An inquiry into the nature and causes of the wealth of

82

The Wealth of Nations

necessarily withdrawn from them, and turned into some of the

new and more profitable ones. In all those old trades, therefore,

the competition comes to be Jess than before. The market comes

to be less fully supplied with many different sorts of goods. Their

price necessarily rises more or less, and yields a greater profit to

those who deal in them, who can, therefore, afford to borrow at a

higher interest. For some time after the conclusion of the late war,

not only private people of the best credit, but some of the greatest

companies in London, commonly borrowed at five per cent. who,

before that, had not been used to pay more than four, and four

and a half per cent. The great accession both of territory and trade

by our acquisitions in North America and the West Indies, will

sufficiently account for this, without supposing any diminution

in the capital stock of the society. So great an accession of new

business to be carried on by the old stock, must necessarily have

diminished the quantity employed in a great number of particular

branches, in which the competition being less, the profits must

have been greater. I shall hereafter have occasion to mention the

reasons which dispose me to believe that the capital stock of Great

Britain was not diminished, even by the enormous expense of the

late war.

The diminution of the capital stock of the society, or of the

funds destined for the maintenance of industry, however, as it lowers

the wages of labour, so it raises the profits of stock, and conse-

quently the interest of money. By the wages of labour being low-

ered, the owners of what stock remains in the society can bring

their goods at less expense to market than before; and less stock

being employed in supplying the market than before, they can sell

them dearer. Their goods cost them less, and they get more for

them. Their profits, therefore, being augmented at both ends, can

well afford a large interest. The great fortunes so suddenly and so

easily acquired in Bengal and the other British settlements in the

East Indies, may satisfy us, that as the wages of labour are very

low, so the profits of stock are very high in those ruined countries.

The interest of money is proportionably so. In Bengal, money is

frequently lent to the farmers at forty, fifty, and sixty per cent. and

the succeeding crop is mortgaged for the payment. As the profits

which can afford such an interest must eat up almost the whole

rent of the landlord, so such enormous usury must in its turn eat

up the greater part of those profits. Before the fall of the Roman

republic, a usury of the same kind seems to have been common in

the provinces, under the ruinous administration of their procon-

suls. The virtuous Brutus lent money in Cyprus at eight-and-forty

per cent. as we learn from the letters of Cicero.

In a country which had acquired that full complement of riches

which the nature of its soil and climate, and its situation with

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Adam Smith

respect to other countries, allowed it to acquire, which could, there-

fore, advance no further, and which was not going backwards,

both the wages of labour and the profits of stock would probably

be very low. In a country fully peopled in proportion to what

either its territory could maintain, or its stock employ, the compe-

tition for employment would necessarily be so great as to reduce

the wages of labour to what was barely sufficient to keep up the

number of labourers, and the country being already fully peopled,

that number could never be augmented. In a country fully stocked

in proportion to all the business it had to transact, as great a quan-

tity of stock would be employed in every particular branch as the

nature and extent of the trade would admit. The competition,

therefore, would everywhere be as great, and, consequently, the

ordinary profit as low as possible.

But, perhaps, no country has ever yet arrived at this degree of

opulence. China seems to have been long stationary, and had, prob-

ably, long ago acquired that full complement of riches which is

consistent with the nature of its laws and institutions. But this

complement may be much inferior to what, with other laws and

institutions, the nature of its soil, climate, and situation, might

admit of. A country which neglects or despises foreign commerce,

and which admits the vessel of foreign nations into one or two of

its ports only, cannot transact the same quantity of business which

it might do with different laws and institutions. In a country, too,

where, though the rich, or the owners of large capitals, enjoy a

good deal of security, the poor, 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 busi-

ness 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 ordi-

nary profits of stock must be sufficient to afford this large interest.

A defect in the law may sometimes raise the rate of interest con-

siderably above what the condition of the country, as to wealth or

poverty, would require. When the law does not enforce the per-

formance of contracts, it puts all borrowers nearly upon the same

footing with bankrupts, or people of doubtful credit, in better

regulated countries. The uncertainty of recovering his money makes

the lender exact the same usurious interest which is usually re-

quired from bankrupts. Among the barbarous nations who over-

ran the western provinces of the Roman empire, the performance

of contracts was left for many ages to the faith of the contracting

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