In ge

premium, or sell for somewhat more in the sometimes happen, becomes of less consemarket than the quantity of gold or silver cur-quence to the public. This free competition, rency for which it was issued. Some people too, obliges all bankers to be more liberal account in this manner for what is called the in their dealings with their customers, lest agio of the bank of Amsterdam, or for the su- their rivals should carry them away. periority of bank money over current money, neral, if any branch of trade, or any division though this bank money, as they pretend, can- of labour, be advantageous to the public, the not be taken out of the bank at the will of the freer and more general the competition, it will owner. The greater part of foreign bills of ex- always be the more so. Notes 15, 16. change must be paid in bank money, that is, by a transfer in the books of the bank; and the directors of the bank, they allege, are careful to keep the whole quantity of bank money always below what this use occasions a demand for. It is upon this account, they say, the bank money sells for a premium, or bears an agio of four or five per cent. above the same OF THE ACCUMULATION OF CAPITAL, OR OF nominal sum of the gold and silver currency of the country. This account of the bank of Amsterdam, however, it will appear hereafter, is in a great measure chimerical.

CHAP. III.

PRODUCTIVE AND UNPRODUCTIVE LABOUR.

THERE is one sort of labour which adds to the value of the subject upon which it is bestow.

A paper currency which falls below the va-ed; there is another which has no such effect. lue of gold and silver coin, does not thereby The former as it produces a value, may be sink the value of those metals, or occasion called productive, the latter, unproductive laequal quantities of them to exchange for a bour. Thus the iabour of a manufacturer' smaller quantity of goods of any other kind. adds generally to the value of the materials The proportion between the value of gold and which he works upon, that of his own mainsilver and that of goods of any other kind, de- tenance, and of his master's profit. The la pends in all cases, not upon the nature and bour of a menial servant, on the contrary, adds quantity of any particular paper money, which to the value of nothing. Though the manu. may be current in any particular country, but facturer has his wages advanced to him by his upon the richness or poverty of the mines, master, he in reality costs him no expense, which happen at any particular time to supply the value of those wages being generally rethe great market of the commercial world stored, together with a profit, in the improved with those metals. It depends upon the pro- value of the subject upon which his labour is portion between the quantity of labour which bestowed. But the maintenance of a menia! is necessary in order to bring a certain quan- servant never is restored. A man grows rich tity of gold and silver to market, and that by employing a multitude of manufacturers; which is necessary in order to bring thither a he grows poor by maintaining a multitude or certain quantity of any other sort of goods. menial servants. The labour of the latter, If bankers are restrained from issuing any however, has its value, and deserves its recirculating bank notes, or notes payable to ward as well as that of the former. But the the bearer, for less than a certain sum; and labour of the manufacturer fixes and realizes if they are subjected to the obligation of an itself in some particular subject or vendible immediate and unconditional payment of such commodity, which lasts for some time at least bank notes as soon as presented, their trade after that labour is past. It is, as it were, a may, with safety to the public, be rendered in certain quantity of labour stocked and stored all other respects perfectly free. The late up, to be employed, if necessary, upon some multiplication of banking companies in both other occasion. That subject, or, what is the parts of the united kingdom, an event by same thing, the price of that subject, can afwhich many people have been much alarmed, terwards, if necessary, put into motion a instead of diminishing, increases the security quantity of labour equal to that which had of the public. It obliges all of them to be originally produced it. The labour of the more circumspect in their conduct, and, by menial servant, on the contrary, does not fix not extending their currency beyond its due or realize itself in any particular subject or proportion to their cash, to guard themselves against those malicious runs, which the rivalship of so many competitors is always ready to bring upon them. It restrains the circulation of each particular company within a narrower circle, and reduces their circulating notes to a smaller number. By dividing the whole circulation into a greater number of parts, the failure of any one company, an accident which, in the course of things, must

vendible commodity. His services generally perish in the very instant of their performance, and seldom leave any trace of value behind them, for which an equal quantity of service could afterwards be procured.

