THE UNIVERSITY 
 
 OF ILLINOIS 
 
 LIBRARY 
 
 352. 
 
 B875 
 V.2T
 
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 OF 
 
 A NEW THEORY 
 
 or 
 
 POLITICAL ECONOMY, 
 
 BY 
 
 ACKOUTE SMYTH. 
 
 
 FERGUSSON, PRINTER, CORK. 
 
 SOLD ftV 
 
 Messrs. LongmaMj Rbes & Co. and Mr. G» B, Whittakeii, LokdoN.
 
 THE PRINCIPAL OBJECT OF THE FOLLOWING PAGES IS TO PROVK 
 
 First. — That the value of every thing, whether natural, as Land, or artificial 
 
 as Manufactures, is regulated by one and the same principle. 
 Secondly. — That Capital is not the domineering thing generally supposed, and 
 Thirdly. — That profit is a dedwch'on /ram production ; and not an addition to it. 
 
 ^
 
 OUTLINES OF POLITICAL ECONOMY. 
 
 Circumsimtccs which promote wealth. 
 
 X OLITiCAL ECONOMY is the science whicli treats of the 
 natural causes whicli lead nations to wealth, and ot the etfects 
 which various human laws and regulations produce in obstruc- 
 ting or fttcilitating the operation of these natural causes. 
 
 Wealth is of two kinds, individual and national. The wealth 
 of individuals is the power wliich they possess, of commanding 
 the produce of the labour of a great many of their countrymen, 
 or whatever can be had in excliange for that produce. It is 
 Avholly relative, and does not imply a command of comforts and 
 luxuries absolutely great, but great only in comparison with 
 those enjoyed by the great majority of the individuals of the 
 society to which they belong. An African Monarch, though 
 the richest of his nation, is niuch less completely supplied with 
 real comforts and luxuries, perhaps, than an English mechanic. 
 The wealth of a nation on the contrary, is the power which it 
 possesses in the aggregate, of commanding absolutely great 
 comforts and luxuries. ^ 
 
 The substance of wealth is the produce of labour, and is 
 greater or less according to the quantity of that produce.* 
 
 The quantity of the produce will however, depend on two 
 circumstances 5 first, on the amount of labour in employment ; 
 and secondly, on the productivenejis of the labour which is 
 in employment. 
 
 * It may possibly be thought that quality ought also lo be mentioned as a crite- 
 fion of the productiveness of labour. Quality is however, in an economical point of 
 view, implied in the term quantity, into which it thus resolves itself ; equal or given 
 labour, produces in/erior articles in greater g'uan^^, than superior ones; therefore, 
 if equal labour, in one country, as England, can produce an article of superior 
 quality, in as great quantity, as it can one of inferior quulily, in anoilier country, as 
 France, it follows that it can produce an article of suptrlor qualily in England, ij' 
 ^eitttr quantity tliain in IVancc.
 
 As to tlie first of these circu instance*, it is self-evident, that if 
 a people be only partly employed, that is, if they spend but a short 
 time every day at work, or do but little during the day, they 
 cannot produce as much as if they were constantly occupied. 
 The circumstances under which nations arrive at constant em- 
 j)loyment are, the prevalence of good laws, and the orderly 
 behaviour of the mass of the peo{)le, from which result the 
 security of property, and an inclination on the part of all to 
 endeavour to create for themselves those comforts which the 
 protection of law enables them to enjoy without molestation. 
 
 As to the second circumstance on whicli depends the quantity 
 of produce, namely, the productiveness of the labour actually 
 in em|)loynjent, little comment seems necessary. The fact is 
 ini[)licd in the word " productiveness" which means, " the 
 j)ower of producing." 
 
 The productiveness of labour, or its power of producing those 
 things which administer to the necessities, comforts, convenien- 
 cies and luxuries of human life, is very different in different 
 nations. Jn some savage communities, the most unremitting 
 toil, in hunting or fishing, is necessary to provide bare sub- 
 sistence, and that of the most meagre and worst kind ; while in 
 other countries, such as England and France, a comparatively 
 small part of the labour of the community is sufficient to supply 
 not only necessaries and comforts to all, but luxuries to many, 
 and ader ail, to leave many hands unemployed for the advance- 
 ment of knowledge, art and science. 
 
 The productiveness of labour depends on two circum- 
 stances ; first, on the division of labour, and secondly, on the 
 perfection of apparatus. 
 
 The division of labour encreases its productiveness by en- 
 creasing the skill and expertness of the workman The more 
 the different operations of labour are subdivided, and the more 
 minutely they are distributed among different hands, the 
 greater must be the skill and dexterity of those engaged in each 
 separate department. The skill of a man engaged in a single 
 trade, and exchanging its produce for that of other trades, is 
 obviously much greater, and therefore, the produce and recom- 
 pense of his industry much more abundant, than if he were
 
 obliged to supply himself by his own individual labour, with 
 every thing which he might want. The dexterity also, of a man 
 engaged in only oae single opera(ion of a particular trade, is 
 much greater than if his attention were continually distracted 
 by passing from one kind of work to another. The greater the 
 division of labour therefore, the greater is the produce ; the 
 same work can then be done by fewer hands than before, and 
 the leisure thus afforded allows scope for further production. 
 
 The particular circumstances of a country mav, and often 
 do, form an obstacle to the thorough division of labour, 
 which cannot take place without a certain demand for its pro- 
 duce ; thus, in any particular trade, there ought to be a demand 
 hi the neighbourhood, for the produce of the labour of one man 
 at least, otherwise, two or more trades must be carried on by 
 one man. Thus also, if a certain manufacture be divisible into 
 five different operations, there ought to be a demand for the 
 produce of five mens labour at leasts otherwise, two or more 
 operations must be committed to one man. 
 
 Maritime situations are therefore most favourable to the divi- 
 sion of labour, for they enable goods to be carried to great 
 distances at little expense; by which means, they are certain of 
 nveeting with demand somewhere or other. Navigable rivers, 
 canals and good roads afford similar opportunities of disposing 
 of goods at a distance, which cannot be disposed of in the 
 neighbourhood. Fairs or periodical markets in certain fixed 
 places have similar effects, bringing a great many buyers and 
 sellers, — a great supply and demand, together to one place. 
 
 But, however, great may be the facility of mercantile com- 
 munication, the division of labour cannot completely take place 
 in many manufactures, unless workmen of the various necesary 
 denominations, co-operate together in one place; and this can 
 only be effected either by a copartnership among themselves, 
 which, however, would really be impracticable, from the impos- 
 sibility of maintaining the necessary harmony and concert among 
 eachother; or else, by the employment of a number of hirelings 
 under a single person, which would also be i mpracticable, unless 
 the employer possessed capital or an accumulation of subsis- 
 tence, which alone could enable him to support his workmen 
 during the progress of their work.
 
 Ca|»ii;il, bowuver, such as employers getierally possess, is not 
 necessary tor effecting the division of labour in every brancli of 
 imUistry. It is necessary only in those niHtmfactures, where 
 immexiiate co-operation among the vrorknien is requisite. In 
 many manufactures, the division of labour may take place to the 
 fullest extent among unconnected independent workmen; the 
 spinner may be independent of the weaver, and the "weaver of 
 the dyer ; but we shall nevertheless hereafter see that even such 
 trades as these liave a tendency to congregate in the manufactory 
 of the capitalist. 
 
 The perfection of apparatus is the other circumstance which 
 encreases the productiveness of labour, and this it effects in a 
 prodigious degree. Like the division of labour, but in afar more 
 striking manner, it enables a small number of men to perform 
 llie work of a large nuinher, and by the leisure thus afforded, 
 gives scope to the further employment of the people in the pro- 
 duction of additional necessaries and comforts : and thi^ obser- 
 vation is equally applicable to all kinds of apparatus ; thus the 
 perfection or fertility of land, the chief apjiaratus of agriculture, 
 enables it to yield food to a greater number than its cultivators, 
 thus supporting a surplus population in leisure, who not being 
 obliged to spend tlieir time in the production of food are ena- 
 bled to advance the improvenicnt of all by the cultivation of 
 arts and sciences. 
 
 But (hough a certain fertility ofsoil, a certain productiveness 
 of agricultural labour is necessary to the existence of maiuifac- 
 tures, yet manufactures may with the most fertile soil remain 
 long absent. Men, particularly when in a rude state, cannot 
 alwaysdiscern theirtrue interests; and even though tbeyshould, 
 yet reason xvould not be strong enough to overcome the fbrceot 
 habit. The capability however of the people to receive improve- 
 ment some time or other is thereby ensured, and whenever a fa- 
 vourable juncture of circumstances tends to promote manufac- 
 tures, thete is a field for their reception. Without them the 
 overproductiveness of soil produces effects generally mischie- 
 vous, making the people idle, turbulent and lawless. Before the 
 riseof manufactures in Europe, men of large income, kno\<'ing 
 no better way of using it, spent it in a profuse hospitality, in the
 
 support of a mnltitude of dependents. Thus that part of the po- 
 pulation which agriculture could dispense with, found noeni- 
 ployment, except in the warsof their masters against each other. 
 
 In saying theretore, that the productiveness of lahour is the 
 source of national wealth, we must not be understood to mean 
 that it necessarily produces it, but only that without it, wealth 
 cannot be produced. In an advanced stage of improvement, 
 ^very encrease in the productiveness ot labour is generally made 
 available for further improvement ; but in a backward state it 
 is not so. The labour.of a horde of Tartars in obtaining food from 
 their fertile pastures, may be very trifling compared lo its pro- 
 duction, and therefore very productive, but it does not follow, 
 that they take the hint to apply themselves to the arts j some- 
 time or other however, they may ; but if their soil were so barren 
 as to be barely capable of maintaining its cultivators, and ifthey 
 had no other place to resort to, they must inevitably, and with- 
 out possibility of change, for ever rest content with bare sub- 
 sistence and uncultivated life. 
 
 We shall now class together the principal apparatus used in 
 the various processes of industry ; these are, /a«c/ the great na- 
 tural apparatus, without which agriculture could not be carried 
 on ; navigable rivers, harbovrs, canals, roads, bridges, ships and 
 carriages^ which are the apparatus of mercantile communica- 
 tion; steam engines, mills, and all kinds of machinery ; buildings 
 for manufactories, ploughs and other agricultural implements, 
 loQnis,power looms, spinning wheels An(\jennies, w\ih spades, saics, 
 hammers, ^nd all instruments or tools used in the mechanic trades. 
 
 A fevv of these it will be perceived are natural apparatus ; 
 they are a capital conferred on man in the infancy of his exis- 
 tence, to enable him to exercise the rude beginnings of industry, 
 and commence the work of providing subsistence. Their influ- 
 ence in improving his situation, is confined within a certain 
 limit, if unassisted by the others, which are artificial apparatus, 
 afterwards constructed by his own ingenuity, and which seem 
 capable of encreasing the productiveness of his labour, and with 
 it, the comforts of his existence, in an almost indefinite degree. 
 Amongst them must be included all artificial improvements of 
 the natural apparatus, such as draining bogs, clearing forests.
 
 9 
 
 manuring lands, deepening harbours and river?, &c. which tbas 
 become partly nafural niu\ partly artificial apparatus. 
 
 The natural apparatus are granted to almost every country ; 
 but in very uneqiKil perfection ; some soils are fertile, some bar- 
 ren ; pome countries possess many deep an<l navigable rivers ; 
 others few, and these perha[)s shallow or rapid ; some coasts are 
 shoal and dangerous, while others are hold and opened witli 
 many good harbours. These differences are very important in 
 their effects, more especially the difference of soil, which we 
 have already noticed. Good natural harbours, and navigable 
 rivers, have similar effects; they facilitate the conveyance of 
 merchandise, and anticipate the necessity of constructing artifi- 
 cial l)arbours and canals. Like these latter, they abridge the 
 labour of mercantile communication, and render it more pro- 
 ductive, leaving a greater number of hands unemployed, for the 
 adoption of other branches of industry, and thus affording an 
 opportunity for the multiplication of the product of the industry 
 of the entire nation. 
 
