligent and well-informed
court of justice would naturally be much more attentive to what they
swore than they who were accustomed to do the same thing before
mobbish and disorderly assemblies.

    The abilities, both civil and military, of the Greeks and Romans
will readily be allowed to have been at least equal to those of any
modern nation. Our prejudice is perhaps rather to overrate them. But
except in what related to military exercises, the state seems to
have been at no pains to form those great abilities, for I cannot be
induced to believe that the musical education of the Greeks could be
of much consequence in forming them. Masters, however, had been found,
it seems, for instructing the better sort of people among those
nations in every art and science in which the circumstances of their
society rendered it necessary or convenient for them to be instructed.
The demand for such instruction produced what it always produces-
the talent for giving it; and the emulation which an unrestrained
competition never fails to excite, appears to have brought that talent
to a very high degree of perfection. In the attention which the
ancient philosophers excited, in the empire which they acquired over
the opinions and principles of their auditors, in the faculty which
they possessed of giving a certain tone and character to the conduct
and conversation of those auditors, they appear to have been much
superior to any modern teachers. In modern times, the diligence of
public teachers is more or less corrupted by the circumstances which
render them more or less independent of their success and reputation
in their particular professions. Their salaries, too, put the
private teacher, who would pretend to come into competition with them,
in the same state with a merchant who attempts to trade without a
bounty in competition with those who trade with a considerable one. If
he sells his goods at nearly the same price, he cannot have the same
profit, and at least, if not bankruptcy and ruin, will infallibly be
his lot. If he attempts to sell them much dearer, he is likely to have
so few customers that his circumstances will not be much mended. The
privileges of graduation, besides, are in many countries necessary, or
at least extremely convenient, to most men of learned professions,
that is, to the far greater part of those who have occasion for a
learned education. But those privileges can be obtained only by
attending the lectures of the public teachers. The most careful
attendance upon the ablest instructions of any private teacher
cannot always give any title to demand them. It is from these
different causes that the private teacher of any of the sciences which
are commonly taught in universities is in modern times generally
considered as in the very lowest order of men of letters. A man of
real abilities can scarce find out a more humiliating or a more
unprofitable employment to turn them to. The endowment of schools
and colleges have, in this manner, not only corrupted the diligence of
public teachers, but have rendered it almost impossible to have any
good private ones.

    Were there no public institutions for education, no system, no
science would be taught for which there was not some demand, or
which the circumstances of the times did not render it either
necessary, or convenient, or at least fashionable, to learn. A private
teacher could never find his account in teaching either an exploded
and antiquated system of a science acknowledged to be useful, or a
science universally believed to be a mere useless and pedantic heap of
sophistry and nonsense. Such systems, such sciences, can subsist
nowhere, but in those incorporated societies for education whose
prosperity and revenue are in a great measure independent of their
reputation and altogether independent of their industry. Were there no
public institutions for education, a gentleman, after going through
with application and abilities the most complete course of education
which the circumstances of the times were supposed to afford, could
not come into the world completely ignorant of everything which is the
common subject of conversation among gentlemen and men of the world.

    There are no public institutions for the education of women, and
there is accordingly nothing useless, absurd, or fantastical in the
common course of their education. They are taught what their parents
or guardians judge it necessary or useful for them to learn, and
they are taught nothing else. Every part of their education tends
evidently to some useful purpose; either to improve the natural
attractions of their person, or to form their mind to reserve, to
modesty, to chastity, and to economy; to render them both likely to
become the mistresses of a family, and to behave properly when they
have become such. In every part of her life a woman feels some
conveniency or advantage from every part of her education. It seldom
happens that a man, in any part of his life, derives any conveniency
or advantage from some of the most laborious and troublesome parts
of his education.

    Ought the public, therefore, to give no attention, it may be
asked, to the education of the people? Or if it ought to give any,
what are the different parts of education which it ought to attend
to in the different orders of the people? and in what manner ought
it to attend to them?

    In some cases the state of the society necessarily places the
greater part of individuals in such situations as naturally form in
them, without any attention of government, almost all the abilities
and virtues which that state requires, or perhaps can admit of. In
other cases the state of the society does not place the part of
individuals in such situations, and some attention of government is
necessary in order to prevent the almost entire corruption and
degeneracy of the great body of the people.

    In the progress of the division of labour, the employment of the
far greater part of those who live by labour, that is, of the great
body of the people, comes to be confined to a few very simple
operations, frequently to one or two. But the understandings of the
greater part of men are necessarily formed by their ordinary
employments. The man whose whole life is spent in performing a few
simple operations, of which the effects are perhaps always the same,
or very nearly the same, has no occasion to exert his understanding or
to exercise his invention in finding out expedients for removing
difficulties which never occur. He naturally loses, therefore, the
habit of such exertion, and generally becomes as stupid and ignorant
as it is possible for a human creature to become. The torpor of his
mind renders him not only incapable of relishing or bearing a part
in any rational conversation, but of conceiving any generous, noble,
or tender sentiment, and consequently of forming any just judgment
concerning many even of the ordinary duties of private life. Of the
great and extensive interests of his country he is altogether
incapable of judging, and unless very particular pains have been taken
to render him otherwise, he is equally incapable of defending his
country in war. The uniformity of his stationary life naturally
corrupts the courage of his mind, and makes him regard with abhorrence
the irregular, uncertain, and adventurous life of a soldier. It
corrupts even the activity of his body, and renders him incapable of
exerting his strength with vigour and perseverance in any other
employment than that to which he has been bred. His dexterity at his
own particular trade seems, in this manner, to be acquired at the
expense of his intellectual, social, and martial virtues. But in every
improved and civilised society this is the state into which the
labouring poor, that is, the great body of the people, must
necessarily fall, unless government takes some pains to prevent it.

    It is otherwise in the barbarous societies, as they are commonly
called, of hunters, of shepherds, and even of husbandmen in that
rude state of husbandry which precedes the improvement of manufactures
and the extension of foreign commerce. In such societies the varied
occupations of every man oblige every man to exert his capacity and to
invent expedients for removing difficulties which are continually
occurring. Invention is kept alive, and the mind is not suffered to
fall into that drowsy stupidity which, in a civilised society, seems
to benumb the understanding of almost all the inferior ranks of
people. In those barbarous societies, as they are called, every man,
it has already been observed, is a warrior. Every man, too, is in some
measure a statesman, and can form a tolerable judgment concerning
the interest of the society and the conduct of those who govern it.
How far their chiefs are good judges in peace, or good leaders in war,
is obvious to the observation of almost every single man among them.
In such a society, indeed, no man can well acquire that improved and
refined understanding which a few men sometimes possess in a more
civilised state. Though in a rude society there is a good deal of
variety in the occupations of every individual, there is not a great
deal in those of the whole society. Every man does, or is capable of
doing, almost every thing which any other man does, or is capable of
doing. Every man has a considerable degree of knowledge, ingenuity,
and invention: but scarce any man has a great degree. The degree,
however, which is commonly possessed, is generally sufficient for
conducting the whole simple business of the society. In a civilised
state, on the contrary, though there is little variety in the
occupations of the greater part of individuals, there is an almost
infinite variety in those of the whole society. These varied
occupations present an almost infinite variety of objects to the
contemplation of those few, who, being attached to no particular
occupation themselves, have leisure and inclination to examine the
occupations of other people. The contemplation of so great a variety
of objects necessarily exercises their minds in endless comparisons
and combinations, and renders their understandings, in an
extraordinary degree, both acute and comprehensive. Unless those
few, however, happen to be placed in some very particular
situations, their great abilities, though honourable to themselves,
may contribute very little to the good government or happiness of
their society. Notwithstanding the great abilities of those few, all
the nobler parts of the human character may be, in a great measure,
obliterated and extinguished in the great body of the people.

    The education of the common people requires, perhaps, in a
civilised and commercial society the attention of the public more than
that of people of some rank and fortune. People of some rank and
fortune are generally eighteen or nineteen years of age before they
enter upon that particular business, profession, or trade, by which
they propose to distinguish themselves in the world. They have
before that full time to acquire, or at least to fit themselves for
afterwards acquiring, every accomplishment which can recommend them to
the public esteem, or render them worthy of it. Their parents or
guardians are generally sufficiently anxious that they should be so
accomplished, and are, in most cases, willing enough to lay out the
expense which is necessary for that purpose. If they are not always
properly educated, it is seldom from the want of expense laid out upon
their education, but from the improper application of that expense. It
is seldom from the want of masters, but from the negligence and
incapacity of the masters who are to be had, and from the
difficulty, or rather from the impossibility, which there is in the
present state of things of finding any better. The employments, too,
in which people of some rank or fortune spend the greater part of
their lives are not, like those of the common people, simple and
uniform. They are almost all of them extremely complicated, and such
as exercise the head more than the hands. The understandings of
those who are engaged in such employments can seldom grow torpid for
want of exercise. The employments of people of some rank and
fortune, besides, are seldom such as harass them from morning to
night. They generally have a good deal of leisure, during which they
may perfect themselves in every branch either of useful or
ornamental knowledge of which they may have laid the foundation, or
for which they may have acquired some taste in the earlier part of
life.

    It is otherwise with the common people. They have little time to
spare for education. Their parents can scarce afford to maintain
them even in infancy. As soon as they are able to work they must apply
to some trade by which they can earn their subsistence. That trade,
too, is generally so simple and uniform as to give little exercise
to the understanding, while, at the same time, their labour is both so
constant and so severe, that it leaves them little leisure and less
inclination to apply to, or even to think of, anything else.

    But though the common people cannot, in any civilised society,
be so well instructed as people of some rank and fortune, the most
essential parts of education, however, to read, write, and account,
can be acquired at so early a period of life that the greater part
even of those who are to be bred to the lowest occupations have time
to acquire them before they can be employed in those occupations.
For a very small expense the public can facilitate, can encourage, and
can even impose upon almost the whole body of the people the necessity
of acquiring those most essential parts of education.

    The public can facilitate this acquisition by establishing in
every parish or district a little school, where children may be taught
for a reward so moderate that even a common labourer may afford it;
the master being partly, but not wholly, paid by the public,
because, if he was wholly, or even principally, paid by it, he would
soon learn to neglect his business. In Scotland the establishment of
such parish schools has taught almost the whole common people to read,
and a very great proportion of them to write and account. In England
the establishment of charity schools has had an effect of the same
kind, though not so universally, because the establishment is not so
universal. If in those little schools the books, by which the children
are taught to read, were a little more instructive than they
commonly are, and if, instead of a little smattering of Latin, which
the children of the common people are sometimes taught there, and
which can scarce ever be of any use to them, they were instructed in
the elementary parts of geometry and mechanics, the literary education
of this rank of people would perhaps be as complete as it can be.
There is scarce a common trade which does not afford some
opportunities of applying to it the principles of geometry and
mechanics, and which would not therefore gradually exercise and
improve the common people in those principles, the necessary
introduction to the most sublime as well as to the most useful
sciences.

    The public can encourage the acquisition of those most essential
parts of education by giving small premiums, and little badges of
distinction, to the children of the common people who excel in them.

    The public can impose upon almost the whole body of the people the
necessity of acquiring those most essential parts of education, by
obliging every man to undergo an examination or probation in them
before he can obtain the freedom in any corporation, or be allowed
to set up any trade either in a village or town corporate.

    It was in this manner, by facilitating the acquisition of their
military and gymnastic exercises, by encouraging it, and even by
imposing upon the whole body of the people the necessity of learning
those exercises, that the Greek and Roman republics maintained the
martial spirit of their respective citizens. They facilitated the
acquisition of those exercises by appointing a certain place for
learning and practising them, and by granting to certain masters the
privilege of teaching in that place. Those masters do not appear to
have had either salaries or exclusive privileges of any kind. Their
reward consisted altogether in what they got from their scholars;
and a citizen who had learnt his exercises in the public gymnasia
had no sort of legal advantage over one who had learnt them privately,
provided the latter had learnt them equally well. Those republics
encouraged the acquisition of those exercises by bestowing little
premiums and badges of distinction upon: those who excelled in them.
To have gained a prize in the Olympic, Isthmian, or Nemaean games,
gave illustration, not only to the person who gained it, but to his
whole family and kindred. The obligation which every citizen was under
to serve a certain number of years, if called upon, in the armies of
the republic, sufficiently imposed the necessity of learning those
exercises, without which he could not be fit for that service.

    That in the progress of improvement the practice of military
exercises, unless government takes proper pains to support it, goes
gradually to decay, and, together with it, the martial spirit of the
great body of the people, the example of modern Europe sufficiently
demonstrates. But the security of every society must always depend,
more or less, upon the martial spirit of the great body of the people.
In the present times, indeed, that martial spirit alone, and
unsupported by a well-disciplined standing army, would not perhaps
be sufficient for the defence and security of any society. But where
every citizen had the spirit of a soldier, a smaller standing army
would surely be requisite. That spirit, besides, would necessarily
diminish very much the dangers to liberty, whether real or
imaginary, which are commonly apprehended from a standing army. As
it would very much facilitate the operations of that army against a
foreign invader, so it would obstruct them as much if,
unfortunately, they should ever be directed against the constitution
of the state.

    The ancient institutions of Greece and Rome seem to have been much
more effectual for maintaining the martial spirit of the great body of
the people than the establishment of what are called the militias of
modern times. They were much more simple. When they were once
established they executed themselves, and it required little or no
attention from government to maintain them in the most perfect vigour.
Whereas to maintain, even in tolerable execution, the complex
regulations of any modern militia, requires the continual and
painful attention of government, without which they are constantly
falling into total neglect and disuse. The influence, besides, of
the ancient institutions was much more universal. By means of them the
whole body of the people was completely instructed in the use of arms.
Whereas it is but a very small part of them who can ever be so
instructed by the regulations of any modern militia, except,
perhaps, that of Switzerland. But a coward, a man incapable either
of defending or of revenging himself, evidently wants one of the
most essential parts of the character of a man. He is as much
mutilated and deformed in his mind as another is in his body, who is
either deprived of some of its most essential members, or has lost the
use of them. He is evidently the more wretched and miserable of the
two; because happiness and misery, which reside altogether in the
mind, must necessarily depend more upon the healthful or
unhealthful, the mutilated or entire state of the mind, than upon that
of the body. Even though the martial spirit of the people were of no
use towards the defence of the society, yet to prevent that sort of
mental mutilation, deformity, and wretchedness, which cowardice
necessarily involves in it, from spreading themselves through the
great body of the people, would still deserve the most serious
attention of government, in the same manner as it would deserve its
most serious attention to prevent a leprosy or any other loathsome and
offensive disease, though neither mortal nor dangerous, from spreading
itself among them, though perhaps no other public good might result
from such attention besides the prevention of so great a public evil.

    The same thing may be said of the gross ignorance and stupidity
which, in a civilised society, seem so frequently to benumb the
understandings of all the inferior ranks of people. A man without
the proper use of the intellectual faculties of a man, is, if
possible, more contemptible than even a coward, and seems to be
mutilated and deformed in a still more essential part of the character
of human nature. Though the state was to derive no advantage from
the instruction of the inferior ranks of people, it would still
deserve its attention that they should not be altogether uninstructed.
The state, however, derives no inconsiderable advantage from their
instruction. The more they are instructed the less liable they are
to the delusions of enthusiasm and superstition, which, among ignorant
nations, frequently occasion the most dreadful disorders. An
instructed and intelligent people, besides, are always more decent and
orderly than an ignorant and stupid one. They feel themselves, each
individually, more respectable and more likely to obtain the respect
of their lawful superiors, and they are therefore more disposed to
respect those superiors. They are more disposed to examine, and more
capable of seeing through, the interested complaints of faction and
sedition, and they are, upon that account, less apt to be misled
into any wanton or unnecessary opposition to the measures of
government. In free countries, where the safety of government
depends very much upon the favourable judgment which the people may
form of its conduct, it must surely be of the highest importance
that they should not be disposed to judge rashly or capriciously
concerning it.

                         ARTICLE III

   Of the Expense of the Institutions for the Instruction of

                     People of all Ages

    The institutions for the instruction of people of all ages are
chiefly those for religious instruction. This is a species of
instruction of which the object is not so much to render the people
good citizens in this world, as to prepare them for another and a
better world in a life to come. The teachers of the doctrine which
contains this instruction, in the same manner as other teachers, may
either depend altogether for their subsistence upon the voluntary
contributions of their hearers, or they may derive it from some
other fund to which the law of their country may entitle them; such as
a landed estate, a tithe or land tax, an established salary or
stipend. Their exertion, their zeal and industry, are likely to be
much greater in the former situation than in the latter. In this
respect the teachers of new religions have always had a considerable
advantage in attacking those ancient and established systems of
which the clergy, reposing themselves upon their benefices, had
neglected to keep up the fervour of faith and devotion in the great
body of the people, and having given themselves up to indolence,
were become altogether incapable of making any vigorous exertion in
defence even of their own establishment. The clergy of an
established and well-endowed religion frequently become men of
learning and elegance, who possess all the virtues of gentlemen, or
which can recommend them to the esteem of gentlemen: but they are
apt gradually to lose the qualities, both good and bad, which gave
them authority and influence with the inferior ranks of people, and
which had perhaps been the original causes of the success and
establishment of their religion. Such a clergy, when attacked by a set
of popular and bold, though perhaps stupid and ignorant enthusiasts,
feel themselves as perfectly defenceless as the indolent,
effeminate, and full-fed nations of the southern parts of Asia when
they were invaded by the active, hardy, and hungry Tartars of the
North. Such a clergy, upon such an emergency, have commonly no other
resource than to call upon the civil magistrate to persecute,
destroy or drive out their adversaries, as disturbers of the public
peace. It was thus that the Roman Catholic clergy called upon the
civil magistrates to persecute the Protestants, and the Church of
England to persecute the Dissenters; and that in general every
religious sect, when it has once enjoyed for a century or two the
security of a legal establishment, has found itself incapable of
making any vigorous defence against any new sect which chose to attack
its doctrine or discipline. Upon such occasions the advantage in point
of learning and good writing may sometimes be on the side of the
established church. But the arts of popularity, all the arts of
gaining proselytes, are constantly on the side of its adversaries.
In England those arts have been long neglected by the well-endowed
clergy of the established church, and are at present chiefly
cultivated by the Dissenters and by the Methodists. The independent
provisions, however, which in many places have been made for
dissenting teachers by means of voluntary subscriptions, of trust
rights, and other evasions of the law, seem very much to have abated
the zeal and activity of those teachers. They have many of them become
very learned, ingenious, and respectable men; but they have in general
ceased to be very popular preachers. The Methodists, without half
the learning of the Dissenters, are much more in vogue.

    In the Church of Rome, the industry and zeal of the inferior
clergy are kept more alive by the powerful motive of self-interest
than perhaps in any established Protestant church. The parochial
clergy derive, many of them, a very considerable part of their
subsistence from the voluntary oblations of the people; a source of
revenue which confession gives them many opportunities of improving.
The mendicant orders derive their whole subsistence from such
oblations. It is with them as with the hussars and light infantry of
some armies; no plunder, no pay. The parochial clergy are like those
teachers whose reward depends partly upon their salary, and partly
upon the fees or honoraries which they get from their pupils, and
these must always depend more or less upon their industry and
reputation. The mendicant orders are like those teachers whose
subsistence depends altogether upon the industry. They are obliged,
therefore, to use every art which can animate the devotion of the
common people. The establishment of the two great mendicant orders
of St. Dominic and St. Francis, it is observed by Machiavel,
revived, in the thirteenth and fourteenth centuries, the languishing
faith and devotion of the Catholic Church. In Roman Catholic countries
the spirit of devotion is supported altogether by the monks and by the
poorer parochial clergy. The great dignitaries of the church, with all
the accomplishments of gentlemen and men of the world, and sometimes
with those of men of learning, are careful enough to maintain the
necessary discipline over their inferiors, but seldom give
themselves any trouble about the instruction of the people.

    "Most of the arts and professions in a state," says by far the
most illustrious philosopher and historian of the present age, "are of
such a nature that, while they promote the interests of the society,
they are also useful or agreeable to some individuals; and in that
case, the constant rule of the magistrate, except perhaps on the first
introduction of any art, is to leave the profession to itself, and
trust its encouragement to the individuals who reap the benefit of it.
The artisans, finding their profits to rise by the favour of their
customers, increase as much as possible their skill and industry;
and as matters are not disturbed by any injudicious tampering, the
commodity is always sure to be at all times nearly proportioned to the
demand.

    "But there are also some callings, which, though useful and even
necessary in a state, bring no advantage or pleasure to any
individual, and the supreme power is obliged to alter its conduct with
regard to the retainers of those professions. It must give them public
encouragement in order to their subsistence, and it must provide
against that negligence to which they will naturally be subject,
either by annexing particular honours to the profession, by
establishing a long subordination of ranks and a strict dependence, or
by some other expedient. The persons employed in the finances, fleets,
and magistracy, are instances of this order of men.

    "It may naturally be thought, at first sight, that the
ecclesiastics belong to the first class, and that their encouragement,
as well as that of lawyers and physicians, may safely be entrusted
to the liberality of individuals, who are attached to their doctrines,
and who find benefit or consolation from their spiritual ministry
and assistance. Their industry and vigilance will, no doubt, be
whetted by such an additional motive; and their skill in the
profession, as well as their address in governing the minds of the
people, must receive daily increase from their increasing practice,
study, and attention.

    "But if we consider the matter more closely, we shall find that
this interested diligence of the clergy is what every wise
legislator will study to prevent; because in every religion except the
true it is highly pernicious, and it has even a natural tendency to
pervert the true, by infusing into it a strong mixture of
superstition, folly, and delusion. Each ghostly practitioner, in order
to render himself more precious and sacred in the eyes of his
retainers, will inspire them with the most violent abhorrence of all
other sects, and continually endeavour, by some novelty, to excite the
languid devotion of his audience. No regard will be paid to truth,
morals, or decency in the doctrines inculcated. Every tenet will be
adopted that best suits the disorderly affections of the human
frame. Customers will be drawn to each conventicle by new industry and
address in practising on the passions and credulity of the populace.
And in the end, the civil magistrate will find that he has dearly paid
for his pretended frugality, in saving a fixed establishment for the
priests; and that in reality the most decent and advantageous
composition which he can make with the spiritual guides, is to bribe
their indolence by assigning stated salaries to their profession,
and rendering it superfluous for them to be farther active than merely
to prevent their flock from straying in quest of new pastures. And
in this manner ecclesiastical establishments, though commonly they
arose at first from religious views, prove in the end advantageous
to the political interests of society."

    But whatever may have been the good or bad effects of the
independent provision of the clergy, it has, perhaps, been very seldom
bestowed upon them from any view to those effects. Times of violent
religious controversy have generally been times of equally violent
political faction. Upon such occasions, each political party has
either found it, or imagined it, for its interest to league itself
with some one or other of the contending religious sects. But this
could be done only by adopting, or at least by favouring, the tenets
of that particular sect. The sect which had the good fortune to be
leagued with the conquering party necessarily shared in the victory of
its ally, by whose favour and protection it was soon enabled in some
degree to silence and subdue all its adversaries. Those adversaries
had generally leagued themselves with the enemies of the conquering
party, and were therefore the enemies of that party. The clergy of
this particular sect having thus become complete masters of the field,
and their influence and authority with the great body of the people
being in its highest vigour, they were powerful enough to overawe
the chiefs and leaders of their own party, and to oblige the civil
magistrate to respect their opinions and inclinations. Their first
demand was generally that he should silence and subdue an their
adversaries: and their second, that he should bestow an independent
provision on themselves. As they had generally contributed a good deal
to the victory, it seemed not unreasonable that they should have
some share in the spoil. They were weary, besides, of humouring the
people, and of depending upon their caprice for a subsistence. In
making this demand, therefore, they consulted their own ease and
comfort, without troubling themselves about the effect which it
might have in future times upon the influence and authority of their
order. The civil magistrate, who could comply with this demand only by
giving them something which he would have chosen much rather to
take, or to keep to himself, was seldom very forward to grant it.
Necessity, however, always forced him to submit at last, though
frequently not till after many delays, evasions, and affected excuses.

    But if politics had never called in the aid of religion, had the
conquering party never adopted the tenets of one sect more than
those of another when it had gained the victory, it would probably
have dealt equally and impartially with all the different sects, and
have allowed every man to choose his own priest and his own religion
as he thought proper. There would in this case, no doubt' have been
a great multitude of religious sects. Almost every different
congregation might probably have made a little sect by itself, or have
entertained some peculiar tenets of its own. Each teacher would no
doubt have felt himself under the necessity of making the utmost
exertion and of using every art both to preserve and to increase the
number of his disciples. But as every other teacher would have felt
himself under the same necessity, the success of no one teacher, or
sect of teachers, could have been very great. The interested and
active zeal of religious teachers can be dangerous and troublesome
only where there is either but one sect tolerated in the society, or
where the whole of a large society is divided into two or three
great sects; the teachers of each acting by concert, and under a
regular discipline and subordination. But that zeal must be altogether
innocent where the society is divided into two or three hundred, or
perhaps into as many thousand small sects, of which no one could be
considerable enough to disturb the public tranquility. The teachers of
each sect, seeing themselves surrounded on all sides with more
adversaries than friends, would be obliged to learn that candour and
moderation which is so seldom to be found among the teachers of
those great sects whose tenets, being supported by the civil
magistrate, are held in veneration by almost all the inhabitants of
extensive kingdoms and empires, and who therefore see nothing round
them but followers, disciples, and humble admirers. The teachers of
each little sect, finding themselves almost alone, would be obliged to
respect those of almost every other sect, and the concessions which
they would mutually find it both convenient and agreeable to make to
one another, might in time probably reduce the doctrine of the greater
part of them to that pure and rational religion, free from every
mixture of absurdity, imposture, or fanaticism, such as wise men
have in all ages of the world wished to see established; but such as
positive law has perhaps never yet established, and probably never
will establish, in any country: because, with regard to religion,
positive law always has been, and probably always will be, more or
less influenced by popular superstition and enthusiasm. This plan of
ecclesiastical government, or more properly of no ecclesiastical
government, was what the sect called Independents, a sect no doubt
of very wild enthusiasts, proposed to establish in England towards the
end of the civil war. If it had been established, though of a very
unphilosophical origin, it would probably by this time have been
productive of the most philosophical good temper and moderation with
regard to every sort of religious principle. It has been established
in Pennsylvania, where, though the Quakers happen to be the most
numerous, the law in reality favours no one sect more than another,
and it is there said to have been productive of this philosophical
good temper and moderation.

    But though this equality of treatment should not be productive
of this good temper and moderation in all, or even in the greater part
of the religious sects of a particular country, yet provided those
sects were sufficiently numerous, and each of them consequently too
small to disturb the public tranquillity, the excessive zeal of each
for its particular tenets could not well be productive of any very
harmful effects, but, on the contrary, of several good ones: and if
the government was perfectly decided both to let them all alone, and
to oblige them all to let alone one another, there is little danger
that they would not of their own accord subdivide themselves fast
enough so as soon to become sufficiently numerous.

    In every civilised society, in every society where the distinction
of ranks has once been completely established, there have been
always two different schemes or systems of morality current at the
same time; of which the one may be called the strict or austere; the
other the liberal, or, if you will, the loose system. The former is
generally admired and revered by the common people: the latter is
commonly more esteemed and adopted by what are called people of
fashion. The degree of disapprobation with which we ought to mark
the vices of levity, the vices which are apt to arise from great
prosperity, and from the excess of gaiety and good humour, seems to
constitute the principal distinction between those two opposite
schemes or systems. In the liberal or loose system, luxury, wanton and
even disorderly mirth, the pursuit of pleasure to some degree of
intemperance, the breach of chastity, at least in one of the two
sexes, etc., provided they are not accompanied with gross indecency,
and do not lead to falsehood or injustice, are generally treated
with a good deal of indulgence, and are easily either excused or
pardoned altogether. In the austere system, on the contrary, those
excesses are regarded with the utmost abhorrence and detestation.
The vices of levity are always ruinous to the common people, and a
single week's thoughtlessness and dissipation is often sufficient to
undo a poor workman for ever, and to drive him through despair upon
committing the most enormous crimes. The wiser and better sort of
the common people, therefore, have always the utmost abhorrence and
detestation of such excesses, which their experience tells them are so
immediately fatal to people of their condition. The disorder and
extravagance of several years, on the contrary, will not always ruin a
man of fashion, and people of that rank are very apt to consider the
power of indulging in some degree of excess as one of the advantages
of their fortune, and the liberty of doing so without censure or
reproach as one of the privileges which belong to their station. In
people of their own station, therefore, they regard such excesses with
but a small degree of disapprobation, and censure them either very
slightly or not at all.

    Almost all religious sects have begun among the common people,
from whom they have generally drawn their earliest as well as their
most numerous proselytes. The austere system of morality has,
accordingly, been adopted by those sects almost constantly, or with
very few exceptions; for there have been some. It was the system by
which they could best recommend themselves to that order of people
to whom they first proposed their plan of reformation upon what had
been before established. Many of them, perhaps the greater part of
them, have even endeavoured to gain credit by refining upon this
austere system, and by carrying it to some degree of folly and
extravagance; and this excessive rigour has frequently recommended
them more than anything else to the respect and veneration of the
common people.

    A man of rank and fortune is by his station the distinguished
member of a great society, who attend to every part of his conduct,
and who thereby oblige him to attend to every part of it himself.
His authority and consideration depend very much upon the respect
which this society bears to him. He dare not do anything which would
disgrace or discredit him in it, and he is obliged to a very strict
observation of that species of morals, whether liberal or austere,
which the general consent of this society prescribes to persons of his
rank and fortune. A man of low condition, on the contrary, is far from
being a distinguished member of any great society. While he remains in
a country village his conduct may be attended to, and he may be
obliged to attend to it himself. In this situation, and in this
situation only, he may have what is called a character to lose. But as
soon as he comes into a great city he is sunk in obscurity and
darkness. His conduct is observed and attended to by nobody, and he is
therefore very likely to neglect it himself, and to abandon himself to
every sort of low profligacy and vice. He never emerges so effectually
from this obscurity, his conduct never excites so much the attention
of any respectable society, as by his becoming the member of a small
religious sect. He from that moment acquires a degree of consideration
which he never had before. All his brother sectaries are, for the
credit of the sect, interested to observe his conduct, and if he gives
occasion to any scandal, if he deviates very much from those austere
morals which they almost always require of one another, to punish
him by what is always a very severe punishment, even where no civil
effects attend it, expulsion or excommunication from the sect. In
little religious sects, accordingly, the morals of the common people
have been almost always remarkably regular and orderly; generally much
more so than in the established church. The morals of those little
sects, indeed, have frequently been rather disagreeably rigorous and
unsocial.

    There are two very easy and effectual remedies, however, by
whose joint operation the state might, without violence, correct
whatever was unsocial or disagreeably rigorous in the morals of all
the little sects into which the country was divided.

    The first of those remedies is the study of science and
philosophy, which the state might render almost universal among all
people of middling or more than middling rank and fortune; not by
giving salaries to teachers in order to make them negligent and
idle, but by instituting some sort of probation, even in the higher
and more difficult sciences, to be undergone by every person before he
was permitted to exercise any liberal profession, or before he could
be received as a candidate for any honourable office of trust or
profit. If the state imposed upon this order of men the necessity of
learning, it would have no occasion to give itself any trouble about
providing them with proper teachers. They would soon find better
teachers for themselves than any whom the state could provide for
them. Science is the great antidote to the poison of enthusiasm and
superstition; and where all the superior ranks of people were
secured from it, the inferior ranks could not be much exposed to it.

    The second of those remedies is the frequency and gaiety of public
diversions. The state, by encouraging, that is by giving entire
liberty to all those who for their own interest would attempt
without scandal or indecency, to amuse and divert the people by
painting, poetry, music, dancing; by all sorts of dramatic
representations and exhibitions, would easily dissipate, in the
greater part of them, that melancholy and gloomy humour which is
almost always the nurse of popular superstition and enthusiasm. Public
diversions have always been the objects of dread and hatred to all the
fanatical promoters of those popular frenzies. The gaiety and good
humour which those diversions inspire were altogether inconsistent
with that temper of mind which was fittest for their purpose, or which
they could best work upon. Dramatic representations, besides,
frequently exposing their artifices to public ridicule, and
sometimes even to public execration, were upon that account, more than
all other diversions, the objects of their peculiar abhorrence.

    In a country where the law favoured the teachers of no one
religion more than those of another, it would not be necessary that
any of them should have any particular or immediate dependency upon
the sovereign or executive power; or that he should have anything to
do either in appointing or in dismissing them from their offices. In
such a situation he would have no occasion to give himself any concern
about them, further than to keep the peace among them in the same
manner as among the rest of his subjects; that is, to hinder them from
persecuting, abusing, or oppressing one another. But it is quite
otherwise in countries where there is an established or governing
religion. The sovereign can in this case never be secure unless he has
the means of influencing in a considerable degree the greater part
of the teachers of that religion.

    The clergy of every established church constitute a great
incorporation. They can act in concert, and pursue their interest upon
one plan and with one spirit, as much as if they were under the
direction of one man; and they are frequently, too, under such
direction. Their interest as an incorporated body is never the same
with that of the sovereign, and is sometimes directly opposite to
it. Their great interest is to maintain their authority with the
people; and this authority depends upon the supposed certainty and
importance of the whole doctrine which they inculcate, and upon the
supposed necessity of adopting every part of it with the most implicit
faith, in order to avoid eternal misery. Should the sovereign have the
imprudence to appear either to deride or doubt himself of the most
trifling part of their doctrine, or from humanity attempt to protect
those who did either the one or the other, the punctilious honour of a
clergy who have no sort of dependency upon him is immediately provoked
to proscribe him as a profane person, and to employ all the terrors of
religion in order to oblige the people to transfer their allegiance to
some more orthodox and obedient prince. Should he oppose any of
their pretensions or usurpations, the danger is equally great. The
princes who have dared in this manner to rebel against the church,
over and above this crime of rebellion have generally been charged,
too, with the additional crime of heresy, notwithstanding their solemn
protestations of their faith and humble submission to every tenet
which she thought proper to prescribe to them. But the authority of
religion is superior to every other authority. The fears which it
suggests conquer all other fears. When the authorized teachers of
religion propagate through the great body of the people doctrines
subversive of the authority of the sovereign, it is by violence
only, or by the force of a standing army, that he can maintain his
authority. Even a standing army cannot in this case give him any
lasting security; because if the soldiers are not foreigners, which
can seldom be the case, but drawn from the great body of the people,
which must almost always be the case, they are likely to be soon
corrupted by those very doctrines. The revolutions which the
turbulence of the Greek clergy was continually occasioning at
Constantinople, as long as the eastern empire subsisted; the
convulsions which, during the course of several centuries, the
turbulence of the Roman clergy was continually occasioning in every
part of Europe, sufficiently demonstrate how precarious and insecure
must always be the situation of the sovereign who has no proper
means of influencing the clergy of the established and governing
religion of his country.

    Articles of faith, as well as all other spiritual matters, it is
evident enough, are not within the proper department of a temporal
sovereign, who, though he may be very well qualified for protecting,
is seldom supposed to be so for instructing the people. With regard to
such matters, therefore, his authority can seldom be sufficient to
counterbalance the united authority of the clergy of the established
church. The public tranquillity, however, and his own security, may
frequently depend upon the doctrines which they may think proper to
propagate concerning such matters. As he can seldom directly oppose
their decision, therefore, with proper weight and authority, it is
necessary that he should be able to influence it; and be can influence
it only by the fears and expectations which he may excite in the
greater part of the individuals of the order. Those fears and
expectations may consist in the fear of deprivation or other
punishment, and in the expectation of further preferment.

    In all Christian churches the benefices of the clergy are a sort
of freeholds which they enjoy, not during pleasure, but during life or
good behaviour. If they held them by a more precarious tenure, and
were liable to be turned out upon every slight disobligation either of
the sovereign or of his ministers, it would perhaps be impossible
for them to maintain their authority with the people, who would then
consider them as mercenary dependents upon the court, in the
security of whose instructions they could no longer have any
confidence. But should the sovereign attempt irregularly, and by
violence, to deprive any number of clergymen of their freeholds, on
account, perhaps, of their having propagated, with more than
ordinary zeal, some factious or seditious doctrine, he would only
render, by such persecution, both them and their doctrine ten times
more popular, and therefore ten times more troublesome and
dangerous, than they had been before. Fear is in almost all cases a
wretched instrument of government, and ought in particular never to be
employed against any order of men who have the smallest pretensions to
independency. To attempt to terrify them serves only to irritate their
bad humour, and to confirm them in an opposition which more gentle
usage perhaps might easily induce them either to soften or to lay
aside altogether. The violence which the French government usually
employed in order to oblige all their parliaments, or sovereign courts
of justice, to enregister any unpopular edict, very seldom
succeeded. The means commonly employed, however, the imprisonment of
all the refractory members, one would think were forcible enough.
The princes of the house of Stewart sometimes employed the like
means in order to influence some of the members of the Parliament of
England; and they generally found them equally intractable. The
Parliament of England is now managed in another manner; and a very
small experiment which the Duke of Choiseul made about twelve years
ago upon the Parliament of Paris, demonstrated sufficiently that all
the parliaments of France might have been managed still more easily in
the same manner. That experiment was not pursued. For though
management and persuasion are always the easiest and the safest
instruments of governments, as force and violence are the worst and
the most dangerous, yet such, it seems, is the natural insolence of
man that he almost always disdains to use the good instrument,
except when he cannot or dare not use the bad one. The French
government could and durst use force, and therefore disdained to use
management and persuasion. But there is no order of men, it appears, I
believe, from the experience of all ages, upon whom it is so
dangerous, or rather so perfectly ruinous, to employ force and
violence, as upon the respected clergy of any established church.
The rights, the privileges, the personal liberty of every individual
ecclesiastic who is upon good terms with his own order are, even in
the most despotic governments, more respected than those of any
other person of nearly equal rank and fortune. It is so in every
gradation of despotism, from that of the gentle and mild government of
Paris to that of the violent and furious government of Constantinople.
But though this order of men can scarce ever be forced, they may be
managed as easily as any other; and the security of the sovereign,
as well as the public tranquillity, seems to depend very much upon the
means which he has of managing them; and those means seem to consist
altogether in the preferment which he has to bestow upon them.

    In the ancient constitution of the Christian church, the bishop of
each diocese was elected by the joint votes of the clergy and of the
people of the episcopal city. The people did not long retain their
right of election; and while they did retain it, they almost always
acted under the influence of the clergy, who in such spiritual matters
appeared to be their natural guides. The clergy, however, soon grew
weary of the trouble of managing them, and found it easier to elect
their own bishops themselves. The abbot, in the same manner, was
elected by the monks of the monastery, at least in the greater part of
the abbacies. All the inferior ecclesiastical benefices comprehended
within the diocese were collated by the bishop, who bestowed them upon
such ecclesiastics as he thought proper. All church preferments were
in this manner in the disposal of the church. The sovereign, though he
might have some indirect influence in those elections, and though it
was sometimes usual to ask both his consent to elect and his
approbation of the election, yet had no direct or sufficient means
of managing the clergy. The ambition of every clergyman naturally
led him to pay court not so much to his sovereign as to his own order,
from which only he could expect preferment.

    Through the greater part of Europe the Pope gradually drew to
himself first the collation of almost all bishoprics and abbacies,
or of what were called Consistorial benefices, and afterwards, by
various machinations and pretences, of the greater part of inferior
benefices comprehended within each diocese; little more being left
to the bishop than what was barely necessary to give him a decent
authority with his own clergy. By this arrangement the condition of
the sovereign was still worse than it had been before. The clergy of
all the different countries of Europe were thus formed into a sort
of spiritual army, dispersed in different quarters, indeed, but of
which all the movements and operations could now be directed by one
head, and conducted upon one uniform plan. The clergy of each
particular country might be considered as a particular detachment of
that army, or which the operations could easily be supported and
seconded by all the other detachments quartered in the different
countries round about. Each detachment was not only independent of the
sovereign of the country in which it was quartered, and by which it
was maintained, but dependent upon a foreign sovereign, who could at
any time turn its arms against the sovereign of that particular
country, and support them by the arms of all the other detachments.