The labour of some of the most respectable

Ir

Some French authors of great learning and inge the last chapter of the fourth book, I shall endeavour to nuity have used those words in a different sense. shew that their sense is an improper one.

orders in the society is, like that of menial or to some other person, as the rent of his servants, unproductive of any value, and does land. Thus, of the produce of land, one part not fix or realize itself in any permanent sub-replaces the capital of the farmer; the other ject, or vendible commodity, which endures pays his profit and the rent of the landlord; after that labour is past, and for which an and thus constitutes a revenue both to the equal quantity of labour could afterwards be owner of this capital, as the profits of his stock. procured. The sovereign, for example, with and to some other person as the rent of his all the officers both of justice and war who land. Of the produce of a great manufacto. serve under him, the whole army and navy, ry, in the same manner, one part, and that alare unproductive labourers. They are the ways the largest, replaces the capital of the unservants of the public, and are maintained by dertaker of the work; the other pays his proa part of the annual produce of the industry fit, and thus constitutes a revenue to the own

is immediately destined for constituting a revenue, either as profit or as rent, may maintain indifferently either productive or unproductive hands.

kind, that part is from that moment withdrawn from his capital, and placed in his stock reserved for immediate consumption.

of other people. Their service, how honour-er of this capital. able, how useful, or how necessary soever, That part of the annual produce of the land produces nothing for which ar. equal quantity and labour of any country which replaces a of service can afterwards be procured. The capital, never is immediately employed to main. protection, security, and defence, of the com-tain any but productive hands. It pays the nonwealth, the effect of their labour this year, wages of productive labour only. That which will not purchase its protection, security, and defence, for the year to come. In the same class must be ranked, some both of the gravest and most important, and some of the most frivolous professions; churchmen, lawyers, Whatever part of his stock a man employs physicians, men of letters of all kinds; players, as a capital, he always expects it to be re buffoons, musicians, opera-singers, opera-placed to him with a profit. He employs it, dancers, &c. The labour of the meanest of therefore, in maintaining productive hands these has a certain value, regulated by the only; and after having served in the function very same principles which regulate that of of a capital to him, it constitutes a revenue to every other sort of labour; and that of the them. Whenever he employs any part of it noblest and most useful produces nothing in maintaining unproductive hands of any which could afterwards purchase or procure an equal quantity of labour. Like the declamation of the actor, the harangue of the orator, or the tune of the musician, the work Unproductive labourers, and those who do of all of them perishes in the very instant of not labour at all, are all maintained by reve its production. nue; either, first, by that part of the annual Both productive and unproductive labour-produce which is originally destined for coners, and those who do not labour at all, are stituting a revenue to some particular perall equally maintained by the annual produce sons, either as the rent of land, or as the proof the land and labour of the country. This fits of stock; or, secondly, by that part which, produce, how great soever, can never be in- though originally destined for replacing a ca finite, but must have certain limits. Accord-pital, and for maintaining productive labouring, therefore, as a smaller or greater propor-ers only, yet when it comes into their hands, tion of it is in any one year employed in main- whatever part of it is over and above their necaining unproductive hands, the more in the cessary subsistence, may be employed in maiaone case, and the less in the other, will re-taining indifferently either productive or unmain for the productive, and the next year's productive hands. Thus, not only the great produce will be greater or smaller according- landlord or the rich merchant, but even the ly; the whole annual produce, if we except common workman, if his wages are considerthe spontaneous productions of the earth, be-able, may maintain a menial servant; or he ing the effect of productive labour. may sometimes go to a play or a puppet-show, Though the whole annual produce of the and so contribute his share towards maintainland and labour of every country is no doubt ing one set of unproductive labourers; or he ultimately destined for supplying the con- may pay some taxes, and thus help to mainsumption of its inhabitants, and for procuring tain another set, more honourable and useful, a revenue to them; yet when it first comes indeed, but equally unproductive. No part either from the ground, or from the hands of of the annual produce, however, which had the productive labourers, it naturally divides been originally destined to replace a capital, itself into two parts. One of them, and fre- is ever directed towards maintaining unproquently the largest, is, in the first place, des- ductive hands, till after it has put into motion tined for replacing a capital, or for renewing its full complement of productive labour, or the provisions, materials, and finished work, which had been withdrawn from a capital; the other for constituting a revenue either to the owner of this capital, as the profit of his stock,

all that it could put into motion in the way in which it was employed. The workman must have earned his wages by work done, before he can employ any part of them in this man

one.

