cent.

per cent.

during the course of the present century, been | chants are very apt to complain that trade de
always regulated by the market rate *. In cays, though the diminution of profit is the
1720, interest was reduced from the twentieth natural effect of its prosperity, or of a greater
to the fiftieth penny, or from five to two per stock being employed in it than before. Dur,
In 1724, it was raised to the thirtieth ing the late war, the Dutch gained the whole
penny, or to three and a third per cent. In carrying trade of France, of which they stil
1725, it was again raised to the twentieth retain a very large share. The great proper-
penny, or to five per cent. In 1766, during ty which they possess both in French and
the administration of Mr Laverdy, it was re- English funds, about forty millions, it is said
duced to the twenty-fifth penny, or to four in the latter (in which, I suspect, however,
The Abbé Terray raised it after- there is a considerable exaggeration), the great
wards to the old rate of five per cent. The sums which they lend to private people, in
supposed purpose of many of those violent re- countries where the rate of interest is higher
ductions of interest was to prepare the way than in their own, are circumstances which no
for reducing that of the public debts; a pur- doubt demonstrate the redundancy of their
pose which has sometimes been executed. stock, or that it has increased beyond what
France is, perhaps, in the present times, not they can employ with tolerable profit in the
so rich a country as England; and though proper business of their own country; but
the legal rate of interest has in France fre- they do not demonstrate that that business has
quently been lower than in England, the decreased. As the capital of a private man,
market rate has generally been higher; for though acquired by a particular trade, may
there, as in other countries, they have several increase beyond what he can employ in it, and
very safe and easy methods of evading the law. yet that trade continue to increase too, so may
The profits of trade, I have been assured by likewise the capital of a great nation.
British merchants who had traded in both
In our North American and West Indian
countries, are higher in France than in Eng-colonies, not only the wages of labour, but the
land; and it is no doubt upon this account, interest of money, and consequently the pro-
that many British subjects chuse rather to em-fits of stock, are higher than in England. In
ploy their capitals in a country where trade is the different colonies, both the legal and the
in disgrace, than in one where it is highly re-market rate of interest run from six to eight
spected. The wages of labour are lower in
France than in England. When you go from
Scotland to England, the difference which you
may remark between the dress and counte-
nance of the common people in the one coun-
try and in the other, sufficiently indicates the
difference in their condition. The contrast
is still greater when you return from France.
France, though no doubt a richer country
than Scotland, seems not to be going forward
so fast. It is a common and even a popular
opinion in the country, that it is going back-
wards; an opinion which I apprehend, is ill-vourably situated, the land near the sea-shore,
founded, even with regard to France, but
which nobody can possibly entertain with re-
gard to Scotland, who sees the country now,
and who saw it twenty or thirty years ago.

per cent. High wages of labour and high profits of stock, however, are things, perhaps, which scarce ever go together, except in the peculiar circumstances of new colonies. A new colony must always, for some time, be more understocked in proportion to the extent of its territory, and more underpeopled in proportion to the extent of its stock, than the greater part of other countries. They have more land than they have stock to cultivate. What they have, therefore, is applied to the cultivation only of what is most fertile and most fa

and along the banks of navigable rivers. Such land, too, is frequently purchased at a price below the value even of its natural produce. Stock employed in the purchase and The province of Holland, on the other improvement of such lands, must yield a very nand, in proportion to the extent of its terri- large profit, and, consequently, afford to pay tory and the number of its people, is a richer a very large interest. Its rapid accumulation country than England. The government there in so profitable an employment enables the borrow at two per cent. and private people of planter to increase the number of his hands good credit at three. The wages of labour faster than he can find them in a new settleare said to be higher in Holland than in Eng-ment. Those whom he can find, therefore, land, and the Dutch, it is well known, trade are very liberally rewarded. As the colony upon lower profits than any people in Eu- increases, the profits of stock gradually dimiThe trade of Holland, it has been pro- nish. When the most fertile and best situatended by some people, is decaying, and it ted lands have been all occupied, less profit may perhaps be true that some particular can be made by the cultivation of what is inbranches of it are so; but these symptoms ferior both in soil and situation, and less inseem to indicate sufficiently that there is no terest can be afforded for the stock which is general decay. When profit diminishes, mer- so employed. In the greater part of our colonies, accordingly, both the legal and the market rate of interest have been considerably reduced during the course of the present

rope.