    Those arms were the most formidable that can well be imagined.
In the ancient state of Europe, before the establishment of arts and
manufactures, the wealth of the clergy gave them the same sort of
influence over the common people which that of the great barons gave
them over their respective vassals, tenants, and retainers. In the
great landed estates which the mistaken piety both of princes and
private persons had bestowed upon the church, jurisdictions were
established of the same kind with those of the great barons, and for
the same reason. In those great landed estates, the clergy, or their
bailiffs, could easily keep the peace without the support or
assistance either of the king or of any other person; and neither
the king nor any other person could keep the peace there without the
support and assistance of the clergy. The jurisdictions of the clergy,
therefore, in their particular baronies or manors, were equally
independent, and equally exclusive of the authority of the king's
courts, as those of the great temporal lords. The tenants of the
clergy were, like those of the great barons, almost all tenants at
will, entirely dependent upon their immediate lords, and therefore
liable to be called out at pleasure in order to fight in any quarrel
in which the clergy might think proper to engage them. Over and
above the rents of those estates, the clergy possessed in the
tithes, a very large portion of the rents of all the other estates
in every kingdom of Europe. The revenues arising from both those
species of rents were, the greater part of them, paid in kind, in
corn, wine, cattle poultry, etc. The quantity exceeded greatly what
the clergy could themselves consume; and there were neither arts nor
manufactures for the produce of which they could exchange the surplus.
The clergy could derive advantage from this immense surplus in no
other way than by employing it, as the great barons employed the
like surplus of their revenues, in the most profuse hospitality, and
in the most extensive charity. Both the hospitality and the charity of
the ancient clergy, accordingly, are said to have been very great.
They not only maintained almost the whole poor of every kingdom, but
many knights and gentlemen had frequently no other means of
subsistence than by travelling about from monastery to monastery,
under pretence of devotion, but in reality to enjoy the hospitality of
the clergy. The retainers of some particular prelates were often as
numerous as those of the greatest lay-lords; and the retainers of
all the clergy taken together were, perhaps, more numerous than
those of all the lay-lords. There was always much more union among the
clergy than among the lay-lords. The former were under a regular
discipline and subordination to the papal authority. The latter were
under no regular discipline or subordination, but almost always
equally jealous of one another, and of the king. Though the tenants
and retainers of the clergy, therefore, had both together been less
numerous than those of the great lay-lords, and their tenants were
probably much less numerous, yet their union would have rendered
them more formidable. The hospitality and charity of the clergy,
too, not only gave them the command of a great temporal force, but
increased very much the weight of their spiritual weapons. Those
virtues procured them the highest respect and veneration among all the
inferior ranks of people, of whom many were constantly, and almost all
occasionally, fed by them. Everything belonging or related to so
popular an order, its possessions, its privileges, its doctrines,
necessarily appeared sacred in the eyes of the common people, and
every violation of them, whether real or pretended, the highest act of
sacrilegious wickedness and profaneness. In this state of things, if
the sovereign frequently found it difficult to resist the
confederacy of a few of the great nobility, we cannot wonder that he
should find it still more so to resist the united force of the
clergy of his own dominions, supported by that of the clergy of all
the neighbouring dominions. In such circumstances the wonder is, not
that he was sometimes obliged to yield, but that he ever was able to
resist.

    The privilege of the clergy in those ancient times (which to us
who live in the present times appear the most absurd), their total
exemption from the secular jurisdiction, for example, or what in
England was called the benefit of the clergy, were the natural or
rather the necessary consequences of this state of things. How
dangerous must it have been for the sovereign to attempt to punish a
clergyman for any crime whatever, if his own order were disposed to
protect him, and to represent either the proof as insufficient for
convicting so holy a man, or the punishment as too severe to be
inflicted upon one whose person had been rendered sacred by
religion? The sovereign could, in such circumstances, do no better
than leave him to be tried by the ecclesiastical courts, who, for
the honour of their own order, were interested to restrain, as much as
possible, every member of it from committing enormous crimes, or
even from giving occasion to such gross scandal as might disgust the
minds of the people.

    In the state in which things were through the greater part of
Europe during the tenth, eleventh, twelfth, and thirteenth
centuries, and for some time both before and after that period, the
constitution of the Church of Rome may be considered as the most
formidable combination that ever was formed against the authority
and security of civil government, as well as against the liberty,
reason, and happiness of mankind, which can flourish only where
civil government is able to protect them. In that constitution the
grossest delusions of superstition were supported in such a manner
by the private interests of so great a number of people as put them
out of all danger from any assault of human reason: because though
human reason might perhaps have been able to unveil, even to the
eyes of the common people, some of the delusions of superstition, it
could never have dissolved the ties of private interest. Had this
constitution been attacked by no other enemies but the feeble
efforts of human reason, it must have endured for ever. But that
immense and well-built fabric, which all the wisdom and virtue of
man could never have shaken, much less have overturned, was by the
natural course of things, first weakened, and afterwards in part
destroyed, and is now likely, in the course of a few centuries more,
perhaps, to crumble into ruins altogether.

    The gradual improvements of arts, manufactures, and commerce,
the same causes which destroyed the power of the great barons,
destroyed in the same manner, through the greater part of Europe,
the whole temporal power of the clergy. In the produce of arts,
manufactures, and commerce, the clergy, like the great barons, found
something for which they could exchange their rude produce, and
thereby discovered the means of spending their whole revenues upon
their own persons, without giving any considerable share of them to
other people. Their charity became gradually less extensive, their
hospitality less liberal or less profuse. Their retainers became
consequently less numerous, and by degrees dwindled away altogether.
The clergy too, like the great barons, wished to get a better rent
from their landed estates, in order to spend it, in the same manner,
upon the gratification of their own private vanity and folly. But this
increase of rent could be got only by granting leases to their
tenants, who thereby became in a great measure independent of them.
The ties of interest which bound the inferior ranks of people to the
clergy were in this manner gradually broken and dissolved. They were
even broken and dissolved sooner than those which bound the same ranks
of people to the great barons: because the benefices of the church
being, the greater part of them, much smaller than the estates of
the great barons, the possessor of each benefice was much sooner
able to spend the whole of its revenue upon his own person. During the
greater part of the fourteenth and fifteenth centuries the power of
the great barons was, through the greater part of Europe, in full
vigour. But the temporal power of the clergy, the absolute command
which they had once had over the great body of the people, was very
much decayed. The power of the church was by that time very nearly
reduced through the greater part of Europe to what arose from her
spiritual authority; and even that spiritual authority was much
weakened when it ceased to be supported by the charity and hospitality
of the clergy. The inferior ranks of people no longer looked upon that
order, as they had done before, as the comforters of their distress,
and the relievers of their indigence. On the contrary, they were
provoked and disgusted by the vanity, luxury, and expense of the
richer clergy, who appeared to spend upon their own pleasures what had
always before been regarded as the patrimony of the poor.

    In this situation of things, the sovereigns in the different
states of Europe endeavoured to recover the influence which they had
once had in the disposal of the great benefices of the church, by
procuring to the deans and chapters of each diocese the restoration of
their ancient right of electing the bishop, and to the monks of each
abbacy that of electing the abbot. The re-establishing of this ancient
order was the object of several statutes enacted in England during the
course of the fourteenth century, particularly of what is called the
Statute of Provisors; and of the Pragmatic Sanction established in
France in the fifteenth century. In order to render the election
valid, it was necessary that the sovereign should both consent to it
beforehand, and afterwards approve of the person elected; and though
the election was still supposed to be free, he had, however, all the
indirect means which his situation necessarily afforded him of
influencing the clergy in his own dominions. Other regulations of a
similar tendency were established in other parts of Europe. But the
power of the pope in the collation of the great benefices of the
church seems, before the Reformation, to have been nowhere so
effectually and so universally restrained as in France and England.
The Concordat afterwards, in the sixteenth century, gave to the
kings of France the absolute right of presenting to all the great,
or what are called the consistorial, benefices of the Gallican Church.

    Since the establishment of the Pragmatic Sanction and of the
Concordat, the clergy of France have in general shown less respect
to the decrees of the papal court than the clergy of any other
Catholic country. In all the disputes which their sovereign has had
with the pope, they have almost constantly taken party with the
former. This independency of the clergy of France upon the court of
Rome seems to be principally founded upon the Pragmatic Sanction and
the Concordat. In the earlier periods of the monarchy, the clergy of
France appear to have been as much devoted to the pope as those of any
other country. When Robert, the second prince of the Capetian race,
was most unjustly excommunicated by the court of Rome, his own
servants, it is said, threw the victuals which came from his table
to the dogs, and refused to taste anything themselves which little
been polluted by the contact of a person in his situation. They were
taught to do so, it may very safely be presumed, by the clergy of
his own dominions.

    The claim of collating to the great benefices of the church, a
claim in defence of which the court of Rome had frequently shaken, and
sometimes overturned the thrones of some of the greatest sovereigns in
Christendom, was in this manner either restrained or modified, or
given up altogether, in many different parts of Europe, even before
the time of the Reformation. As the clergy had now less influence over
the people, so the state had more influence over the clergy. The
clergy, therefore, had both less power and less inclination to disturb
the state.

    The authority of the Church of Rome was in this state of
declension when the disputes which gave birth to the Reformation began
in Germany, and soon spread themselves through every part of Europe.
The new doctrines were everywhere received with a high degree of
popular favour. They were propagated with all that enthusiastic zeal
which commonly animates the spirit of party when it attacks
established authority. The teachers of those doctrines, though perhaps
in other respects not more learned than many of the divines who
defended the established church, seem in general to have been better
acquainted with ecclesiastical history, and with the origin and
progress of that system of opinions upon which the authority of the
church was established, and they had thereby some advantage in
almost every dispute. The austerity of their manners gave them
authority with the common people, who contrasted the strict regularity
of their conduct with the disorderly lives of the greater part of
their own clergy. They possessed, too, in a much higher degree than
their adversaries all the arts of popularity and of gaining
proselytes, arts which the lofty and dignified sons of the church
had long neglected as being to them in a great measure useless. The
reason of the new doctrines recommended them to some, their novelty to
many; the hatred and contempt of the established clergy to a still
greater number; but the zealous, passionate, and fanatical, though
frequently coarse and rustic, eloquence with which they were almost
everywhere inculcated, recommended them to by far the greatest number.

    The success of the new doctrines was almost everywhere so great
that the princes who at that time happened to be on bad terms with the
court of Rome were by means of them easily enabled, in their own
dominions, to overturn the church, which, having lost the respect
and veneration of the inferior ranks of people, could make scarce
any resistance. The court of Rome had disobliged some of the smaller
princes in the northern parts of Germany, whom it had probably
considered as too insignificant to be worth the managing. They
universally, therefore, established the Reformation in their own
dominions. The tyranny of Christian II and of Troll, Archbishop of
Upsala, enabled Gustavus Vasa to expel them both from Sweden. The pope
favoured the tyrant and the archbishop, and Gustavus Vasa found no
difficulty in establishing the Reformation in Sweden. Christian II was
afterwards deposed from the throne of Denmark, where his conduct had
rendered him as odious as in Sweden. The pope, however, was still
disposed to favour him, and Frederick of Holstein, who had mounted the
throne in his stead, revenged himself by following the example of
Gustavus Vasa. The magistrates of Berne and Zurich, who had no
particular quarrel with the pope, established with great ease the
Reformation in their respective cantons, where just before some of the
clergy had, by an imposture somewhat grosser than ordinary, rendered
the whole order both odious and contemptible.

    In this critical situation of its affairs, the papal court was
at sufficient pains to cultivate the friendship of the powerful
sovereigns of France and Spain, of whom the latter was at that time
Emperor of Germany. With their assistance it was enabled, though not
without great difficulty and much bloodshed, either to suppress
altogether or to obstruct very much the progress of the Reformation in
their dominions. It was well enough inclined, too, to be complaisant
to the King of England. But from the circumstances of the times, it
could not be so without giving offence to a still greater sovereign,
Charles V, King of Spain and Emperor of Germany. Henry VIII
accordingly, though he did not embrace himself the greater part of the
doctrines of the Reformation, was yet enabled, by their general
prevalence, to suppress all the monasteries, and to abolish the
authority of the Church of Rome in his dominions. That he should go so
far, though he went no further, gave some satisfaction to the
patrons of the Reformation, who having got possession of the
government in the reign of his son and successor, completed without
any difficulty the work which Henry VIII had begun.

    In some countries, as in Scotland, where the government was
weak, unpopular, and not very firmly established, the Reformation
was strong enough to overturn, not only the church, but the state
likewise for attempting to support the church.

    Among the followers of the Reformation dispersed in all the
different countries of Europe, there was no general tribunal which,
like that of the court of Rome, or an oecumenical council, could
settle all disputes among them, and with irresistible authority
prescribe to all of them the precise limits of orthodoxy. When the
followers of the Reformation in one country, therefore, happened to
differ from their brethren in another, as they had no common judge
to appeal to, the dispute could never be decided; and many such
disputes arose among them. Those concerning the government of the
church, and the right of conferring ecclesiastical benefices, were
perhaps the most interesting to the peace and welfare of civil
society. They gave birth accordingly to the two principal parties of
sects among the followers of the Reformation, the Lutheran and
Calvinistic sects, the only sects among them of which the doctrine and
discipline have ever yet been established by law in any part of
Europe.

    The followers of Luther, together with what is called the Church
of England, preserved more or less of the episcopal government,
established subordination among the clergy, gave the sovereign the
disposal of all the bishoprics and other consistorial benefices within
his dominions, and thereby rendered him the real head of the church;
and without depriving the bishop of the right of collating to the
smaller benefices within his diocese, they, even to those benefices,
not only admitted, but favoured the right of presentation both in
the sovereign and in all other lay-patrons. This system of church
government was from the beginning favourable to peace and good
order, and to submission to the civil sovereign. It has never,
accordingly, been the occasion of any tumult or civil commotion in any
country in which it has once been established. The Church of England
in particular has always valued herself, with great reason, upon the
unexceptionable loyalty of her principles. Under such a government the
clergy naturally endeavour to recommend themselves to the sovereign,
to the court, and to the nobility and gentry of the country, by
whose influence they chiefly expect to obtain preferment. They pay
court to those patrons sometimes, no doubt, by the vilest flattery and
assentation, but frequently, too, by cultivating all those arts
which best deserve, and which are therefore most likely to gain them
the esteem of people of rank and fortune; by their knowledge in all
the different branches of useful and ornamental learning, by the
decent liberality of their manners, by the social good humour of their
conversation, and by their avowed contempt of those absurd and
hypocritical austerities which fanatics inculcate and pretend to
practise, in order to draw upon themselves the veneration, and upon
the greater part of men of rank and fortune, who avow that they do not
practise them, the abhorrence of the common people. Such a clergy,
however, while they pay their court in this manner to the higher ranks
of life, are very apt to neglect altogether the means of maintaining
their influence and authority with the lower. They are listened to,
esteemed, and respected by their superiors; but before their inferiors
they are frequently incapable of defending, effectually and to the
conviction of such hearers, their own sober and moderate doctrines
against the most ignorant enthusiast who chooses to attack them.

    The followers of Zwingli, or more properly those of Calvin, on the
contrary, bestowed upon the people of each parish, whenever the church
became vacant, the right of electing their own pastor, and established
at the same time the most perfect equality among the clergy. The
former part of this institution, as long as it remained in vigour,
seems to have been productive of nothing but disorder and confusion,
and to have tended equally to corrupt the morals both of the clergy
and of the people. The latter part seems never to have had any effects
but what were perfectly agreeable.

    As long as the people of each parish preserved the right of
electing their own pastors, they acted almost always under the
influence of the clergy, and generally of the most factious and
fanatical of the order. The clergy, in order to preserve their
influence in those popular elections, became, or affected to become,
many of them, fanatics themselves, encouraged fanaticism among the
people, and gave the preference almost always to the most fanatical
candidate. So small a matter as the appointment of a parish priest
occasioned almost always a violent contest, not only in one parish,
but in all the neighbouring parishes, who seldom failed to take part
in the quarrel. When the parish happened to be situated in a great
city, it divided all the inhabitants into two parties; and when that
city happened either to constitute itself a little republic, or to
be the head and capital of a little republic, as is the case with many
of the considerable cities in Switzerland and Holland, every paltry
dispute of this kind, over and above exasperating the animosity of all
their other factions, threatened to leave behind it both a new
schism in the church, and a new faction in the state. In those small
republics, therefore, the magistrate very soon found it necessary, for
the sake of preserving the public peace, to assume to himself the
right of presenting to all vacant benefices. In Scotland, the most
extensive country in which this Presbyterian form of church government
has ever been established, the rights of patronage were in effect
abolished by the act which established Presbytery in the beginning
of the reign of William III. That act at least put it in the power
of certain classes of people in each parish to purchase, for a very
small price, the right of electing their own pastor. The
constitution which this act established was allowed to subsist for
about two-and-twenty years, but was abolished by the 10th of Queen
Anne, c. 12, on account of the confusions and disorders which this
more popular mode of, election had almost everywhere occasioned. In so
extensive a country as Scotland, however, a tumult in a remote
parish was not so likely to give disturbance to government as in a
smaller state. The 10th of Queen Anne restored the rights of
patronage. But though in Scotland the law gives the benefice without
any exception to the person presented by the patron, yet the church
requires sometimes (for she has not in this respect been very
uniform in her decisions) a certain concurrence of the people before
she will confer upon the presentee what is called the cure of souls,
or the ecclesiastical jurisdiction in the parish. She sometimes at
least, from an affected concern for the peace of the parish, delays
the settlement till this concurrence can be procured. The private
tampering of some of the neighbouring clergy, sometimes to procure,
but more frequently to prevent, this concurrence, and the popular arts
which they cultivate in order to enable them upon such occasions to
tamper more effectually, are perhaps the causes which principally keep
up whatever remains of the old fanatical spirit, either in the
clergy or in the people of Scotland.

    The equality which the Presbyterian form of church government
establishes among the clergy, consists, first, in the equality of
authority or ecclesiastical jurisdiction; and, secondly, in the
equality of benefice. In all Presbyterian churches the equality of
authority is perfect: that of benefice is not so. The difference,
however, between one benefice and another is seldom so considerable as
commonly to tempt the possessor even of the small one to pay court
to his patron by the vile arts of flattery and assentation in order to
get a better. In all the Presbyterian churches, where the rights of
patronage are thoroughly established, it is by nobler and better
arts that the established clergy in general endeavour to gain the
favour of their superiors; by their learning, by the irreproachable
regularity of their life, and by the faithful and diligent discharge
of their duty. Their patrons even frequently complain of the
independency of their spirit, which they are apt to construe into
ingratitude for past favours, but which at worst, perhaps, is seldom
any more than that indifference which naturally arises from the
consciousness that no further favours of the kind are ever to be
expected. There is scarce perhaps to be found anywhere in Europe a
more learned, decent, independent, and respectable set of men than the
greater part of the Presbyterian clergy of Holland, Geneva,
Switzerland, and Scotland.

    Where the church benefices are all nearly equal, none of them
can be very great, and this mediocrity of benefice, though it may no
doubt be carried, too far, has, however, some very agreeable
effects. Nothing but the most exemplary morals can give dignity to a
man of small fortune. The vices of levity and vanity necessarily
render him ridiculous, and are, besides, almost as ruinous to him as
they are to the common people. In his own conduct, therefore, he is
obliged to follow that system of morals which the common people
respect the most. He gains their esteem and affection by that plan
of life which his own interest and situation would lead him to follow.
The common people look upon him with that kindness with which we
naturally regard one who approaches somewhat to our own condition, but
who, we think, ought to be in a higher. Their kindness naturally
provokes his kindness. He becomes careful to instruct them, and
attentive to assist and relieve them. He does not even despise the
prejudices of people who are disposed to be so favourable to him,
and never treats them with those contemptuous and arrogant airs
which we so often meet with in the proud dignitaries of opulent and
well-endowed churches. The Presbyterian clergy, accordingly, have more
influence over the minds of the common people than perhaps the
clergy of any other established church. It is accordingly in
Presbyterian countries only that we ever find the common people
converted, without persecution, completely, and almost to a man, to
the established church.

    In countries where church benefices are the greater part of them
very moderate, a chair in a university is generally a better
establishment than a church benefice. The universities have, in this
case, the picking and choosing of their members from all the churchmen
of the country, who, in every country, constitute by far the most
numerous class of men of letters. Where church benefices, on the
contrary, are many of them very considerable, the church naturally
draws from the universities the greater part of their eminent men of
letters, who generally find some patron who does himself honour by
procuring them church preferment. In the former situation we are
likely to find the universities filled with the most eminent men of
letters that are to be found in the country. In the latter we are
likely to find few eminent men among them, and those few among the
youngest members of the society, who are likely, too, to be drained
away from it before they can have acquired experience and knowledge
enough to be of much use to it. It is observed by Mr. de Voltaire,
that Father Porrie, a Jesuit of no great eminence in the republic of
letters, was the only professor they had ever had in France whose
works were worth the reading. In a country which has produced so
many eminent men of letters, it must appear somewhat singular that
scarce one of them should have been a professor in a university. The
famous Gassendi was, in the beginning of his life, a professor in
the University of Aix. Upon the first dawning of his genius, it was
represented to him that by going into the church he could easily
find a much more quiet and comfortable subsistence, as well as a
better situation for pursuing his studies; and he immediately followed
the advice. The observation of Mr. de Voltaire may be applied, I
believe, not only to France, but to all other Roman Catholic
countries. We very rarely find, in any of them, an eminent man of
letters who is a professor in a university, except, perhaps, in the
professions of law and physic; professions from which the church is
not so likely to draw them. After the Church of Rome, that of
England is by far the richest and best endowed church in
Christendom. In England, accordingly, the church is continually
draining the universities of all their best and ablest members; and an
old college tutor, who is known and distinguished in Europe as an
eminent man of letters, is as rarely to be found there as in any Roman
Catholic country. In Geneva, on the contrary, in the Protestant
cantons of Switzerland, in the Protestant countries of Germany, in
Holland, in Scotland, in Sweden, and Denmark, the most eminent men
of letters whom those countries have produced, have, not all indeed,
but the far greater part of them, been professors in universities.
In those countries the universities are continually draining the
church of all its most eminent men of letters.

    It may, perhaps, be worth while to remark that, if we expect the
poets, a few orators, and a few historians, the far greater part of
the other eminent men of letters, both of Greece and Rome, appear to
have been either public or private teachers; generally either of
philosophy or of rhetoric. This remark will be found to hold true from
the days of Lysias and Isocrates, of Plato and Aristotle, down to
those of Plutarch and Epictetus, of Suetonius and Quintilian. To
impose upon any man the necessity of teaching, year after year, any
particular branch of science, seems, in reality, to be the most
effectual method for rendering him completely master of it himself. By
being obliged to go every year over the same ground, if he is good for
anything, he necessarily becomes, in a few years, well acquainted with
every part of it: and if upon any particular point he should form
too hasty an opinion one year, when he comes in the course of his
lectures to reconsider the same subject the year thereafter, he is
very likely to correct it. As to be a teacher of science is
certainly the natural employment of a mere man of letters, so is it
likewise, perhaps, the education which is most likely to render him
a man of solid learning and knowledge. The mediocity of church
benefices naturally tends to draw the greater part of men of
letters, in the country where it takes place, to the employment in
which they can be the most useful to the public, and, at the same
time, to give them the best education, perhaps, they are capable of
receiving. It tends to render their learning both as solid as
possible, and as useful as possible.

    The revenue of every established church, such parts of it excepted
as may arise from particular lands or manors, is a branch, it ought to
be observed, of the general revenue of the state which is thus
diverted to a purpose very different from the defence of the state.
The tithe, for example, is a real land-tax, which puts it out of the
power of the proprietors of land to contribute so largely towards
the defence of the state as they otherwise might be able to do. The
rent of land, however, is, according to some, the sole fund, and,
according to others, the principal fund, from which, in all great
monarchies, the exigencies of the state must be ultimately supplied.
The more of this fund that is given to the church, the less, it is
evident, can be spared to the state. It may be laid down as a
certain maxim that, all other things being supposed equal, the
richer the church, the poorer must necessarily be, either the
sovereign on the one hand, or the people on the other; and, in all
cases, the less able must the state be to defend itself. In several
Protestant countries, particularly in all the Protestant cantons of
Switzerland, the revenue which anciently belonged to the Roman
Catholic Church, the tithes and church lands, has been found a fund
sufficient, not only to afford competent salaries to the established
clergy, but to defray, with little or no addition, all the other
expenses of the state. The magistrates of the powerful canton of
Berne, in particular, have accumulated out of the savings from this
fund a very large sum, supposed to amount to several millions, part of
which is deposited in a public treasure, and part is placed at
interest in what are called the public funds of the different indebted
nations of Europe; chiefly in those of France and Great Britain.
What may be the amount of the whole expense which the church, either
of Berne, or of any other Protestant canton, costs the state, I do not
pretend to know. By a very exact account it appears that, in 1755, the
whole revenue of the clergy of the Church of Scotland, including their
glebe or church lands, and the rent of their manses or
dwelling-houses, estimated according to a reasonable valuation,
amounted only to L68,514 1s. 5 1/12d. This very moderate revenue
affords a decent subsistence to nine hundred and forty-four ministers.
The whole expense of the church, including what is occasionally laid
out for the building and reparation of churches, and of the manses
of ministers, cannot well be supposed to exceed eighty or
eighty-five thousand pounds a year. The most opulent church in
Christendom does not maintain better the uniformity of faith, the
fervour of devotion, the spirit of order, regularity, and austere
morals in the great body of the people, than this very poorly
endowed Church of Scotland. All the good effects, both civil and
religious, which an established church can be supposed to produce, are
produced by it as completely as by any other. The greater part of
the Protestant churches of Switzerland, which in general are not
better endowed than the Church of Scotland, produce those effects in a
still higher degree. In the greater part of the Protestant cantons
there is not a single person to be found who does not profess
himself to be of the established church. If he professes himself to be
of any other, indeed, the law obliges him to leave the canton. But
so severe, or rather indeed so oppressive a law, could never have been
executed in such free countries had not the diligence of the clergy
beforehand converted to the established church the whole body of the
people, with the exception of, perhaps, a few individuals only. In
some parts of Switzerland, accordingly, where, from the accidental
union of a Protestant and Roman Catholic country, the conversion has
not been so complete, both religions are not only tolerated but
established by law.

    The proper performance of every service seems to require that
its pay or recompense should be, as exactly as possible,
proportioned to the nature of the service. If any service is very much
underpaid, it is very apt to suffer by the meanness and incapacity
of the greater part of those who are employed in it. If it is very
much overpaid, it is apt to suffer, perhaps, still more by their
negligence and idleness. A man of a large revenue, whatever may be his
profession, thinks he ought to live like other men of large
revenues, and to spend a great part of his time in festivity, in
vanity, and in dissipation. But in a clergyman this train of life
not only consumes the time which ought to be employed in the duties of
his function, but in the eyes of the common people destroys almost
entirely that sanctity of character which can alone enable him to
perform those duties with proper weight and authority.

                           PART 4

      Of the Expense of Supporting the Dignity of the Sovereign

    Over and above the expenses necessary for enabling the sovereign
to perform his several duties, a certain expense is requisite for
the support of his dignity. This expense varies both with the
different periods of improvement, and with the different forms of
government.

    In an opulent and improved society, where all the different orders
of people are growing every day more expensive in their houses, in
their furniture, in their tables, in their dress, and in their
equipage, it cannot well be expected that the sovereign should alone
hold out against the fashion. He naturally, therefore, or rather
necessarily, becomes more expensive in all those different articles
too. His dignity even seems to require that he should become so.

    As in point of dignity a monarch is more raised above his subjects
than the chief magistrate of any republic is ever supposed to be above
his fellow-citizens, so a greater expense is necessary for
supporting that higher dignity. We naturally expect more splendour
in the court of a king than in the mansion-house of a doge or
burgomaster.

                          CONCLUSION

    The expense of defending the society, and that of supporting the
dignity of the chief magistrate, are both laid out for the general
benefit of the whole society. It is reasonable, therefore, that they
should be defrayed by the general contribution of the whole society,
all the different members contributing, as nearly as possible, in
proportion to their respective abilities.

    The expense of the administration of justice, too, may, no
doubt, be considered as laid out for the benefit of the whole society.
There is no impropriety, therefore, in its being defrayed by the
general contribution of the whole society. The persons, however, who
gave occasion to this expense are those who, by their injustice in one
way or another, make it necessary to seek redress or protection from
the courts of justice. The persons again most immediately benefited by
this expense are those whom the courts of justice either restore to
their rights or maintain in their rights. The expense of the
administration of justice, therefore, may very properly be defrayed by
the particular contribution of one or other, or both, of those two
different sets of persons, according as different occasions may
require, that is, by the fees of court. It cannot be necessary to have
recourse to the general contribution of the whole society, except
for the conviction of those criminals who have not themselves any
estate or fund sufficient for paying those fees.

    Those local or provincial expenses of which the benefit is local
or provincial (what is laid out, for example, upon the police of a
particular town or district) ought to be defrayed by a local or
provincial revenue, and ought to be no burden upon the general revenue
of the society. It is unjust that the whole society should
contribute towards an expense of which the benefit is confined to a
part of the society.

    The expense of maintaining good roads and communications is, no
doubt, beneficial to the whole society, and may, therefore, without
any injustice. be defrayed by the general contribution of the whole
society. This expense, however, is most immediately and directly
beneficial to those who travel or carry goods from one place to
another, and to those who consume such goods. The turnpike tolls in
England, and the duties called peages in other countries, lay it
altogether upon those two different sets of people, and thereby
discharge the general revenue of the society from a very
considerable burden.

    The expense of the institutions for education and religious
instruction is likewise, no doubt, beneficial to the whole society,
and may, therefore, without injustice, be defrayed by the general
contribution of the whole society. This expense, however, might
perhaps with equal propriety, and even with some advantage, be
defrayed altogether by those who receive the immediate benefit of such
education and instruction, or by the voluntary contribution of those
who think they have occasion for either the one or the other.

    When the institutions or public works which are beneficial to
the whole society either cannot be maintained altogether, or are not
maintained altogether by the contribution of such particular members
of the society as are most immediately benefited by them, the
deficiency must in most cases be made up by the general contribution
of the whole society. The general revenue of the society, over and
above defraying the expense of defending the society, and of
supporting the dignity of the chief magistrate, must make up for the
deficiency of many particular branches of revenue. The sources of this
general or public revenue I shall endeavour to explain in the
following chapter.

                           CHAPTER II

  Of the Sources of the General or Public Revenue of the Society

    THE revenue which must defray, not only the expense of defending
the society and of supporting the dignity of the chief magistrate, but
all the other necessary expenses of government for which the
constitution of the state has not provided any particular revenue, may
be drawn either, first, from some fund which peculiarly belongs to the
sovereign or commonwealth, and which is independent of the revenue
of the people; or, secondly, from the revenue of the people.

                            PART 1

     Of the Funds or Sources of Revenue which may peculiarly

              belong to the Sovereign or Commonwealth

    THE funds or sources of revenue which may peculiarly belong to the
sovereign or commonwealth must consist either in stock or in land.

    The sovereign, like any other owner of stock, may derive a revenue
from it, either by employing it himself, or by lending it. His revenue
is in the one case profit, in the other interest.

    The revenue of a Tartar or Arabian chief consists in profit. It
arises principally from the milk and increase of his own herds and
flocks, of which he himself superintends the management, and is the
principal shepherd or herdsman of his own horde or tribe. It is,
however, in this earliest and rudest state of civil government only
that profit has ever made the principal part of the public revenue
of a monarchial state.

    Small republics have sometimes derived a considerable revenue from
the profit of mercantile projects. The republic of Hamburg is said
to do so from the profits of a public wine cellar and apothecary's
shop. The state cannot be very great of which the sovereign has
leisure to carry on the trade of a wine merchant or apothecary. The
profit of a public bank has been a source of revenue to more
considerable states. It has been so not only to Hamburg, but to Venice
and Amsterdam. A revenue of this kind has even by some people been
thought not below the attention of so great an empire as that of Great
Britain. Reckoning the ordinary dividend of the Bank of England at
five and a half per cent and its capital at ten millions seven hundred
and eighty thousand pounds, the net annual profit, after paying the
expense of management, must amount, it is said, to five hundred and
ninety-two thousand nine hundred pounds. Government, it is
pretended, could borrow this capital at three per cent interest, and
by taking the management of the bank into its own hands, might make
a clear profit of two hundred and sixty-nine thousand five hundred
pounds a year. The orderly, vigilant, and parsimonious
administration of such aristocracies as those of Venice and
Amsterdam is extremely proper, it appears from experience, for the
management of a mercantile project of this kind. But whether such a
government as that of England- which, whatever may be its virtues, has
never been famous for good economy; which, in time of peace, has
generally conducted itself with the slothful and negligent profusion
that is perhaps natural to monarchies; and in time of war has
constantly acted with all the thoughtless extravagance that
democracies are apt to fall into- could be safely trusted with the
management of such a project, must at least be good deal more
doubtful.

    The post office is properly a mercantile project. The government
advances the expense of establishing the different offices, and of
buying or hiring the necessary horses or carriages, and is repaid with
a large profit by the duties upon what is carried. It is perhaps the
only mercantile project which has been successfully managed by, I
believe, every sort of government. The capital to be advanced is not
very considerable. There is no mystery in the business. The returns
are not only certain, but immediate.

    Princes, however, have frequently engaged in many other mercantile
projects, and have been willing, like private persons, to mend their
fortunes by becoming adventurers in the common branches of trade. They
have scarce ever succeeded. The profusion with which the affairs of
princes are always managed renders it almost impossible that they
should. The agents of a prince regard the wealth of their master as
inexhaustible; are careless at what price they buy; are careless at
what price they sell; are careless at what expense they transport
his goods from one place to another. Those agents frequently live with
the profusion of princes, and sometimes too, in spite of that
profusion, and by a proper method of making up their accounts, acquire
the fortunes of princes. It was thus, as we are told by Machiavel,
that the agents of Lorenzo of Medicis, not a prince of mean abilities,
carried on his trade. The republic of Florence was several times
obliged to pay the debt into which their extravagance had involved
him. He found it convenient, accordingly, to give up the business of
merchant, the business to which his family had originally owed their
fortune, and in the latter part of his life to employ both what
remained of that fortune, and the revenue of the state of which he had
the disposal, in projects and expenses more suitable to his station.

    No two characters seem more inconsistent than those of trader
and sovereign. If the trading spirit of the English East India Company
renders them very bad sovereigns, the spirit of sovereignty seems to
have rendered them equally bad traders. While they were traders only
they managed their trade successfully, and were able to pay from their
profits a moderate dividend to the proprietors of their stock. Since
they became sovereigns, with a revenue which, it is said, was
originally more than three millions sterling, they have been obliged
to beg extraordinary assistance of government in order to avoid
immediate bankruptcy. In their former situation, their servants in
India considered themselves as the clerks of merchants: in their
present situation, those servants consider themselves as the ministers
of sovereigns.

    A state may sometimes derive some part of its public revenue
from the interest of money, as well as from the profits of stock. If
it has amassed a treasure, it may lend a part of that treasure
either to foreign states, or to its own subjects.

    The canton of Berne derives a considerable revenue by lending a
part of its treasure to foreign states; that is, by placing it in
the public funds of the different indebted nations of Europe,
chiefly in those of France and England. The security of this revenue
must depend, first, upon the security of the funds in which it is
placed, or upon the good faith of the government which has the
management of them; and, secondly, upon the certainty or probability
of the continuance of peace with the debtor nation. In the case of a
war, the very first act of hostility, on the part of the debtor
nation, might be the forfeiture of the funds of its creditor. This
policy of lending money to foreign states is, so far as I know,
peculiar to the canton of Berne.

    The city of Hamburg has established a sort of public pawnshop,
which lends money to the subjects of the state upon pledges at six per
cent interest. This pawnshop or Lombard, as it is called, affords a
revenue, it is pretended, to the state of a hundred and fifty thousand
crowns, which, at four and sixpence the crown, amounts to L33,750
sterling.

    The government of Pennsylvania, without amassing any treasure,
invented a method of lending, not money indeed, but what is equivalent
to money, to its subjects. By advancing to private people at interest,
and upon land security to double the value, paper bills of credit to
be redeemed fifteen years after their date, and in the meantime made
transferable from hand to hand like bank notes, and declared by act of
assembly to be a legal tender in all payments from one inhabitant of
the province to another, it raised a moderate revenue, which went a
considerable way towards defraying an annual expense of about L4500,
the whole ordinary expense of that frugal and orderly government.
The success of an expedient of this kind must have depended upon three
different circumstances; first, upon the demand for some other
instrument of commerce besides gold and silver money; or upon the
demand for such a quantity of consumable stock as could not be had
without sending abroad the greater part of their gold and silver money
in order to purchase it; secondly, upon the good credit of the
government which made use of this expedient; and, thirdly, upon the
moderation with which it was used, the whole value of the paper
bills of credit never exceeding that of the gold and silver money
which would have been necessary for carrying on their circulation
had there been no paper bills of credit. The same expedient was upon
different occasions adopted by several other American colonies: but,
from want of this moderation, it produced, in the greater part of
them, much more disorder than conveniency.

    The unstable and perishable nature of stock and credit, however,
render them unfit to be trusted to as the principal funds of that
sure, steady, and permanent revenue which can alone give security
and dignity to government. The government of no great nation that
was advanced beyond the shepherd state seems ever to have derived
the greater part of its public revenue from such sources.

    Land is a fund of a more stable and permanent nature; and the rent
of public lands, accordingly, has been the principal source of the
public revenue of many a great nation that was much advanced beyond
the shepherd state. From the produce or rent of the public lands,
the ancient republics of Greece and Italy derived, for a long time,
the greater part of that revenue which defrayed the necessary expenses
of the commonwealth. The rent of the crown lands constituted for a
long time the greater part of the revenue of the ancient sovereigns of
Europe.

    War and the preparation for war are the two circumstances which in
modern times occasion the greater part of the necessary expense of all
great states. But in the ancient republics of Greece and Italy every
citizen was a soldier, who both served and prepared himself for
service at his own expense. Neither of those two circumstances,
therefore, could occasion any very considerable expense to the
state. The rent of a very moderate landed estate might be fully
sufficient for defraying all the other necessary expenses of
government.

    In the ancient monarchies of Europe, the manners and customs of
the times sufficiently Prepared the great body of the people for
war; and when they took the field, they were, by the condition of
their feudal tenures, to be maintained either at their own expense, or
at that of their immediate lords, without bringing any new charge upon
the sovereign. The other expenses of government were, the greater part
of them, very moderate. The administration of justice, it has been
shown, instead of being a cause of expense, was a source of revenue.
The labour of the country people, for three days before and for
three days after harvest, was thought a fund sufficient for making and
maintaining all the bridges, highways, and other public works which
the commerce of the country was supposed to require. In those days the
principal expense of the sovereign seems to have consisted in the
maintenance of his own family and household. The officers of his
household, accordingly, were then the great officers of state. The
lord treasurer received his rents. The lord steward and lord
chamberlain looked after the expense of his family. The care of his
stables was committed to the lord constable and the lord marshal.
His houses were all built in the form of castles, and seem to have
been the principal fortresses which he possessed. The keepers of those
houses or castles might be considered as a sort of military governors.
They seem to have been the only military officers whom it was
necessary to maintain in time of peace. In these circumstances the
rent of a great landed estate might, upon ordinary occasions, very
well defray all the necessary expenses of government.

    In the present state of the greater part of the civilised
monarchies of Europe, the rent of all the lands in the country,
managed as they probably would be if they all belonged to one
proprietor, would scarce perhaps amount to the ordinary revenue
which they levy upon the people even in peaceable times. The
ordinary revenue of Great Britain, for example, including not only
what is necessary for defraying the current expense of the year, but
for paying the interest of the public debts, and for sinking a part of
the capital of those debts, amounts to upwards of ten millions a year.
But the land-tax, at four shillings in the pound, falls short of two
millions a year. This land-tax, as it is called, however, is
supposed to be one-fifth, not only of the rent of all the land, but of
that of all the houses, and of the interest of all the capital stock
of Great Britain, that part of it only excepted which is either let to
the public, or employed as farming stock in the cultivation of land. A
very considerable part of the produce of this tax arises from the rent
of houses, and the interest of capital stock. The land-tax of the city
of London, for example, at four shillings in the pound, amounts to
L123,399 6s. 7d. That of the city of Westminster, to L63,092 1s. 5d.
That of the palaces of Whitehall and St. James's, to L30,754 6s. 3d. A
certain proportion of the land-tax is in the same manner assessed upon
all the other cities and towns corporate in the kingdom, and arises
almost altogether, either from the rent of houses, or from what is
supposed to be the interest of trading and capital stock. According to
the estimation, therefore, by which Great Britain is rated to the
land-tax, the whole mass of revenue arising from the rent of all the
lands, from that of all the houses, and from the interest of all the
capital stock, that part of it only excepted which is either lent to
the public, or employed in the cultivation of land, does not exceed
ten millions sterling a year, the ordinary revenue which government
levies upon the people even in peaceable times. The estimation by
which Great Britain is rated to the land-tax is, no doubt, taking
the whole kingdom at an average, very much below the real value;
though in several particular counties and districts it is said to be
nearly equal to that value. The rent of the lands alone, exclusively
of that of houses, and of the interest of stock, has by many people
been estimated at twenty millions, an estimation made in a great
measure at random, and which, I apprehend, is as likely to be above as
below the truth. But if the lands of Great Britain, in the present
state of their cultivation, do not afford a rent of more than twenty
millions a year, they could not well afford the half, most probably
not the fourth part of that rent, if they all belonged to a single
proprietor, and were put under the negligent, expensive, and
oppressive management of his factors and agents. The crown lands of
Great Britain do not at present afford the fourth part of the rent
which could probably be drawn from them if they were the property of
private persons. If the crown lands were more extensive, it is
probable they would be still worse managed.

