An Inquiry into the Nature and Causes of the Wealth of Nations
by Adam Smith · English · Gutenberg #3300 · 2,432,722 chars · public domain (US)
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Title: An Inquiry into the Nature and Causes of the Wealth of Nations
Author: Adam Smith
Release date: June 1, 2002 [eBook #3300]
Most recently updated: July 3, 2025
Language: English
Other information and formats: www.gutenberg.org/ebooks/3300
Credits: Credits: Colin Muir and David Widger
*** START OF THE PROJECT GUTENBERG EBOOK AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS ***
An Inquiry into the Nature and Causes of the Wealth of Nations
by Adam Smith
Contents
INTRODUCTION AND PLAN OF THE WORK.
BOOK I. OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE
POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY
DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE.
CHAPTER I. OF THE DIVISION OF LABOUR.
CHAPTER II. OF THE PRINCIPLE WHICH GIVES OCCASION TO THE
DIVISION OF LABOUR.
CHAPTER III. THAT THE DIVISION OF LABOUR IS LIMITED BY
THE EXTENT OF THE MARKET.
CHAPTER IV. OF THE ORIGIN AND USE OF MONEY.
CHAPTER V. OF THE REAL AND NOMINAL PRICE OF
COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY.
CHAPTER VI. OF THE COMPONENT PART OF THE PRICE OF COMMODITIES.
CHAPTER VII. OF THE NATURAL AND MARKET PRICE OF COMMODITIES.
CHAPTER VIII. OF THE WAGES OF LABOUR.
CHAPTER IX. OF THE PROFITS OF STOCK.
CHAPTER X. OF WAGES AND PROFIT IN THE DIFFERENT
EMPLOYMENTS OF LABOUR AND STOCK.
CHAPTER XI. OF THE RENT OF LAND.
BOOK II. OF THE NATURE, ACCUMULATION, AND
EMPLOYMENT OF STOCK.
CHAPTER I. OF THE DIVISION OF STOCK.
CHAPTER II. OF MONEY, CONSIDERED AS A PARTICULAR BRANCH
OF THE GENERAL STOCK OF THE SOCIETY, OR OF THE EXPENSE OF MAINTAINING THE
NATIONAL CAPITAL.
CHAPTER III. OF THE ACCUMULATION OF CAPITAL, OR OF
PRODUCTIVE AND UNPRODUCTIVE LABOUR.
CHAPTER IV. OF STOCK LENT AT INTEREST.
CHAPTER V. OF THE DIFFERENT EMPLOYMENTS OF
CAPITALS.
BOOK III. OF THE DIFFERENT PROGRESS OF OPULENCE IN
DIFFERENT NATIONS
CHAPTER I. OF THE NATURAL PROGRESS OF OPULENCE.
CHAPTER II. OF THE DISCOURAGEMENT OF AGRICULTURE IN THE
ANCIENT STATE OF EUROPE, AFTER THE FALL OF THE ROMAN EMPIRE.
CHAPTER III. OF THE RISE AND PROGRESS OF CITIES AND
TOWNS, AFTER THE FALL OF THE ROMAN EMPIRE.
CHAPTER IV. HOW THE COMMERCE OF TOWNS CONTRIBUTED TO THE
IMPROVEMENT OF THE COUNTRY.
BOOK IV. OF SYSTEMS OF POLITICAL ECONOMY.
CHAPTER I. OF THE PRINCIPLE OF THE COMMERCIAL OR
MERCANTILE SYSTEM.
CHAPTER II. OF RESTRAINTS UPON IMPORTATION FROM FOREIGN
COUNTRIES OF SUCH GOODS AS CAN BE PRODUCED AT HOME.
CHAPTER III. OF THE EXTRAORDINARY RESTRAINTS UPON THE
IMPORTATION OF GOODS OF ALMOST ALL KINDS, FROM THOSE COUNTRIES WITH WHICH THE
BALANCE IS SUPPOSED TO BE DISADVANTAGEOUS.
CHAPTER IV. OF DRAWBACKS.
CHAPTER V. OF BOUNTIES.
CHAPTER VI. OF TREATIES OF COMMERCE.
CHAPTER VII. OF COLONIES.
CHAPTER VIII. CONCLUSION OF THE MERCANTILE SYSTEM.
CHAPTER IX. OF THE AGRICULTURAL SYSTEMS, OR OF THOSE
SYSTEMS OF POLITICAL ECONOMY WHICH REPRESENT THE PRODUCE OF LAND, AS EITHER
THE SOLE OR THE PRINCIPAL SOURCE OF THE REVENUE AND WEALTH OF EVERY COUNTRY.
BOOK V. OF THE REVENUE OF THE SOVEREIGN OR COMMONWEALTH
CHAPTER I. OF THE EXPENSES OF THE SOVEREIGN OR COMMONWEALTH.
CHAPTER II. OF THE SOURCES OF THE GENERAL OR PUBLIC
REVENUE OF THE SOCIETY.
CHAPTER III. OF PUBLIC DEBTS.
INTRODUCTION AND PLAN OF THE WORK.
The annual labour of every nation is the fund which originally supplies it
with all the necessaries and conveniencies of life which it annually
consumes, and which consist always either in the immediate produce of that
labour, or in what is purchased with that produce from other nations.
According, therefore, as this produce, or what is purchased with it, bears
a greater or smaller proportion to the number of those who are to consume
it, the nation will be better or worse supplied with all the necessaries
and conveniencies for which it has occasion.
But this proportion must in every nation be regulated by two different
circumstances: first, by the skill, dexterity, and judgment with which its
labour is generally applied; and, secondly, by the proportion between the
number of those who are employed in useful labour, and that of those who
are not so employed. Whatever be the soil, climate, or extent of territory
of any particular nation, the abundance or scantiness of its annual supply
must, in that particular situation, depend upon those two circumstances.
The abundance or scantiness of this supply, too, seems to depend more upon
the former of those two circumstances than upon the latter. Among the
savage nations of hunters and fishers, every individual who is able to
work is more or less employed in useful labour, and endeavours to provide,
as well as he can, the necessaries and conveniencies of life, for himself,
and such of his family or tribe as are either too old, or too young, or
too infirm, to go a-hunting and fishing. Such nations, however, are so
miserably poor, that, from mere want, they are frequently reduced, or at
least think themselves reduced, to the necessity sometimes of directly
destroying, and sometimes of abandoning their infants, their old people,
and those afflicted with lingering diseases, to perish with hunger, or to
be devoured by wild beasts. Among civilized and thriving nations, on the
contrary, though a great number of people do not labour at all, many of
whom consume the produce of ten times, frequently of a hundred times, more
labour than the greater part of those who work; yet the produce of the
whole labour of the society is so great, that all are often abundantly
supplied; and a workman, even of the lowest and poorest order, if he is
frugal and industrious, may enjoy a greater share of the necessaries and
conveniencies of life than it is possible for any savage to acquire.
The causes of this improvement in the productive powers of labour, and the
order according to which its produce is naturally distributed among the
different ranks and conditions of men in the society, make the subject of
the first book of this Inquiry.
Whatever be the actual state of the skill, dexterity, and judgment, with
which labour is applied in any nation, the abundance or scantiness of its
annual supply must depend, during the continuance of that state, upon the
proportion between the number of those who are annually employed in useful
labour, and that of those who are not so employed. The number of useful
and productive labourers, it will hereafter appear, is everywhere in
proportion to the quantity of capital stock which is employed in setting
them to work, and to the particular way in which it is so employed. The
second book, therefore, treats of the nature of capital stock, of the
manner in which it is gradually accumulated, and of the different
quantities of labour which it puts into motion, according to the different
ways in which it is employed.
Nations tolerably well advanced as to skill, dexterity, and judgment, in
the application of labour, have followed very different plans in the
general conduct or direction of it; and those plans have not all been
equally favourable to the greatness of its produce. The policy of some
nations has given extraordinary encouragement to the industry of the
country; that of others to the industry of towns. Scarce any nation has
dealt equally and impartially with every sort of industry. Since the
down-fall of the Roman empire, the policy of Europe has been more
favourable to arts, manufactures, and commerce, the industry of towns,
than to agriculture, the Industry of the country. The circumstances which
seem to have introduced and established this policy are explained in the
third book.
Though those different plans were, perhaps, first introduced by the
private interests and prejudices of particular orders of men, without any
regard to, or foresight of, their consequences upon the general welfare of
the society; yet they have given occasion to very different theories of
political economy; of which some magnify the importance of that industry
which is carried on in towns, others of that which is carried on in the
country. Those theories have had a considerable influence, not only upon
the opinions of men of learning, but upon the public conduct of princes
and sovereign states. I have endeavoured, in the fourth book, to explain
as fully and distinctly as I can those different theories, and the
principal effects which they have produced in different ages and nations.
To explain in what has consisted the revenue of the great body of the
people, or what has been the nature of those funds, which, in different
ages and nations, have supplied their annual consumption, is the object of
these four first books. The fifth and last book treats of the revenue of
the sovereign, or commonwealth. In this book I have endeavoured to shew,
first, what are the necessary expenses of the sovereign, or commonwealth;
which of those expenses ought to be defrayed by the general contribution
of the whole society, and which of them, by that of some particular part
only, or of some particular members of it: secondly, what are the
different methods in which the whole society may be made to contribute
towards defraying the expenses incumbent on the whole society, and what
are the principal advantages and inconveniencies of each of those methods;
and, thirdly and lastly, what are the reasons and causes which have
induced almost all modern governments to mortgage some part of this
revenue, or to contract debts; and what have been the effects of those
debts upon the real wealth, the annual produce of the land and labour of
the society.
BOOK I.
OF THE CAUSES OF IMPROVEMENT IN THE
PRODUCTIVE POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS
NATURALLY DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLE.
CHAPTER I.
OF THE DIVISION OF LABOUR.
The greatest improvements in the productive powers of labour, and the
greater part of the skill, dexterity, and judgment, with which it is
anywhere directed, or applied, seem to have been the effects of the
division of labour. The effects of the division of labour, in the general
business of society, will be more easily understood, by considering in
what manner it operates in some particular manufactures. It is commonly
supposed to be carried furthest in some very trifling ones; not perhaps
that it really is carried further in them than in others of more
importance: but in those trifling manufactures which are destined to
supply the small wants of but a small number of people, the whole number
of workmen must necessarily be small; and those employed in every
different branch of the work can often be collected into the same
workhouse, and placed at once under the view of the spectator.
In those great manufactures, on the contrary, which are destined to supply
the great wants of the great body of the people, every different branch of
the work employs so great a number of workmen, that it is impossible to
collect them all into the same workhouse. We can seldom see more, at one
time, than those employed in one single branch. Though in such
manufactures, therefore, the work may really be divided into a much
greater number of parts, than in those of a more trifling nature, the
division is not near so obvious, and has accordingly been much less
observed.
To take an example, therefore, from a very trifling manufacture, but one
in which the division of labour has been very often taken notice of, the
trade of a pin-maker: a workman not educated to this business (which the
division of labour has rendered a distinct trade), nor acquainted with the
use of the machinery employed in it (to the invention of which the same
division of labour has probably given occasion), could scarce, perhaps,
with his utmost industry, make one pin in a day, and certainly could not
make twenty. But in the way in which this business is now carried on, not
only the whole work is a peculiar trade, but it is divided into a number
of branches, of which the greater part are likewise peculiar trades. One
man draws out the wire; another straights it; a third cuts it; a fourth
points it; a fifth grinds it at the top for receiving the head; to make
the head requires two or three distinct operations; to put it on is a
peculiar business; to whiten the pins is another; it is even a trade by
itself to put them into the paper; and the important business of making a
pin is, in this manner, divided into about eighteen distinct operations,
which, in some manufactories, are all performed by distinct hands, though
in others the same man will sometimes perform two or three of them. I have
seen a small manufactory of this kind, where ten men only were employed,
and where some of them consequently performed two or three distinct
operations. But though they were very poor, and therefore but
indifferently accommodated with the necessary machinery, they could, when
they exerted themselves, make among them about twelve pounds of pins in a
day. There are in a pound upwards of four thousand pins of a middling
size. Those ten persons, therefore, could make among them upwards of
forty-eight thousand pins in a day. Each person, therefore, making a tenth
part of forty-eight thousand pins, might be considered as making four
thousand eight hundred pins in a day. But if they had all wrought
separately and independently, and without any of them having been educated
to this peculiar business, they certainly could not each of them have made
twenty, perhaps not one pin in a day; that is, certainly, not the two
hundred and fortieth, perhaps not the four thousand eight hundredth, part
of what they are at present capable of performing, in consequence of a
proper division and combination of their different operations.
In every other art and manufacture, the effects of the division of labour
are similar to what they are in this very trifling one, though, in many of
them, the labour can neither be so much subdivided, nor reduced to so
great a simplicity of operation. The division of labour, however, so far
as it can be introduced, occasions, in every art, a proportionable
increase of the productive powers of labour. The separation of different
trades and employments from one another, seems to have taken place in
consequence of this advantage. This separation, too, is generally carried
furthest in those countries which enjoy the highest degree of industry and
improvement; what is the work of one man, in a rude state of society,
being generally that of several in an improved one. In every improved
society, the farmer is generally nothing but a farmer; the manufacturer,
nothing but a manufacturer. The labour, too, which is necessary to produce
any one complete manufacture, is almost always divided among a great
number of hands. How many different trades are employed in each branch of
the linen and woollen manufactures, from the growers of the flax and the
wool, to the bleachers and smoothers of the linen, or to the dyers and
dressers of the cloth! The nature of agriculture, indeed, does not admit
of so many subdivisions of labour, nor of so complete a separation of one
business from another, as manufactures. It is impossible to separate so
entirely the business of the grazier from that of the corn-farmer, as the
trade of the carpenter is commonly separated from that of the smith. The
spinner is almost always a distinct person from the weaver; but the
ploughman, the harrower, the sower of the seed, and the reaper of the
corn, are often the same. The occasions for those different sorts of
labour returning with the different seasons of the year, it is impossible
that one man should be constantly employed in any one of them. This
impossibility of making so complete and entire a separation of all the
different branches of labour employed in agriculture, is perhaps the
reason why the improvement of the productive powers of labour, in this
art, does not always keep pace with their improvement in manufactures. The
most opulent nations, indeed, generally excel all their neighbours in
agriculture as well as in manufactures; but they are commonly more
distinguished by their superiority in the latter than in the former. Their
lands are in general better cultivated, and having more labour and expense
bestowed upon them, produce more in proportion to the extent and natural
fertility of the ground. But this superiority of produce is seldom much
more than in proportion to the superiority of labour and expense. In
agriculture, the labour of the rich country is not always much more
productive than that of the poor; or, at least, it is never so much more
productive, as it commonly is in manufactures. The corn of the rich
country, therefore, will not always, in the same degree of goodness, come
cheaper to market than that of the poor. The corn of Poland, in the same
degree of goodness, is as cheap as that of France, notwithstanding the
superior opulence and improvement of the latter country. The corn of
France is, in the corn-provinces, fully as good, and in most years nearly
about the same price with the corn of England, though, in opulence and
improvement, France is perhaps inferior to England. The corn-lands of
England, however, are better cultivated than those of France, and the
corn-lands of France are said to be much better cultivated than those of
Poland. But though the poor country, notwithstanding the inferiority of
its cultivation, can, in some measure, rival the rich in the cheapness and
goodness of its corn, it can pretend to no such competition in its
manufactures, at least if those manufactures suit the soil, climate, and
situation, of the rich country. The silks of France are better and cheaper
than those of England, because the silk manufacture, at least under the
present high duties upon the importation of raw silk, does not so well
suit the climate of England as that of France. But the hardware and the
coarse woollens of England are beyond all comparison superior to those of
France, and much cheaper, too, in the same degree of goodness. In Poland
there are said to be scarce any manufactures of any kind, a few of those
coarser household manufactures excepted, without which no country can well
subsist.
This great increase in the quantity of work, which, in consequence of the
division of labour, the same number of people are capable of performing,
is owing to three different circumstances; first, to the increase of
dexterity in every particular workman; secondly, to the saving of the time
which is commonly lost in passing from one species of work to another;
and, lastly, to the invention of a great number of machines which
facilitate and abridge labour, and enable one man to do the work of many.
First, the improvement of the dexterity of the workmen, necessarily
increases the quantity of the work he can perform; and the division of
labour, by reducing every man’s business to some one simple operation, and
by making this operation the sole employment of his life, necessarily
increases very much the dexterity of the workman. A common smith, who,
though accustomed to handle the hammer, has never been used to make nails,
if, upon some particular occasion, he is obliged to attempt it, will
scarce, I am assured, be able to make above two or three hundred nails in
a day, and those, too, very bad ones. A smith who has been accustomed to
make nails, but whose sole or principal business has not been that of a
nailer, can seldom, with his utmost diligence, make more than eight
hundred or a thousand nails in a day. I have seen several boys, under
twenty years of age, who had never exercised any other trade but that of
making nails, and who, when they exerted themselves, could make, each of
them, upwards of two thousand three hundred nails in a day. The making of
a nail, however, is by no means one of the simplest operations. The same
person blows the bellows, stirs or mends the fire as there is occasion,
heats the iron, and forges every part of the nail: in forging the head,
too, he is obliged to change his tools. The different operations into
which the making of a pin, or of a metal button, is subdivided, are all of
them much more simple, and the dexterity of the person, of whose life it
has been the sole business to perform them, is usually much greater. The
rapidity with which some of the operations of those manufactures are
performed, exceeds what the human hand could, by those who had never seen
them, be supposed capable of acquiring.