ner. That part, too, is generally but a small | who can dispose of the labour and service of It is his spare revenue only, of which all those whom it maintains. In the present productive labourers have seldom a great deal. state of Europe, the share of the landlord selThey generally have some, however; and in dom exceeds a third, sometimes not a fourth the payment of taxes, the greatness of their part of the whole produce of the land. The number may compensate, in some measure, rent of land, however, in all the improved the smallness of their contribution. The rent parts of the country, has been tripled and quaof land and the profits of stock are everywhere, drupled since those ancient times; and this therefore, the principal sources from which third or fourth part of the annual produce is, unproductive hands derive their subsistence. it seems, three or four times greater than the These are the two sorts of revenue of which whole had been before. In the progress of the owners have generally most to spare. improvement, rent, though it increases in proThey might both maintain indifferently, either portion to the extent, diminishes in proportion productive or unproductive hands. They to the produce of the land. seem, however, to have some predilection for the latter. The expense of a great lord feeds generally more idle than industrious people The rich merchant, though with his capital he maintains industrious people only, yet by his expense, that is, by the employment of his revenue, he feeds commonly the very same sort as the great lord.

The proportion, therefore, between the productive and unproductive hands, depends very much in every country upon the proportion between that part of the annual produce, which, as soon as it comes either from the ground, or from the hands of the productive labourers, is destined for replacing a capital, and that which is destined for constituting a revenue, either as rent or as profit. This proportion is very different in rich from what it is in poor countries.

In the opulent countries of Europe, great capitals are at present employed in trade and manufactures. In the ancient state, the little trade that was stirring, and the few homely and coarse manufactures that were carried on, required but very small capitals. These, however, must have yielded very large profits. The rate of interest was nowhere less than ten per cent. and their profits must have been sufficient to afford this great interest. At pre sent, the rate of interest, in the improved parts of Europe, is nowhere higher than six per cent.; and in some of the most improved, it is so low as four, three, and two per cent. Though that part of the revenue of the inhabitants which is derived from the profits of stock, is always much greater in rich than in poor countries, it is because the stock is much greater; in proportion to the stock, the profits are generally much less.

Thus, at present, in the opulent countries of Europe, a very large, frequently the largest, That part of the annual produce, therefore, f portion of the produce of the land, is destined which, as soon as it comes either from the for replacing the capital of the rich and inde- ground, or from the hands of the productive pendent farmer; the other for paying his pro- labourers, is destined for replacing a capital, fits, and the rent of the landlord. But an- is not only much greater in rich than in poor ciently, during the prevalency of the feudal countries, but bears a much greater proporgovernment, a very small portion of the pro- tion to that which is immediately destined for duce was sufficient to replace the capital em- constituting a revenue either as rent or as proployed in cultivation. It consisted common- fit. The funds destined for the maintenance ly in a few wretched cattle, maintained alto- of productive labour are not only much greatgether by the spontaneous produce of unculti-er in the former than in the latter, but bear a vated land, and which might, therefore, be much greater proportion to those which, though considered as a part of that spontaneous pro- they may be employed to maintain either produce. It generally, too, belonged to the land-ductive or unproductive hands, have generally lord, and was by him advanced to the occu- 2 predilection for the latter. piers of the land. All the rest of the produce The proportion between those different properly belonged to him too, either as rent funds necessarily determines in every country for his land, or as profit upon this paltry capi- the general character of the inhabitants as to tal. The occupiers of land were generally industry or idleness. We are more industri. oondmen, whose persons and effects were ous than our forefathers, because, in the preequally his property. Those who were not sent times, the funds destined for the mainte. bondmen were tenants at will; and though nance of industry are much greater in proporthe rent which they paid was often nominally tion to those which are likely to be employed little more than a quit-rent, it really amount-in the maintenance of idleness, than they were ed to the whole produce of the land. Their two or three centuries ago. Our ancestors lord could at all times command their labour were idle for want of a sufficient encouragein peace and their service in war. Though ment to industry. It is better, says the prothey lived at a distance from his house, they verb, to play for nothing, than to work for nowere equally dependent upon him as his re-thing. In mercantile and manufacturing tainers who lived in it. But the whole pro- towns, where the inferior ranks of people are dure of the land undoubtedly belongs to him, chiefly maintained by the employment of ca

