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Chapter 5

CHAPTER V.

OF THE DIFFERENT EMPLOYMENTS OF CAPITALS.

Though all capitals are destined for the maintenance of productive labour
only, yet the quantity of that labour which equal capitals are capable of
putting into motion, varies extremely according to the diversity of their
employment; as does likewise the value which that employment adds to the
annual produce of the land and labour of the country.

A capital may be employed in four different ways; either, first, in
procuring the rude produce annually required for the use and consumption of
the society ; or, secondly, in manufacturing and preparing that rude produce
for immediate use and consumption; or, thirdly in transporting either the
rude or manufactured produce from the places where they abound to those
where they are wanted ; or, lastly, in dividing particular portions of
either into such small parcels as suit the occasional demands of those who
want them. In the first way are employed the capitals of all those who
undertake improvement or cultivation of lands, mines, or fisheries; in the
second, those of all master manufacturers ; in the third, those of all
wholesale merchants; and in the fourth, those of all retailers. It is
difficult to conceive that a capital should be employed in any way which may
not be classed under some one or other of those four.

Each of those four methods of employing a capital is essentially necessary,
either to the existence or extension of the other three, or to the general
conveniency of the society.

Unless a capital was employed in furnishing rude produce to a certain degree
of abundance, neither manufactures nor trade of any kind could exist.

Unless a capital was employed in manufacturing that part of the rude
produce which requires a good deal of preparation before it can be fit for
use and consumption, it either would never 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 alehouses, to give the must suspicious example, that
occasions a general disposition to drunkenness among the common people; but
that disposition, arising from other causes, necessarily gives employment to
a multitude of alehouses.

The persons whose capitals are employed in any of those four ways, are
themselves productive labourers. Their labour, when properly directed, fixes
and realizes itself in the subject or vendible commodity upon which it is
bestowed, and generally adds to its price the value at least of their own
maintenance and consumption. The profits of the farmer, of the manufacturer,
of the merchant, and retailer, are all drawn from the price of the goods
which the two first produce, and the two last buy and sell. Equal capitals.
however, employed in each of those four different ways, will immediately put
into motion very different quantities of productive labour ; and augment,
too, in very different proportions, the value of the annual produce of the
land and labour of the society to which they belong.

The capital of the retailer replaces, together with its profits, that of the
merchant of whom he purchases goods, and thereby enables him to continue his
business. The retailer himself is the only productive labourer whom it
immediately employs. In his profit consists the whole value which its
employment adds to the annual produce of the land and labour of the society.

The capital of the wholesale merchant replaces, together with their
profits, the capital's 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 masters'
profits upon the whole stock of wages, materials, and instruments of trade
employed in the business. It puts immediately into motion, therefore, a much
greater quantity of productive labour, and adds a much greater value to the
annual produce of the land and labour of the society, than an equal capital
in the hands of any wholesale merchant.

No equal capital puts into motion a greater quantity of productive labour
than that of the farmer. Not only his labouring servants, but his labouring
cattle, are productive labourers. In agriculture, too, Nature labours along
with man ; and though her labour 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 owner's profits, but of a much greater
value. Over and above the capital of the farmer, and all its profits, they
regularly occasion the reproduction of the rent of the landlord. This rent
may be considered as the produce of those powers of Nature, the use of which
the landlord lends to the farmer. It is greater or smaller, according to the
supposed extent of those powers, or, in other words, according to the
supposed natural or improved fertility of the land. It is the work of Nature
which remains, after deducting or compensating every thing which can be
regarded as the work of man. It is seldom less than a fourth, and
frequently more than a third, of the whole produce. No equal quantity of
productive labour employed in manufactures, can ever occasion so great
reproduction. In them Nature does nothing ; man does all ; and the
reproduction must always be in proportion to the strength of the agents that
occasion it. The capital employed in agriculture, therefore, not only puts
into motion a greater quantity of productive labour than any equal capital
employed in manufactures; but in proportion, too, to the quantity of
productive labour which it employs, it adds a much greater value to the
annual produce of the land and labour of the country, to the real wealth and
revenue of its inhabitants. Of all the ways in which a capital can be
employed, it is by far the most advantageous to society.