Secondly, the advantage which is gained by saving the time commonly lost
in passing from one sort of work to another, is much greater than we
should at first view be apt to imagine it. It is impossible to pass very
quickly from one kind of work to another, that is carried on in a
different place, and with quite different tools. A country weaver, who
cultivates a small farm, must lose a good deal of time in passing from
his loom to the field, and from the field to his loom. When the two trades
can be carried on in the same workhouse, the loss of time is, no doubt,
much less. It is, even in this case, however, very considerable. A man
commonly saunters a little in turning his hand from one sort of employment
to another. When he first begins the new work, he is seldom very keen and
hearty; his mind, as they say, does not go to it, and for some time he
rather trifles than applies to good purpose. The habit of sauntering, and
of indolent careless application, which is naturally, or rather
necessarily, acquired by every country workman who is obliged to change
his work and his tools every half hour, and to apply his hand in twenty
different ways almost every day of his life, renders him almost always
slothful and lazy, and incapable of any vigorous application, even on the
most pressing occasions. Independent, therefore, of his deficiency in
point of dexterity, this cause alone must always reduce considerably the
quantity of work which he is capable of performing.
Thirdly, and lastly, everybody must be sensible how much labour is
facilitated and abridged by the application of proper machinery. It is
unnecessary to give any example. I shall only observe, therefore, that the
invention of all those machines by which labour is so much facilitated and
abridged, seems to have been originally owing to the division of labour.
Men are much more likely to discover easier and readier methods of
attaining any object, when the whole attention of their minds is directed
towards that single object, than when it is dissipated among a great
variety of things. But, in consequence of the division of labour, the
whole of every man’s attention comes naturally to be directed towards some
one very simple object. It is naturally to be expected, therefore, that
some one or other of those who are employed in each particular branch of
labour should soon find out easier and readier methods of performing their
own particular work, whenever the nature of it admits of such improvement.
A great part of the machines made use of in those manufactures in which
labour is most subdivided, were originally the invention of common
workmen, who, being each of them employed in some very simple operation,
naturally turned their thoughts towards finding out easier and readier
methods of performing it. Whoever has been much accustomed to visit such
manufactures, must frequently have been shewn very pretty machines, which
were the inventions of such workmen, in order to facilitate and quicken
their own particular part of the work. In the first fire engines {this was
the current designation for steam engines}, a boy was constantly employed
to open and shut alternately the communication between the boiler and the
cylinder, according as the piston either ascended or descended. One of
those boys, who loved to play with his companions, observed that, by tying
a string from the handle of the valve which opened this communication to
another part of the machine, the valve would open and shut without his
assistance, and leave him at liberty to divert himself with his
play-fellows. One of the greatest improvements that has been made upon
this machine, since it was first invented, was in this manner the
discovery of a boy who wanted to save his own labour.
All the improvements in machinery, however, have by no means been the
inventions of those who had occasion to use the machines. Many
improvements have been made by the ingenuity of the makers of the
machines, when to make them became the business of a peculiar trade; and
some by that of those who are called philosophers, or men of speculation,
whose trade it is not to do any thing, but to observe every thing, and
who, upon that account, are often capable of combining together the powers
of the most distant and dissimilar objects in the progress of society,
philosophy or speculation becomes, like every other employment, the
principal or sole trade and occupation of a particular class of citizens.
Like every other employment, too, it is subdivided into a great number of
different branches, each of which affords occupation to a peculiar tribe
or class of philosophers; and this subdivision of employment in
philosophy, as well as in every other business, improves dexterity, and
saves time. Each individual becomes more expert in his own peculiar
branch, more work is done upon the whole, and the quantity of science is
considerably increased by it.
It is the great multiplication of the productions of all the different
arts, in consequence of the division of labour, which occasions, in a
well-governed society, that universal opulence which extends itself to the
lowest ranks of the people. Every workman has a great quantity of his own
work to dispose of beyond what he himself has occasion for; and every
other workman being exactly in the same situation, he is enabled to
exchange a great quantity of his own goods for a great quantity or, what
comes to the same thing, for the price of a great quantity of theirs. He
supplies them abundantly with what they have occasion for, and they
accommodate him as amply with what he has occasion for, and a general
plenty diffuses itself through all the different ranks of the society.
Observe the accommodation of the most common artificer or daylabourer in a
civilized and thriving country, and you will perceive that the number of
people, of whose industry a part, though but a small part, has been
employed in procuring him this accommodation, exceeds all computation. The
woollen coat, for example, which covers the day-labourer, as coarse and
rough as it may appear, is the produce of the joint labour of a great
multitude of workmen. The shepherd, the sorter of the wool, the
wool-comber or carder, the dyer, the scribbler, the spinner, the weaver,
the fuller, the dresser, with many others, must all join their different
arts in order to complete even this homely production. How many merchants
and carriers, besides, must have been employed in transporting the
materials from some of those workmen to others who often live in a very
distant part of the country? How much commerce and navigation in
particular, how many ship-builders, sailors, sail-makers, rope-makers,
must have been employed in order to bring together the different drugs
made use of by the dyer, which often come from the remotest corners of the
world? What a variety of labour, too, is necessary in order to produce the
tools of the meanest of those workmen! To say nothing of such complicated
machines as the ship of the sailor, the mill of the fuller, or even the
loom of the weaver, let us consider only what a variety of labour is
requisite in order to form that very simple machine, the shears with which
the shepherd clips the wool. The miner, the builder of the furnace for
smelting the ore, the feller of the timber, the burner of the charcoal to
be made use of in the smelting-house, the brickmaker, the bricklayer, the
workmen who attend the furnace, the millwright, the forger, the smith,
must all of them join their different arts in order to produce them. Were
we to examine, in the same manner, all the different parts of his dress
and household furniture, the coarse linen shirt which he wears next his
skin, the shoes which cover his feet, the bed which he lies on, and all
the different parts which compose it, the kitchen-grate at which he
prepares his victuals, the coals which he makes use of for that purpose,
dug from the bowels of the earth, and brought to him, perhaps, by a long
sea and a long land-carriage, all the other utensils of his kitchen, all
the furniture of his table, the knives and forks, the earthen or pewter
plates upon which he serves up and divides his victuals, the different
hands employed in preparing his bread and his beer, the glass window which
lets in the heat and the light, and keeps out the wind and the rain, with
all the knowledge and art requisite for preparing that beautiful and happy
invention, without which these northern parts of the world could scarce
have afforded a very comfortable habitation, together with the tools of
all the different workmen employed in producing those different
conveniencies; if we examine, I say, all these things, and consider what a
variety of labour is employed about each of them, we shall be sensible
that, without the assistance and co-operation of many thousands, the very
meanest person in a civilized country could not be provided, even
according to, what we very falsely imagine, the easy and simple manner in
which he is commonly accommodated. Compared, indeed, with the more
extravagant luxury of the great, his accommodation must no doubt appear
extremely simple and easy; and yet it may be true, perhaps, that the
accommodation of an European prince does not always so much exceed that of
an industrious and frugal peasant, as the accommodation of the latter
exceeds that of many an African king, the absolute masters of the lives
and liberties of ten thousand naked savages.
CHAPTER II.
OF THE PRINCIPLE WHICH GIVES OCCASION
TO THE DIVISION OF LABOUR.
This division of labour, from which so many advantages are derived, is not
originally the effect of any human wisdom, which foresees and intends that
general opulence to which it gives occasion. It is the necessary, though
very slow and gradual, consequence of a certain propensity in human
nature, which has in view no such extensive utility; the propensity to
truck, barter, and exchange one thing for another.
Whether this propensity be one of those original principles in human
nature, of which no further account can be given, or whether, as seems
more probable, it be the necessary consequence of the faculties of reason
and speech, it belongs not to our present subject to inquire. It is common
to all men, and to be found in no other race of animals, which seem to
know neither this nor any other species of contracts. Two greyhounds, in
running down the same hare, have sometimes the appearance of acting in
some sort of concert. Each turns her towards his companion, or endeavours
to intercept her when his companion turns her towards himself. This,
however, is not the effect of any contract, but of the accidental
concurrence of their passions in the same object at that particular time.
Nobody ever saw a dog make a fair and deliberate exchange of one bone for
another with another dog. Nobody ever saw one animal, by its gestures and
natural cries signify to another, this is mine, that yours; I am willing
to give this for that. When an animal wants to obtain something either of
a man, or of another animal, it has no other means of persuasion, but to
gain the favour of those whose service it requires. A puppy fawns upon its
dam, and a spaniel endeavours, by a thousand attractions, to engage the
attention of its master who is at dinner, when it wants to be fed by him.
Man sometimes uses the same arts with his brethren, and when he has no
other means of engaging them to act according to his inclinations,
endeavours by every servile and fawning attention to obtain their good
will. He has not time, however, to do this upon every occasion. In
civilized society he stands at all times in need of the co-operation and
assistance of great multitudes, while his whole life is scarce sufficient
to gain the friendship of a few persons. In almost every other race of
animals, each individual, when it is grown up to maturity, is entirely
independent, and in its natural state has occasion for the assistance of
no other living creature. But man has almost constant occasion for the
help of his brethren, and it is in vain for him to expect it from their
benevolence only. He will be more likely to prevail if he can interest
their self-love in his favour, and shew them that it is for their own
advantage to do for him what he requires of them. Whoever offers to
another a bargain of any kind, proposes to do this. Give me that which I
want, and you shall have this which you want, is the meaning of every such
offer; and it is in this manner that we obtain from one another the far
greater part of those good offices which we stand in need of. It is not
from the benevolence of the butcher, the brewer, or the baker that we
expect our dinner, but from their regard to their own interest. We address
ourselves, not to their humanity, but to their self-love, and never talk
to them of our own necessities, but of their advantages. Nobody but a
beggar chooses to depend chiefly upon the benevolence of his
fellow-citizens. Even a beggar does not depend upon it entirely. The
charity of well-disposed people, indeed, supplies him with the whole fund
of his subsistence. But though this principle ultimately provides him with
all the necessaries of life which he has occasion for, it neither does nor
can provide him with them as he has occasion for them. The greater part of
his occasional wants are supplied in the same manner as those of other
people, by treaty, by barter, and by purchase. With the money which one
man gives him he purchases food. The old clothes which another bestows
upon him he exchanges for other clothes which suit him better, or for
lodging, or for food, or for money, with which he can buy either food,
clothes, or lodging, as he has occasion.
As it is by treaty, by barter, and by purchase, that we obtain from one
another the greater part of those mutual good offices which we stand in
need of, so it is this same trucking disposition which originally gives
occasion to the division of labour. In a tribe of hunters or shepherds, a
particular person makes bows and arrows, for example, with more readiness
and dexterity than any other. He frequently exchanges them for cattle or
for venison, with his companions; and he finds at last that he can, in
this manner, get more cattle and venison, than if he himself went to the
field to catch them. From a regard to his own interest, therefore, the
making of bows and arrows grows to be his chief business, and he becomes a
sort of armourer. Another excels in making the frames and covers of their
little huts or moveable houses. He is accustomed to be of use in this way
to his neighbours, who reward him in the same manner with cattle and with
venison, till at last he finds it his interest to dedicate himself
entirely to this employment, and to become a sort of house-carpenter. In
the same manner a third becomes a smith or a brazier; a fourth, a tanner
or dresser of hides or skins, the principal part of the clothing of
savages. And thus the certainty of being able to exchange all that surplus
part of the produce of his own labour, which is over and above his own
consumption, for such parts of the produce of other men’s labour as he may
have occasion for, encourages every man to apply himself to a particular
occupation, and to cultivate and bring to perfection whatever talent or
genius he may possess for that particular species of business.
The difference of natural talents in different men, is, in reality, much
less than we are aware of; and the very different genius which appears to
distinguish men of different professions, when grown up to maturity, is
not upon many occasions so much the cause, as the effect of the division
of labour. The difference between the most dissimilar characters, between
a philosopher and a common street porter, for example, seems to arise not
so much from nature, as from habit, custom, and education. When they came
in to the world, and for the first six or eight years of their existence,
they were, perhaps, very much alike, and neither their parents nor
play-fellows could perceive any remarkable difference. About that age, or
soon after, they come to be employed in very different occupations. The
difference of talents comes then to be taken notice of, and widens by
degrees, till at last the vanity of the philosopher is willing to
acknowledge scarce any resemblance. But without the disposition to truck,
barter, and exchange, every man must have procured to himself every
necessary and conveniency of life which he wanted. All must have had the
same duties to perform, and the same work to do, and there could have been
no such difference of employment as could alone give occasion to any great
difference of talents.
As it is this disposition which forms that difference of talents, so
remarkable among men of different professions, so it is this same
disposition which renders that difference useful. Many tribes of animals,
acknowledged to be all of the same species, derive from nature a much more
remarkable distinction of genius, than what, antecedent to custom and
education, appears to take place among men. By nature a philosopher is not
in genius and disposition half so different from a street porter, as a
mastiff is from a grey-hound, or a grey-hound from a spaniel, or this last
from a shepherd’s dog. Those different tribes of animals, however, though
all of the same species are of scarce any use to one another. The strength
of the mastiff is not in the least supported either by the swiftness of
the greyhound, or by the sagacity of the spaniel, or by the docility of
the shepherd’s dog. The effects of those different geniuses and talents,
for want of the power or disposition to barter and exchange, cannot be
brought into a common stock, and do not in the least contribute to the
better accommodation and conveniency of the species. Each animal is still
obliged to support and defend itself, separately and independently, and
derives no sort of advantage from that variety of talents with which
nature has distinguished its fellows. Among men, on the contrary, the most
dissimilar geniuses are of use to one another; the different produces of
their respective talents, by the general disposition to truck, barter, and
exchange, being brought, as it were, into a common stock, where every man
may purchase whatever part of the produce of other men’s talents he has
occasion for.
CHAPTER III.
THAT THE DIVISION OF LABOUR IS
LIMITED BY THE EXTENT OF THE MARKET.
As it is the power of exchanging that gives occasion to the division of
labour, so the extent of this division must always be limited by the
extent of that power, or, in other words, by the extent of the market.
When the market is very small, no person can have any encouragement to
dedicate himself entirely to one employment, for want of the power to
exchange all that surplus part of the produce of his own labour, which is
over and above his own consumption, for such parts of the produce of other
men’s labour as he has occasion for.
There are some sorts of industry, even of the lowest kind, which can be
carried on nowhere but in a great town. A porter, for example, can find
employment and subsistence in no other place. A village is by much too
narrow a sphere for him; even an ordinary market-town is scarce large
enough to afford him constant occupation. In the lone houses and very
small villages which are scattered about in so desert a country as the
highlands of Scotland, every farmer must be butcher, baker, and brewer,
for his own family. In such situations we can scarce expect to find even a
smith, a carpenter, or a mason, within less than twenty miles of another
of the same trade. The scattered families that live at eight or ten miles
distance from the nearest of them, must learn to perform themselves a
great number of little pieces of work, for which, in more populous
countries, they would call in the assistance of those workmen. Country
workmen are almost everywhere obliged to apply themselves to all the
different branches of industry that have so much affinity to one another
as to be employed about the same sort of materials. A country carpenter
deals in every sort of work that is made of wood; a country smith in every
sort of work that is made of iron. The former is not only a carpenter, but
a joiner, a cabinet-maker, and even a carver in wood, as well as a
wheel-wright, a plough-wright, a cart and waggon-maker. The employments of
the latter are still more various. It is impossible there should be such a
trade as even that of a nailer in the remote and inland parts of the
highlands of Scotland. Such a workman at the rate of a thousand nails
a-day, and three hundred working days in the year, will make three hundred
thousand nails in the year. But in such a situation it would be impossible
to dispose of one thousand, that is, of one day’s work in the year. As by
means of water-carriage, a more extensive market is opened to every sort
of industry than what land-carriage alone can afford it, so it is upon the
sea-coast, and along the banks of navigable rivers, that industry of every
kind naturally begins to subdivide and improve itself, and it is
frequently not till a long time after that those improvements extend
themselves to the inland parts of the country. A broad-wheeled waggon,
attended by two men, and drawn by eight horses, in about six weeks time,
carries and brings back between London and Edinburgh near four ton weight
of goods. In about the same time a ship navigated by six or eight men, and
sailing between the ports of London and Leith, frequently carries and
brings back two hundred ton weight of goods. Six or eight men, therefore,
by the help of water-carriage, can carry and bring back, in the same time,
the same quantity of goods between London and Edinburgh as fifty
broad-wheeled waggons, attended by a hundred men, and drawn by four
hundred horses. Upon two hundred tons of goods, therefore, carried by the
cheapest land-carriage from London to Edinburgh, there must be charged the
maintenance of a hundred men for three weeks, and both the maintenance and
what is nearly equal to maintenance the wear and tear of four hundred
horses, as well as of fifty great waggons. Whereas, upon the same quantity
of goods carried by water, there is to be charged only the maintenance of
six or eight men, and the wear and tear of a ship of two hundred tons
burthen, together with the value of the superior risk, or the difference
of the insurance between land and water-carriage. Were there no other
communication between those two places, therefore, but by land-carriage,
as no goods could be transported from the one to the other, except such
whose price was very considerable in proportion to their weight, they
could carry on but a small part of that commerce which at present subsists
between them, and consequently could give but a small part of that
encouragement which they at present mutually afford to each other’s
industry. There could be little or no commerce of any kind between the
distant parts of the world. What goods could bear the expense of
land-carriage between London and Calcutta? Or if there were any so
precious as to be able to support this expense, with what safety could
they be transported through the territories of so many barbarous nations?