pital, they are in general industrious, sober, | of revenue, corrupts, it is probable, the indus-
and thriving; as in many English, and in try of those who ought to be maintained by
inost Dutch towns. In those towns which are the employment of capital, and renders it less
principally supported by the constant or occa- advantageous to employ a capital there than in
sional residence of a court, and in which the other places. There was little trade or indus-
inferior ranks of people are chiefly maintained try in Edinburgh before the Union. When
by the spending of revenue, they are in gene- the Scotch parliament was no longer to be as-
ral idle, dissolute, and poor; as at Rome, sembled in it, when it ceased to be the neces-
Versailles, Compeigne, and Fontainbleau. If sary residence of the principal nobility and
you except Rouen and Bourdeaux, there is gentry of Scotland, it became a city of some
little trade or industry in any of the parlia- trade and industry. It still continues, how.
ment towns of France; and the inferior ranks ever, to be the residence of the principal
of people, being chiefly maintained by the ex- courts of justice in Scotland, of the boards of
pense of the members of the courts of justice, customs and excise, &c. A considerable re-
and of those who come to plead before them, venue, therefore, still continues to be spent in
are in general idle and poor. The great it. In trade and industry, it is much inferior
trade of Rouen and Bourdeaux seems to be to Glasgow, of which the inhabitants are
altogether the effect of their situation. Rouen chiefly maintained by the employment of ca-
is necessarily the entrepot of almost all the pital. The inhabitants of a large village, it
goods which are brought either from foreign has sometimes been observed, after having
countries, or from the maritime provinces of made considerable progress in manufactures,
France, for the consumption of the great city have become idle and poor, in consequence of
of Paris. Bourdeaux is, in the same manner, a great lord's having taken up his residence in
the entrepot of the wines which grow upon the their neighbourhood.
banks of the Garronne, and of he rivers The proportion between capital and reve.
which run into it, one of the richest wine nue, therefore, seems everywhere to regulate
countries in the world, and which seems to the proportion between industry and idleness
produce the wine fittest for exportation, or best Wherever capital predominates, industry pre-
suited to the taste of foreign nations. Such vails; wherever revenue, idleness. Every in-
advantageous situations necessarily attract a crease or diminution of capital, therefore, na-
great capital by the great employment which turally tends to increase or diminish the real
they afford it; and the employment of this ca- quantity of industry, the number of produc
pital is the cause of the industry of those two tive hands, and consequently the exchangeable
cities. In the other parliament towns of value of the annual produce of the land and
France, very littie more capital seems to be labour of the country, the real wealth and re
employed than what is necessary for supply-venue of all its inhabitants.
ing their own consumption; that is, little Capitals are increased by parsimony, and
more than the smallest capital which can be
employed in them. The same thing may be Whatever a person saves from his revenue he
said of Paris, Madrid, and Vienna. Of those adds to his capital, and either employs it him
three cities, Paris is by far the most industri- self in maintaining an additional number of
ous, but Paris itself is the principal market of productive hands, or enables some other per-
all the manufactures established at Paris, and son to do so, by lending it to him for an inte-
its own consumption is the principal object of rest, that is, for a share of the profits. As the
all the trade which it carries on. London, capital of an individual can be increased only
Lisbon, and Copenhagen, are, perhaps, the by what he saves from his annual revenue or
only three cities in Europe, which are both his annual gains, so the capital of a society,
the constant residence of a court, and can at which is the same with that of all the indivi-
the same time be considered as trading cities, duals who compose it, can be increased only
or as cities which trade not only for their own in the same manner.
consumption, but for that of other cities and
Parsimony, and not industry, is the imme
countries. The situation of all the three is diate cause of the increase of capital. Indus-
extremely advantageous, and naturally fits try, indeed, provides the subject which parsi-
them to be the entrepots of a great part of the mony accumulates; but whatever industry
goods destined for the consumption of distant might acquire, if parsimony did not save and
places. In a city where a great revenue is store up, the capital would never be the
spent, to employ with advantage a capital for greater.

diminished by prodigality and misconduct.

any other purpose than for supplying the con- Parsimony, by increasing the fund which is sumption of that city, is probably more diffi-destined for the maintenance of productive cult than in one in which the inferior ranks of hands, tends to increase the number of those people have no other maintenance but what hands whose labour adds to the value of the they derive from the employment of such a subject upon which it is bestowed. It tends, capital. The idleness of the greater part of therefore, to increase the exchangeable value the people who are maintained by the expense of the annual produce of the land and labour

1

of the country. It puts Into motion an addi- | sated by the frugality of others, the conduct tional quantity of industry, which gives an ad- of every prodigal, by feeding the idle with the ditional value to the annual produce. bread of the industrious, would tend not only to beggar himself, but to impoverish his country.