* See Denisørt, Article Taux des Interests, tom. iii,

18

2

century. As riches, improvement, and popu- | wages of labour, so it raises the profits of lation, have increased, interest has declined. stock, and consequently the interest of money. The wages of labour do not sink with the pro- By the wages of labour being lowered, the fits of stock. The demand for labour increases owners of what stock remains in the society with the increase of stock, whatever be its can bring their goods at less expense to mar profits; and after these are diminished, stock ket than before; and less stock being employmay not only continue to increase, but to in- ed in supplying the market than before, they crease much faster than before. It is with in- can sell them dearer. Their goods cost them dustrious nations, who are advancing in the less, and they get more for them. Their proacquisition of riches, as with industrious indi- fits, therefore, being augmented at both ends, viduals. A great stock, though with small can well afford a large interest. The great profits, generally increases faster than a small fortunes so suddenly and so easily acquired in stock with great profits. Money, says the pro- Bengal and the other British settlements in verb, makes money. When you have got a the East Indies, may satisfy us, that as the little, it is often easy to get more. The great wages of labour are very low, so the profits of difficulty is to get that little. The connection stock are very high in those ruined countries. between the increase of stock and that of in- The interest of money is proportionably so. dustry, or of the demand for useful labour, In Bengal, money is frequently lent to the has partly been explained already, but will be farmers at forty, fifty, and sixty per cent. and explained more fully hereafter, in treating of the succeeding crop is mortgaged for the paythe accumulation of stock. ment. As the profits which can afford such The acquisition of new territory, or of new an interest must eat up almost the whole rent branches of trade, may sometimes raise the of the landlord, so such enormous usury must profits of stock, and with them the interest of in its turn eat up the greater part of those money, even in a country which is fast ad-profits. Before the fall of the Roman repubvancing in the acquisition of riches. The lic, a usury of the same kind seems to have stock of the country, not being sufficient for been common in the provinces, under the ruinthe whole accession of business which such ac-ous administration of their proconsuls. quisitions present to the different people among virtuous Brutus lent money in Cyprus at whom it is divided, is applied to those parti- eight-and-forty per cent. as we learn from the cular branches only which afford the greatest letters of Cicero. profit. Part of what had before been employ- In a country which had acquired that full ed in other trades, is necessarily withdrawn complement of riches which the nature of its from them, and turned into some of the new soil and climate, and its situation with respect and more profitable ones. In all those old to other countries, allowed it to acquire, which trades, therefore, the competition comes to be could, therefore, advance no further, and less than before. The market comes to be which was not going backwards, both the less fully supplied with many different sorts wages of labour and the profits of stock would of goods. Their price necessarily rises more probably be very low. In a country fully of less, and yields a greater profit to those who peopled in proportion to what either its terrideal in them, who can, therefore, afford to tory could maintain, or its stock employ, the borrow at a higher interest. For some time competition for employment would necessarily after the conclusion of the late war, not only be so great as to reduce the wages of labour private people of the best credit, but some of to what was barely sufficient to keep up the the greatest companies in London, commonly number of labourers, and the country being borrowed at five per cent. who, before that, already fully peopled, that number could nehad not been used to pay more than four, and ver be augmented. In a country fully stockfour and a half per cent. The great accession ed in proportion to all the business it had to both of territory and trade by our acquisitions transact, as great a quantity of stock would in North America and the West Indies, will be employed in every particular branch as the sufficiently account for this, without suppos- nature and extent of the trade would admit. ing any diminution in the capital stock of the The competition, therefore, would everywhere society. So great an accession of new busi-be as great, and, consequently, the ordinary ness to be carried on by the old stock, must profit as low as possible.