 Every country, as we have said, possesses these natural ap- 
 paratus in a greater or lesser degree ; without them man could 
 not exist; he must have some object in conjunction with which 
 to exert his strength and ingenuity ; he could not provide food 
 by rubbing his fingers together ; he is not however supplied gra- 
 tuitously with the nicer and more complex apparatus ; because 
 by proper care and foresight he may construct them himself. 
 This care and foresight consists in the accumulation of sub- 
 sistence, wiiliout which he would find it impossible to pursue 
 any work not intended for his immediate and daily support. 'Tis 
 true, such tools and implementi as could be completed between 
 meals, or in a very short space of time, like the implements of 
 savage nations, might in any stage of society be provided. But 
 in order to prepare apparatus of more complex, and expensive 
 kind, the maker must not only have invented it, or formed the 
 idea of it in his mind, which is a process of very slow growth, but 
 he must also be able to maintain himself during its progress, 
 without the interruption of hunting or fishing, or whatever else 
 may be his way of livelihood. For this purpose, he must either 
 have a store of subsistence laid up, or a store of some other
 
 9 
 
 produce of labour, capable when required, of purchasing the 
 means of subsistence ; otherwise he must perish before the com- 
 pletion of tlje work. Ttiis necessary accumulation has been 
 called capital. 
 
 Without capital therefore, no nation can possess apparatus, 
 nor consequently, employ themselves as advantageously as witb 
 it ; and the more abundant capital is, the more advantageously 
 the nation can employ itself. But nevertheless it does not fol- 
 low, that a nation without capital cannot employ itself at all, 
 as would seem to be implied in the prevailing doctrines. Every 
 nation with any spare time at all, might turn its attention to 
 the fabrication of the conveniences of life, and although their 
 work might at first be rude and laborious, yet it would be a 
 foundation laid for future opulence and industry, which are the 
 invariable results of patience, and perseverance, antl fruga- 
 lity. 1 have thought it worth while to say thus much, in this 
 place, on the subject of capital, on account of the extraordinary 
 opinions generally entertained as to its nature and uses. 
 
 National wealth then we have seen is greater or less, accord- 
 ing to the quantity of produce yielded by the labour of the 
 whole society. The greater (he productiveness of labour, 
 the greater opportunity the nation possesses to become weal- 
 thy ; but the productiveness of labour, has in itself no ten- 
 dency to encrease the value of the nations possessions. When 
 the productiveness of labour is encreased, each particular com- 
 modity loses value; it is then produced with less trouble than 
 before, and therefore is less esteemed. But from the encrease 
 of production generally consequent on encreased productiveness 
 of labour, the void left by the diminution of labour, is soon 
 filled up by further production, and the sum total of productions 
 recovers its former value. 
 
 ON VALUE. 
 
 Value is a subject, which has greatly ptizzlcd the political 
 economists. The word is used in two senses; specnlative, and 
 practical. Speculative value is merely utility, or the estimation 
 in which any thing is held, which may be procured without 
 trouble. Practical value is that estimation attended with 
 trouble, in procuring the object of it. This latter kind of
 
 iO 
 
 value is measured by ilie trouble, or ibe fcjuivalent of the 
 trouble employed in obtaiiiiiiij it. Tbe trouble employed may 
 consist ot labour used either iu directly providing it, or else in 
 providing something else, wherewith to induce the owner to 
 part with it. Jn either case however, the valuable article can 
 command the expenditure of so much labour or labours ()ro- 
 duce to obtain it; and this, whether it have been itself pro<iuced 
 by labour, as doth ; or furnished gratuitously by nature, as land. 
 
 Value then, according to the common acceptation of the 
 term, is the power of purchasing, or of commanding in ex- 
 change. When three pounds of bread will exchange for one 
 pound of butchers meat, the value of the former is said to be 
 equal to that of the latter ; that is, their value is equal, and each 
 represents the value or exhibits the price of the other ; price 
 is the representative of value, and may consist of any particular 
 commodity; but for practical purposes, the precious metals, 
 have been universally found the most convenient. It is at the 
 same time and place only however, that any commodity, (as 
 well gold and silver, as any other) can measure the value of 
 another; for the circumstances which regulate the value of 
 commodities are different at different times and places, and 
 so consequently is their value itself. The circumstances which 
 regulate value, are so imperfectly understood, that 1 shall be- 
 stow particular pains on this part of the subject. 
 
 The value of every thing is immediately regulated by the pro- 
 portion, or, more correctly speaking, the disfance, between the 
 supply and the demand. The greaterthe supply of commodities 
 compared to the demand, the lower is their value, and the greater 
 the demand in comparison of the supply the higher is the value. 
 The supply of air and water is boundless, and may be considered 
 infinite compared to the demand ; accordingly, their price is 
 infinitely small, or nothing. But if the supply of either were 
 for any time artificially withdrawn, its price would rise, and 
 incredible sums be demanded and given for a small portion. What 
 would not have been given by those confined in the black hole at 
 Calcutta, to any orte that could provide a supply of fresh air ? 
 
 There are two sorts of substances ; those which are inaugmen* 
 'ahle, as air, water, land and mints ; and those which are augmen- 
 *.ubltj as tilhige produce, labouring animals, and maaufuctures.
 
 u 
 
 Tlic itiaiifi:iuen(ab]e substances, nlr ;infl wafer, will form no 
 part of our enquiries ; the demand tor Ihein can never overtake 
 the supply, so as to render a lar-^er quantity desirable. They 
 therefore can never acquire value, properly so called. But with 
 land and mines, the case is very diU'erent. The whole surface 
 of the former nnay be occupied, and all the known mines may be 
 in operation, and must of course be subject to the same laws, as 
 if no others existed. The spontaneous produce of the earth, 
 duringthe absence of agriculture, (ufider which must be included 
 all animals, whether of chase or pasture) may be classed here ; 
 it is inaugmeiitnhle, whether the demand for it be great or small ; 
 though it may be diminished by excessive demand. 
 
 Land in the infancy of society is totally destitute of vfdue. It 
 is like air and water, so extremely abundant, that no body would 
 think of paying for it, since he cotild appropriate enough of that 
 which lay unoccupied. But as population overspreads the land, 
 the demand for food must advance, but without a correspond- 
 ing advance of the supply, and then land would acquire value 
 in the following manner. 
 
 When the demand for food advances, without a correspond- 
 ing advance of the supply, food necessarily becomes scarce ; i ; 
 price rises, and then exceeds the expense of its production, 
 which is the reasonable remuneration of the farmer ; husbandry 
 immediately becomes more profitable than other occupations, 
 and attracts competitors for land, the apparatus, without which 
 it cannot be carried on. The demand for land thus rises, 
 while the supply remains (he same, and then the land like other 
 commodities brings a price, which may be paid either in full, 
 at the time of sale as in early times, or in the manner now gene- 
 rally adopted, by a yearly rent, or the interest of what would be 
 the original price if paid in full ; the lender or letter reserving 
 a power of calling in the principal (or land,) if the interest (or 
 rent) be not regularly paid* 
 
 * That land was anciently bought and sold likp otlier comn»odities, can admit of 
 no question, Abraham purchased a field for 400 shekels of silver. Gen. chap. 23. 
 The absolute nature of this purchase is very strongly indnted out in the orisiinal. 
 Jacob also bought " a parcel of a field" for an hundred pieces of money. Gen. 
 chap. 33. V. 19. Scripture I believe, affords nHinerous instances of the ahsoluie 
 purchase of land. At a later period, the chief priests of the Jews bought the potter's- 
 fitld with th« thirty pieces of silver which Judas Iicariot returo«d.
 
 12 
 
 We must not omit to mention, that the best parts of the land 
 would acquire vahje, before worse parts would acquire any. 
 Men would naturally occupy the best first, and abstain from 
 the worse, until, by the eucrease of population, the deuiaud for 
 produce should rise beyond its tbrmer proportion to the 
 supply; and produce a rise of price. The price, when thus 
 enhanced, would then more than remunerate the cultivaior ; 
 and as others would be anxious to possess the same advantag;e8, 
 a demand for the land which conferred them would immediately 
 be created, and a price offered for it. /\t the same time, it 
 would be found that, although nobody could afford to cultivate 
 worse land before, yet since the price of produce rose, it 
 .might now be attempted, particularly as the cultivator would 
 bave nothing to pity for the land, and in this respect would 
 nave an advantage over the cultivator of the best land, to com- 
 pensate the disadvantage ot the poorness of his ground. As 
 lood would continue to rise, lliis ground of the second quality 
 would acquire value like the first, and land of the third quality 
 would then come info use, and alter a time acquire value ; and 
 so on, every spot of £^round in the country would in its turn, 
 nrst come into use, and then acquire value in successive order 
 according to its quality. 
 
 riexi to land, mines claim our attention. They are equally 
 inaugmenfable with land ; but a striking difference exists be- 
 tween them, which is, that land lying open from the beginning, 
 the best portions are first entered upon : whereas mines, 
 being concealed in the bowels of the earth, the discovery of*, 
 richer ones is often posterior to that of poorer. Hence by the 
 
 Some pa^n^es of Horace shew that in the most civilized age and country of anti- 
 <lii:iy, rent was unknown or uncommon. " V^oii give" says he, " money in exchange 
 Un- "■ grapes, chickens, eg<;s and wine, and in lliis way, you buy as it were that 
 
 nelo (sc. that produces them) which was purchased for three hundred thousand 
 " sesterces, (treccnta millia) or more" 2 Kpist. 2, 162. see also 1. Kpist. 7. bl. Tlie 
 /oca/wand conrluctio of tiie [{omans signified lending and borrowing, and when ap- 
 plied to land and houses had nearly the same signitication as " hiring" with us. The 
 tact then of the letting of land being classed with the borrowing of money and the 
 hiring of moveables seems to prove, that it could not have been very extensively 
 practised ; since, if it were, that very circumstance must have raised in the eyes of 
 men, a perfect distinction between the two, unincumbered with doubt, and fully 
 as decided, 'us to be presumed, as that which at present exists. The universal m- 
 trodiiciion of rent originated iri the feudal system. It consisted at first of military 
 icrvKcSj which at laud grew dear, were afterwardi commuted to pecuniary pit} inentF*
 
 13 
 
 discovery of uew mine?, the old have often not only ceased to 
 possess value, but have ceased even to be worth working:, beings 
 then in the situation of bad land not yet resorted to. 
 
 Mines acquire value precisely in the same manner as land. 
 When the encrease of demand for their produce raises its price 
 beyond what would compensate the expense of working- tliem. 
 mining becomes more profitable than other occupations, and 
 attracts competitors for mines, thai is creates a demand 
 for them, which, not being- accompanied with an encrease 
 of the supply, with a discovery of more mines, communicates 
 value to them, and they bring a price wliich is s[enerally paid 
 in rent. But if other mines should be afterwards discovered, 
 encreased abundance would soon lower (he price of minerals 
 again, and more or less deprive the old mines of the value which 
 they had acquired. Jf their value should have been sufficiently 
 considerable to allow the depreciation ofminerals to expend its 
 whole force upon it, without encroaching on the otiier cost of 
 production, they may continue still to be worked ; but if their 
 value should not have been sufficient to receive the whole effects 
 of the depreciation, they must be abandoned. The poorer mines 
 nmst therefore be abandoned the first ; they have the least chance 
 of withstanding the shock. If all the mines were of equal pro- 
 ductiveness, none of them need be compelled to discontinue 
 operations altogether. All being equally productive, the pressure 
 would fall equally on all, and therefore the only expedient that 
 must necessarily be resorted to in (hat case, would be the re- 
 duction of the extent of operations in each ; by which means (he 
 supply of minerals could be adjusted to the demand, without any 
 being compelled to discontinue operations altogether. But all 
 the mines must necessarily in such case cease to possess any 
 value, nor could they recover it, until after the encreasing demand 
 for minerals should have put all of them in the fullest operation. 
 