    The revenue which the great body of the people derives from land
is in proportion, not to the rent, but to the produce of the land. The
whole annual produce of the land of every country, if we except what
is reserved for seed, is either annually consumed by the great body of
the people, or exchanged for something else that is consumed by
them. Whatever keeps down the produce of the land below what it
would otherwise rise to keeps down the revenue of the great body of
the people still more than it does that of the proprietors of land.
The rent of land, that portion of the produce which belongs to the
proprietors, is scarce anywhere in Great Britain supposed to be more
than a third part of the whole produce. If the land which in one state
of cultivation affords a rent of ten millions sterling a year would in
another afford a rent of twenty millions, the rent being, in both
cases, supposed a third part of the produce, the revenue of the
proprietors would be less than it otherwise might be by ten millions a
year only; but the revenue of the great body of the people would be
less than it otherwise might be by thirty millions a year, deducting
only what would be necessary for seed. The population of the country
would be less by the number of people which thirty millions a year,
deducting always the seed, could maintain according to the
particular mode of living and expense which might take place in the
different ranks of men among whom the remainder was distributed.

    Though there is not at present, in Europe, any civilised state
of any kind which derives the greater part of its public revenue
from the rent of lands which are the property of the state, yet in all
the great monarchies of Europe there are still many large tracts of
land which belong to the crown. They are generally forest; and
sometimes forest where, after travelling several miles, you will
scarce find a single tree; a mere waste and loss of country in respect
both of produce and population. In every great monarchy of Europe
the sale of the crown lands would produce a very large sum of money,
which, if applied to the payment of the public debts, would deliver
from mortgage a much greater revenue than any which those lands have
ever afforded to the crown. In countries where lands, improved and
cultivated very highly, and yielding at the time of sale as great a
rent as can easily be got from them, commonly sell at thirty years'
purchase, the unimproved, uncultivated, and low-rented crown lands
might well be expected to sell at forty, fifty, or sixty years'
purchase. The crown might immediately enjoy the revenue which this
great price would redeem from mortgage. In the course of a few years
it would probably enjoy another revenue. When the crown lands had
become private property, they would, in the course of a few years,
become well improved and well cultivated. The increase of their
produce would increase the population of the country by augmenting the
revenue and consumption of the people. But the revenue which the crown
derives from the duties of customs and excise would necessarily
increase with the revenue and consumption of the people.

    The revenue which, in any civilised monarchy, the crown derives
from the crown lands, though it appears to cost nothing to
individuals, in reality costs more to the society than perhaps any
other equal revenue which the crown enjoys. It would, in all cases, be
for the interest of the society to replace this revenue to the crown
by some other equal revenue, and to divide the lands among the people,
which could not well be done better, perhaps, than by exposing them to
public sale.

    Lands for the purposes of pleasure and magnificence- parks,
gardens, public walks, etc., possessions which are everywhere
considered as causes of expense, not as sources of revenue- seem to be
the only lands which, in a great and civilised monarchy, ought to
belong to the crown.

    Public stock and public lands, therefore, the two sources of
revenue which may peculiarly belong to the sovereign or
commonwealth, being both improper and insufficient funds for defraying
the necessary expense of any great and civilised state, it remains
that this expense must, the greater part of it, be defrayed by taxes
of one kind or another; the people contributing a part of their own
private revenue in order to make up a public revenue to the
sovereign or commonwealth.

                            PART 2

                           Of Taxes

    THE private revenue of individuals, it has been shown in the first
book of this Inquiry, arises ultimately from three different
sources: Rent, Profit, and Wages. Every tax must finally be paid
from some one or other of those three different sorts of revenue, or
from all of them indifferently. I shall endeavour to give the best
account I can, first, of those taxes which, it is intended, should
fall upon rent; secondly, of those which, it is intended, should
fall upon profit; thirdly, of those which, it is intended, should fall
upon wages; and, fourthly, of those which, it is intended, should fall
indifferently upon all those three different sources of private
revenue. The particular consideration of each of these four
different sorts of taxes will divide the second part of the present
chapter into four articles, three of which will require several
other subdivisions. Many of those taxes, it will appear from the
following review, are not finally paid from the fund, or source of
revenue, upon which it was intended they should fall.

    Before I enter upon the examination of particular taxes, it is
necessary to premise the four following maxims with regard to taxes in
general.

    I. The subjects of every state ought to contribute towards the
support of the government, as nearly as possible, in proportion to
their respective abilities; that is, in proportion to the revenue
which they respectively enjoy under the protection of the state. The
expense of government to the individuals of a great nation is like the
expense of management to the joint tenants of a great estate, who
are all obliged to contribute in proportion to their respective
interests in the estate. In the observation or neglect of this maxim
consists what is called the equality or inequality of taxation.
Every tax, it must be observed once for all, which falls finally
upon one only of the three sorts of revenue above mentioned, is
necessarily unequal in so far as it does not affect the other two.
In the following examination of different taxes I shall seldom take
much further notice of this sort of inequality, but shall, in most
cases, confine my observations to that inequality which is
occasioned by a particular tax falling unequally even upon that
particular sort of private revenue which is affected by it.

    II. The tax which each individual is bound to pay ought to be
certain, and not arbitrary. The time of payment, the manner of
payment, the quantity to be paid, ought all to be clear and plain to
the contributor, and to every other person. Where it is otherwise,
every person subject to the tax is put more or less in the power of
the tax-gathered, who can either aggravate the tax upon any
obnoxious contributor, or extort, by the terror of such aggravation,
some present or perquisite to himself. The uncertainty of taxation
encourages the insolence and favours the corruption of an order of men
who are naturally unpopular, even where they are neither insolent
nor corrupt. The certainty of what each individual ought to pay is, in
taxation, a matter of so great importance that a very considerable
degree of inequality, it appears, I believe, from the experience of
all nations, is not near so great an evil as a very small degree of
uncertainty.

    III. Every tax ought to be levied at the time, or in the manner,
in which it is most likely to be convenient for the contributor to pay
it. A tax upon the rent of land or of houses, payable at the same term
at which such rents are usually paid, is levied at the time when it is
most likely to be convenient for the contributor to pay; or, when he
is most likely to have wherewithal to pay. Taxes upon such
consumable goods as are articles of luxury are all finally paid by the
consumer, and generally in a manner that is very convenient for him.
He pays them by little and little, as he has occasion to buy the
goods. As he is at liberty, too, either to buy, or not to buy, as he
pleases, it must be his own fault if he ever suffers any
considerable inconveniency from such taxes.

    IV. Every tax ought to be so contrived as both to take out and
to keep out of the pockets of the people as little as possible over
and above what it brings into the public treasury of the state. A
tax may either take out or keep out of the pockets of the people a
great deal more than it brings into the public treasury, in the four
following ways. First, the levying of it may require a great number of
officers, whose salaries may eat up the greater part of the produce of
the tax, and whose perquisites may impose another additional tax
upon the people. Secondly, it may obstruct the industry the people,
and discourage them from applying to certain branches of business
which might give maintenance and unemployment to great multitudes.
While it obliges the people to pay, it may thus diminish, or perhaps
destroy, some of the funds which might enable them more easily to do
so. Thirdly, by the forfeitures and other penalties which those
unfortunate individuals incur who attempt unsuccessfully to evade
the tax, it may frequently ruin them, and thereby put an end to the
benefit which the community might have received from the employment of
their capitals. An injudicious tax offers a great temptation to
smuggling. But the penalties of smuggling must rise in proportion to
the temptation. The law, contrary to all the ordinary principles of
justice, first creates the temptation, and then punishes those who
yield to it; and it commonly enhances the punishment, too, in
proportion to the very circumstance which ought certainly to alleviate
it, the temptation to commit the crime. Fourthly, by subjecting the
people to the frequent visits and the odious examination of the
tax-gatherers, it may expose them to much unnecessary trouble,
vexation, and oppression; and though vexation is not, strictly
speaking, expense, it is certainly equivalent to the expense at
which every man would be willing to redeem himself from it. It is in
some one or other of these four different ways that taxes are
frequently so much more burdensome to the people than they are
beneficial to the sovereign.

    The evident justice and utility of the foregoing maxims have
recommended them more or less to the attention of all nations. All
nations have endeavoured, to the best of their judgment, to render
their taxes as equal as they could contrive; as certain, as convenient
to the contributor, both in the time and in the mode of payment,
and, in proportion to the revenue which they brought to the prince, as
little burdensome to the people. The following short review of some of
the principal taxes which have taken place in different ages and
countries will show that the endeavours of all nations have not in
this respect been equally successful.

                          ARTICLE I

         Taxes upon Rent. Taxes upon the Rent of Land

    A tax upon the rent of land may either every district being valued
at a certain rent, be imposed according to a certain canon, which
valuation is not afterwards to be altered, or it may be imposed in
such a manner as to vary with every variation in the real rent of
the land, and to rise or fall with the improvement or declension of
its cultivation.

    A land-tax which, like that of Great Britain, is assessed upon
each district according to a certain invariable canon, though it
should be equal at the time of its first establishment, necessarily
becomes unequal in process of time, according to the unequal degrees
of improvement or neglect in the cultivation of the different parts of
the country. In England, the valuation according to which the
different countries and parishes were assessed to the land-tax by
the 4th of William and Mary was very unequal even at its first
establishment. This tax, therefore, so far offends against the first
of the four maxims above mentioned. It is perfectly agreeable to the
other three. It is perfectly certain. The time of payment for the tax,
being the same as that for the rent, is as convenient as it can be
to the contributor though the landlord is in all cases the real
contributor, the tax is commonly advanced by the tenant, to whom the
landlord is obliged to allow it in the payment of the rent. This tax
is levied by a much smaller number of officers than any other which
affords nearly the same revenue. As the tax upon each district does
not rise with the rise of the rent, the sovereign does not share in
the profits of the landlord's improvements. Those improvements
sometimes contribute, indeed, to the discharge of the other
landlords of the district. But the aggravation of the tax which may
sometimes occasion upon a particular estate is always so very small
that it never can discourage those improvements, nor keep down the
produce of the land below what it would otherwise rise to. As it has
no tendency to diminish the quantity, it can have none to raise the
price of that produce. It does not obstruct the industry of the
people. It subjects the landlord to no other inconveniency besides the
unavoidable one of paying the tax.

    The advantage, however, which the landlord has derived from the
invariable constancy of the valuation by which all the lands of
Great Britain are rated to the land-tax, has been principally owing to
some circumstances altogether extraneous to the nature of the tax.

    It has been owing in part to the great prosperity of almost
every part of the country, the rents of almost all the estates of
Great Britain having, since the time when this valuation was first
established, been continually rising, and scarce any of them having
fallen. The landlords, therefore, have almost all gained the
difference between the tax which they would have paid according to the
present rent of their estates, and that which they actually pay
according to the ancient valuation. Had the state of the country
been different, had rents been gradually falling in consequence of the
declension of cultivation, the landlords would almost all have lost
this difference. In the state of things which has happened to take
place since the revolution, the constancy of the valuation has been
advantageous to the landlord and hurtful to the sovereign. In a
different state of things it might have been advantageous to the
sovereign and hurtful to the landlord.

    As the tax is made payable in money, so the valuation of the
land is expressed in money. Since the establishment of this
valuation the value of silver has been pretty uniform, and there has
been no alteration in the standard of the coin either as to weight
or fineness. Had silver risen considerably in its value, as it seems
to have done in the course of the two centuries which preceded the
discovery of the mines of America, the constancy of the valuation
might have proved very oppressive to the landlord. Had silver fallen
considerably in its value, as it certainly did for about a century
at least after the discovery of those mines, the same constancy of
valuation would have reduced very much this branch of the revenue of
the sovereign. Had any considerable alteration been made in the
standard of the money, either by sinking the same quantity of silver
to a lower denomination, or by raising it to a higher; had an ounce of
silver, for example, instead of being coined into five shillings and
twopence, been coined either into pieces which bore so low a
denomination as two shillings and sevenpence, or into pieces which
bore so high a one as ten shillings and fourpence, it would in the one
case have hurt the revenue of the proprietor, in the other that of the
sovereign.

    In circumstances, therefore, somewhat different from those which
have actually taken place, this constancy of valuation might have been
a very great inconveniency, either to the contributors, or to the
commonwealth. In the course of ages such circumstances, however, must,
at some time or other, happen. But though empires, like all the
other works of men, have all hitherto proved mortal, yet every
empire aims at immortality. Every constitution, therefore, which it is
meant should be as permanent as the empire itself, ought to be
convenient, not in certain circumstances only, but in all
circumstances; or ought to be suited, not to those circumstances which
are transitory, occasional, or accidental, but to those which are
necessary and therefore always the same.

    A tax upon the rent of land which varies with every variation of
the rent, or which rises and falls according to the improvement or
neglect of cultivation, is recommended by that sect of men of
letters in France who call themselves The Economists as the most
equitable of all taxes. All taxes, they pretend, fall ultimately
upon the rent of land, and ought therefore to be imposed equally
upon the fund which must finally pay them. That all taxes ought to
fall as equally as possible upon the fund which must finally pay
them is certainly true. But without entering into the disagreeable
discussion of the metaphysical arguments by which they support their
very ingenious theory, it will sufficiently appear, from the following
review, what are the taxes which fall finally upon the rent of the
land, and what are those which fall finally upon some other fund.

    In the Venetian territory all the arable lands which are given
in lease to farmers are taxed at a tenth of the rent. The leases are
recorded in a public register which is kept by the officers of revenue
in each province or district. When the proprietor cultivates his own
lands, they are valued according to an equitable estimation, and he is
allowed a deduction of one-fifth of the tax, so that for such lands he
pays only eight instead of ten per cent of the supposed rent.

    A land-tax of this kind is certainly more equal than the
land-tax of England. It might not, perhaps, be altogether so
certain, and the assessment of the tax might frequently occasion a
good deal more trouble to the landlord. It might, too, be a good
deal more expensive in the levying.

    Such a system of administration, however, might perhaps be
contrived as would, in a great measure, both prevent this
uncertainty and moderate this expense.

    The landlord and tenant, for example, might jointly be obliged
to record their lease in a public register. Proper penalties might
be enacted against concealing or misrepresenting any of the
conditions; and if part of those penalties were to be paid to either
of the two parties who informed against and convicted the other of
such concealment or misrepresentation, it would effectually deter them
from combining together in order to defraud the public revenue. All
the conditions of the lease might be sufficiently known from such a
record.

    Some landlords, instead of raising the rent, take a fine for the
renewal of the lease. This practice is in most cases the expedient
of a spendthrift, who for a sum of ready money sells a future
revenue of much greater value. It is in most cases, therefore, hurtful
to the landlords. It is frequently hurtful to the tenant, and it is
always hurtful to the community. It frequently takes from the tenant
so great a part of his capital, and thereby diminishes so much his
ability to cultivate the land, that he finds it more difficult to
pay a small rent than it would otherwise have been to pay a great one.
Whatever diminishes his ability to cultivate, necessarily keeps
down, below what it would otherwise have been, the most important part
of the revenue of the community. By rendering the tax upon such
fines a good deal heavier than upon the ordinary rent, this hurtful
practice might be discouraged, to the no small advantage of all the
different parties concerned, of the landlord, of the tenant, of the
sovereign, and of the whole community.

    Some leases prescribe to the tenant a certain mode of
cultivation and a certain succession of crops during the whole
continuance of the lease. This condition, which is generally the
effect of the landlord's conceit of his own superior knowledge (a
conceit in most cases very ill founded), ought always to be considered
as an additional rent; as a rent in service instead of a rent in
money. In order to discourage the practice, which is generally a
foolish one, this species of rent might be valued rather high, and
consequently taxed somewhat higher than common money rents.

    Some landlords, instead of a rent in money, require a rent in
kind, in corn, cattle, poultry, wine, oil, etc.; others, again,
require a rent in service. Such rents are always more hurtful to the
tenant than beneficial to the landlord. They either take more or
keep more out of the pocket of the former than they put into that of
the latter. In every country where they take place the tenants are
poor and beggarly, pretty much according to the degree in which they
take place. By valuing, in the same manner, such rents rather high,
and consequently taxing them somewhat higher than common money
rents, a practice which is hurtful to the whole community might
perhaps be sufficiently discouraged.

    When the landlord chose to occupy himself a part of his own lands,
the rent might be valued according to an equitable arbitration of
the farmers and landlords in the neighbourhood, and a moderate
abatement of the tax might be granted to him, in the same manner as in
the Venetian territory, provided the rent of the lands which he
occupied did not exceed a certain sum. It is of importance that the
landlord should be encouraged to cultivate a part of his own land. His
capital is generally greater than that of the tenant, and with less
skill he can frequently raise a greater produce. The landlord can
afford to try experiments, and is generally disposed to do so. His
unsuccessful experiments occasion only a moderate loss to himself. His
successful ones contribute to the improvement and better cultivation
of the whole country. It might be of importance, however, that the
abatement of the tax should encourage him to cultivate to a certain
extent only. If the landlords should, the greater part of them, be
tempted to farm the whole of their own lands, the country (instead
of sober and industrious tenants, who are bound by their own
interest to cultivate as well as their capital and skill will allow
them) would be filled with idle and profligate bailiffs, whose abusive
management would soon degrade the cultivation and reduce the annual
produce of the land, to the diminution, not only of the revenue of
their masters, but of the most important part of that of the whole
society.

    Such a system of administration might, perhaps, free a tax of this
kind from any degree of uncertainty which could occasion either
oppression or inconveniency of the contributor; and might at the
same time serve to introduce into the common management of land such a
plan or policy as might contribute a good deal to the general
improvement and good cultivation of the country.

    The expense of levying a land-tax which varied with every
variation of the rent would no doubt be somewhat greater than that
of levying one which was already rated according to a fixed valuation.
Some additional expense would necessarily be incurred both by the
different register offices which it would be proper to establish in
the different districts of the country, and by the different
valuations which might occasionally be made of the lands which the
proprietor chose to occupy himself. The expense of all this,
however, might be very moderate, and much below what is incurred in
the levying of many other taxes which afford a very inconsiderable
revenue in comparison of what might easily be drawn from a tax of this
kind.

    The discouragement which a variable land-tax of this kind might
give to the improvement of land seems to be the most important
objection which can be made to it. The landlord would certainly be
less disposed to improve when the sovereign, who contributed nothing
to the expense, was to share in the profit of the improvement. Even
this objection might perhaps be obviated by allowing the landlord,
before he began his improvement, to ascertain, in conjunction with the
officers of revenue, the actual value of his lands according to the
equitable arbitration of a certain number of landlords and farmers
in the neighborhood, equally chosen by both parties, and by rating him
according to this valuation for such a number of years as might be
fully sufficient for his complete indemnification. To draw the
attention of the sovereign towards the improvement of the land, from a
regard to the increase of his own revenue, is one of the principal
advantages proposed by this species of land-tax. The term,
therefore, allowed for the indemnification of the landlord ought not
to be a great deal longer than what was necessary for that purpose,
lest the remoteness of the interest should discourage too much this
attention. It had better, however, be somewhat too long than in any
respect too short. No incitement to the attention of the sovereign can
ever counterbalance the smallest discouragement to that of the
landlord. The attention of the sovereign can be at best but a very
general and vague consideration of what is likely to contribute to the
better cultivation of the greater part of his dominions. The attention
of the landlord is a particular and minute consideration of what is
likely to be the most advantageous application of every inch of ground
upon his estate. The principal attention of the sovereign ought to
be to encourage, by every means in his power, the attention both of
the landlord and of the farmer, by allowing both to pursue their own
interest in their own way and according to their own judgment; by
giving to both the most perfect security that they shall enjoy the
full recompense of their own industry; and by procuring to both the
most extensive market for every part of their produce, in
consequence of establishing the easiest and safest communications both
by land and by water through every part of his own dominions as well
as the most unbounded freedom of exportation to the dominions of all
other princes.

    If by such a system of administration a tax of this kind could
be so managed as to give, not only no discouragement, but, on the
contrary, some encouragement to the improvement of land, it does not
appear likely to occasion any other inconveniency to the landlord,
except always the unavoidable one of being obliged to pay the tax.

    In all the variations of the state of the society, in the
improvement and in the declension of agriculture; in all the
variations in the value of silver, and in all those in the standard of
the coin, a tax of this kind would, of its own accord and without
any attention of government, readily suit itself to the actual
situation of things, and would be equally just and equitable in all
those different changes. It would, therefore, be much more proper to
be established as a perpetual and unalterable regulation, or as what
is called a fundamental law of the commonwealth, than any tax which
was always to be levied according to a certain valuation.

    Some states, instead of the simple and obvious expedient of a
register of leases, have had recourse to the laborious and expensive
one of an actual survey and valuation of all the lands in the country.
They have suspected, probably, that the lessor and lessee, in order to
defraud the public revenue, might combine to conceal the real terms of
the lease. Domesday-Book seems to have been the result of a very
accurate survey of this kind.

    In the ancient dominions of the King of Prussia, the land-tax is
assessed according to an actual survey and valuation, which is
reviewed and altered from time to time. According to that valuation,
the lay proprietors pay from twenty to twenty-five per cent of their
revenue. Ecclesiastics from forty to forty-five per cent. The survey
and valuation of Silesia was made by order of the present king; it
is said with great accuracy. According to that valuation, the lands
belonging to the Bishop of Breslaw are taxed at twenty-five per cent
of their rent. The other revenues of the ecclesiastics of both
religions, at fifty per cent. The commanderies of the Teutonic
order, and of that of Malta, at forty per cent. Lands held by a
noble tenure, at thirty-eight and one-third per cent. Lands held by
a base tenure, at thirty-five and one-third per cent.

    The survey and valuation of Bohemia is said to have been the
work of more than a hundred years. It was not perfected till after the
peace of 1748, by the orders of the present empress queen. The
survey of the duchy of Milan, which was begun in the time of Charles
VI, was not perfected till after 1760. It is esteemed one of the
most accurate that has ever been made. The survey of Savoy and
Piedmont was executed under the orders of the late King of Sardinia.

    In the dominions of the King of Prussia the revenue of the
church is taxed much higher than that of lay proprietors. The
revenue of the church is, the greater part of it, a burden upon the
rent of land. It seldom happens that any part of it is applied towards
the improvement of land, or is so employed as to contribute in any
respect towards increasing the revenue of the great body of the
people. His Prussian Majesty had probably, upon that account,
thought it reasonable that it should contribute a good deal more
towards relieving the exigencies of the state. In some countries the
lands of the church are exempted from all taxes. In others they are
taxed more lightly than other lands. In the duchy of Milan, the
lands which the church possessed before 1575 are rated to the tax at a
third only of their value.

    In Silesia, lands held by a noble tenure are taxed three per
cent higher than those held by a base tenure. The honours and
privileges of different kinds annexed to the former, his Prussian
Majesty had probably imagined, would sufficiently compensate to the
proprietor a small aggravation of the tax; while at the same time
the humiliating inferiority of the latter would be in some measure
alleviated by being taxed somewhat more lightly. In other countries,
the system of taxation, instead of alleviating, aggravates this
inequality. In the dominions of the King of Sardinia, and in those
provinces of France which are subject to what is called the real or
predial taille, the tax falls altogether upon the lands held by a base
tenure. Those held by a noble one are exempted.

    A land-tax assessed according to a general survey and valuation,
how equal soever it may be at first, must, in the course of a very
moderate period of time, become unequal. To prevent its becoming so
would require the continual and painful attention of government to all
the variations in the state and produce of every different farm in the
country. The governments of Prussia, of Bohemia, of Sardinia, and of
the duchy of Milan actually exert an attention of this kind; an
attention so unsuitable to the nature of government that it is not
likely to be of long continuance, and which, if it is continued,
will probably in the long-run occasion much more trouble and
vexation than it can possibly bring relief to the contributors.

    In 1666, the generality of Montauban was assessed to the real or
predial taille according, it is said, to a very exact survey and
valuation. By 1727, this assessment had become altogether unequal.
In order to remedy this inconveniency, government has found no
better expedient than to impose upon the whole generality an
additional tax of a hundred and twenty thousand livres. This
additional tax is rated upon all the different districts subject to
the taille according to the old assessment. But it is levied only upon
those which in the actual state of things are by that assessment
undertaxed, and it is applied to the relief of those which by the same
assessment are overtaxed. Two districts, for example, one of which
ought in the actual state of things to be taxed at nine hundred, the
other at eleven hundred livres, are by the old assessment both taxed
at a thousand livres. Both these districts are by the additional tax
rated at eleven hundred livres each. But this additional tax is levied
only upon the district undercharged, and it is applied altogether to
the relief of that overcharged, which consequently pays only nine
hundred livres. The government neither gains nor loses by the
additional tax, which is applied altogether to remedy the inequalities
arising from the old assessment. The application is pretty much
regulated according to the discretion of the intendant of the
generality, and must, therefore, be in a great measure arbitrary.

    Taxes which are proportioned, not to the Rent, but to the

                           Produce of Land

    Taxes upon the produce of land are in reality taxes upon the rent;
and though they may be originally advanced by the farmer, are
finally paid by the landlord. When a certain portion of the produce is
to be paid away for a tax, the farmer computes, as well as he can,
what the value of this portion is, one year with another, likely to
amount to, and he makes a proportionable abatement in the rent which
he agrees to pay to the landlord. There is no farmer who does not
compute beforehand what the church tithe, which is a land-tax of
this kind, is, one year with another, likely to amount to.

    The tithe, and every other land-tax of this kind, under the
appearance of perfect equality, are very unequal taxes; a certain
portion of the produce being, in different situations, equivalent to a
very different portion of the rent. In some very rich lands the
produce is so great that the one half of it is fully sufficient to
replace to the farmer his capital employed in cultivation, together
with the ordinary profits of farming stock in the neighbourhood. The
other half, or, what comes to the same thing, the value of the other
half, he could afford to pay as rent to the landlord, if there was
no tithe. But if a tenth of the produce is taken from him in the way
of tithe, he must require an abatement of the fifth part of his
rent, otherwise he cannot get back his capital with the ordinary
profit. In this case the rent of the landlord, instead of amounting to
a half or five-tenths of the whole produce, will amount only to
four-tenths of it. In poorer lands, on the contrary, the produce is
sometimes so small, and the expense of cultivation so great, that it
requires four-fifths of the whole produce to replace to the farmer his
capital with the ordinary profit. In this case, though there was no
tithe, the rent of the landlord could amount to no more than one-fifth
or two-tenths of the whole produce. But if the farmer pays one-tenth
of the produce in the way of tithe, he must require an equal abatement
of the rent of the landlord, which will thus be reduced to one-tenth
only of the whole produce. Upon the rent of rich lands, the tithe
may sometimes be a tax of no more than one-fifth part, or four
shillings in the pound; whereas upon that of poorer lands, it may
sometimes be a tax of one-half, or of ten shillings in the pound.

    The tithe, as it is frequently a very unequal tax upon the rent,
so it is always a great discouragement both to the improvements of the
landlord and to the cultivation of the farmer. The one cannot
venture to make the most important, which are generally the most
expensive improvements, nor the other to raise the most valuable,
which are generally too the most expensive crops, when the church,
which lays out no part of the expense, is to share so very largely
in the profit. The cultivation of madder was for a long time
confined by the tithe to the United Provinces, which, being
Presbyterian countries, and upon that account exempted from this
destructive tax, enjoyed a sort of monopoly of that useful dyeing drug
against the rest of Europe. The late attempts to introduce the culture
of this plant into England have been made only in consequence of the
statute which enacted that five shillings an acre should be received
in lieu of all manner of tithe upon madder.

    As through the greater part of Europe the church, so in many
different countries of Asia the state, is principally supported by a
land-tax, proportioned, not to the rent, but to the produce of the
land. In China, the principal revenue of the sovereign consists in a
tenth part of the produce of all lands of the empire. This tenth part,
however, is estimated so very moderately that, in many provinces, it
is said not to exceed a thirtieth part of the ordinary produce. The
land-tax or land-rent which used to be paid to the Mahometan
government of Bengal, before that country fell into the hands of the
English East India Company, is said to have amounted to about a
fifth part of the produce. The land-tax of ancient Egypt is said
likewise to have amounted to a fifth part.

    In Asia, this sort of land-tax is said to interest the sovereign
in the improvement and cultivation of land. The sovereigns of China,
those of Bengal while under the Mahometan government, and those of
ancient Egypt, are said accordingly to have been extremely attentive
to the making and maintaining of good roads and navigable canals, in
order to increase, as much as possible, both the quantity and value of
every part of the produce of the land, by procuring to every part of
it the most extensive market which their own dominions could afford.
The tithe of the church is divided into such small portions that no
one of its proprietors can have any interest of this kind. The
parson of a parish could never find his account in making a road or
canal to a distant part of the country, in order to extend the
market for the produce of his own particular parish. Such taxes,
when destined for the maintenance of the state, have some advantages
which may serve in some measure to balance their inconveniency. When
destined for the maintenance of the church, they are attended with
nothing but inconveniency.

    Taxes upon the produce of land may be levied either in kind, or,
according to a certain valuation, in money.

    The parson of a parish, or a gentleman of small fortune who
lives upon his estate, may sometimes, perhaps, find some advantage
in receiving, the one his tithe, and the other his rent, in kind.
The quantity to be collected, and the district within which it is to
be collected, are so small that they both can oversee, with their
own eyes, the collection and disposal of every part of what is due
to them. A gentleman of great fortune, who lived in the capital, would
be in danger of suffering much by the neglect, and more by the fraud
of his factors and agents, if the rents of an estate in a distant
province were to be paid to him in this manner. The loss of the
sovereign from the abuse and depredation of his tax-gatherers would
necessarily be much greater. The servants of the most careless private
person are, perhaps, more under the eye of their master than those
of the most careful prince; and a public revenue which was paid in
kind would suffer so much from the mismanagement of the collectors
that a very small part of what was levied upon the people would ever
arrive at the treasury of the prince. Some part of the public
revenue of China, however, is said to be paid in this manner. The
mandarins and other tax-gatherers will, no doubt, find their advantage
in continuing the practice of a payment which is so much more liable
to abuse than any payment in money.

    A tax upon the produce of land which is levied in money may be
levied either according to a valuation which varies with all the
variations of the market price, or according to a fixed valuation, a
bushel of wheat, for example, being always valued at one and the
same money price, whatever may be the state of the market. The produce
of a tax levied in the former way will vary only according to the
variations in the real produce of the land, according to the
improvement or neglect of cultivation. The produce of a tax levied
in the latter way will vary, not only according to the variations in
the produce of the land, but according to both those in the value of
the precious metals and those in the quantity of those metals which is
at different times contained in coin of the same denomination. The
produce of the former will always bear the same proportion to the
value of the real produce of the land. The produce of the latter
may, at different times, bear very different proportions to that
value.

    When, instead either of a certain portion of the produce of
land, or of the price of a certain portion, a certain sum of money
is to be paid in full compensation for all tax or tithe, the tax
becomes, in this case, exactly of the same nature with the land-tax of
England. It neither rises nor falls with the rent of the land. It
neither encourages nor discourages improvement. The tithe in the
greater part of those parishes which pay what is called a Modus in
lieu of all other tithe is a tax of this kind. During the Mahometan
government of Bengal, instead of the payment in kind of a fifth part
of the produce, a modus, and, it is said, a very moderate one, was
established in the greater part of the districts or zemindaries of the
country. Some of the servants of the East India Company, under
pretence of restoring the public revenue to its proper value, have, in
some provinces, exchanged this modus for a payment in kind. Under
their management this change is likely both to discourage cultivation,
and to give new opportunities for abuse in the collection of the
public revenue which has fallen very much below what it was said to
have been when it first fell under the management of the company.
The servants of the company may, perhaps, have profited by this
change, but at the expense, it is probable, both of their masters
and of the country.

               Taxes upon the Rent of House.

    The rent of a house may be distinguished into two parts, of
which the one may very properly be called the Building-rent; the other
is commonly called the Ground-rent.

    The building-rent is the interest or profit of the capital
expended in building the house. In order to put the trade of a builder
upon a level with other trades, it is necessary that this rent
should be sufficient, first, to pay him the same interest which he
would have got for his capital if he had lent it upon good security;
and, secondly, to keep the house in constant repair, or, what comes to
the same thing, to replace, within a certain term of years, the
capital which had been employed in building it. The building-rent,
or the ordinary profit of building, is, therefore, everywhere
regulated by the ordinary interest of money. Where the market rate
of interest is four per cent the rent of a house which, over and above
paying the ground-rent, affords six or six and a half per cent upon
the whole expense of building, may perhaps afford a sufficient
profit to the builder. Where the market rate of interest is five per
cent, it may perhaps require seven or seven and a half per cent. If,
in proportion to the interest of money, the trade of the builder
affords at any time a much greater profit than this, it will soon draw
so much capital from other trades as will reduce the profit to its
proper level. If it affords at any time much less than this, other
trades will soon draw so much capital from it as will again raise that
profit.

    Whatever part of the whole rent of a house is over and above
what is sufficient for affording this reasonable profit naturally goes
to the ground-rent; and where the owner of the ground and the owner of
the building are two different persons, is, in most cases,
completely paid to the former. This surplus rent is the price which
the inhabitant of the house pays for some real or supposed advantage
of the situation. In country houses at a distance from any great town,
where there is plenty of ground to choose upon, the ground-rent is
scarce anything, or no more than what the ground which the house
stands upon would pay if employed in agriculture. In country villas in
the neighborhood of some great town, it is sometimes a good deal
higher, and the peculiar conveniency or beauty of situation is there
frequently very well paid for. Ground-rents are generally highest in
the capital, and in those particular parts of it where there happens
to be the greatest demand for houses, whatever be the reason of that
demand, whether for trade and business, for pleasure and society, or
for mere vanity and fashion.

    A tax upon house-rent, payable by the tenant and proportioned to
the whole rent of each house, could not, for any considerable time
at least, affect the building-rent. If the builder did not get his
reasonable profit, he would be obliged to quit the trade; which, by
raising the demand for building, would in a short time bring back
his profit to its proper level with that of other trades. Neither
would such a tax fall altogether upon the ground-rent; but it would
divide itself in such a manner as to fall partly upon the inhabitant
of the house, and partly upon the owner of the ground.

    Let us suppose, for example, that a particular person judges
that he can afford for house-rent an expense of sixty pounds a year;
and let us suppose, too, that a tax of four shillings in the pound, or
of one-fifth, payable by the inhabitant, is laid upon house-rent. A
house of sixty pounds rent will in this case cost him seventy-two
pounds a year, which is twelve pounds more than he thinks he can
afford. He will, therefore, content himself with a worse house, or a
house of fifty pounds rent, which, with the additional ten pounds that
he must pay for the tax, will make up the sum of sixty pounds a
year, the expense which he judges he can afford; and in order to pay
the tax he will give up a part of the additional conveniency which
he might have had from a house of ten pounds a year more rent. He will
give up, I say, a part of this additional conveniency; for he will
seldom be obliged to give up the whole, but will, in consequence of
the tax, get a better house for fifty pounds a year than he could have
got if there had been no tax. For as a tax of this kind by taking away
this particular competitor, must diminish the competition for houses
of sixty pounds rent, so it must likewise diminish it for those of
fifty pounds rent, and in the same manner for those of all other
rents, except the lowest rent, for which it would for some time
increase the competition. But the rents of every class of houses for
which the competition was diminished would necessarily be more or less
reduced. As no part of this reduction, however, could, for any
considerable time at least, affect the building-rent, the whole of
it must in the long-run necessarily fall upon the ground-rent. The
final payment of this tax, therefore, would fall partly upon the
inhabitant of the house, who, in order to pay his share, would be
obliged to give up a part of his conveniency, and partly upon the
owner of the ground, who, in order to pay his share, would be
obliged to give up a part of his revenue. In what proportion this
final payment would be divided between them it is not perhaps very
easy to ascertain. The division would probably be very different in
different circumstances, and a tax of this kind might, according to
those different circumstances, affect very unequally both the
inhabitant of the house and the owner of the ground.

    The inequality with which a tax of this kind might fall upon the
owners of different ground-rents would arise altogether from the
accidental inequality of this division. But the inequality with
which it might fall upon the inhabitants of different houses would
arise not only from this, but from another cause. The proportion of
the expense of house-rent to the whole expense of living is
different in the different degrees of fortune. It is perhaps highest
in the highest degree, and it diminishes gradually through the
inferior degrees, so as in general to be lowest in the lowest
degree. The necessaries of life occasion the great expense of the
poor. They find it difficult to get food, and the greater part of
their little revenue is spent in getting it. The luxuries and vanities
of life occasion the principal expense of the rich, and a
magnificent house embellishes and sets off to the best advantage all
the other luxuries and vanities which they possess. A tax upon
house-rents, therefore, would in general fall heaviest upon the
rich; and in this sort of inequality there would not, perhaps, be
anything very unreasonable. It is not very unreasonable that the
rich should contribute to the public expense, not only in proportion
to their revenue, but something more than in that proportion.

    The rent of houses, though it in some respects resembles the
rent of land, is in one respect essentially different from it. The
rent of land is paid for the use of a productive subject. The land
which pays it produces it. The rent of houses is paid for the use of
an unproductive subject. Neither the house nor the ground which it
stands upon produce anything. The person who pays the rent, therefore,
must draw it from some other source of revenue distinct from the
independent of this subject. A tax upon the rent of houses, so far
as it falls upon the inhabitants, must be drawn from the same source
as the rent itself, and must be paid from their revenue, whether
derived from the wages of labour, the profits of stock, or the rent of
land. So far as it falls upon the inhabitants, it is one of those
taxes which fall, not upon one only, but indifferently upon all the
three different sources of revenue, and is in every respect of the
same nature as a tax upon any other sort of consumable commodities. In
general there is not, perhaps, any one article of expense or
consumption by which the liberality or narrowness of a man's whole
expense can be better judged of than by his house-rent. A proportional
tax upon this particular article of expense might, perhaps, produce
a more considerable revenue than any which has hitherto been drawn
from it in any part of Europe. If the tax indeed was very high, the
greater part of people would endeavour to evade it, as much as they
could, by contenting themselves with smaller houses, and by turning
the greater part of their expense into some other channel.

    The rent of houses might easily be ascertained with sufficient
accuracy by a policy of the same kind with that which would be
necessary for ascertaining the ordinary rent of land. Houses not
inhabited ought to pay no tax. A tax upon them would fall altogether
upon the proprietor, who would thus be taxed for a subject which
afforded him neither conveniency nor revenue. Houses inhabited by
the proprietor ought to be rated, not according to the expense which
they might have cost in building, but according to the rent which an
equitable arbitration might judge them likely to bring if leased to
a tenant. If rated according to the expense which they may have cost
in building, a tax of three or four shillings in the pound, joined
with other taxes, would ruin almost all the rich and great families of
this, and, I believe, of every other civilised country. Whoever will
examine, with attention, the different town and country houses of some
of the richest and greatest families in this country will find that,
at the rate of only six and a half or seven per cent upon the original
expense of building, their house-rent is nearly equal to the whole net
rent of their estates. It is the accumulated expense of several
successive generations, laid out upon objects of great beauty and
magnificance, indeed; but, in proportion to what they cost, of very
small exchangeable value.

    Ground-rents are a still more proper subject of taxation than
the rent of houses. A tax upon ground-rents would not raise the
rents of houses. It would fall altogether upon the owner of the
ground-rent, who acts always as a monopolist, and exacts the
greatest rent which can be got for the use of his ground. More or less
can be got for it according as the competitors happen to be richer
or poorer, or can afford to gratify their fancy for a particular
spot of ground at a greater or smaller expense. In every country the
greatest number of rich competitors is in the capital, and it is there
accordingly that the highest ground-rents are always to be found. As
the wealth of those competitors would in no respect be increased by
a tax upon ground-rents, they would not probably be disposed to pay
more for the use of the ground. Whether the tax was to be advanced
by the inhabitant, or by the owner of the ground, would be of little
importance. The more the inhabitant was obliged to pay for the tax,
the less he would incline to pay for the ground; so that the final
payment of the tax would fall altogether upon the owner of the
ground-rent. The ground-rents of uninhabited houses ought to pay no
tax.

    Both ground-rents and the ordinary rent of land are a species of
revenue which the owner, in many cases, enjoys without any care or
attention of his own. Though a part of this revenue should be taken
from him in order to defray the expenses of the state, no
discouragement will thereby be given to any sort of industry. The
annual produce of the land and labour of the society, the real
wealth and revenue of the great body of the people, might be the
same after such a tax as before. Ground-rents and the ordinary rent of
land are, therefore, perhaps, the species of revenue which can best
bear to have a peculiar tax imposed upon them.

    Ground-rents seem, in this respect, a more proper subject of
peculiar taxation than even the ordinary rent of land. The ordinary
rent of land is, in many cases, owing partly at least to the attention
and good management of the landlord. A very heavy tax might discourage
too, much this attention and good management. Ground-rents, so far
as they exceed the ordinary rent of land, are altogether owing to
the good government of the sovereign, which, by protecting the
industry either of the whole people, or of the inhabitants of some
particular place, enables them to pay so much more than its real value
for the ground which they build their houses upon; or to make to its
owner so much more than compensation for the loss which he might
sustain by this use of it. Nothing can be more reasonable than that
a fund which owes its existence to the good government of the state
should be taxed peculiarly, or should contribute something more than
the greater part of other funds, towards the support of that
government.