Those two cities, however, at present carry on a very considerable
commerce with each other, and by mutually affording a market, give a good
deal of encouragement to each other’s industry.
Since such, therefore, are the advantages of water-carriage, it is natural
that the first improvements of art and industry should be made where this
conveniency opens the whole world for a market to the produce of every
sort of labour, and that they should always be much later in extending
themselves into the inland parts of the country. The inland parts of the
country can for a long time have no other market for the greater part of
their goods, but the country which lies round about them, and separates
them from the sea-coast, and the great navigable rivers. The extent of the
market, therefore, must for a long time be in proportion to the riches and
populousness of that country, and consequently their improvement must
always be posterior to the improvement of that country. In our North
American colonies, the plantations have constantly followed either the
sea-coast or the banks of the navigable rivers, and have scarce anywhere
extended themselves to any considerable distance from both.
The nations that, according to the best authenticated history, appear to
have been first civilized, were those that dwelt round the coast of the
Mediterranean sea. That sea, by far the greatest inlet that is known in
the world, having no tides, nor consequently any waves, except such as are
caused by the wind only, was, by the smoothness of its surface, as well as
by the multitude of its islands, and the proximity of its neighbouring
shores, extremely favourable to the infant navigation of the world; when,
from their ignorance of the compass, men were afraid to quit the view of
the coast, and from the imperfection of the art of ship-building, to
abandon themselves to the boisterous waves of the ocean. To pass beyond
the pillars of Hercules, that is, to sail out of the straits of Gibraltar,
was, in the ancient world, long considered as a most wonderful and
dangerous exploit of navigation. It was late before even the Phoenicians
and Carthaginians, the most skilful navigators and ship-builders of those
old times, attempted it; and they were, for a long time, the only nations
that did attempt it.
Of all the countries on the coast of the Mediterranean sea, Egypt seems to
have been the first in which either agriculture or manufactures were
cultivated and improved to any considerable degree. Upper Egypt extends
itself nowhere above a few miles from the Nile; and in Lower Egypt, that
great river breaks itself into many different canals, which, with the
assistance of a little art, seem to have afforded a communication by
water-carriage, not only between all the great towns, but between all the
considerable villages, and even to many farm-houses in the country, nearly
in the same manner as the Rhine and the Maese do in Holland at present.
The extent and easiness of this inland navigation was probably one of the
principal causes of the early improvement of Egypt.
The improvements in agriculture and manufactures seem likewise to have
been of very great antiquity in the provinces of Bengal, in the East
Indies, and in some of the eastern provinces of China, though the great
extent of this antiquity is not authenticated by any histories of whose
authority we, in this part of the world, are well assured. In Bengal, the
Ganges, and several other great rivers, form a great number of navigable
canals, in the same manner as the Nile does in Egypt. In the eastern
provinces of China, too, several great rivers form, by their different
branches, a multitude of canals, and, by communicating with one another,
afford an inland navigation much more extensive than that either of the
Nile or the Ganges, or, perhaps, than both of them put together. It is
remarkable, that neither the ancient Egyptians, nor the Indians, nor the
Chinese, encouraged foreign commerce, but seem all to have derived their
great opulence from this inland navigation.
All the inland parts of Africa, and all that part of Asia which lies any
considerable way north of the Euxine and Caspian seas, the ancient
Scythia, the modern Tartary and Siberia, seem, in all ages of the world,
to have been in the same barbarous and uncivilized state in which we find
them at present. The sea of Tartary is the frozen ocean, which admits of
no navigation; and though some of the greatest rivers in the world run
through that country, they are at too great a distance from one another to
carry commerce and communication through the greater part of it. There are
in Africa none of those great inlets, such as the Baltic and Adriatic seas
in Europe, the Mediterranean and Euxine seas in both Europe and Asia, and
the gulfs of Arabia, Persia, India, Bengal, and Siam, in Asia, to carry
maritime commerce into the interior parts of that great continent; and the
great rivers of Africa are at too great a distance from one another to
give occasion to any considerable inland navigation. The commerce,
besides, which any nation can carry on by means of a river which does not
break itself into any great number of branches or canals, and which runs
into another territory before it reaches the sea, can never be very
considerable, because it is always in the power of the nations who possess
that other territory to obstruct the communication between the upper
country and the sea. The navigation of the Danube is of very little use to
the different states of Bavaria, Austria, and Hungary, in comparison of
what it would be, if any of them possessed the whole of its course, till
it falls into the Black sea.
CHAPTER IV.
OF THE ORIGIN AND USE OF MONEY.
When the division of labour has been once thoroughly established, it is
but a very small part of a man’s wants which the produce of his own labour
can supply. He supplies the far greater part of them by exchanging that
surplus part of the produce of his own labour, which is over and above his
own consumption, for such parts of the produce of other men’s labour as he
has occasion for. Every man thus lives by exchanging, or becomes, in some
measure, a merchant, and the society itself grows to be what is properly a
commercial society.
But when the division of labour first began to take place, this power of
exchanging must frequently have been very much clogged and embarrassed in
its operations. One man, we shall suppose, has more of a certain commodity
than he himself has occasion for, while another has less. The former,
consequently, would be glad to dispose of; and the latter to purchase, a
part of this superfluity. But if this latter should chance to have nothing
that the former stands in need of, no exchange can be made between them.
The butcher has more meat in his shop than he himself can consume, and the
brewer and the baker would each of them be willing to purchase a part of
it. But they have nothing to offer in exchange, except the different
productions of their respective trades, and the butcher is already
provided with all the bread and beer which he has immediate occasion for.
No exchange can, in this case, be made between them. He cannot be their
merchant, nor they his customers; and they are all of them thus mutually
less serviceable to one another. In order to avoid the inconveniency of
such situations, every prudent man in every period of society, after the
first establishment of the division of labour, must naturally have
endeavoured to manage his affairs in such a manner, as to have at all
times by him, besides the peculiar produce of his own industry, a certain
quantity of some one commodity or other, such as he imagined few people
would be likely to refuse in exchange for the produce of their industry.
Many different commodities, it is probable, were successively both thought
of and employed for this purpose. In the rude ages of society, cattle are
said to have been the common instrument of commerce; and, though they must
have been a most inconvenient one, yet, in old times, we find things were
frequently valued according to the number of cattle which had been given
in exchange for them. The armour of Diomede, says Homer, cost only nine
oxen; but that of Glaucus cost a hundred oxen. Salt is said to be the
common instrument of commerce and exchanges in Abyssinia; a species of
shells in some parts of the coast of India; dried cod at Newfoundland;
tobacco in Virginia; sugar in some of our West India colonies; hides or
dressed leather in some other countries; and there is at this day a
village in Scotland, where it is not uncommon, I am told, for a workman to
carry nails instead of money to the baker’s shop or the ale-house.
In all countries, however, men seem at last to have been determined by
irresistible reasons to give the preference, for this employment, to
metals above every other commodity. Metals can not only be kept with as
little loss as any other commodity, scarce any thing being less perishable
than they are, but they can likewise, without any loss, be divided into
any number of parts, as by fusion those parts can easily be re-united
again; a quality which no other equally durable commodities possess, and
which, more than any other quality, renders them fit to be the instruments
of commerce and circulation. The man who wanted to buy salt, for example,
and had nothing but cattle to give in exchange for it, must have been
obliged to buy salt to the value of a whole ox, or a whole sheep, at a
time. He could seldom buy less than this, because what he was to give for
it could seldom be divided without loss; and if he had a mind to buy more,
he must, for the same reasons, have been obliged to buy double or triple
the quantity, the value, to wit, of two or three oxen, or of two or three
sheep. If, on the contrary, instead of sheep or oxen, he had metals to
give in exchange for it, he could easily proportion the quantity of the
metal to the precise quantity of the commodity which he had immediate
occasion for.
Different metals have been made use of by different nations for this
purpose. Iron was the common instrument of commerce among the ancient
Spartans, copper among the ancient Romans, and gold and silver among all
rich and commercial nations.
Those metals seem originally to have been made use of for this purpose in
rude bars, without any stamp or coinage. Thus we are told by Pliny (Plin.
Hist Nat. lib. 33, cap. 3), upon the authority of Timaeus, an ancient
historian, that, till the time of Servius Tullius, the Romans had no
coined money, but made use of unstamped bars of copper, to purchase
whatever they had occasion for. These rude bars, therefore, performed at
this time the function of money.
The use of metals in this rude state was attended with two very
considerable inconveniences; first, with the trouble of weighing, and
secondly, with that of assaying them. In the precious metals, where a
small difference in the quantity makes a great difference in the value,
even the business of weighing, with proper exactness, requires at least
very accurate weights and scales. The weighing of gold, in particular, is
an operation of some nicety in the coarser metals, indeed, where a small
error would be of little consequence, less accuracy would, no doubt, be
necessary. Yet we should find it excessively troublesome if every time a
poor man had occasion either to buy or sell a farthing’s worth of goods,
he was obliged to weigh the farthing. The operation of assaying is still
more difficult, still more tedious; and, unless a part of the metal is
fairly melted in the crucible, with proper dissolvents, any conclusion
that can be drawn from it is extremely uncertain. Before the institution
of coined money, however, unless they went through this tedious and
difficult operation, people must always have been liable to the grossest
frauds and impositions; and instead of a pound weight of pure silver, or
pure copper, might receive, in exchange for their goods, an adulterated
composition of the coarsest and cheapest materials, which had, however, in
their outward appearance, been made to resemble those metals. To prevent
such abuses, to facilitate exchanges, and thereby to encourage all sorts
of industry and commerce, it has been found necessary, in all countries
that have made any considerable advances towards improvement, to affix a
public stamp upon certain quantities of such particular metals, as were in
those countries commonly made use of to purchase goods. Hence the origin
of coined money, and of those public offices called mints; institutions
exactly of the same nature with those of the aulnagers and stamp-masters
of woollen and linen cloth. All of them are equally meant to ascertain, by
means of a public stamp, the quantity and uniform goodness of those
different commodities when brought to market.
The first public stamps of this kind that were affixed to the current
metals, seem in many cases to have been intended to ascertain, what it was
both most difficult and most important to ascertain, the goodness or
fineness of the metal, and to have resembled the sterling mark which is at
present affixed to plate and bars of silver, or the Spanish mark which is
sometimes affixed to ingots of gold, and which, being struck only upon one
side of the piece, and not covering the whole surface, ascertains the
fineness, but not the weight of the metal. Abraham weighs to Ephron the
four hundred shekels of silver which he had agreed to pay for the field of
Machpelah. They are said, however, to be the current money of the
merchant, and yet are received by weight, and not by tale, in the same
manner as ingots of gold and bars of silver are at present. The revenues
of the ancient Saxon kings of England are said to have been paid, not in
money, but in kind, that is, in victuals and provisions of all sorts.
William the Conqueror introduced the custom of paying them in money. This
money, however, was for a long time, received at the exchequer, by weight,
and not by tale.
The inconveniency and difficulty of weighing those metals with exactness,
gave occasion to the institution of coins, of which the stamp, covering
entirely both sides of the piece, and sometimes the edges too, was
supposed to ascertain not only the fineness, but the weight of the metal.
Such coins, therefore, were received by tale, as at present, without the
trouble of weighing.
The denominations of those coins seem originally to have expressed the
weight or quantity of metal contained in them. In the time of Servius
Tullius, who first coined money at Rome, the Roman as or pondo contained a
Roman pound of good copper. It was divided, in the same manner as our
Troyes pound, into twelve ounces, each of which contained a real ounce of
good copper. The English pound sterling, in the time of Edward I.
contained a pound, Tower weight, of silver of a known fineness. The Tower
pound seems to have been something more than the Roman pound, and
something less than the Troyes pound. This last was not introduced into
the mint of England till the 18th of Henry the VIII. The French livre
contained, in the time of Charlemagne, a pound, Troyes weight, of silver
of a known fineness. The fair of Troyes in Champaign was at that time
frequented by all the nations of Europe, and the weights and measures of
so famous a market were generally known and esteemed. The Scots money
pound contained, from the time of Alexander the First to that of Robert
Bruce, a pound of silver of the same weight and fineness with the English
pound sterling. English, French, and Scots pennies, too, contained all of
them originally a real penny-weight of silver, the twentieth part of an
ounce, and the two hundred-and-fortieth part of a pound. The shilling,
too, seems originally to have been the denomination of a weight. “When
wheat is at twelve shillings the quarter,” says an ancient statute of
Henry III. “then wastel bread of a farthing shall weigh eleven shillings
and fourpence”. The proportion, however, between the shilling, and either
the penny on the one hand, or the pound on the other, seems not to have
been so constant and uniform as that between the penny and the pound.
During the first race of the kings of France, the French sou or shilling
appears upon different occasions to have contained five, twelve, twenty,
and forty pennies. Among the ancient Saxons, a shilling appears at one
time to have contained only five pennies, and it is not improbable that it
may have been as variable among them as among their neighbours, the
ancient Franks. From the time of Charlemagne among the French, and from
that of William the Conqueror among the English, the proportion between
the pound, the shilling, and the penny, seems to have been uniformly the
same as at present, though the value of each has been very different; for
in every country of the world, I believe, the avarice and injustice of
princes and sovereign states, abusing the confidence of their subjects,
have by degrees diminished the real quantity of metal, which had been
originally contained in their coins. The Roman as, in the latter ages of
the republic, was reduced to the twenty-fourth part of its original value,
and, instead of weighing a pound, came to weigh only half an ounce. The
English pound and penny contain at present about a third only; the Scots
pound and penny about a thirty-sixth; and the French pound and penny about
a sixty-sixth part of their original value. By means of those operations,
the princes and sovereign states which performed them were enabled, in
appearance, to pay their debts and fulfil their engagements with a smaller
quantity of silver than would otherwise have been requisite. It was indeed
in appearance only; for their creditors were really defrauded of a part of
what was due to them. All other debtors in the state were allowed the same
privilege, and might pay with the same nominal sum of the new and debased
coin whatever they had borrowed in the old. Such operations, therefore,
have always proved favourable to the debtor, and ruinous to the creditor,
and have sometimes produced a greater and more universal revolution in the
fortunes of private persons, than could have been occasioned by a very
great public calamity.
It is in this manner that money has become, in all civilized nations, the
universal instrument of commerce, by the intervention of which goods of
all kinds are bought and sold, or exchanged for one another.
What are the rules which men naturally observe, in exchanging them either
for money, or for one another, I shall now proceed to examine. These rules
determine what may be called the relative or exchangeable value of goods.
The word VALUE, it is to be observed, has two different meanings, and
sometimes expresses the utility of some particular object, and sometimes
the power of purchasing other goods which the possession of that object
conveys. The one may be called ‘value in use;’ the other, ‘value in
exchange.’ The things which have the greatest value in use have frequently
little or no value in exchange; and, on the contrary, those which have the
greatest value in exchange have frequently little or no value in use.
Nothing is more useful than water; but it will purchase scarce any thing;
scarce any thing can be had in exchange for it. A diamond, on the
contrary, has scarce any value in use; but a very great quantity of other
goods may frequently be had in exchange for it.
In order to investigate the principles which regulate the exchangeable
value of commodities, I shall endeavour to shew,
First, what is the real measure of this exchangeable value; or wherein
consists the real price of all commodities.
Secondly, what are the different parts of which this real price is
composed or made up.
And, lastly, what are the different circumstances which sometimes raise
some or all of these different parts of price above, and sometimes sink
them below, their natural or ordinary rate; or, what are the causes which
sometimes hinder the market price, that is, the actual price of
commodities, from coinciding exactly with what may be called their natural
price.
I shall endeavour to explain, as fully and distinctly as I can, those
three subjects in the three following chapters, for which I must very
earnestly entreat both the patience and attention of the reader: his
patience, in order to examine a detail which may, perhaps, in some places,
appear unnecessarily tedious; and his attention, in order to understand
what may perhaps, after the fullest explication which I am capable of
giving it, appear still in some degree obscure. I am always willing to run
some hazard of being tedious, in order to be sure that I am perspicuous;
and, after taking the utmost pains that I can to be perspicuous, some
obscurity may still appear to remain upon a subject, in its own nature
extremely abstracted.
CHAPTER V.
OF THE REAL AND NOMINAL PRICE OF
COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY.
Every man is rich or poor according to the degree in which he can afford
to enjoy the necessaries, conveniencies, and amusements of human life. But
after the division of labour has once thoroughly taken place, it is but a
very small part of these with which a man’s own labour can supply him. The
far greater part of them he must derive from the labour of other people,
and he must be rich or poor according to the quantity of that labour which
he can command, or which he can afford to purchase. The value of any
commodity, therefore, to the person who possesses it, and who means not to
use or consume it himself, but to exchange it for other commodities, is
equal to the quantity of labour which it enables him to purchase or
command. Labour therefore, is the real measure of the exchangeable value
of all commodities.
The real price of every thing, what every thing really costs to the man
who wants to acquire it, is the toil and trouble of acquiring it. What
every thing is really worth to the man who has acquired it and who wants
to dispose of it, or exchange it for something else, is the toil and
trouble which it can save to himself, and which it can impose upon other
people. What is bought with money, or with goods, is purchased by labour,
as much as what we acquire by the toil of our own body. That money, or
those goods, indeed, save us this toil. They contain the value of a
certain quantity of labour, which we exchange for what is supposed at the
time to contain the value of an equal quantity. Labour was the first
price, the original purchase money that was paid for all things. It was
not by gold or by silver, but by labour, that all the wealth of the world
was originally purchased; and its value, to those who possess it, and who
want to exchange it for some new productions, is precisely equal to the
quantity of labour which it can enable them to purchase or command.