 Legislative restrictions may place land in a similar situation, 
 with mines. The English have resorted to inferior land, on ac- 
 count of the superior lands of other countries being, as far as re- 
 gards ^Apm, the same thing as undiscovered. If all restrictions 
 and duties on the importation of food were removed, it would 
 be like a discovery of other and superior laud, which would 
 cause the good lands^ of England to lose value, and the inferior
 
 14 
 
 knds lo be abandoiu'd (u i)HSUir«'. All restrictions howrrrr, 
 could not l)e entirely rcnjovid ; lor the expanse of importHtion 
 is an insuperable anil permanent restriction to a certain amount. 
 
 Siiniliir <n'i'cls may he produced by great and sudden improve- 
 ments in ai^riculturc. 1(, by means of these improvements, (whe- 
 ther they consist of the reclaimins: of waste land, or the better 
 cultivation of the old) the supply of food should at any time ad- 
 vance faster than the demunil, iis price must tall, and with it the 
 rent of land. It is like the discovery of addiiionat neighbour- 
 ing lanil, by which the supply ot food would be suddenly aug- 
 mented. Such sudden improvements therefore, are injurious to 
 the agriculturists, though beneficial to the nation at large. They 
 were doubtless, in part, the cause of the extraordinary fall of prices 
 and rents a few years ago. The agriculiurists however cannot 
 controul this which is an evil to themselves. They cannot act 
 sufficiently in concert, to limit pr(»duction. Each must consult 
 for himself alone, and endeavour to make his own crop as plenti- 
 ful as possible. If he acted otherwise, the limitation of his own 
 particular crop would have no perceptible effect on [)rices, but 
 would have a very perceptible efl'ect in reducing the sum received 
 by himself. Hence it is that, all concurring in the principle of 
 producing as much as possible, the produce may sometimes hap- 
 pen to encrease faster than the demand tor it. 
 
 We sliall now consider the subject of fl?/o-me»/a6/e commodi- 
 ties, a much moredifiiculi one, and one which will require a great 
 deal of attention. Augmentable commodities are those which are 
 capable of being erjcreased in quantity. The supply of them may 
 be enoreased, and is always greater or less according to the rfe- 
 mandj on which it attends, and which it follows at a certain dis- 
 tance, behind. It follows the demand for the following reason. 
 If the demand should at any time advance faster than tlie supply, 
 the latter would soon fall very far short of the former ; the supply 
 would be small compared to the demand : competition would be 
 excited among buyers, the consequence of which would be an en- 
 crease of value and a rise of price : many would then find it profi- 
 table to produce the article, and by thus encreasing the supply, 
 would cause it to follow the demand. And it follows the demand 
 at a certain distance behind^ because if it should happen to draw 
 so close to the demand as to sink ibe value below the expense of
 
 15 
 
 produotion, it would cease <o be Ihe interest of any one to pro- 
 duce the article ; its production would be attended with loss and 
 therefore abandoned by many. Tlius, it would cease to be pro- 
 duced, until, by the consumptiou of tlie stock on hands, the sup- 
 ply should retire to the proper distance behind the demand, and 
 the price rise again to a level uiih the cost of production. 
 
 It is evident that the supply ol any thing of value must al- 
 ways be behind the demand. As every thiugof value requires 
 trouble to obtain it, either in direct efforts to procure it, or in 
 some other work to purchase it with, a man must feel his want 
 of it before he will take the trouble to obtain it ; and the trou- 
 ble necessary for the purpose, M'ill prevent him from supplying 
 himself as abundantly, as if he could do so without trouble ; 
 that is, as if the ariicle had no value. The supply therefore, 
 which he is willing to proviile, is less than his unchecked 
 wishes would aspire to, that is, less than, or behind the demand. 
 
 We must of course observe a very marked difference in the 
 manner in which the value ot auginentable and inatigmentable 
 substances is ultimately influenced. In one particular however, 
 they uniformly agree. Their valuk is imaikdiately regula- 
 ted BY THEDISTANCE BETWEEN THE SUPPLY AND THE DEMAND. 
 
 Their difference consists in the circumstanct-s which afleet that 
 distance^ not which afil-ct their value: their value is in every 
 possible case regulated by that distance; but in augmenlab/e 
 commodities that distance is itself regulated by another influence, 
 namely, the cost of production, whereas in inaugmentable com- 
 modities, it is not regulated at all ; but is continually undergoing 
 immense alterations. These alterations are effected enlirely by 
 the advance of demand, the sup[)ly being siaiionary. At first 
 the position of supply and demand is in inverted order ; the 
 supply is far in advance of the demand ; and as long as this 
 continues, there can be no value or price. The demand how- 
 ever, at last overtakes the supply ; and when once it gels beyond 
 it, value and price are communicdted in the manner before 
 described. 
 
 But in the case ofaugmentable commodities, the supply which 
 Is nothing in the beginning, advances as well as the demand, 
 and maintains some regular distance from it, which distance is 
 regulated by the cost of production. Hence the cost of pro- 
 
 t
 
 16 
 
 duclion i« only llie ulfimate and rrinote, while the distance be- 
 tween the supply atid demand is the imnediate and proximate re- 
 gulator of their value Che effects of alterdti»)ns of the former 
 are never instantaneous : thus, if foreign food were admitted 
 into England dtity free, the price of labour would not on that ac- 
 count fall, until tlie eucreased facility of support sliould have 
 augmented the population, and caused tlie supply of labour to 
 draw nearer to tlie demand for it than before, until in fact, it 
 should have lessened the distance between the supply and de- 
 maud for labour. On the other hand, if, from a glut of any 
 commodity in the market, the supply should advance too close 
 to the demand, though without any alteration of the cost of its 
 production, its price would fall instantaneously. 
 
 However, whatever irregularities may occur from sudden 
 alterations of the distance between supply and demand, that 
 distance always settles gradually to its usual standard. \\.^ 
 usual standard however, is not in itself invariable ; it is regu- 
 lated by the cost of production as has been already stated, ant! 
 must partake of whatever alterations the cost of production it- 
 self undergoes. The cost of production is the lowest sum which 
 a workman can aff'ord to accept for his goods ; and as most men 
 wish to promote the sale of their own goods, and acquire estab- 
 lished business, ihey generally ofiVr them for the lowest sum 
 which they can afford to accept; and this sum is the natural 
 price of their goods. But this natural price, this* cost of produc- 
 tion, is itself composed of principles, which are liable to change. 
 It is compounded of the wages of labour, and the profit on the 
 capital employed in production, both of which are liable to 
 variations. The manner in which it is composed of wages and 
 profit is so well understood that we shall say nothing on it, but 
 proceed to shew that wages and profit are liable to variations, 
 and for this purpose we nmst explain their nature. 
 
 ON WAGES. 
 
 Thb wages OP LABOUR are the recompense received by 
 every man for his exertions. They consist properly of the 
 very product of his labour, or its exact equivalent. Thus every 
 man may spend his time, either its Robinson Crusoe is repre- 
 sented to have done, in producing cotatorts and necessaries for
 
 hiiilself directly, or else in producing tliein for olliers, and re- 
 ceiving; equivalents. As liowever, in iniproved nations, labour 
 is found to be beyond all comparison more productive, when 
 it is divided and every workman labours exclusively at a 
 single occujiation, one hundredtb part of the produce of which 
 however, he could not use himself, he always take care to em- 
 ploy hitnself in the latter manner exclusively, that is, in pro- 
 ducing tor others, and receiving from them equivalents, or the 
 price of equivalents suited to his own consumption. The abso- 
 lute amount of his acquisitions however, will depend on two 
 circumstances namely, the fullness of employ men t, and the pro* 
 ductiveness of the labour tvhich is in actual employment. 
 
 It will depend, first, on the fullness of employment. It is 
 manifest that the more a man's time is employed the greater is 
 his production. Yet the scarcity or fullness of employment can- 
 not make the recompense low or high, in a greater ratio than 
 employment itself is scarce or full. There is a M5 inertias in 
 labour as well as in matter. Scarcity of employment arises from 
 the idleness of the people in the average, and habitual scarcity 
 of employment, with its concomitant paucity of comforts, sits 
 as light on them as habitual plenty of it ; they are as well con- 
 tent to labour a little for a small recom()ense, as other nations 
 to labour much for a greater one. There is therefore no more 
 competition for enj ploy men t in the one case than in the other. 
 The demand for labour may be small in the idle nation ; but 
 X\\e voluntary supply of it, which alone can be called supply, is 
 equally small, and the labourers recompense, compared to his 
 work may be the same as in a busy nation ; for although in the 
 latter, each man receives a much larger amount in the whole, 
 yet it may not be larger in proportion to the labour actually 
 performed. 'Tis true, the recompense of labour mea>ured by 
 'A giaen period o^ wovV, may sometimes be difiTtrent in boih, even 
 where the labour of both is equally productive; but it does not 
 follow that the same labour is performed, in that given period 
 in both ; the habit of idleness is inveterate, and the work per- 
 formed by a workman of a busy nation in a given time, is 
 much greater than that performed by one of an idle nation in 
 the same time. The universal and provoking idleness o{ the 
 Jrish country labourers is much complained of. 
 
 c
 
 18 
 
 The pn^cr which each workman posFesje* of encrtasing the 
 fiiMness of employiiH'uf, by hl< own itulividiial exertion!!, must 
 ever depend npon the deniand for hi* pRxhictions-— upon the 
 quantity which he cnn dispose of, and receive equivalents for. 
 How far soever it initMit he in his powrr to work incessantly 
 in producint:^ articles for his own use <lirectly, like Kobinson 
 Crusoe, if like Iiini he were in<lependent of the labour of 
 others, yet in the improved state of society, not beine^ thus in- 
 <le[)endent, he cannot do so without iiicurriucr greater disad- 
 vautasfe than that which he wishes to avoid ; and he cannot 
 compel others who choose to be partly idle, to work at equiva- 
 lents for him, in order to enable him to dispose of his entire la- 
 bour ir> productions to purchase them with ; or in other words, 
 lie cannot find purchasers for more than a certain quantity of 
 j)rodnce. Jt is only by the common consent of the entire peo- 
 ple that employment can be full, and that there can be a full 
 demand for the labour of every person. The demand and supply 
 of labour are reciprocally encreased by, and in a manner consti- 
 tute one another. 'Tis true, the whole labour of a single man 
 would hardly glut the market j he might find a sale for his en- 
 creased production, but then the sale of the goods of all others 
 of his trade would be diminished in an equal degree, though 
 imperceptibly, fi-om the great diffusion of the effect However, 
 it is not every individual who happens to be indtistrious that 
 can, even though he wishes it, put all his labour in requisition: 
 the necessity of working in manufactories conjointly with a 
 great number, forbids it ; and the en)ployer regulates the 
 number of his workmen by the demand of his custotners, which 
 his large establishment might easily over do ; and the discard- 
 ed workman must rest content without that employment 
 M'hich he cannot profitably undertake singly unassisted by the 
 machinery and co-operation of a large manufactory. It is only 
 by the coritetuporaneous encrease of industry, among workmen 
 of several different trades, that the fullness of em[)loyment can 
 ever encrease. 
 
 It is the relation of employers and hireling workmen, just 
 mentioned, that mikes wages assume the character of the price 
 of labour, which they have dune most completely, being greater
 
 or less according to the distance between the supply of labour 
 and the demand for it, in accordance with the t^eneral rule 
 which regulates the price of every tiling. T\\e less abundant 
 labourers are, compared to the demand for tiiem, the greater 
 wages they receive, and vice versa. 
 