    Though, in many different countries of Europe, taxes have been
imposed upon the rent of houses, I do not know of any in which
ground-rents have been considered as a separate subject of taxation.
The contrivers of taxes have, probably, found some difficulty in
ascertaining what part of the rent ought to be considered as
ground-rent, and what part ought to be considered as building-rent. It
should not, however, seem very difficult to distinguish those two
parts of the rent from one another.

    In Great Britain the rent of houses is supposed to be taxed in the
same proportion as the rent of land by what is called the annual
land-tax. The valuation, according to which each different parish
and district is assessed to this tax, is always the same. It was
originally extremely unequal, and it still continues to be so. Through
the greater part of the kingdom this tax falls still more lightly upon
the rent of houses than upon that of land. In some few districts only,
which were originally rated high, and in which the rents of houses
have fallen considerably, the land-tax of three or four shillings in
the pound is said to amount to an equal proportion of the real rent of
houses. Untenanted houses, though by law subject to the tax, are, in
most districts, exempted from it by the favour of the assessors; and
this exemption sometimes occasions some little variation in the rate
of particular houses, though that of the district is always the
same. Improvements of rent, by new buildings, repairs, etc., go to the
discharge of the district, which occasions still further variations in
the rate of particular houses.

    In the province of Holland every house is taxed at two and a
half per cent of its value, without any regard either to the rent
which it actually pays, or to the circumstances of its being
tenanted or untenanted. There seems to be a hardship in obliging the
proprietor to pay a tax for an untenanted house, from which he can
derive no revenue, especially so very heavy a tax. In Holland, where
the market rate of interest does not exceed three per cent, two and
a half per cent upon the whole value of the house must, in most cases,
amount to more than a third of the building-rent, perhaps of the whole
rent. The valuation, indeed, according to which the houses are
rated, though very unequal, is said to be always below the real value.
When a house is rebuilt, improved, or enlarged, there is a new
valuation, and the tax is rated accordingly.

    The contrivers of the several taxes which in England have, at
different times, been imposed upon houses, seem to have imagined
that there was some great difficulty in ascertaining, with tolerable
exactness, what was the real rent of every house. They have
regulated their taxes, therefore, according to some more obvious
circumstances, such as they had probably imagined would, in most
cases, bear some proportion to the rent.

    The first tax of this kind was hearth-money, or a tax of two
shillings upon every hearth. In order to ascertain how many hearths
were in the house, it was necessary that the tax-gatherer should enter
every room in it. This odious visit rendered the tax odious. Soon
after the revolution, therefore, it was abolished as a badge of
slavery.

    The next tax of this kind was a tax of two shillings upon every
dwelling-house inhabited. A house with ten windows to pay four
shillings more. A house with twenty windows and upwards to pay eight
shillings. This tax was afterwards so far altered that houses with
twenty windows, and with less than thirty, were ordered to pay ten
shillings, and those with thirty windows and upwards to pay twenty
shillings. The number of windows can, in most cases, be counted from
the outside, and, in all cases, without entering every room in the
house. The visit of the tax-gatherer, therefore, was less offensive in
this tax than in the hearth-money.

    This tax was afterwards repealed, and in the room of it was
established the window-tax, which has undergone, too, several
alterations and augmentations. The window-tax, as it stands at present
(January 1775), over and above the duty of three shillings upon
every house in England, and of one shilling upon every house in
Scotland, lays a duty upon every window, which, in England, augments
gradually from twopence, the lowest rate, upon houses with not more
than seven windows, to two shillings, the highest rate, upon houses
with twenty-five windows and upwards.

    The principal objection to all such taxes of the worst is their
inequality, an inequality of the worst kind, as they must frequently
fall much heavier upon the poor than upon the rich. A house of ten
pounds rent in a country town may sometimes have more windows than a
house of five hundred pounds rent in London; and though the inhabitant
of the former is likely to be a much poorer man than that of the
latter, yet so far as his contribution is regulated by the window-tax,
he must contribute more to the support of the state. Such taxes are,
therefore, directly contrary to the first of the four maxims above
mentioned. They do not seem to offend much against any of the other
three.

    The natural tendency of the window-tax, and of all other taxes
upon houses, is to lower rents. The more a man pays for the tax, the
less, it is evident, he can afford to pay for the rent. Since the
imposition of the window-tax, however, the rents of houses have upon
the whole risen, more or less, in almost every town and village of
Great Britain with which I am acquainted. Such has been almost
everywhere the increase of the demand for houses, that it has raised
the rents more than the window-tax could sink them; one of the many
proofs of the great prosperity of the country, and of the increasing
revenue of its inhabitants. Had it not been for the tax, rents would
probably have risen still higher.

                              ARTICLE II

      Taxes on Profit, or upon the Revenue arising from Stock

    The revenue or profit arising from stock naturally divides
itself into two parts; that which pays the interest, and which belongs
to the owner of the stock, and that surplus part which is over and
above what is necessary for paying the interest.

    This latter part of profit is evidently a subject not taxable
directly. It is the compensation, and in most cases it is no more than
a very moderate compensation, for the risk and trouble of employing
the stock. The employer must have this compensation, otherwise he
cannot, consistently with his own interest, continue the employment.
If he was taxed directly, therefore, in proportion to the whole
profit, he would be obliged either to raise the rate of his profit, or
to charge the tax upon the interest of money; that is, to pay less
interest. If he raised the rate of his profit in proportion to the
tax, the whole tax, though it might be advanced by him, would be
finally paid by one or other of two different sets of people,
according to the different ways in which he might employ the stock
of which he had the management. If he employed it as a farming stock
in the cultivation of land, he could raise the rate of his profit only
by retaining a greater portion, or, what comes to the same thing,
the price of a greater portion of the produce of the land; and as this
could be done only by a reduction of rent, the final payment of the
tax would fall upon the landlord. If he employed it as a mercantile or
manufacturing stock, he could raise the rate of his profit only by
raising the price of his goods; in which case the final payment of the
tax would fall altogether upon the consumers of those goods. If he did
not raise the rate of his profit, he would be obliged to charge the
whole tax upon that part of it which was allotted for the interest
of money. He could afford less interest for whatever stock he
borrowed, and the whole weight of the tax would in this case fall
ultimately upon the interest of money. So far as he could not
relieve himself from the tax in the one way, he would be obliged to
relieve himself in the other.

    The interest of money seems at first sight a subject equally
capable of being taxed directly as the rent of land. Like the rent
of land, it is a net produce which remains after completely
compensating the whole risk and trouble of employing the stock. As a
tax upon the rent of land cannot raise rents; because the net
produce which remains after replacing the stock of the farmer,
together with his reasonable profit, cannot be greater after the tax
than before it, so, for the same reason, a tax upon the interest of
money could not raise the rate of interest; the quantity of stock or
money in the country, like the quantity of land, being supposed to
remain the same after the tax as before it. The ordinary rate of
profit, it has been shown in the first book, is everywhere regulated
by the quantity of stock to be employed in proportion to the
quantity of the employment, or of the business which must be done by
it. But the quantity of the employment, or of the business to be
done by stock, could neither be increased nor diminished by any tax
upon the interest of money. If the quantity of the stock to be
employed, therefore, was neither increased nor diminished by it, the
ordinary rate of profit would necessarily remain the same. But the
portion of this profit necessary for compensating the risk and trouble
of the employer would likewise remain the same, that risk and
trouble being in no respect altered. The residue, therefore, that
portion which belongs to the owner of the stock, and which pays the
interest of money, would necessarily remain the same too. At first
sight, therefore, the interest of money seems to be a subject as fit
to be taxed directly as the rent of land.

    There are, however, two different circumstances which render the
interest of money a much less proper subject of direct taxation than
the rent of land.

    First, the quantity and value of the land which any man
possesses can never be a secret, and can always be ascertained with
great exactness. But the whole amount of the capital stock which he
possesses is almost always a secret, and can scarce ever be
ascertained with tolerable exactness. It is liable, besides, to almost
continual variations. A year seldom passes away, frequently not a
month, sometimes scarce a single day, in which it does not rise or
fall more or less. An inquisition into every man's private
circumstances, and an inquisition which, in order to accommodate the
tax to them, watched over all the fluctuations of his fortunes,
would be a source of such continual and endless vexation as no
people could support.

    Secondly, land is a subject which cannot be removed; whereas stock
easily may. The proprietor of land is necessarily a citizen of the
particular country in which his estate lies. The proprietor of stock
is properly a citizen of the world, and is not necessarily attached to
any particular country. He would be apt to abandon the country in
which he was exposed to a vexatious inquisition, in order to be
assessed to a burdensome tax, and would remove his stock to some other
country where he could either carry on his business, or enjoy his
fortune more at his ease. By removing his stock he would put an end to
all the industry which it had maintained in the country which he left.
Stock cultivates land; stock employs labour. A tax which tended to
drive away stock from any particular country would so far tend to
dry up every source of revenue both to the sovereign and to the
society. Not only the profits of stock, but the rent of land and the
wages of labour would necessarily be more or less diminished by its
removal.

    The nations, accordingly, who have attempted to tax the revenue
arising from stock, instead of any severe inquisition of this kind,
have been obliged to content themselves with some very loose, and,
therefore, more or less arbitrary, estimation. The extreme
inequality and uncertainty of a tax assessed in this manner can be
compensated only by its extreme moderation, in consequence of which
every man finds himself rated so very much below his real revenue that
he gives himself little disturbance though his neighbour should be
rated somewhat lower.

    By what is called the land-tax in England, it was intended that
stock should be taxed in the same proportion as land. When the tax
upon land was at four shillings in the pound, or at one-fifth of the
supposed rent, it was intended that stock should be taxed at one-fifth
of the supposed interest. When the present annual land-tax was first
imposed, the legal rate of interest was six per cent. Every hundred
pounds stock, accordingly, was supposed to be taxed at twenty-four
shillings, the fifth part of six pounds. Since the legal rate of
interest has been reduced to five per cent every hundred pounds
stock is supposed to be taxed at twenty shillings only. The sum to
be raised by what is called the land-tax was divided between the
country and the principal towns. The greater part of it was laid
upon the country; and of what was laid upon the towns, the greater
part was assessed upon the houses. What remained to be assessed upon
the stock or trade of the towns (for the stock upon the land was not
meant to be taxed) was very much below the real value of that stock or
trade. Whatever inequalities, therefore, there might be in the
original assessment gave little disturbance. Every parish and district
still continues to be rated for its land, its houses, and its stock,
according to the original assessment; and the almost universal
prosperity of the country, which in most places has raised very much
the value of all these, has rendered those inequalities of still
less importance now. The rate, too, upon each district continuing
always the same, the uncertainty of this tax so far as it might be
assessed upon the stock of any individual, has been very much
diminished, as well as rendered of much less consequence. If the
greater part of the lands of England are not rated to the land-tax
at half their actual value, the greater part of the stock of England
is, perhaps, scarce rated at the fiftieth part of its actual value. In
some towns the whole land-tax is assessed upon houses, as in
Westminster, where stock and trade are free. It is otherwise in
London.

    In all countries a severe inquisition into the circumstances of
private persons has been carefully avoided.

    At Hamburg every inhabitant is obliged to pay to the state
one-fourth per cent of all that he possesses; and as the wealth of the
people of Hamburg consists principally in stock, this tax may be
considered as a tax upon stock. Every man assesses himself, and, in
the presence of the magistrate, puts annually into the public coffer a
certain sum of money which he declares upon oath to be one-fourth
per cent of all that he possesses, but without declaring what it
amounts to, or being liable to any examination upon that subject. This
tax is generally supposed to be paid with great fidelity. In a small
republic, where the people have entire confidence in their
magistrates, are convinced of the necessity of the tax for the support
of the state, and believe that it will be faithfully applied to that
purpose, such conscientious and voluntary payment may sometimes be
expected. It is not peculiar to the people of Hamburg.

    The canton of Unterwald in Switzerland is frequently ravaged by
storms and inundations, and is thereby exposed to extraordinary
expenses. Upon such occasions the people assemble, and every one is
said to declare with the greatest frankness what he is worth in
order to be taxed accordingly. At Zurich the law orders that, in cases
of necessity, every one should be taxed in proportion to his
revenue- the amount of which he is obliged to declare upon oath.
They have no suspicion, it is said, that any of their
fellow-citizens will deceive them. At Basel the principal revenue of
the state arises from a small custom upon goods exported. All the
citizens make oath that they will pay every three months all the taxes
imposed by the law. All merchants and even all innkeepers are
trusted with keeping themselves the account of the goods which they
sell either within or without the territory. At the end of every three
months they send this account to the treasurer with the amount of
the tax computed at the bottom of it. It is not suspected that the
revenue suffers by this confidence.

    To oblige every citizen to declare publicly upon oath the amount
of his fortune must not, it seems, in those Swiss cantons be
reckoned a hardship. At Hamburg it would be reckoned the greatest.
Merchants engaged in the hazardous protects of trade all tremble at
the thoughts of being obliged at all to expose the real state of their
circumstances. The ruin of their credit and the miscarriage of their
projects, they foresee, would too often be the consequence. A sober
and parsimonious people, who are strangers to all such projects, do
not feel that they have occasion for any such concealment.

    In Holland, soon after the exaltation of the late Prince of Orange
to the stadtholdership, a tax of two per cent, or the fiftieth
penny, as it was called, was imposed upon the whole substance of every
citizen. Every citizen assessed himself and paid his tax in the same
manner as at Hamburg, and it was in general supposed to have been paid
with great fidelity. The people had at that time the greatest
affection for their new government, which they had just established by
a general insurrection. The tax was to be paid but once, in order to
relieve the state in a particular exigency. It was, indeed, too
heavy to be permanent. In a country where the market rate of
interest seldom exceeds three per cent, a tax of two per cent
amounts to thirteen shillings and fourpence in the pound upon the
highest net revenue which is commonly drawn from stock. It is a tax
which very few people could pay without encroaching more or less
upon their capitals. In a particular exigency the people may, from
great public zeal, make a great effort, and give up even a part of
their capital in order to relieve the state. But it is impossible that
they should continue to do so for any considerable time; and if they
did, the tax would ruin them so completely as to render them
altogether incapable of supporting the state.

    The tax upon stock imposed by the Land-tax Bill in England, though
it is proportioned to the capital, is not intended to diminish or take
away any part of that capital. It is meant only to be a tax upon the
interest of money proportioned to that upon the rent of land, so
that when the latter is at four shillings in the pound, the former may
be at four shillings in the pound too. The tax at Hamburg and the
still more moderate tax of Unterwald and Zurich are meant, in the same
manner, to be taxes, not upon the capital, but upon the interest or
net revenue of stock. That of Holland was meant to be a tax upon the
capital.

        Taxes upon as Profit of particular Employments

    In some countries extraordinary taxes are imposed upon the profits
of stock, sometimes when employed in particular branches of trade, and
sometimes when employed in agriculture.

    Of the former kind are in England the tax upon hawkers and
pedlars, that upon hackney coaches and chairs, and that which the
keepers of ale-houses pay for a licence to retail ale and spirituous
liquors. During the late war, another tax of the same kind was
proposed upon shops. The war having been undertaken, it was said, in
defence of the trade of the country, the merchants, who were to profit
by it, ought to contribute towards the support of it.

    A tax, however, upon the profits of stock employed in any
particular branch of trade can never fall finally upon the dealers
(who must in all ordinary cases have their reasonable profit, and
where the competition is free can seldom have more than that
profit), but always upon the consumers, who must be obliged to pay
in the price of the goods the tax which the dealer advances; and
generally with some overcharge.

    A tax of this kind when it is proportioned to the trade of the
dealer is finally paid by the consumer, and occasions no oppression to
the dealer. When it is not so proportioned, but is the same upon all
dealers, though in this case, too, it is finally paid by the consumer,
yet it favours the great, and occasions some oppression to the small
dealer. The tax of five shillings a week upon every hackney coach, and
that of ten shillings a year upon every hackney chair, so far as it is
advanced by the different keepers of such coaches and chairs, is
exactly enough proportioned to the extent of their respective
dealings. It neither favours the great, nor oppresses the smaller
dealer. The tax of twenty shillings a year for a licence to sell
ale; of forty shillings for a licence to sell spirituous liquors;
and of forty shillings more for a licence to sell wine, being the same
upon all retailers, must necessarily give some advantage to the great,
and occasion some oppression to the small dealers. The former must
find it more easy to get back the tax in the price of their goods than
the latter. The moderation of the tax, however, renders this
inequality of less importance, and it may to many people appear not
improper to give some discouragement to the multiplication of little
ale-houses. The tax upon shops, it was intended, should be the same
upon all shops. It could not well have been otherwise. It would have
been impossible to proportion with tolerable exactness the tax upon
a shop to the extent of the trade carried on in it without such an
inquisition as would have been altogether insupportable in a free
country. If the tax had been considerable, it would have oppressed the
small, and forced almost the whole retail trade into the hands of
the great dealers. The competition of the former being taken away, the
latter would have enjoyed a monopoly of the trade, and like all
other monopolists would soon have combined to raise their profits much
beyond what was necessary for the payment of the tax. The final
payment, instead of falling upon the shopkeeper, would have fallen
upon the consumer, with a considerable overcharge to the profit of the
shopkeeper. For these reasons the project of a tax upon shops was laid
aside, and in the room of it was substituted the subsidy, 1759.

    What in France is called the personal taille is, perhaps, the most
important tax upon the profits of stock employed in agriculture that
is levied in any part of Europe.

    In the disorderly state of Europe during the prevalence of the
feudal government, the sovereign was obliged to content himself with
taxing those who were too weak to refuse to pay taxes. The great
lords, though willing to assist him upon particular emergencies,
refused to subject themselves to any constant tax, and he was not
strong enough to force them. The occupiers of land all over Europe
were, the greater part of them, originally bondmen. Through the
greater part of Europe they were gradually emancipated. Some of them
acquired the property of landed estates which they held by some base
or ignoble tenure, sometimes under the king, and sometimes under
some other great lord, like the ancient copy-holders of England.
Others without acquiring the property, obtained leases for terms of
years of the lands which they occupied under their lord, and thus
became less dependent upon him. The great lords seem to have beheld
the degree of prosperity and independency which this inferior order of
men had thus come to enjoy with a malignant and contemptuous
indignation, and willingly consented that the sovereign should tax
them. In some countries this tax was confined to the lands which
were held in property by an ignoble tenure; and, in this case, the
taille was said to be real. The land-tax established by the late
King of Sardinia, and the taille in the provinces of Languedoc,
Provence, Dauphine, and Brittany, in the generality of Montauban,
and in the elections of Agen and Comdom, as well as in some other
districts of France, are taxes upon lands held in property by an
ignoble tenure. In other countries the tax was laid upon the
supposed profits of all those who held in farm or lease lands
belonging to other people, whatever might be the tenure by which the
proprietor held them; and in this case the taille was said to be
personal. In the greater part of those provinces of France which are
called the Countries of Elections the taille is of this kind. The real
taille, as it is imposed only upon a part of the lands of the country,
is necessarily an unequal, but it is not always an arbitrary tax,
though it is so upon some occasions. The personal taille, as it is
intended to be proportioned to the profits of a certain class of
people which can only be guessed at, is necessarily both arbitrary and
unequal.

    In France the personal taille at present (1775) annually imposed
upon the twenty generalities called the Countries of Elections amounts
to 40,107,239 livres, 16 sous. The proportion in which this sum is
assessed upon those different provinces varies from year to year
according to the reports which are made to the king's council
concerning the goodness or badness of the crops, as well as other
circumstances which may either increase or diminish their respective
abilities to pay. Each generality it divided into a certain number
of elections, and the proportion in which the sum imposed upon the
whole generality is divided among those different elections varies
likewise from year to year according to the reports made to the
council concerning their respective abilities. It seems impossible
that the council, with the best intentions, can ever proportion with
tolerable exactness either of those two assessments to the real
abilities of the province or district upon which they are respectively
laid. Ignorance and misinformation must always, more or less,
mislead the most upright council. The proportion which each parish
ought to support of what is assessed upon the whole election, and that
which each individual ought to support of what is assessed upon his
particular parish, are both in the same manner varied, from year to
year, according as circumstances are supposed to require. These
circumstances are judged of, in the one case, by the officers of the
election, in the other by those of the parish, and both the one and
the other are, more or less, under the direction and influence of
the intendant. Not only ignorance and misinformation, but
friendship, party animosity, and private resentment are said
frequently to mislead such assessors. No man subject to such a tax, it
is evident, can ever be certain, before he is assessed, of what he
is to pay. He cannot even be certain after he is assessed. If any
person has been taxed who ought to have been exempted, or if any
person has been taxed beyond his proportion, though both must pay in
the meantime, yet if they complain, and make good their complaints,
the whole parish is reimposed next year in order to reimburse them. If
any of the contributors become bankrupt or insolvent, the collector is
obliged to advance his tax, and the whole parish is reimposed next
year in order to reimburse the collector. If the collector himself
should become bankrupt, the parish which elects him must answer for
his conduct to the receiver general of the election. But, as it
might be troublesome for the receiver to prosecute the whole parish,
he takes at his choice five or six of the richest contributors and
obliges them to make good what had been lost by the insolvency of
the collector. The parish is afterwards reimposed in order to
reimburse those five or six. Such reimpositions are always over and
above the taille of the particular year in which they are laid on.

    When a tax is imposed upon the profits of stock in a particular
branch of trade, the traders are all careful to bring no more goods to
market than what they can sell at a price sufficient to reimburse them
for advancing the tax. Some of them withdraw a part of their stocks
from the trade, and the market is more sparingly supplied than before.
The price of the goods rises, and the final payment of the tax falls
upon the consumer. But when a tax is imposed upon the profits of stock
employed in agriculture, it is not the interest of the farmers to
withdraw any part of their stock from that employment. Each farmer
occupies a certain quantity of land, for which hi pays rent. For the
proper cultivation of this land a certain quantity of stock is
necessary, and by withdrawing any part of this necessary quantity, the
farmer is not likely to be more able to pay either the rent or the
tax. In order to pay the tax, it can never be his interest to diminish
the quantity of his produce, nor consequently to supply the market
more sparingly than before. The tax, therefore, will never enable
him to raise the price of his produce so as to reimburse himself by
throwing the final payment upon the consumer. The farmer, however,
must have his reasonable profit as well as every other dealer,
otherwise he must give up the trade. After the imposition of a tax
of this kind, he can get this reasonable profit only by paying less
rent to the landlord. The more he is obliged to pay in the way of
tax the less he can afford to pay in the way of rent. A tax of this
kind imposed during the currency of a lease may, no doubt, distress or
ruin the farmer. Upon the renewal of the lease it must always fall
upon the landlord.

    In the countries where the personal taille takes place, the farmer
is commonly assessed in proportion to the stock which he appears to
employ in cultivation. He is, upon this account, frequently afraid
to have a good team of horses or oxen, but endeavours to cultivate
with the meanest and most wretched instruments of husbandry that he
can. Such is his distrust in the justice of his assessors that he
counterfeits poverty, and wishes to appear scarce able to pay anything
for fear of being obliged to pay too much. By this miserable policy he
does not, perhaps, always consult his own interest in the most
effectual manner, and he probably loses more by the diminution of
his produce than he saves by that of his tax. Though, in consequence
of this wretched cultivation, the market is, no doubt, somewhat
worse supplied, yet the small rise of price which may occasion, as
it is not likely even to indemnify the farmer for the diminution of
his produce, it is still less likely to enable him to pay more rent to
the landlord. The public, the farmer, the landlord, all suffer more or
less by this degraded cultivation. That the personal taille tends,
in many different ways, to discourage cultivation, and consequently to
dry up the principal source of the wealth of every great country, I
have already had occasion to observe in the third book of this
Inquiry.

    What are called poll-taxes in the southern provinces of North
America, and in the West Indian Islands annual taxes of so much a head
upon every negro, are properly taxes upon the profits of a certain
species of stock employed in agriculture. As the planters are, the
greater part of them, both farmers and landlords, the final payment of
the tax falls upon them in their quality of landlords without any
retribution.

    Taxes of so much a head upon the bondmen employed in cultivation
seem anciently to have been common all over Europe. There subsists
at present a tax of this kind in the empire of Russia. It is
probably upon this account that poll-taxes of all kinds have often
been represented as badges of slavery. Every tax, however, is to the
person who pays it a badge, not of slavery, but of liberty. It denotes
that he is subject to government, indeed, but that, as he has some
property, he cannot himself be the property of a master. A poll-tax
upon slaves is altogether different from a poll-tax upon freemen.
The latter is paid by the persons upon whom it is imposed; the
former by a different set of persons. The latter is either
altogether arbitrary or altogether unequal, and in most cases is
both the one and the other; the former, though in some respects
unequal, different slaves being of different values, is in no
respect arbitrary. Every master who knows the number of his own slaves
knows exactly what he has to pay. Those different taxes, however,
being called by the same name, have been considered as of the same
nature.

    The taxes which in Holland are imposed upon men- and maid-servants
are taxes, not upon stock, but upon expense, and so far resemble the
taxes upon consumable commodities. The tax of a guinea a head for
every man-servant which has lately been imposed in Great Britain is of
the same kind. It falls heaviest upon the middling rank. A man of
two hundred a year may keep a single manservant. A man of ten thousand
a year will not keep fifty. It does not affect the poor.

    Taxes upon the profits of stock in particular employments can
never affect the interest of money. Nobody will lend his money for
less interest to those who exercise the taxed than to those who
exercise the untaxed employments. Taxes upon the revenue arising
from stock in all employments where the government attempts to levy
them with any degree of exactness, will, in many cases, fall upon
the interest of money. The Vingtieme, or twentieth penny, in France is
a tax of the same kind with what is called the land-tax in England,
and is assessed, in the same manner, upon the revenue arising from
land, houses, and stock. So far as it affects stock it is assessed,
though not with great rigour, yet with much more exactness than that
part of the land-tax of England which is imposed upon the same fund.
It, in many cases, falls altogether upon the interest of money.
Money is frequently sunk in France upon what are called Contracts
for the constitution of a rent; that is, perpetual annuities
redeemable at any time by the debtor upon repayment of the sum
originally advanced, but of which this redemption is not exigible by
the creditor except in particular cases. The Vingtieme, seems not to
have raised the rate of those annuities, though it is exactly levied
upon them all.

               Appendix to ARTICLES I and II.

    Taxes upon the Capital Value of Land, Houses, and Stock

    While property remains in the possession of the same person,
whatever permanent taxes may have been imposed upon it, they have
never been intended to diminish or take away any part of its capital
value, but only some part of the revenue arising from it. But when
property changes hands, when it is transmitted either from the dead to
the living, or from the living to the living, such taxes have
frequently been imposed upon it as necessarily take away some part
of its capital value.

    The transference of all sorts of property from the dead to the
living, and that of immovable property, of lands and houses, from
the living to the living, are transactions which are in their nature
either public and notorious, or such as cannot be long concealed. Such
transactions, therefore, may be taxed directly. The transference of
stock, or movable property, from the living to the living, by the
lending of money, is frequently a secret transaction, and may always
be made so. It cannot easily, therefore, be taxed directly. It has
been taxed indirectly in two different ways; first, by requiring
that the deed containing the obligation to repay should be written
upon paper or parchment which had paid a certain stamp-duty, otherwise
not to be valid; secondly, by requiring, under the like penalty of
invalidity, that it should be recorded either in a public or secret
register, and by imposing certain duties upon such registration.
Stamp-duties and duties of registration have frequently been imposed
likewise upon the deeds transferring property of all kinds from the
dead to the living, and upon those transferring immovable property
from the living to the living, transactions which might easily have
been taxed directly.

    The Vicesima Hereditatum, the twentieth penny of inheritances
imposed by Augustus upon the ancient Romans, was a tax upon the
transference of property from the dead to the living. Dion Cassius,
the author who writes concerning it the least indistinctly, says
that it was imposed upon all successions, legacies, and donations in
case of death, except upon those to the nearest relations and to the
poor.

    Of the same kind is the Dutch tax upon successions. Collateral
successions are taxed, according to the degree of relation, from
five to thirty per cent upon the whole value of the succession.
Testamentary donations, or legacies to collaterals, are subject to the
like duties. Those from husband to wife, or from wife to husband, to
the fiftieth penny. The Luctuosa Hereditas, the mournful succession of
ascendants to descendants, to the twentieth penny only. Direct
successions, or those of descendants to ascendants, pay no tax. The
death of a father, to such of his children as live in the same house
with him, is seldom attended with any increase, and frequently with
a considerable diminution of revenue, by the loss of his industry,
of his office, or of some life-rent estate of which he may have been
in possession. That tax would be cruel and oppressive which aggravated
their loss by taking from them any part of his succession. It may,
however, sometimes be otherwise with those children who, in the
language of the Roman law, are said to be emancipated; in that of
the Scotch law, to be forisfamiliated; that is, who have received
their portion, have got families of their own, and are supported by
funds separate and independent of those of their father. Whatever part
of his succession might come to such children would be a real addition
to their fortune, and might therefore, perhaps, without more
inconveniency than what attends all duties of this kind, be liable
to some tax.

    The casualties of the feudal law were taxes upon the
transference of land, both from the dead to the living, and from the
living to the living. In ancient times they constituted in every
part of Europe one of the principal branches of the revenue of the
crown.

    The heir of every immediate vassal of the crown paid a certain
duty, generally a year's rent, upon receiving the investiture of the
estate. If the heir was a minor, the whole rents of the estate
during the continuance of the minority devolved to the superior
without any other charge besides the maintenance of the minor, and the
payment of the widow's dower when there happened to be a dowager
upon the land. When the minor came to be of age, another tax, called
Relief, was still due to the superior, which generally amounted
likewise to a year's rent. A long minority, which in the present times
so frequently disburdens a great estate of all its incumbrances and
restores the family to their ancient splendour, could in those times
have no such effect. The waste, and not the disincumbrance of the
estate, was the common effect of a long minority.

    By the feudal law the vassal could not alienate without the
consent of his superior, who generally extorted a fine or
composition for granting it. This fine, which was at first
arbitrary, came in many countries to be regulated at a certain portion
of the price of the land. In some countries where the greater part
of the other feudal customs have gone into disuse, this tax upon the
alienation of land still continues to make a very considerable
branch of the revenue of the sovereign. In the canton of Berne it is
so high as a sixth part of the price of all noble fiefs, and a tenth
part of that of all ignoble ones. In the canton of Lucerne the tax
upon the sale of lands is not universal, and takes place only in
certain districts. But if any person sells his land in order to remove
out of the territory, he pays ten per cent upon the whole price of the
sale. Taxes of the same kind upon the sale either of all lands, or
of lands held by certain tenures, take place in many other
countries, and make a more or less considerable branch of the
revenue of the sovereign.

    Such transactions may be taxed indirectly by means either of
stamp-duties, or of duties upon registration, and those duties
either may or may not be proportioned to the value of the subject
which is transferred.

    In Great Britain the stamp-duties are higher or lower, not so much
according to the value of the property transferred (an eighteenpenny
or half-crown stamp being sufficient upon a bond for the largest sum
of money) as according to the nature of the deed. The highest do not
exceed six pounds upon every sheet of paper or skin of parchment,
and these high duties fall chiefly upon grants from the crown, and
upon certain law proceedings, without any regard to the value of the
subject. There are in Great Britain no duties on the registration of
deeds or writings, except the fees of the officers who keep the
register, and these are seldom more than a reasonable recompense for
their labour. The crown derives no revenue from them.

    In Holland there are both stamp-duties and duties upon
registration, which in some cases are, and in some are not,
proportioned to the value of the property transferred. All
testaments must be written upon stamped paper of which the price is
proportioned to the property disposed of, so that there are stamps
which cost from threepence, or three stivers a sheet, to three hundred
florins, equal to about twenty-seven pounds ten shillings of our
money. If the stamp is of an inferior price to what the testator ought
to have made use of, his succession is confiscated. This is over and
above all their other taxes on succession. Except bills of exchange,
and some other mercantile bills, all other deeds, bonds, and contracts
are subject to a stamp-duty. This duty, however, does not rise in
proportion to the value of the subject. All sales of land and of
houses, and all mortgages upon either, must be registered, and, upon
registration, pay a duty to the state of two and a half per cent
upon the amount of the price or of the mortgage. This duty is extended
to the sale of all ships and vessels of more than two tons burden,
whether decked or undecked. These, it seems, are considered as a
sort of houses upon the water. The sale of movables, when it is
ordered by a court of justice, is subject to the like duty of two
and a half per cent.

    In France there are both stamp-duties and duties upon
registration. The former are considered as a branch of the aides or
excise, and in the provinces where those duties take place are
levied by the excise officers. The latter are considered as a branch
of the domain of the crown, and are levied by a different set of
officers.

    Those modes of taxation, by stamp-duties and by duties upon
registration, are of very modern invention. In the course of little
more than a century, however, stamp-duties have, in Europe, become
almost universal, and duties upon registration extremely common. There
is no art which one government sooner learns of another than that of
draining money from the pockets of the people.

    Taxes upon the transference of property from the dead to the
living fall finally as well as immediately upon the person to whom the
property is transferred. Taxes upon the sale of land fall altogether
upon the seller. The seller is almost always under the necessity of
selling, and must, therefore, take such a price as he can get. The
buyer is scarce ever under the necessity of buying, and will,
therefore, only give such a price as he likes. He considers what the
land will cost him in tax and price together. The more he is obliged
to pay in the way of tax, the less he will be disposed to give in
the way of price. Such taxes, therefore, fall almost always upon a
necessitous person, and must, therefore, be frequently very cruel
and oppressive. Taxes upon the sale of new-built houses, where the
building is sold without the ground, fall generally upon the buyer,
because the builder must generally have his profit, otherwise he
must give up the trade. If he advances the tax, therefore, the buyer
must generally repay it to him. Taxes upon the sale of old houses, for
the same reason as those upon the sale of land, fall generally upon
the seller, whom in most cases either conveniency or necessity obliges
to sell. The number of new-built houses that are annually brought to
market is more or less regulated by the demand. Unless the demand is
such as to afford the builder his profit, after paying all expenses,
he will build no more houses. The number of old houses which happen at
any time to come to market is regulated by accidents of which the
greater part have no relation to the demand. Two or three great
bankruptcies in a mercantile town will bring many houses to sale which
must be sold for what can be got for them. Taxes upon the sale of
ground-rents fall altogether upon the seller, for the same reason as
those upon the sale of land. Stamp-duties, and duties upon the
registration of bonds and contracts for borrowed money, fall
altogether upon the borrower, and, in fact, are always paid by him.
Duties of the same kind upon law proceedings fall upon the suitors.
They reduce to both the capital value of the subject in dispute. The
more it costs to acquire any property, the less must be the net
value of it when acquired.

    All taxes upon the transference of property of every kind, so
far as they diminish the capital value of that property, tend to
diminish the funds destined for the maintenance of productive
labour. They are all more or less unthrifty taxes that increase the
revenue of the sovereign, which seldom maintains any but
unproductive labourers, at the expense of the capital of the people,
which maintains none but productive.

    Such taxes, even when they are proportioned to the value of the
property transferred, are still unequal, the frequency of transference
not being always equal in property of equal value. When they are not
proportioned to this value, which is the case with the greater part of
the stamp-duties and duties of registration, they are still more so.
They are in no respect arbitrary, but are or may be in all cases
perfectly clear and certain. Though they sometimes fall upon the
person who is not very able to pay, the time of payment is in most
cases sufficiently convenient for him. When the payment becomes due,
he must in most cases have the money to pay. They are levied at very
little expense, and in general subject the contributors to no other
inconveniency besides always the unavoidable one of paying the tax.

    In France the stamp-duties are not much complained of. Those of
registration, which they call the Controle, are. They give occasion,
it is pretended, to much extortion in the officers of the
farmers-general who collect the tax, which is in a great measure
arbitrary and uncertain. In the greater part of the libels which
have been written against the present system of finances in France the
abuses of the Controle make a principal article. Uncertainty, however,
does not seem to be necessarily inherent in the nature of such
taxes. If the popular complaints are well founded, the abuse must
arise, not so much from the nature of the tax as from the want of
precision and distinctness in the words of the edicts or laws which
impose it.

    The registration of mortgages, and in general of all rights upon
immovable property, as it gives great security both to creditors and
purchasers, is extremely advantageous to the public. That of the
greater part of deeds of other kinds is frequently inconvenient and
even dangerous to individuals, without any advantage to the public.
All registers which, it is acknowledged, ought to be kept secret,
ought certainly never to exist. The credit of individuals ought
certainly never to depend upon so very slender a security as the
probity and religion of the inferior officers of revenue. But where
the fees of registration have been made a source of revenue to the
sovereign, register offices have commonly been multiplied without end,
both for the deeds which ought to be registered, and for those which
ought not. In France there are several different sorts of secret
registers. This abuse, though not perhaps a necessary, it must be
acknowledged, is a very natural effect of such taxes.

    Such stamp-duties as those in England upon cards and dice, upon
newspapers and periodical pamphlets, etc., are properly taxes upon
consumption; the final payment falls upon the persons who use or
consume such commodities. Such stamp-duties as those upon licences
to retail ale, wine, and spirituous liquors, though intended, perhaps,
to fall upon the profits of the retailers, are likewise finally paid
by the consumers of those liquors. Such taxes, though called by the
same name, and levied by the same officers and in the same manner with
the stamp-duties above mentioned upon the transference of property,
are, however, of a quite different nature, and fall upon quite
different funds.

                       ARTICLE III

              Taxes upon the Wages of Labour

    The wages of the inferior classes of workmen, I have endeavoured
to show in the first book, are everywhere necessarily regulated by two
different circumstances; the demand for labour, and the ordinary or
average price of provisions. The demand for labour, according as it
happens to be either increasing, stationary, or declining, or to
require an increasing, stationary, or declining population,
regulates the subsistence of the labourer, and determines in what
degree it shall be, either liberal, moderate, or scanty. The
ordinary or average price of provisions determines the quantity of
money which must be paid to the workman in order to enable him, one
year with another, to purchase this liberal, moderate, or scanty
subsistence. While the demand for labour and the price of
provisions, therefore, remain the same, a direct tax upon the wages of
labour can have no other effect than to raise them somewhat higher
than the tax. Let us suppose, for example, that in a particular
place the demand for labour and the price of provisions were such as
to render ten shillings a week the ordinary wages of labour, and
that a tax of one-fifth, or four shillings in the pound, was imposed
upon wages. If the demand for labour and the price of provisions
remained the same, it would still be necessary that the labourer
should in that place earn such a subsistence as could be bought only
for ten shillings a week free wages. But in order to leave him such
free wages after paying such a tax, the price of labour must in that
place soon rise, not to twelve shillings a week only, but to twelve
and sixpence; that is, in order to enable him to pay a tax of
one-fifth, his wages must necessarily soon rise, not one-fifth part
only, but one-fourth. Whatever was the proportion of the tax, the
wages of labour must in all cases rise, not only in that proportion,
but in a higher proportion. If the tax, for example, was one-tenth,
the wages of labour must necessarily soon rise, not one-tenth part
only, but one-eighth.

    A direct tax upon the wages of labour, therefore, though the
labourer might perhaps pay it out of his hand, could not properly be
said to be even advanced by him; at least if tile demand for labour
and the average price of provisions remained the same after the tax as
before it. In all such cases, not only the tax but something more than
the tax would in reality be advanced by the person who immediately
employed him. The final payment would in different cases fall upon
different persons. The rise which such a tax might occasion in the
wages of manufacturing labour would be advanced by the master
manufacturer, who would both be entitled and obliged to charge it,
with a profit, upon the price of his goods. The final payment of
this rise of wages, therefore, together with the additional profit
of the master manufacturer, would fall upon the consumer. The rise
which such a tax might occasion in the wages of country labour would
be advanced by the farmer, who, in order to maintain the same number
of labourers as before, would be obliged to employ a greater
capital. In order to get back this greater capital, together with
the ordinary profits of stock, it would be necessary that he should
retain a larger portion, or what comes to the same thing, the price of
a larger portion, of the produce of the land, and consequently that he
should pay less rent to the landlord. The final payment of this rise
of wages, therefore, would in this case fall upon the landlord,
together with the additional profit of the farmer who had advanced it.
In all cases a direct tax upon the wages of labour must, in the
long-run, occasion both a greater reduction in the rent of land, and a
greater rise in the price of manufactured goods, than would have
followed from the proper assessment of a sum equal to the produce of
the tax partly upon the rent of land, and partly upon consumable
commodities.

    If direct taxes upon the wages of labour have not always
occasioned a proportionable rise in those wages, it is because they
have generally occasioned a considerable fall in the demand for
labour. The declension of industry, the decrease of employment for the
poor, the diminution of the annual produce of the land and labour of
the country, have generally been the effects of such taxes. In
consequence of them, however, the price of labour must always be
higher than it otherwise would have been in the actual state of the
demand: and this enhancement of price, together with the profit of
those who advance it, must always be finally paid by the landlords and
consumers.