Wealth, as Mr Hobbes says, is power. But the person who either acquires,
or succeeds to a great fortune, does not necessarily acquire or succeed to
any political power, either civil or military. His fortune may, perhaps,
afford him the means of acquiring both; but the mere possession of that
fortune does not necessarily convey to him either. The power which that
possession immediately and directly conveys to him, is the power of
purchasing a certain command over all the labour, or over all the produce
of labour which is then in the market. His fortune is greater or less,
precisely in proportion to the extent of this power, or to the quantity
either of other men’s labour, or, what is the same thing, of the produce
of other men’s labour, which it enables him to purchase or command. The
exchangeable value of every thing must always be precisely equal to the
extent of this power which it conveys to its owner.
But though labour be the real measure of the exchangeable value of all
commodities, it is not that by which their value is commonly estimated. It
is often difficult to ascertain the proportion between two different
quantities of labour. The time spent in two different sorts of work will
not always alone determine this proportion. The different degrees of
hardship endured, and of ingenuity exercised, must likewise be taken into
account. There may be more labour in an hour’s hard work, than in two
hours easy business; or in an hour’s application to a trade which it cost
ten years labour to learn, than in a month’s industry, at an ordinary and
obvious employment. But it is not easy to find any accurate measure either
of hardship or ingenuity. In exchanging, indeed, the different productions
of different sorts of labour for one another, some allowance is commonly
made for both. It is adjusted, however, not by any accurate measure, but
by the higgling and bargaining of the market, according to that sort of
rough equality which, though not exact, is sufficient for carrying on the
business of common life.
Every commodity, besides, is more frequently exchanged for, and thereby
compared with, other commodities, than with labour. It is more natural,
therefore, to estimate its exchangeable value by the quantity of some
other commodity, than by that of the labour which it can produce. The
greater part of people, too, understand better what is meant by a quantity
of a particular commodity, than by a quantity of labour. The one is a
plain palpable object; the other an abstract notion, which though it can
be made sufficiently intelligible, is not altogether so natural and
obvious.
But when barter ceases, and money has become the common instrument of
commerce, every particular commodity is more frequently exchanged for
money than for any other commodity. The butcher seldom carries his beef or
his mutton to the baker or the brewer, in order to exchange them for bread
or for beer; but he carries them to the market, where he exchanges them
for money, and afterwards exchanges that money for bread and for beer. The
quantity of money which he gets for them regulates, too, the quantity of
bread and beer which he can afterwards purchase. It is more natural and
obvious to him, therefore, to estimate their value by the quantity of
money, the commodity for which he immediately exchanges them, than by that
of bread and beer, the commodities for which he can exchange them only by
the intervention of another commodity; and rather to say that his
butcher’s meat is worth three-pence or fourpence a-pound, than that it is
worth three or four pounds of bread, or three or four quarts of small
beer. Hence it comes to pass, that the exchangeable value of every
commodity is more frequently estimated by the quantity of money, than by
the quantity either of labour or of any other commodity which can be had
in exchange for it.
Gold and silver, however, like every other commodity, vary in their value;
are sometimes cheaper and sometimes dearer, sometimes of easier and
sometimes of more difficult purchase. The quantity of labour which any
particular quantity of them can purchase or command, or the quantity of
other goods which it will exchange for, depends always upon the fertility
or barrenness of the mines which happen to be known about the time when
such exchanges are made. The discovery of the abundant mines of America,
reduced, in the sixteenth century, the value of gold and silver in Europe
to about a third of what it had been before. As it cost less labour to
bring those metals from the mine to the market, so, when they were brought
thither, they could purchase or command less labour; and this revolution
in their value, though perhaps the greatest, is by no means the only one
of which history gives some account. But as a measure of quantity, such as
the natural foot, fathom, or handful, which is continually varying in its
own quantity, can never be an accurate measure of the quantity of other
things; so a commodity which is itself continually varying in its own
value, can never be an accurate measure of the value of other commodities.
Equal quantities of labour, at all times and places, may be said to be of
equal value to the labourer. In his ordinary state of health, strength,
and spirits; in the ordinary degree of his skill and dexterity, he must
always lay down the same portion of his ease, his liberty, and his
happiness. The price which he pays must always be the same, whatever may
be the quantity of goods which he receives in return for it. Of these,
indeed, it may sometimes purchase a greater and sometimes a smaller
quantity; but it is their value which varies, not that of the labour which
purchases them. At all times and places, that is dear which it is
difficult to come at, or which it costs much labour to acquire; and that
cheap which is to be had easily, or with very little labour. Labour alone,
therefore, never varying in its own value, is alone the ultimate and real
standard by which the value of all commodities can at all times and places
be estimated and compared. It is their real price; money is their nominal
price only.
But though equal quantities of labour are always of equal value to the
labourer, yet to the person who employs him they appear sometimes to be of
greater, and sometimes of smaller value. He purchases them sometimes with
a greater, and sometimes with a smaller quantity of goods, and to him the
price of labour seems to vary like that of all other things. It appears to
him dear in the one case, and cheap in the other. In reality, however, it
is the goods which are cheap in the one case, and dear in the other.
In this popular sense, therefore, labour, like commodities, may be said to
have a real and a nominal price. Its real price may be said to consist in
the quantity of the necessaries and conveniencies of life which are given
for it; its nominal price, in the quantity of money. The labourer is rich
or poor, is well or ill rewarded, in proportion to the real, not to the
nominal price of his labour.
The distinction between the real and the nominal price of commodities and
labour is not a matter of mere speculation, but may sometimes be of
considerable use in practice. The same real price is always of the same
value; but on account of the variations in the value of gold and silver,
the same nominal price is sometimes of very different values. When a
landed estate, therefore, is sold with a reservation of a perpetual rent,
if it is intended that this rent should always be of the same value, it is
of importance to the family in whose favour it is reserved, that it should
not consist in a particular sum of money. Its value would in this case be
liable to variations of two different kinds: first, to those which arise
from the different quantities of gold and silver which are contained at
different times in coin of the same denomination; and, secondly, to those
which arise from the different values of equal quantities of gold and
silver at different times.
Princes and sovereign states have frequently fancied that they had a
temporary interest to diminish the quantity of pure metal contained in
their coins; but they seldom have fancied that they had any to augment it.
The quantity of metal contained in the coins, I believe of all nations,
has accordingly been almost continually diminishing, and hardly ever
augmenting. Such variations, therefore, tend almost always to diminish the
value of a money rent.
The discovery of the mines of America diminished the value of gold and
silver in Europe. This diminution, it is commonly supposed, though I
apprehend without any certain proof, is still going on gradually, and is
likely to continue to do so for a long time. Upon this supposition,
therefore, such variations are more likely to diminish than to augment the
value of a money rent, even though it should be stipulated to be paid, not
in such a quantity of coined money of such a denomination (in so many
pounds sterling, for example), but in so many ounces, either of pure
silver, or of silver of a certain standard.
The rents which have been reserved in corn, have preserved their value
much better than those which have been reserved in money, even where the
denomination of the coin has not been altered. By the 18th of Elizabeth,
it was enacted, that a third of the rent of all college leases should be
reserved in corn, to be paid either in kind, or according to the current
prices at the nearest public market. The money arising from this corn
rent, though originally but a third of the whole, is, in the present
times, according to Dr Blackstone, commonly near double of what arises
from the other two-thirds. The old money rents of colleges must, according
to this account, have sunk almost to a fourth part of their ancient value,
or are worth little more than a fourth part of the corn which they were
formerly worth. But since the reign of Philip and Mary, the denomination
of the English coin has undergone little or no alteration, and the same
number of pounds, shillings, and pence, have contained very nearly the
same quantity of pure silver. This degradation, therefore, in the value of
the money rents of colleges, has arisen altogether from the degradation in
the price of silver.
When the degradation in the value of silver is combined with the
diminution of the quantity of it contained in the coin of the same
denomination, the loss is frequently still greater. In Scotland, where the
denomination of the coin has undergone much greater alterations than it
ever did in England, and in France, where it has undergone still greater
than it ever did in Scotland, some ancient rents, originally of
considerable value, have, in this manner, been reduced almost to nothing.
Equal quantities of labour will, at distant times, be purchased more
nearly with equal quantities of corn, the subsistence of the labourer,
than with equal quantities of gold and silver, or, perhaps, of any other
commodity. Equal quantities of corn, therefore, will, at distant times, be
more nearly of the same real value, or enable the possessor to purchase or
command more nearly the same quantity of the labour of other people. They
will do this, I say, more nearly than equal quantities of almost any other
commodity; for even equal quantities of corn will not do it exactly. The
subsistence of the labourer, or the real price of labour, as I shall
endeavour to shew hereafter, is very different upon different occasions;
more liberal in a society advancing to opulence, than in one that is
standing still, and in one that is standing still, than in one that is
going backwards. Every other commodity, however, will, at any particular
time, purchase a greater or smaller quantity of labour, in proportion to
the quantity of subsistence which it can purchase at that time. A rent,
therefore, reserved in corn, is liable only to the variations in the
quantity of labour which a certain quantity of corn can purchase. But a
rent reserved in any other commodity is liable, not only to the variations
in the quantity of labour which any particular quantity of corn can
purchase, but to the variations in the quantity of corn which can be
purchased by any particular quantity of that commodity.
Though the real value of a corn rent, it is to be observed, however,
varies much less from century to century than that of a money rent, it
varies much more from year to year. The money price of labour, as I shall
endeavour to shew hereafter, does not fluctuate from year to year with the
money price of corn, but seems to be everywhere accommodated, not to the
temporary or occasional, but to the average or ordinary price of that
necessary of life. The average or ordinary price of corn, again is
regulated, as I shall likewise endeavour to shew hereafter, by the value
of silver, by the richness or barrenness of the mines which supply the
market with that metal, or by the quantity of labour which must be
employed, and consequently of corn which must be consumed, in order to
bring any particular quantity of silver from the mine to the market. But
the value of silver, though it sometimes varies greatly from century to
century, seldom varies much from year to year, but frequently continues
the same, or very nearly the same, for half a century or a century
together. The ordinary or average money price of corn, therefore, may,
during so long a period, continue the same, or very nearly the same, too,
and along with it the money price of labour, provided, at least, the
society continues, in other respects, in the same, or nearly in the same,
condition. In the mean time, the temporary and occasional price of corn
may frequently be double one year of what it had been the year before, or
fluctuate, for example, from five-and-twenty to fifty shillings the
quarter. But when corn is at the latter price, not only the nominal, but
the real value of a corn rent, will be double of what it is when at the
former, or will command double the quantity either of labour, or of the
greater part of other commodities; the money price of labour, and along
with it that of most other things, continuing the same during all these
fluctuations.
Labour, therefore, it appears evidently, is the only universal, as well as
the only accurate, measure of value, or the only standard by which we can
compare the values of different commodities, at all times, and at all
places. We cannot estimate, it is allowed, the real value of different
commodities from century to century by the quantities of silver which were
given for them. We cannot estimate it from year to year by the quantities
of corn. By the quantities of labour, we can, with the greatest accuracy,
estimate it, both from century to century, and from year to year. From
century to century, corn is a better measure than silver, because, from
century to century, equal quantities of corn will command the same
quantity of labour more nearly than equal quantities of silver. From year
to year, on the contrary, silver is a better measure than corn, because
equal quantities of it will more nearly command the same quantity of
labour.
But though, in establishing perpetual rents, or even in letting very long
leases, it may be of use to distinguish between real and nominal price; it
is of none in buying and selling, the more common and ordinary
transactions of human life.
At the same time and place, the real and the nominal price of all
commodities are exactly in proportion to one another. The more or less
money you get for any commodity, in the London market, for example, the
more or less labour it will at that time and place enable you to purchase
or command. At the same time and place, therefore, money is the exact
measure of the real exchangeable value of all commodities. It is so,
however, at the same time and place only.
Though at distant places there is no regular proportion between the real
and the money price of commodities, yet the merchant who carries goods
from the one to the other, has nothing to consider but the money price, or
the difference between the quantity of silver for which he buys them, and
that for which he is likely to sell them. Half an ounce of silver at
Canton in China may command a greater quantity both of labour and of the
necessaries and conveniencies of life, than an ounce at London. A
commodity, therefore, which sells for half an ounce of silver at Canton,
may there be really dearer, of more real importance to the man who
possesses it there, than a commodity which sells for an ounce at London is
to the man who possesses it at London. If a London merchant, however, can
buy at Canton, for half an ounce of silver, a commodity which he can
afterwards sell at London for an ounce, he gains a hundred per cent. by
the bargain, just as much as if an ounce of silver was at London exactly
of the same value as at Canton. It is of no importance to him that half an
ounce of silver at Canton would have given him the command of more labour,
and of a greater quantity of the necessaries and conveniencies of life
than an ounce can do at London. An ounce at London will always give him
the command of double the quantity of all these, which half an ounce could
have done there, and this is precisely what he wants.
As it is the nominal or money price of goods, therefore, which finally
determines the prudence or imprudence of all purchases and sales, and
thereby regulates almost the whole business of common life in which price
is concerned, we cannot wonder that it should have been so much more
attended to than the real price.
In such a work as this, however, it may sometimes be of use to compare the
different real values of a particular commodity at different times and
places, or the different degrees of power over the labour of other people
which it may, upon different occasions, have given to those who possessed
it. We must in this case compare, not so much the different quantities of
silver for which it was commonly sold, as the different quantities or
labour which those different quantities of silver could have purchased.
But the current prices of labour, at distant times and places, can scarce
ever be known with any degree of exactness. Those of corn, though they
have in few places been regularly recorded, are in general better known,
and have been more frequently taken notice of by historians and other
writers. We must generally, therefore, content ourselves with them, not as
being always exactly in the same proportion as the current prices of
labour, but as being the nearest approximation which can commonly be had
to that proportion. I shall hereafter have occasion to make several
comparisons of this kind.
In the progress of industry, commercial nations have found it convenient
to coin several different metals into money; gold for larger payments,
silver for purchases of moderate value, and copper, or some other coarse
metal, for those of still smaller consideration, They have always,
however, considered one of those metals as more peculiarly the measure of
value than any of the other two; and this preference seems generally to
have been given to the metal which they happen first to make use of as the
instrument of commerce. Having once begun to use it as their standard,
which they must have done when they had no other money, they have
generally continued to do so even when the necessity was not the same.
The Romans are said to have had nothing but copper money till within five
years before the first Punic war (Pliny, lib. xxxiii. cap. 3), when they
first began to coin silver. Copper, therefore, appears to have continued
always the measure of value in that republic. At Rome all accounts appear
to have been kept, and the value of all estates to have been computed,
either in asses or in sestertii. The as was always the denomination of a
copper coin. The word sestertius signifies two asses and a half. Though
the sestertius, therefore, was originally a silver coin, its value was
estimated in copper. At Rome, one who owed a great deal of money was said
to have a great deal of other people’s copper.
The northern nations who established themselves upon the ruins of the
Roman empire, seem to have had silver money from the first beginning of
their settlements, and not to have known either gold or copper coins for
several ages thereafter. There were silver coins in England in the time of
the Saxons; but there was little gold coined till the time of Edward III
nor any copper till that of James I. of Great Britain. In England,
therefore, and for the same reason, I believe, in all other modern nations
of Europe, all accounts are kept, and the value of all goods and of all
estates is generally computed, in silver: and when we mean to express the
amount of a person’s fortune, we seldom mention the number of guineas, but
the number of pounds sterling which we suppose would be given for it.
Originally, in all countries, I believe, a legal tender of payment could
be made only in the coin of that metal which was peculiarly considered as
the standard or measure of value. In England, gold was not considered as a
legal tender for a long time after it was coined into money. The
proportion between the values of gold and silver money was not fixed by
any public law or proclamation, but was left to be settled by the market.
If a debtor offered payment in gold, the creditor might either reject such
payment altogether, or accept of it at such a valuation of the gold as he
and his debtor could agree upon. Copper is not at present a legal tender,
except in the change of the smaller silver coins.
In this state of things, the distinction between the metal which was the
standard, and that which was not the standard, was something more than a
nominal distinction.
In process of time, and as people became gradually more familiar with the
use of the different metals in coin, and consequently better acquainted
with the proportion between their respective values, it has, in most
countries, I believe, been found convenient to ascertain this proportion,
and to declare by a public law, that a guinea, for example, of such a
weight and fineness, should exchange for one-and-twenty shillings, or be a
legal tender for a debt of that amount. In this state of things, and
during the continuance of any one regulated proportion of this kind, the
distinction between the metal, which is the standard, and that which is
not the standard, becomes little more than a nominal distinction.
In consequence of any change, however, in this regulated proportion, this
distinction becomes, or at least seems to become, something more than
nominal again. If the regulated value of a guinea, for example, was either
reduced to twenty, or raised to two-and-twenty shillings, all accounts
being kept, and almost all obligations for debt being expressed, in silver
money, the greater part of payments could in either case be made with the
same quantity of silver money as before; but would require very different
quantities of gold money; a greater in the one case, and a smaller in the
other. Silver would appear to be more invariable in its value than gold.
