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spare revenue of the people, may consume so the private misconduct of others, or by the great a share of their whole revenue, and there- public extravagance of government. But we by oblige so great a number to encroach upon shall find this to have been the case of almost their capitals, upon the funds destined for the all nations, in all tolerably quiet and peacemaintenance of productive labour, that all the able times, even of those who have not enjoyed frugality and good conduct of individuals may the most prudent and parsimonious governnot be able to compensate the waste and de- ments. To form a right judgment of it, ingradation of produce occasioned by this vio-deed, we must compare the state of the counlent and forced encroachment.

try at periods somewhat distant from one anoThis frugality and good conduct, however, ther. The progress is frequently so gradual, is, upon most occasions, it appears from expe- that, at near periods, the improvement is not rience, sufficient to compensate, not only the only not sensible, but, from the declension eiprivate prodigality and misconduct of indivi- ther of certain branches of industry, or of cerduals, but the public extravagance of govern- tain districts of the country, things which ment. The uniform, constant, and uninter-sometimes happen, though the country in gerupted effort of every man to better his condi- neral is in great prosperity, there frequently tion, the principle from which public and na- arises a suspicion, that the riches and industry tional, as well as private opulence is original- of the whole are decaying.

ly derived, is frequently powerful enough to The annual produce of the land and labour maintain the natural progress of things to- of England, for example, is certainly much wards improvement, in spite both of the ex-greater than it was a little more than a centravagance of government, and of the greatest tury ago, at the restoration of Charles II. errors of administration. Like the unknown principle of animal life, it frequently restores health and vigour to the constitution, in spite not only of the disease, but of the absurd prescriptions of the doctor.

Though at present few people, I believe, doubt of this, yet during this period five years have seldom passed away, in which some book or pamphlet has not been published, written, too, with such abilities as to gain some authority with the public, and pretending to demonstrate that the wealth of the nation was fast declining; that the country was depopulated, agriculture neglected, manufactures decaying, and trade undone. Nor have these publications been all party pamphlets, the wretched offspring of falsehood and venality. Many of them have been written by very candid and very intelligent people, who wrote nothing but what they believed, and for no other reason but because they believed it.

The annual produce of the land and labour of any nation can be increased in its value by no other means, but by increasing either the number of its productive labourers, or the productive powers of those labourers who had before been employed. The number of its productive labourers, it is evident, can never be much increased, but in consequence of an increase of capital, or of the funds destined for maintaining them. The productive powers of the same number of labourers cannot be increased, but in consequence either of some The annual produce of the land and labour addition and improvement to those machines of England, again, was certainly much greatand instruments which facilitate and abridge er at the Restoration than we can suppose it labour, or of more proper division and distri- to have been about a hundred years before, at bution of employment. In either case, an ad- the accession of Elizabeth. At this period, ditional capital is almost always required. It too, we have all reason to believe, the country is by means of an additional capital only, that was much more advanced in improvement, the undertaker of any work can either provide than it had been about a century before, tohis workmen with better machinery, or make wards the close of the dissensions between the a more proper distribution of employment houses of York and Lancaster. Even then it among them. When the work to be done was, probably, in a better condition than it consists of a number of parts, to keep every had been at the Norman conquest; and at the man constantly employed in one way, requires Norman conquest, than during the confusion a much greater capital than where every man is occasionally employed in every different part of the work. When we compare, therefore, the state of a nation at two different periods, and find that the annual produce of its land and labour is evidently greater at the latIn each of those periods, however, there ter than at the former, that its lands are better was not only much private and public profu cultivated, its manufactures more numerous sion, many expensive and unnecessary wars, and more flourishing, and its trade more ex- great perversion of the annual produce from tensive; we may be assured that its capital maintaining productive to maintain unproducmust have increased during the interval be-tive hands; but sometimes, in the confusion tween those two periods, and that more must of civil discord, such absolute waste and dehave been added to it by the good conduct of struction of stock, as might be supposed, not some, than had been taken from it either by only to retard, as it certainly did, the natural

of the Saxon heptarchy. Even at this early period, it was certainly a more improved country than at the invasion of Julius Cæsar, when its inhabitants were nearly in the same state with the savages in North America.