    A tax upon the wages of country labour does not raise the price of
the rude produce of land in proportion to the tax, for the same reason
that a tax upon the farmer's profit does not raise that price in
that proportion.

    Absurd and destructive as such taxes are, however, they take place
in many countries. In France that part of the taille which is
charged upon the industry of workmen and day-labourers in country
villages is properly a tax of this kind. Their wages are computed
according to the common rate of the district in which they reside, and
that they may be as little liable as possible to any overcharge, their
yearly gains are estimated at no more than two hundred working days in
the year. The tax of each individual is varied from year to year
according to different circumstances, of which the collector or the
commissary whom the intendant appoints to assist him are the judges.
In Bohemia, in consequence of the alteration in the system of finances
which was begun in 1748, a very heavy tax is imposed upon the industry
of artificers. They are divided into four classes. The highest class
pay a hundred florins a year which, at two-and-twenty pence
halfpenny a florin, amounts to L9 7s. 6d. The second class are taxed
at seventy; the third at fifty; and the fourth, comprehending
artificers in villages, and the lowest class of those in towns, at
twenty-five florins.

    The recompense of ingenious artists and of men of liberal
professions, I have endeavoured to show in the first book, necessarily
keeps a certain proportion to the emoluments of inferior trades. A tax
upon this recompense, therefore, could have no other effect than to
raise it somewhat higher than in proportion to the tax. If it did
not rise in this manner, the ingenious arts and the liberal
professions, being no longer upon a level with other trades, would
be so much deserted that they would soon return to that level.

    The emoluments of offices are not, like those of trades and
professions, regulated by the free competition of the market, and do
not, therefore, always bear a just proportion to what the nature of
the employment requires. They are, perhaps, in most countries,
higher than it requires; the persons who have the administration of
government being generally disposed to reward both themselves and
their immediate dependants rather more than enough. The emoluments
of offices, therefore, can in most cases very well bear to be taxed.
The persons, besides, who enjoy public offices, especially the more
lucrative, are in all countries the objects of general envy, and a tax
upon their emoluments, even though it should be somewhat higher than
upon any other sort of revenue, is always a very popular tax. In
England, for example, when by the land-tax every other sort of revenue
was supposed to be assessed at four shillings in the pound, it was
very popular to lay a real tax of five shillings and sixpence in the
pound upon the salaries of offices which exceeded a hundred pounds a
year, the pensions of the younger branches of the royal family, the
pay of the officers of the army and navy, and a few others less
obnoxious to envy excepted. There are in England no other direct taxes
upon the wages of labour.

                          ARTICLE IV

  Taxes which, it is intended, should fall indifferently upon every

                    different Species of Revenue

    The taxes which, it is intended, should fall indifferently upon
every different species of revenue, are capitation taxes, and taxes
upon consumable commodities. These must be paid indifferently from
whatever revenue the contributors may possess; from the rent of
their land, from the profits of their stock, or from the wages of
their labour.

                        Capitation Taxes

    Capitation taxes, if it is attempted to proportion them to the
fortune or revenue of each contributor, become altogether arbitrary.
The state of a man's fortune varies from day to day, and without an
inquisition more intolerable than any tax, and renewed at least once
every year, can only be guessed at. His assessment, therefore, must in
most cases depend upon the good or bad humour of his assessors, and
must, therefore, be altogether arbitrary and uncertain.

    Capitation taxes, if they are proportioned not to the supposed
fortune, but to the rank of each contributor, become altogether
unequal, the degrees of fortune being frequently unequal in the same
degree of rank.

    Such taxes, therefore, if it is attempted to render them equal,
become altogether arbitrary and uncertain, and if it is attempted to
render them certain and not arbitrary, become altogether unequal.
Let the tax be light or heavy, uncertainty is always a great
grievance. In a light tax a considerable degree of inequality may be
supported; in a heavy one it is altogether intolerable.

    In the different poll-taxes which took place in England during the
reign of William III the contributors were, the greater part of
them, assessed according to the degree of their rank; as dukes,
marquisses, earls, viscounts, barons, esquires, gentlemen, the
eldest and youngest sons of peers, etc. All shopkeepers and
tradesmen worth more than three hundred pounds, that is, the better
sort of them, were subject to the same assessment, how great soever
might be the difference in their fortunes. Their rank was more
considered than their fortune. Several of those who in the first
poll-tax were rated according to their supposed fortune were
afterwards rated according to their rank. Serjeants, attorneys, and
proctors at law, who in the first poll-tax were assessed at three
shillings in the pound of their supposed income, were afterwards
assessed as gentlemen. In the assessment of a tax which was not very
heavy, a considerable degree of inequality had been found less
insupportable than any degree of uncertainty.

    In the capitation which has been levied in France without any
interruption since the beginning of the present century, the highest
orders of people are rated according to their rank by an invariable
tariff; the lower orders of people, according to what is supposed to
be their fortune, by an assessment which varies from year to year. The
officers of the king's court, the judges and other officers in the
superior courts of justice, the officers of the troops, etc., are
assessed in the first manner. The inferior ranks of people in the
provinces are assessed in the second. In France the great easily
submit to a considerable degree of inequality in a tax which, so far
as it affects them, is not a very heavy one, but could not brook the
arbitrary assessment of an intendant. The inferior ranks of people
must, in that country, suffer patiently the usage which their
superiors think proper to give them.

    In England the different poll-taxes never produced the sum which
had been expected from them, or which, it was supposed, they might
have produced, had they been exactly levied. In France the
capitation always produces the sum expected from it. The mild
government of England, when it assessed the different ranks of
people to the poll-tax, contented itself with what that assessment
happened to produce, and required no compensation for the loss which
the state might sustain either by those who could not pay, or by those
who would not pay (for there were many such), and who, by the
indulgent execution of the law, were not forced to pay. The more
severe government of France assesses upon each generality a certain
sum, which the intendant must find as he can. If any province
complains of being assessed too high, it may, in the assessment of
next year, obtain an abatement proportioned to the overcharge of the
year before. But it must pay in the meantime. The intendant, in
order to be sure of finding the sum assessed upon his generality,
was empowered to assess it in a larger sum that the failure or
inability of some of the contributors might be compensated by the
overcharge of the rest, and till 1765 the fixation of this surplus
assessment was left altogether to his discretion. In that year,
indeed, the council assumed this power to itself. In the capitation of
the provinces, it is observed by the perfectly well-informed author of
the Memoires upon the impositions in France, the proportion which
falls upon the nobility, and upon those whose privileges exempt them
from the taille, is the least considerable. The largest falls upon
those subject to the taille, who are assessed to the capitation at
so much a pound of what they pay to that other tax.

    Capitation taxes, so far as they are levied upon the lower ranks
of people, are direct taxes upon the wages of labour, and are attended
with all the inconveniences of such taxes.

    Capitation taxes are levied at little expense, and, where they are
rigorously exacted, afford a very sure revenue to the state. It is
upon this account that in countries where the ease, comfort, and
security of the inferior ranks of people are little attended to,
capitation taxes are very common. It is in general, however, but a
small part of the public revenue which, in a great empire, has ever
been drawn from such taxes, and the greatest sum which they have
ever afforded might always have been found in some other way much more
convenient to the people.

             Taxes upon Consumable Commodities

    The impossibility of taxing the people, in proportion to their
revenue, by any capitation, seems to have given occasion to the
invention of taxes upon consumable commodities. The state, not knowing
how to tax, directly and proportionably, the revenue of its
subjects, endeavours to tax it indirectly by taxing their expense,
which, it is supposed, will in most cases be nearly in proportion to
their revenue. Their expense is taxed by taxing the consumable
commodities upon which it is laid out.

    Consumable commodities are either necessaries or luxuries.

    By necessaries I understand not only the commodities which are
indispensably necessary for the support of life, but whatever the
custom of the country renders it indecent for creditable people,
even of the lowest order, to be without. A linen shirt, for example,
is, strictly speaking, not a necessary of life. The Greeks and
Romans lived, I suppose, very comfortably though they had no linen.
But in the present times, through the greater part of Europe, a
creditable day-labourer would be ashamed to appear in public without a
linen shirt, the want of which would be supposed to denote that
disgraceful degree of poverty which, it is presumed, nobody can well
fall into without extreme bad conduct. Custom, in the same manner, has
rendered leather shoes a necessary of life in England. The poorest
creditable person of either sex would be ashamed to appear in public
without them. In Scotland, custom has rendered them a necessary of
life to the lowest order of men; but not to the same order of women,
who may, without any discredit, walk about barefooted. In France
they are necessaries neither to men nor to women, the lowest rank of
both sexes appearing there publicly, without any discredit,
sometimes in wooden shoes, and sometimes barefooted. Under
necessaries, therefore, I comprehend not only those things which
nature, but those things which the established rules of decency have
rendered necessary to the lowest rank of people. All other things I
call luxuries, without meaning by this appellation to throw the
smallest degree of reproach upon the temperate use of them. Beer and
ale, for example, in Great Britain, and wine, even in the wine
countries, I call luxuries. A man of any rank may, without any
reproach, abstain totally from tasting such liquors. Nature does not
render them necessary for the support of life, and custom nowhere
renders it indecent to live without them.

    As the wages of labour are everywhere regulated, partly by the
demand for it, and partly by the average price of the necessary
articles of subsistence, whatever raises this average price must
necessarily raise those wages so that the labourer may still be able
to purchase that quantity of those necessary articles which the
state of the demand for labour, whether increasing, stationary, or
declining, requires that he should have. A tax upon those articles
necessarily raises their price somewhat higher than the amount of
the tax, because the dealer, who advances the tax, must generally
get it back with a profit. Such a tax must, therefore, occasion a rise
in the wages of labour proportionable to this rise of price.

    It is thus that a tax upon the necessaries of life operates
exactly in the same manner as a direct tax upon the wages of labour.
The labourer, though he may pay it out of his hand, cannot, for any
considerable time at least, be properly said even to advance it. It
must always in the long-run be advanced to him by his immediate
employer in the advanced rate of his wages. His employer, if he is a
manufacturer, will charge upon the price of his goods this rise of
wages, together with a profit; so that the final payment of the tax,
together with this overcharge, will fall upon the consumer. If his
employer is a farmer, the final payment, together with a like
overcharge, will fall upon the rent of the landlord.

    It is otherwise with taxes upon what I call luxuries, even upon
those of the poor. The rise in the price of the taxed commodities will
not necessarily occasion any rise in the wages of labour. A tax upon
tobacco, for example, though a luxury of the poor as well as of the
rich, will not raise wages. Though it is taxed in England at three
times, and in France at fifteen times its original price, those high
duties seem to have no effect upon the wages of labour. The same thing
may be said of the taxes upon tea and sugar, which in England and
Holland have become luxuries of the lowest ranks of people, and of
those upon chocolate, which in Spain is said to have become so. The
different taxes which in Great Britain have in the course of the
present century been imposed upon spirituous liquors are not
supposed to have had any effect upon the wages of labour. The rise
in the price of porter, occasioned by an additional tax of three
shillings upon the barrel of strong beer, has not raised the wages
of common labour in London. These were about eighteen pence and twenty
pence a day before the tax, and they are not more now.

    The high price of such commodities does not necessarily diminish
the ability of the inferior ranks of people to bring up families. Upon
the sober and industrious poor, taxes upon such commodities act as
sumptuary laws, and dispose them either to moderate, or to refrain
altogether from the use of superfluities which they can no longer
easily afford. Their ability to bring up families, in consequence of
this forced frugality, instead of being diminished, is frequently,
perhaps, increased by the tax. It is the sober and industrious poor
who generally bring up the most numerous families, and who principally
supply the demand for useful labour. All the poor, indeed, are not
sober and industrious, and the dissolute and disorderly might continue
to indulge themselves in the use of such commodities after this rise
of price in the same manner as before without regarding the distress
which this indulgence might bring upon their families. Such disorderly
persons, however, seldom rear up numerous families, their children
generally perishing from neglect, mismanagement, and the scantiness or
unwholesomeness of their food. If by the strength of their
constitution they survive the hardships to which the bad conduct of
their parents exposes them, yet the example of that bad conduct
commonly corrupts their morals, so that, instead of being useful to
society by their industry, they become public nuisances by their vices
and disorders. Though the advanced price of the luxuries of the
poor, therefore, might increase somewhat the distress of such
disorderly families, and thereby diminish somewhat their ability to
bring up children, it would not probably diminish much the useful
population of the country.

    Any rise in the average price of necessaries, unless it is
compensated by a proportionable rise in the wages of labour, must
necessarily diminish more or less the ability of the poor to bring
up numerous families, and consequently to supply the demand for useful
labour, whatever may be the state of that demand, whether
increasing, stationary, or declining, or such as requires an
increasing, stationary, or declining population.

    Taxes upon luxuries have no tendency to raise the price of any
other commodities except that of the commodities taxed. Taxes upon
necessaries, by raising the wages of labour, necessarily tend to raise
the price of all manufactures, and consequently to diminish the extent
of their sale and consumption. Taxes upon luxuries are finally paid by
the consumers of the commodities taxed without any retribution. They
fall indifferently upon every species of revenue, the wages of labour,
the profits of stock, and the rent of land. Taxes upon necessaries, so
far as they affect the labouring poor, are finally paid, partly by
landlords in the diminished rent of their lands, and partly by rich
consumers, whether landlords or others, in the advanced price of
manufactured goods, and always with a considerable overcharge. The
advanced price of such manufactures as are real necessaries of life,
and are destined for the consumption of the poor, of coarse
woollens, for example, must be compensated to the poor by a further
advancement of their wages. The middling and superior ranks of people,
if they understand their own interest, ought always to oppose all
taxes upon the necessaries of life, as well as all direct taxes upon
the wages of labour. The final payment of both the one and the other
falls altogether upon themselves, and always with a considerable
overcharge. They fall heaviest upon the landlords, who always pay in a
double capacity; in that of landlords by the reduction of their
rent, and in that of rich consumers by the increase of their
expense. The observation of Sir Matthew Decker, that certain taxes
are, in the price of certain goods, sometimes repeated and accumulated
four or five times, is perfectly just with regard to taxes upon the
necessaries of life. In the price of leather, for example, you must
pay not only for the tax upon the leather of your own shoes, but for a
part of that upon those of the shoemaker and the tanner. You must pay,
too, for the tax upon the salt, upon the soap, and upon the candles
which those workmen consume while employed in your service, and for
the tax upon the leather which the salt-maker, the soap-maker, and the
candle-maker consume while employed in their service.

    In Great Britain, the principal taxes upon the necessaries of life
are those upon the four commodities just now mentioned, salt, leather,
soap, and candles.

    Salt is a very ancient and a very universal subject of taxation.
It was taxed among the Romans, and it is so at present in, I
believe, every part of Europe. The quantity annually consumed by any
individual is so small, and may be purchased so gradually, that
nobody, it seems to have been thought, could feel very sensibly even a
pretty heavy tax upon it. It is in England taxed at three shillings
and fourpence a bushel- about three times the original price of the
commodity. In some other countries the tax is still higher. Leather is
a real necessary of life. The use of linen renders soap such. In
countries where the winter nights are long, candles are a necessary
instrument of trade. Leather and soap are in Great Britain taxed at
three halfpence a pound, candles at a penny; taxes which, upon the
original price of leather, may amount to about eight or ten per
cent; upon that of soap to about twenty or five-and-twenty per cent;
and upon that of candles to about fourteen or fifteen per cent;
taxes which, though lighter than that upon salt, are still very heavy.
As all those four commodities are real necessaries of life, such heavy
taxes upon them must increase somewhat the expense of the sober and
industrious poor, and must consequently raise more or less the wages
of their labour.

    In a country where the winters are so cold as in Great Britain,
fuel is, during that season, in the strictest sense of the word, a
necessary of life, not only for the purpose of dressing victuals,
but for the comfortable subsistence of many different sorts of workmen
who work within doors; and coals are the cheapest of all fuel. The
price of fuel has so important an influence upon that of labour that
all over Great Britain manufactures have confined themselves
principally to the coal countries, other parts of the country, on
account of the high price of this necessary article, not being able to
work so cheap. In some manufactures, besides, coal is a necessary
instrument of trade, as in those of glass, iron, and all other metals.
If a bounty could in any case be reasonable, it might perhaps be so
upon the transportation of coals from those parts of the country in
which they abound to those in which they are wanted. But the
legislature, instead of a bounty, has imposed a tax of three shillings
and threepence a ton upon coal carried coastways, which upon most
sorts of coal is more than sixty per cent of the original price at the
coal-pit. Coals carried either by land or by inland navigation pay
no duty. Where they are naturally cheap, they are consumed duty
free: where they are naturally dear, they are loaded with a heavy
duty.

    Such taxes, though they raise the price of subsistence, and
consequently the wages of labour, yet they afford a considerable
revenue to government which it might not be easy to find in any
other way. There may, therefore, be good reasons for continuing
them. The bounty upon the exportation of corn, so far as it tends in
the actual state of tillage to raise the price of that necessary
article, produces all the like bad effects, and instead of affording
any revenue, frequently occasions a very great expense to
government. The high duties upon the importation of foreign corn,
which in years of moderate plenty amount to a prohibition, and the
absolute prohibition of the importation either of live cattle or of
salt provisions, which takes place in the ordinary state of the law,
and which, on account of the scarcity, is at present suspended for a
limited time with regard to Ireland and the British plantations,
have all the bad effects of taxes upon the necessaries of life, and
produce no revenue to government. Nothing seems necessary for the
repeal of such regulations but to convince the public of the
futility of that system in consequence of which they have been
established.

    Taxes upon the necessaries of life are much higher in many other
countries than in Great Britain. Duties upon flour and meal when
ground at the mill, and upon bread when baked at the oven, take
place in many countries. In Holland the money price of the bread
consumed in towns is supposed to be doubled by means of such taxes. In
lieu of a part of them, the people who live in the country pay every
year so much a head according to the sort of bread they are supposed
to consume. Those who consume wheaten bread pay three guilders fifteen
stivers- about six shillings and ninepence halfpenny. These, and
some other taxes of the same kind, by raising the price of labour, are
said to have ruined the greater part of the manufactures of Holland.
Similar taxes, though not quite so heavy, take place in the
Milanese, in the states of Genoa, in the duchy of Modena, in the
duchies of Parma, Placentia, and Guastalla, and in the
ecclesiastical state. A French author of some note has proposed to
reform the finances of his country by substituting in the room of
the greater part of other taxes this most ruinous of all taxes.
There is nothing so absurd, says Cicero, which has not sometimes
been asserted by philosophers.

    Taxes upon butchers' meat are still more common than those upon
bread. It may indeed be doubted whether butchers' meat is anywhere a
necessary of life. Grain and other vegetables, with the help of
milk, cheese, and butter, or oil where butter is not to be had, it
is known from experience, can, without any butchers' meat, afford
the most plentiful, the most wholesome, the most nourishing, and the
most invigorating diet. Decency nowhere requires that any man should
eat butchers' meat, as it in most places requires that he should
wear a linen shirt or a pair of leather shoes.

    Consumable commodities, whether necessaries or luxuries, may be
taxed in two different ways. The consumer may either pay an annual sum
on account of his using or consuming goods of a certain kind, or the
goods may be taxed while they remain in the hands of the dealer, and
before they are delivered to the consumer. The consumable goods
which last a considerable time before they are consumed altogether are
most properly taxed in the one way; those of which the consumption
is either immediate or more speedy, in the other. The coach-tax and
plate-tax are examples of the former method of imposing: the greater
part of the other duties of excise and customs, of the latter.

    A coach may, with good management, last ten or twelve years. It
might be taxed, once for all, before it comes out of the hands of
the coachmaker. But it is certainly more convenient for the buyer to
pay four pounds a year for the privilege of keeping a coach than to
pay all at once forty or forty-eight pounds additional price to the
coachmaker, or a sum equivalent to what the tax is likely to cost
him during the time he uses the same coach. A service of plate, in the
same manner, may last more than a century. It is certainly easier
for the consumer to pay five shillings a year for every hundred ounces
of plate, near one per cent of the value, than to redeem this long
annuity at five-and-twenty or thirty years' purchase, which would
enhance the price at least five-and-twenty or thirty per cent. The
different taxes which affect houses are certainly more conveniently
paid by moderate annual payments than by a heavy tax of equal value
upon the first building or sale of the house.

    It was the well-known proposal of Sir Matthew Decker that all
commodities, even those of which the consumption is either immediate
or very speedy, should be taxed in this manner, the dealer advancing
nothing, but the consumer paying a certain annual sum for the
licence to consume certain goods. The object of his scheme was to
promote all the different branches of foreign trade, particularly
the carrying trade, by taking away all duties upon importation and
exportation, and thereby enabling the merchant to employ his whole
capital and credit in the purchase of goods and the freight of
ships, no part of either being diverted towards the advancing of
taxes. The project, however, of taxing, in this manner, goods of
immediate or speedy consumption seems liable to the four following
very important objections. First, the tax would be more unequal, or
not so well proportioned to the expense and consumption of the
different contributors as in the way in which it is commonly
imposed. The taxes upon ale, wine, and spirituous liquors, which are
advanced by the dealers, are finally paid by the different consumers
exactly in proportion to their respective consumption. But if the
tax were to be paid by purchasing a licence to drink those liquors,
the sober would, in proportion to his consumption, be taxed much
more heavily than the drunken consumer. A family which exercised great
hospitality would be taxed much more lightly than one who
entertained fewer guests. Secondly, this mode of taxation, by paying
for an annual, half-yearly, or quarterly licence to consume certain
goods, would diminish very much one of the principal conveniences of
taxes upon goods of speedy consumption the piecemeal payment. In the
price of threepence halfpenny, which is at present paid for a pot of
porter, the different taxes upon malt, hops, and beer, together with
the extraordinary profit which the brewer charges for having
advanced them, may perhaps amount to about three halfpence. If a
workman can conveniently spare those three halfpence, he buys a pot of
porter. If he cannot, he contents himself with a pint, and, as a penny
saved is a penny got, he thus gains a farthing by his temperance. He
pays the tax piecemeal as he can afford to pay it, and when he can
afford to pay it, and every act of payment is perfectly voluntary, and
what he can avoid if he chooses to do so. Thirdly, such taxes would
operate less as sumptuary laws. When the licence was once purchased,
whether the purchaser drank much or drank little, his tax would be the
same. Fourthly, if a workman were to pay all at once, by yearly,
half-yearly, or quarterly payments, a tax equal to what he at
present pays, with little or no inconveniency, upon all the
different pots and pints of porter which he drinks in any such
period of time, the sum might frequently distress him very much.
This mode of taxation, therefore, it seems evident, could never,
without the most grievous oppression, produce a revenue nearly equal
to what is derived from the present mode without any oppression. In
several countries, however, commodities of an immediate or very speedy
consumption are taxed in this manner. In Holland people pay so much
a head for a licence to drink tea. I have already mentioned a tax upon
bread, which, so far as it is consumed in farm-houses and country
villages, is there levied in the same manner.

    The duties of excise are imposed briefly upon goods of home
produce destined for home consumption. They are imposed only upon a
few sorts of goods of the most general use. There can never be any
doubt either concerning the goods which are subject to those duties,
or concerning the particular duty which each species of goods is
subject to. They fall almost altogether upon what I call luxuries,
excepting always the four duties above mentioned, upon salt soap,
leather, candles, and, perhaps, that upon green glass.

    The duties of customs are much more ancient than those of
excise. They seem to have been called customs as denoting customary
payments which had been in use from time immemorial. They appear to
have been originally considered as taxes upon the profits of
merchants. During the barbarous times of feudal anarchy, merchants,
like all the other inhabitants of burghs, were considered as little
better than emancipated bondmen, whose persons were despised, and
whose gains were envied. The great nobility, who had consented that
the king should tallage the profits of their own tenants, were not
unwilling that he should tallage likewise those of an order of men
whom it was much less their interest to protect. In those ignorant
times it was not understood that the profits of merchants are a
subject not taxable directly, or that the final payment of all such
taxes must fall, with a considerable overcharge, upon the consumers.

    The gains of alien merchants were looked upon more unfavourably
than those of English merchants. It was natural, therefore, that those
of the former should be taxed more heavily than those of the latter.
This distinction between the duties upon aliens and those upon English
merchants, which was begun from ignorance, has been continued from the
spirit of monopoly, or in order to give our own merchants an advantage
both in the home and in the foreign market.

    With this distinction, the ancient duties of customs were
imposed equally upon all sorts of goods, necessaries as well as
luxuries, goods exported as well as goods imported. Why should the
dealers in one sort of goods, it seems to have been thought, be more
favoured than those in another? or why should the merchant exporter be
more favoured than the merchant importer?

    The ancient customs were divided into three branches. The first,
and perhaps the most ancient of all those duties, was that upon wool
and leather. It seems to have been chiefly or altogether an
exportation duty. When the woollen manufacture came to be
established in England, lest the king should lose any part of his
customs upon wool by the exportation of woollen cloths, a like duty
was imposed upon them. The other two branches were, first, a duty upon
wine, which, being imposed at so much a ton, was called a tonnage,
and, secondly, a duty upon all other goods, which, being imposed at so
much a pound of their supposed value, was called a poundage. In the
forty-seventh year of Edward III a duty of sixpence in the pound was
imposed upon all goods exported and imported, except wools,
wool-fells, leather, and wines, which were subject to particular
duties. In the fourteenth of Richard II this duty was raised to one
shilling in the pound, but three years afterwards it was again reduced
to sixpence. It was raised to eightpence in the second year of Henry
IV, and in the fourth year of the same prince to one shilling. From
this time to the ninth year of William III this duty continued at
one shilling in the pound. The duties of tonnage and poundage were
generally granted to the king by one and the same Act of Parliament,
and were called the Subsidy of Tonnage and Poundage. The Subsidy of
Poundage having continued for so long a time at one shining in the
pound, or at five per cent, a subsidy came, in the language of the
customs, to denote a general duty of this kind of five per cent.
This subsidy, which is now called the Old Subsidy, still continues
to be levied according to the book of rates established in the twelfth
of Charles II. The method of ascertaining, by a book of rates, the
value of goods subject to this duty is said to be older than the
time of James I. The New Subsidy imposed by the ninth and tenth of
William III was an additional five per cent upon the greater part of
goods. The One-third and the Two-third Subsidy made up between them
another five per cent of which they were proportionable parts. The
Subsidy of 1747 made a fourth five per cent upon the greater part of
goods; and that of 1759 a fifth upon some particular sorts of goods.
Besides those five subsidies, a great variety of other duties have
occasionally been imposed upon particular sorts of goods, in order
sometimes to relieve the exigencies of the state, and sometimes to
regulate the trade of the country according to the principles of the
mercantile system.

    That system has come gradually more and more into fashion. The Old
Subsidy was imposed indifferently upon exportation as well as
importation. The four subsequent subsidies, as well as the other
duties which have been occasionally imposed upon particular sorts of
goods have, with a few exceptions, been laid altogether upon
importation. The greater part of the ancient duties which had been
imposed upon the exportation of the goods of home produce and
manufacture have either been lightened or taken away altogether. In
most cases they have been taken away. Bounties have even been given
upon the exportation of some of them. Drawbacks too, sometimes of
the whole, and, in most cases, of a part of the duties which are
paid upon the importation of foreign goods, have been granted upon
their exportation. Only half the duties imposed by the Old Subsidy
upon importation are drawn back upon exportation: but the whole of
those imposed by the latter subsidies and other imposts are, upon
the greater part of goods, drawn back in the same manner. This growing
favour of exportation, and discouragement of importation, have
suffered only a few exceptions, which chiefly concern the materials of
some manufactures. These our merchants and manufacturers are willing
should come as cheap as possible to themselves, and as dear as
possible to their rivals and competitors in other countries. Foreign
materials are, upon this account, sometimes allowed to be imported
duty free; Spanish wool, for example, flax, and raw linen yarn. The
exportation of the materials of home produce, and of those which are
the particular produce of our colonies, has sometimes been prohibited,
and sometimes subjected to higher duties. The exportation of English
wool has been prohibited. That of beaver skins, of beaver wool, and of
gum Senega has been subjected to higher duties. Great Britain, by
the conquest of Canada and Senegal, having got almost the monopoly
of those commodities.

    That the mercantile system has not been very favourable to the
revenue of the great body of the people, to the annual produce of
the land and labour of the country, I have endeavoured to show in
the fourth book of this Inquiry. It seems not to have been more
favourable to the revenue of the sovereign, so far at least as that
revenue depends upon the duties of customs.

    In consequence of that system, the importation of several sorts of
goods has been prohibited altogether. This prohibition has in some
cases entirely prevented, and in others has very much diminished the
importation of those commodities by reducing the importers to the
necessity of smuggling. It has entirely prevented the importation of
foreign woollens, and it has very much diminished that of foreign
silks and velvets. In both cases it has entirely annihilated the
revenue of customs which might have been levied upon such importation.

    The high duties which have been imposed upon the importation of
many different sorts of foreign goods, in order to discourage their
consumption in Great Britain, have in many cases served only to
encourage smuggling, and in all cases have reduced the revenue of
the customs below what more moderate duties would have afforded. The
saying of Dr. Swift, that in the arithmetic of the customs two and
two, instead of making four, make sometimes only one, holds
perfectly true with regard to such heavy duties which never could have
been imposed had not the mercantile system taught us, in many cases,
to employ taxation as an instrument, not of revenue, but of monopoly.

    The bounties which are sometimes given upon the exportation of
home produce and manufactures, and the drawbacks which are paid upon
the re-exportation of the greater part of foreign goods, have given
occasion to many frauds, and to a species of smuggling more
destructive of the public revenue than any other. In order to obtain
the bounty or drawback, the goods, it is well known, are sometimes
shipped and sent to sea, but soon afterwards clandestinely relanded in
some other part of the country. The defalcation of the revenue of
customs occasioned by the bounties and drawbacks, of which a great
part are obtained fraudulently, is very great. The gross produce of
the customs in the year which ended on the 5th of January 1755
amounted to L5,068,000. The bounties which were paid out of this
revenue, though in that year there was no bounty upon corn, amounted
to L167,800. The drawbacks which were paid upon debentures and
certificates, to L2,156,800. Bounties and drawbacks together
amounted to L2,324,600. In consequence of these deductions the revenue
of the customs amounted only to L2,743,400: from which, deducting
L287,900 for the expense of management in salaries and other
incidents, the net revenue of the customs for that year comes out to
be L2,455,500. The expense of management amounts in this manner to
between five and six per cent upon the gross revenue of the customs,
and to something more than ten per cent upon what remains of that
revenue after deducting what is paid away in bounties and drawbacks.

    Heavy duties being imposed upon almost all goods imported, our
merchant importers smuggle as much and make entry of as little as they
can. Our merchant exporters, on the contrary, make entry of more
than they export; sometimes out of vanity, and to pass for great
dealers in goods which pay no duty, and sometimes to gain a bounty
or a drawback. Our exports, in consequence of these different
frauds, appear upon the customhouse books greatly to overbalance our
imports, to the unspeakable comfort of those politicians who measure
the national prosperity by what they call the balance of trade.

    All goods imported, unless particularly exempted, and such
exemptions are not very numerous, are liable to some duties of
customs. If any goods are imported not mentioned in the book of rates,
they are taxed at 4s. 9 9/20d. for every twenty shillings value,
according to the oath of the importer, that is, nearly at five
subsidies, or five poundage duties. The book of rates is extremely
comprehensive, and enumerates a great variety of articles, many of
them little used, and therefore not well known. It is upon this
account frequently uncertain under what article a particular sort of
goods ought to be classed, and consequently what duty they ought to
pay. Mistakes with regard to this sometimes ruin the custom-house
officer, and frequently occasion much trouble, expense, and vexation
to the importer. In point of perspicuity, precision, and distinctness,
therefore, the duties of customs are much more inferior to those of
excise.

    In order that the greater part of the members of any society
should contribute to the public revenue in proportion to their
respective expense, it does not seem necessary that every single
article of that expense should be taxed. The revenue which is levied
by the duties of excise is supposed to fall as equally upon the
contributors as that which is levied by the duties of customs, and the
duties of excise are imposed upon a few articles only of the most
general use and consumption. It has been the opinion of many people
that, by proper management, the duties of customs might likewise,
without any loss to the public revenue, and with great advantage to
foreign trade, be confined to a few articles only.

    The foreign articles of the most general use and consumption in
Great Britain seem at present to consist chiefly in foreign wines
and brandies; in some of the productions of America and the West
Indies- sugar, rum, tobacco, cocoanuts, etc.; and in some of those
of the East Indies- tea, coffee, china-ware, spiceries of all kinds,
several sorts of piece-goods, etc. These different articles afford,
perhaps, at present, the greater part of the revenue which is drawn
from the duties of customs. The taxes which at present subsist upon
foreign manufactures, if you except those upon the few contained in
the foregoing enumeration, have the greater part of them been
imposed for the purpose, not of revenue, but of monopoly, or to give
our own merchants an advantage in the home market. By removing all
prohibitions, and by subjecting all foreign manufactures to such
moderate taxes as it was found from experience afforded upon each
article the greatest revenue to the public, our own workmen might
still have a considerable advantage in the home market, and many
articles, some of which at present afford no revenue to government,
and others a very inconsiderable one, might afford a very great one.

    High taxes, sometimes by diminishing the consumption of the
taxed commodities, and sometimes by encouraging smuggling,
frequently afford a smaller revenue to government than what might be
drawn from more moderate taxes.

    When the diminution of revenue is the effect of the diminution
of consumption there can be but one remedy, and that is the lowering
of the tax.

    When the diminution of the revenue is the diminution of the
revenue is the effect of the encouragement given to smuggling, it
may perhaps be remedied in two ways; either by diminishing the
temptation to smuggle, or by increasing the difficulty of smuggling.
The temptation to smuggle can be diminished only by the lowering of
the tax, and the difficulty of smuggling can be increased only by
establishing that system of administration which is most proper for
preventing it.

    The excise laws, it appears, I believe, from experience,
obstruct and embarrass the operations of the smuggler much more
effectually than those of the customs. By introducing into the customs
a system of administration as similar to that of the excise as the
nature of the different duties will admit, the difficulty of smuggling
might be very much increased. This alteration, it has been supposed by
many people, might very easily be brought about.

    The importer of commodities liable to any duties of customs, it
has been said, might as his option be allowed either to carry them
to his own private warehouse, or to lodge them in a warehouse provided
either at his own expense or at that of the public, but under the
key of the custom-house officer, and never to be opened but in his
presence. If the merchant carried them to his own private warehouse,
the duties to be immediately paid, and never afterwards to be drawn
back, and that warehouse to be at all times subject to the visit and
examination of the custom-house officer, in order to ascertain how far
the quantity contained in it corresponded with that for which the duty
had been paid. If he carried them to the public warehouse, no duty
to be paid till they were taken out for home consumption. If taken out
for exportation, to be duty free, proper security being always given
that they should be so exported. The dealers in those particular
commodities, either by wholesale or retail, to be at all times subject
to the visit and examination of the custom-house officer, and to be
obliged to justify by proper certificates the payment of the duty upon
the whole quantity contained in their shops or warehouses. What are
called the excise-duties upon rum imported are at present levied in
this manner, and the same system of administration might perhaps be
extended to all duties upon goods imported, provided always that those
duties were, like the duties of excise, confined to a few sorts of
goods of the most general use and consumption. If they were extended
to almost all sorts of goods, as at present, public warehouses of
sufficient extent could not easily be provided, and goods of a very
delicate nature, or of which the preservation required much care and
attention, could not safely be trusted by the merchant in any
warehouse but his own.

    If by such a system of administration smuggling, to any
considerable extent, could be prevented even under pretty high duties,
and if every duty was occasionally either heightened or lowered
according as it was most likely, either the one way or the other, to
afford the greatest revenue to the state, taxation being always
employed as an instrument of revenue and never of monopoly, it seems
not improbable that a revenue at least equal to the present net
revenue of the customs might be drawn from duties upon the importation
of only a few sorts of goods of the most general use and
consumption, and that the duties of customs might thus be brought to
the same degree of simplicity, certainty, and precision as those of
excise. What the revenue at present loses by drawbacks upon the
re-exportation of foreign goods which are afterwards relanded and
consumed at home would under this system be saved altogether. If to
this saving, which would alone be very considerable, were added the
abolition of all bounties upon the exportation of home produce in
all cases in which those bounties were not in reality drawbacks of
some duties of excise which had before been advanced, it cannot well
be doubted but that the net revenue of customs might, after an
alteration of this kind, be fully equal to what it had ever been
before.

    If by such a change of system the public revenue suffered no loss,
the trade and manufactures of the country would certainly gain a
very considerable advantage. The trade in the commodities not taxed,
by far the greatest number, would be perfectly free, and might be
carried on to and from all parts of the world with every possible
advantage. Among those commodities would be comprehended all the
necessaries of life and all the materials of manufacture. So far as
the free importation of the necessaries of life reduced their
average money price in the home market it would reduce the money price
of labour, but without reducing in any respect its real recompense.
The value of money is in proportion to the quantity of the necessaries
of life which it will purchase. That of the necessaries of life is
altogether independent of the quantity of money which can be had for
them. The reduction in the money price of labour would necessarily
be attended with a proportionable one in that of all home
manufactures, which would thereby gain some advantage in all foreign
markets. The price of some manufactures would be reduced in a still
greater proportion by the free importation of the raw materials. If
raw silk could be imported from China and Indostan duty free, the silk
manufacturers in England could greatly undersell those of both
France and Italy. There would be no occasion to prohibit the
importation of foreign silks and velvets. The cheapness of their goods
would secure to our own workmen not only the possession of the home,
but a very great command of the foreign market. Even the trade in
the commodities taxed would be carried on with much more advantage
than at present. If those commodities were delivered out of the public
warehouse for foreign exportation, being in this case exempted from
all taxes, the trade in them would be perfectly free. The carrying
trade in all sorts of goods would under this system enjoy every
possible advantage. If those commodities were delivered out for home
consumption, the importer not being obliged to advance the tax till he
had an opportunity of selling his goods, either to some dealer, or
to some consumer, he could always afford to sell them cheaper than
if he had been obliged to advance it at the moment of importation.
Under the same taxes, the foreign trade of consumption even in the
taxed commodities might in this manner be carried on with much more
advantage than it can be at present.

    It was the object of the famous excise scheme of Sir Robert
Walpole to establish, with regard to wine and tobacco, a system not
very unlike that which is here proposed. But though the bill which was
then brought into Parliament comprehended those two commodities,
only it was generally supposed to be meant as an introduction to a
more extensive scheme of the same kind, faction, combined with the
interest of smuggling merchants, raised so violent, though so
unjust, a clamour against that bill, that the minister thought
proper to drop it, and from a dread of exciting a clamour of the
same kind, none of his successors have dared to resume the project.

    The duties upon foreign luxuries imported for home consumption,
though they sometimes fall upon the poor, fall principally upon people
of middling or more than middling fortune. Such are, for example,
the duties upon foreign wines, upon coffee, chocolate, tea, sugar,
etc.

    The duties upon the cheaper luxuries of home produce destined
for home consumption fall pretty equally upon people of all ranks in
proportion to their respective expense. The poor pay the duties upon
malt, hops, beer, and ale, upon their own consumption: the rich,
upon both their own consumption and that of their servants.

    The whole consumption of the inferior ranks of people, or of those
below the middling rank, it must be observed, is in every country much
greater, not only in quantity, but in value, than that of the middling
and of those above the middling rank. The whole expense of the
inferior is much greater than that of the superior ranks. In the first
place, almost the whole capital of every country is annually
distributed among the inferior ranks of people as the wages of
productive labour. Secondly, a great part of the revenue arising
from both the rent of land and the profits of stock is annually
distributed among the same rank in the wages and maintenance of menial
servants, and other unproductive labourers. Thirdly, some part of
the profits of stock belongs to the same rank as a revenue arising
from the employment of their small capitals. The amount of the profits
annually made by small shopkeepers, tradesmen, and retailers of all
kinds is everywhere very considerable, and makes a very considerable
portion of the annual produce. Fourthly, and lastly, some part even of
the rent of land belongs to the same rank, a considerable part of
those who are somewhat below the middling rank, and a small part
even to the lowest rank, common labourers sometimes possessing in
property an acre or two of land. Though the expense of those
inferior ranks of people, therefore, taking them individually, is very
small, yet the whole mass of it, taking them collectively, amounts
always to by much the largest portion of the whole expense of the
society; what remains of the annual produce of the land and labour
of the country for the consumption of the superior ranks being
always much less, not only in quantity, but in value. The taxes upon
expense, therefore, which fall chiefly upon that of the superior ranks
of people, upon the smaller portion of the annual produce, are
likely to be much less productive than either those which fall
indifferently upon the expense of all ranks, or even those which
fall chiefly upon that of the inferior ranks; than either those
which fall indifferently upon the whole annual produce, or those which
fall chiefly upon the larger portion of it. The excise upon the
materials and manufacture of home-made fermented and spirituous
liquors is accordingly, of all the different taxes upon expense, by
far the most productive; and this branch of the excise falls very
much, perhaps principally, upon the expense of the common people. In
the year which ended on the 5th of July 1775, the gross produce of
this branch of the excise amounted to L3,341,837 9s. 9d.