Silver would appear to measure the value of gold, and gold would not
appear to measure the value of silver. The value of gold would seem to
depend upon the quantity of silver which it would exchange for, and the
value of silver would not seem to depend upon the quantity of gold which
it would exchange for. This difference, however, would be altogether owing
to the custom of keeping accounts, and of expressing the amount of all
great and small sums rather in silver than in gold money. One of Mr
Drummond’s notes for five-and-twenty or fifty guineas would, after an
alteration of this kind, be still payable with five-and-twenty or fifty
guineas, in the same manner as before. It would, after such an alteration,
be payable with the same quantity of gold as before, but with very
different quantities of silver. In the payment of such a note, gold would
appear to be more invariable in its value than silver. Gold would appear
to measure the value of silver, and silver would not appear to measure the
value of gold. If the custom of keeping accounts, and of expressing
promissory-notes and other obligations for money, in this manner should
ever become general, gold, and not silver, would be considered as the
metal which was peculiarly the standard or measure of value.
In reality, during the continuance of any one regulated proportion between
the respective values of the different metals in coin, the value of the
most precious metal regulates the value of the whole coin. Twelve copper
pence contain half a pound avoirdupois of copper, of not the best quality,
which, before it is coined, is seldom worth seven-pence in silver. But as,
by the regulation, twelve such pence are ordered to exchange for a
shilling, they are in the market considered as worth a shilling, and a
shilling can at any time be had for them. Even before the late reformation
of the gold coin of Great Britain, the gold, that part of it at least
which circulated in London and its neighbourhood, was in general less
degraded below its standard weight than the greater part of the silver.
One-and-twenty worn and defaced shillings, however, were considered as
equivalent to a guinea, which, perhaps, indeed, was worn and defaced too,
but seldom so much so. The late regulations have brought the gold coin as
near, perhaps, to its standard weight as it is possible to bring the
current coin of any nation; and the order to receive no gold at the public
offices but by weight, is likely to preserve it so, as long as that order
is enforced. The silver coin still continues in the same worn and degraded
state as before the reformation of the cold coin. In the market, however,
one-and-twenty shillings of this degraded silver coin are still considered
as worth a guinea of this excellent gold coin.
The reformation of the gold coin has evidently raised the value of the
silver coin which can be exchanged for it.
In the English mint, a pound weight of gold is coined into forty-four
guineas and a half, which at one-and-twenty shillings the guinea, is equal
to forty-six pounds fourteen shillings and sixpence. An ounce of such gold
coin, therefore, is worth £ 3:17:10½ in silver. In England, no duty or
seignorage is paid upon the coinage, and he who carries a pound weight or
an ounce weight of standard gold bullion to the mint, gets back a pound
weight or an ounce weight of gold in coin, without any deduction. Three
pounds seventeen shillings and tenpence halfpenny an ounce, therefore, is
said to be the mint price of gold in England, or the quantity of gold coin
which the mint gives in return for standard gold bullion.
Before the reformation of the gold coin, the price of standard gold
bullion in the market had, for many years, been upwards of £3:18s.
sometimes £ 3:19s, and very frequently £4 an ounce; that sum, it is
probable, in the worn and degraded gold coin, seldom containing more than
an ounce of standard gold. Since the reformation of the gold coin, the
market price of standard gold bullion seldom exceeds £ 3:17:7 an ounce.
Before the reformation of the gold coin, the market price was always more
or less above the mint price. Since that reformation, the market price has
been constantly below the mint price. But that market price is the same
whether it is paid in gold or in silver coin. The late reformation of the
gold coin, therefore, has raised not only the value of the gold coin, but
likewise that of the silver coin in proportion to gold bullion, and
probably, too, in proportion to all other commodities; though the price of
the greater part of other commodities being influenced by so many other
causes, the rise in the value of either gold or silver coin in proportion
to them may not be so distinct and sensible.
In the English mint, a pound weight of standard silver bullion is coined
into sixty-two shillings, containing, in the same manner, a pound weight
of standard silver. Five shillings and twopence an ounce, therefore, is
said to be the mint price of silver in England, or the quantity of silver
coin which the mint gives in return for standard silver bullion. Before
the reformation of the gold coin, the market price of standard silver
bullion was, upon different occasions, five shillings and fourpence, five
shillings and fivepence, five shillings and sixpence, five shillings and
sevenpence, and very often five shillings and eightpence an ounce. Five
shillings and sevenpence, however, seems to have been the most common
price. Since the reformation of the gold coin, the market price of
standard silver bullion has fallen occasionally to five shillings and
threepence, five shillings and fourpence, and five shillings and fivepence
an ounce, which last price it has scarce ever exceeded. Though the market
price of silver bullion has fallen considerably since the reformation of
the gold coin, it has not fallen so low as the mint price.
In the proportion between the different metals in the English coin, as
copper is rated very much above its real value, so silver is rated
somewhat below it. In the market of Europe, in the French coin and in the
Dutch coin, an ounce of fine gold exchanges for about fourteen ounces of
fine silver. In the English coin, it exchanges for about fifteen ounces,
that is, for more silver than it is worth, according to the common
estimation of Europe. But as the price of copper in bars is not, even in
England, raised by the high price of copper in English coin, so the price
of silver in bullion is not sunk by the low rate of silver in English
coin. Silver in bullion still preserves its proper proportion to gold, for
the same reason that copper in bars preserves its proper proportion to
silver.
Upon the reformation of the silver coin, in the reign of William III., the
price of silver bullion still continued to be somewhat above the mint
price. Mr Locke imputed this high price to the permission of exporting
silver bullion, and to the prohibition of exporting silver coin. This
permission of exporting, he said, rendered the demand for silver bullion
greater than the demand for silver coin. But the number of people who want
silver coin for the common uses of buying and selling at home, is surely
much greater than that of those who want silver bullion either for the use
of exportation or for any other use. There subsists at present a like
permission of exporting gold bullion, and a like prohibition of exporting
gold coin; and yet the price of gold bullion has fallen below the mint
price. But in the English coin, silver was then, in the same manner as
now, under-rated in proportion to gold; and the gold coin (which at that
time, too, was not supposed to require any reformation) regulated then, as
well as now, the real value of the whole coin. As the reformation of the
silver coin did not then reduce the price of silver bullion to the mint
price, it is not very probable that a like reformation will do so now.
Were the silver coin brought back as near to its standard weight as the
gold, a guinea, it is probable, would, according to the present
proportion, exchange for more silver in coin than it would purchase in
bullion. The silver coin containing its full standard weight, there would
in this case, be a profit in melting it down, in order, first to sell the
bullion for gold coin, and afterwards to exchange this gold coin for
silver coin, to be melted down in the same manner. Some alteration in the
present proportion seems to be the only method of preventing this
inconveniency.
The inconveniency, perhaps, would be less, if silver was rated in the coin
as much above its proper proportion to gold as it is at present rated
below it, provided it was at the same time enacted, that silver should not
be a legal tender for more than the change of a guinea, in the same manner
as copper is not a legal tender for more than the change of a shilling. No
creditor could, in this case, be cheated in consequence of the high
valuation of silver in coin; as no creditor can at present be cheated in
consequence of the high valuation of copper. The bankers only would suffer
by this regulation. When a run comes upon them, they sometimes endeavour
to gain time, by paying in sixpences, and they would be precluded by this
regulation from this discreditable method of evading immediate payment.
They would be obliged, in consequence, to keep at all times in their
coffers a greater quantity of cash than at present; and though this might,
no doubt, be a considerable inconveniency to them, it would, at the same
time, be a considerable security to their creditors.
Three pounds seventeen shillings and tenpence halfpenny (the mint price of
gold) certainly does not contain, even in our present excellent gold coin,
more than an ounce of standard gold, and it may be thought, therefore,
should not purchase more standard bullion. But gold in coin is more
convenient than gold in bullion; and though, in England, the coinage is
free, yet the gold which is carried in bullion to the mint, can seldom be
returned in coin to the owner till after a delay of several weeks. In the
present hurry of the mint, it could not be returned till after a delay of
several months. This delay is equivalent to a small duty, and renders gold
in coin somewhat more valuable than an equal quantity of gold in bullion.
If, in the English coin, silver was rated according to its proper
proportion to gold, the price of silver bullion would probably fall below
the mint price, even without any reformation of the silver coin; the value
even of the present worn and defaced silver coin being regulated by the
value of the excellent gold coin for which it can be changed.
A small seignorage or duty upon the coinage of both gold and silver, would
probably increase still more the superiority of those metals in coin above
an equal quantity of either of them in bullion. The coinage would, in this
case, increase the value of the metal coined in proportion to the extent
of this small duty, for the same reason that the fashion increases the
value of plate in proportion to the price of that fashion. The superiority
of coin above bullion would prevent the melting down of the coin, and
would discourage its exportation. If, upon any public exigency, it should
become necessary to export the coin, the greater part of it would soon
return again, of its own accord. Abroad, it could sell only for its weight
in bullion. At home, it would buy more than that weight. There would be a
profit, therefore, in bringing it home again. In France, a seignorage of
about eight per cent. is imposed upon the coinage, and the French coin,
when exported, is said to return home again, of its own accord.
The occasional fluctuations in the market price of gold and silver bullion
arise from the same causes as the like fluctuations in that of all other
commodities. The frequent loss of those metals from various accidents by
sea and by land, the continual waste of them in gilding and plating, in
lace and embroidery, in the wear and tear of coin, and in that of plate,
require, in all countries which possess no mines of their own, a continual
importation, in order to repair this loss and this waste. The merchant
importers, like all other merchants, we may believe, endeavour, as well as
they can, to suit their occasional importations to what they judge is
likely to be the immediate demand. With all their attention, however, they
sometimes overdo the business, and sometimes underdo it. When they import
more bullion than is wanted, rather than incur the risk and trouble of
exporting it again, they are sometimes willing to sell a part of it for
something less than the ordinary or average price. When, on the other
hand, they import less than is wanted, they get something more than this
price. But when, under all those occasional fluctuations, the market price
either of gold or silver bullion continues for several years together
steadily and constantly, either more or less above, or more or less below
the mint price, we may be assured that this steady and constant, either
superiority or inferiority of price, is the effect of something in the
state of the coin, which, at that time, renders a certain quantity of coin
either of more value or of less value than the precise quantity of bullion
which it ought to contain. The constancy and steadiness of the effect
supposes a proportionable constancy and steadiness in the cause.
The money of any particular country is, at any particular time and place,
more or less an accurate measure or value, according as the current coin
is more or less exactly agreeable to its standard, or contains more or
less exactly the precise quantity of pure gold or pure silver which it
ought to contain. If in England, for example, forty-four guineas and a
half contained exactly a pound weight of standard gold, or eleven ounces
of fine gold, and one ounce of alloy, the gold coin of England would be as
accurate a measure of the actual value of goods at any particular time and
place as the nature of the thing would admit. But if, by rubbing and
wearing, forty-four guineas and a half generally contain less than a pound
weight of standard gold, the diminution, however, being greater in some
pieces than in others, the measure of value comes to be liable to the same
sort of uncertainty to which all other weights and measures are commonly
exposed. As it rarely happens that these are exactly agreeable to their
standard, the merchant adjusts the price of his goods as well as he can,
not to what those weights and measures ought to be, but to what, upon an
average, he finds, by experience, they actually are. In consequence of a
like disorder in the coin, the price of goods comes, in the same manner,
to be adjusted, not to the quantity of pure gold or silver which the coin
ought to contain, but to that which, upon an average, it is found, by
experience, it actually does contain.
By the money price of goods, it is to be observed, I understand always the
quantity of pure gold or silver for which they are sold, without any
regard to the denomination of the coin. Six shillings and eight pence, for
example, in the time of Edward I., I consider as the same money price with
a pound sterling in the present times, because it contained, as nearly as
we can judge, the same quantity of pure silver.
CHAPTER VI.
OF THE COMPONENT PART OF THE PRICE OF COMMODITIES.
In that early and rude state of society which precedes both the
accumulation of stock and the appropriation of land, the proportion
between the quantities of labour necessary for acquiring different
objects, seems to be the only circumstance which can afford any rule for
exchanging them for one another. If among a nation of hunters, for
example, it usually costs twice the labour to kill a beaver which it does
to kill a deer, one beaver should naturally exchange for or be worth two
deer. It is natural that what is usually the produce of two days or two
hours labour, should be worth double of what is usually the produce of one
day’s or one hour’s labour.
If the one species of labour should be more severe than the other, some
allowance will naturally be made for this superior hardship; and the
produce of one hour’s labour in the one way may frequently exchange for
that of two hour’s labour in the other.
Or if the one species of labour requires an uncommon degree of dexterity
and ingenuity, the esteem which men have for such talents, will naturally
give a value to their produce, superior to what would be due to the time
employed about it. Such talents can seldom be acquired but in consequence
of long application, and the superior value of their produce may
frequently be no more than a reasonable compensation for the time and
labour which must be spent in acquiring them. In the advanced state of
society, allowances of this kind, for superior hardship and superior
skill, are commonly made in the wages of labour; and something of the same
kind must probably have taken place in its earliest and rudest period.
In this state of things, the whole produce of labour belongs to the
labourer; and the quantity of labour commonly employed in acquiring or
producing any commodity, is the only circumstance which can regulate the
quantity of labour which it ought commonly to purchase, command, or
exchange for.
As soon as stock has accumulated in the hands of particular persons, some
of them will naturally employ it in setting to work industrious people,
whom they will supply with materials and subsistence, in order to make a
profit by the sale of their work, or by what their labour adds to the
value of the materials. In exchanging the complete manufacture either for
money, for labour, or for other goods, over and above what may be
sufficient to pay the price of the materials, and the wages of the
workmen, something must be given for the profits of the undertaker of the
work, who hazards his stock in this adventure. The value which the workmen
add to the materials, therefore, resolves itself in this case into two
parts, of which the one pays their wages, the other the profits of their
employer upon the whole stock of materials and wages which he advanced. He
could have no interest to employ them, unless he expected from the sale of
their work something more than what was sufficient to replace his stock to
him; and he could have no interest to employ a great stock rather than a
small one, unless his profits were to bear some proportion to the extent
of his stock.
The profits of stock, it may perhaps be thought, are only a different name
for the wages of a particular sort of labour, the labour of inspection and
direction. They are, however, altogether different, are regulated by quite
different principles, and bear no proportion to the quantity, the
hardship, or the ingenuity of this supposed labour of inspection and
direction. They are regulated altogether by the value of the stock
employed, and are greater or smaller in proportion to the extent of this
stock. Let us suppose, for example, that in some particular place, where
the common annual profits of manufacturing stock are ten per cent. there
are two different manufactures, in each of which twenty workmen are
employed, at the rate of fifteen pounds a year each, or at the expense of
three hundred a-year in each manufactory. Let us suppose, too, that the
coarse materials annually wrought up in the one cost only seven hundred
pounds, while the finer materials in the other cost seven thousand. The
capital annually employed in the one will, in this case, amount only to
one thousand pounds; whereas that employed in the other will amount to
seven thousand three hundred pounds. At the rate of ten per cent.
therefore, the undertaker of the one will expect a yearly profit of about
one hundred pounds only; while that of the other will expect about seven
hundred and thirty pounds. But though their profits are so very different,
their labour of inspection and direction may be either altogether or very
nearly the same. In many great works, almost the whole labour of this kind
is committed to some principal clerk. His wages properly express the value
of this labour of inspection and direction. Though in settling them some
regard is had commonly, not only to his labour and skill, but to the trust
which is reposed in him, yet they never bear any regular proportion to the
capital of which he oversees the management; and the owner of this
capital, though he is thus discharged of almost all labour, still expects
that his profit should bear a regular proportion to his capital. In the
price of commodities, therefore, the profits of stock constitute a
component part altogether different from the wages of labour, and
regulated by quite different principles.
In this state of things, the whole produce of labour does not always
belong to the labourer. He must in most cases share it with the owner of
the stock which employs him. Neither is the quantity of labour commonly
employed in acquiring or producing any commodity, the only circumstance
which can regulate the quantity which it ought commonly to purchase,
command or exchange for. An additional quantity, it is evident, must be
due for the profits of the stock which advanced the wages and furnished
the materials of that labour.
As soon as the land of any country has all become private property, the
landlords, like all other men, love to reap where they never sowed, and
demand a rent even for its natural produce. The wood of the forest, the
grass of the field, and all the natural fruits of the earth, which, when
land was in common, cost the labourer only the trouble of gathering them,
come, even to him, to have an additional price fixed upon them. He must
then pay for the licence to gather them, and must give up to the landlord
a portion of what his labour either collects or produces. This portion,
or, what comes to the same thing, the price of this portion, constitutes
the rent of land, and in the price of the greater part of commodities,
makes a third component part.
The real value of all the different component parts of price, it must be
observed, is measured by the quantity of labour which they can, each of
them, purchase or command. Labour measures the value, not only of that
part of price which resolves itself into labour, but of that which
resolves itself into rent, and of that which resolves itself into profit.
In every society, the price of every commodity finally resolves itself
into some one or other, or all of those three parts; and in every improved
society, all the three enter, more or less, as component parts, into the
price of the far greater part of commodities.
In the price of corn, for example, one part pays the rent of the landlord,
another pays the wages or maintenance of the labourers and labouring
cattle employed in producing it, and the third pays the profit of the
farmer. These three parts seem either immediately or ultimately to make up
the whole price of corn. A fourth part, it may perhaps be thought is
necessary for replacing the stock of the farmer, or for compensating the
wear and tear of his labouring cattle, and other instruments of husbandry.
