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Chapter 3

CHAPTER III.

OF THE ACCUMULATION OF CAPITAL, OR OF
PRODUCTIVE AND UNPRODUCTIVE LABOUR.

There is one sort of labour which adds to the value of the subject upon
which it is bestowed ; there is another which has no such effect. The former
as it produces a value, may be called productive, the latter, unproductive
labour. { Some French authors of great learning and ingenuity have used
those words in a different sense. In the last chapter of the fourth book, I
shall endeavour to shew that their sense is an improper one.} Thus the labour
of a manufacturer adds generally to the value of the materials which he
works upon, that of his own maintenance, and of his master's profit. The
labour of a menial servant, on the contrary, adds to the value of nothing.
Though the manufacturer has his wages advanced to him by his master, he in
reality costs him no expense, the value of those wages being generally
restored, together with a profit, in the improved value of the subject upon
which his labour is bestowed. But the maintenance of a menial servant never
is restored. A man grows rich by employing a multitude of manufacturers ;
he grows poor by maintaining a multitude or menial servants. The labour of
the latter, however, has its value, and deserves its reward as well as that
of the former. But the labour of the manufacturer fixes and realizes itself
in some particular subject or vendible commodity, which lasts for some time
at least after that labour is past. It is, as it were, a certain quantity of
labour stocked and stored up, to be employed, if necessary, upon some other
occasion. That subject, or, what is the same thing, the price of that
subject, can afterwards, if necessary, put into motion a quantity of labour
equal to that which had originally produced it. The labour of the menial
servant, on the contrary, does not fix or realize itself in any particular
subject or vendible commodity. His services generally perish in the very
instant of their performance, and seldom leave any trace of value behind
them, for which an equal quantity of service could afterwards be procured.

The labour of some of the most respectable orders in the society is, like
that of menial servants, unproductive of any value, and does not fix or
realize itself in any permanent subject, or vendible commodity, which
endures after that labour is past, and for which an equal quantity of labour
could afterwards be procured. The sovereign, for example, with all the
officers both of justice and war who serve under him, the whole army and
navy, are unproductive labourers. They are the servants of the public, and
are maintained by a part of the annual produce of the industry of other
people. Their service, how honourable, how useful, or how necessary soever,
produces nothing for which an equal quantity of service can afterwards be
procured. The protection, security, and defence, of the commonwealth, the
effect of their labour this year, will not purchase its protection,
security, and defence, for the year to come. In the same class must be
ranked, some both of the gravest and most important, and some of the most
frivolous professions; churchmen, lawyers, physicians, men of letters of all
kinds ; players, buffoons, musicians, opera-singers, opera-dancers, etc.
The labour of the meanest of these has a certain value, regulated by the
very same principles which regulate that of every other sort of labour; and
that of the noblest and most useful, produces nothing which could afterwards
purchase or procure an equal quantity of labour. Like the declamation of the
actor, the harangue of the orator, or the tune of the musician, the work of
all of them perishes in the very instant of its production.

Both productive and unproductive labourers, and those who do not labour at
all, are all equally maintained by the annual produce of the land and labour
of the country. This produce, how great soever, can never be infinite, but
must have certain limits. According, therefore, as a smaller or greater
proportion of it is in any one year employed in maintaining unproductive
hands, the more in the one case, and the less in the other, will remain for
the productive, and the next year's produce will be greater or smaller
accordingly ; the whole annual produce, if we except the spontaneous
productions of the earth, being the effect of productive labour.

Though the whole annual produce of the land and labour of every country is
no doubt ultimately destined for supplying the consumption of its
inhabitants, and for procuring a revenue to them; yet when it first comes
either from the ground, or from the hands of the productive labourers, it
naturally divides itself into two parts. One of them, and frequently the
largest, is, in the first place, destined for replacing a capital, or for
renewing the provisions, materials, and finished work, which had been
withdrawn from a capital ; the other for constituting a revenue either to
the owner of this capital, as the profit of his stock, or to some other
person, as the rent of his land. Thus, of the produce of land, one part
replaces the capital of the farmer ; the other pays his profit and the rent
of the landlord ; and thus constitutes a revenue both to the owner of this
capital, as the profits of his stock, and to some other person as the rent
of his land. Of the produce of a great manufactory, in the same manner, one
part, and that always the largest, replaces the capital of the undertaker of
the work ; the other pays his profit, and thus constitutes a revenue to the
owner of this capital.