 The manner in which a general rise of wages takes place, by 
 the internal transactions of a country, is as follows; and for 
 the j)urpose of describing it more accurately, we shall recur to 
 the simple stale of mankind when each man works indepen- 
 dently. In this case, if each man wi.shes to work harder in or- 
 der to procure more enjoyments, and that this spirit takes place 
 in any one particular trade, they will naturally look out for |)eo- 
 ple to exchange their additional produce with, and if such can- 
 not be found, that is if other trades do not partake of the spirit 
 of industry, they must again relax their work, unless a foreign 
 market open for their produce. But if the industrious spirit 
 pervade the rest of the people as well as themselves, they need 
 not then look out for foreigners to exchange with, but all will 
 dispose of their increased productions by exchanging them wiih 
 one another, by, in fact, enlarging their transactions with one 
 another. An additional portion of each man's labour would 
 thus be called into requisition, by the encrease of his own de- 
 sires, and this being general, would constitute an increase 
 of industry. 
 
 What requires most particularly to be inculcated in these 
 remarks, is the fact, that encrease of demand is always caused 
 and ^jreceded by encrease of production. He who encreases his 
 production has an encreased fund wherewith to buy such things 
 as he wants, and his demand on the productions of others is 
 thus augmented, and if it be met by a .similar encrease of tl.e 
 productions of others, he succeeds in supplying his encreased 
 desires j and so do they; and it is thus industiy encreases and 
 not by any domineering influence of capital and capitalists. If 
 capital be deficient, the only necessary consequence will be 
 that the commodities produced will be ruder and less abundant 
 and the labour performed about them more tedious an<l labo- 
 rious ; but these defects are only relative, and if a nation chooses^ 
 to be industrious, it can be so whether it bus capital or not.
 
 20 
 
 Capital is a result, not a necessary cause of indusU y j it is used 
 not in the production ot vvealtii, but lu/dcilitntihg its production. 
 It may perhaps seem at first view, that the increase of indus- 
 try in tlie manner we have described, could only take place 
 among single independent workmen, who would have it in 
 their power to encrease their production at will, and that (he 
 wor'unicn employed in large matiufactorics could never accom- 
 plish it, since the amount of employment liiey receive, and of 
 M'ork they can perform, is limited by the demand which the 
 capitalist has for their services, over which they can have 
 no cunti'oul. I can easily shew this to be an erroneous con- 
 clusion. If the workmen really have a desire to work harder, 
 there will ensue a competition for employment, and there- 
 fore a reduction of wages at first, and consequently a greater 
 amount of employment actually given ; for the capitali'^t 
 will like to avail himself of the cheap rate at which his 
 men are willing to work, and will endeavour to profit by it, by 
 encrease of production. Or, to take it in another point of view ; 
 supposing the employer does not encrease his production on ac- 
 count of the lowness of wages, other circumstances over which 
 he has no controul, will directly induce him to do so. The ex- 
 pense of production will first be reduced by the fall of wages, 
 and as the spirit of industry will of course not be confined to 
 his own workmen, the competitiop of diftVrent capitalists will 
 lower the price of their produce, in consequence of which the 
 workmen will find their wages, though reduced, sufficient to 
 purchase as much goods as before, and as they will therefore offer 
 in themselves a market for the goods of their employers, the 
 latter will soon comply with their wishes, and give them that 
 encrease of employment, which they want, and with it, the 
 same sum U)r wages as formerly, as we shall [)resently shew; 
 so that er*ch workman would thenceforward produce more for 
 the same wages than before, and be able also to purchase with 
 those wages more of the produce of others labour than before ; 
 for the workman's wages, though reduced in relation to cora- 
 liiodities produced by people whose industry has undergone no 
 encrease, is not at all reduced in relation to those produced by 
 Vien who like himself have felt anxiety for more work, and con-
 
 tented themselves with lower wages ; the productions of all 
 these are equally depreciated, and they can purchase them from 
 one another on as advantageous terms as before ; for the goods 
 are cheapened as much as the wages are lowered. And as for 
 thos€ men whose industry has felt no encrease, the influence 
 of the others will soon extend to them, and they will be com- 
 pelled to imitate the conduct of their neighbours. Competi- 
 tion for employment in one branch soon extends to others, and 
 the only reason why it does not do so at once, i^ because habit 
 and education prevent men from immediately changing their 
 trade or calling. Soon however, the int^iijx of competition 
 Avould force the idle departments to reduce tiieir wages, and 
 cause the price of their produce to be lowered and its consump- 
 tion encreased, like that of the others, until at last every de- 
 partment would have encreased its industry and its production ; 
 and all being reduced once more to a level, their respective wages 
 would bear the same relation as before to the productions of the 
 rest; for the wages of each from thenceforward would enable 
 him to purchase more commodities than before, just as he him- 
 self would produce more commodities for his wages than be- 
 fore ; but those wages themselves would not be raised higher 
 in pecuniary or nominal amount, than they were before, as we 
 shall proceed to shew. 
 
 When the wages of the industrious would fall, as we have 
 mentioned, they would fall not only in relation to the commodi- 
 ties of those whose industry received no stimulus, but also in 
 their nominal or money price. But as soon as those commodities 
 which were exported for gold and silver, partook of the gene- 
 ral depreciation, arising from encreased anxiety to work, the 
 wages or daily remtineration, which had fallen in nominal or 
 money value, would rise again in nominal or money value to 
 their former amount; but no more than this, notwithstanding 
 the greater work now done in a given time; for the supply of 
 commodities being encreased without any encrease of demand 
 for them on the part of the miners abroad, they would be 
 permanently depreciated with relation to gold and silver, 
 and the produce of a days work of them, however augmented 
 in quantity above what it used to be, would still be ex-
 
 ported in rt-turn fur the suine (jiiaiiiity cf pfold and silver, ns 
 used to he rereived for a lisscr (luautity, supplied in Ier*s ahuii- 
 daiice, but <till the produce of a <lii\s work, or of such part of 
 a day as each man, takintj the whole [)o|)ulaiion in the average 
 would have cliu-ieu to work. It is clear lliereforp, tliat in coun- 
 tries nut cuniaiuing a^cld and silver mines, an encrease of in- 
 dustry alone, without other causes would not encrease the no- 
 minal, though it would the real rate of wages, unless the work- 
 Hien in the gi>ld and silver niines ahruad, became also at the 
 same time more eager lor work than before. 
 
 The \\ork man's ac(|ulsition will depend, «ecoiuIIy, upon the 
 
 l)ru(luctiveness of his labour, if the labour of one country be 
 
 more productive than that of another, the labojui is acfjuivitiou 
 
 will of course be gi eater in the former than in the latter. Tq. 
 
 the former, he will produce more commodities with the suiue 
 
 labour; and if he consumes tbeni liimself, he will manifestly 
 
 be better supplied, and if he exchanges them for any thing 
 
 else, he will receive larger equivalents. His acquisition w\\\ 
 
 therefore be greater. It may be so, even though he he less con- 
 
 stanf/j/ emploi/ed. Jf for instance, he can get employment for 
 
 only half his time, but would be able to make two pair of shoes^ 
 
 in one day, his absolute accjuisiiion will be twice as great as 
 
 that of the inhaljilant of another country, where the mamifac- 
 
 tiire of a pair of shoes cost the labour of two days, even though 
 
 the latter should have constant employment. Either however, 
 
 receives the jiroduce of his labour or its eqivalent as fully 
 
 as the other. The absolute recon)pense is of course greater 
 
 in the coiuitry of productive labour, cacteris parihns ; but it is 
 
 still the produce of the workman's labour, or of the equivalent 
 
 labour of his countrymen, making allowance for the effect of 
 
 profit which shall be hereafter explained. 
 
 We have now seen that the absolute recompense received 
 by the workman, is greater or less according to-— first, tlie 
 fullness of employment ; and secondly, the productiveness of 
 labour. We may observe some analogy between the two : the 
 labour of an idle nation produces little, because the people are 
 idle J that of an unproductive nation produces little, because it 
 is unproductive. The causes are different, but the effects arc
 
 23 
 
 tlie same, namely, the ]al)Oiir of both produces little. The work- 
 man's recompense i« therefore always affected by X\\e joint ope- 
 ration of both, which may either co-operate together or coun- 
 teract one another. It may therefore be briefly stated to be 
 greater or less according" to the productiveness of hands, an ex- 
 pression which comprehends both the fulhiess of employment 
 and the prodiirliveness of loboiir. But whether the recompense 
 be great or small, it consists always of the produce of the labour 
 employed, or of equivalent labour of the same country, making due 
 allowance for the effects of profit, which are very considerable. 
 
 Having frequently made use of the expression " equivalent 
 labour," it may be desirable to explain it in this f)lace. There 
 are different standards of labour in every country, which, ac- 
 cording to their greater or less scarcity, obtain liigher or lower 
 rates of wages. Labour that requires the direction of skill, 
 obtains higher or lower wages according to the difficulty of 
 attaining that skill. The um"ecompen»;ed labour employed in 
 attaining it, discourages its pursuit ; and those who have the 
 means of procuring the requisite education are comparatively 
 few. Hence the supply of educated hands is much farther be- 
 hind the demand than that of conmion hihourers, and their 
 wages are consequently higher. And lure we may admire the 
 beauty of the estabii^-hed order of things, which by the o[)era- 
 tion of a simple and general law, gives to the skilled labourer 
 a means of compensation for the trouble and expense sustained, 
 without which he would have no object in attaining his skill, 
 and mankind would be destitute of all the elegancies of life. 
 
 Disagreeableness or unwholesomeness, or the precariousness 
 of employment in any kind of work, temls to scare away the 
 .t^^upply of labourers, and raise the wages of thixe tliat remain. 
 Hence miners, porters, &c receive disproportionate wages. 
 
 Great talents in some professions, from their rarity, receive 
 a large recompense. The greatness of the recompense, assisted 
 perhaps by ihe thirst of fatne, attracts numbers of aspirants, 
 who are only prevented from still further encreasing, by the 
 extreme ill luck of the unsuccessful, as excessive perhaps in 
 one extreme, as the success of the talented \^ in the other.
 
 ^4 
 
 These ditt'ercnt kindt of labour, being of <iift"erenl value, are 
 not exchangeable for one another in equal quantities. A ^niall 
 portion of the produce of dear labour is exchanged for u large 
 portion of that of cheap labour. The small portion of one is 
 equivalent to a large poriion of the other. 
 
 VARIATION OF WAGES. 
 
 Particular circumstances may produce temporary alterations 
 in the distance between the supply and demand for labour, and 
 consequent fluctuationsof wagcs,whereby therecompenseofpar. 
 ticular denominations of workmen is raised above or sunk below 
 that of others. Thus chance or fashion frequently encreases 
 or lessens the demand for particular sorts of commodities, and 
 with it of course the demand for the workmen that produce 
 them. The supply of workmen however, undergoes do imme- 
 diate alteration, and the demand for them thus varying, without 
 any variation of the supply, their wages also necessarily vary. 
 
 If a mortality carry oflfa greater proportion of one trade than 
 of another, the wages of that trade which is most reduced will 
 rise ; for the number oi consutners of its produce is not reduced 
 as mudi as that of the producers: the demand for workmen of 
 that trade is not rediiced as much as those workmen themselves. 
 The wages therefore of the survivors rise, and their high rate 
 will continue, until it is reduced by the accelerated encrease 
 of that particular trade. 
 