What is annually saved, is as regularly consumed as what is annually spent, and nearly in the same time too; but it is consumed by a different set of people. That portion of his revenue which a rich man annually spends, is, in most cases, consumed by idle guests and menial servants, who leave nothing behind them in return for their consumption. That portion which he annually saves, as, for the sake of the profit, it is immediately employed as a capital, is consumed in the same manner, and nearly in the same time too, but by a different set of people: by labourers, manufacturers, and artificers, who re-produce, with a profit, the value of their annual consumption. His revenue, we shall suppose, is paid him in money. Had he spent the whole, the food, clothing, and lodging, which the whole could have purchased, would have been distributed among the former set of people. By saving a part of it, as that part is, for the sake of the profit, immediately employed as a capital, either by himself or by some other person, the food, clothing, and lodging, which may be purchased with it, are necessarily reserved for the latter. The consumption is the same, but the consumers are different.

Though the expense of the prodigal should be altogether in home made, and no part of it in foreign commodities, its effect upon the productive funds of the society would still be the same. Every year there would still be a certain quantity of food and clothing, which ought to have maintained productive, employed in maintaining unproductive hands. Every year, therefore, there would still be some diminution in what would otherwise have been the value of the annual produce of the land and labour of the country.

This expense, it may be said, indeed, not being in foreign goods, and not occasioning any exportation of gold and silver, the same quantity of money would remain in the country as before. But if the quantity of food and clothing which were thus consumed by unproductive, had been distributed among productive hands, they would have reproduced, together with a profit, the full value of their consumption. The same quantity of money would, in this case, equally have remained in the country, and there would, besides, have been a reproduction of an equal value of consumable goods. There would have been two values instead of one.

The

By what a frugal man annually saves, he not only affords maintenance to an additional The same quantity of money, besides, cannumber of productive hands, for that of the not long remain in any country in which the ensuing year, but like the founder of a public value of the annual produce diminishes. The work-house he establishes, as it were, a per- sole use of money is to circulate consumable petual fund for the maintenance of an equal goods. By means of it, provisions, materials, number in all times to come. The perpetual and finished work, are bought and sold, and allotment and destination of this fund, indeed, distributed to their proper consumers. is not always guarded by any positive law, by quantity of money, therefore, which can be any trust-right or deed of mortmain. It is annually employed in any country, must be always guarded, however, by a very powerful determined by the value of the consumable principle, the plain and evident interest of eve-goods annually circulated within it. ry individual to whom any share of it shall ever belong. No part of it can ever afterwards be employed to maintain any but productive hands, without an evident loss to the person who thus perverts it from its proper destination.

These must consist, either in the immediate produce of the land and labour of the country itself, or in something which had been purchased with some part of that produce. Their value, therefore, must diminish as the value of that produce diminishes, and along with it the The prodigal perverts it in this manner: quantity of money which can be employed in By not confining his expense within his in- circulating them. But the money which, by come, he encroaches upon his capital. Like this annual diminution of produce, is annualhim who perverts the revenues of some piously thrown out of domestic circulation, will not foundation to profane purposes, he pays the be allowed to lie idle. The interest of whowages of idleness with those funds which the ever possesses it requires that it should be emfrugality of his forefathers had, as it were, ployed; but having no employment at home, consecrated to the maintenance of industry. it will, in spite of all laws and prohibitions, be By diminishing the funds destined for the em- sent abroad, and employed in purchasing conployment of productive labour, he necessarily sumable goods, which may be of some use at diminishes, so far as it depends upon him, the home. Its annual exportation will, in this quantity of that labour which adds a value to manner, continue for some time to add somethe subject upon which it is bestowed, and, thing to the annual consumption of the counconsequently, the value of the annual produce try beyond the value of its own annual of the land and labour of the whole country, produce. What in the days of its prosperity the real wealth and revenue of its inhabitants. had been saved from that annual produce, and If the prodigality of some were not compen-lemployed in purchasing gold and silver, will