The

necessarily have diminished the quantity em- But, perhaps, no country has ever yet ar. ployed in a great number of particular branch-rived at this degree of opulence. China seems es, in which the competition being less, the to have been long stationary, and had, probprofits must have been greater. I shall here- ably, long ago acquired that full complement after have occasion to mention the reasons of riches which is consistent with the nature which dispose me to believe that the capital of its laws and institutions. But this comstock of Great Britain was not diminished, plement may be much inferior to what, with even by the enormous expense of the late war. other laws and institutions, the nature of its The diminution of the capital stock of the soil, climate, and situation, might admit of society, or of the funds destined for the main- A country which neglects or despises foreign tenance of industry, however, as it lowers the commerce, and which admits the vessels of

foreign nations into one or two of its ports on- in the same manner, be something more thar. ly, cannot transact the same quantity of busi-sufficient to compensate the occasional losses ness which it might do with different laws to which lending, even with tolerable pru and institutions. In a country, too, where, dence, is exposed, Were it not, mere charity though the rich, or the owners of large capi- or friendship could be the only motives for tals, enjoy a good deal of security, the poor, lending. or the owners of small capitals, enjoy scarce any, but are liable, under the pretence of justice, to be pillaged and plundered at any time by the inferior mandarins, the quantity of stock employed in all the different branches of business transacted within it, can never be equal to what the nature and extent of that business might admit. In every different branch, the oppression of the poor must establish the monopoly of the rich, who, by engrossing the whole trade to themselves, will be able to make very large profits. Twelve per cent. accordingly, is said to be the common interest of money in China, and the ordinary profits of stock must be sufficient to afford this large interest.

In a country which had acquired its full complement of riches, where, in every particular branch of business, there was the greatest quantity of stock that could be employed in it, as the ordinary rate of clear profit would be very small, so the usual market rate of interest which could be afforded out of it would be so low as to render it impossible for any but the very wealthiest people to live upor the interest of their money. All people of small or middling fortunes would be obliged to superintend themselves the employment of their own stocks. It would be necessary that almost every man should be a man of business, or engage in some sort of trade. The province of Holland seems to be approaching A defect in the law may sometimes raise near to this state. It is there unfashionable the rate of interest considerably above what not to be a man of business. Necessity the condition of the country, as to wealth or makes it usual for almost every man to be so, poverty, would require. When the law does and custom everywhere regulates fashion. As not enforce the performance of contracts, it it is ridiculous not to dress, so is it, in some puts all borrowers nearly upon the same foot- measure, not to be employed like other people. ing with bankrupts, or people of doubtful As a man of a civil profession seems awkward credit, in better regulated countries. The un-in a camp or a garrison, and is even in so:ne certainty of recovering his money makes the lender exact the same usurious interest which is usually required from bankrupts. Among the barbarous nations who overran the western provinces of the Roman empire, the performance of contracts was left for many ages to the faith of the contracting parties. The courts of justice of their kings seldom intermeddled in it. The high rate of interest which took place in those ancient times, may, perhaps, be partly accounted for from this

cause.

When the law prohibits interest altogether, it does not prevent it. Many people must borrow, and nobody will lend without such a consideration for the use of their money as is suitable, not only to what can be made by the use of it, but to the difficulty and danger of evading the law. The high rate of interest among all Mahometan nations is accounted for by M. Montesquieu, not from their poverty, but partly from this, and partly from the difficulty of recovering the money.

danger of being despised there, so does an idle man among men of business.

The highest ordinary rate of profit may be such as, in the price of the greater part of commodities, eats up the whole of what should go to the rent of the land, and leaves only what is sufficient to pay the labour of preparing and bringing them to market, according to the lowest rate at which labour can anywhere be paid, the bare subsistence of the la bourer. The workman must always have been fed in some way or other while he was about the work, but the landlord may not always have been paid. The profits of the trade which the servants of the East India Company carry on in Bengal may not, perhaps, be very far from this rate.

The proportion which the usual market rate of interest ought to bear to the ordinary rate of clear profit, necessarily varies as profit rises or falls. Double interest is in Great Britain reckoned what the merchants call a good, moderate, reasonable profit; terms The lowest ordinary rate of profit must al- which, I apprehend, mean no more than a ways be something more than what is suffi- common and usual profit. In a country where cient to compensate the occasional losses to the ordinary rate of clear profit is eight or which every employment of stock is exposed. ten per cent. it may be reasonable that one It is this surplus only which is neat or clear half of it should go to interest, wherever busi. profit. What is called gross profit, compre-ness is carried on with borrowed money. The hends frequently not only this surplus, but what is retained for compensating such extraordinary losses. The interest which the borrower can afford to pay is in proportion to the clear profit only.