But it must be considered, that the price of any instrument of husbandry,
such as a labouring horse, is itself made up of the same time parts; the
rent of the land upon which he is reared, the labour of tending and
rearing him, and the profits of the farmer, who advances both the rent of
this land, and the wages of this labour. Though the price of the corn,
therefore, may pay the price as well as the maintenance of the horse, the
whole price still resolves itself, either immediately or ultimately, into
the same three parts of rent, labour, and profit.
In the price of flour or meal, we must add to the price of the corn, the
profits of the miller, and the wages of his servants; in the price of
bread, the profits of the baker, and the wages of his servants; and in the
price of both, the labour of transporting the corn from the house of the
farmer to that of the miller, and from that of the miller to that of the
baker, together with the profits of those who advance the wages of that
labour.
The price of flax resolves itself into the same three parts as that of
corn. In the price of linen we must add to this price the wages of the
flax-dresser, of the spinner, of the weaver, of the bleacher, etc.
together with the profits of their respective employers.
As any particular commodity comes to be more manufactured, that part of
the price which resolves itself into wages and profit, comes to be greater
in proportion to that which resolves itself into rent. In the progress of
the manufacture, not only the number of profits increase, but every
subsequent profit is greater than the foregoing; because the capital from
which it is derived must always be greater. The capital which employs the
weavers, for example, must be greater than that which employs the
spinners; because it not only replaces that capital with its profits, but
pays, besides, the wages of the weavers: and the profits must always bear
some proportion to the capital.
In the most improved societies, however, there are always a few
commodities of which the price resolves itself into two parts only: the
wages of labour, and the profits of stock; and a still smaller number, in
which it consists altogether in the wages of labour. In the price of
sea-fish, for example, one part pays the labour of the fisherman, and the
other the profits of the capital employed in the fishery. Rent very seldom
makes any part of it, though it does sometimes, as I shall shew hereafter.
It is otherwise, at least through the greater part of Europe, in river
fisheries. A salmon fishery pays a rent; and rent, though it cannot well
be called the rent of land, makes a part of the price of a salmon, as well
as wares and profit. In some parts of Scotland, a few poor people make a
trade of gathering, along the sea-shore, those little variegated stones
commonly known by the name of Scotch pebbles. The price which is paid to
them by the stone-cutter, is altogether the wages of their labour; neither
rent nor profit makes any part of it.
But the whole price of any commodity must still finally resolve itself
into some one or other or all of those three parts; as whatever part of it
remains after paying the rent of the land, and the price of the whole
labour employed in raising, manufacturing, and bringing it to market, must
necessarily be profit to somebody.
As the price or exchangeable value of every particular commodity, taken
separately, resolves itself into some one or other, or all of those three
parts; so that of all the commodities which compose the whole annual
produce of the labour of every country, taken complexly, must resolve
itself into the same three parts, and be parcelled out among different
inhabitants of the country, either as the wages of their labour, the
profits of their stock, or the rent of their land. The whole of what is
annually either collected or produced by the labour of every society, or,
what comes to the same thing, the whole price of it, is in this manner
originally distributed among some of its different members. Wages, profit,
and rent, are the three original sources of all revenue, as well as of all
exchangeable value. All other revenue is ultimately derived from some one
or other of these.
Whoever derives his revenue from a fund which is his own, must draw it
either from his labour, from his stock, or from his land. The revenue
derived from labour is called wages; that derived from stock, by the
person who manages or employs it, is called profit; that derived from it
by the person who does not employ it himself, but lends it to another, is
called the interest or the use of money. It is the compensation which the
borrower pays to the lender, for the profit which he has an opportunity of
making by the use of the money. Part of that profit naturally belongs to
the borrower, who runs the risk and takes the trouble of employing it, and
part to the lender, who affords him the opportunity of making this profit.
The interest of money is always a derivative revenue, which, if it is not
paid from the profit which is made by the use of the money, must be paid
from some other source of revenue, unless perhaps the borrower is a
spendthrift, who contracts a second debt in order to pay the interest of
the first. The revenue which proceeds altogether from land, is called
rent, and belongs to the landlord. The revenue of the farmer is derived
partly from his labour, and partly from his stock. To him, land is only
the instrument which enables him to earn the wages of this labour, and to
make the profits of this stock. All taxes, and all the revenue which is
founded upon them, all salaries, pensions, and annuities of every kind,
are ultimately derived from some one or other of those three original
sources of revenue, and are paid either immediately or mediately from the
wages of labour, the profits of stock, or the rent of land.
When those three different sorts of revenue belong to different persons,
they are readily distinguished; but when they belong to the same, they are
sometimes confounded with one another, at least in common language.
A gentleman who farms a part of his own estate, after paying the expense
of cultivation, should gain both the rent of the landlord and the profit
of the farmer. He is apt to denominate, however, his whole gain, profit,
and thus confounds rent with profit, at least in common language. The
greater part of our North American and West Indian planters are in this
situation. They farm, the greater part of them, their own estates: and
accordingly we seldom hear of the rent of a plantation, but frequently of
its profit.
Common farmers seldom employ any overseer to direct the general operations
of the farm. They generally, too, work a good deal with their own hands,
as ploughmen, harrowers, etc. What remains of the crop, after paying the
rent, therefore, should not only replace to them their stock employed in
cultivation, together with its ordinary profits, but pay them the wages
which are due to them, both as labourers and overseers. Whatever remains,
however, after paying the rent and keeping up the stock, is called profit.
But wages evidently make a part of it. The farmer, by saving these wages,
must necessarily gain them. Wages, therefore, are in this case confounded
with profit.
An independent manufacturer, who has stock enough both to purchase
materials, and to maintain himself till he can carry his work to market,
should gain both the wages of a journeyman who works under a master, and
the profit which that master makes by the sale of that journeyman’s work.
His whole gains, however, are commonly called profit, and wages are, in
this case, too, confounded with profit.
A gardener who cultivates his own garden with his own hands, unites in his
own person the three different characters, of landlord, farmer, and
labourer. His produce, therefore, should pay him the rent of the first,
the profit of the second, and the wages of the third. The whole, however,
is commonly considered as the earnings of his labour. Both rent and profit
are, in this case, confounded with wages.
As in a civilized country there are but few commodities of which the
exchangeable value arises from labour only, rent and profit contributing
largely to that of the far greater part of them, so the annual produce of
its labour will always be sufficient to purchase or command a much greater
quantity of labour than what was employed in raising, preparing, and
bringing that produce to market. If the society were annually to employ
all the labour which it can annually purchase, as the quantity of labour
would increase greatly every year, so the produce of every succeeding year
would be of vastly greater value than that of the foregoing. But there is
no country in which the whole annual produce is employed in maintaining
the industrious. The idle everywhere consume a great part of it; and,
according to the different proportions in which it is annually divided
between those two different orders of people, its ordinary or average
value must either annually increase or diminish, or continue the same from
one year to another.
CHAPTER VII.
OF THE NATURAL AND MARKET PRICE OF COMMODITIES.
There is in every society or neighbourhood an ordinary or average rate,
both of wages and profit, in every different employment of labour and
stock. This rate is naturally regulated, as I shall shew hereafter, partly
by the general circumstances of the society, their riches or poverty,
their advancing, stationary, or declining condition, and partly by the
particular nature of each employment.
There is likewise in every society or neighbourhood an ordinary or average
rate of rent, which is regulated, too, as I shall shew hereafter, partly
by the general circumstances of the society or neighbourhood in which the
land is situated, and partly by the natural or improved fertility of the
land.
These ordinary or average rates may be called the natural rates of wages,
profit and rent, at the time and place in which they commonly prevail.
When the price of any commodity is neither more nor less than what is
sufficient to pay the rent of the land, the wages of the labour, and the
profits of the stock employed in raising, preparing, and bringing it to
market, according to their natural rates, the commodity is then sold for
what may be called its natural price.
The commodity is then sold precisely for what it is worth, or for what it
really costs the person who brings it to market; for though, in common
language, what is called the prime cost of any commodity does not
comprehend the profit of the person who is to sell it again, yet, if he
sells it at a price which does not allow him the ordinary rate of profit
in his neighbourhood, he is evidently a loser by the trade; since, by
employing his stock in some other way, he might have made that profit. His
profit, besides, is his revenue, the proper fund of his subsistence. As,
while he is preparing and bringing the goods to market, he advances to his
workmen their wages, or their subsistence; so he advances to himself, in
the same manner, his own subsistence, which is generally suitable to the
profit which he may reasonably expect from the sale of his goods. Unless
they yield him this profit, therefore, they do not repay him what they may
very properly be said to have really cost him.
Though the price, therefore, which leaves him this profit, is not always
the lowest at which a dealer may sometimes sell his goods, it is the
lowest at which he is likely to sell them for any considerable time; at
least where there is perfect liberty, or where he may change his trade as
often as he pleases.
The actual price at which any commodity is commonly sold, is called its
market price. It may either be above, or below, or exactly the same with
its natural price.
The market price of every particular commodity is regulated by the
proportion between the quantity which is actually brought to market, and
the demand of those who are willing to pay the natural price of the
commodity, or the whole value of the rent, labour, and profit, which must
be paid in order to bring it thither. Such people may be called the
effectual demanders, and their demand the effectual demand; since it maybe
sufficient to effectuate the bringing of the commodity to market. It is
different from the absolute demand. A very poor man may be said, in some
sense, to have a demand for a coach and six; he might like to have it; but
his demand is not an effectual demand, as the commodity can never be
brought to market in order to satisfy it.
When the quantity of any commodity which is brought to market falls short
of the effectual demand, all those who are willing to pay the whole value
of the rent, wages, and profit, which must be paid in order to bring it
thither, cannot be supplied with the quantity which they want. Rather than
want it altogether, some of them will be willing to give more. A
competition will immediately begin among them, and the market price will
rise more or less above the natural price, according as either the
greatness of the deficiency, or the wealth and wanton luxury of the
competitors, happen to animate more or less the eagerness of the
competition. Among competitors of equal wealth and luxury, the same
deficiency will generally occasion a more or less eager competition,
according as the acquisition of the commodity happens to be of more or
less importance to them. Hence the exorbitant price of the necessaries of
life during the blockade of a town, or in a famine.
When the quantity brought to market exceeds the effectual demand, it
cannot be all sold to those who are willing to pay the whole value of the
rent, wages, and profit, which must be paid in order to bring it thither.
Some part must be sold to those who are willing to pay less, and the low
price which they give for it must reduce the price of the whole. The
market price will sink more or less below the natural price, according as
the greatness of the excess increases more or less the competition of the
sellers, or according as it happens to be more or less important to them
to get immediately rid of the commodity. The same excess in the
importation of perishable, will occasion a much greater competition than
in that of durable commodities; in the importation of oranges, for
example, than in that of old iron.
When the quantity brought to market is just sufficient to supply the
effectual demand, and no more, the market price naturally comes to be
either exactly, or as nearly as can be judged of, the same with the
natural price. The whole quantity upon hand can be disposed of for this
price, and can not be disposed of for more. The competition of the
different dealers obliges them all to accept of this price, but does not
oblige them to accept of less.
The quantity of every commodity brought to market naturally suits itself
to the effectual demand. It is the interest of all those who employ their
land, labour, or stock, in bringing any commodity to market, that the
quantity never should exceed the effectual demand; and it is the interest
of all other people that it never should fall short of that demand.
If at any time it exceeds the effectual demand, some of the component
parts of its price must be paid below their natural rate. If it is rent,
the interest of the landlords will immediately prompt them to withdraw a
part of their land; and if it is wages or profit, the interest of the
labourers in the one case, and of their employers in the other, will
prompt them to withdraw a part of their labour or stock, from this
employment. The quantity brought to market will soon be no more than
sufficient to supply the effectual demand. All the different parts of its
price will rise to their natural rate, and the whole price to its natural
price.
If, on the contrary, the quantity brought to market should at any time
fall short of the effectual demand, some of the component parts of its
price must rise above their natural rate. If it is rent, the interest of
all other landlords will naturally prompt them to prepare more land for
the raising of this commodity; if it is wages or profit, the interest of
all other labourers and dealers will soon prompt them to employ more
labour and stock in preparing and bringing it to market. The quantity
brought thither will soon be sufficient to supply the effectual demand.
All the different parts of its price will soon sink to their natural rate,
and the whole price to its natural price.
The natural price, therefore, is, as it were, the central price, to which
the prices of all commodities are continually gravitating. Different
accidents may sometimes keep them suspended a good deal above it, and
sometimes force them down even somewhat below it. But whatever may be the
obstacles which hinder them from settling in this centre of repose and
continuance, they are constantly tending towards it.
The whole quantity of industry annually employed in order to bring any
commodity to market, naturally suits itself in this manner to the
effectual demand. It naturally aims at bringing always that precise
quantity thither which may be sufficient to supply, and no more than
supply, that demand.
But, in some employments, the same quantity of industry will, in different
years, produce very different quantities of commodities; while, in others,
it will produce always the same, or very nearly the same. The same number
of labourers in husbandry will, in different years, produce very different
quantities of corn, wine, oil, hops, etc. But the same number of spinners
or weavers will every year produce the same, or very nearly the same,
quantity of linen and woollen cloth. It is only the average produce of the
one species of industry which can be suited, in any respect, to the
effectual demand; and as its actual produce is frequently much greater,
and frequently much less, than its average produce, the quantity of the
commodities brought to market will sometimes exceed a good deal, and
sometimes fall short a good deal, of the effectual demand. Even though
that demand, therefore, should continue always the same, their market
price will be liable to great fluctuations, will sometimes fall a good
deal below, and sometimes rise a good deal above, their natural price. In
the other species of industry, the produce of equal quantities of labour
being always the same, or very nearly the same, it can be more exactly
suited to the effectual demand. While that demand continues the same,
therefore, the market price of the commodities is likely to do so too, and
to be either altogether, or as nearly as can be judged of, the same with
the natural price. That the price of linen and woollen cloth is liable
neither to such frequent, nor to such great variations, as the price of
corn, every man’s experience will inform him. The price of the one species
of commodities varies only with the variations in the demand; that of the
other varies not only with the variations in the demand, but with the much
greater, and more frequent, variations in the quantity of what is brought
to market, in order to supply that demand.
The occasional and temporary fluctuations in the market price of any
commodity fall chiefly upon those parts of its price which resolve
themselves into wages and profit. That part which resolves itself into
rent is less affected by them. A rent certain in money is not in the least
affected by them, either in its rate or in its value. A rent which
consists either in a certain proportion, or in a certain quantity, of the
rude produce, is no doubt affected in its yearly value by all the
occasional and temporary fluctuations in the market price of that rude
produce; but it is seldom affected by them in its yearly rate. In settling
the terms of the lease, the landlord and farmer endeavour, according to
their best judgment, to adjust that rate, not to the temporary and
occasional, but to the average and ordinary price of the produce.
Such fluctuations affect both the value and the rate, either of wages or
of profit, according as the market happens to be either overstocked or
understocked with commodities or with labour, with work done, or with work
to be done. A public mourning raises the price of black cloth (with which
the market is almost always understocked upon such occasions), and
augments the profits of the merchants who possess any considerable
quantity of it. It has no effect upon the wages of the weavers. The market
is understocked with commodities, not with labour, with work done, not
with work to be done. It raises the wages of journeymen tailors. The
market is here understocked with labour. There is an effectual demand for
more labour, for more work to be done, than can be had. It sinks the price
of coloured silks and cloths, and thereby reduces the profits of the
merchants who have any considerable quantity of them upon hand. It sinks,
too, the wages of the workmen employed in preparing such commodities, for
which all demand is stopped for six months, perhaps for a twelvemonth. The
market is here overstocked both with commodities and with labour.
But though the market price of every particular commodity is in this
manner continually gravitating, if one may say so, towards the natural
price; yet sometimes particular accidents, sometimes natural causes, and
sometimes particular regulations of policy, may, in many commodities, keep
up the market price, for a long time together, a good deal above the
natural price.
When, by an increase in the effectual demand, the market price of some
particular commodity happens to rise a good deal above the natural price,
those who employ their stocks in supplying that market, are generally
careful to conceal this change. If it was commonly known, their great
profit would tempt so many new rivals to employ their stocks in the same
way, that, the effectual demand being fully supplied, the market price
would soon be reduced to the natural price, and, perhaps, for some time
even below it. If the market is at a great distance from the residence of
those who supply it, they may sometimes be able to keep the secret for
several years together, and may so long enjoy their extraordinary profits
without any new rivals. Secrets of this kind, however, it must be
acknowledged, can seldom be long kept; and the extraordinary profit can
last very little longer than they are kept.
Secrets in manufactures are capable of being longer kept than secrets in
trade. A dyer who has found the means of producing a particular colour
with materials which cost only half the price of those commonly made use
of, may, with good management, enjoy the advantage of his discovery as
long as he lives, and even leave it as a legacy to his posterity. His
extraordinary gains arise from the high price which is paid for his
private labour. They properly consist in the high wages of that labour.
But as they are repeated upon every part of his stock, and as their whole
amount bears, upon that account, a regular proportion to it, they are
commonly considered as extraordinary profits of stock.
Such enhancements of the market price are evidently the effects of
particular accidents, of which, however, the operation may sometimes last
for many years together.
Some natural productions require such a singularity of soil and situation,
that all the land in a great country, which is fit for producing them, may
not be sufficient to supply the effectual demand. The whole quantity
brought to market, therefore, may be disposed of to those who are willing
to give more than what is sufficient to pay the rent of the land which
produced them, together with the wages of the labour and the profits of
the stock which were employed in preparing and bringing them to market,
according to their natural rates. Such commodities may continue for whole
centuries together to be sold at this high price; and that part of it
which resolves itself into the rent of land, is in this case the part
which is generally paid above its natural rate. The rent of the land which
affords such singular and esteemed productions, like the rent of some
vineyards in France of a peculiarly happy soil and situation, bears no
regular proportion to the rent of other equally fertile and equally well
cultivated land in its neighbourhood. The wages of the labour, and the
profits of the stock employed in bringing such commodities to market, on
the contrary, are seldom out of their natural proportion to those of the
other employments of labour and stock in their neighbourhood.