 But if, in an isolated country, amortality carry off an exactly 
 proportionate number of every trade, it causes no rise of wages; 
 for though it creates a scarcity of labourers, yet it causes also 
 an equivalent failure of demand, by the equivalent destruction 
 of consumers ; and the wants of those that remain, bear exactly 
 the same proportion to the supply as those of the previously 
 undiminished population did to the former supply. There al- 
 ways exists however, a class of men, namely the landlords, 
 whose demand on the productions of others would hardly be 
 diminished by the mere diminution of their numbers without 
 a diminution also of their aggregate income. This diminution 
 however, would infallibly take place ; for the cheapness of food 
 coDsequent on the diminution of its consumers would quickly
 
 25 
 lo«*er rents, and, by thus diminishing the income of the land- 
 lords, would cause the demand on their parts to fall in common 
 M'ith that of the rest of the community. A mortaliry however 
 never falls equally on all trades : the manufacturing workmen 
 being crowded into towns suffer most, and being theretore 
 diminished in a greater proportion than the agriculturist-, their 
 wages consequently rise. 
 
 If the workmen of a parlioular trade were from some cause 
 or other precluded from the possibility of encreasing wiib the 
 rest of the population, they would for similar reasons, obtain 
 higher wages than the rest of (he people in perpefunl monopoly. 
 Likewise if, in a manufactory, whose en creased prodnc'iveness 
 of labour and consequent cheapness of produce attracted the 
 preference of demand ; if in such a manufactory, the encrease 
 of the workmen were from some cause or other impossible, thei/ 
 also would enjoy a perpetual monopoly of higher wages than 
 their countrymen. This to be sure, is more an imaginary, than 
 a possible case ; but if we consider a particular country in the 
 light of a particular manufactory, and other countries, as its 
 customers, it is a case of ordinary occurrence. Thus if (he la- 
 bour of a particular country be peculiarly productive, and the 
 consequent cheapness of its productions attract the demand of 
 the world; and if, from the expense, and more particul.irly the 
 pro///6?7?ow of the importation of food, the population be pre- 
 cluded from the possibility of encreasing, wages must rise greatly 
 in the country attracting the demand, and continue to rise, un- 
 til the price of commodities should have risen so hii^li, as to 
 counteract and neutralize the cheapening quality of the produc- 
 tiveness of labour, by becoming itself equal to the price of 
 foreign productions. 
 
 Towns are similarly situated with respect to the country, as a 
 particular nation, such as we have been considering, is with res- 
 pect to other nations. In many ways towns present advanlaijes 
 that cannot be attained in the country. Like permanent fairs, 
 they bring together the buyers and sellers of all sorts, present 
 an extensive assortment, and variety of commodities for selec- 
 tion, and afford a steady and abundant market with a ct-tiaiDfy 
 of supply, accommodated to all necessities and tastes, while at
 
 2(5 
 
 the same time, the magnitude of ^fcmand crrafrs farilHips for the' 
 complete division of lahonr. Town^ thpp'forp aftmct all the 
 dtiiiaiKJ ot llic country for manufacfiires. At the sAme thiR% the 
 eric'reasc of iheir poprifatiou is checked by* the scarcity of food ; 
 fur the circuit of country in their rjeiehboi)rh»>od is small, unit 
 the supply of food from distant parts is checked by the expense 
 ot carriage. Hence food is much scarcer amoncj them, than in 
 the country, where every one is surrounded with it, and their 
 ]>opuiatiou does not expand as much as it otherwise would. 
 The supply compared to the demand for labour is smaller, and 
 hibourers are scarcer and dearer, that is their wages are higher, 
 in the town than the country. The demand of the country how- 
 ever, continues to be^directed to the town, for it cannot for a 
 loni^ time be transferred to itself, without incurring still greater 
 disadvantage than the dearness of the town. Wages therefore, 
 in the latter continue to rise with the price of productions.; jiik| 
 wjien, from the encreasing size of the town, and the consequer»t 
 dearness of its articles, the advantages and disadvantages o| 
 town and country become pretty nearly balanced, other little 
 towns spring up in thejcouuiry, atid answer many of the pur- 
 poses of the original town, but in many other particulars, the 
 greater size of the latter, long maintains for it a superiority, 
 giving it a decided preference of demand in all articles of the 
 more expensive kind. 
 
 A deficiency of food therefore, by limiting population, itbtle 
 the demand lor the work of that population encreases, tends al- 
 ways to raise wages, liut a merely sudden and temporary defi- 
 ciency of food, zahich has not time to njfect the amount of the 
 population, does not at all tend to raise them ; but for other 
 reasons just now to be mentioned, has a directly contrary effect. 
 
 How far soever men are content to live as they have been ac- 
 customed ;— to receive their usual quantum of the good* of this 
 life at their usual price, that is with the usual and accustomed 
 quantity oi trouble, whether that quantum of goods and of trou- 
 ble be usually great or usually small ; they are not prepared \o 
 bear variations of them, to which they are not inured, with the 
 sanip equanimity. If the harvest be unusually short, the supply 
 of food becomes less, while the demand remains the same. The
 
 population is then straitened in tlie article of food, and becomes 
 snore ea^er for employment in order to procure a better supply. 
 The tender of their services or the supply of their labour is thus 
 encreased, while the demand for it underujoes no alteration, and 
 wages consequently fall. If on the other hand, the harvest be 
 unusually plentiful, wages rise. The working classes then pro- 
 cure their usual quantity of food for less than before, and as 
 man is the creature of habit, he immediately relaxes his industry : 
 he is content with his usual comforts, and will not work harder 
 than will procure them in the same measure as usual, and since 
 on these occasions, they are procured for less labour than before, 
 he is content to remain idle for the residue. This however is 
 to be received with some qualification, for the very habit of 
 working must prevent men from discarding employment altoge- 
 ther in the same proportion as their condition has been improv- 
 ed. Their competition for employment however, is considera- 
 bly reduced. The supply of their labour becomes less compared 
 to the demand for it, and wages consequently rise. 
 
 Adam Smith gives some authorities to shew that there is an 
 actual encreaseofthe production of manufactures in cheap years, 
 and a decrease in dear years, which would seem to militate against 
 the fact we have been shewing, namely that there is less anxiety 
 for work in cheap than in dear years. If, however it be the fact 
 that there is an encrease of manufactures in cheap years, and that 
 this encrease is not partial but universal, it may be explained in 
 the following manner. 
 
 The daily consumption of (he working classes is regulated by 
 their daily means; and since, as we have seen, they do not in 
 cfaeap'years discard employment wholly in the same degree as 
 food has become cheap, they have a certain surplus which they 
 willingly spend in encreasing their consumption of maimfjac- 
 tures. On the other hand, in dear years, they will not encrease 
 the supply of their labour, (even if they should have leisure lo do 
 so,) in fully the same proportion as the price of food has risen, 
 and they cannot diO so, if all their labour be already engrossed. 
 They are therefore willing to dispense wiih a portion of manu- 
 factured commodities in order (o procure food enoug-b.
 
 9S 
 
 It is thus then, it would appear, that the consumption of ma- , 
 nufactures is eiicreased in cheap and reduced in dear years, and I 
 it v^oiild iheretore seem that the concomitant fluctuutioos of 
 wnges oujj^ht to be greater in the manufacturing than the agri- 
 cultural dcparfmeuts; for clieap years, not only lessen competition 
 for employment in the former equally as in the latter, but also 
 encrease lite (/r;//fl«(/formauufactured produce, and these two cir- 
 cnn)slances co-operating ought to raise wages particularly high, 
 among the manufacturers. On the other hand, dear years, not 
 only encrease competition for employment, but also lessen the de- 
 mand f<ir manufactures; hence in dear years the wages of the 
 mauuficturers ought to be particularly high. 
 
 These observations apply to the whole working population, 
 both manufacturing and agricultural, none beiog excepted but 
 )he landed interest, that is the farmers and landlords. These must 
 be ailVou-d by the cheapness or dearness of the season, in the 
 converse of the working classes ; for the price of food, as is well 
 known, rises and falls in a greater proportion than the supply 
 is deficient or redundant, and farmers are more prosperous in 
 dear than in cheap years, unless their prosperity be in the former 
 counteracted by the abrupt admission of f)reign produce, as 
 under (lie English corn laws. It may therefore be imagined, 
 that jijupc I hey are enriched or impoverished in the converse of 
 the >\orking classes, their consumption of manufactures ought 
 also to be in the converse of that of the latter, and counterbalance 
 its clKcts on iliein. The consumption however of the landed inte- 
 rest does not fluctuate with every temporary reverse ; it does not 
 depend on the income of the moment ; their condition is above 
 sucli a necessity, and their consumption goes on equably, neither 
 encreased much in a prosperous, nor much decreased in an un- 
 prosperuus year. If it were not so, the variations of demand of 
 the working classes for manufactures would assuredly be coun- 
 teracted by a coutraryr action taking place among the landed 
 interest. 
 
 I may here observe that if the price of food did not rise or fall 
 in a greater projmrtion than supply failed or abounded, neither 
 the landed interest, nor the working classes would be affected 
 in the manuer 1 have described. The farmers would receive
 
 29 
 
 file same sum for their whole produce, whether it was scanty or 
 abuDdant, and ihe consumers, consisting of all the rest of the 
 population, would give the same sum as befjre for their food, 
 receiving however a smaller quantity or inferior quality. 
 
 Wages may sometimes rise high by a deficiency of population 
 below the demand for it, occasioned by the impossibility of mul- 
 tiplying faster than nature has allowed. Thus the cheapness of 
 rude produce arising from the great abundance of land in a newly 
 occupied country, may attract a great foreign demand for it. 
 Labourers to raise it would therefore be in great demand, while 
 the population would as yet be inconsiderable. There would 
 be a deficiency of the supply of labourers compared to the de- 
 mand, which would keep up wages, until population should 
 have become sufficient to place the supply of produce more 
 nearly on a par with the demand. In this way the demand for 
 produce would enhance not rent, but wages, for the land would 
 be plenty, and labourers scarce, whereas when rent receives the 
 enhancement, it is the labourers that are plenty, and land scarce. 
 Population would however encrease with unusual rapidity, and 
 at the same time, augment the demand for the mechanic trades, 
 faster perhaps than, on account of the difficulty of attaining the 
 requisite skill, they could possibly encrease. Hence the wages 
 of these latter would be uncommonly high. This is the state of 
 things in North America. 
 
 Having so far considered the subject of one of the component 
 parts of price, namely wages, I come now to the other, namely, 
 profit, all price being made up of these two principles, wages 
 and profit, 
 
 PROFIT. 
 
 Profit in its most extensive sense, may be defined, a gain ac- 
 cruing to individuals from any exclusive advantage possessed by 
 them. Thus all monopolies give their owners the means of 
 gaining vast profits, by limiting production, and thus raising 
 price. The possession of land, after food has become dear, gives 
 its owners the power of gaining large profits by its cultivation, 
 or large income by setting it to others. But the advantage which 
 is most usually considered as the source of profit, is the possession 
 of Capital, and the g^ia which this occasions is alone profit pro-
 
 perly so Pulled ; thf>iii:li the others which I have just mentioned, 
 nmy vt-ry convi-nifiitly be classed with if. IJut before we can 
 thoroughly unilersfand the uature of profit, it is necessary, to 
 examine minutely the natiirc and the uses of capital. 
 
 CAIMTAL, 
 
 Capital is, as I have said before, an accumulation of the pro- 
 duce of labour, it is used in two ways, either, as circulating^ 
 or as fixed capi(al. 
 