That part of the annual produce of the land and labour of any country which
replaces a capital, never is immediately employed to maintain any but
productive hands. It pays the wages of productive labour only. That which is
immediately destined for constituting a revenue, either as profit or as
rent, may maintain indifferently either productive or unproductive hands.

Whatever part of his stock a man employs as a capital, he always expects it
to be replaced to him with a profit. He employs it, therefore, in
maintaining productive hands only ; and after having served in the function
of a capital to him, it constitutes a revenue to them. Whenever he employs
any part of it in maintaining unproductive hands of any kind, that part is
from that moment withdrawn from his capital, and placed in his stock
reserved for immediate consumption.

Unproductive labourers, and those who do not labour at all, are all
maintained by revenue; either, first, by that part of the annual produce
which is originally destined for constituting a revenue to some particular
persons, either as the rent of land, or as the profits of stock ; or,
secondly, by that part which, though originally destined for replacing a
capital, and for maintaining productive labourers only, yet when it comes
into their hands, whatever part of it is over and above their necessary
subsistence, may be employed in maintaining indifferently either productive
or unproductive hands. Thus, not only the great landlord or the rich
merchant, but even the common workman, if his wages are considerable, may
maintain a menial servant; or he may sometimes go to a play or a
puppet-show, and so contribute his share towards maintaining one set of
unproductive labourers; or he may pay some taxes, and thus help to maintain
another set, more honourable and useful, indeed, but equally unproductive.
No part of the annual produce, however, which had been originally destined
to replace a capital, is ever directed towards maintaining unproductive
hands, till after it has put into motion its full complement of productive
labour, or all that it could put into motion in the way in which it was
employed. The workman must have earned his wages by work done, before he can
employ any part of them in this manner. That part, too, is generally but a
small one. It is his spare revenue only, of which productive labourers have
seldom a great deal. They generally have some, however ; and in the payment
of taxes, the greatness of their number may compensate, in some measure, the
smallness of their contribution. The rent of land and the profits of stock
are everywhere, therefore, the principal sources from which unproductive
hands derive their subsistence. These are the two sorts of revenue of which
the owners have generally most to spare. They might both maintain
indifferently, either productive or unproductive hands. They seem, however,
to have some predilection for the latter. The expense of a great lord feeds
generally more idle than industrious people The rich merchant, though with
his capital he maintains industrious people only, yet by his expense, that
is, by the employment of his revenue, he feeds commonly the very same sort
as the great lord.

The proportion, therefore, between the productive and unproductive hands,
depends very much in every country upon the proportion between that part of
the annual produce, which, as soon as it comes either from the ground, or
from the hands of the productive labourers, is destined for replacing a
capital, and that which is destined for constituting a revenue, either as
rent or as profit. This proportion is very different in rich from what it is
in poor countries.

Thus, at present, in the opulent countries of Europe, a very large,
frequently the largest, portion of the produce of the land, is destined for
replacing the capital of the rich and independent farmer ; the other for
paying his profits, and the rent of the landlord. But anciently, during the
prevalency of the feudal government, a very small portion of the produce was
sufficient to replace the capital employed in cultivation. It consisted
commonly in a few wretched cattle, maintained altogether by the spontaneous
produce of uncultivated land, and which might, therefore, be considered as a
part of that spontaneous produce. It generally, too, belonged to the
landlord, and was by him advanced to the occupiers of the land. All the rest
of the produce properly belonged to him too, either as rent for his land, or
as profit upon this paltry capital. The occupiers of land were generally
bond-men, whose persons and effects were equally his property. Those who were
not bond-men were tenants at will; and though the rent which they paid was
often nominally little more than a quit-rent, it really amounted to the
whole produce of the land. Their lord could at all times command their
labour in peace and their service in war. Though they lived at a distance
from his house, they were equally dependent upon him as his retainers who
lived in it. But the whole produce of the land undoubtedly belongs to him,
who can dispose of the labour and service of all those whom it maintains. In
the present state of Europe, the share of the landlord seldom exceeds a
third, sometimes not a fourth part of the whole produce of the land. The
rent of land, however, in all the improved parts of the country, has been
tripled and quadrupled since those ancient times; and this third or fourth
part of the annual produce is, it seems, three or four times greater than
the whole had been before. In the progress of improvement, rent, though it
increases in proportion to the extent, diminishes in proportion to the
produce of the land.