Such enhancements of the market price are evidently the effect of natural
causes, which may hinder the effectual demand from ever being fully
supplied, and which may continue, therefore, to operate for ever.
A monopoly granted either to an individual or to a trading company, has
the same effect as a secret in trade or manufactures. The monopolists, by
keeping the market constantly understocked by never fully supplying the
effectual demand, sell their commodities much above the natural price, and
raise their emoluments, whether they consist in wages or profit, greatly
above their natural rate.
The price of monopoly is upon every occasion the highest which can be got.
The natural price, or the price of free competition, on the contrary, is
the lowest which can be taken, not upon every occasion indeed, but for any
considerable time together. The one is upon every occasion the highest
which can be squeezed out of the buyers, or which it is supposed they will
consent to give; the other is the lowest which the sellers can commonly
afford to take, and at the same time continue their business.
The exclusive privileges of corporations, statutes of apprenticeship, and
all those laws which restrain in particular employments, the competition
to a smaller number than might otherwise go into them, have the same
tendency, though in a less degree. They are a sort of enlarged monopolies,
and may frequently, for ages together, and in whole classes of
employments, keep up the market price of particular commodities above the
natural price, and maintain both the wages of the labour and the profits
of the stock employed about them somewhat above their natural rate.
Such enhancements of the market price may last as long as the regulations
of policy which give occasion to them.
The market price of any particular commodity, though it may continue long
above, can seldom continue long below, its natural price. Whatever part of
it was paid below the natural rate, the persons whose interest it affected
would immediately feel the loss, and would immediately withdraw either so
much land or so much labour, or so much stock, from being employed about
it, that the quantity brought to market would soon be no more than
sufficient to supply the effectual demand. Its market price, therefore,
would soon rise to the natural price; this at least would be the case
where there was perfect liberty.
The same statutes of apprenticeship and other corporation laws, indeed,
which, when a manufacture is in prosperity, enable the workman to raise
his wages a good deal above their natural rate, sometimes oblige him, when
it decays, to let them down a good deal below it. As in the one case they
exclude many people from his employment, so in the other they exclude him
from many employments. The effect of such regulations, however, is not
near so durable in sinking the workman’s wages below, as in raising them
above their natural rate. Their operation in the one way may endure for
many centuries, but in the other it can last no longer than the lives of
some of the workmen who were bred to the business in the time of its
prosperity. When they are gone, the number of those who are afterwards
educated to the trade will naturally suit itself to the effectual demand.
The policy must be as violent as that of Indostan or ancient Egypt (where
every man was bound by a principle of religion to follow the occupation of
his father, and was supposed to commit the most horrid sacrilege if he
changed it for another), which can in any particular employment, and for
several generations together, sink either the wages of labour or the
profits of stock below their natural rate.
This is all that I think necessary to be observed at present concerning
the deviations, whether occasional or permanent, of the market price of
commodities from the natural price.
The natural price itself varies with the natural rate of each of its
component parts, of wages, profit, and rent; and in every society this
rate varies according to their circumstances, according to their riches or
poverty, their advancing, stationary, or declining condition. I shall, in
the four following chapters, endeavour to explain, as fully and distinctly
as I can, the causes of those different variations.
First, I shall endeavour to explain what are the circumstances which
naturally determine the rate of wages, and in what manner those
circumstances are affected by the riches or poverty, by the advancing,
stationary, or declining state of the society.
Secondly, I shall endeavour to shew what are the circumstances which
naturally determine the rate of profit; and in what manner, too, those
circumstances are affected by the like variations in the state of the
society.
Though pecuniary wages and profit are very different in the different
employments of labour and stock; yet a certain proportion seems commonly
to take place between both the pecuniary wages in all the different
employments of labour, and the pecuniary profits in all the different
employments of stock. This proportion, it will appear hereafter, depends
partly upon the nature of the different employments, and partly upon the
different laws and policy of the society in which they are carried on. But
though in many respects dependent upon the laws and policy, this
proportion seems to be little affected by the riches or poverty of that
society, by its advancing, stationary, or declining condition, but to
remain the same, or very nearly the same, in all those different states. I
shall, in the third place, endeavour to explain all the different
circumstances which regulate this proportion.
In the fourth and last place, I shall endeavour to shew what are the
circumstances which regulate the rent of land, and which either raise or
lower the real price of all the different substances which it produces.
CHAPTER VIII.
OF THE WAGES OF LABOUR.
The produce of labour constitutes the natural recompence or wages of
labour. In that original state of things which precedes both the
appropriation of land and the accumulation of stock, the whole produce of
labour belongs to the labourer. He has neither landlord nor master to
share with him.
Had this state continued, the wages of labour would have augmented with
all those improvements in its productive powers, to which the division of
labour gives occasion. All things would gradually have become cheaper.
They would have been produced by a smaller quantity of labour; and as the
commodities produced by equal quantities of labour would naturally in this
state of things be exchanged for one another, they would have been
purchased likewise with the produce of a smaller quantity.
But though all things would have become cheaper in reality, in appearance
many things might have become dearer, than before, or have been exchanged
for a greater quantity of other goods. Let us suppose, for example, that
in the greater part of employments the productive powers of labour had
been improved to tenfold, or that a day’s labour could produce ten times
the quantity of work which it had done originally; but that in a
particular employment they had been improved only to double, or that a
day’s labour could produce only twice the quantity of work which it had
done before. In exchanging the produce of a day’s labour in the greater
part of employments for that of a day’s labour in this particular one, ten
times the original quantity of work in them would purchase only twice the
original quantity in it. Any particular quantity in it, therefore, a pound
weight, for example, would appear to be five times dearer than before. In
reality, however, it would be twice as cheap. Though it required five
times the quantity of other goods to purchase it, it would require only
half the quantity of labour either to purchase or to produce it. The
acquisition, therefore, would be twice as easy as before.
But this original state of things, in which the labourer enjoyed the whole
produce of his own labour, could not last beyond the first introduction of
the appropriation of land and the accumulation of stock. It was at an end,
therefore, long before the most considerable improvements were made in the
productive powers of labour; and it would be to no purpose to trace
further what might have been its effects upon the recompence or wages of
labour.
As soon as land becomes private property, the landlord demands a share of
almost all the produce which the labourer can either raise or collect from
it. His rent makes the first deduction from the produce of the labour
which is employed upon land.
It seldom happens that the person who tills the ground has wherewithal to
maintain himself till he reaps the harvest. His maintenance is generally
advanced to him from the stock of a master, the farmer who employs him,
and who would have no interest to employ him, unless he was to share in
the produce of his labour, or unless his stock was to be replaced to him
with a profit. This profit makes a second deduction from the produce of
the labour which is employed upon land.
The produce of almost all other labour is liable to the like deduction of
profit. In all arts and manufactures, the greater part of the workmen
stand in need of a master, to advance them the materials of their work,
and their wages and maintenance, till it be completed. He shares in the
produce of their labour, or in the value which it adds to the materials
upon which it is bestowed; and in this share consists his profit.
It sometimes happens, indeed, that a single independent workman has stock
sufficient both to purchase the materials of his work, and to maintain
himself till it be completed. He is both master and workman, and enjoys
the whole produce of his own labour, or the whole value which it adds to
the materials upon which it is bestowed. It includes what are usually two
distinct revenues, belonging to two distinct persons, the profits of
stock, and the wages of labour.
Such cases, however, are not very frequent; and in every part of Europe
twenty workmen serve under a master for one that is independent, and the
wages of labour are everywhere understood to be, what they usually are,
when the labourer is one person, and the owner of the stock which employs
him another.
What are the common wages of labour, depends everywhere upon the contract
usually made between those two parties, whose interests are by no means
the same. The workmen desire to get as much, the masters to give as
little, as possible. The former are disposed to combine in order to raise,
the latter in order to lower, the wages of labour.
It is not, however, difficult to foresee which of the two parties must,
upon all ordinary occasions, have the advantage in the dispute, and force
the other into a compliance with their terms. The masters, being fewer in
number, can combine much more easily: and the law, besides, authorises, or
at least does not prohibit, their combinations, while it prohibits those
of the workmen. We have no acts of parliament against combining to lower
the price of work, but many against combining to raise it. In all such
disputes, the masters can hold out much longer. A landlord, a farmer, a
master manufacturer, or merchant, though they did not employ a single
workman, could generally live a year or two upon the stocks, which they
have already acquired. Many workmen could not subsist a week, few could
subsist a month, and scarce any a year, without employment. In the long
run, the workman may be as necessary to his master as his master is to
him; but the necessity is not so immediate.
We rarely hear, it has been said, of the combinations of masters, though
frequently of those of workmen. But whoever imagines, upon this account,
that masters rarely combine, is as ignorant of the world as of the
subject. Masters are always and everywhere in a sort of tacit, but
constant and uniform, combination, not to raise the wages of labour above
their actual rate. To violate this combination is everywhere a most
unpopular action, and a sort of reproach to a master among his neighbours
and equals. We seldom, indeed, hear of this combination, because it is the
usual, and, one may say, the natural state of things, which nobody ever
hears of. Masters, too, sometimes enter into particular combinations to
sink the wages of labour even below this rate. These are always conducted
with the utmost silence and secrecy till the moment of execution; and when
the workmen yield, as they sometimes do without resistance, though
severely felt by them, they are never heard of by other people. Such
combinations, however, are frequently resisted by a contrary defensive
combination of the workmen, who sometimes, too, without any provocation of
this kind, combine, of their own accord, to raise the price of their
labour. Their usual pretences are, sometimes the high price of provisions,
sometimes the great profit which their masters make by their work. But
whether their combinations be offensive or defensive, they are always
abundantly heard of. In order to bring the point to a speedy decision,
they have always recourse to the loudest clamour, and sometimes to the
most shocking violence and outrage. They are desperate, and act with the
folly and extravagance of desperate men, who must either starve, or
frighten their masters into an immediate compliance with their demands.
The masters, upon these occasions, are just as clamorous upon the other
side, and never cease to call aloud for the assistance of the civil
magistrate, and the rigorous execution of those laws which have been
enacted with so much severity against the combination of servants,
labourers, and journeymen. The workmen, accordingly, very seldom derive
any advantage from the violence of those tumultuous combinations, which,
partly from the interposition of the civil magistrate, partly from the
superior steadiness of the masters, partly from the necessity which the
greater part of the workmen are under of submitting for the sake of
present subsistence, generally end in nothing but the punishment or ruin
of the ringleaders.
But though, in disputes with their workmen, masters must generally have
the advantage, there is, however, a certain rate, below which it seems
impossible to reduce, for any considerable time, the ordinary wages even
of the lowest species of labour.
A man must always live by his work, and his wages must at least be
sufficient to maintain him. They must even upon most occasions be somewhat
more, otherwise it would be impossible for him to bring up a family, and
the race of such workmen could not last beyond the first generation. Mr
Cantillon seems, upon this account, to suppose that the lowest species of
common labourers must everywhere earn at least double their own
maintenance, in order that, one with another, they may be enabled to bring
up two children; the labour of the wife, on account of her necessary
attendance on the children, being supposed no more than sufficient to
provide for herself: But one half the children born, it is computed, die
before the age of manhood. The poorest labourers, therefore, according to
this account, must, one with another, attempt to rear at least four
children, in order that two may have an equal chance of living to that
age. But the necessary maintenance of four children, it is supposed, may
be nearly equal to that of one man. The labour of an able-bodied slave,
the same author adds, is computed to be worth double his maintenance; and
that of the meanest labourer, he thinks, cannot be worth less than that of
an able-bodied slave. Thus far at least seems certain, that, in order to
bring up a family, the labour of the husband and wife together must, even
in the lowest species of common labour, be able to earn something more
than what is precisely necessary for their own maintenance; but in what
proportion, whether in that above-mentioned, or any other, I shall not
take upon me to determine.
There are certain circumstances, however, which sometimes give the
labourers an advantage, and enable them to raise their wages considerably
above this rate, evidently the lowest which is consistent with common
humanity.
When in any country the demand for those who live by wages, labourers,
journeymen, servants of every kind, is continually increasing; when every
year furnishes employment for a greater number than had been employed the
year before, the workmen have no occasion to combine in order to raise
their wages. The scarcity of hands occasions a competition among masters,
who bid against one another in order to get workmen, and thus voluntarily
break through the natural combination of masters not to raise wages. The
demand for those who live by wages, it is evident, cannot increase but in
proportion to the increase of the funds which are destined to the payment
of wages. These funds are of two kinds, first, the revenue which is over
and above what is necessary for the maintenance; and, secondly, the stock
which is over and above what is necessary for the employment of their
masters.
When the landlord, annuitant, or monied man, has a greater revenue than
what he judges sufficient to maintain his own family, he employs either
the whole or a part of the surplus in maintaining one or more menial
servants. Increase this surplus, and he will naturally increase the number
of those servants.
When an independent workman, such as a weaver or shoemaker, has got more
stock than what is sufficient to purchase the materials of his own work,
and to maintain himself till he can dispose of it, he naturally employs
one or more journeymen with the surplus, in order to make a profit by
their work. Increase this surplus, and he will naturally increase the
number of his journeymen.
The demand for those who live by wages, therefore, necessarily increases
with the increase of the revenue and stock of every country, and cannot
possibly increase without it. The increase of revenue and stock is the
increase of national wealth. The demand for those who live by wages,
therefore, naturally increases with the increase of national wealth, and
cannot possibly increase without it.
It is not the actual greatness of national wealth, but its continual
increase, which occasions a rise in the wages of labour. It is not,
accordingly, in the richest countries, but in the most thriving, or in
those which are growing rich the fastest, that the wages of labour are
highest. England is certainly, in the present times, a much richer country
than any part of North America. The wages of labour, however, are much
higher in North America than in any part of England. In the province of
New York, common labourers earned in 1773, before the commencement of the
late disturbances, three shillings and sixpence currency, equal to two
shillings sterling, a-day; ship-carpenters, ten shillings and sixpence
currency, with a pint of rum, worth sixpence sterling, equal in all to six
shillings and sixpence sterling; house-carpenters and bricklayers, eight
shillings currency, equal to four shillings and sixpence sterling;
journeymen tailors, five shillings currency, equal to about two shillings
and tenpence sterling. These prices are all above the London price; and
wages are said to be as high in the other colonies as in New York. The
price of provisions is everywhere in North America much lower than in
England. A dearth has never been known there. In the worst seasons they
have always had a sufficiency for themselves, though less for exportation.
If the money price of labour, therefore, be higher than it is anywhere in
the mother-country, its real price, the real command of the necessaries
and conveniencies of life which it conveys to the labourer, must be higher
in a still greater proportion.
But though North America is not yet so rich as England, it is much more
thriving, and advancing with much greater rapidity to the further
acquisition of riches. The most decisive mark of the prosperity of any
country is the increase of the number of its inhabitants. In Great
Britain, and most other European countries, they are not supposed to
double in less than five hundred years. In the British colonies in North
America, it has been found that they double in twenty or five-and-twenty
years. Nor in the present times is this increase principally owing to the
continual importation of new inhabitants, but to the great multiplication
of the species. Those who live to old age, it is said, frequently see
there from fifty to a hundred, and sometimes many more, descendants from
their own body. Labour is there so well rewarded, that a numerous family
of children, instead of being a burden, is a source of opulence and
prosperity to the parents. The labour of each child, before it can leave
their house, is computed to be worth a hundred pounds clear gain to them.
A young widow with four or five young children, who, among the middling or
inferior ranks of people in Europe, would have so little chance for a
second husband, is there frequently courted as a sort of fortune. The
value of children is the greatest of all encouragements to marriage. We
cannot, therefore, wonder that the people in North America should
generally marry very young. Notwithstanding the great increase occasioned
by such early marriages, there is a continual complaint of the scarcity of
hands in North America. The demand for labourers, the funds destined for
maintaining them increase, it seems, still faster than they can find
labourers to employ.
Though the wealth of a country should be very great, yet if it has been
long stationary, we must not expect to find the wages of labour very high
in it. The funds destined for the payment of wages, the revenue and stock
of its inhabitants, may be of the greatest extent; but if they have
continued for several centuries of the same, or very nearly of the same
extent, the number of labourers employed every year could easily supply,
and even more than supply, the number wanted the following year. There
could seldom be any scarcity of hands, nor could the masters be obliged to
bid against one another in order to get them. The hands, on the contrary,
would, in this case, naturally multiply beyond their employment. There
would be a constant scarcity of employment, and the labourers would be
obliged to bid against one another in order to get it. If in such a
country the wages of labour had ever been more than sufficient to
maintain the labourer, and to enable him to bring up a family, the
competition of the labourers and the interest of the masters would soon
reduce them to the lowest rate which is consistent with common humanity.