The capitals employed in the agriculture and in the retail trade of any
society, must always reside within that society. Their employment is
confined almost to a precise spot, to the farm, and to the shop of the
retailer. They must generally, too, though there are some exceptions to
this, belong to resident members of the society.

The capital of a wholesale merchant, on the contrary, seems to have no fixed
or necessary residence anywhere, but may wander about from place to place,
according as it can either buy cheap or sell dear.

The capital of the manufacturer must, no doubt, reside where the manufacture
is carried on ; but where this shall be, is not always necessarily
determined. It may frequently be at a great distance, both from the place
where the materials grow, and from that where the complete manufacture is
consumed. Lyons is very distant, both from the places which afford the
materials of its manufactures, and from those which consume them. The people
of fashion in Sicily are clothed in silks made in other countries, from the
materials which their own produces. Part of the wool of Spain is
manufactured in Great Britain, and some part of that cloth is afterwards
sent back to Spain.

Whether the merchant whose capital exports the surplus produce of any
society, be a native or a foreigner, is of very little importance. If he is
a foreigner, the number of their productive labourers is necessarily less
than if he had been a native, by one man only ; and the value of their
annual produce, by the profits of that one man. The sailors or carriers whom
he employs, may still belong indifferently either to his country, or to
their country, or to some third country, in the same manner as if he had
been a native. The capital of a foreigner gives a value to their surplus
produce equally with that of a native, by exchanging it for something for
which there is a demand at home. It as effectually replaces the capital of
the person who produces that surplus, and as effectually enables him to
continue his business, the service by which the capital of a wholesale
merchant chiefly contributes to support the productive labour, and to
augment the value of the annual produce of the society to which he belongs.

It is of more consequence that the capital of the manufacturer should reside
within the country. It necessarily puts into motion a greater quantity of
productive labour, and adds a greater value to the annual produce of the
land and labour of the society. It may, however, be very useful to the
country, though it should not reside within it. The capitals of the British
manufacturers who work up the flax and hemp annually imported from the
coasts of the Baltic, are surely very useful to the countries which produce
them. Those materials are a part of the surplus produce of those countries,
which, unless it was annually exchanged for something which is in demand
here, 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 a capital to manufacture it at home.
There are many little manufacturing towns in Great Britain, of which the
inhabitants have not capital sufficient to transport the produce of their
own industry to those distant markets where there is demand and consumption
for it. If there are any merchants among them, they are, properly, only the
agents of wealthier merchants who reside in some of the great commercial
cities.

When the capital of any country is not sufficient for all those three
purposes, in proportion as a greater share of it is employed in agriculture,
the greater will be the quantity of productive labour which it puts into
motion within the country ; as will likewise be the value which its
employment adds to the annual produce of the land and labour of the society.
After agriculture, the capital employed in manufactures puts into motion
the greatest quantity of productive labour, and adds the greatest value to
the annual produce. That which is employed in the trade of exportation has
the least effect of any of the three.

The country, indeed, which has not capital sufficient for all those three
purposes, has not arrived at that degree of opulence for which it seems
naturally destined. To attempt, however, prematurely, and with an
insufficient capital, to do all the three, is certainly not the shortest way
for a society, no more than it would be for an individual, to acquire a
sufficient one. The capital of all the individuals of a nation has its
limits, in the same manner as that of a single individual, and is capable
of executing only certain purposes. The capital of all the individuals of a
nation is increased in the same manner as that of a single individual, by
their continually accumulating and adding to it whatever they save out of
their revenue. It is likely to increase the fastest, therefore, when it is
employed in the way that affords the greatest revenue to all the inhabitants
or the country, as they will thus be enabled to make the greatest savings.
But the revenue of all the inhabitants of the country is necessarily in
proportion to the value of the annual produce of their land and labour.

It has been the principal cause of the rapid progress of our American
colonies towards wealth and greatness, that almost their whole capitals have
hitherto been employed in agriculture. They have no manufactures, those
household and coarser manufactures excepted, which necessarily accompany the
progress of agriculture, and which are the work of the women and children in
every private family. The greater part, both of the exportation and coasting
trade of America, is carried on by the capitals of merchants who reside in
Great Britain. Even the stores and warehouses from which goods are retailed
in some provinces, particularly in Virginia and Maryland, belong many of
them to merchants who reside in the mother country, and afford one of the
few instances of the retail trade of a society being carried on by the
capitals of those who are not resident members of it. Were the Americans,
either by combination, or by any other sort of violence, to stop the
importation of European manufactures, and, by thus giving a monopoly to such
of their own countrymen as could manufacture the like goods, divert any
considerable part of their capital into this employment, they would retard,
instead of accelerating, the further increase in the value of their annual
produce, and would obstruct, instead of promoting, the progress of their
country towards real wealth and greatness. This would be still more the
case, were they to attempt, in the same manner, to monopolize to themselves
their whole exportation trade.