it is to be hoped, will do so in all future times. England, however, as it has never been blessed with a very parsimonious government, so parsimony has at no time been the characteristic virtue of its inhabitants. It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves al ways, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state. that of the subject never will.

accumulation of riches, but to have left the ment in almost all former times, and which, country, at the end of the period, poorer than at the beginning. Thus, in the happiest and most fortunate period of them all, that which has passed since the Restoration, how many disorders and misfortunes have occurred, which, could they have been foreseen, not only the impoverishment, but the total ruin of the country would have been expected from them? The fire and the plague of London, the two Dutch wars, the disorders of the revolution, the war in Ireland, the four expensive French wars of 1688, 1701, 1742, and 1756, together with the two rebellions of 1715 and 1745. In the course of the four French wars, the nation has contracted more than L.145,000,000 of debt, over and above all the other extraordinary annual expense which they occasioned; so that the whole cannot be computed at less than L. 200,000,000. So great a share of the annual produce of the land and labour of the country, has, since the Revolution, been employed upon different occasions, in maintaining an extraordinary number of unproductive hands.

As frugality increases, and prodigality diminishes, the public capital, so the conduct of those whose expense just equals their revenue, without either accumulating or encroaching, neither increases nor diminishes it. Some modes of expense, however, seem to contribute more to the growth of public opulence than others.

But had not those wars given this particular direction to so large a capital, the greater part of it would naturally have been The revenue of an individual may be spent, employed in maintaining productive hands, either in things which are consumed immediwhose labour would have replaced, with a pro- ately, and in which one day's expense can nei fit, the whole value of their consumption. The ther alleviate nor support that of another; or it value of the annual produce of the land and may be spent in things mere durable, which labour of the country would have been consi- can therefore be accumulated, and in which derably increased by it every year, and every every day's expense may, as he chooses, either year's increase would have augmented still alleviate, or support and heighten, the effect more that of the following year. More houses of that of the following day. A man of forwould have been built, more lands would have tune, for example, may either spend his reve been improved, and those which had been im-nue in a profuse and sumptuous table, and in proved before would have been better cultivated; more manufactures would have been established, and those which had been estabtished before would have been more extended; and to what height the real wealth and revenue of the country might by this time have been raised, it is not perhaps very easy even to imagine.

maintaining a great number of menial ser. vants, and a multitude of dogs and horses; or, contenting himself with a frugal table, and few attendants, he may lay out the great er part of it in adorning his house or his country villa, in useful or ornamental buildings, in useful or ornamental furniture, in collecting books, statues, pictures; or in things more But though the profusion of government frivolous, jewels, baubles, ingenious trinkets must undoubtedly have retarded the natural of different kinds; or, what is most trifling progress of England towards wealth and im- of all, in amassing a great wardrobe of fine provement, it has not been able to stop it. clothes, like the favourite and minister of a The annual produce of its land and labour is great prince who died a few years ago. Were undoubtedly much greater at present than it two men of equal fortune to spend their revewas either at the Restoration or at the Revo-nue, the one chiefly in the one way, the other lution. The capital, therefore, annually em- in the other, the magnificence of the person ployed in cultivating this land, and in main- whose expense had been chiefly in durable taining this labour, must likewise be much commodities, would be continually increasing, In the midst of all the exactions of every day's expense contributing something greater. government, this capital has been silently and to support and heighten the effect of that of gradually accumulated by the private fruga- the following day; that of the other, on the ity and good conduct of individuals, by their contrary, would be no greater at the end of universal, continual, and uninterrupted effort the period than at the beginning. The forto better their own condition. It is this effort, mer too would, at the end of the period, be protected by law, and allowed by liberty to the richer man of the two. He would have exert itself in the manner that is most advan- a stock of goods of some kind or other, which, tageous, which has maintained the progress though it might not be worth all that it cost, of England towards opulence and improve- would always be worth something. No trace

or vestige of the expense of the latter would remain, and the effects of ten or twenty years' profusion would be as completely annihilated as if they had never existed.

posed to imply soine acknowledgment of pre ceding bad conduct. Few, therefore, of those who have once been so unfortunate as to launch out too far into this sort of expense, have af. terwards the courage to reform, till ruin and bankruptcy oblige them. But if a person has, at any time, been at too great an expense in building, in furniture, in books, or pictures, no imprudence can be inferred from his changing his conduct. These are things in which further expense is frequently rendered unnecessary by former expense; and when a person stops short, he appears to do so, not because he has exceeded bis fortune, but because he has satisfied his fancy.