 Circulating capital Is that tvliich is laid out in circulating out- 
 lays, which are nothing more nor less than exchanges. Farmers 
 exchange most of the produce of the past harvest, for the la- 
 bour and manure to be employed in producing the next, that 's, 
 for the produce of the next, which in its turn is exchanged in a 
 like manner. The mamifacturer exchanges liis goods for more 
 materials and food or the price of food for his workmen. These 
 materials and this food he gives to them, and receives their 
 exertions in return, that is, their productions. These again he 
 sells for more food and materials, deducting of course his own 
 reasonable remuneration ; and thus a perpetual round of ex- 
 change is preserved. The merchant exchanges one commodity 
 for another, as hardware for sugar, sugar for cloth, cloth for 
 teas, and so on, and although these operations by the inter- 
 vention of circulating medium or money, are distributed among 
 different merchants, and although this intervention of money 
 may apparently complicate tlie subject, still this is the real na- 
 ture of trade, a perpetual circulation of exchanges from one 
 man to another; he who consun>es, sujiplying something in the 
 place of what lie consumes, and this something in its turn con- 
 sumed, and replaced by sometliing else, through the labour of 
 him who consumed it, so that a substitute rises up in the place 
 of every thing that is consumed, like a phoenix from its ashes ; 
 and it is no exception to this rule that a number of landowners 
 and professional men, consume a great deal without producing 
 any thing. The landowner merely shares the productions of 
 his tenants, who, if the land were extremely plenty, would keep 
 all themselves ; and the professional men only get a share of 
 what all the rest would keep, if evil moral and physical did 
 not exist upon the earth, lu order to effect this circulation of
 
 31 
 
 exchanges in any niagnitiul(>, it is j^lain there ninst he ?onie 
 substance accumulated, v/itli which to beiiiii the circle of ex-- 
 chdDges. If it be s{)ecie, the best tuiderstood repre?eiitati\e (;!:' 
 wealth accumulated ; that specie is exchanged for subsistence 
 and materials, or whatever else is to be made one of the sub- 
 jects of exchange, and thus gives ihe first impulse to the circu- 
 lation or circle of exchanges, being itself a commodity exchang- 
 ed like those which follow it. 
 
 This circulation of accumulation* i« merely the going out and 
 returning in of productions to their owners by great alternate 
 strokes, instead of flowing in gently and equably as fast as they 
 flow out. In poor savage nations, exchanges are frou) the mi- 
 nuteness of their amount, always carried on, as it were, in a 
 smooth and continuous matmer. Tiiere are no accumulati(His, 
 and every person exchanges each days work se|)arately. The 
 beast caught in the chace is exchanged for the bow of a few 
 hours manufacture. In improved nations however, the ease,i^ 
 far otherwise. The circulation is there separated into great and 
 distinct and distant exchanges, which from their respective 
 magnitude, render a great previous accumulation of produce 
 tions necessavv. Whereas a work wliich can be completed 
 between breakfast and. dinner, and whose materials possess no 
 value, may be effected without any previous accunullatior^, 
 and of such works alone, does the industry of poor and savage 
 nations for the most part consist. 
 
 jri The advantages derived from great circulating accumulations 
 are sufficiently obvious. Many works are of si^ch magnitude 
 that they could not be accomplished at all without them. It 
 may theoretically indeed be §aid, that a sufiicient number of 
 .labourers could be employed, so as tohave the woi:k comple;^- 
 ed in the space of a day, and thus receive their wages ere the 
 cravings of hunger should become intolerable. This however, 
 would be a ludicrous and barely possible sv^ppositipn. It is eyi- 
 dent that few operations are susceptible of such management. 
 The farmer must wait for. the distant returns jpf the seasons, 
 before he can complete the cji^cle of J)i3,,ope^'^,tiioq? j, he piu^t 
 have been provided by gradual accumulation, with the supi- 
 port of the, year, (from harvest to harvest, one harvest forming
 
 32 
 hi.« sni)port till the next. Now tlir /f/*ji/ harvest couh! not h^ve 
 ht*en preceded by any such siipport. Beasts of pasture, being 
 a natural capital, a spontaneous produce of the earth, might 
 HM<I mtist have afforded it in a certain degree, and formed the 
 niirlois of his accuninlation, but by no means in such quantity 
 as extended cultivation re«piires. Tillage must at first have been • 
 cornparativeW trifling, and afterwards extended gradually, by | 
 gradual uiignientation of its own proper i)rodnce ; each succes- 
 sive harvest extending that of the year following. In like man- 
 ner, manufacturing operatijns are, from their very nature inca- 
 pable of being expedited in tlie manner before alluded to, ami 
 even if they were so capable, still not more than a certain num- 
 ber of workmen could even find room round the materials. 
 
 It might also perhaps be thought that the capital of a manu- 
 facturer might be dispensed with, by the purchasers occasion- 
 ally advancing small sums to him. These small sums however, 
 would still be capital, and would be thus only diverted from 
 one use to another. They would cease to be the capital of the 
 one, and would virtually become the capital of the other. And 
 although the workman would gain no profit on capital thus 
 lent to him, yet the lender would gain it, by not having it to pay. 
 
 Large circulating capital confers advantages in many ways— 
 in the export and itnport of commodities in large quantity and 
 consequent economy ; in the providing of large stock, and exten- 
 sive aKriety ; and in other v.'ays which may be easily conceived. 
 But by far the most important advantage of circulating capital 
 is the means which it affords for the division of labour. We 
 have already had occasion to notice the necessity which 
 exists in some manufactures, for co-operation among workmeti 
 of different trades, which could never take place, unless all be- 
 longed to the same manufactory, and in order to effect this, 
 there must be some superintending influence to preserve har- 
 mony among the different members of the establishment. Such 
 an influence can only be maintained by an employer, whom all 
 have an interest in obeying. Nobody however is competent to 
 assume this character, unless he have an accumulated capital, 
 large enough to support all his workmen during the progress 
 of their work, which alone wotild make them feel an Ti^terest
 
 23 
 
 in obovinE; him. A pin which costs ahiiost noiliing, nnj>;t pa«s, 
 before ii is-coaipleted, through the hands of a luvi^v Dumber of 
 co-operatit)j^ vvorkmeti, to which circumstaiu-e alone it is in- 
 debted for its extraordinary cheapness. \\'itlio;s! cajital how- 
 ever, tliis division of labour could not be effVoted. There would 
 be nobody competent to support a lari^e number of workmen, 
 and production would be confined to sitigle ariificers, 
 
 The consideration of the nature of circulatins^ capital, shews 
 us of what substance the national capital for the most part con- 
 sists. It consists as we may perceive, of large stocks of com- 
 modities, accumulated either of necessity, or tor more advanta- 
 geous exchange or production. The harvest, thwu^h gradually 
 and by no sudden exchange disposed of, is nevertlieless accu- 
 mulated of necessity ^ as we have already seen. Manufactures 
 and merchandize are accumulated for more advantageous ex- 
 change and more advantageous production. Neither could be 
 accumulated fully at once, but when once they are accumulat- 
 ed, they form the piincipal part of the national capital. A large 
 j)ortion of it however, consists of artificial apparatus, and this 
 brings us to the subject of fixed capital. 
 
 Fixed capital is artificial apj)aratus, and the fixed outlay of 
 capital is its investment in the purchase of that apparatus, the 
 nature and uses of which we have already considered. Capital 
 thus invested is from thenceforth fixed, and ceases to circulate. 
 It is in fact sunk for ever, and valuable only from the |Biosi)ect 
 it affords of encreasing the productiveness of future labour. He 
 who provides himself with tools and machinery, does so not 
 with the view of suj)plying himself or his workmen with neces- 
 saries during the progress of their work, nor of using them as 
 materials to work up and exchange, like the ordinary produce 
 of liis labour, in return for necessaries and materials, but solely 
 with the view of rendering his future labour nsore ])roductive, 
 and to accomplish this, he is content that the labour which 
 has procured him those a[)j)araius, or in return foi the pi'oduce 
 of which he has procured them, shall receive no recompense, 
 in the hope that this sacrifice will enhance all the future returns 
 of his industry, and more than compensate his loss. Without 
 a previous accumulation however, in his hands, or in tlie hands 
 
 s
 
 54 
 of some others indebted to him, he could no more provide him- 
 self with apparatus tliaii with any other Inrge work. He could 
 not purcliase it a< is evident, nt'ithrr ctxild he ninkcit iiimself, 
 if he were coii:petent: for in order to maintain liiniself during 
 its progress, he must i)ave a store of subsistence, or the price 
 of it, or a quantity of the usual produce of his labour, to expose 
 to daily sale, as if he were continuing his ordinary occupation, 
 otherwise he must perish before the completion of the work ; 
 unless it were very insignificant indeed, and capable like tlie 
 implements of savage nations, of being finished between meals, 
 or in a very short space of time. In any case however, a cer- 
 tain portion of his labour must go for nought, which he can 
 only hope to retrieve by the greater productiveness of his future 
 labour. How this encreased productiveness can retrieve his 
 loss, remains yet to be explained ; for in considering the advan- 
 tages derived from the productiveness of labour, our former ob- 
 servations had reference solely to the benefit which it conferred 
 on society in the aggregate. 
 
 PROFIT OF ARTIFICIAL CAPITAL. 
 
 We have already spoken oi profit, as an exclusive advantage, 
 attached to the possession of capital ; and it is this advantage 
 which repays the owner of capital, both for his circulating and 
 fixed outlays. It consists of a certain dedicctwn from the Avork 
 performed ; but will be more familiarly recognized as an 
 addition to the price of commodities. It is called profit and is 
 i\\e price o{ capital. 
 
 if every work were carried on without capital, as in the first 
 ages of the world, there would be no such thing as profit. It 
 M as early perceived however, that great advantage would result 
 from the division of labour and the use of apparatus, and that 
 commodities produced with these advantages must obtain a de- 
 cided preference in the market. Those persons only however, 
 who had accumulated something, would be able to carry those 
 improvements into eflect, and the few that cotild do so, would 
 be able to undersell all otiiers of their trade, and attract to them- 
 selves the demand of the country. All buyers would flock to 
 them : the demand for their productions would quickly encrease 
 on account of their cheapness and excellence, while the supply
 
 35 
 
 which so few (as they must be at first) could prochicf, would be 
 very inconsiderdble iu co!n[)anson with the dematid ; and if the 
 capitalists had been so sbort-slg-jiled at first as to content tliem- 
 selves with moderate remuneration, they would soon find that 
 there was rcom to advance their price considerably, without di- 
 minishing the demand below what they could supply. In one 
 word, capitalists would be few, the demand for them would be 
 great and the price of them, that is, the profit on their capital 
 would he enormous. The demand of the nation, like a flood 
 retiring from the plains into channels cut to receive it, would 
 fly wl)cre the supply was most copious, deserting the for- 
 mer workmen of that particular department throughout the 
 country, and confining itself as far as possible to the capitalists. 
 The low price and the excellence of their work, would attract 
 the demand, just as the low elevation of the channels would 
 attract the flux of waters, and the gains of the capitalists would 
 exceed those of the former workmen, as much as the depth of 
 water in the channels would exceed that which it iiad been on 
 the plain. Every further accession of capital therefore, by ab- 
 stracting some of the demand from, and lowering the profit of 
 the preceding, may be compared to an additional or a widened 
 channel, drawing off water from, and lowering the depth of the 
 others j and as the excess of depth of the channels, beyond that 
 which it had been in the plain, cannot be entirely destroyed, 
 until they become so numerous as to join one another in every 
 part, and become entirely obliterated, forming at last another 
 perfect plain ; so neither can profit be completely annihilated, 
 until capital arrive at a similarly excessive abundance, per- 
 vading the whole society. 
 
 If the few capitalists in the beginning, were insuflScient to 
 supply the whole society, some of the former workmen must 
 continue to supply the deficiency. The diminished demand for 
 their work would induce many of them to turn to other employ- 
 ments, until the remainder should be no more than sufficient 
 to supply the still remaining demand. The reduction of their 
 numbers would raise their wages again to their former standard, 
 and their work would be bought at the same price, according 
 to its quality, as that of the capitalists. But (he capitalists
 
 36 
 
 \\im\i\ hv recti \ii)g cnuriuous gains, wliik- the oilier workmen 
 \vould be Diily receiving the rcconi[)eiise of tlicir lubnir as for- 
 merly. The capitalists would be receiving both wages and 
 profit : the otlicr workmen would be receiving only wages. 
 