    It must always be remembered, however, that it is the luxurious
and not the necessary expense of the inferior ranks of people that
ought ever to be taxed. The final payment of any tax upon their
necessary expense would fall altogether upon the superior ranks of
people; upon the smaller portion of the annual produce, and not upon
the greater. Such a tax must in all cases either raise the wages of
labour, or lessen the demand for it. It could not raise the wages of
labour without throwing the final payment of the tax upon the superior
ranks of people. It could not lessen the demand for labour without
lessening the annual produce of the land and labour of the country,
the fund from which all taxes must be finally paid. Whatever might
be the state to which a tax of this kind reduced the demand for
labour, it must always raise wages higher than they otherwise would be
in that state, and the final payment of this enhancement of wages must
in all cases fall upon the superior ranks of people.

    Fermented liquors brewed, and spirituous liquors distilled, not
for sale, but for private use, are not in Great Britain liable to
any duties of excise. This exemption, of which the object is to save
private families from the odious visit and examination of the
tax-gatherer, occasions the burden of those duties to fall
frequently much lighter upon the rich than upon the poor. It is not,
indeed, very common to distil for private use, though it is done
sometimes. But in the country many middling and almost all rich and
great families brew their own beer. Their strong beer, therefore,
costs them eight shillings a barrel less than it costs the common
brewer, who must have his profit upon the tax as well as upon all
the other expense which he advances. Such families, therefore, must
drink their beer at least nine or ten shillings a barrel cheaper
than any liquor of the same quality can be drunk by the common people,
to whom it is everywhere more convenient to buy their beer, by
little and little, from the brewery or the alehouse. Malt, in the same
manner, that is made for the use of a private family is not liable
to the visit or examination of the tax-gatherer; but in this case
the family must compound at seven shillings and sixpence a head for
the tax. Seven shillings and sixpence are equal to the excise upon ten
bushels of malt- a quantity fully equal to what all the different
members of any sober family, men, women, and children, are at an
average likely to consume. But in rich and great families, where
country hospitality is much practised, the malt liquors consumed by
the members of the family make but a small part of the consumption
of the house. Either on account of this composition, however, or for
other reasons, it is not near so common to malt as to brew for private
use. It is difficult to imagine any equitable reason why those who
either brew or distil for private use should not be subject to a
composition of the same kind.

    A greater revenue than what is at present drawn from all the heavy
taxes upon malt, beer, and ale might be raised, it has frequently been
said, by a much lighter tax upon malt, the opportunities of defrauding
the revenue being much greater in a brewery than in a malt-house,
and those who brew for private use being exempted from all duties or
composition for duties, which is not the case with those who malt
for private use.

    In the porter brewery of London a quarter of malt is commonly
brewed into more than two barrels and a half, sometimes into three
barrels of porter. The different taxes upon malt amount to six
shillings a quarter, those upon strong beer and ale to eight shillings
a barrel. In the porter brewery, therefore, the different taxes upon
malt, beer, and ale amount to between twenty-six and thirty
shillings upon the produce of a quarter of malt. In the country
brewery for common country sale a quarter of malt is seldom brewed
into less than two barrels of strong and one barrel of small beer,
frequently into two barrels and a half of strong beer. The different
taxes upon small beer amount to one shilling and fourpence a barrel.
In the country brewery, therefore, the different taxes upon malt,
beer, and ale seldom amount to less than twenty-three shillings and
fourpence, frequently to twenty-six shillings, upon the produce of a
quarter of malt. Taking the whole kingdom at an average, therefore,
the whole amount of the duties upon malt, beer, and ale cannot be
estimated at less than twenty-four or twenty-five shillings upon the
produce of a quarter of malt. But by taking off all the different
duties upon beer and ale, and by tripling the malt-tax, or by
raising it from six to eighteen shillings upon the quarter of malt,
a greater revenue, it is said, might be raised by this single tax than
what is at present drawn from all those heavier taxes.

    Under the old malt tax, indeed, is comprehended a tax of four
shillings upon the hogshead of cyder, and another of ten shillings
upon the barrel of mum. In 1774, the tax upon cyder produced only
L3083 6s. 8d. It probably fell somewhat short of its usual amount, all
the different taxes upon cyder having, that year, produced less than
ordinary. The tax upon mum, though much heavier, is still less
productive, on account of the smaller consumption of that liquor.
But to balance whatever may be the ordinary amount of those two taxes,
there is comprehended under what is called the country excise,
first, the old excise of six shillings and eightpence upon the
hogshead of cyder; secondly, a like tax of six shillings and
eightpence upon the hogshead of verjuice; thirdly, another of eight
shillings and ninepence upon the hogshead of vinegar; and, lastly, a
fourth tax of elevenpence upon the gallon of mead or metheglin: the
produce of those different taxes will probably much more than
counterbalance that of the duties imposed by what is called the annual
malt tax upon cyder and mum.

                                                  L       s.    d.

  In 1772, the old malt-tax produced           722,023    11    11

           The additional                      356,776     7     9 3/4

  In 1773, the old tax produced                561,627     3     7 1/2

           The additional                      278,650    15     3 3/4

  In 1774, the old tax produced                624,614    17     5 3/4

           The additional                      310,745     2     8 1/2

  In 1775, the old tax produced                657,357     0     8 1/4

           The additional                      323,785    12     6 1/4

                                       ---------------------------

                                           4)3,835,580    12     0 3/4

                                       ---------------------------

       Average of these four years             958,895     3    0 3/16

                                       ---------------------------

  In 1772, the country excise produced       1,243,128     5     3

           The London brewery                  408,260     7     2 3/4

  In 1773, the country excise                1,245,808     3     3

           The London brewery                  405,406    17    10 1/2

  In 1774, the country excise                1,246,373    14     5 1/2

           The London brewery                  320,601    18     0 1/4

  In 1775, the country excise                1,214,583     6     1

           The London brewery                  463,670     7     0 1/4

                                       ---------------------------

                                           4)6,547,832    19     2 1/4

                                       ---------------------------

       Average of these four years         1,636,958       4     9 1/2

  To which adding the average malt-tax, or   958,895       3    0 3/16

  The whole amount of those different

    taxes comes out to be                  2,595,853       7   9 11/19

                                       ---------------------------

  But by tripling the malt-tax, or by

    raising it from six to eighteen

    shillings upon the quarter of malt,

    that single tax would produce          2,876,685       9    0 9/16

  A sum which exceeds the foregoing by       280,832       1   2 14/16

    Malt is consumed not only in the brewery of beer and ale, but in
the manufacture of wines and spirits. If the malt tax were to be
raised to eighteen shillings upon the quarter, it might be necessary
to make some abatement in the different excises which are imposed upon
those particular sorts of low wines and spirits of which malt makes
any part of the materials. In what are called malt spirits it makes
commonly but a third part of the materials, the other two-thirds being
either raw barley, or one-third barley and one-third wheat. In the
distillery of malt spirits, both the opportunity and the temptation to
smuggle are much greater than either in a brewery or in a
malt-house; the opportunity on account of the smaller bulk and greater
value of the commodity, and the temptation on account of the
superior height of the duties, which amount to 3s. 10 2/3d.* upon
the gallon of spirits. By increasing the duties upon malt, and
reducing those upon the distillery, both the opportunities and the
temptation to smuggle would be diminished, which might occasion a
still further augmentation of revenue.

  * Though the duties directly imposed upon proof spirits amount
only to 2s. 6d. per gallon, these added to the duties upon the low
wines, from which they are distilled, amount to 3s. 10 2/3d. Both
low wines and proof spirits are, to prevent frauds, now rated
according to what they gauge in the wash.

    It has for some time past been the policy of Great Britain to
discourage the consumption of spirituous liquors, on account of
their supposed tendency to ruin the health and to corrupt the morals
of the common people. According to this policy, the abatement of the
taxes upon the distillery ought not to be so great as to reduce, in
any respect, the price of those liquors. Spirituous liquors might
remain as dear as ever, while at the same time the wholesome and
invigorating liquors of beer and ale might be considerably reduced
in their price. The people might thus be in part relieved from one
of the burdens of which they at present complain the most, while at
the same time the revenue might be considerably augmented.

    The objections of Dr. Davenant to this alteration in the present
system of excise duties seem to be without foundation. Those
objections are, that the tax, instead of dividing itself as at present
pretty equally upon the profit of the maltster, upon that of the
brewer, and upon that of the retailer, would, so far as it affected
profit, fall altogether upon that of the maltster; that the maltster
could not so easily get back the amount of the tax in the advanced
price of his malt as the brewer and retailer in the advanced price
of their liquor; and that so heavy a tax upon malt might reduce the
rent and profit of barley land.

    No tax can ever reduce, for any considerable time, the rate of
profit in any particular trade which must always keep its level with
other trades in the neighbourhood. The present duties upon malt, beer,
and ale do not affect the profits of the dealers in those commodities,
who all get back the tax with an additional profit in the enhanced
price of their goods. A tax, indeed, may render the goods upon which
it is imposed so dear as to diminish the consumption of them. But
the consumption of malt is in malt liquors, and a tax of eighteen
shillings upon the quarter of malt could not well render those liquors
dearer than the different taxes, amounting to twenty-four or
twenty-five shillings, do at present. Those liquors, on the
contrary, would probably become cheaper, and the consumption of them
would be more likely to increase than to diminish.

    It is not very easy to understand why it should be more
difficult for the maltster to get back eighteen shillings in the
advanced price of his malt than it is at present for the brewer to get
back twenty-four or twenty-five, sometimes thirty, shillings in that
of his liquor. The maltster, indeed, instead of a tax of six
shillings, would be obliged to advance one of eighteen shillings
upon every quarter of malt. But the brewer is at present obliged to
advance a tax of twenty-four or twenty-five, sometimes thirty,
shillings upon every quarter of malt which he brews. It could not be
more inconvenient for the maltster to advance a lighter tax than it is
at present for the brewer to advance a heavier one. The maltster
doth not always keep in his granaries a stock of malt which it will
require a longer time to dispose of than the stock of beer and ale
which the brewer frequently keeps in his cellars. The former,
therefore, may frequently get the returns of his money as soon as
the latter. But whatever inconveniency might arise to the maltster
from being obliged to advance a heavier tax, it could easily be
remedied by granting him a few months' longer credit than is at
present commonly given to the brewer.

    Nothing could reduce the rent and profit of barley land which
did not reduce the demand for barley. But a change of system which
reduced the duties upon a quarter of malt brewed into beer and ale
from twenty-four and twenty-five shillings to eighteen shillings would
be more likely to increase than diminish that demand. The rent and
profit of barley land, besides, must always be nearly equal to those
of other equally fertile and equally well-cultivated land. If they
were less, some part of the barley land would soon be turned to some
other purpose; and if they were greater, more land would soon be
turned to the raising of barley. When the ordinary price of any
particular produce of land is at what may be called a monopoly
price, a tax upon it necessarily reduces the rent and profit of the
land which grows it. A tax upon the produce of those precious
vineyards of which the wine falls so much short of the effectual
demand that its price is always above the natural proportion to that
of the produce of other equally fertile and equally well cultivated
land would necessarily reduce the rent and profit of those
vineyards. The price of the wines being already the highest that could
be got for the quantity commonly sent to market, it could not be
raised higher without diminishing that quantity, and the quantity
could not be diminished without still greater loss, because the
lands could not be turned to any other equally valuable produce. The
whole weight of the tax, therefore, would fall upon the rent and
profit- properly upon the rent of the vineyard. When it has been
proposed to lay any new tax upon sugar, our sugar planters have
frequently complained that the whole weight of such taxes fell, not
upon the consumer, but upon the producer, they never having been
able to raise the price of their sugar after the tax higher than it
was before. The price had, it seems, before the tax been a monopoly
price, and the argument adduced to show that sugar was an improper
subject of taxation demonstrated, perhaps, that it was a proper one,
the gains of monopolists, whenever they can be come at, being
certainly of all subjects the most proper. But the ordinary price of
barley has never been a monopoly price, and the rent and profit of
barley land have never been above their natural proportion to those of
other equally fertile and equally well-cultivated land. The
different taxes which have been imposed upon malt, beer, and ale
have never lowered the price of barley, have never reduced the rent
and profit of barley land. The price of malt to the brewer has
constantly risen in proportion to the taxes imposed upon it, and those
taxes, together with the different duties upon beer and ale, have
constantly either raised the price, or what comes to the same thing,
reduced the quality of those commodities to the consumer. The final
payment of those taxes has fallen constantly upon the consumer, and
not upon the producer.

    The only people likely to suffer by the change of system here
proposed are those who brew for their own private use. But the
exemption which this superior rank of people at present enjoy from
very heavy taxes which are paid by the poor labourer and artificer
is surely most unjust and unequal, and ought to be taken away, even
though this change was never to take place. It has probably been the
interest of this superior order of people, however, which has hitherto
prevented a change of system that could not well fail both to increase
the revenue and to relieve the people.

    Besides such duties as those of customs and excise above
mentioned, there are several others which affect the price of goods
more unequally and more indirectly. Of this kind are the duties
which in French are called Peages, which in old Saxon times were
called Duties of Passage, and which seem to have been originally
established for the same purpose as our turnpike tolls, or the tolls
upon our canals and navigable rivers, for the maintenance of the
road or of the navigation. Those duties, when applied to such
purposes, are most properly imposed according to the bulk or weight of
the goods. As they were originally local and provincial duties,
applicable to local and provincial purposes, the administration of
them was in most cases entrusted to the particular town, parish, or
lordship in which they were levied, such communities being in some way
or other supposed to be accountable for the application. The
sovereign, who is altogether unaccountable, has in many countries
assumed to himself the administration of those duties, and though he
has in most cases enhanced very much the duty, he has in many entirely
neglected the application. If the turnpike tolls of Great Britain
should ever become one of the resources of government, we may learn,
by the example of many other nations, what would probably be the
consequence. Such tolls are no doubt finally paid by the consumer; but
the consumer is not taxed in proportion to his expense when he pays,
not according to the value, but according to the bulk or weight of
what he consumes. When such duties are imposed, not according to the
bulk or weight, but according to the supposed value of the goods, they
become properly a sort of inland customs or excises which obstruct
very much the most important of all branches of commerce, the interior
commerce of the country.

    In some small states duties similar to those passage duties are
imposed upon goods carried across the territory, either by land or
by water, from one foreign country to another. These are in some
countries called transit-duties. Some of the little Italian states
which are situated upon the Po and the rivers which run into it derive
some revenue from duties of this kind which are paid altogether by
foreigners, and which, perhaps, are the only duties that one state can
impose upon the subjects of another without obstructing in any respect
the industry or commerce of its own. The most important transit-duty
in the world is that levied by the King of Denmark upon all merchant
ships which pass through the Sound.

    Such taxes upon luxuries as the greater part of the duties of
customs and excise, though they all fall indifferently upon every
different species of revenue, and are paid finally, or without any
retribution, by whoever consumes the commodities upon which they are
imposed, yet they do not always fall equally or proportionably upon
the revenue of every individual. As every man's humour regulates the
degree of his consumption, every man contributes rather according to
his humour than in proportion to his revenue; the profuse contribute
more, the parsimonious less, than their proper proportion. During
the minority of a man of great fortune he contributes commonly very
little, by his consumption, towards the support of that state from
whose protection he derives a great revenue. Those who live in another
country contribute nothing, by their consumption, towards the
support of the government of that country in which is situated the
source of their revenue. If in this latter country there should be
no land-tax, nor any considerable duty upon the transference either of
movable or of immovable property, as is the case in Ireland, such
absentees may derive a great revenue from the protection of a
government to the support of which they do not contribute a single
shilling. This inequality is likely to be greatest in a country of
which the government is in some respects subordinate and dependent
upon that of some other. The people who possess the most extensive
property in the dependent will in this case generally choose to live
in the governing country. Ireland is precisely in this situation,
and we cannot, therefore, wonder that the proposal of a tax upon
absentees should be so very popular in that country. It might,
perhaps, be a little difficult to ascertain either what sort or what
degree of absence would subject a man to be taxed as an absentee, or
at what precise time the tax should either begin or end. If you
except, however, this very peculiar situation, any inequality in the
contribution of individuals which can arise from such taxes is much
more than compensated by the very circumstance which occasions that
inequality- the circumstance that every man's contribution is
altogether voluntary, it being altogether in his power either to
consume or not to consume the commodity taxed. Where such taxes,
therefore, are properly assessed, and upon proper commodities, they
are paid with less grumbling than any other. When they are advanced by
the merchant or manufacturer, the consumer, who finally pays them,
soon comes to confound them with the price of the commodities, and
almost forgets that he pays any tax.

    Such taxes are or may be perfectly certain, or may be assessed
so as to leave no doubt concerning either what ought to be paid, or
when it ought to be paid; concerning either the quantity or the time
of payment. Whatever uncertainty there may sometimes be, either in the
duties of customs in Great Britain, or in other duties of the same
kind in other countries, it cannot arise from the nature of those
duties, but from the inaccurate or unskilful manner in which the law
that imposes them is expressed.

    Taxes upon luxuries generally are, and always may be, paid
piecemeal, or in proportion as the contributors have occasion to
purchase the goods upon which they are imposed. In the time and mode
of payment they are, or may be, of all taxes the most convenient. Upon
the whole, such taxes, are, perhaps, as agreeable to the three first
of the four general maxims concerning taxation as any other. They
offend in every respect against the fourth.

    Such taxes, in proportion to what they bring into the public
treasury of the state, always take out or keep out of the pockets of
the people more than almost any other taxes. They seem to do this in
all the four different ways in which it is possible to do it.

    First, the levying of such taxes, even when imposed in the most
judicious manner, requires a great number of custom-house and excise
officers, whose salaries and perquisites are a real tax upon the
people, which brings nothing into the treasury of the state. This
expense, however, it must be acknowledged, is more moderate in Great
Britain than in most other countries. In the year which ended on the
5th of July 1775, the gross produce of the different duties, under the
management of the commissioners of excise in England, amounted to
L5,507,308 18s. 8 1/4d., which was levied at an expense of little more
than five and a half per cent. From this gross produce, however, there
must be deducted what was paid away in bounties and drawbacks upon the
exportation of excisable goods, which will reduce the net produce
below five millions.* The levying of the salt duty, an excise duty,
but under a different management, is much more expensive. The net
revenue of the customs does not amount to two millions and a half,
which is levied at an expense of more than ten per cent in the
salaries of officers, and other incidents. But the perquisites of
custom-house officers are everywhere much greater than their salaries;
at some ports more than double or triple those salaries. If the
salaries of officers, and other incidents, therefore, amount to more
than ten per cent upon the net revenue of the customs, the whole
expense of levying that revenue may amount, in salaries and
perquisites together, to more than twenty or thirty per cent. The
officers of excise receive few or no perquisites, and the
administration of that branch of the revenue, being of more recent
establishment, is in general less corrupted than that of the
customs, into which length of time has introduced and authorized
many abuses. By charging upon malt the whole revenue which is at
present levied by the different duties upon malt and malt liquors, a
saving, it is supposed, of more than fifty thousand pounds might be
made in the annual expense of the excise. By confining the duties of
customs to a few sorts of goods, and by levying those duties according
to the excise laws, a much greater saving might probably be made in
the annual expense of the customs.

  * The net produce of that year, after deducting all expenses and
allowances, amounted to L4,975,652 19s. 6d.

    Secondly, such taxes necessarily occasion some obstruction or
discouragement to certain branches of industry. As they always raise
the price of the commodity taxed, they so far discourage its
consumption, and consequently its production. If it is a commodity
of home growth or manufacture, less labour comes to be employed in
raising and producing it. If it is a foreign commodity of which the
tax increases in this manner the price, the commodities of the same
kind which are made at home may thereby, indeed, gain some advantage
in the home market, and a greater quantity of domestic industry may
thereby be turned toward preparing them. But though this rise of price
in a foreign commodity may encourage domestic industry in one
particular branch, it necessarily discourages that industry in
almost every other. The dearer the Birmingham manufacturer buys his
foreign wine, the cheaper he necessarily sells that part of his
hardware with which, or, what comes to the same thing, with the
price of which he buys it. That part of his hardware, therefore,
becomes of less value to him, and he has less encouragement to work at
it. The dearer the consumers in one country pay for the surplus
produce of another, the cheaper they necessarily sell that part of
their own surplus produce with which, or, what comes to the same
thing, with the price of which they buy it. That part of their own
surplus produce becomes of less value to them, and they have less
encouragement to increase its quantity. All taxes upon consumable
commodities, therefore, tend to reduce the quantity of productive
labour below what it otherwise would be, either in preparing the
commodities taxed, if they are home commodities, or in preparing those
with which they are purchased, if they are foreign commodities. Such
taxes, too, always alter, more or less, the natural direction of
national industry, and turn it into a channel always different from,
and generally less advantageous than that in which it would have run
of its own accord.

    Thirdly, the hope of evading such taxes by smuggling gives
frequent occasion to forfeitures and other penalties which entirely
ruin the smuggler; a person who, though no doubt highly blamable for
violating the laws of his country, is frequently incapable of
violating those of natural justice, and would have been, in every
respect, an excellent citizen had not the laws of his country made
that a crime which nature never meant to be so. In those corrupted
governments where there is at least a general suspicion of much
unnecessary expense, and great misapplication of the public revenue,
the laws which guard it are little respected. Not many people are
scrupulous about smuggling when, without perjury, they can find any
easy and safe opportunity of doing so. To pretend to have any
scruple about buying smuggled goods, though a manifest encouragement
to the violation of the revenue laws, and to the perjury which
almost always attends it, would in most countries be regarded as one
of those pedantic pieces of hypocrisy which, instead of gaining credit
with anybody, serve only to expose the person who affects to
practise them to the suspicion of being a greater knave than most of
his neighbours. By this indulgence of the public, the smuggler is
often encouraged to continue a trade which he is thus taught to
consider as in some measure innocent, and when the severity of the
revenue laws is ready to fall upon him, he is frequently disposed to
defend with violence what he has been accustomed to regard as his just
property. From being at first, perhaps, rather imprudent than
criminal, he at last too often becomes one of the hardiest and most
determined violators of the laws of society. By the ruin of the
smuggler, his capital, which had before been employed in maintaining
productive labour, is absorbed either in the revenue of the state or
in that of the revenue officer, and is employed in maintaining
unproductive, to the diminution of the general capital of the
society and of the useful industry which it might otherwise have
maintained.

    Fourthly, such taxes, by subjecting at least the dealers in the
taxed commodities to the frequent visits and odious examination of the
tax-gatherers, expose them sometimes, no doubt, to some degree of
oppression, and always to much trouble and vexation; and though
vexation, as has already been said, is not, strictly speaking,
expense, it is certainly equivalent to the expense at which every
man would be willing to redeem himself from it. The laws of excise,
though more effectual for the purpose for which they were
instituted, are, in this respect, more vexatious than those of the
customs. When a merchant has imported goods subject to certain
duties of customs, when he has paid those duties, and lodged the goods
in his warehouse, he is not in most cases liable to any further
trouble or vexation from the custom-house officer. It is otherwise
with goods subject to duties of excise. The dealers have no respite
from the continual visits and examination of the excise officers.
The duties of excise are, upon this account, more unpopular than those
of the customs; and so are the officers who levy them. Those officers,
it is pretended, though in general, perhaps, they do their duty
fully as well as those of the customs, yet as that duty obliges them
to be frequently very troublesome to some of their neighbours,
commonly contract a certain hardness of character which the others
frequently have not. This observation, however, may very probably be
the mere suggestion of fraudulent dealers whose smuggling is either
prevented or detected by their diligence.

    The inconveniencies, however, which are, perhaps, in some degree
inseparable from taxes upon consumable commodities, fall as light upon
the people of Great Britain as upon those of any other country of
which the government is nearly as expensive. Our state is not perfect,
and might be mended, but it is as good or better than that of most
of our neighbours.

    In consequence of the notion that duties upon consumable goods
were taxes upon the profits of merchants, those duties have, in some
countries, been repeated upon every successive sale of the goods. If
the profits of the merchant importer or merchant manufacturer were
taxed, equality seemed to require that those of all the middle
buyers who intervened between either of them and the consumer should
likewise be taxed. The famous alcavala of Spain seems to have been
established upon this principle. It was at first a tax of ten per
cent, afterwards of fourteen per cent, and is at present of only six
per cent upon the sale of every sort of property whether movable or
immovable, and it is repeated every time the property is sold. The
levying of this tax requires a multitude of revenue officers
sufficient to guard the transportation of goods, not only from one
province to another, but from one shop to another. It subjects not
only the dealers in some sorts of goods, but those in all sorts, every
farmer, every manufacturer, every merchant and shopkeeper, to the
continual visits and examination of the tax-gatherers. Through the
greater part of a country in which a tax of this kind is established
nothing can be produced for distant sale. The produce of every part of
the country must be proportioned to the consumption of the
neighborhood. It is to the alcavala, accordingly, that Ustaritz
imputes the ruin of the manufactures of Spain. He might have imputed
to it likewise the declension of agriculture, it being imposed not
only upon manufactures, but upon the rude produce of the land.

    In the kingdom of Naples there is a similar tax of three per
cent upon the value of all contracts, and consequently upon that of
all contracts of sale. It is both lighter than the Spanish tax, and
the greater part of towns and parishes are allowed to pay a
composition in lieu of it. They levy this composition in what manner
they please, generally in a way that gives no interruption to the
interior commerce of the place. The Neapolitan tax, therefore, is
not near so ruinous as the Spanish one.

    The uniform system of taxation which, with a few exceptions of
no great consequence, takes place in all the different parts of the
United Kingdom of Great Britain, leaves the interior commerce of the
country, the inland and coasting trade, almost entirely free. The
inland trade is almost perfectly free, and the greater part of goods
may be carried from one end of the kingdom to the other without
requiring any permit or let-pass, without being subject to question,
visit, or examination from the revenue officers. There are a few
exceptions, but they are such as can give no interruption to any
important branch of the inland commerce of the country. Goods
carried coastwise, indeed, require certificates or coast-cockets. If
you except coals, however, the rest are almost all duty-free. This
freedom of interior commerce, the effect of the uniformity of the
system of taxation, is perhaps one of the principal causes of the
prosperity of Great Britain, every great country being necessarily the
best and most extensive market for the greater part of the productions
of its own industry. If the same freedom, in consequence of the same
uniformity, could be extended to Ireland and the plantations, both the
grandeur of the state and the prosperity of every part of the empire
would probably be still greater than at present.

    In France, the different revenue laws which take place in the
different provinces require a multitude of revenue officers to
surround not only the frontiers of the kingdom, but those of almost
each particular province, in order either to prevent the importation
of certain goods, or to subject it to the payment of certain duties,
to the no small interruption of the interior commerce of the
country. Some provinces are allowed to compound for the gabelle or
salt-tax. Others are exempted from it altogether. Some provinces are
exempted from the exclusive sale of tobacco, which the farmers-general
enjoy through the greater part of the kingdom. The aides, which
correspond to the excise in England, are very different in different
provinces. Some provinces are exempted from them, and pay a
composition or equivalent. In those in which they take place and are
in farm there are many local duties which do not extend beyond a
particular town or district. The traites, which correspond to our
customs, divide the kingdom into three great parts; first, the
provinces subject to the tariff of 1664, which are called the
provinces of the five great farms, and under which are comprehended
Picardy, Normandy, and the greater part of the interior provinces of
the kingdom; secondly, the provinces subject to the tariff of 1667,
which are called the provinces reckoned foreign, and under which are
comprehended the greater part of the frontier provinces; and, thirdly,
those provinces which are said to be treated as foreign, or which,
because they are allowed a free commerce with foreign countries, are
in their commerce with other provinces of France subjected to the same
duties as other foreign countries. These are Alsace, the three
bishoprics of Metz, Toul, and Verdun, and the three cities of Dunkirk,
Bayonne, and Marseilles. Both in the provinces of the five great farms
(called so on account of an ancient division of the duties of
customs into five great branches, each of which was originally the
subject of a particular farm, though they are now all united into
one), and in those which are said to be reckoned foreign, there are
many local duties which do not extend beyond a particular town or
district. There are some such even in the provinces which are said
to be treated as foreign, particularly in the city of Marseilles. It
is unnecessary to observe how much both the restraints upon the
interior commerce of the country and the number of the revenue
officers must be multiplied in order to guard the frontiers of those
different provinces and districts which are subject to such
different systems of taxation.

    Over and above the general restraints arising from this
complicated system of revenue laws, the commerce of wine, after corn
perhaps the most important production of France, is in the greater
part of the provinces subject to particular restraints, arising from
the favour which has been shown to the vineyards of particular
provinces and districts, above those of others. The provinces most
famous for their wines, it will be found, I believe, are those in
which the trade in that article is subject to the fewest restraints of
this kind. The extensive market which such provinces enjoy, encourages
good management both in the cultivation of their vineyards, and in the
subsequent preparation of their wines.

    Such various and complicated revenue laws are not peculiar to
France. The little duchy of Milan is divided into six provinces, in
each of which there is a different system of taxation with regard to
several different sorts of consumable goods. The still smaller
territories of the Duke of Parma are divided into three or four,
each of which has, in the same manner, a system of its own. Under such
absurd management, nothing but the great fertility of the soil and
happiness of the climate could preserve such countries from soon
relapsing into the lowest state of poverty and barbarism.

    Taxes upon consumable commodities may either be levied by an
administration of which the officers are appointed by government and
are immediately accountable to government, of which the revenue must
in this case vary from year to year according to the occasional
variations in the produce of the tax, or they may be let in farm for a
rent certain, the farmer being allowed to appoint his own officers,
who, though obliged to levy the tax in the manner directed by the law,
are under his immediate inspection, and are immediately accountable to
him. The best and most frugal way of levying a tax can never be by
farm. Over and above what is necessary for paying the stipulated rent,
the salaries of the officers, and the whole expense of administration,
the farmer must always draw from the produce of the tax a certain
profit proportioned at least to the advance which he makes, to the
risk which he runs, to the trouble which he is at, and to the
knowledge and skill which it requires to manage so very complicated
a concern. Government, by establishing an administration under their
own immediate inspection of the same kind with that which the farmer
establishes, might at least save this profit, which is almost always
exorbitant. To farm any considerable branch of the public revenue
requires either a great capital or a great credit; circumstances which
would alone restrain the competition for such an undertaking to a very
small number of people. Of the few who have this capital or credit,
a still smaller number have the necessary knowledge or experience;
another circumstance which restrains the competition still further.
The very few, who are in condition to become competitors, find it more
for their interest to combine together; to become co-partners
instead of competitors, and when the farm is set up to auction, to
offer no rent but what is much below the real value. In countries
where the public revenues are in farm, the farmers are generally the
most opulent people. Their wealth would alone excite the public
indignation, and the vanity which almost always accompanies such
upstart fortunes, the foolish ostentation with which they commonly
display that wealth, excites that indignation still more.

    The farmers of the public revenue never find the laws too severe
which punish any attempt to evade the payment of a tax. They have no
bowels for the contributors, who are not their subjects, and whose
universal bankruptcy, if it should happen the day after their farm
is expired, would not much affect their interest. In the greatest
exigencies of the state, when the anxiety of the sovereign for the
exact payment of his revenue is necessarily the greatest, they
seldom fail to complain that without laws more rigorous than those
which actually take place, it will be impossible for them to pay
even the usual rent. In those moments of public distress their demands
cannot be disputed. The revenue laws, therefore, become gradually more
and more severe. The most sanguinary are always to be found in
countries where the greater part of the public revenue is in farm; the
mildest, in countries where it is levied under the immediate
inspection of the sovereign. Even a bad sovereign feels more
compassion for his people than can ever be expected from the farmers
of his revenue. He knows that the permanent grandeur of his family
depends upon the prosperity of his people, and he will never knowingly
ruin that prosperity for the sake of any momentary interest of his
own. It is otherwise with the farmers of his revenue, whose grandeur
may frequently be the effect of the ruin, and not of the prosperity of
his people.

    A tax is sometimes not only farmed for a certain rent, but the
farmer has, besides, the monopoly of the commodity taxed. In France,
the duties upon tobacco and salt are levied in this manner. In such
cases the farmer, instead of one, levies two exorbitant profits upon
the people; the profit of the farmer, and the still more exorbitant
one of the monopolist. Tobacco being a luxury, every man is allowed to
buy or not to buy as he chooses. But salt being a necessary, every man
is obliged to buy of the farmer a certain quantity of it; because,
if he did not buy this quantity of the farmer, he would, it is
presumed, buy it of some smuggler. The taxes upon both commodities are
exorbitant. The temptation to smuggle consequently is to many people
irresistible, while at the same time the rigour of the law, and the
vigilance of the farmer's officers, render the yielding to that
temptation almost certainly ruinous. The smuggling of salt and tobacco
sends every year several hundred people to the galleys, besides a very
considerable number whom it sends to the gibbet. Those taxes levied in
this manner yield a very considerable revenue to government. In
1767, the farm of tobacco was let for twenty-two millions five hundred
and forty-one thousand two hundred and seventy-eight livres a year.
That of salt, for thirty-six millions four hundred and ninety-four
thousand four hundred and four livres. The farm in both cases was to
commence in 1768, and to last for six years. Those who consider the
blood of the people as nothing in comparison with the revenue of the
prince, may perhaps approve of this method of levying taxes. Similar
taxes and monopolies of salt and tobacco have been established in many
other countries; particularly in the Austrian and Prussian
dominions, and in the greater part of the states of Italy.

    In France, the greater part of the actual revenue of the crown
is derived from eight different sources; the taille, the capitation,
the two vingtiemes, the gabelles, the aides, the traites, the domaine,
and the farm of tobacco. The five last are, in the greater part of the
provinces, under farm. The three first are everywhere levied by an
administration under the immediate inspection and direction of
government, and it is universally acknowledged that, in proportion
to what they take out of the pockets of the people, they bring more
into the treasury of the prince than the other five, of which the
administration is much more wasteful and expensive.

    The finances of France seem, in their present state, to admit of
three very obvious reformations. First, by abolishing the taille and
the capitation, and by increasing the number of vingtiemes, so as to
produce an additional revenue equal to the amount of those other
taxes, the revenue of the crown might be preserved; the expense of
collection might be much diminished; the vexation of the inferior
ranks of people, which the taille and capitation occasion, might be
entirely prevented; and the superior ranks might not be more
burdened than the greater part of them are at present. The
vingtieme, I have already observed, is a tax very nearly of the same
kind with what is called the land-tax of England. The burden of the
taille, it is acknowledged, falls finally upon the proprietors of
land; and as the greater part of the capitation is assessed upon those
who are subject to the taille at so much a pound of that other tax,
the final payment of the greater part of it must likewise fall upon
the same order of people. Though the number of the vingtiemes,
therefore, was increased so as to produce an additional revenue
equal to the amount of both those taxes, the superior ranks of
people might not be more burdened than they are at present. Many
individuals no doubt would, on account of the great inequalities
with which the taille is commonly assessed upon the estates and
tenants of different individuals. The interest and opposition of
such favoured subjects are the obstacles most likely to prevent this
or any other reformation of the same kind. Secondly, by rendering
the gabelle, the aides, the traites, the taxes upon tobacco, all the
different customs and excises, uniform in all the different parts of
the kingdom, those taxes might be levied at much less expense, and the
interior commerce of the kingdom might be rendered as free as that
of England. Thirdly, and lastly, by subjecting all those taxes to an
administration under the immediate inspection and direction of
government, the exorbitant profits of the farmers-general might be
added to the revenue of the state. The opposition arising from the
private interest of individuals is likely to be as effectual for
preventing the two last as the first-mentioned scheme of reformation.

    The French system of taxation seems, in every respect, inferior to
the British. In Great Britain ten millions sterling are annually
levied upon less than eight millions of people without its being
possible to say that any particular order is oppressed. From the
collections of the Abbe Expilly, and the observations of the author of
the Essay upon legislation and commerce of corn, it appears probable
that France, including the provinces of Lorraine and Bar, contains
about twenty-three or twenty-four millions of people three times the
number perhaps contained in Great Britain. The soil and climate of
France are better than those of Great Britain. The country has been
much longer in a state of improvement and cultivation, and is, upon
that account, better stocked with all those things which it requires a
long time to raise up and accumulate, such as great towns, and
convenient and well-built houses, both in town and country. With these
advantages it might be expected that in France a revenue of thirty
millions might be levied for the support of the state with as little
inconveniency as a revenue of ten millions is in Great Britain. In
1765 and 1766, the whole revenue paid into the treasury of France,
according to the best, though, I acknowledge, very imperfect, accounts
which I could get of it, usually run between 308 and 325 millions of
livres; that is, it did not amount to fifteen millions sterling; not
the half of what might have been expected had the people contributed
in the same proportion to their numbers as the people of Great
Britain. The people of France, however, it is generally
acknowledged, are much more oppressed by taxes than the people of
Great Britain. France, however, is certainly the great empire in
Europe which, after that of Great Britain, enjoys the mildest and most
indulgent government.

    In Holland the heavy taxes upon the necessaries of life have
ruined, it is said, their principal manufactures, and are likely to
discourage gradually even their fisheries and their trade in
shipbuilding. The taxes upon the necessaries of life are
inconsiderable in Great Britain, and no manufacture has hitherto
been ruined by them. The British taxes which bear hardest on
manufactures are some duties upon the importation of raw materials,
particularly upon that of raw silk. The revenue of the
states-general and of the different cities, however, is said to amount
to more than five millions two hundred and fifty thousand pounds
sterling; and as the inhabitants of the United Provinces cannot well
be supposed to amount to more than a third part of those of Great
Britain, they must, in proportion to their number, be much more
heavily taxed.

    After all the proper subjects of taxation have been exhausted,
if the exigencies of the state still continue to require new taxes,
they must be imposed upon improper ones. The taxes upon the
necessaries of life, therefore, the wisdom of that republic which,
in order to acquire and to maintain its independency, has, in spite of
its great frugality, been involved in such expensive wars as have
obliged it to contract great debts. The singular countries of
Holland and Zeeland, besides, require a considerable expense even to
preserve their existence, or to prevent their being swallowed up by
the sea, which must have contributed to increase considerably the load
of taxes in those two provinces. The republican form of government
seems to be the principal support of the present grandeur of
Holland. The owners of great capitals, the great mercantile
families, have generally either some direct share or some indirect
influence in the administration of that government. For the sake of
the respect and authority which they derive from this situation,
they are willing to live in a country where their capital, if they
employ it themselves, will bring them less profit, and if they lend it
to another, less interest; and where the very moderate revenue which
they can draw from it will purchase less of the necessaries and
conveniences of life than in any other part of Europe. The residence
of such wealthy people necessarily keeps alive, in spite of all
disadvantages, a certain degree of industry in the country. Any public
calamity which should destroy the republican form of government, which
should throw the whole administration into the hands of nobles and
of soldiers, which should annihilate altogether the importance of
those wealthy merchants, would soon render it disagreeable to them
to live in a country where they were no longer likely to be much
respected. They would remove both their residences and their
capitals to some other country, and the industry and commerce of
Holland would soon follow the capitals which supported them.

                        Chapter III

                      Of Public Debts

    IN that rude state of society which precedes the extension of
commerce and the improvement of manufactures, when those expensive
luxuries which commerce and manufactures can alone introduce are
altogether unknown, the person who possesses a large revenue, I have
endeavoured to show in the third book of this Inquiry, can spend or
enjoy that revenue in no other way than by maintaining nearly as
many people as it can maintain. A large revenue may at all times be
said to consist in the command of a large quantity of the
necessaries of life. In that rude state of things it is commonly
paid in a large quantity of those necessaries, in the materials of
plain food and coarse clothing, in corn and cattle, in wool and raw
hides. When neither commerce nor manufactures furnish anything for
which the owner can exchange the greater part of those materials which
are over and above his own consumption, he can do nothing with the
surplus but feed and clothe nearly as many people as it will feed
and clothe. A hospitality in which there is no luxury, and a
liberality in which there is no ostentation, occasion, in this
situation of things, the principal expenses of the rich and the great.
But these, I have likewise endeavoured to show in the same book, are
expenses by which people are not very apt to ruin themselves. There is
not, perhaps, any selfish pleasure so frivolous of which the pursuit
has not sometimes ruined even sensible men. A passion for
cock-fighting has ruined many. But the instances, I believe, are not
very numerous of people who have been ruined by a hospitality or
liberality of this kind, though the hospitality of luxury and the
liberality of ostentation have ruined many. Among our feudal
ancestors, the long time during which estates used to continue in
the same family sufficiently demonstrates the general disposition of
people to live within their income. Though the rustic hospitality
constantly exercised by the great land-holders may not, to us in the
present times, seem consistent with that order which we are apt to
consider as inseparably connected with good economy, yet we must
certainly allow them to have been at least so far frugal as not
commonly to have spent their whole income. A part of their wool and
raw hides they had generally an opportunity of selling for money. Some
part of this money, perhaps, they spent in purchasing the few
objects of vanity and luxury with which the circumstances of the times
could furnish them; but some part of it they seem commonly to have
hoarded. They could not well, indeed, do anything else but hoard
whatever money they saved. To trade was disgraceful to a gentleman,
and to lend money at interest, which at that time was considered as
usury and prohibited by law, would have been still more so. In those
times of violence and disorder, besides, it was convenient to have a
hoard of money at hand, that in case they should be driven from
their own home they might have something of known value to carry
with them to some place of safety. The same violence which made it
convenient to hoard made it equally convenient to conceal the hoard.
The frequency of treasure-trove, or of treasure found of which no
owner was known, sufficiently demonstrates the frequency in those
times both of hoarding and of concealing the board. Treasure-trove was
then considered as an important branch of the revenue of the
sovereign. All the treasure-trove of the kingdom would scarce
perhaps in the present times make an important branch of the revenue
of a private gentleman of a good estate.