As the one mode of expense is more favourable than the other to the opulence of an individual, so is it likewise to that of a nation. The houses, the furniture, the clothing of the rich, in a little time, become useful to the inferior and middling ranks of people. They are able to purchase them when their superiors grow weary of them; and the general accommodation of the whole people is thus gradually improved, when this mode of expense becomes universal among men of fortune. In countries which have long been rich, you will The expense, besides, that is laid out in frequently find the inferior ranks of people in durable commodities, gives maintenance, compossession both of houses and furniture per-monly, to a greater number of people than fectly good and entire, but of which neither that which is employed in the most profuse the one could have been built, nor the other hospitality. Of two or three hundred weight have been made for their use. What was for- of provisions, which may sometimes be served merly a seat of the family of Seymour, is now up at a great festival, one half, perhaps, is an inn upon the Bath road. The marriage- thrown to the dunghill, and there is always a bed of James I. of Great Britain, which his great deal wasted and abused. But if the exqueen brought with her from Denmark, as a pense of this entertainment had been employed present fit for a sovereign to make to a sove-in setting to work masons, carpenters, upholreign, was, a few years ago, the ornament of sterers, mechanics, &c. a quantity of provisions an alehouse at Dunfermline. In some an- of equal value would have been distributed cient cities, which either have been long sta-among a still greater number of people, who tionary, or have gone somewhat to decay, you would have bought them in pennyworths and will sometimes scarce find a single house which could have been built for its present inhabitants. If you go into those houses, too, you will frequently find many excellent, though antiquated pieces of furniture, which are still very fit for use, and which could as little have been made for them. Noble palaces, magnificent villas, great collections of books, statues, pictures, and other curiosities, I would not, however, by all this, be unare frequently both an ornament and an hon-derstood to mean, that the one species of exour, not only to the neighbourhood, but to pense always betokens a more liberal or genethe whole country to which they belong. Ver-rous spirit than the other. When a man of sailles is an ornament and an honour to France, fortune spends his revenue chiefly in hospita.. Stowe and Wilton to England. Italy still continues to command some sort of veneration, by the number of monuments of this kind which it possesses, though the wealth which produced them has decayed, and though the genius which planned them seems to be extinguished, perhaps from not having the same employment.

The expense, too, which is laid out in durable commodities, is favourable not only to accumulation, but to frugality. If a person should at any time exceed in it, he can easily reform without exposing himself to the censure of the public. To reduce very much the number of his servants, to reform his table from great profusion to great frugality, to lay down his equipage after he has once set it up, are changes which cannot escape the observa tion of his neighbours, and which are sup

pound weights, and not have lost or thrown
away a single ounce of them. In the one way,
besides, this expense maintains productive, in
the other unproductive hands.
In the one
way, therefore, it increases, in the other it
does not increase the exchangeable value of
the annual produce of the land and labour of
the country.

lity, he shares the greater part of it with his friends and companions; but when he employs it in purchasing such durable commo dities, he often spends the whole upon his own person, and gives nothing to any body without an equivalent. The latter species of expense, therefore, especially when directed towards frivolous objects, the little ornaments of dress and furniture, jewels, trinkets, gewgaws, frequently indicates, not only a trifling, but a base and selfish disposition. All that I mean is, that the one sort of expense, as it always occasions some accumulation of valu. able commodities, as it is more favourable w private frugality, and, consequently, to the increase of the public capital, and as it maintains productive rather than unproductive hands, conduces more than the other to the growth of public opulence. Notes 17, 18.

CHAP. IV.

OF STOCK LENT AT INTEREST.