China has been long one of the richest, that is, one of the most fertile,
best cultivated, most industrious, and most populous, countries in the
world. It seems, however, to have been long stationary. Marco Polo, who
visited it more than five hundred years ago, describes its cultivation,
industry, and populousness, almost in the same terms in which they are
described by travellers in the present times. It had, perhaps, even long
before his time, acquired that full complement of riches which the nature
of its laws and institutions permits it to acquire. The accounts of all
travellers, inconsistent in many other respects, agree in the low wages of
labour, and in the difficulty which a labourer finds in bringing up a
family in China. If by digging the ground a whole day he can get what will
purchase a small quantity of rice in the evening, he is contented. The
condition of artificers is, if possible, still worse. Instead of waiting
indolently in their work-houses for the calls of their customers, as in
Europe, they are continually running about the streets with the tools of
their respective trades, offering their services, and, as it were, begging
employment. The poverty of the lower ranks of people in China far
surpasses that of the most beggarly nations in Europe. In the
neighbourhood of Canton, many hundred, it is commonly said, many thousand
families have no habitation on the land, but live constantly in little
fishing-boats upon the rivers and canals. The subsistence which they find
there is so scanty, that they are eager to fish up the nastiest garbage
thrown overboard from any European ship. Any carrion, the carcase of a
dead dog or cat, for example, though half putrid and stinking, is as
welcome to them as the most wholesome food to the people of other
countries. Marriage is encouraged in China, not by the profitableness of
children, but by the liberty of destroying them. In all great towns,
several are every night exposed in the street, or drowned like puppies in
the water. The performance of this horrid office is even said to be the
avowed business by which some people earn their subsistence.
China, however, though it may, perhaps, stand still, does not seem to go
backwards. Its towns are nowhere deserted by their inhabitants. The lands
which had once been cultivated, are nowhere neglected. The same, or very
nearly the same, annual labour, must, therefore, continue to be performed,
and the funds destined for maintaining it must not, consequently, be
sensibly diminished. The lowest class of labourers, therefore,
notwithstanding their scanty subsistence, must some way or another make
shift to continue their race so far as to keep up their usual numbers.
But it would be otherwise in a country where the funds destined for the
maintenance of labour were sensibly decaying. Every year the demand for
servants and labourers would, in all the different classes of employments,
be less than it had been the year before. Many who had been bred in the
superior classes, not being able to find employment in their own business,
would be glad to seek it in the lowest. The lowest class being not only
overstocked with its own workmen, but with the overflowings of all the
other classes, the competition for employment would be so great in it, as
to reduce the wages of labour to the most miserable and scanty subsistence
of the labourer. Many would not be able to find employment even upon these
hard terms, but would either starve, or be driven to seek a subsistence,
either by begging, or by the perpetration perhaps, of the greatest
enormities. Want, famine, and mortality, would immediately prevail in that
class, and from thence extend themselves to all the superior classes, till
the number of inhabitants in the country was reduced to what could easily
be maintained by the revenue and stock which remained in it, and which had
escaped either the tyranny or calamity which had destroyed the rest. This,
perhaps, is nearly the present state of Bengal, and of some other of the
English settlements in the East Indies. In a fertile country, which had
before been much depopulated, where subsistence, consequently, should not
be very difficult, and where, notwithstanding, three or four hundred
thousand people die of hunger in one year, we may be assured that the funds
destined for the maintenance of the labouring poor are fast decaying. The
difference between the genius of the British constitution, which protects
and governs North America, and that of the mercantile company which
oppresses and domineers in the East Indies, cannot, perhaps, be better
illustrated than by the different state of those countries.
The liberal reward of labour, therefore, as it is the necessary effect, so
it is the natural symptom of increasing national wealth. The scanty
maintenance of the labouring poor, on the other hand, is the natural
symptom that things are at a stand, and their starving condition, that
they are going fast backwards.
In Great Britain, the wages of labour seem, in the present times, to be
evidently more than what is precisely necessary to enable the labourer to
bring up a family. In order to satisfy ourselves upon this point, it will
not be necessary to enter into any tedious or doubtful calculation of what
may be the lowest sum upon which it is possible to do this. There are many
plain symptoms, that the wages of labour are nowhere in this country
regulated by this lowest rate, which is consistent with common humanity.
First, in almost every part of Great Britain there is a distinction, even
in the lowest species of labour, between summer and winter wages. Summer
wages are always highest. But, on account of the extraordinary expense of
fuel, the maintenance of a family is most expensive in winter. Wages,
therefore, being highest when this expense is lowest, it seems evident
that they are not regulated by what is necessary for this expense, but by
the quantity and supposed value of the work. A labourer, it may be said,
indeed, ought to save part of his summer wages, in order to defray his
winter expense; and that, through the whole year, they do not exceed what
is necessary to maintain his family through the whole year. A slave,
however, or one absolutely dependent on us for immediate subsistence,
would not be treated in this manner. His daily subsistence would be
proportioned to his daily necessities.
Secondly, the wages of labour do not, in Great Britain, fluctuate with the
price of provisions. These vary everywhere from year to year, frequently
from month to month. But in many places, the money price of labour remains
uniformly the same, sometimes for half a century together. If, in these
places, therefore, the labouring poor can maintain their families in dear
years, they must be at their ease in times of moderate plenty, and in
affluence in those of extraordinary cheapness. The high price of
provisions during these ten years past, has not, in many parts of the
kingdom, been accompanied with any sensible rise in the money price of
labour. It has, indeed, in some; owing, probably, more to the increase of
the demand for labour, than to that of the price of provisions.
Thirdly, as the price of provisions varies more from year to year than the
wages of labour, so, on the other hand, the wages of labour vary more from
place to place than the price of provisions. The prices of bread and
butchers’ meat are generally the same, or very nearly the same, through
the greater part of the united kingdom. These, and most other things which
are sold by retail, the way in which the labouring poor buy all things,
are generally fully as cheap, or cheaper, in great towns than in the
remoter parts of the country, for reasons which I shall have occasion to
explain hereafter. But the wages of labour in a great town and its
neighbourhood are frequently a fourth or a fifth part, twenty or five-and—twenty
per cent. higher than at a few miles distance. Eighteen pence a day may be
reckoned the common price of labour in London and its neighbourhood. At a
few miles distance, it falls to fourteen and fifteen pence. Tenpence may
be reckoned its price in Edinburgh and its neighbourhood. At a few miles
distance, it falls to eightpence, the usual price of common labour through
the greater part of the low country of Scotland, where it varies a good
deal less than in England. Such a difference of prices, which, it seems,
is not always sufficient to transport a man from one parish to another,
would necessarily occasion so great a transportation of the most bulky
commodities, not only from one parish to another, but from one end of the
kingdom, almost from one end of the world to the other, as would soon
reduce them more nearly to a level. After all that has been said of the
levity and inconstancy of human nature, it appears evidently from
experience, that man is, of all sorts of luggage, the most difficult to be
transported. If the labouring poor, therefore, can maintain their families
in those parts of the kingdom where the price of labour is lowest, they
must be in affluence where it is highest.
Fourthly, the variations in the price of labour not only do not
correspond, either in place or time, with those in the price of
provisions, but they are frequently quite opposite.
Grain, the food of the common people, is dearer in Scotland than in
England, whence Scotland receives almost every year very large supplies.
But English corn must be sold dearer in Scotland, the country to which it
is brought, than in England, the country from which it comes; and in
proportion to its quality it cannot be sold dearer in Scotland than the
Scotch corn that comes to the same market in competition with it. The
quality of grain depends chiefly upon the quantity of flour or meal which
it yields at the mill; and, in this respect, English grain is so much
superior to the Scotch, that though often dearer in appearance, or in
proportion to the measure of its bulk, it is generally cheaper in reality,
or in proportion to its quality, or even to the measure of its weight. The
price of labour, on the contrary, is dearer in England than in Scotland.
If the labouring poor, therefore, can maintain their families in the one
part of the united kingdom, they must be in affluence in the other.
Oatmeal, indeed, supplies the common people in Scotland with the greatest
and the best part of their food, which is, in general, much inferior to
that of their neighbours of the same rank in England. This difference,
however, in the mode of their subsistence, is not the cause, but the
effect, of the difference in their wages; though, by a strange
misapprehension, I have frequently heard it represented as the cause. It
is not because one man keeps a coach, while his neighbour walks a-foot,
that the one is rich, and the other poor; but because the one is rich, he
keeps a coach, and because the other is poor, he walks a-foot.
During the course of the last century, taking one year with another, grain
was dearer in both parts of the united kingdom than during that of the
present. This is a matter of fact which cannot now admit of any reasonable
doubt; and the proof of it is, if possible, still more decisive with
regard to Scotland than with regard to England. It is in Scotland
supported by the evidence of the public fiars, annual valuations made upon
oath, according to the actual state of the markets, of all the different
sorts of grain in every different county of Scotland. If such direct proof
could require any collateral evidence to confirm it, I would observe, that
this has likewise been the case in France, and probably in most other
parts of Europe. With regard to France, there is the clearest proof. But
though it is certain, that in both parts of the united kingdom grain was
somewhat dearer in the last century than in the present, it is equally
certain that labour was much cheaper. If the labouring poor, therefore,
could bring up their families then, they must be much more at their ease
now. In the last century, the most usual day-wages of common labour
through the greater part of Scotland were sixpence in summer, and
fivepence in winter. Three shillings a-week, the same price, very nearly
still continues to be paid in some parts of the Highlands and Western
islands. Through the greater part of the Low country, the most usual wages
of common labour are now eight pence a-day; tenpence, sometimes a
shilling, about Edinburgh, in the counties which border upon England,
probably on account of that neighbourhood, and in a few other places where
there has lately been a considerable rise in the demand for labour, about
Glasgow, Carron, Ayrshire, etc. In England, the improvements of
agriculture, manufactures, and commerce, began much earlier than in
Scotland. The demand for labour, and consequently its price, must
necessarily have increased with those improvements. In the last century,
accordingly, as well as in the present, the wages of labour were higher in
England than in Scotland. They have risen, too, considerably since that
time, though, on account of the greater variety of wages paid there in
different places, it is more difficult to ascertain how much. In 1614, the
pay of a foot soldier was the same as in the present times, eightpence
a-day. When it was first established, it would naturally be regulated by
the usual wages of common labourers, the rank of people from which foot
soldiers are commonly drawn. Lord-chief-justice Hales, who wrote in the
time of Charles II. computes the necessary expense of a labourer’s family,
consisting of six persons, the father and mother, two children able to do
something, and two not able, at ten shillings a-week, or twenty-six pounds
a-year. If they cannot earn this by their labour, they must make it up, he
supposes, either by begging or stealing. He appears to have enquired very
carefully into this subject {See his scheme for the maintenance of the
poor, in Burn’s History of the Poor Laws.}. In 1688, Mr Gregory King,
whose skill in political arithmetic is so much extolled by Dr Davenant,
computed the ordinary income of labourers and out-servants to be fifteen
pounds a-year to a family, which he supposed to consist, one with another,
of three and a half persons. His calculation, therefore, though different
in appearance, corresponds very nearly at bottom with that of Judge Hales.
Both suppose the weekly expense of such families to be about twenty-pence
a-head. Both the pecuniary income and expense of such families have
increased considerably since that time through the greater part of the
kingdom, in some places more, and in some less, though perhaps scarce
anywhere so much as some exaggerated accounts of the present wages of
labour have lately represented them to the public. The price of labour, it
must be observed, cannot be ascertained very accurately anywhere,
different prices being often paid at the same place and for the same sort
of labour, not only according to the different abilities of the workman,
but according to the easiness or hardness of the masters. Where wages are
not regulated by law, all that we can pretend to determine is, what are
the most usual; and experience seems to shew that law can never regulate
them properly, though it has often pretended to do so.
The real recompence of labour, the real quantity of the necessaries and
conveniencies of life which it can procure to the labourer, has, during
the course of the present century, increased perhaps in a still greater
proportion than its money price. Not only grain has become somewhat
cheaper, but many other things, from which the industrious poor derive an
agreeable and wholesome variety of food, have become a great deal cheaper.
Potatoes, for example, do not at present, through the greater part of the
kingdom, cost half the price which they used to do thirty or forty years
ago. The same thing may be said of turnips, carrots, cabbages; things
which were formerly never raised but by the spade, but which are now
commonly raised by the plough. All sort of garden stuff, too, has become
cheaper. The greater part of the apples, and even of the onions, consumed
in Great Britain, were, in the last century, imported from Flanders. The
great improvements in the coarser manufactories of both linen and woollen
cloth furnish the labourers with cheaper and better clothing; and those in
the manufactories of the coarser metals, with cheaper and better
instruments of trade, as well as with many agreeable and convenient pieces
of household furniture. Soap, salt, candles, leather, and fermented
liquors, have, indeed, become a good deal dearer, chiefly from the taxes
which have been laid upon them. The quantity of these, however, which the
labouring poor are under any necessity of consuming, is so very small, that
the increase in their price does not compensate the diminution in that of
so many other things. The common complaint, that luxury extends itself
even to the lowest ranks of the people, and that the labouring poor will
not now be contented with the same food, clothing, and lodging, which
satisfied them in former times, may convince us that it is not the money
price of labour only, but its real recompence, which has augmented.
Is this improvement in the circumstances of the lower ranks of the people
to be regarded as an advantage, or as an inconveniency, to the society?
The answer seems at first abundantly plain. Servants, labourers, and
workmen of different kinds, make up the far greater part of every great
political society. But what improves the circumstances of the greater
part, can never be regarded as any inconveniency to the whole. No society
can surely be flourishing and happy, of which the far greater part of the
members are poor and miserable. It is but equity, besides, that they who
feed, clothe, and lodge the whole body of the people, should have such a
share of the produce of their own labour as to be themselves tolerably
well fed, clothed, and lodged.
Poverty, though it no doubt discourages, does not always prevent,
marriage. It seems even to be favourable to generation. A half-starved
Highland woman frequently bears more than twenty children, while a
pampered fine lady is often incapable of bearing any, and is generally
exhausted by two or three. Barrenness, so frequent among women of fashion,
is very rare among those of inferior station. Luxury, in the fair sex,
while it inflames, perhaps, the passion for enjoyment, seems always to
weaken, and frequently to destroy altogether, the powers of generation.
But poverty, though it does not prevent the generation, is extremely
unfavourable to the rearing of children. The tender plant is produced; but
in so cold a soil, and so severe a climate, soon withers and dies. It is
not uncommon, I have been frequently told, in the Highlands of Scotland,
for a mother who has born twenty children not to have two alive. Several
officers of great experience have assured me, that, so far from recruiting
their regiment, they have never been able to supply it with drums and
fifes, from all the soldiers’ children that were born in it. A greater
number of fine children, however, is seldom seen anywhere than about a
barrack of soldiers. Very few of them, it seems, arrive at the age of
thirteen or fourteen. In some places, one half the children die before
they are four years of age, in many places before they are seven, and in
almost all places before they are nine or ten. This great mortality,
however will everywhere be found chiefly among the children of the common
people, who cannot afford to tend them with the same care as those of
better station. Though their marriages are generally more fruitful than
those of people of fashion, a smaller proportion of their children arrive
at maturity. In foundling hospitals, and among the children brought up by
parish charities, the mortality is still greater than among those of the
common people.
Every species of animals naturally multiplies in proportion to the means
of their subsistence, and no species can ever multiply beyond it. But in
civilized society, it is only among the inferior ranks of people that the
scantiness of subsistence can set limits to the further multiplication of
the human species; and it can do so in no other way than by destroying a
great part of the children which their fruitful marriages produce.
The liberal reward of labour, by enabling them to provide better for their
children, and consequently to bring up a greater number, naturally tends
to widen and extend those limits. It deserves to be remarked, too, that it
necessarily does this as nearly as possible in the proportion which the
demand for labour requires. If this demand is continually increasing, the
reward of labour must necessarily encourage in such a manner the marriage
and multiplication of labourers, as may enable them to supply that
continually increasing demand by a continually increasing population. If
the reward should at any time be less than what was requisite for this
purpose, the deficiency of hands would soon raise it; and if it should at
any time be more, their excessive multiplication would soon lower it to
this necessary rate. The market would be so much understocked with labour
in the one case, and so much overstocked in the other, as would soon force
back its price to that proper rate which the circumstances of the society
required. It is in this manner that the demand for men, like that for any
other commodity, necessarily regulates the production of men, quickens it
when it goes on too slowly, and stops it when it advances too fast. It is
this demand which regulates and determines the state of propagation in all
the different countries of the world; in North America, in Europe, and in
China; which renders it rapidly progressive in the first, slow and gradual
in the second, and altogether stationary in the last.
The wear and tear of a slave, it has been said, is at the expense of his
master; but that of a free servant is at his own expense. The wear and
tear of the latter, however, is, in reality, as much at the expense of his
master as that of the former. The wages paid to journeymen and servants of
every kind must be such as may enable them, one with another to continue
the race of journeymen and servants, according as the increasing,
diminishing, or stationary demand of the society, may happen to require.
But though the wear and tear of a free servant be equally at the expense
of his master, it generally costs him much less than that of a slave. The
fund destined for replacing or repairing, if I may say so, the wear and
tear of the slave, is commonly managed by a negligent master or careless
overseer. That destined for performing the same office with regard to the
freeman is managed by the freeman himself. The disorders which generally
prevail in the economy of the rich, naturally introduce themselves into
the management of the former; the strict frugality and parsimonious
attention of the poor as naturally establish themselves in that of the
latter. Under such different management, the same purpose must require
very different degrees of expense to execute it. It appears, accordingly,
from the experience of all ages and nations, I believe, that the work done
by freemen comes cheaper in the end than that performed by slaves. It is
found to do so even at Boston, New-York, and Philadelphia, where the wages
of common labour are so very high.
The liberal reward of labour, therefore, as it is the effect of increasing
wealth, so it is the cause of increasing population. To complain of it,
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