    The same disposition to save and to hoard prevailed in the
sovereign as well as in the subjects. Among nations to whom commerce
and manufactures are little known, the sovereign, it has already
been observed in the fourth book, is in a situation which naturally
disposes him to the parsimony requisite for accumulation. In that
situation the expense even of a sovereign cannot be directed by that
vanity which delights in the gaudy finery of a court. The ignorance of
the times affords but few of the trinkets in which that finery
consists. Standing armies are not then necessary, so that the
expense even of a sovereign, like that of any other great lord, can be
employed in scarce anything but bounty to his tenants and
hospitality to his retainers. But bounty and hospitality very seldom
lead to extravagance; though vanity almost always does. All the
ancient sovereigns of Europe accordingly, it has already been
observed, had treasures. Every Tartar chief in the present times is
said to have one.

    In a commercial country abounding with every sort of expensive
luxury, the sovereign, in the same manner as almost all the great
proprietors in his dominions, naturally spends a great part of his
revenue in purchasing those luxuries. His own and the neighbouring
countries supply him abundantly with all the costly trinkets which
compose the splendid but insignificant pageantry of a court. For the
sake of an inferior pageantry of the same kind, his nobles dismiss
their retainers, make their tenants independent, and become
gradually themselves as insignificant as the greater part of the
wealthy burghers in his dominions. The same frivolous passions which
influence their conduct influence his. How can it be supposed that
he should be the only rich man in his dominions who is insensible to
pleasures of this kind? If he does not, what he is very likely to
do, spend upon those pleasures so great a part of his revenue as to
debilitate very much the defensive power of the state, it cannot
well be expected that he should not spend upon them all that part of
it which is over and above what is necessary for supporting that
defensive power. His ordinary expense becomes equal to his ordinary
revenue, and it is well if it does not frequently exceed it. The
amassing of treasure can no longer be expected, and when extraordinary
exigencies require extraordinary expenses, he must necessarily call
upon his subjects for an extraordinary aid. The present and the late
king of Prussia are the only great princes of Europe who, since the
death of Henry IV of France in 1610, are supposed to have amassed
any considerable treasure. The parsimony which leads to accumulation
has become almost as rare in republican as in monarchical governments.
The Italian republics, the United Provinces of the Netherlands, are
all in debt. The canton of Berne is the single republic in Europe
which has amassed any considerable treasure. The other Swiss republics
have not. The taste for some sort of pageantry, for splendid
buildings, at least, and other public ornaments, frequently prevails
as much in the apparently sober senate-house of a little republic as
in the dissipated court of the greatest king.

    The want of parsimony in time of peace imposes the necessity of
contracting debt in time of war. When war comes, there is no money
in the treasury but what is necessary for carrying on the ordinary
expense of the peace establishment. In war an establishment of three
of four times that expense becomes necessary for the defence of the
state, and consequently a revenue three or four times greater than the
peace revenue. Supposing that the sovereign should have, what he
scarce ever has, the immediate means of augmenting his revenue in
proportion to the augmentation of his expense, yet still the produce
of the taxes, from which this increase of revenue must be drawn,
will not begin to come into the treasury till perhaps ten or twelve
months after they are imposed. But the moment in which war begins,
or rather the moment in which it appears likely to begin, the army
must be augmented, the fleet must be fitted out, the garrisoned
towns must be put into a posture of defence; that army, that fleet,
those garrisoned towns must be furnished with arms, ammunition, and
provisions. An immediate and great expense must be incurred in that
moment of immediate danger, which will not wait for the gradual and
slow returns of the new taxes. In this exigency government can have no
other resource but in borrowing.

    The same commercial state of society which, by the operation of
moral causes, brings government in this manner into the necessity of
borrowing, produces in the subjects both an ability and an inclination
to lend. If it commonly brings along with it the necessity of
borrowing, it likewise brings along with it the facility of doing so.

    A country abounding with merchants and manufacturers necessarily
abounds with a set of people through whose hands not only their own
capitals, but the capitals of all those who either lend them money, or
trust them with goods, pass as frequently, or more frequently, than
the revenue of a private man, who, without trade or business, lives
upon his income, passes through his hands. The revenue of such a man
can regularly pass through his hands only once in a year. But the
whole amount of the capital and credit of a merchant, who deals in a
trade of which the returns are very quick, may sometimes pass
through his hands two, three, or four times a year. A country
abounding with merchants and manufacturers, therefore, necessarily
abounds with a set of people who have it at all times in their power
to advance, if they choose to do so, a very large sum of money to
government. Hence the ability in the subjects of a commercial state to
lend.

    Commerce and manufactures can seldom flourish long in any state
which does not enjoy a regular administration of justice, in which the
people do not feel themselves secure in the possession of their
property, in which the faith of contracts is not supported by law, and
in which the authority of the state is not supposed to be regularly
employed in enforcing the payment of debts from all those who are able
to pay. Commerce and manufactures, in short, can seldom flourish in
any state in which there is not a certain degree of confidence in
the justice of government. The same confidence which disposes great
merchants and manufacturers, upon ordinary occasions, to trust their
property to the protection of a particular government, disposes
them, upon extraordinary occasions, to trust that government with
the use of their property. By lending money to government, they do not
even for a moment diminish their ability to carry on their trade and
manufactures. On the contrary, they commonly augment it. The
necessities of the state render government upon most occasions willing
to borrow upon terms extremely advantageous to the lender. The
security which it grants to the original creditor is made transferable
to any other creditor, and, from the universal confidence in the
justice of the state, generally sells in the market for more than
was originally paid for it. The merchant or monied man makes money
by lending money to government, and instead of diminishing,
increases his trading capital. He generally considers it as a
favour, therefore, when the administration admits him to a share in
the first subscription for a new loan. Hence the inclination or
willingness in the subjects of a commercial state to lend.

    The government of such a state is very apt to repose itself upon
this ability and willingness of its subjects to lend it their money on
extraordinary occasions. It foresees the facility of borrowing, and
therefore dispenses itself from the duty of saving.

    In a rude state of society there are no great mercantile or
manufacturing capitals. The individuals who hoard whatever money
they can save, and who conceal their hoard, do so from a distrust of
the justice of government, from a fear that if it was known that
they had a hoard, and where that hoard was to be found, they would
quickly be plundered. In such a state of things few people would be
able, and nobody would be willing, to lend their money to government
on extraordinary exigencies. The sovereign feels that he must
provide for such exigencies by saving because he foresees the absolute
impossibility of borrowing. This foresight increases still further his
natural disposition to save.

    The progress of the enormous debts which at present oppress, and
will in the long-run probably ruin, all the great nations of Europe
has been pretty uniform. Nations, like private men, have generally
begun to borrow upon what may be called personal credit, without
assigning or mortgaging any particular fund for the payment of the
debt; and when this resource has failed them, they have gone on to
borrow upon assignments or mortgages of particular funds.

    What is called the unfunded debt of Great Britain is contracted in
the former of those two ways. It consists partly in a debt which
bears, or is supposed to bear, no interest, and which resembles the
debts that a private man contracts upon account, and partly in a
debt which bears interest, and which resembles what a private man
contracts upon his bill or promissory note. The debts which are due
either for extraordinary services, or for services either not provided
for, or not paid at the time when they are performed, part of the
extrordinaries of the army, navy, and ordnance, the arrears of
subsidies to foreign princes, those of seamen's wages, etc., usually
constitute a debt of the first kind, sometimes in payment of a part of
such Navy and exchequer bills, which are issued sometimes in payment
of a part of such debts and sometimes for other purposes, constitute a
debt of the second kind- exchequer bills bearing interest from the day
on which they are issued, and navy bills six months after they are
issued. The Bank of England, either by voluntarily discounting those
bills at their current value, or by agreeing with government for
certain considerations to circulate exchequer bills, that is, to
receive them at par, paying the interest which happens to be due
upon them, keeps up their value and facilitates their circulation, and
thereby frequently enables government to contract a very large debt of
this kind. In France, where there is no bank, the state bills (billets
d'etat) have sometimes sold at sixty and seventy per cent discount.
During the great recoinage in King William's time, when the Bank of
England thought proper to put a stop to its usual transactions,
exchequer bills and tallies are said to have sold from twenty-five
to sixty per cent discount; owing partly, no doubt, to the supposed
instability of the new government established by the Revolution, but
partly, too, to the want of the support of the Bank of England.

    When this resource is exhausted, and it becomes necessary, in
order to raise money, to assign or mortgage some particular branch
of the public revenue for the payment of the debt, government has upon
different occasions done this in two different ways. Sometimes it
has made this assignment or mortgage for a short period of time
only, a year, or a few years, for example; and sometimes for
perpetuity. In the one case the fund was supposed sufficient to pay,
within the limited time, both principal and interest of the money
borrowed. In the other it was supposed sufficient to pay the
interest only, or a perpetual annuity equivalent to the interest,
government being at liberty to redeem at any time this annuity upon
paying back the principal sum borrowed. When money was raised in the
one way, it was said to be raised by anticipation; when in the
other, by perpetual funding, or, more shortly, by funding.

    In Great Britain the land and malt taxes are regularly anticipated
every year, by virtue of a borrowing clause constantly inserted into
the acts which impose them. The Bank of England generally advances
at an interest, which since the Revolution has varied from eight to
three per cent, the sums for which those taxes are granted, and
receives payment as their produce gradually comes in. If there is a
deficiency, which there always is, it is provided for in the
supplies of the ensuing year. The only considerable branch of the
public revenue which yet remains unmortgaged is thus regularly spent
before it comes in. Like an improvident spendthrift, whose pressing
occasions will not allow him to wait for the regular payment of his
revenue, the state is in the constant practice of borrowing of its own
factors and agents, and of paying interest for the use of its own
money.

    In the reign of King William, and during a great part of that of
Queen Anne, before we had become so familiar as we are now with the
practice of perpetual funding, the greater part of the new taxes
were imposed but for a short period of time (for four, five, six, or
seven years only), and a great part of the grants of every year
consisted in loans upon anticipations of the produce of those taxes.
The produce being frequently insufficient for paying within the
limited term the principal and interest of the money borrowed,
deficiencies arose, to make good which it became necessary to
prolong the term.

    In 1697, by the 8th of William III, c. 20, the deficiencies of
several taxes were charged upon what was then called the first general
mortgage or fund, consisting of a prolongation to the first of
August 1706 of several different taxes which would have expired within
a shorter term, and of which the produce was accumulated into one
general fund. The deficiencies charged upon this prolonged term
amounted to L5,160,459 14s. 9 1/4d.

    In 1701, those duties, with some others, were still further
prolonged for the like purposes till the first of August 1710, and
were called the second general mortgage or fund. The deficiencies
charged upon it amounted to L2,055,999 7s. 11 1/2d.

    In 1707, those duties were still further prolonged, as a fund
for new loans, to the first of August 1712, and were called the
third general mortgage or fund. The sum borrowed upon it was
L983,254 11s. 9 1/4d.

    In 1708, those duties were all (except the Old Subsidy of
Tonnage and Poundage, of which one moiety only was made a part of this
fund, and a duty upon the importation of Scotch linen, which had
been taken off by the Articles of Union) still further continued, as a
fund for new loans, to the first of August 1714, and were called the
fourth general mortgage or fund. The sum borrowed upon it was L925,176
9s. 2 1/4d.

    In 1709, those cities were all (except the Old Subsidy of
Tonnage and Poundage, which was now left out of this fund
altogether) still further continued for the same purpose to the
first of August 1716, and were called the fifth general mortgage or
fund. The sum borrowed upon it was L922,029 6s.

    In 1710, those duties were again prolonged to the first of
August 1720, and were called the sixth general mortgage or fund. The
sum borrowed upon it was L1,296,552 9s. 11 3/4d.

    In 1711, the same duties (which at this time were thus subject
to four different anticipations) together with several others were
continued for ever, and made a fund for paying the interest of the
capital of the South Sea Company, which had that year advanced to
government, for paying debts and making good deficiencies, the sum
of L9,177,967 15s. 4d.; the greatest loan which at that time had
ever been made.

    Before this period, the principal, so far as I have been able to
observe, the only taxes which in order to pay the interest of a debt
had been imposed for perpetuity, were those for paying the interest of
the money which had been advanced to government by the Bank and the
East India Company, and of what it was expected would be advanced, but
which was never advanced, by a projected land bank. The bank fund at
this time amounted to L3,375,027 17s. 10 1/2d., for which was paid
an annuity or interest of L206,501 13s. 5d. The East India fund
amounted to L3,200,000, for which was paid an annuity or interest of
L160,000- the bank fund being at six per cent, the East India fund
at five per cent interest.

    In 1715, by the 1st of George I, c. 12, the different taxes
which had been mortgaged for paying the bank annuity, together with
several others which by this act were likewise rendered perpetual,
were accumulated into one common fund called The Aggregate Fund, which
was charged not only with the payments of the bank annuity, but with
several other annuities and burdens of different kinds. This fund
was afterwards augmented by the 3rd of George I, c. 8, and by the
5th of George I, c. 3, and the different duties which were then
added to it were likewise rendered perpetual.

    In 1717, by the 3rd of George I, c. 7, several other taxes were
rendered perpetual, and accumulated into another common fund, called
The General Fund, for the payment of certain annuities, amounting in
the whole to L724,849 6s. 10 1/2d.

    In consequence of those different acts, the greater part of the
taxes which before had been anticipated only for a short term of years
were rendered perpetual as a fund for paying, not the capital, but the
interest only, of the money which had been borrowed upon them by
different successive anticipations.

    Had money never been raised but by anticipation, the course of a
few years would have liberated the public revenue without any other
attention of government besides that of not overloading the fund by
charging it with more debt than it could pay within the limited
term, and of not anticipating a second time before the expiration of
the first anticipation. But the greater part of European governments
have been incapable of those attentions. They have frequently
overloaded the fund even upon the first anticipation, and when this
happened not to be the case, they have generally taken care to
overload it by anticipating a second and a third time before the
expiration of the first anticipation. The fund becoming in this manner
altogether insufficient for paying both principal and interest of
the money borrowed upon it, it became necessary to charge it with
the interest only, or a perpetual annuity equal to the interest, and
such unprovident anticipations necessarily gave birth to the more
ruinous practice of perpetual funding. But though this practice
necessarily puts off the liberation of the public revenue from a fixed
period to one so indefinite that it is not very likely ever to arrive,
yet as a greater sum can in all cases be raised by this new practice
than by the old one of anticipations, the former, when men have once
become familiar with it, has in the great exigencies of the state been
universally preferred to the latter. To relieve the present exigency
is always the object which principally interests those immediately
concerned in the administration of public affairs. The future
liberation of the public revenue they leave to the care of posterity.

    During the reign of Queen Anne, the market rate of interest had
fallen from six to five per cent, and in the twelfth year of her reign
five per cent was declared to be the highest rate which could lawfully
be taken for money borrowed upon private security. Soon after the
greater part of the temporary taxes of Great Britain had been rendered
perpetual, and distributed into the Aggregate, South Sea, and
General Funds, the creditors of the public, like those of private
persons, were induced to accept of five per cent for the interest of
their money, which occasioned a saving of one per cent upon the
capital of the greater part of the debts which had been thus funded
for perpetuity, or of one-sixth of the greater part of the annuities
which were paid out of the three great funds above mentioned. This
saving left a considerable surplus in the produce of the different
taxes which had been accumulated into those funds over and above
what was necessary for paying the annuities which were now charged
upon them, and laid the foundation of what has since been called the
Sinking Fund. In 1717, it amounted to L323,434 7s. 7 1/2d. In 1727,
the interest of the greater part of the public debts was still further
reduced to four per cent; and in 1753 and 1757, to three and a half
and three per cent; which reductions still further augmented the
sinking fund.

    A sinking fund, though instituted for the payment of old,
facilitates very much the contracting of new debts. It is a subsidiary
fund always at hand to be mortgaged in aid of any other doubtful
fund upon which money is proposed to be raised in an exigency of the
state. Whether the sinking fund of Great Britain has been more
frequently applied to the one or to the other of those two purposes
will sufficiently appear by and by.

    Besides those two methods of borrowing, by anticipations and by
perpetual funding, there are two other methods which hold a sort of
middle place between them. These are, that of borrowing upon annuities
for terms of years, and that of borrowing upon annuities for lives.

    During the reigns of King William and Queen Anne, large sums
were frequently borrowed upon annuities for terms of years, which were
sometimes longer and sometimes shorter. In 1693, an act was passed for
borrowing one million upon an annuity of fourteen per cent, or of
L140,000 a year for sixteen years. In 1691, an act was passed for
borrowing a million upon annuities for lives, upon terms which in
the present times would appear very advantageous. But the subscription
was not filled up. In the following year the deficiency was made
good by borrowing upon annuities for lives at fourteen per cent, or at
little more than seven years' purchase. In 1695, the persons who had
purchased those annuities were allowed to exchange them for others
of ninety-six years upon paying into the Exchequer sixty-three
pounds in the hundred; that is, the difference between fourteen per
cent for life, and fourteen per cent for ninety-six years, was sold
for sixty-three pounds, or for four and a half years' purchase. Such
was the supposed instability of government that even these terms
procured few purchasers. In the reign of Queen Anne money was upon
different occasions borrowed both upon annuities for lives, and upon
annuities for terms of thirty-two, of eighty-nine, of ninety-eight,
and of ninety-nine years. In 1719, the proprietors of the annuities
for thirty-two years were induced to accept in lieu of them South
Sea stock to the amount of eleven and a half years' purchase of the
annuities, together with an additional quantity of stock equal to
the arrears which happened then to be due upon them. In 1720, the
greater part of the other annuities for terms of years both long and
short were subscribed into the same fund. The long annuities at that
time amounted to L666,821 8s. 3 1/2d. a year. On the 5th of January
1775, the remainder of them, or what was not subscribed at that
time, amounted only to L136,453 12s. 8d.

    During the two wars which began in 1739 and in 1755, little
money was borrowed either upon annuities for terms of years, or upon
those for lives. An annuity for ninety-eight or ninety-nine years,
however, is worth nearly as much money as a perpetuity, and should,
therefore, one might think, be a fund for borrowing nearly as much.
But those who, in order to make family settlements, and to provide for
remote futurity, buy into the public stocks, would not care to
purchase into one of which the value was continually diminishing;
and such people make a very considerable proportion both of the
proprietors and purchasers of stock. An annuity for a long term of
years, therefore, though its intrinsic value may be very nearly the
same with that of a perpetual annuity, will not find nearly the same
number of purchasers. The subscribers to a new loan, who mean
generally to sell their subscriptions as soon as possible, prefer
greatly a perpetual annuity redeemable by Parliament to an
irredeemable annuity for a long term of years of only equal amount.
The value of the former may be supposed always the same, or very
nearly the same, and it makes, therefore, a more convenient
transferable stock than the latter.

    During the two last-mentioned wars, annuities, either for terms of
years or for lives, were seldom granted but as premiums to the
subscribers to a new loan over and above the redeemable annuity or
interest upon the credit of which the loan was supposed to be made.
They were granted, not as the proper fund upon which the money was
borrowed, but as an additional encouragement to the lender.

    Annuities for lives have occasionally been granted in two
different ways; either upon separate lives, or upon lots of lives,
which in French are called Tontines, from the name of their
inventor. When annuities are granted upon separate lives, the death of
every individual annuitant disburthens the public revenue so far as it
was affected by his annuity. When annuities are granted upon tontines,
the liberation of the public revenue does not commence till the
death of all annuitants comprehended in one lot, which may sometimes
consist of twenty or thirty persons, of whom the survivors succeed
to the annuities of all those who die before them, the last survivor
succeeding to the annuities of the whole lot. Upon the same revenue
more money can always be raised by tontines than by annuities for
separate lives. An annuity, with a right of survivorship, is really
worth more than an equal annuity for a separate life, and from the
confidence which every man naturally has in his own good fortune,
the principle upon which is founded the success of all lotteries, such
an annuity generally sells for something more than it is worth. In
countries where it is usual for government to raise money by
granting annuities, tontines are upon this account generally preferred
to annuities for separate lives. The expedient which will raise most
money is almost always preferred to that which is likely to bring
about in the speediest manner the liberation of the public revenue.

    In France a much greater proportion of the public debts consists
in annuities for lives than in England. According to a memoir
presented by the Parliament of Bordeaux to the king in 1764, the whole
public debt of France is estimated at twenty-four hundred millions
of livres, of which the capital for which annuities for lives had been
granted is supposed to amount to three hundred millions, the eighth
part of the whole public debt. The annuities themselves are computed
to amount to thirty millions a year, the fourth part of one hundred
and twenty millions, the supposed interest of that whole debt. These
estimations, I know very well, are not exact, but having been
presented by so very respectable a body as approximations to the
truth, they may, I apprehend, be considered as such. It is not the
different degrees of anxiety in the two governments of France and
England for the liberation of the public revenue which occasions
this difference in their respective modes of borrowing. It arises
altogether from the different views and interests of the lenders.

    In England, the seat of government being in the greatest
mercantile city in the world, the merchants are generally the people
who advance money to government. By advancing it they do not mean to
diminish, but, on the contrary, to increase their mercantile capitals,
and unless they expected to sell with some profit their share in the
subscription for a new loan, they never would subscribe. But if by
advancing their money they were to purchase, instead of perpetual
annuities, annuities for lives only, whether their own or those of
other people, they would not always be so likely to sell them with a
profit. Annuities upon their own lives they would always sell with
loss, because no man will give for an annuity upon the life of
another, whose age and state of health are nearly the same with his
own, the same price which he would give for one upon his own. An
annuity upon the life of a third person, indeed, is, no doubt, of
equal value to the buyer and the seller; but its real value begins
to diminish from the moment it is granted, and continues to do so more
and more as long as it subsists. It can never, therefore, make so
convenient a transferable stock as a perpetual annuity, of which the
real value may be supposed always the same, or very nearly the same.

    In France, the seat of government not being in a great
mercantile city, merchants do not make so great a proportion of the
people who advance money to government. The people concerned in the
finances, the farmers general, the receivers of the taxes which are
not in farm, the court bankers, etc., make the greater part of those
who advance their money in all public exigencies. Such people are
commonly men of mean birth, but of great wealth, and frequently of
great pride. They are too proud to marry their equals, and women of
quality disdain to marry them. They frequently resolve, therefore,
to live bachelors, and having neither any families of their own, nor
much regard for those of their relations, whom they are not always
very fond of acknowledging, they desire only to live in splendour
during their own time, and are not unwilling that their fortune should
end with themselves. The number of rich people, besides, who are
either averse to marry, or whose condition of life renders it either
improper or inconvenient for them to do so, is much greater in
France than in England. To such people, who have little or no care for
posterity, nothing can be more convenient than to exchange their
capital for a revenue which is to last just as long, and no longer,
than they wish it to do.

    The ordinary expense of the greater part of modern governments
in time of peace being equal or nearly equal to their ordinary
revenue, when war comes they are both unwilling and unable to increase
their revenue in proportion to the increase of their expense. They are
unwilling for fear of offending the people, who, by so great and so
sudden an increase of taxes, would soon be disgusted with the war; and
they are unable from not well knowing what taxes would be sufficient
to produce the revenue wanted. The facility of borrowing delivers them
from the embarrassment which this fear and inability would otherwise
occasion. By means of borrowing they are enabled, with a very moderate
increase of taxes, to raise, from year to year, money sufficient for
carrying on the war, and by the practice of perpetually funding they
are enabled, with the smallest possible increase of taxes, to raise
annually the largest possible sum of money. In great empires the
people who live in the capital, and in the provinces remote from the
scene of action, feel, many of them, scarce any inconveniency from the
war; but enjoy, at their ease, the amusement of reading in the
newspapers the exploits of their own fleets and armies. To them this
amusement compensates the small difference between the taxes which
they pay on account of the war, and those which they had been
accustomed to pay in time of peace. They are commonly dissatisfied
with the return of peace, which puts an end to their amusement, and to
a thousand visionary hopes of conquest and national glory from a
longer continuance of the war.

    The return of peace, indeed, seldom relieves them from the greater
part of the taxes imposed during the war. These are mortgaged for
the interest of the debt contracted in order to carry it on. If,
over and above paying the interest of this debt, and defraying the
ordinary expense of government, the old revenue, together with the new
taxes, produce some surplus revenue, it may perhaps be converted
into a sinking fund for paying off the debt. But, in the first
place, this sinking fund, even supposing it should be applied to no
other purpose, is generally altogether inadequate for paying, in the
course of any period during which it can reasonably be expected that
peace should continue, the whole debt contracted during the war;
and, in the second place, this fund is almost always applied to
other purposes.

    The new taxes were imposed for the sole purpose of paying the
interest of the money borrowed upon them. If they produce more, it
is generally something which was neither intended nor expected, and is
therefore seldom very considerable. Sinking funds have generally
arisen not so much from any surplus of the taxes which was over and
above what was necessary for paying the interest or annuity originally
charged upon them, as from a subsequent reduction of that interest.
That of Holland in 1655, and that of the ecclesiastical state in 1685,
were both formed in this manner. Hence the usual insufficiency of such
funds.

    During the most profound peace various events occur which
require an extraordinary expense, and government finds it always
more convenient to defray this expense by misapplying the sinking fund
than by imposing a new tax. Every new tax is immediately felt more
or less by the people. It occasions always some murmur, and meets with
some opposition. The more taxes may have been multiplied, the higher
they may have been raised upon every different subject of taxation;
the more loudly the people complain of every new tax, the more
difficult it becomes, too, either to find out new subjects of
taxation, or to raise much higher the taxes already imposed upon the
old. A momentary suspension of the payment of debt is not
immediately felt by the people, and occasions neither murmur nor
complaint. To borrow of the sinking fund is always an obvious and easy
expedient for getting out of the present difficulty. The more the
public debts may have been accumulated, the more necessary it may have
become to study to reduce them, the more dangerous, the more ruinous
it may be to misapply any part of the sinking fund; the less likely is
the public debt to be reduced to any considerable degree, the more
likely, the more certainly is the sinking fund to be misapplied
towards defraying all the extraordinary expenses which occur in time
of peace. When a nation is already overburdened with taxes, nothing
but the necessities of a new war, nothing but either the animosity
of national vengeance, or the anxiety for national security, can
induce the people to submit, with tolerable patience, to a new tax.
Hence the usual misapplication of the sinking fund.

    In Great Britain, from the time that we had first recourse to
the ruinous expedient of perpetual funding, the reduction of the
public debt in time of peace has never borne any proportion to its
accumulation in time of war. It was in the war which began in 1688,
and was concluded by the Treaty of Ryswick in 1697, that the
foundation of the present enormous debt of Great Britain was first
laid.

    On the 31st of December 1697, the public debts of Great Britain,
funded and unfunded, amounted to L21,515,742 13s. 8 1/2d. A great part
of those debts had been contracted upon short anticipations, and
some part upon annuities for lives, so that before the 31st of
December 1701, in less than four years, there had partly been paid
off, and partly reverted to the public, the sum of L5,121,041 12s. 0
3/4d.; a greater reduction of the public debt than has ever since been
brought about in so short a period of time. The remaining debt,
therefore, amounted only to L16,394,701 1s. 7 1/4d.

    In the war which began in 1709., and which was concluded by the
Treaty of Utrecht, the public debts were still more accumulated. On
the 31st of December 1714, they amounted to L53,681,076 5s. 6 1/2d.
The subscription into the South Sea fund of the short and long
annuities increased the capital of the public debts, so that on the
31st of December 1722 it amounted to L55,282,978 1s. 3 5/6d. The
reduction of the debt began in 1723, and went on so slowly that, on
the 31st of December 1739, during seventeen years of profound peace,
the whole sum paid off was no more than L8,328,354 17s. 11 3/12d., the
capital of the public debt at that time amounting to L46,954,623 3s. 4
7/12d.

    The Spanish war, which began in 1739, and the French war which
soon followed it occasioned further increase of the debt, which, on
the 31st of December 1748, after the war had been concluded by the
Treaty of Aix-la-Chapelle, amounted to L78,293,313 1s. 10 3/4d. The
most profound peace of seventeen years continuance had taken no more
than L8,328,354 17s. 11 3/12d. from it. A war of less than nine years'
continuance added L31,338,689 18s. 6 1/6d. to it.

    During the administration of Mr. Pelham, the interest of the
public debt was reduced, or at least measures were taken for
reducing it, from four to three per cent; the sinking fund was
increased, and some part of the public debt was paid off. In 1755,
before the breaking out of the late war, the funded debt of Great
Britain amounted to L72,289,673. On the 5th of January 1763, at the
conclusion of the peace, the funded debt amounted to L122,603,336
8s. 2 1/4d. The unfunded debt has been stated at L13,927,589 2s. 2d.
But the expense occasioned by the war did not end with the
conclusion of the peace, so that though, on the 5th of January 1764,
the funded debt was increased (partly by a new loan, and partly by
funding a part of the unfunded debt) to L129,586,789 10s. 1 3/4d.,
there still remained (according to the very well informed author of
the Considerations on the Trade and Finances of Great Britain) an
unfunded debt which was brought to account in that and the following
year of L9,975,017 12s. 2 15/44d. In 1764, therefore, the public
debt of Great Britain, funded and unfunded together, amounted,
according to this author, to L139,516,807 2s. 4d. The annuities for
lives, too, which had been granted as premiums to the subscribers to
the new loans in 1757, estimated at fourteen years' purchase, were
valued at L472,500; and the annuities for long terms of years, granted
as premiums likewise in 1761 and 1762, estimated at twenty-seven and a
half years' purchase, were valued at L6,826,875. During a peace of
about seven years' continuance, the prudent and truly patriot
administration of Mr. Pelham was not able to pay off an old debt of
six millions. During a war of nearly the same continuance, a new
debt of more than seventy-five millions was contracted.

    On the 5th of January 1775, the funded debt of Great Britain
amounted to L124,996,086 1s. 6 1/4d. The unfunded, exclusive of a
large civil list debt, to L4,150,263 3s. 11 7/8d. Both together, to
L129,146,322 5s. 6d. According to this account the whole debt paid off
during eleven years' profound peace amounted only to L10,415,474
16s. 9 7/8d. Even this small reduction of debt, however, has not
been all made from the savings out of the ordinary revenue of the
state. Several extraneous sums, altogether independent of that
ordinary revenue, have contributed towards it. Amongst these we may
reckon an additional shilling in the pound land-tax for three years;
the two millions received from the East India Company as
indemnification for their territorial acquisitions; and the one
hundred and ten thousand pounds received from the bank for the renewal
of their charter. To these must be added several other sums which,
as they arose out of the late war, ought perhaps to be considered as
deductions from the expenses of it. The principal are,

                                                L       s.       d.

  The produce of French prizes               690,449    18       9

  Composition for French prisoners           670,000     0       0

  What has been received from the sale

    of the ceded islands                      95,500     0       0

If we add to this sum the balance of the Earl of Chatham's and Mr.
Calcraft's accounts, and other army savings of the same kind, together
with what has been received from the bank, the East India Company, and
the additional shilling in the pound land-tax, the whole must be a
good deal more than five millions. The debt, therefore, which since
the peace has been paid out of the savings the ordinary revenue of the
state, has not, one year with another, amounted to half a million a
year. The sinking fund has, no doubt, been considerably augmented
since the peace, by the debt which has been paid off, by the reduction
of the redeemable four per cents to three per cents, and by the
annuities for lives which have fallen in, and, if peace were to
continue, a million, perhaps, might now be annually spared out of it
towards the discharge of the debt. Another million, accordingly, was
paid in the course of last year; but, at the same time, a new civil
list debt was left unpaid, and we are now involved in a new war which,
in its progress, may prove as expensive as any of our former wars.*
The new debt which will probably be contracted before the end of the
next campaign may perhaps be nearly equal to all the old debt which
has been paid off from the savings out of the ordinary revenue of
the state. It would be altogether chimerical, therefore, to expect
that the public debt should ever be completely discharged by any
savings which are likely to be made from that ordinary revenue as it
stands at present.

  * It has proved more expensive than all of our former wars; and
has involved us in an additional debt of more than one hundred
millions. During a profound peace of eleven years, little more than
ten millions of debt was paid; during a war of seven years, more
than one hundred millions was contracted.

    The public funds of the different indebted nations of Europe,
particularly those of England, have by one author been represented
as the accumulation of a great capital superadded to the other capital
of the country, by means of which its trade is extended, its
manufactures multiplied, and its lands cultivated and improved much
beyond what they could have been by means of that other capital
only. He does not consider that the capital which the first
creditors of the public advanced to government was, from the moment in
which they advanced it, a certain portion of the annual produce turned
away from serving in the function of a capital to serve in that of a
revenue; from maintaining productive labourers to maintain
unproductive ones, and to be spent and wasted, generally in the course
of the year, without even the hope of any future reproduction. In
return for the capital which they advanced they obtained, indeed, an
annuity in the public funds in most cases of more than equal value.
This annuity, no doubt, replaced to them their capital, and enabled
them to carry on their trade and business to the same or perhaps to
a greater extent than before; that is, they were enabled either to
borrow of other people a new capital upon the credit of this
annuity, or by selling it to get from other people a new capital of
their own equal or superior to that which they had advanced to
government. This new capital, however, which they in this manner
either bought or borrowed of other people, must have existed in the
country before, and must have been employed, as all capitals are, in
maintaining productive labour. When it came into the hands of those
who had advanced their money to government, though it was in some
respects a new capital to them, it was not so to the country, but
was only a capital withdrawn from certain employments in or to be
turned towards others. Though it replaced to them what they had
advanced to government, it did not replace it to the country. Had they
not advanced this capital to government, there would have been in
the country two capitals, two portions of the annual produce,
instead of one, employed in maintaining productive labour.

    When for defraying the expense of government a revenue is raised
within the year from the produce of free or unmortgaged taxes, a
certain portion of the revenue of private people is only turned away
from maintaining one species of unproductive labour towards
maintaining another. Some part of what they pay in those taxes might
no doubt have been accumulated into capital, and consequently employed
in maintaining productive labour; but the greater part would
probably have been spent and consequently employed in maintaining
unproductive labour. The public expense, however, when defrayed in
this manner, no doubt hinders more or less the further accumulation of
new capital; but it does not necessarily occasion the destruction of
any actually existing capital.

    When the public expense is defrayed by funding, it is defrayed
by the annual destruction of some capital which had before existed
in the country; by the perversion of some portion of the annual
produce which had before been destined for the maintenance of
productive labour towards that of unproductive labour. As in this
case, however, the taxes are lighter than they would have been had a
revenue sufficient for defraying the same expense been raised within
the year, the private revenue of individuals is necessarily less
burdened, and consequently their ability to save and accumulate some
part of that revenue into capital is a good deal less impaired. If the
method of funding destroys more old capital, it at the same time
hinders less the accumulation or acquisition of new capital than
that of defraying the public expense by a revenue raised within the
year. Under the system of funding, the frugality and industry of
private people can more easily repair the breaches which the waste and
extravagance of government may occasionally make in the general
capital of the society.

    It is only during the continuance of war, however, that the system
of funding has this advantage over the other system. Were the
expense of war to be defrayed always by a revenue raised within the
year, the taxes from which that extraordinary revenue was drawn
would last no longer than the war. The ability of private people to
accumulate, though less during the war, would have been greater during
the peace than under the system of funding. War would not
necessarily have occasioned the destruction of any old capitals, and
peace would have occasioned the accumulation of many more new. Wars
would in general be more speedily concluded, and less wantonly
undertaken. The people feeling, during the continuance of the war, the
complete burden of it, would soon grow weary of it, and government, in
order to humour them, would not be under the necessity of carrying
it on longer than it was necessary to do so. The foresight of the
heavy and unavoidable burdens of war would hinder the people from
wantonly calling for it when there was no real or solid interest to
fight for. The seasons during which the ability of private people to
accumulate was somewhat impaired would occur more rarely, and be of
shorter continuance. Those, on the contrary, during which the
ability was in the highest vigour would be of much longer duration
than they can well be under the system of funding.

    When funding, besides, has made a certain progress, the
multiplication of taxes which it brings along with it sometimes
impairs as much the ability of private people to accumulate even in
time of peace as the other system would in time of war. The peace
revenue of Great Britain amounts at present to more than ten
millions a year. If free and unmortgaged, it might be sufficient, with
proper management and without contracting a shilling of new debt, to
carry on the most vigorous war. The private revenue of the inhabitants
of Great Britain is at present as much encumbered in time of peace,
their ability to accumulate is as much impaired as it would have
been in the time of the most expensive war had the pernicious system
of funding never been adopted.

    In the payment of the interest of the public debt, it has been
said, it is the right hand which pays the left. The money does not
go out of the country. It is only a part of the revenue of one set
of the inhabitants which is transferred to another, and the nation
is not a farthing the poorer. This apology is founded altogether in
the sophistry of the mercantile system, and after the long examination
which I have already bestowed upon that system, it may perhaps be
unnecessary to say anything further about it. It supposes, besides,
that the whole public debt is owing to the inhabitants of the country,
which happens not to be true; the Dutch, as well as several other
foreign nations, having a very considerable share in our public funds.
But though the whole debt were owing to the inhabitants of the
country, it would not upon that account be less pernicious.

    Land and capital stock are the two original sources of all revenue
both private and public. Capital stock pays the wages of productive
labour, whether employed in agriculture, manufactures, or commerce.
The management of those two original sources of revenue belong to
two different sets of people; the proprietors of land, and the
owners or employers of capital stock.

    The proprietor of land is interested for the sake of his own
revenue to keep his estate in as good condition as he can, by building
and repairing his tenants' houses, by making and maintaining the
necessary drains and enclosures, and all those other expensive
improvements which it properly belongs to the landlord to make and
maintain. But by different land-taxes the revenue of the landlord
may be so much diminished, and by different duties upon the
necessaries and conveniences of life that diminished revenue may be
rendered of so little real value, that he may find himself
altogether unable to make or maintain those expensive improvements.
When the landlord, however, ceases to do his part, it is altogether
impossible that the tenant should continue to do his. As the
distress of the landlord increases, the agriculture of the country
must necessarily decline.

    When, by different taxes upon the necessaries and conveniences
of life, the owners and employers of capital stock find that
whatever revenue they derive from it will not, in a particular
country, purchase the same quantity of those necessaries and
conveniences which an equal revenue would in almost any other, they
will be disposed to remove to some other. And when, in order to
raise those taxes, all or the greater part of merchants and
manufacturers, that is, all or the greater part of the employers of
great capitals, come to be continually exposed to the mortifying and
vexatious visits of the tax-gatherers, the disposition to remove
will soon be changed into an actual removal. The industry of the
country will necessarily fall with the removal of the capital which
supported it, and the ruin of trade and manufactures will follow the
declension of agriculture.

    To transfer from the owners of those two great sources of revenue,
land and capital stock, from the persons immediately interested in the
good condition of every particular portion of land, and in the good
management of every particular portion of capital stock, to another
set of persons (the creditors of the public, who have no such
particular interest), the greater part of the revenue arising from
either must, in the long-run, occasion both the neglect of land, and
the waste or removal of capital stock. A creditor of the public has no
doubt a general interest in the prosperity of the agriculture,
manufactures, and commerce of the country, and consequently in the
good condition of its lands, and in the good management of its capital
stock. Should there be any general failure or declension in any of
these things, the produce of the different taxes might no longer be
sufficient to pay him the annuity or interest which is due to him. But
a creditor of the public, considered merely as such, has no interest
in the good condition of any particular portion of land, or in the
good management of any particular portion of capital stock. As a
creditor of the public he has no knowledge of any such particular
portion. He has no inspection of it. He can have no care about it. Its
ruin may in some cases be unknown to him, and cannot directly affect
him.

    The practice of funding has gradually enfeebled every state
which has adopted it. The Italian republics seem to have begun it.
Genoa and Venice, the only two remaining which can pretend to an
independent existence, have both been enfeebled by it. Spain seems
to have learned the practice from the Italian republics, and (its
taxes being probably less judicious than theirs) it has, in proportion
to its natural strength, been still more enfeebled. The debts of Spain
are of very old standing. It was deeply in debt before the end of
the sixteenth century, about a hundred years before England owed a
shilling. France, notwithstanding all its natural resources,
languishes under an oppressive load of the same kind. The republic
of the United Provinces is as much enfeebled by its debts as either
Genoa or Venice. Is it likely that in Great Britain alone a practice
which has brought either weakness or desolation into every other
country should prove altogether innocent?