[borrow at interest, in order to pay the debt.
The capital borrowed replaces the capitals oi
those shop-keepers and tradesmen which the
country gentlemen could not have replaced
from the rents of their estates.
It is not pro-
perly borrowed in order to be spent, but in
order to replace a capital which had been spent
before.

THE stock which is lent at interest is always considered as a capital by the lender. He expects that in due time it is to be restored to Almost all loans at interest are made in him, and that, in the mean time, the borrower money, either of paper, or of gold and silver; is to pay him a certain annual rent for the use but what the borrower really wants, and what of it. The borrower may use it either as a the lender readily supplies him with, is not capital, or as a stock reserved for immediate the money, but the money's worth, or the consumption. If he uses it as a capital, he goods which it can purchase. If he wants it employs it in the maintenance of productive as a stock for immediate consumption, it is labourers, who reproduce the value, with a those goods only which he can place in that profit. He can, in this case, both restore the stock. If he wants it as a capital for employcapital, and pay the interest, without alienat-ing industry, it is from those goods only that ing or encroaching upon any other source of the industrious can be furnished with the tools, revenue. If he uses it as a stock reserved for materials, and maintenance necessary for carimmediate consumption, he acts the part of arying on their work. By means of the loan, prodigal, and dissipates, in the maintenance the lender, as it were, assigns to the borrower of the idle, what was destined for the support his right to a certain portion of the annual of the industrious. He can, in this case, nei-produce of the land and labour of the counther restore the capital nor pay the interest, try, to be employed as the borrower pleases. without either alienating or encroaching upon some other source of revenue, such as the property or the rent of land.

The quantity of stock, therefore, or, as it is commonly expressed, of money, which can be lent at interest in any country, is not regu The stock which is lent at interest is, no lated by the value of the money, whether pa doubt, occasionally employed in both these per or coin, which serves as the instrument ways, but in the former much more frequently of the different loans made in that country, than in the latter. The man who borrows in but by the value of that part of the annual order to spend will soon be ruined, and he produce, which, as soon as it comes either from who lends to him will generally have occasion the ground, or from the hands of the producto repent of his folly. To borrow or to lend tive labourers, is destined, not only for refor such a purpose, therefore, is, in all cases, placing a capital, but such a capital as the where gross usury is out of the question, con-owner does not care to be at the trouble of trary to the interest of both parties; and employing himself. As such capitals are comthough it no doubt happens sometimes, that monly lent out and paid back in money, they people do both the one and the other, yet, constitute what is called the monied interest. from the regard that all men have for their It is distinct, not only from the landed, but own interest, we may be assured, that it cannot happen so very frequently as we are sometimes apt to imagine. Ask any rich man of common prudence, to which of the two sorts of people he has lent the greater part of his stock, to those who he thinks will employ it profit ably, or to those who will spend it idly, and he will laugh at you for proposing the question. Even among borrowers, therefore, not the people in the world most famous for frugality, the number of the frugal and industrious surpasses considerably that of the prodigal and idle.

from the trading and manufacturing interests, as in these last the owners themselves employ their own capitals. Even in the monied interest, however, the money is, as it were, but the deed of assignment, which conveys from one hand to another those capitals which the owners do not care to employ themselves. Those capitals may be greater, in almost any proportion, than the amount of the money which serves as the instrument of their conveyance; the same pieces of money succes sively serving for many different loans, as wel as for many different purchases. A, for exThe only people to whom stock is commonly ample, lends to W L.1000, with which W lent, without their being expected to make any immediately purchases of B L. 1000 worth of very profitable use of it, are country gentle-goods. B having no occasion for the money men, who borrow upon mortgage. Even they himself, lends the identical pieces to X, with scarce ever borrow merely to spend. What which X immediately purchases of C another they borrow, one may say, is commonly spent L. 1000 worth of goods. C, in the same manbefore they borrow it. They have generally ner, and for the same reason, lends them to consumed so great a quantity of goods, ad-Y, who again purchases goods with them of vanced to them upon credit by shop-keepers D. In this manner, the same pieces, either and tradesmen, that they find it necessary to of coin or of paper, may, in the course of a