In the opulent countries of Europe, great capitals are at present employed
in trade and manufactures. In the ancient state, the little trade that was
stirring, and the few homely and coarse manufactures that were carried on,
required but very small capitals. These, however, must have yielded very
large profits. The rate of interest was nowhere less than ten per cent. and
their profits must have been sufficient to afford this great interest. At
present, the rate of interest, in the improved parts of Europe, is nowhere
higher than six per cent.; and in some of the most improved, it is so low as
four, three, and two per cent. Though that part of the revenue of the
inhabitants which is derived from the profits of stock, is always much
greater in rich than in poor countries, it is because the stock is much
greater ; in proportion to the stock, the profits are generally much less.

That part of the annual produce, therefore, which, as soon as it comes
either from the ground, or from the hands of the productive labourers, is
destined for replacing a capital, is not only much greater in rich than in
poor countries, but bears a much greater proportion to that which is
immediately destined for constituting a revenue either as rent or as profit.
The funds destined for the maintenance of productive labour are not only
much greater in the former than in the latter, but bear a much greater
proportion to those which, though they may be employed to maintain either
productive or unproductive hands, have generally a predilection for the
latter.

The proportion between those different funds necessarily determines in every
country the general character of the inhabitants as to industry or idleness.
We are more industrious than our forefathers, because, in the present times,
the funds destined for the maintenance of industry are much greater in
proportion to those which are likely to be employed in the maintenance of
idleness, than they were two or three centuries ago. Our ancestors were idle
for want of a sufficient encouragement to industry. It is better, says the
proverb, to play for nothing, than to work for nothing. In mercantile
and manufacturing towns, where the inferior ranks of people are chiefly
maintained by the employment of capital, they are in general industrious,
sober, and thriving; as in many English, and in most Dutch towns. In those
towns which are principally supported by the constant or occasional
residence of a court, and in which the inferior ranks of people are chiefly
maintained by the spending of revenue, they are in general idle, dissolute,
and poor; as at Rome, Versailles, Compeigne, and Fontainbleau. If you except
Rouen and Bourdeaux, there is little trade or industry in any of the
parliament towns of France; and the inferior ranks of people, being chiefly
maintained by the expense of the members of the courts of justice, and of
those who come to plead before them, are in general idle and poor. The great
trade of Rouen and Bourdeaux seems to be altogether the effect of their
situation. Rouen is necessarily the entrepot of almost all the goods which
are brought either from foreign countries, or from the maritime provinces of
France, for the consumption of the great city of Paris. Bourdeaux is, in the
same manner, the entrepot of the wines which grow upon the banks of the
Garronne, and of the rivers which run into it, one of the richest wine
countries in the world, and which seems to produce the wine fittest for
exportation, or best suited to the taste of foreign nations. Such
advantageous situations necessarily attract a great capital by the great
employment which they afford it ; and the employment of this capital is the
cause of the industry of those two cities. In the other parliament towns
of France, very little more capital seems to be employed than what is
necessary for supplying their own consumption; that is, little more than the
smallest capital which can be employed in them. The same thing may be said
of Paris, Madrid, and Vienna. Of those three cities, Paris is by far the
most industrious, but Paris itself is the principal market of all the
manufactures established at Paris, and its own consumption is the principal
object of all the trade which it carries on. London, Lisbon, and Copenhagen,
are, perhaps, the only three cities in Europe, which are both the constant
residence of a court, and can at the same time be considered as trading
cities, or as cities which trade not only for their own consumption, but for
that of other cities and countries. The situation of all the three is
extremely advantageous, and naturally fits them to be the entrepots of a
great part of the goods destined for the consumption of distant places. In a
city where a great revenue is spent, to employ with advantage a capital for
any other purpose than for supplying the consumption of that city, is
probably more difficult than in one in which the inferior ranks of people
have no other maintenance but what they derive from the employment of such a
capital. The idleness of the greater part of the people who are maintained
by the expense of revenue, corrupts, it is probable, the industry of those
who ought to be maintained by the employment of capital, and renders it less
advantageous to employ a capital there than in other places. There was
little trade or industry in Edinburgh before the Union. When the Scotch
parliament was no longer to be assembled in it, when it ceased to be the
necessary residence of the principal nobility and gentry of Scotland, it
became a city of some trade and industry. It still continues, however, to
be the residence of the principal courts of justice in Scotland, of the
boards of customs and excise, etc. A considerable revenue, therefore, still
continues to be spent in it. In trade and industry, it is much inferior to
Glasgow, of which the inhabitants are chiefly maintained by the employment
of capital. The inhabitants of a large village, it has sometimes been
observed, after having made considerable progress in manufactures, have
become idle and poor, in consequence of a great lord's having taken up his
residence in their neighbourhood.