    The system of taxation established in those different countries,
it may be said, is inferior to that of England. I believe it is so.
But it ought to be remembered that, when the wisest government has
exhausted all the proper subjects of taxation, it must, in cases of
urgent necessity, have recourse to improper ones. The wise republic of
Holland has upon some occasions been obliged to have recourse to taxes
as inconvenient as the greater part of those of Spain. Another war
begun before any considerable liberation of the public revenue had
been brought about, and growing in its progress as expensive as the
last war, may, from irresistible necessity, render the British
system of taxation as oppressive as that of Holland, or even as that
of Spain. To the honour of our present system of taxation, indeed,
it has hitherto given so little embarrassment to industry that, during
the course even of the most expensive wars, the frugality and good
conduct of individuals seem to have been able, by saving and
accumulation, to repair all the breaches which the waste and
extravagance of government had made in the general capital of the
society. At the conclusion of the late war, the most expensive that
Great Britain ever waged, her agriculture was as flourishing, her
manufacturers as numerous and as fully employed, and her commerce as
extensive as they had ever been before. The capital, therefore,
which supported all those different branches of industry must have
been equal to what it had ever been before. Since the peace,
agriculture has been still further improved, the rents of houses
have risen in every town and village of the country- a proof of the
increasing wealth and revenue of the people; and the annual amount the
greater part of the old taxes, of the principal branches of the excise
and customs in particular, has been continually increasing- an equally
clear proof of an increasing consumption, and consequently of an
increasing produce which could alone support that consumption. Great
Britain seems to support with ease a burden which, half a century ago,
nobody believed her capable of supporting. Let us not, however, upon
this account rashly conclude that she is capable of supporting any
burden, nor even be too confident that she could support, without
great distress, a burden a little greater than what has already been
laid upon her.

    When national debts have once been accumulated to a certain
degree, there is scarce, I believe, a single instance of their
having been fairly and completely paid. The liberation of the public
revenue, if it has ever been brought about by bankruptcy; sometimes by
an avowed one, but always by a real one, though frequently by a
pretended payment.

    The raising of the denomination of the coin has been the most
usual expedient by which a real public bankruptcy has been disguised
under the appearance of a pretended payment. If a sixpence, for
example, should either by Act of Parliament or Royal Proclamation be
raised to the denomination of a shilling, and twenty sixpences to that
of a pound sterling, the person who under the old denomination had
borrowed twenty shillings, or near four ounces of silver, would, under
the new, pay with twenty sixpences, or with something less than two
ounces. A national debt of about a hundred and twenty-eight
millions, nearly the capital of the funded and unfunded debt of
Great Britain, might in this manner be paid with about sixty-four
millions of our present money. It would indeed be a pretended
payment only, and the creditors of the public would really be
defrauded of ten shillings in the pound of what was due to them. The
calamity, too, would extend much further than to the creditors of
the public, and those of every private person would suffer a
proportionable loss; and this without any advantage, but in most cases
with a great additional loss, to the creditors of the public. If the
creditors of the public, indeed, were generally much in debt to
other people, they might in some measure compensate their loss by
paying their creditors in the same coin in which the public had paid
them. But in most countries the creditors of the public are, the
greater part of them, wealthy people, who stand more in the relation
of creditors than in that of debtors towards the rest of their
fellow-citizens. A pretended payment of this kind, therefore,
instead of alleviating, aggravates in most cases the loss of the
creditors of the public, and without any advantage to the public,
extends the calamity to a great number of other innocent people. It
occasions a general and most pernicious subversion of the fortunes
of private people, enriching in most cases the idle and profuse debtor
at the expense of the industrious and frugal creditor, and
transporting a great part of the national capital from the hands which
were likely to increase and improve it to those which are likely to
dissipate and destroy it. When it becomes necessary for a state to
declare itself bankrupt, in the same manner as when it becomes
necessary for an individual to do so, a fair, open, and avowed
bankruptcy is always the measure which is both least dishonourable
to the debtor and least hurtful to the creditor. The honour of a state
is surely very poorly provided for when, in order to cover the
disgrace of a real bankruptcy, it has recourse to a juggling trick
of this kind, so easily seen through, and at the same time so
extremely pernicious.

    Almost all states, however, ancient as well as modern, when
reduced to this necessity have, upon some occasions, played this
very juggling trick. The Romans, at the end of the first Punic war,
reduced the As, the coin or denomination by which they computed the
value of all their other coins, from containing twelve ounces of
copper to contain only two ounces; that is, they raised two ounces
of copper to a denomination which had always before expressed the
value of twelve ounces. The republic was, in this manner, enabled to
pay the great debts which it had contracted with the sixth part of
what it really owed. So sudden and so great a bankruptcy, we should in
the present times be apt to imagine, must have occasioned a very
violent popular clamour. It does not appear to have occasioned any.
The law which enacted it was, like all other laws relating to the
coin, introduced and carried through the assembly of the people by a
tribune, and was probably a very popular law. In Rome, as in all the
other ancient republics, the poor people were constantly in debt to
the rich and the great, who in order to secure their votes at the
annual elections, used to lend them money at exorbitant interest,
which, being never paid, soon accumulated into a sum too great
either for the debtor to pay, or for anybody else to pay for him.
The debtor, for fear of a very severe execution, was obliged,
without any further gratuity, to vote for the candidate whom the
creditor recommended. In spite of all the laws against bribery and
corruption, the bounty of the candidates, together with the occasional
distributions of corn which were ordered by the senate, were the
principal funds from which, during the latter times of the Roman
republic, the poorer citizens derived their subsistence. To deliver
themselves from this subjection to their creditors, the poorer
citizens were continually calling out either for an entire abolition
of debts, or for what they called New Tables; that is, for a law which
should entitle them to a complete acquittance upon paying only a
certain proportion of their accumulated debts. The law which reduced
the coin of all denominations to a sixth part of its former value,
as it enabled them to pay their debts with a sixth part of what they
really owed, was equivalent to the most advantageous New Tables. In
order to satisfy the people, the rich and the great were, upon several
different occasions, obliged to consent to laws both for abolishing
debts, and for introducing New Tables; and they probably were
induced to consent to this law partly for the same reason, and
partly that, by liberating the public revenue, they might restore
vigour to that government of which they themselves had the principal
direction. An operation of this kind would at once reduce a debt of
a hundred and twenty-eight millions to twenty-one millions three
hundred and thirty-three thousand three hundred and thirty-three
pounds six shillings and eightpence. In the course of the second Punic
war the As was still further reduced, first, from two ounces of copper
to one ounce, and afterwards from one ounce to half an ounce; that is,
to the twenty-fourth part of its original value. By combining the
three Roman operations into one, a debt of a hundred and
twenty-eight millions of our present money might in this manner be
reduced all at once to a debt of five millions three hundred and
thirty-three thousand three hundred and thirty-three pounds six
shillings and eightpence. Even the enormous debts of Great Britain
might in this manner soon be paid.

    By means of such expedients the coin of, I believe, all nations
has been gradually reduced more and more below its original value, and
the same nominal sum has been gradually brought to contain a smaller
and a smaller quantity of silver.

    Nations have sometimes, for the same purpose, adulterated the
standard of their coin; that is, have mixed a greater quantity of
alloy in it. If in the pound weight of our silver coin, for example,
instead of eighteen pennyweight, according to the present standard,
there was mixed eight ounces of alloy, a pound sterling, or twenty
shillings of such coin, would be worth little more than six
shillings and eightpence of our present money. The quantity of
silver contained in six shillings and eightpence of our present
money would thus be raised very nearly to the denomination of a
pound sterling. The adulteration of the standard has exactly the
same effect with what the French call an augmentation, or a direct
raising of the denomination of the coin.

    An augmentation, or a direct raising of the coin, always is, and
from its nature must be, an open and avowed operation. By means of
it pieces of a smaller weight and bulk are called by the same name
which had before been given to pieces of a greater weight and bulk.
The adulteration of the standard, on the contrary, has generally
been a concealed operation. By means of it pieces were issued from the
mint of the same denominations, and, as nearly as could be
contrived, of the same weight, bulk, and appearance with pieces
which had been current before of much greater value. When King John of
France, in order to pay his debts, adulterated his coin, all the
officers of his mint were sworn to secrecy. Both operations are
unjust. But a simple augmentation is an injustice of open violence,
whereas the adulteration is an injustice of treacherous fraud. This
latter operation, therefore, as soon as it has been discovered, and it
could never be concealed very long, has always excited much greater
indignation than the former. The coin after any considerable
augmentation has very seldom been brought back to its former weight;
but after the greater adulterations it has almost always been
brought back to its former fineness. It has scarce ever happened
that the fury and indignation of the people could otherwise be
appeased.

    In the end of the reign of Henry VIII and in the beginning of that
of Edward VI the English coin was not only raised in its denomination,
but adulterated in its standard. The like frauds were practised in
Scotland during the minority of James VI. They have occasionally
been practised in most other countries.

    That the public revenue of Great Britain can never be completely
liberated, or even that any considerable progress can ever be made
towards that liberation, while the surplus of that revenue, or what is
over and above defraying the annual expense of the peace
establishment, is so very small, it seems altogether in vain to
expect. That liberation, it is evident, can never be brought about
without either some very considerable augmentation of the public
revenue, or some equally considerable reduction of the public expense.

    A more equal land-tax, a more equal tax upon the rent of houses,
and such alterations in the present system of customs and excise as
those which have been mentioned in the foregoing chapter might,
perhaps, without increasing the burden of the greater part of the
people, but only distributing the weight of it more equally upon the
whole, produce a considerable augmentation of revenue. The most
sanguine projector, however, could scarce flatter himself that any
augmentation of this kind would be such as could give any reasonable
hopes either of liberating the public revenue altogether, or even of
making such progress towards that liberation in time of peace as
either to prevent or to compensate the further accumulation of the
public debt in the next war.

    By extending the British system of taxation to all the different
provinces of the empire inhabited by people of either British or
European extraction, a much greater augmentation of revenue might be
expected. This, however, could scarce, perhaps, be done,
consistently with the principles of the British constitution,
without admitting into the British Parliament, or if you will into the
states general of the British empire, a fair and equal
representation of all those different provinces, that of each province
bearing the same proportion to the produce of its taxes as the
representation of Great Britain might bear to the produce of the taxes
levied upon Great Britain. The private interest of many powerful
individuals, the confirmed prejudices of great bodies of people
seem, indeed, at present, to oppose to so great a change such
obstacles as it may be very difficult, perhaps altogether
impossible, to surmount. Without, however, pretending to determine
whether such a union be practicable or impracticable, it may not,
perhaps, be improper, in a speculative work of this kind, to
consider how far the British system of taxation might be applicable to
all the different provinces of the empire, what revenue might be
expected from it if so applied, and in what manner a general union
of this kind might be likely to affect the happiness and prosperity of
the different provinces comprehended within it. Such a speculation can
at worst be regarded but as a new Utopia, less amusing certainly,
but not more useless and chimerical than the old one.

    The land-tax, the stamp-duties, and the different duties of
customs and excise constitute the four principal branches of the
British taxes.

    Ireland is certainly as able, and our American and West Indian
plantations more able to pay a land-tax than Great Britain. Where
the landlord is subject neither to tithe nor poor-rate, he must
certainly be more able to pay such a tax than where he is subject to
both those other burdens. The tithe, where there is no modus, and
where it is levied in kind, diminishes more what would otherwise be
the rent of the landlord than a land-tax which really amounted to five
shillings in the pound. Such a tithe will be found in most cases to
amount to more than a fourth part of the real rent of the land, or
of what remains after replacing completely the capital of the
farmer, together with his reasonable profit. If all moduses and all
impropriations were taken away, the complete church tithe of Great
Britain and Ireland could not well be estimated at less than six or
seven millions. If there was no tithe either in Great Britain or
Ireland, the landlords could afford to pay six or seven millions
additional land-tax without being more burdened than a very great part
of them are at present. America pays no tithe, and could therefore
very well afford to pay a land-tax. The lands in America and the
West Indies, indeed, are in general not tenanted nor leased out to
farmers. They could not therefore be assessed according to any
rent-roll. But neither were the lands of Great Britain, in the 4th
of William and Mary, assessed according to any rent-roll, but
according to a very loose and inaccurate estimation. The lands in
America might be assessed either in the same manner, or according to
an equitable valuation in consequence of an accurate survey like
that which was lately made in the Milanese, and in the dominions of
Austria, Prussia, and Sardinia.

    Stamp-duties, it is evident, might be levied without any variation
in all countries where the forms of law process, and the deeds by
which property both real and personal is transferred, are the same
or nearly the same.

    The extension of the custom-house laws of Great Britain to Ireland
and the plantations, provided it was accompanied, as in justice it
ought to be, with an extension of the freedom of trade, would be in
the highest degree advantageous to both. All the invidious
restraints which at present oppress the trade of Ireland, the
distinction between the enumerated and non-enumerated commodities of
America, would be entirely at an end. The countries north of Cape
Finisterre would be as open to every part of the produce of America as
those south of that Cape are to some parts of that produce at present.
The trade between all the different parts of the British empire would,
in consequence of this uniformity in the custom-house laws, be as free
as the coasting trade of Great Britain is at present. The British
empire would thus afford within itself an immense internal market
for every part of the produce of all its different provinces. So great
an extension of market would soon compensate both to Ireland and the
plantations all that they could suffer from the increase of the duties
of customs.

    The excise is the only part of the British system of taxation
which would require to be varied in any respect according as it was
applied to the different provinces of the empire. It might be
applied to Ireland without any variation, the produce and
consumption of that kingdom being exactly of the same nature with
those of Great Britain. In its application to America and the West
Indies, of which the produce and consumption are so very different
from those of Great Britain, some modification might be necessary in
the same manner as in its application to the cyder and beer counties
of England.

    A fermented liquor, for example, which is called beer, but
which, as it is made of molasses, bears very little resemblance to our
beer, makes a considerable part of the common drink of the people in
America. This liquor, as it can be kept only for a few days, cannot,
like our beer, be prepared and stored up for sale in great
breweries; but every private family must brew it for their own use, in
the same manner as they cook their victuals. But to subject every
private family to the odious visits and examination of the
tax-gatherers, in the same manner as we subject the keepers of
alehouses and the brewers for public sale, would be altogether
inconsistent with liberty. If for the sake of equality it was
thought necessary to lay a tax upon this liquor, it might be taxed
by taxing the material of which it is made, either at the place of
manufacture, or, if the circumstances of the trade rendered such an
excise improper, by laying a duty upon its importation into the colony
in which it was to be consumed. Besides the duty of one penny a gallon
imposed by the British Parliament upon the importation of molasses
into America, there is a provincial tax of this kind upon their
importation into Massachusetts Bay, in ships belonging to any other
colony, of eightpence the hogshead; and another upon their
importation, from the northern colonies into South Carolina, of
fivepence the gallon. Or if neither of these methods was found
convenient, each family might compound for its consumption of this
liquor, either according to the number of persons of which it
consisted, in the same manner as private families compound for the
malt-tax in England; or according to the different ages and sexes of
those persons, in the same manner as several different taxes are
levied in Holland; or nearly as Sir Matthew Decker proposes that all
taxes upon consumable commodities should be levied in England. This
mode of taxation, it has already been observed, when applied to
objects of a speedy consumption is not a very convenient one. It might
be adopted, however, in cases where no better could be done.

    Sugar, rum, and tobacco are commodities which are nowhere
necessaries of life, which are become objects of almost universal
consumption, and which are therefore extremely proper subjects of
taxation. If a union with the colonies were to take place, those
commodities might be taxed either before they go out of the hands of
the manufacturer or grower, or if this mode of taxation did not suit
the circumstances of those persons, they might be deposited in
public warehouses both at the place of manufacture, and at all the
different ports of the empire to which they might afterwards be
transported, to remain there, under the joint custody of the owner and
the revenue officer, till such time as they should be delivered out
either to the consumer, to the merchant retailer for home consumption,
or to the merchant exporter, the tax not to be advanced till such
delivery. When delivered out for exportation, to go duty free upon
proper security being given that they should really be exported out of
the empire. These are perhaps the principal commodities with regard to
which a union with the colonies might require some considerable change
in the present system of British taxation.

    What might be the amount of the revenue which this system of
taxation extended to all the different provinces of the empire might
produce, it must, no doubt, be altogether impossible to ascertain with
tolerable exactness. By means of this system there is annually
levied in Great Britain, upon less than eight millions of people, more
than ten millions of revenue. Ireland contains more than two
millions of people, and according to the accounts laid before the
congress, the twelve associated provinces of America contain more than
three. Those accounts, however, may have been exaggerated, in order,
perhaps, either to encourage their own people, or to intimidate
those of this country, and we shall suppose, therefore, that our North
American and West Indian colonies taken together contain no more
than three millions; or that the whole British empire, in Europe and
America, contains no more than thirteen millions of inhabitants. If
upon less than eight millions of inhabitants this system of taxation
raises a revenue of more than ten millions sterling, it ought upon
thirteen millions of inhabitants to raise a revenue of more than
sixteen millions two hundred and fifty thousand pounds sterling.
From this revenue, supposing that this system could produce it, must
be deducted the revenue usually raised in Ireland and the
plantations for defraying the expense of their respective civil
governments. The expense of the civil and military establishment of
Ireland, together with the interest of the public debt, amounts, at
a medium of the two years which ended March 1775, to something less
than seven hundred and fifty thousand pounds a year. By a very exact
account of the revenue of the principal colonies of America and the
West Indies, it amounted, before the commencement of the present
disturbances, to a hundred and forty-one thousand eight hundred
pounds. In this account, however, the revenue of Maryland, of North
Carolina, and of all our late acquisitions both upon the continent and
in the islands is omitted, which may perhaps make a difference of
thirty or forty thousand pounds. For the sake of even numbers,
therefore, let us suppose that the revenue necessary for supporting
the civil government of Ireland and the plantations may amount to a
million. There would remain consequently a revenue of fifteen millions
two hundred and fifty thousand pounds to be applied towards
defraying the general expense of the empire, and towards paying the
public debt. But if from the present revenue of Great Britain a
million could in peaceable times be spared towards the payment of that
debt, six millions two hundred and fifty thousand pounds could very
well be spared from this improved revenue. This great sinking fund,
too, might be augmented every year by the interest of the debt which
had been discharged the year before, and might in this manner increase
so very rapidly as to be sufficient in a few years to discharge the
whole debt, and thus to restore completely the at present
debilitated and languishing vigour of the empire. In the meantime
the people might be relieved from some of the most burdensome taxes;
from those which are imposed either upon the necessaries of life, or
upon the materials of manufacture. The labouring poor would thus be
enabled to live better, to work cheaper, and to send their goods
cheaper to market. The cheapness of their goods would increase the
demand for them, and consequently for the labour of those who produced
them. This increase in the demand for labour would both increase the
numbers and improve the circumstances of the labouring poor. Their
consumption would increase, and together with it the revenue arising
from all those articles of their consumption upon which the taxes
might be allowed to remain.

    The revenue arising from this system of taxation, however, might
not immediately increase in proportion to the number of people who
were subjected to it. Great indulgence would for some time be due to
those provinces of the empire which were thus subjected to burdens
to which they had not before been accustomed, and even when the same
taxes came to be levied everywhere as exactly as possible, they
would not everywhere produce a revenue proportioned to the numbers
of the people. In a poor country the consumption of the principal
commodities subject to the duties of customs and excise is very small,
and in a thinly inhabited country the opportunities of smuggling are
very great. The consumption of malt liquors among the inferior ranks
of people in Scotland is very small, and the excise upon malt, beer,
and ale produces less there than in England in proportion to the
numbers of the people and the rate of the duties, which upon malt is
different on account of a supposed difference of quality. In these
particular branches of the excise there is not, I apprehend, much more
smuggling in the one country than in the other. The duties upon the
distillery, and the greater part of the duties of customs, in
proportion to the numbers of people in the respective countries,
produce less in Scotland than in England, not only on account of the
smaller consumption of the taxed commodities, but of the much
greater facility of smuggling. In Ireland the inferior ranks of people
are still poorer than in Scotland, and many parts of the country are
almost as thinly inhabited. In Ireland, therefore, the consumption
of the taxed commodities might, in proportion to the number of the
people, be still less than Scotland, and the facility of smuggling
nearly the same. In America and the West Indies the white people
even of the lowest rank are in much better circumstances than those of
the same rank in England, and their consumption of all the luxuries in
which they usually indulge themselves is probably much greater. The
blacks, indeed, who make the greater part of the inhabitants both of
the southern colonies upon the continent and of the West India
islands, as they are in a state of slavery, are, no doubt, in a
worse condition than the poorest people either in Scotland or Ireland.
We must not, however, upon that account, imagine that they are worse
fed, or that their consumption of articles which might be subjected to
moderate duties is less than that even of the lower ranks of people in
England. In order that they may work well, it is the interest of their
master that they should be fed well and kept in good heart in the same
manner as it is his interest that his working cattle should be so. The
blacks accordingly have almost everywhere their allowance of rum and
molasses or spruce beer in the same manner as the white servants,
and this allowance would not probably be withdrawn though those
articles should be subjected to moderate duties. The consumption of
the taxed commodities, therefore, in proportion to the number of
inhabitants, would probably be as great in America and the West Indies
as in any part of the British empire. The opportunities of
smuggling, indeed, would be much greater; America, in proportion to
the extent of the country, being much more thinly inhabited than
either Scotland or Ireland. If the revenue, however, which is at
present raised by the different duties upon malt and malt liquors were
to be levied by a single duty upon malt, the opportunity of
smuggling in the most important branch of the excise would be almost
entirely taken away: and if the duties of customs, instead of being
imposed upon almost all the different articles of importation, were
confined to a few of the most general use and consumption, and if
the levying of those duties were subjected to the excise laws, the
opportunity of smuggling, though not so entirely taken away, would
be very much diminished. In consequence of those two, apparently, very
simple and easy alterations, the duties of customs and excise might
probably produce a revenue as great in proportion to the consumption
of the most thinly inhabited province as they do at present in
proportion to that of the most populous.

    The Americans, it has been said, indeed, have no gold or silver
money; the interior commerce of the country being carried on by a
paper currency, and the gold and silver which occasionally come
among them being all sent to Great Britain in return for the
commodities which they receive from us. But without gold and silver,
it is added, there is no possibility of paying taxes. We already get
all the gold and silver which they have. How is it possible to draw
from them what they have not?

    The present scarcity of gold and silver money in America is not
the effect of the poverty of that country, or of the inability of
the people there to purchase those metals. In a country where the
wages of labour are so much higher, and the price of provisions so
much lower than in England, the greater part of the people must surely
have wherewithal to purchase a greater quantity if it were either
necessary or convenient for them to do so. The scarcity of those
metals, therefore, must be the effect of choice, and not of necessity.

    It is for transacting either domestic or foreign business that
gold and silver money is either necessary or convenient.

    The domestic business of every country, it has been shown in the
second book of this Inquiry, may, at least in peaceable times, be
transacted by means of a paper currency with nearly the same degree of
conveniency as by gold and silver money. It is convenient for the
Americans, who could always employ with profit in the improvement of
their lands a greater stock than they can easily get, to save as
much as possible the expense of so costly an instrument of commerce as
gold and silver, and rather to employ that part of their surplus
produce which would be necessary for purchasing those metals in
purchasing the instruments of trade, the materials of clothing,
several parts of household furniture, and the ironwork necessary for
building and extending their settlements and plantations; in
purchasing, not dead stock, but active and productive stock. The
colony governments find it for their interest to supply the people
with such a quantity of papermoney as is fully sufficient and
generally more than sufficient for transacting their domestic
business. Some of those governments, that of Pennsylvania
particularly, derive a revenue from lending this paper-money to
their subjects at an interest of so much per cent. Others, like that
of Massachusetts Bay, advance upon extraordinary emergencies a
paper-money of this kind for defraying the public expense, and
afterwards, when it suits the conveniency of the colony, redeem it
at the depreciated value to which it gradually falls. In 1747, that
colony paid, in this manner, the greater part of its public debts with
the tenth part of the money for which its bills had been granted. It
suits the conveniency of the planters to save the expense of employing
gold and silver money in their domestic transactions, and it suits the
conveniency of the colony governments to supply them with a medium
which, though attended with some very considerable disadvantages,
enables them to save that expense. The redundancy of paper-money
necessarily banishes gold and silver from the domestic transactions of
the colonies, for the same reason that it has banished those metals
from the greater part of the domestic transactions in Scotland; and in
both countries it is not the poverty, but the enterprising and
projecting spirit of the people, their desire of employing all the
stock which they can get as active and productive stock, which has
occasioned this redundancy of paper-money.

  In the exterior commerce which the different colonies carry on
with Great Britain, gold and silver are more or less employed
exactly in proportion as they are more or less necessary. Where
those metals are not necessary they seldom appear. Where they are
necessary they are generally found.

    In the commerce between Great Britain and the tobacco colonies the
British goods are generally advanced to the colonists at a pretty long
credit, and are afterwards paid for in tobacco, rated at a certain
price. It is more convenient for the colonists to pay in tobacco
than in gold and silver. It would be more convenient for any
merchant to pay for the goods which his correspondents had sold to him
in some other sort of goods which he might happen to deal in than in
money. Such a merchant would have no occasion to keep any part of
his stock by him unemployed, and in ready money, for answering
occasional demands. He could have, at all times, a larger quantity
of goods in his shop or warehouse, and he could deal to a greater
extent. But it seldom happens to be convenient for all the
correspondents of a merchant to receive payment for the goods which
they sell to him in goods of some other kind which he happens to
deal in. The British merchants who trade to Virginia and Maryland
happen to be a particular set of correspondents, to whom it is more
convenient to receive payment for the goods which they sell to those
colonies in tobacco than in gold and silver. They expect to make a
profit by the sale of the tobacco. They could make none by that of the
gold and silver. Gold and silver, therefore, very seldom appear in the
commerce between Great Britain and the tobacco colonies. Maryland
and Virginia have as little occasion for those metals in their foreign
as in their domestic commerce. They are said, accordingly, to have
less gold and silver money than any other colonies in America. They
are reckoned, however, as thriving, and consequently as rich, as any
of their neighbours.

    In the northern colonies, Pennsylvania, New York, New Jersey,
the four governments of New England, etc., the value of their own
produce which they export to Great Britain is not equal to that of the
manufactures which they import for their own use, and for that of some
of the other colonies to which they are the carriers. A balance,
therefore, must be paid to the mother country in gold and silver,
and this balance they generally find.

    In the sugar colonies the value of the produce annually exported
to Great Britain is much greater than that of all the goods imported
from thence. If the sugar and rum annually sent to the mother
country were paid for in those colonies, Great Britain would be
obliged to send out every year a very large balance in money, and
the trade to the West Indies would, by a certain species of
politicians, be considered as extremely disadvantageous. But it so
happens that many of the principal proprietors of the sugar
plantations reside in Great Britain. Their rents are remitted to
them in sugar and rum, the produce of their estates. The sugar and rum
which the West India merchants purchase in those colonies upon their
own account are not equal in value to the goods which they annually
sell there. A balance, therefore, must necessarily be paid to them
in gold and silver, and this balance, too, is generally found.

    The difficulty and irregularity of payment from the different
colonies to Great Britain have not been at all in proportion to the
greatness or smallness of the balances which were respectively due
from them. Payments have in general been more regular from the
northern than from the tobacco colonies, though the former have
generally paid a pretty large balance in money, while the latter
have either paid no balance, or a much smaller one. The difficulty
of getting payment from our different sugar colonies has been
greater or less in proportion, not so much to the extent of the
balances respectively due from them, as to the quantity of
uncultivated land which they contained; that is, to the greater or
smaller temptation which the planters have been under of
overtrading, or of undertaking the settlement and plantation of
greater quantities of waste land than suited the extent of their
capitals. The returns from the great island of Jamaica, where there is
still much uncultivated land, have, upon this account, been in general
more irregular and uncertain than those from the smaller islands of
Barbadoes, Antigua, and St. Christophers, which have for these many
years been completely cultivated, and have, upon that account,
afforded less field for the speculations of the planter. The new
acquisitions of Grenada, Tobago, St. Vincents, and Dominica have
opened a new field for speculations of this kind, and the returns from
those islands have of late been as irregular and uncertain as those
from the great island of Jamaica.

    It is not, therefore, the poverty of the colonies which occasions,
in the greater part of them, the present scarcity of gold and silver
money. Their great demand for active and productive stock makes it
convenient for them to have as little dead stock as possible, and
disposes them upon that account to content themselves with a cheaper
though less commodious instrument of commerce than gold and silver.
They are thereby enabled to convert the value of that gold and
silver into the instruments of trade, into the materials of
clothing, into household furniture, and into the ironwork necessary
for building and extending their settlements and plantations. In those
branches of business which cannot be transacted without gold and
silver money, it appears that they can always find the necessary
quantity of those metals; and if they frequently do not find it, their
failure is generally the effect, not of their necessary poverty, but
of their unnecessary and excessive enterprise. It is not because
they are poor that their payments are irregular and uncertain, but
because they are too eager to become excessively rich. Though all that
part of the produce of the colony taxes which was over and above
what was necessary for defraying the expense of their own civil and
military establishments were to be remitted to Great Britain in gold
and silver, the colonies have abundantly wherewithal to purchase the
requisite quantity of those metals. They would in this case be
obliged, indeed, to exchange a part of their surplus produce, with
which they now purchase active and productive stock, for dead stock.
In transacting their domestic business they would be obliged to employ
a costly instead of a cheap instrument of commerce, and the expense of
purchasing this costly instrument might damp somewhat the vivacity and
ardour of their excessive enterprise in the improvement of land. It
might not, however, be necessary to remit any part of the American
revenue in gold and silver. It might be remitted in bills drawn upon
and accepted by particular merchants or companies in Great Britain
to whom a part of the surplus produce of America had been consigned,
who would pay into the treasury the American revenue in money, after
having themselves received the value of it in goods; and the whole
business might frequently be transacted without exporting a single
ounce of gold or silver from America.

    It is not contrary to justice that both Ireland and America should
contribute towards the discharge of the public debt of Great
Britain. That debt has been contracted in support of the government
established by the Revolution, a government to which the Protestants
of Ireland owe, not only the whole authority which they at present
enjoy in their own country, but every security which they possess
for their liberty, their property, and their religion; a government to
which several of the colonies of America owe their present charters,
and consequently their present constitution, and to which all the
colonies of America owe the liberty, security, and property which they
have ever since enjoyed. That public debt has been contracted in the
defence, not of Great Britain alone, but of all the different
provinces of the empire; the immense debt contracted in the late war
in particular, and a great part of that contracted in the war
before, were both properly contracted in defence of America.

    By a union with Great Britain, Ireland would gain, besides the
freedom of trade, other advantages much more important, and which
would much more than compensate any increase of taxes that might
accompany that union. By the union with England the middling and
inferior ranks of people in Scotland gained a complete deliverance
from the power of an aristocracy which had always before oppressed
them. By a union with Great Britain the greater part of the people
of all ranks in Ireland would gain an equally complete deliverance
from a much more oppressive aristocracy; an aristocracy not founded,
like that of Scotland, in the natural and respectable distinctions
of birth and fortune, but in the most odious of all distinctions,
those of religious and political prejudices; distinctions which,
more than any other, animate both the insolence of the oppressors
and the hatred and indignation of the oppressed, and which commonly
render the inhabitants of the same country more hostile to one another
than those of different countries ever are. Without a union with Great
Britain the inhabitants of Ireland are not likely for many ages to
consider themselves as one people.

    No oppressive aristocracy has ever prevailed in the colonies. Even
they, however, would, in point of happiness and tranquility, gain
considerably by a union with Great Britain. It would, at least,
deliver them from those rancorous and virulent factions which are
inseparable from small democracies, and which have so frequently
divided the affections of their people, and disturbed the tranquillity
of their governments, in their form so nearly democratical. In the
case of a total separation from Great Britain, which, unless prevented
by a union of this kind, seems very likely to take place, those
factions would be ten times more virulent than ever. Before the
commencement of the present disturbances, the coercive power of the
mother country had always been able to restrain those factions from
breaking out into anything worse than gross brutality and insult. If
that coercive power were entirely taken away, they would probably soon
break out into open violence and bloodshed. In all great countries
which are united under one uniform government, the spirit of party
commonly prevails less in the remote provinces than in the centre of
the empire. The distance of those provinces from the capital, from the
principal seat of the great scramble of faction and ambition, makes
them enter less into the views of any of the contending parties, and
renders them more indifferent and impartial spectators of the
conduct of all. The spirit of party prevails less in Scotland than
in England. In the case of a union it would probably prevail less in
Ireland than in Scotland, and the colonies would probably soon enjoy a
degree of concord and unanimity at present unknown in any part of
the British empire. Both Ireland and the colonies, indeed, would be
subjected to heavier taxes than any which they at present pay. In
consequence, however, of a diligent and faithful application of the
public revenue towards the discharge of the national debt, the greater
part of those taxes might not be of long continuance, and the public
revenue of Great Britain might soon be reduced to what was necessary
for maintaining a moderate peace establishment.

    The territorial acquisitions of the East India Company, the
undoubted right of the crown, that is, of the state and people of
Great Britain, might be rendered another source of revenue more
abundant, perhaps, than all those already mentioned. Those countries
are represented as more fertile, more extensive, and, in proportion to
their extent, much richer and more populous than Great Britain. In
order to draw a great revenue from them, it would not probably be
necessary to introduce any new system of taxation into countries which
are already sufficiently and more than sufficiently taxed. It might,
perhaps, be more proper to lighten than to aggravate the burden of
those unfortunate countries, and to endeavour to draw a revenue from
them, not by imposing new taxes, but by preventing the embezzlement
and misapplication of the greater part of those which they already
pay.

    If it should be found impracticable for Great Britain to draw
any considerable augmentation of revenue from any of the resources
above mentioned, the only resource which can remain to her is a
diminution of her expense. In the mode of collecting and in that of
expending the public revenue, though in both there may be still room
for improvement, Great Britain seems to be at least as economical as
any of her neighbours. The military establishment which she
maintains for her own defence in time of peace is more moderate than
that of any European state which can pretend to rival her either in
wealth or in power. None of those articles, therefore, seem to admit
of any considerable reduction of expense. The expense of the peace
establishment of the colonies was, before the commencement of the
present disturbances, very considerable, and is an expense which
may, and if no revenue can be drawn from them ought certainly to be
saved altogether. This constant expense in time of peace, though
very great, is insignificant in comparison with what the defence of
the colonies has cost us in time of war. The last war, which was
undertaken altogether on account of the colonies, cost Great
Britain, it has already been observed, upwards of ninety millions. The
Spanish war of 1739 was principally undertaken on their account, in
which, and in the French war that was the consequence of it, Great
Britain spent upwards of forty millions, a great part of which ought
justly to be charged to the colonies. In those two wars the colonies
cost Great Britain much more than double the sum which the national
debt amounted to before the commencement of the first of them. Had
it not been for those wars that debt might, and probably would by this
time, have been completely paid; and had it not been for the colonies,
the former of those wars might not, and the latter certainly would not
have been undertaken. It was because the colonies were supposed to
be provinces of the British empire that this expense was laid out upon
them. But countries which contribute neither revenue nor military
force towards the support of the empire cannot be considered as
provinces. They may perhaps be considered as appendages, as a sort
of splendid and showy equipage of the empire. But if the empire can no
longer support the expense of keeping up this equipage, it ought
certainly to lay it down; and if it cannot raise its revenue in
proportion to its expense, it ought, at least, to accommodate its
expense to its revenue. If the colonies, notwithstanding their refusal
to submit to British taxes, are still to be considered as provinces of
the British empire, their defence in some future war may cost Great
Britain as great an expense as it ever has done in any former war. The
rulers of Great Britain have, for more than a century past, amused the
people with the imagination that they possessed a great empire on
the west side of the Atlantic. This empire, however, has hitherto
existed in imagination only. It has hitherto been, not an empire,
but the project of an empire; not a gold mine, but the project of a
gold mine; a project which has cost, which continues to cost, and
which, if pursued in the same way as it has been hitherto, is likely
to cost, immense expense, without being likely to bring any profit;
for the effects of the monopoly of the colony trade, it has been
shown, are, to the great body of the people, mere loss instead of
profit. It is surely now time that our rulers should either realize
this golden dream, in which they have been indulging themselves,
perhaps, as well as the people, or that they should awake from it
themselves, and endeavour to awaken the people. If the project
cannot be completed, it ought to be given up. If any of the
provinces of the British empire cannot be made to contribute towards
the support of the whole empire, it is surely time that Great
Britain should free herself from the expense of defending those
provinces in time of war, and of supporting any part of their civil or
military establishments in time of peace, and endeavour to accommodate
her future views and designs to the real mediocrity of her
circumstances.
APPENDIX

                           Appendix

The two following accounts are subjoined in order to illustrate and
confirm what is said in the fifth chapter of the fourth book,
concerning the tonnage bounty to the white-herring fishery. The
reader, I believe, may depend upon the accuracy of both accounts.

 An account of Busses fitted out in Scotland for Eleven Years, with

 the Number of Empty Barrels carried out, and the Number of Barrels

  of Herrings caught; also the Bounty at a Medium on each Barrel of

          Seasteeks, and on each Barrel when fully packed.

                          Empty         Barrels

          Number of      Barrels      of Herrings     Bounty paid on

  Years    Busses      carried out      caught          the Busses

                                                       L     s.   d.

  1771       29           5948           2832        2085    0    0

  1772      168          41316          22237       11055    7    6

  1773      190          42333          42055       12510    8    6

  1774      248          59303          56365       16952    2    6

  1775      275          69144          52879       19315   15    0

  1776      294          76329          51863       21290    7    6

  1777      240          62679          43313       17592    2    6

  1778      220          56390          40958       16316    2    6

  1779      206          55194          29367       15287    0    0

  1780      181          48315          19885       13445   12    6

  1781      135          33992          16593        9613   12    6

           ----         ------         ------      ------   --    -

 Total     2186         550943         378347      155463   11    0

Seasteeks              378,347        Bounty at a medium for each

                                    barrel of seasteeks

                                                      L0   8   2 1/4

                                      But a barrel of seasteeks being

                                    only reckoned two-thirds of a

                                    barrel fully packed, one-third is

                                    deducted, which brings the bounty

                                    to                L0  12   3 3/4
1/3 deducted           126,115 2/3

                       -----------
Barrels fully packed   252,231 1/3

  And if the herrings are exported, there is, besides,
a premium of                                           0   2   8

                                                      --------------

  So that the bounty paid by Government in money for
each barrel is                                        L0  14  11 3/4

  But if to this the duty of the salt usually taken
credit for as expended in curing each barrel, which
at a medium is of foreign, one bushel and one-fourth
of a bushel, at 10s. a bushel, be added, viz.          0  12   6

                                                      --------------

  The bounty on each barrel would amount to           L1   7   5 3/4

  If the herrings are cured with British salt, it will stand thus,
viz.

  Bounty as before                                    L0  14  11 3/4

  But if to this bounty the duty on two bushels of
Scots salt at 1s. 6d. per bushel, supposed to be the
quantity at a medium used in curing each barrel is
added, to wit                                          0   3   0

                                                      --------------

  The bounty on each barrel will amount to            L0  17  11 3/4

  And,
When buss herrings are entered for home consumption in Scotland, and
pay the shilling a barrel of duty, the bounty stands thus, to wit as
before                                                L0  12   3 3/4

  From which the 1s. a barrel is to be deducted        0   1   0

                                                      --------------

                                                       0  11   3 3/4

  But to that there is to be added again the duty of
the foreign salt used in curing a barrel of herrings,
viz.                                                   0  12   6

                                                      --------------

  So that the premium allowed for each barrel of
herring entered for home consumption is               L1   3   9 3/4

  If the herrings are cured with British salt, it will stand as
follows, viz.

  Bounty on each barrel brought in by the busses as
above                                                 L0  12   3 3/4

  From which deduct the 1s. a barrel paid at the time
they are entered for home consumption                   0   1   0

                                                      --------------

                                                      L0  11   3 3/4

  But if to the bounty the duty on two bushels of
Scots salt at 1s. 6d. per bushel, supposed to be the
quantity at a medium used in curing each barrel, is
added, to wit                                          0   3   0

                                                      --------------

  The premium for each barrel entered for home
consumption will be                                   L0  14   3 3/4

  Though the loss of duties upon herrings exported cannot, perhaps
properly be considered as bounty; that upon herrings entered for
home consumption certainly may.

  An Account of the Quantity of Foreign Salt imported in Scotland,

 and of Scots Salt delivered Duty free from the Works there for the

  Fishery, from the 5th of April 1771 to the 5th of April 1782, with

                   a Medium of both for one Year.

                                                        Scots Salt

                                     Foreign Salt     delivered from

          Period                       Imported          the Works

                                        Bushels           Bushels

From the 5th of April 1771

  to the 5th of April 1782            936,974           168,226

Medium for one Year                    85,179 5/11       15,293 3/11

  It is to be observed that the Bushel of Foreign Salt weights 84 lb.,
that of British Salt 56 lb. only.

                               THE END
.