The course of human prosperity, indeed, seems scarce ever to have been of so
long continuance as to unable 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, maybe
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 hack 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 of the encouragement to the industry
or productive labour of the country.

But the returns of the foreign trade of consumption are very seldom so quick
as those of the home trade. The returns of the home trade generally come in
before the end of the year, and sometimes three or four times in the year.
The returns of the foreign trade of consumption seldom come in before the
end of the year, and sometimes not till after two or three years. A capital,
therefore, employed in the home trade, will sometimes make twelve
operations, or be sent out and returned twelve times, before a capital
employed in the foreign trade of consumption has made one. If the capitals
are equal, therefore, the one will give four-and-twenty times more
encouragement and support to the industry of the country than the other.

The foreign goods for home consumption may sometimes be purchased, not with
the produce of domestic industry but with some other foreign goods. These
last, however, must have been purchased, either immediately with the produce
of domestic industry, or with something else that had been purchased with it;
for, the case of war and conquest excepted, foreign goods can never be
acquired, but in exchange for something that had been produced at home,
either immediately, or after two or more different exchanges. The effects,
therefore, of a capital employed in such a round-about foreign trade of
consumption, are, in every respect, the same as those of one employed in the
most direct trade of the same kind, except that the final returns are likely
to be still more distant, as they must depend upon the returns of two or
three distinct foreign trades. If the hemp and flax of Riga are purchased
with the tobacco of Virginia, which had been purchased with British
manufactures, the merchant must wait for the returns of two distinct foreign
trades, before he can employ the same capital in repurchasing a like
quantity of British manufactures. If the tobacco of Virginia had been
purchased, not with British manufactures, but with the sugar and rum of
Jamaica, which had been purchased with those manufactures, he must wait for
the returns of three. If those two or three distinct foreign trades should
happen to be carried on by two or three distinct merchants, of whom the
second buys the goods imported by the first, and the third buys those
imported by the second, in order to export them again, each merchant,
indeed, will, in this case, receive the returns of his own capital more
quickly ; but the final returns of the whole capital employed in the trade
will be just as slow as ever. Whether the whole capital employed in such a
round about trade belong to one merchant or to three, can make no
difference with regard to the country, though it may with regard to the
particular merchants. Three times a greater capital must in both cases be
employed, in order to exchange a certain value of British manufactures for a
certain quantity of flax and hemp, than would have been necessary, had the
manufactures and the flax and hemp been directly exchanged for one another.
The whole capital employed, therefore, in such a round-about foreign trade
of consumption, will generally give less encouragement and support to the
productive labour of the country, than an equal capital employed in a more
direct trade of the same kind.

Whatever be the foreign commodity with which the foreign goods for home
consumption are purchased, it can occasion no essential difference, either in
the nature of the trade, or in the encouragement and support which it can
give to the productive labour of the country from which it is carried on. If
they are purchased with the gold of Brazil, for example, or with the silver
of Peru, this gold and silver, like the tobacco of Virginia, must have been
purchased with something that either was the produce of the industry of the
country, or that had been purchased with something else that was so. So far,
therefore, as the productive labour of the country is concerned, the foreign
trade of consumption, which is carried on by means of gold and silver, has
all the advantages and all the inconveniencies of any other equally
round-about foreign trade of consumption; and will replace, just as fast, or
just as slow, the capital which is immediately employed in supporting that
productive labour. It seems even to have one advantage over any other
equally round-about foreign trade. The transportation of those metals from
one place to another, on account of their small bulk and great value, is
less expensive than that of almost any other foreign goods of equal value.
Their freight is much less, and their insurance not greater ; and no goods,
besides, are less liable to suffer by the carriage. An equal quantity of
foreign goods, therefore, may frequently be purchased with a smaller
quantity of the produce of domestic industry, by the intervention of gold
and silver, than by that of any other foreign goods. The demand of the
country may frequently, in this manner, be supplied more completely, and at
a smaller expense, than in any other. Whether, by the continual exportation
of those metals, a trade of this kind is likely to impoverish the country
from which it is carried on in any other way, I shall have occasion to
examine at great length hereafter.