The proportion between capital and revenue, therefore, seems everywhere to
regulate the proportion between industry and idleness Wherever capital
predominates, industry prevails ; wherever revenue, idleness. Every increase
or diminution of capital, therefore, naturally tends to increase or diminish
the real quantity of industry, the number of productive hands, and
consequently the exchangeable value of the annual produce of the land and
labour of the country, the real wealth and revenue of all its inhabitants.

Capitals are increased by parsimony, and diminished by prodigality and
misconduct.

Whatever a person saves from his revenue he adds to his capital, and either
employs it himself in maintaining an additional number of productive hands,
or enables some other person to do so, by lending it to him for an interest,
that is, for a share of the profits. As the capital of an individual can be
increased only by what he saves from his annual revenue or his annual gains,
so the capital of a society, which is the same with that of all the
individuals who compose it, can be increased only in the same manner.

Parsimony, and not industry, is the immediate cause of the increase of
capital. Industry, indeed, provides the subject which parsimony accumulates;
but whatever industry might acquire, if parsimony did not save and store up,
the capital would never be the greater.

Parsimony, by increasing the fund which is destined for the maintenance of
productive hands, tends to increase the number of those hands whose labour
adds to the value of the subject upon winch it is bestowed. It tends,
therefore, to increase the exchangeable value of the annual produce of the
land and labour of the country. It puts into motion an additional quantity
of industry, which gives an additional value to the annual produce.

What is annually saved, is as regularly consumed as what is annually spent,
and nearly in the same time too : but it is consumed by a different set of
people. That portion of his revenue which a rich man annually spends, is, in
most cases, consumed by idle guests and menial servants, who leave nothing
behind them in return for their consumption. That portion which he annually
saves, as, for the sake of the profit, it is immediately employed as a
capital, is consumed in the same manner, and nearly in the same time too,
but by a different set of people: by labourers, manufacturers, and
artificers, who reproduce, with a profit, the value of their annual
consumption. His revenue, we shall suppose, is paid him in money. Had he
spent the whole, the food, clothing, and lodging, which the whole could have
purchased, would have been distributed among the former set of people. By
saving a part of it, as that part is, for the sake of the profit,
immediately employed as a capital, either by himself or by some other
person, the food, clothing, and lodging, which may be purchased with it, are
necessarily reserved for the latter. The consumption is the same, but the
consumers are different.

By what a frugal man annually saves, he not only affords maintenance to an
additional number of productive hands, for that of the ensuing year, but
like the founder of a public work-house he establishes, as it were, a
perpetual fund for the maintenance of an equal number in all times to come.
The perpetual allotment and destination of this fund, indeed, is not always
guarded by any positive law, by any trust-right or deed of mortmain. It is
always guarded, however, by a very powerful principle, the plain and evident
interest of every individual to whom any share of it shall ever belong. No
part of it can ever afterwards be employed to maintain any but productive
hands, without an evident loss to the person who thus perverts it from its
proper destination.

The prodigal perverts it in this manner: By not confining his expense within
his income, he encroaches upon his capital. Like him who perverts the
revenues of some pious foundation to profane purposes, he pays the wages of
idleness with those funds which the frugality of his forefathers had, as it
were, consecrated to the maintenance of industry. By diminishing the funds
destined for the employment of productive labour, he necessarily diminishes,
so far as it depends upon him, the quantity of that labour which adds a
value to the subject upon which it is bestowed, and, consequently, the value
of the annual produce of the land and labour of the whole country, the real
wealth and revenue of its inhabitants. If the prodigality of some were not
compensated by the frugality of others, the conduct of every prodigal, by
feeding the idle with the bread of the industrious, would tend not only to
beggar himself, but to impoverish his country.

Though the expense of the prodigal should be altogether in home made, and no
part of it in foreign commodities, its effect upon the productive funds of
the society would still be the same. Every year there would still be a
certain quantity of food and clothing, which ought to have maintained
productive, employed in maintaining unproductive hands. Every year,
therefore, there would still be some diminution in what would otherwise have
been the value of the annual produce of the land and labour of the country.

This expense, it may be said, indeed, not being in foreign goods, and not
occasioning any exportation of gold and silver, the same quantity of money
would remain in the country as before. But if the quantity of food and
clothing which were thus consumed by unproductive, had been distributed
among productive hands, they would have reproduced, together with a profit,
the full value of their consumption. The same quantity of money would, in
this case, equally have remained in the country, and there would, besides,
have been a reproduction of an equal value of consumable goods. There would
have been two values instead of one.

