An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader macos .TXT) 📕

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 the profit below what is sufficient to

compensate the risk. To compensate it completely, the common returns ought, over and above

the ordinary profits of stock, not only to make up for all occasional losses, but to afford a

surplus profit to the adventurers, of the same nature with the profit of insurers. But if the

common returns were sufficient for all this, bankruptcies would not be more frequent in these

than in other trades.

Of the five circumstances, therefore, which vary the wages of labour, two only affect the

profits of stock ; the agreeableness or disagreeableness of the business, and the risk or security

with which it is attended. In point of agreeableness or disagreeableness, 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 he 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 sea-port 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

recompence 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 must be 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 butchers’ 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 butchers’

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 butchers’ 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 butchers’ 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 lie 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