few days, serve as the instrument of three dif- consequence, a competition between different ferent loans, and of three different purchases, capitals, the owner of one endeavouring to each of which is, in value, equal to the whole get possession of that employment which is amount of those pieces. What the three mo- occupied by another; but, upon most occanied men, A, B, and C, assigned to the three sions, he can hope to justle that other out of borrowers, W, X, and Y, is the power of this employment by no other means but by making those purchases. In this power con- dealing upon more reasonable terms. He must sist both the value and the use of the loans. not only sell what he deals in somewhat cheapThe stock lent by the three monied men is er, but, in order to get it to sell, he must equal to the value of the goods which can be sometimes, too, buy it dearer. The demand for purchased with it, and is three times greater productive labour, by the increase of the funds than that of the money with which the pur- which are destined for maintaining it, grows chases are made. Those loans, however, may every day greater and greater. Labourers eabe all perfectly well secured, the goods pur-sily find employment; but the owners of cachased by the different debtors being so em-pitals find it difficult to get labourers to employed as, in due time, to bring back, with a ploy. Their competition raises the wages of profit, an equal value either of coin or of pa- labour, and sinks the profits of stock. Bu per. And as the same pieces of money can when the profits which can be made by the thus serve as the instrument of different loans use of a capital are in this manner diminishto three, or, for the same reason, to thirty ed, as it were, at both ends, the price which times their value, so they may likewise suc- can be paid for the use of it, that is, the rate cessively serve as the instrument of repay-of interest, must necessarily be diminished with them.

ment.

A capital lent at interest may, in this man- Mr Locke, Mr Lawe, and Mr Montesquieu, ner, be considered as an assignment, from the as well as many other writers, seem to have lender to the borrower, of a certain consider-imagined that the increase of the quantity of able portion of the annual produce, upon con- gold and silver, in consequence of the disco dition that the borrower in return shall, dur- very of the Spanish West Indies, was the real ing the continuance of the loan, annually as-cause of the lowering of the rate of interest sign to the lender a small portion, called the through the greater part of Europe. Those interest; and, at the end of it, a portion equally metals, they say, having become of less value considerable with that which had originally themselves, the use of any particular portion been assigned to him, called the repayment. of them necessarily became of less value too, Though money, either coin or paper, serves and, consequently, the price which could be generally as the deed of assignment, both to paid for it. This notion, which at first sight the smaller and to the more considerable por- seems so plausible, has been so fully exposed tion, it is itself altogether different from what by Mr Hume, that it is, perhaps, unnecessary is assigned by it. to say any thing more about it. The follow ing very short and plain argument, however, may serve to explain more distinctly the fal lacy which seems to have misled those gentle. men.

In proportion as that share 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, increases in any country, what is called Before the discovery of the Spanish West the monied interest naturally increases with Indies, ten per cent. seems to have been the it. The increase of those particular capitals common rate of interest through the greater from which the owners wish to derive a reve-part of Europe. It has since that time, in nue, without being at the trouble of employ-different countries, sunk to six, five, four, and ing them themselves, naturally accompanies three per cent. Let us suppose, that in every

the general increase of capitals; or, in other particular country the value of silver has sunk words, as stock increases, the quantity of stock precisely in the same proportion as the rate of to be lent at interest grows gradually greater interest; and that in those countries, for ex and greater. ample, where interest has been reduced from As the quantity of stock to be lent at inte- ten to five per cent. the same quantity of silsest increases, the interest, or the price which ver can now purchase just half the quantity of must be paid for the use of that stock, neces- goods which it could have purchased before. sarily diminishes, not only from those general This supposition will not, I believe, be found causes which make the market price of things anywhere agreeable to the truth; but it is the commonly diminish as their quantity increases, most favourable to the opinion which we are but from other causes which are peculiar to going to examine; and, even upon this supthis particular case. As capitals increase in position, it is utterly impossible that the lowany country, the profits which can be made ering of the value of silver could have the by employing them necessarily diminish. It smallest tendency to lower the rate of interest. becomes gradually more and more difficult to If £100 are in those countries now of nɑ find within the country a profitable method of more value than £50 were then, £10 must employing any new capital. There arises, in now be of no more value than £5 were then.

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