The same quantity of money, besides, can. not long remain in any country in
which the value of the annual produce diminishes. The sole use of money is
to circulate consumable goods. By means of it, provisions, materials, and
finished work, are bought and sold, and distributed to their proper
consumers. The quantity of money, therefore, which can be annually employed
in any country, must be determined by the value of the consumable goods
annually circulated within it. These must consist, either in the immediate
produce of the land and labour of the country itself, or in something which
had been purchased with some part of that produce. Their value, therefore,
must diminish as the value of that produce diminishes, and along with it the
quantity of money which can be employed in circulating them. But the money
which, by this annual diminution of produce, is annually thrown out of
domestic circulation, will not be allowed to lie idle. The interest of
whoever possesses it requires that it should be employed; but having no
employment at home, it will, in spite of all laws and prohibitions, be sent
abroad, and employed in purchasing consumable goods, which may be of some
use at home. Its annual exportation will, in this manner, continue for some
time to add something to the annual consumption of the country beyond the
value of its own annual produce. What in the days of its prosperity had been
saved from that annual produce, and employed in purchasing gold and silver.
will contribute, for some little time, to support its consumption in
adversity. The exportation of gold and silver is, in this case, not the
cause, but the effect of its declension, and may even, for some little time,
alleviate the misery of that declension.

The quantity of money, on the contrary, must in every country naturally
increase as the value of the annual produce increases. The value of the
consumable goods annually circulated within the society being greater, will
require a greater quantity of money to circulate them. A part of the
increased produce, therefore, will naturally be employed in purchasing,
wherever it is to be had, the additional quantity of gold and silver
necessary for circulating the rest. The increase of those metals will, in
this case, be the effect, not the cause, of the public prosperity. Gold and
silver are purchased everywhere in the same manner. The food, clothing, and
lodging, the revenue and maintenance, of all those whose labour or stock is
employed in bringing them from the mine to the market, is the price paid for
them in Peru as well as in England. The country which has this price to pay,
will never belong without the quantity of those metals which it has occasion
for; and no country will ever long retain a quantity which it has no
occasion for.

Whatever, therefore, we may imagine the real wealth and revenue of a country
to consist in, whether in the value of the annual produce of its land and
labour, as plain reason seems to dictate, or in the quantity of the precious
metals which circulate within it, as vulgar prejudices suppose ; in either
view of the matter, every prodigal appears to be a public enemy, and every
frugal man a public benefactor.

The effects of misconduct are often the same as those of prodigality. Every
injudicious and unsuccessful project in agriculture, mines, fisheries,
trade, or manufactures, tends in the same manner to diminish the funds
destined for the maintenance of productive labour. In every such project,
though the capital is consumed by productive hands only, yet as, by the
injudicious manner in which they are employed, they do not reproduce the
full value of their consumption, there must always be some diminution in
what would otherwise have been the productive funds of the society.

It can seldom happen, indeed, that the circumstances of a great nation can
be much affected either by the prodigality or misconduct of individuals; the
profusion or imprudence of some being always more than compensated by the
frugality and good conduct of others.

With regard to profusion, the principle which prompts to expense is the
passion for present enjoyment; which, though sometimes violent and very
difficult to be restrained, is in general only momentary and occasional. But
the principle which prompts to save, is the desire of bettering our condition; a desire
which, though generally calm and dispassionate, comes with us from the womb,
and never leaves us till we go into the grave. In the whole interval which
separates those two moments, there is scarce, perhaps, a single instance, in
which any man is so perfectly and completely satisfied with his situation,
as to be without any wish of alteration or improvement of any kind. An
augmentation of fortune is the means by which the greater part of men
propose and wish to better their condition. It is the means the most vulgar
and the most obvious; and the most likely way of augmenting their fortune,
is to save and accumulate some part of what they acquire, either regularly
and annually, or upon some extraordinary occasion. Though the principle
of expense, therefore, prevails in almost all men upon some occasions, and in
some men upon almost all occasions ; yet in the greater part of men, taking
the whole course of their life at an average, the principle of frugality
seems not only to predominate, but to predominate very greatly.

With regard to misconduct, the number of prudent and successful undertakings
is everywhere much greater than that of injudicious and unsuccessful ones.
After all our complaints of the frequency of bankruptcies, the unhappy men
who fall into this misfortune, make but a very small part of the whole
number engaged in trade, and all other sorts of business; not much more,
perhaps, than one in a thousand. Bankruptcy is, perhaps, the greatest and
most humiliating calamity which can befal an innocent man. The greater part
of men, therefore, are sufficiently careful to avoid it. Some, indeed, do
not avoid it; as some do not avoid the gallows.

