An inquiry into the nature and causes of the wealth of

80

The Wealth of Nations

in both countries, are higher in France than in England; and it is

no doubt upon this account, that many British subjects chuse

rather to employ their capitals in a country where trade is in dis-

grace, than in one where it is highly respected. 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 countenance of the common people in the one country

and in the other, sufficiently indicates the difference in their con-

dition. 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 backwards; an opinion

which I apprehend, is ill-founded, even with regard to France, but

which nobody can possibly entertain with regard to Scotland, who

sees the country now, and who saw it twenty or thirty years ago.

The province of Holland, on the other hand, in proportion to

the extent of its territory and the number of its people, is a richer

country than England. The government there borrow at two per

cent. and private people of good credit at three. The wages of

labour are said to be higher in Holland than in England, and the

Dutch, it is well known, trade upon lower profits than any people

in Europe. The trade of Holland, it has been pretended by some

people, is decaying, and it may perhaps be true that some particu-

lar branches of it are so; but these symptoms seem to indicate

sufficiently that there is no general decay. When profit dimin-

ishes, merchants are very apt to complain that trade decays, though

the diminution of profit is the natural effect of its prosperity, or of

a greater stock being employed in it than before. During the late

war, the Dutch gained the whole carrying trade of France, of which

they still retain a very large share. The great property which they

possess both in French and English funds, about forty millions, it

is said in the latter (in which, I suspect, however, there is a consid-

erable exaggeration ), the great sums which they lend to private

people, in countries where the rate of interest is higher than in

their own, are circumstances which no doubt demonstrate the re-

dundancy of their stock, or that it has increased beyond what they

can employ with tolerable profit in the proper business of their

own country; but they do not demonstrate that that business has

decreased. As the capital of a private man, though acquired by a

particular trade, may increase beyond what he can employ in it,

and yet that trade continue to increase too, so may likewise the

capital of a great nation.

In our North American and West Indian colonies, not only the

wages of labour, but the interest of money, and consequently the

profits of stock, are higher than in England. In the different colo-

nies, both the legal and the market rate of interest run from six to

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Adam Smith

eight percent. High wages of labour and high profits of stock,

however, are things, perhaps, which scarce ever go together, ex-

cept 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 propor-

tion to the extent of its stock, than the greater part of other coun-

tries. 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 favourably situated, the land near the sea-

shore, 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 improvement of

such lands, must yield a very large profit, and, consequently, af-

ford to pay a very large interest. Its rapid accumulation in so prof-

itable an employment enables the planter to increase the number

of his hands faster than he can find them in a new settlement.

Those whom he can find, therefore, are very liberally rewarded.

As the colony increases, the profits of stock gradually diminish.

When the most fertile and best situated lands have been all occu-

pied, less profit can be made by the cultivation of what is inferior

both in soil and situation, and less interest can be afforded for the

stock which is 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 cen-

tury. As riches, improvement, and population, have increased, in-

terest has declined. The wages of labour do not sink with the prof-

its of stock. The demand for labour increases with the increase of

stock, whatever be its profits; and after these are diminished, stock

may not only continue to increase, but to increase much faster than

before. It is with industrious nations, who are advancing in the ac-

quisition of riches, as with industrious individuals. A great stock,

though with small profits, generally increases faster than a small

stock with great profits. Money, says the proverb, makes money.

When you have got a little, it is often easy to get more. The great

difficulty is to get that little. The connection between the increase

of stock and that of industry, or of the demand for useful labour,

has partly been explained already, but will be explained more fully

hereafter, in treating of the accumulation of stock.

The acquisition of new territory, or of new branches of trade,

may sometimes raise the profits of stock, and with them the inter-

est of money, even in a country which is fast advancing in the

acquisition of riches. The stock of the country, not being suffi-

cient for the whole accession of business which such acquisitions

present to the different people among whom it is divided, is ap-

plied to those particular branches only which afford the greatest

profit. Part of what had before been employed in other trades, is

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