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

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 workhouse he establishes, as it were, a

perpetual fund for the maintenance of an equal number in all times to come.

The perpetual allotment and destination of this fund, indeed, is not always

guarded by any positive law, by any trust-right or deed of mortmain. It is

always guarded, however, by a very powerful principle, the plain and evident

interest of every individual to whom any share of it shall ever belong. No

part of it can ever afterwards be employed to maintain any but productive

hands, without an evident loss to the person who thus perverts it from its

proper destination.

The prodigal perverts it in this manner: By not confining his expense within

his income, he encroaches upon his capital. Like him who perverts the

revenues of some pious foundation to profane purposes, he pays the wages of

idleness with those funds which the frugality of his forefathers had, as it

were, consecrated to the maintenance of industry. By diminishing the funds

destined for the employment of productive labour, he necessarily diminishes,

so far as it depends upon him, the quantity of that labour which adds a

value to the subject upon which it is bestowed, and, consequently, the value

of the annual produce of the land and labour of the whole country, the real

wealth and revenue of its inhabitants. If the prodigality of some 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