The lowest ordinary rate of interest must,

stock is at the risk of the borrower, who, as it were, insures it to the lender; and four or five per cent. may, in the greater part of trades, be both a sufficient profit upon the risk of this insurance, and a sufficient recompence for the trouble of employing the stock. But the

proportion between interest and clear profit might not be the same in countries where the ordinary rate of profit was either a good deal lower, or a good deal higher.

If it were a

СНАР. Х.

good deal lower, one half of it, perhaps, could OF WAGES AND PROFIT IN THE DIFFERENT EL! not be afforded for interest; and more might be afforded if it were a good deal higher.

PLOYMENTS OF LABOUR AND STOCK.

In countries which are fast advancing to THE whole of the advantages and disadvant riches, the low rate of profit may, in the price ages of the different employments of labou: of many commodities, compensate the high and stock, must, in the same neighbourhood, wages of labour, and enable those countries be either perfectly equal, or continually tendto sell as cheap as their less thriving neigh- ing to equality. If, in the same neighbourbours, among whom the wages of labour may hood, there was any employment evidently be lower. either more or less advantageous than the rest, In reality, high profits tend much more to so many people would crowd into it in the one raise the price of work than high wages. If, case, and so many would desert it in the other, in the linen manufacture, for example, the that its advantages would soon return to the wages of the different working people, the flax level of other employments. This, at least, dressers, the spinners, the weavers, &c. should would be the case in a society where things all of them be advanced twopence a-day, it were left to follow their natural course, where would be necessary to heighten the price of a there was perfect liberty, and where every man piece of linen only by a number of twopences was perfectly free both to choose what occu.. equal to the number of people that had been pation he thought proper, and to change it as employed about it, multiplied by the number often as he thought proper. Every man's inof days during which they had been so em-terest would prompt him to seek the advantployed. That part of the price of the com- ageous, and to shun the disadvantageous emmodity which resolved itself into the wages, ployment. would, through all the different stages of the Pecuniary wages and profit, indeed, arc manufacture, rise only in arithmetical propor- everywhere in Europe extremely different, action to this rise of wages. But if the profits cording to the different employments of labour of all the different employers of those work- and stock. But this difference arises, partly ing people should be raised five per cent. that from certain circumstances in the employpart of the price of the commodity which re- ments themselves, which, either really, or at solved itself into profit would, through all the least in the imagination of men, make different stages of the manufacture, rise in a small pecuniary gain in some, and counter. geometrical proportion to this rise of profit. balance a great one in others, and partly from The employer of the flax-dressers would, in the policy of Europe, which nowhere leaves selling his flax, require an additional five per things at perfect liberty. cent. upon the whole value of the materials and wages which he advanced to his workmen. The employer of the spinners would require an additional five per cent. both upon the advanced price of the flax, and upon the wages of the spinners. And the employer of the PART I.-Inequalities arising from the nature weavers would require a like five per cent. of the employments themselves. both upon the advanced price of the linen

terest.

up for

The particular consideration of those circumstances, and of that policy, will divide this Chapter into two parts.

yarn, and upon the wages of the weavers. In THE five following are the principal circumraising the price of commodities, the rise of stances which, so far as I have been able to wages operates in the same manner as simple observe, make up for a small pecuniary gain interest does in the accumulation of debt. in some employments, and counterbalance a The rise of profit operates like compound in- great one in others. First, the agreeableness Our merchants and master manufac- or disagreeableness of the employments themturers complain much of the bad effects of selves; secondly, the easiness and cheapness, high wages in raising the price, and thereby or the difficulty and expense of learning them; lessening the sale of their goods, both at home thirdly, the constancy or inconstancy of emand abroad. They say nothing concerning ployment in them; fourthly, the small or great the bad effects of high profits; they are silent trust which must be reposed in those who exwith regard to the pernicious effects of their ercise them; and, fifthly, the probability or own gains; they complain only of those of improbability of success in them. other people. Note 12.

