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

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