Great nations are never impoverished by private, though they sometimes are
by public prodigality and misconduct. The whole, or almost the whole public
revenue is, in most countries, employed in maintaining unproductive hands.
Such are the people who compose a numerous and splendid court, a great
ecclesiastical establishment, great fleets and armies, who in time of peace
produce nothing, and in time of war acquire nothing which can compensate the
expense of maintaining them, even while the war lasts. Such people, as they
themselves produce nothing, are all maintained by the produce of other men's
labour. When multiplied, therefore, to an unnecessary number, they may in a
particular year consume so great a share of this produce, as not to leave a
sufficiency for maintaining the productive labourers, who should reproduce
it next year. The next year's produce, therefore, will be less than that of
the foregoing ; and if the same disorder should continue, that of the third
year will be still less than that of the second. Those unproductive hands
who should be maintained by a part only of the spare revenue of the people,
may consume so great a share of their whole revenue, and thereby oblige so
great a number to encroach upon their capitals, upon the funds destined for
the maintenance of productive labour, that all the frugality and good
conduct of individuals may not be able to compensate the waste and
degradation of produce occasioned by this violent and forced encroachment.

This frugality and good conduct, however, is, upon most occasions, it
appears from experience, sufficient to compensate, not only the private
prodigality and misconduct of individuals, but the public extravagance of
government. The uniform, constant, and uninterrupted effort of every man to
better his condition, the principle from which public and national, as well
as private opulence is originally derived,is frequently powerful enough to
maintain the natural progress of things towards improvement, in spite both
of the extravagance of government, and of the greatest errors of
administration. Like the unknown principle of animal life, it frequently
restores health and vigour to the constitution, in spite not only of the
disease, but of the absurd prescriptions of the doctor.

The annual produce of the land and labour of any nation can be increased in
its value by no other means, but by increasing either the number of its
productive labourers, or the productive powers of those labourers who had
before been employed. The number of its productive labourers, it is evident,
can never be much increased, but in consequence of an increase of capital,
or of the funds destined for maintaining them. The productive powers of the
same number of labourers cannot be increased, but in consequence either of
some addition and improvement to those machines and instruments which
facilitate and abridge labour, or of more proper division and distribution
of employment. In either case, an additional capital is almost always
required. It is by means of an additional capital only, that the undertaker
of any work can either provide his workmen with better machinery, or make a
more proper distribution of employment among them. When the work to be done
consists of a number of parts, to keep every man constantly employed in one
way, requires a much greater capital than where every man is occasionally
employed in every different part of the work. When we compare, therefore,
the state of a nation at two different periods, and find that the annual
produce of its land and labour is evidently greater at the latter than at
the former, that its lands are better cultivated, its manufactures more
numerous and more flourishing, and its trade more extensive; we may be
assured that its capital must have increased during the interval between
those two periods, and that more must have been added to it by the good
conduct of some, than had been taken from it either by the private
misconduct of others, or by the public extravagance of government. But we
shall find this to have been the case of almost all nations, in all
tolerably quiet and peaceable times, even of those who have not enjoyed the
most prudent and parsimonious governments. To form a right judgment of it,
indeed, we must compare the state of the country at periods somewhat distant
from one another. The progress is frequently so gradual, that, at near
periods, the improvement is not only not sensible, but, from the declension
either of certain branches of industry, or of certain districts of the
country, things which sometimes happen, though the country in general is in
great prosperity, there frequently arises a suspicion, that the riches and
industry of the whole are decaying.

The annual produce of the land and labour of England, for example, is
certainly much greater than it was a little more than a century ago, at the
restoration of Charles II. Though at present few people, I believe, doubt of
this, yet during this period five years have seldom passed away, in which
some book or pamphlet has not been published, written, too, with such
abilities as to gain some authority with the public, and pretending to
demonstrate that the wealth of the nation was fast declining; that the
country was depopulated, agriculture neglected, manufactures decaying, and
trade undone. Nor have these publications been all party pamphlets, the
wretched offspring of falsehood and venality. Many of them have been written
by very candid and very intelligent people, who wrote nothing but what they
believed, and for no other reason but because they believed it.

The annual produce of the land and labour of England, again, was certainly
much greater at the Restoration than we can suppose it to have been about a
hundred years before, at the accession of Elizabeth. At this period, too, we
have all reason to believe, the country was much more advanced in
improvement, than it had been about a century before, towards the close of
the dissensions between the houses of York and Lancaster. Even then it was,
probably, in a better condition than it had been at the Norman conquest: and
at the Norman conquest, than during the confusion of the Saxon heptarchy.
Even at this early period, it was certainly a more improved country than at
the invasion of Julius Caesar, when its inhabitants were nearly in the same
state with the savages in North America.