 Profit is connnonly imagined to be an uddi/iun to production. 
 It is really however, h deduction from production. If we sup- 
 pose a nianulacturer to pay his workmen in their own produc- 
 tions, this will appear perfectly plain. He must give theiu 
 ouly a part, in order to keep any thing as profit for himself. He 
 will give them e.g. nine tenths, and keep one tenth for himsell. 
 This is a deduction from their produce. The master ia remu- 
 iicraiing them for their trouble, retains a tenth of the produce 
 of their labour, and gives them ouly nine tenths in return for 
 ten tenths. This transaction is one of the exchanges of circu- 
 lating capital. The capitalist gives his workmen support, and 
 they in return give Iiim the produce cf their labour : but as he 
 alone in this case |)osscsses capital, so he alone retains the 
 profit, and gives his workmen less than the produce of their 
 labour ; and thi.-* is the way in which profit interferes with the 
 labourer receiving always the produce of his own labour, or of 
 equivalent labour. If he pay them in money the case is the 
 same J he gives them the price of nine tenths of their produce, 
 and sells it for the full price himself, thus gaining one tenth. 
 
 In the same manner, a merchant or retailer who imports his 
 goods, deducts his profit j he gives the manufacturer or pro- 
 ducer, nine tenths of what he receives himself by the sale of 
 them, and keeps the other tenth himself. The price is in his 
 own country or province kept above what it is in the place 
 where the goods are produced, by the greater scarcity of those 
 goods. This greater scarcity is caused by the reluctance of 
 merchanis to import until the price rise to such a sum as will 
 yield them their reasonable profit, and the price is kept from 
 rising above this, by the willingness of all merchants to import 
 on those terms. 
 
 And even if a retailer live in the same place with the pro- 
 ducer, still he exacts his profit; he will not sell by retail unless 
 he can obtain it, atid the goods sold hi/ retail become therefore 
 scarce enough to answer his purpose, although the goods them-
 
 37 
 
 selves in their abstract capacity be not so ; and as most pur- 
 chasers choose to purchase by retail rather than by wholesah^, (hey 
 willingly give the retailer the encreased price, rather than sub- 
 mit to the inconvenience of purchasing by wholesale. In these 
 cases, the merchant and retailer merely dispose ot the goods 
 for the producer ; they sell nine tenths of them, and keep one 
 tenth for themselves. 
 
 It is in the sale of goods, that profit appears as an addition 
 to price. If the capitalist consumed it himself, it might be view- 
 ed in its natural character, namely, as a mere deduction ; but 
 as he invariably sells the whole, and receives more than he has 
 given, it then becomes an addition to price ; which has given 
 rise to the fallacy, that it is also an addition to production. 
 Profit is of course, an addition to price, for it enables an 
 article to command in exchange, an extra portion of such 
 goods as may have been produced by mere labour without 
 capital; and in this way, the article will command the pro- 
 duce of more labour than was bestowed upon its own produc- 
 tion. But if an equal amount of profit enter into the price of 
 both articles, neither will command, in exchange for the other, 
 the produce of more labour than was bestowed upon itself ; 
 for the same thing would have taken place on both sides ; both 
 would be equally enhanced in value, above the labour expend- 
 ed, by the addition of profit. Yet though profit would not 
 enable one to command of the other, the produce of more la- 
 bour than its own production received, still it would counter- 
 vail the effect of profit on the other, and in this way would 
 form as effectual a portion of value, and as complete an addi- 
 tion to price, as when it commanded an extra portion of the 
 produce of labour, in a commodity whose price contained 
 no profit. 
 
 The more frequent the returns of circulating capital in any 
 trade, that is, the more exchanges it is susceptible of in a given 
 time, the lower is the rate of profit on each exchange. If it 
 were at any time otherwise, the capital employed in a trade of 
 distant returns would quickly flow into those whose returns 
 were frequent, and by thus encreasing the supply of capital in 
 those particular trades would lower its profit or price.
 
 38 
 An cncrea!>c(l iiivciifincnt of capital in the fixed outlay, may 
 be prevented hy llie prevalence ot a high rale of profit. Thus 
 suppose the rate ot'[)rofit to be fifty per cent, and tliat in a pa- 
 ticular nianutacture, there has been hitherto a sum of £20,000 
 laid out in eirculatiuij outhiy?, yielding this profit of fifty per 
 cent, the price of the manufacture will then amount to £30,000. 
 Now suppose that a capital of £20,000 sunk in the purchase 
 of machinery, would render circulating outlays of £15,000 suf- 
 ficient for the same production ; then the price of the manu- 
 facture will be composed of the circulating outlay of £15,000, 
 the profit on it £7,500, and the profit on the fixed outlay 
 ie>10,000, making in the whole the sum of £32,500, or £2,500 
 more than the price of that made without the aid of machinery, 
 as will more readily appear from the following statement. 
 
 Without the aid of machinery . 
 Circulating outlay, ------ ^^0,000 
 
 Profit on do. 10,000 
 
 Total, £30,000 
 
 With the aid of machinery. 
 
 Circulating outlay, £15,000 
 
 Profit on do. 7,500 
 
 Profit on fixed outlay, 10,000 
 
 Total, £;j2,500 
 The result is very different, if the rate of profit be only ten 
 per cent, thus. 
 
 Without the aid of machinery. 
 
 Circulating outlay, £20,000 
 
 Profit on do 2,000 
 
 Total, x^22,000 
 
 With the aid of machinery. - 
 
 Circulating outlay, ------ £15,000 
 
 Profit on do. 1,500 
 
 Profit on fixed outlay, 2,000 
 
 Total, £18,500
 
 39 
 Or ^3j500 less than the price of that made without the aid 
 of machinery. The higher tlierefore the rate of j)rofit, the less 
 possibiHty there is of the introduction of machinery. 
 
 We may observe (hat the more opulent a people becomes, the 
 greater is the magriiiude of their outlays of capital ; far jjreater 
 indeed than necessity or expediency would seem at first view to 
 explain. We see amongst ihem, vast manufactories in 
 which multiludes of hired workmen are congregated ; while 
 in less opulent communities, there are few or no very extensive 
 manufactories, but on the contrary, a great number of small in- 
 dependent workmen either alone, or with only a small number 
 of hired assistants. Each has his own small capital with which 
 he carries on his business, and this capital is generally so small, 
 - that the different operations of a manufacture, as far as the divi- 
 sion of labour has taken place in the country, are separated 
 among different manufacturers of this description, who purchase 
 from one another^ the performer of a more advanced operation, 
 from him immediately preceding him in the order of operations, 
 and on performing his part of the work, sells it in his turn to 
 the person next in order beyond him. The spinner purchases 
 from the preparer of the fiax or wool, which he then spins, and 
 sells to the weaver, who after weaving it, sells (he cloth to the 
 bleacher or finisher. 
 
 Now the division of labour may in this way be attained to 
 the utmost extent, and the apparatus used may attain fully as 
 much perfection as that of great capitalists. There is no diffi- 
 culty in supposing the aggregate capital of a number of small 
 manufacturers to be equal in amount to that of a single extensive 
 one : therefore it is surely in the power of the former to divide 
 their labour and provide themselves with apparatus as com- 
 pletely as the latter, notwitlistanding which, in opulent coun- 
 tries where single individuals have accumulated immense capi- 
 tals, a great many manufacturing operations are generally 
 performed under the roof of a single establishment. Thus cloth 
 manufacturers have spinners, weavers, dyers, fullers, &c. all in 
 immediate employ. Population has thus a tendency to collect 
 as hired workmen into the service of great capitalists, and from 
 being, many of them, independent workmen themselves, to be-
 
 40 
 rnnu" (he servants of olliers. At first fiiiht (his may appear 
 urjaccoinitabl(% and it may be contended that it Is not in the 
 nature of an iniprovcmenf, biiice the division of labour aud (lie 
 perfection of apparatus may prevail equally amons^ both small 
 and ^real capilnlists ; and it would also seem that (he work of 
 huiali manufaetuiers could be ])erformed more economically, by 
 reason of their atteDtion and superiutesidence being confined 
 wilhin a narrower compas, and could thereft)re compete success- 
 fully wiih that of more extensive manufacturers. Since how- 
 ever, the fact is as I have stated, it must be (he interest of the 
 workmen to enroll themselves in the service of a master; and the 
 reason of this is, as follows. 
 
 When the difTerent operations of a manufacture are divided 
 among unconnected independent workmen, a series of purchases 
 takes place, as I have mentioned, and a celain capital is laid 
 out by each workman in buying from the other. Each however, 
 must have his profit on the capital thus laid out, so that profit is 
 several times multiplied in the price of the article, and not only 
 is profit multiplied, but a profit on each of the profits except the 
 last, is also required, There is therefore a multiplication of pro- 
 fits and profit on profit, or compound profit accumulated in the 
 end on the price of commodities. But a master manufacturer, 
 >\hose establishment includes all operations, makes but one pur- 
 chase ; he therefore, exacts no more profit than simply that 
 vhich becomes payable on a single investment of his capital, 
 without multiplying his profit, and consequently -without com- 
 pound profit. The work therefore, which has passed through 
 the hands of a number of smaller manufacturers, can never com- 
 pete in cheapness, though it may in excellence, with that which 
 the great capitalist produces. Jt is for this reason, that retailers 
 who can import their own goods, find it advantageous to do so, 
 thereby embodying the operations of wholesale and retail trade. 
 
 The foregoing are the principal modes in which capital oper- 
 ates. Capital is highly useful for putting industry in a conve- 
 nient and advantageous position ; but in no other way does it 
 operate. It is not the prime mover of production. Jts absence 
 docs not paralyze man^s energies : man alone produces any 
 thing ; and if he uses capital, he uset it, as a carpenter his
 
 41 
 
 chisel, or a labourer his spade. It is a inos^ e\oi lipiif itistru- 
 nuMit ; but man m;>y be industrious wi<hout it, ami il is by in- 
 dustry alone tliat he can procure it. If the aljsi ikx- of capital 
 checks industry, it must be by means of ihe riy;dry of a ncigh- 
 bourio^ country possessing capital. Thus the industry ot a poor 
 nation may be discouras:ed and suppressed by tiie competition 
 and rivalry of a richer nation, whose produclions are more excel- 
 lent an i cheap ; but there will be a natural tendency in capital 
 to flow from the latter to the former, and graduully equalize their 
 advantages, unless prejudice or distance interfere. Vet in order 
 to accelerate the introduction or production of tajMlal in the 
 poor nation, those who consult her true interests, oii{i;(itto dis- 
 courage by high duties, the importation of manufactures. The 
 late repeal of the duties on English goods, and their rapid and 
 convenient transmission by steam vessels, have nearly destroyed 
 several trifling irish manufacturers, but at the same time, British 
 capital has been making its way into Ireland, and establishing 
 manufactures that may defy competition. 
 
 When all the advantages which capital confers Inive Ix^cn at- 
 tained to tlie utmost, there is no possibility of laying out any 
 more capital in the country, let it accumulate to ever so great an 
 amount, without an encreased demand for commodities. If the 
 whole people be in full employment, that is, as far as (he imper- 
 fection of human nature will admit, their demand cannot en- 
 crease ; for demand can be only commensurate with production, 
 as we have seen. But if population encrease, either by improve- 
 ment in agriculture, or by the importation of foreign food, de- 
 mand must encrease ; in the former case, by liie industry and 
 consumption of the country being carried on, on a larger scale ; 
 and in the latter, by the opening of a foreign market for their 
 manufactured produce. 
 
