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Introduction

BOOK II.

OF THE NATURE, ACCUMULATION, AND EMPLOYMENT OF STOCK.

INTRODUCTION.

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

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

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

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

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

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

Adam Smith

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