In each of those periods, however, there was not only much private and
public profusion, many expensive and unnecessary wars, great perversion of
the annual produce from maintaining productive to maintain unproductive
hands; but sometimes, in the confusion of civil discord, such absolute waste
and destruction of stock, as might be supposed, not only to retard, as it
certainly did, the natural accumulation of riches, but to have left the
country, at the end of the period, poorer than at the beginning. Thus, in
the happiest and most fortunate period of them all, that which has passed
since the Restoration, how many disorders and misfortunes have occurred,
which, could they have been foreseen, not only the impoverishment, but the
total ruin of the country would have been expected from them ? The fire and
the plague of London, the two Dutch wars, the disorders of the revolution,
the war in Ireland, the four expensive French wars of 1688, 1701, 1742, and
1756, together with the two rebellions of 1715 and 1745. In the course of
the four French wars, the nation has contracted more than 145,000,000 of
debt, over and above all the other extraordinary annual expense which they
occasioned ; so that the whole cannot be computed at less than 200,000,000.
So great a share of the annual produce of the land and labour of the
country, has, since the Revolution, been employed upon different occasions,
in maintaining an extraordinary number of unproductive hands. But had not
those wars given this particular direction to so large a capital, the
greater part of it would naturally have been employed in maintaining
productive hands, whose labour would have replaced, with a profit, the whole
value of their consumption. The value of the annual produce of the land and
labour of the country would have been considerably increased by it every
year, and every years increase would have augmented still more that of the
following year. More houses would have been built, more lands would have
been improved, and those which had been improved before would have been
better cultivated; more manufactures would have been established, and those
which had been established before would have been more extended ; and to
what height the real wealth and revenue of the country might by this time
have been raised, it is not perhaps very easy even to imagine.

But though the profusion of government must undoubtedly have retarded the
natural progress of England towards wealth and improvement, it has not been
able to stop it. The annual produce of its land and labour is undoubtedly
much greater at present than it was either at the Restoration or at the
Revolution. The capital, therefore, annually employed in cultivating this
land, and in maintaining this labour, must likewise be much greater. In the
midst of all the exactions of government, this capital has been silently and
gradually accumulated by the private frugality and good conduct of
individuals, by their universal, continual, and uninterrupted effort to
better their own condition. It is this effort, protected by law, and allowed
by liberty to exert itself in the manner that is most advantageous, which
has maintained the progress of England towards opulence and improvement in
almost all former times, and which, it is to be hoped, will do so in all
future times. England, however, as it has never been blessed with a very
parsimonious government, so parsimony has at no time been the characteristic
virtue of its inhabitants. It is the highest impertinence and presumption,
therefore, in kings and ministers to pretend to watch over the economy of
private people, and to restrain their expense, either by sumptuary laws, or
by prohibiting the importation of foreign luxuries. They are themselves
always, and without any exception, the greatest spendthrifts in the society.
Let them look well after their own expense, and they may safely trust
private people with theirs. If their own extravagance does not ruin the
state. that of the subject never will.

As frugality increases, and prodigality diminishes, the public capital, so
the conduct of those whose expense just equals their revenue, without either
accumulating or encroaching, neither increases nor diminishes it. Some modes
of expense, however, seem to contribute more to the growth of public
opulence than others.

The revenue of an individual may be spent, either in things which are
consumed immediately, and in which one day's expense can neither alleviate
nor support that of another ; or it may be spent in things mere durable,
which can therefore be accumulated, and in which every day's expense may, as
he chooses, either alleviate, or support and heighten, the effect of that of
the following day. A man of fortune, for example, may either spend his
revenue in a profuse and sumptuous table, and in maintaining a great number
of menial servants, and a multitude of dogs and horses; or, contenting
himself with a frugal table, and few attendants, he may lay out the greater
part of it in adorning his house or his country villa, in useful or
ornamental buildings, in useful or ornamental furniture, in collecting
books, statues, pictures ; or in things more frivolous, jewels, baubles,
ingenious trinkets of different kinds; or, what is most trifling of all, in
amassing a great wardrobe of fine clothes, like the favourite and minister
of a great prince who died a few years ago. Were two men of equal fortune to
spend their revenue, the one chiefly in the one way, the other in the other,
the magnificence of the person whose expense had been chiefly in durable
commodities, would be continually increasing, every day's expense
contributing something to support and heighten the effect of that of the
following day ; that of the other, on the contrary, would be no greater at
the end of the period than at the beginning. The former too would, at the
end of the period, be the richer man of the two. He would have a stock of
goods of some kind or other, which, though it might not be worth all that it
cost, would always be worth something. No trace or vestige of the expense of
the latter would remain, and the effects of ten or twenty years' profusion
would be as completely annihilated as if they had never existed.