That part of the capital of any country which is employed in the carrying
trade, is altogether withdrawn from supporting the productive labour of that
particular country, to support that of some foreign countries. Though it may
replace, by every operation, two distinct capitals, yet neither of them
belongs to that particular country. The capital of the Dutch merchant, which
carries the corn of Poland to Portugal, and brings back the fruits and wines
of Portugal to Poland, replaces by every such operation two capitals,
neither of which had been employed in supporting the productive labour of
Holland; but one of them in supporting that of Poland, and the other that of
Portugal. The profits only return regularly to Holland, and constitute the
whole addition which this trade necessarily makes to the annual produce of
the land and labour of that country. When, indeed, the carrying trade of any
particular country is carried on with the ships and sailors of that country,
that part of the capital employed in it which pays the freight is
distributed among, and puts into motion, a certain number of productive
labourers of that country. Almost all nations that have had any considerable
share of the carrying trade have, in fact, carried it on in this manner. The
trade itself has probably derived its name from it, the people of such
countries being the carriers to other countries. It does not, however, seem
essential to the nature of the trade that it should be so. A Dutch merchant
may, for example, employ his capital in transacting the commerce of Poland
and Portugal, by carrying part of the surplus produce of the one to the
other, not in Dutch, but in British bottoms. It maybe presumed, that he
actually does so upon some particular occasions. It is upon this account,
however, that the carrying trade has been supposed peculiarly advantageous
to such a country as Great Britain, of which the defence and security depend
upon the number of its sailors and shipping. But the same capital may
employ as many sailors and shipping, either in the foreign trade of
consumption, or even in the home trade, when carried on by coasting vessels,
as it could in the carrying trade. The number of sailors and shipping which
any particular capital can employ, does not depend upon the nature of the
trade, but partly upon the bulk of the goods, in proportion to their value,
and partly upon the distance of the ports between which they are to be
carried; chiefly upon the former of those two circumstances. The coal trade
from Newcastle to London, for example, employs more shipping than all the
carrying trade of England, though the ports are at no great distance. To
force, therefore, by extraordinary encouragements, a larger share of the
capital of any country into the carrying trade, than what would naturally go
to it, will not always necessarily increase the shipping of that country.

The capital, therefore, employed in the home trade of any country, will
generally give encouragement and support to a greater quantity of productive
labour in that country, and increase the value of its annual produce, more
than an equal capital employed in the foreign trade of consumption; and the
capital employed in this latter trade has, in both these respects, a still
greater advantage over an equal capital employed in the carrying trade. The
riches, and so far as power depends upon riches, the power of every country
must always be in proportion to the value of its annual produce, the fund
from which all taxes must ultimately be paid. But the great object of the
political economy of every country, is to increase the riches and power of
that country. It ought, therefore, to give no preference nor superior
encouragement to the foreign trade of consumption above the home trade, nor
to the carrying trade above either of the other two. It ought neither to
force nor to allure into either of those two channels a greater share of the
capital of the country, than what would naturally flow into them of its own
accord.

Each of those different branches of trade, however, is not only
advantageous, but necessary and unavoidable, when the course of things,
without any constraint or violence, naturally introduces it.

When the produce of any particular branch of industry exceeds what the
demand of the country requires, the surplus must be sent abroad, and
exchanged for something for which there is a demand at home. Without
such exportation, a part of the productive labour of the country must cease,
and the value of its annual produce diminish. The land and labour of Great
Britain produce generally more corn, woollens, and hardware, than the demand
of the home market requires. The surplus part of them, therefore, must be
sent abroad, and exchanged for something for which there is a demand at
home. It is only by means of such exportation, that this surplus can
acquired value sufficient to compensate the labour and expense of producing
it. The neighbourhood of the sea-coast, and the banks of all navigable
rivers, are advantageous situations for industry, only because they
facilitate the exportation and exchange of such surplus produce for
something else which is more in demand there.