First, the wages of labour vary with the ease or hardship, the cleanliness or dirtiness, the honourableness or dishonourableness, of the employment. Thus in most places, take the year round, a journeyman tailor earns less than a journeyman weaver. His work is much

The difference between the wages of skilled labour and those of common labour, is founded upon this principle.

easier. A journeyman weaver earns less than expected, over and above the usual wages of
a journeyman smith. His work is not always common labour, will replace to him the whole
easier, but it is much cleanlier. A journey-expense of his education, with at least the or-
man blacksmith, though an artificer, seldom dinary profits of an equally valuable capital
earns so much in twelve hours, as a collier, It must do this too in a reasonable time, re-
who is only a labourer, does in eight. His gard being had to the very uncertain duration
work is not quite so dirty, is less dangerous, of human life, in the same manner as to the
and is carried on in day-light, and above more certain duration of the machine.
ground. Honour makes a great part of the
reward of all honourable professions. In point
of pecuniary gain, all things considered, they
are generally under-recompensed, as I shall The policy of Europe considers the labour
endeavour to shew by and by. Disgrace has of all mechanics, artificers, and manufacturers,
the contrary effect. The trade of a butcher as skilled labour; and that of all country la-
is a brutal and an odious business; but it is bourers as common labour. It seems to sup-
in most places more profitable than the great-pose that of the former to be of a more nice
er part of common trades. The most detest-and delicate nature than that of the latter. It
able of all employments, that of public execu- is so perhaps in some cases; but in the great-
tioner, is, in proportion to the quantity of er part it is quite otherwise, as I shall endeav-
work done, better paid than any common trade our to shew by and by. The laws and cus-
whatever.
toms of Europe, therefore, in order to qualify
Hunting and fishing, the most important any person for exercising the one species of
employments of mankind in the rude state of labour, impose the necessity of an apprentice-
society, become, in its advanced state, their ship, though with different degrees of rigour
most agreeable amusements, and they pursue in different places. They leave the other free
for pleasure what they once followed from ne-and open to every body. During the conti-
cessity. In the advanced state of society, nuance of the apprenticeship, the whole labour
therefore, they are all very poor people who of the apprentice belongs to his master. In
follow as a trade, what other people pursue as the meantime he must, in many cases, be
a pastime. Fishermen have been so since the maintained by his parents or relations, and, in
time of Theocritus". A poacher is every-almost all cases, must be clothed by them.
where a very poor man in Great Britain. In Some money, too, is commonly given to the
countries where the rigour of the law suffers master for teaching him his trade. They who
no poachers, the licensed hunter is not in a cannot give money, give time, or become bound
much better condition. The natural taste for for more than the usual number of years; a
those employments makes more people follow consideration which, though it is not always
them, than can live comfortably by them; and advantageous to the master, on account of the
the produce of their labour, in proportion to usual idleness of apprentices, is always disad-
its quantity, comes always too cheap to mar-vantageous to the apprentice. In country la
ket, to afford any thing but the most scanty
subsistence to the labourers.

bour, on the contrary, the labourer, while he
is employed about the easier, learns the more
Disagreeableness and disgrace affect the difficult parts of his business, and his own la-
profits of stock in the same manner as the bour maintains him through all the different
wages of labour. The keeper of an in or stages of his employment. It is reasonable,
tavern, who is never master of his own house, therefore, that in Europe the wages of me
and who is exposed to the brutality of every chanics, artificers, and manufacturers, should
drunkard, exercises neither a very agreeable be somewhat higher than those of common la-
nor a very creditable business. But there is bourers. They are so accordingly, and their
scarce any common trade in which a small
stock yields so great a profit.

Secondly, the wages of labour vary with the easiness and cheapness, or the difficulty and expense, of learning the business.

When any expensive machine is erected, the extraordinary work to be performed by it before it is worn out, it must be expected, will replace the capital laid out upon it, with at least the ordinary profits. A man educated at the expense of much labour and time co any of those employments which require extraordinary dexterity and skill, may be compared to one of those expensive machines. The work which he learns to perform, it must be

* See Idyllium XXI.

superior gains make them, in most places, be considered as a superior rank of people. This superiority, however, is generally very small: the daily or weekly carnings of journeymen in the more common sorts of manufactures, such as those of plain linen and woollen cloth, computed at an average, are, in most places, very little more than the day-wages of com mon labourers. Their employment, indeed, is more steady and uniform, and the superiority of their earnings, taking the whole year together, may be somewhat greater. It seems evidently, however, to be no greater than what is sufficient to compensate the superior expense of their education.

Education in the ingenious arts, and in the liberal professions, is still more tedious and