As the one mode of expense is more favourable than the other to the opulence
of an individual, so is it likewise to that of a nation. The houses, the
furniture, the clothing of the rich, in a little time, become useful to the
inferior and middling ranks of people. They are able to purchase them when
their superiors grow weary of them ; and the general accommodation of the
whole people is thus gradually improved, when this mode of expense becomes
universal among men of fortune. In countries which have long been rich, you
will frequently find the inferior ranks of people in possession both of
houses and furniture perfectly good and entire, but of which neither the one
could have been built, nor the other have been made for their use. What was
formerly a seat of the family of Seymour, is now an inn upon the Bath road.
The marriage-bed of James I. of Great Britain, which his queen brought with
her from Denmark, as a present fit for a sovereign to make to a sovereign,
was, a few years ago, the ornament of an alehouse at Dunfermline. In some
ancient cities, which either have been long stationary, or have gone
somewhat to decay, you will sometimes scarce find a single house which could
have been built for its present inhabitants. If you go into those houses,
too, you will frequently find many excellent, though antiquated pieces of
furniture, which are still very fit for use, and which could as little have
been made for them. Noble palaces, magnificent villas, great collections of
books, statues, pictures, and other curiosities, are frequently both an
ornament and an honour, not only to the neighbourhood, but to the whole
country to which they belong. Versailles is an ornament and an honour to
France, Stowe and Wilton to England. Italy still continues to command some
sort of veneration, by the number of monuments of this kind which it
possesses, though the wealth which produced them has decayed, and though the
genius which planned them seems to be extinguished, perhaps from not having
the same employment.

The expense, too, which is laid out in durable commodities, is favourable
not only to accumulation, but to frugality. If a person should at any time
exceed in it, he can easily reform without exposing himself to the censure
of the public. To reduce very much the number of his servants, to reform his
table from great profusion to great frugality, to lay down his equipage
after he has once set it up, are changes which cannot escape the observation
of his neighbours, and which are supposed to imply some acknowledgment of
preceding bad conduct. Few, therefore, of those who have once been so
unfortunate as to launch out too far into this sort of expense, have
afterwards the courage to reform, till ruin and bankruptcy oblige them. But
if a person has, at any time, been at too great an expense in building, in
furniture, in books, or pictures, no imprudence can be inferred from his
changing his conduct. These are things in which further expense is
frequently rendered unnecessary by former expense; and when a person stops
short, he appears to do so, not because he has exceeded his fortune, but
because he has satisfied his fancy.

The expense, besides, that is laid out in durable commodities, gives
maintenance, commonly, to a greater number of people than that which is
employed in the most profuse hospitality. Of two or three hundred weight of
provisions, which may sometimes be served up at a great festival, one half,
perhaps, is thrown to the dunghill, and there is always a great deal wasted
and abused. But if the expense of this entertainment had been employed in
setting to work masons, carpenters, upholsterers, mechanics, etc. a quantity
of provisions of equal value would have been distributed among a still
greater number of people, who would have bought them in pennyworths and
pound weights, and not have lost or thrown away a single ounce of them. In
the one way, besides, this expense maintains productive, in the other
unproductive hands. In the one way, therefore, it increases, in the other it
does not increase the exchangeable value of the annual produce of the land
and labour of the country.

I would not, however, by all this, be understood to mean, that the one
species of expense always betokens a more liberal or generous spirit than
the other. When a man of fortune spends his revenue chiefly in hospitality,
he shares the greater part of it with his friends and companions; but when
he employs it in purchasing such durable commodities, he often spends the
whole upon his own person, and gives nothing to any body without an
equivalent. The latter species of expense, therefore, especially when
directed towards frivolous objects, the little ornaments of dress and
furniture, jewels, trinkets, gew-gaws, frequently indicates, not only a
trifling, but a base and selfish disposition. All that I mean is, that the
one sort of expense, as it always occasions some accumulation of valuable
commodities, as it is more favourable to private frugality, and,
consequently, to the increase of the public capital, and as it maintains
productive rather than unproductive hands, conduces more than the other to
the growth of public opulence.

Adam Smith

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