When the foreign goods which are thus purchased with the surplus produce of
domestic industry exceed the demand of the home market, the surplus part
of them must be sent abroad again, and exchanged for something more in
demand at home. About 96,000 hogsheads of tobacco are annually purchased in
Virginia and Maryland with a part of the surplus produce of British
industry. But the demand of Great Britain does not require, perhaps, more
than 14,000. If the remaining 82,000, therefore, could not be sent abroad,
and exchanged for something more in demand at home, the importation of them
must cease immediately, and with it the productive labour of all those
inhabitants of Great Britain who are at present employed in preparing the
goods with which these 82,000 hogsheads are annually purchased. Those goods,
which are part of the produce of the land and labour of Great Britain,
having no market at home, and being deprived of that which they had abroad,
must cease to be produced. The most round-about foreign trade of
consumption, therefore, may, upon some occasions, be as necessary for
supporting the productive labour of the country, and the value of its annual
produce, as the most direct.

When the capital stock of any country is increased to such a degree that it
cannot be all employed in supplying the consumption, and supporting the
productive labour of that particular country, the surplus part of it
naturally disgorges itself into the carrying trade, and is employed in
performing the same offices to other countries. The carrying trade is the
natural effect and symptom of great national wealth; but it does not seem to
be the natural cause of it. Those statesmen who have been disposed to favour
it with particular encouragement, seem to have mistaken the effect and
symptom for the cause. Holland, in proportion to the extent of the land and
the number of it's inhabitants, by far the richest country in Europe, has
accordingly the greatest share of the carrying trade of Europe. England,
perhaps the second richest country of Europe, is likewise supposed to have a
considerable share in it; though what commonly passes for the carrying trade
of England will frequently, perhaps, be found to be no more than a
round-about foreign trade of consumption. Such are, in a great measure, the
trades which carry the goods of the East and West Indies and of America to
the different European markets. Those goods are generally purchased, either
immediately with the produce of British industry, or with something else
which had been purchased with that produce, and the final returns of those
trades are generally used or consumed in Great Britain. The trade which
is carried on in British bottoms between the different ports of the
Mediterranean, and some trade of the same kind carried on by British
merchants between the different 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 one another ; that of the foreign trade of
consumption, by the value of the surplus produce of the whole country, and
of what can be purchased with it; that of the carrying trade, by the value
of the surplus produce of all the different countries in the world. Its
possible extent, therefore, is in a manner infinite in comparison of that of
the other two, and is capable of absorbing the greatest capitals.

The consideration of his own private profit is the sole motive which
determines the owner of any capital to employ it either in agriculture, in
manufactures, or in some particular branch of the wholesale or retail trade.
The different quantities of productive labour which it may put into motion,
and the different values which it may add to the annual produce of the land
and labour of the society, according as it is employed in one or other of
those different ways, never enter into his thoughts. In countries,
therefore, where agriculture is the most profitable of all employments, and
farming and improving the most direct roads to a splendid fortune, the
capitals of individuals will naturally be employed in the manner most
advantageous to the whole society. The profits of agriculture, however, seem
to have no superiority over those of other employments in any part of
Europe. Projectors, indeed, in every corner of it, have, within these few
years, amused the public with most magnificent accounts of the profits to be
made by the cultivation and improvement of land. Without entering into any
particular discussion of their calculations, a very simple observation may
satisfy us that the result of them must be false. We see, every day, the
most splendid fortunes, that have been acquired in the course of a single
life, by trade and manufactures, frequently from a very small capital,
sometimes from no capital. A single instance of such a fortune, acquired by
agriculture in the same time, and from such a capital, has not, perhaps,
occurred in Europe, during the course of the present century. In all the
great countries of Europe, however, much good land still remains
uncultivated ; and the greater part of what is cultivated, is far from being
improved to the degree of which it is capable. Agriculture, therefore, is
almost everywhere capable of absorbing a much greater capital than has ever
yet been employed in it. What circumstances in the policy of Europe have
given the trades which are carried on in towns so great an advantage over
that which is carried on in the country, that private persons frequently
find it more for their advantage to employ their capitals in the most
distant carrying trades of Asia and America. than in the improvement and
cultivation of the most fertile fields in their own neighbourhood, I shall
endeavour to explain at full length in the two following books.

Adam Smith

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