 The advantages of capital however, have never yet been com- 
 pletely attained ; they therefore must be in continual progre^^s 
 towards attainment, and capital must be gradually finding new 
 opportunities of investment, according as the individuals that 
 possess it, devise gradually the manner and objects ot laying it 
 out. Their invention however, does not always keep pace with 
 their accumulation, and accordingly \?e have seen numerous 
 
 F
 
 42 
 
 instances of men A^illiii!^ to rittk tlicir cnpi'Hl in foreign lotiiis (o 
 weak or revolutionary <j«>vernnicri(s, and in oilitr visiomiry pro- 
 jects, for want of' tlie appearimce of more pruinisjus; object"* tor 
 its investment : not l)nt ihtre are at tUe same lime, many lyinfj 
 open, which would certainly succeed better, it Hiey could but be 
 distinguished anil selected ; and (here are ot course, many un- 
 tried manufactures, which would certainly succeed ultimately, 
 and would be attempted, but for the itnperfcction which nil iri- 
 fant manufactures labour under for some years, which discour- 
 ages all attempts to engage in them, rendering legislative pro- 
 tection in all such cases necessary. If however, (he whole 
 population should be already fully em[)loyed, there can l)e rM> 
 advantasre in the introduction of new manufactures, which must 
 flourish by the decline of some of the old ; unless intleed the po- 
 pulation be permitted to encrease by the importation of foreign 
 subsistence, and then there will be an opportunity for the exten- 
 sion of the operations of industry in all directions. 
 
 When all the known vents for the capital of individuals seem 
 pre-occupied, and men cannot strike out new ones, they often 
 join in associations or companies, in order to attain those which 
 lie beyond the reach of individuals, and consequently have been 
 unattempted. These offer abundant opportunity for the invest- 
 ment of idle capital ; but men do not always confine themselves 
 to them ; they sometimes endeavour to form companies to carry 
 on branches of industry which are clearly within the reach of 
 individuals, under whom they must always be victorious when 
 in competition with those carried on under the superintendence 
 of the careless and uninterested agents of a company. 
 
 From these observations it must appear, that capital may 
 abound beyond the wants of a nation ; — beyond the discoverable 
 ohj'.jcts for its investment. The views therefore, of those are 
 very fallacious, who recommend excessive parsimony in the use 
 of capital, and object to a melallic currency, because it absorbs 
 part of the national capital. 
 
 VROKIT OF NATURAL CAPITAL. 
 
 When land becomes scarce compared to the demand for it, 
 those who possess it, possess a high advantajje over those who 
 do not ; for not only can they produce food luor^ advantage-
 
 4;>' 
 
 ously than o(fif»is; but thci/ alone ran produce it at all ; and 
 as laud cannot be iicciiiDulaU'd like arlificia! capital, it can nevt-r 
 like the latter, accomodate itselfto the deinund, byi^radual aug- 
 mentation : on the contrary, the supply of land ii, compared to 
 the demand, indefiniiely ^r.-at in the b?'4inaii)ir ; and dimin- 
 ishes gradnally with the lapse ot (nuf^. The supply of artificial 
 capital is in the beginning, nothiiiji, and encreases gradually to 
 an indefinite amount. These opposite qualities clearly account 
 for the opposite course of variation in rent and profit properly 
 so called. lirnt or the profit of natural capital is always en- 
 creasiag: whereas the profit of artificial capital is always di- 
 minishing with the lapse of time. 
 
 If land were invariably bought and sold for use, like other 
 apparatus, and never for any other purpose, (he purchase 
 money would be only equal to a capital, of which the augmen- 
 tation of the price of the produce would ba the profit ; and in 
 retaining (his augmentation, the cultivator would only retain 
 the usual rate of profit exacted on capital laid out iu the pur- 
 chase of apparatus ; making allowance for the greater perma- 
 nence and indestructibility of land. The prevailing practice 
 however , of letting land to the cultivator, and making it the 
 security for a yearly income, raises its selling price far above 
 what it would be, if land were never purchased but as appara- 
 tus. Monied men, who do not wish to use their property them- 
 selves as capital, and who prefer the security of land to that of 
 merchants and manufacturers, estimate the value of land by the 
 rent ; and pay for it, such principal sum as, at the price of the 
 day, would command a rate of interest, equal to the rent of the 
 land which they purchase. Thus land, answering the purpose, 
 both of those who wish to use it as fixed capital, and of those 
 who wish to exchange their money for a yearly income, exhi- 
 bits the anomalous appearance of profit equal only to interest. 
 The greater security of land however, makes purchasers gener^ 
 ally satisfied with a smaller amount of rent, than they would 
 of interest. 
 
 U, as we have said, it were the practice for all farmers to pur- 
 chase their land, they alone would retain the profit ; this profit 
 would be the price of their capital expended in the purchase.
 
 44 
 
 and woulii he ullowed on account of the scarcity of capit.il ; 
 or at least it would have this appcaraiicp. lint since such ca- 
 pital ciui be dispensed with ; since farmers can take land 
 witlioiit inakini; any such outlay, and the land can be cultivated 
 Mithont any such advance of capital, the profit whicli the land 
 eoiiinmnds, takes a different course, and falls into the hands, not 
 of ihe cuhivators, hut of the landlords. It consists of the whole 
 sum which scarcity adds to the price of the produce, and is re- 
 gidated without reference to capital or profit, or any thing elsp. 
 
 As rent is a consideration paid for the loan of land, it might 
 he imagined, that it partakes more of the nature of interest than 
 fjrolit, particularly as it bears about the same j)roportiou to the 
 selling price of land, that interest does to capital. This how- 
 ever, would he a very erroneous conclusion, for the analogy be- 
 tween them fails in an important respect ; interest being oidy a 
 ptirt^ while rent like profit consists of the mhole augmentation 
 which scarcity adds to the price of produce. Interest can- 
 not consist of the whole, because nobody would borrow ca- 
 pital, if he had to pay away all the profits; but farmers must 
 borrow land on any terms ; for they cannot get their other 
 caj)ital into |)lav, nor gain their livelihood without it; and 
 ilierefore they bid for it, and competition being created, their 
 offers are limited only by the impossibility of paying more than 
 the wln>!e aui,'Mientation of the price of produce. But this sum 
 they are all wiUlng to pay, inasmuch as it conduces to put 
 their other agricultural capital to play, at the usual rate of pro- 
 fit, which alone they require to put them on a footing with 
 r)ther capitalists. If they could at any time get not only the 
 profit on their capital, but also a portion of what goes in rent, 
 they would then be on a better footing than other capitalists; 
 and farming being the most profitable of occupations, would 
 attract competitors for land, until no such advantage could re- 
 main to any except to the cultivator of his own ground, the 
 landlords obtaining the entire suuj which scarcity should add 
 to the price of produce. 
 
 Upon the whole it appears that rent cannot be considered as 
 t!ie profit on the selling price oiUand, but the profit on the laad
 
 45 
 
 itself; neither is it the interest on the selii'.)^^ {jiice; bill the 
 proposition may be inverle'I, and the selling price may be con- 
 sidered as the principal of the rent. 
 
 Having now explained the nature of wages and of profit, it 
 must appear evident that they are the component parts of price 
 in every possible instance. The price of all kinds of manufac- 
 tures is composed of the wages of the workmen, the profit 
 on the capital which pays those wages, and purchases materials, 
 and the profit on the fixed capital expended in the purchase of 
 apparatus. In like manner the price of agricultural produce 
 consists of the wages of the labourers, the profit on the capital 
 which pays those wages and purchases the seed manure, &c. 
 and the profit on the apparatus, wliethernalural, as land, or ar- 
 tificial, as ploughs, horses, spades, &c. 
 
 STANDARD OF VALUE. 
 
 If the same proportion of profit entered into the price of 
 every thing, labour would be an exact standard of value ; for 
 any two commodities of equal value, would be the produce of 
 exactly equivalent labour; but as the quantity of labour required 
 to produce an article, is different at diflcrent times and places, 
 labour could in such case be a standard of value at the same 
 lime and place only. Since, however, the proportion of profit 
 which enters into the price of commodities, is different even at 
 the same time and place, lal)our cannot even at the same 
 time and place be a standard of value. In an old coun- 
 try, a great part of the price of agricultural produce con- 
 sists of rent or the profit of land, while the price of manufac- 
 tures hardly undergoes any addition from the same cause ; the 
 portion of rent paid out of the raw materials bearing a much 
 smaller proportion to the ultimate value of the article, than rent 
 does to the value of agricultural produce. Hence, in every old 
 country, profit enters much more largely into the price of agri- 
 cultural produce, than of manufactures; and vice versa, wages 
 enter much more largely into the price of manufactures, and 
 there is more labour employed in the production of an equal 
 value of the latter than of the former. It therefore follows, that 
 their value being equal, but the labour expended on each being 
 different, labour cannot be a common standard of their value.
 
 4r, 
 
 SiiHi (he labour tMiiploycd in proiliicin^ equal values t>l a^^ricul- 
 (iirni ami miiutifactur. d prcMliicf, is so very different iu au old 
 country, it must be tiiiich more advaiiiugeous for such ncouulry 
 to export manufactures Jliaii airriculturnl produce. If the lat- 
 ter be chietiv expoisd, it j^ocs to supply the landlords with fo- 
 reign manufactures, and supports a manufacturing population 
 abroad, instead ol maintaining^ a similar additional population at 
 home : so that it (lure be no manufacluns at home, there will 
 be a tendency in all the food which remains over and above the 
 support of the euliivators, to pass into other countries ; the 
 expenses of transmission indeed will check this in some degree ; 
 but on the whole there will be little more food left in the coun- 
 try, than is sutTicieMt for the support of those who can find em- 
 ployment in a«:riculture, (for the food consumed by the landlords 
 is too trifling to be mentioned.) In Ireland, however, the par- 
 ticular food used by the population cannot be ex|>orted, for seve- 
 ral reasons ; and as it supports a greater number than any other 
 kind of food, the population is maintained in greater numbers 
 than agriculture can fully employ. It may indeed be said, that 
 an additional quantity of exportable commodities might be raised 
 in lieu of potatoes, and the cultivation of the latter confined to 
 the support of the necessari/ population. It is, however, as 
 profitable to cultivate a large quantity of potatoes, for the sup- 
 ply of a large population, as a small quantitj' of other food, tor 
 the supply of a small one ; inasmuch as the sum total |)aid for the 
 potatoes by the large population, may be equal to that paid tor 
 other food by a small population; and the quantity of produce 
 exported will always be exactly adapted to maintain this equality 
 or equilibrium. This opinion cannot be minutely discussed 
 here, but is briefly offered as a substitute tor the common non 
 scquitur argument of the sub-division of land.* 
 
 In order that labour should be an exact standard of value, it 
 is not necessary that it should be equal in value to the articles 
 ■which it produces, but only that its value should bear a certain 
 fixed proportion to theirs : in which case, every workman 
 
 • See " An Enquiry into the causes of ihe Poverty of Ireland," sold by Mr. 
 Sams, London, wbich,.amoni; some errors, contains a more full expobition of this sobjecL
 
 47 
 
 would receive in return for his wages, a produce of Iriljonr equi- 
 valent to that represented by liis wag^-s. Tims if we suppose 
 the wajjts to be paid in ihe actual produce of the workmen, 
 then each workman receives o. g. nme-(en(hs of that produce 
 for his waives, and with these nine-tenths [k^ cao purchase nine- 
 tenths of the pro(iii<rt" of another man's labour; so that his 
 waives wonhl enahie iiiiii always to command the prodncn 
 of labour equivalent to that which produced his waixos. — 
 And if we consider the subject in the more complex form 
 of money payments, the same conclusion will follow ; lor 
 the vvorknian will receive the price ot niue-tcntbs of his pro- 
 duce, with which he will be able to piuchase nine-tenths of the 
 produce of another man. Or to argue the matter closer ; suj)- 
 posing^ profit to enter ecpiaily as in all other commodities into 
 the value of silver, or money, his employer will pay him in sil- 
 ver, the produce ot nine-tentlis of a [)ortion of labour equiva- 
 lent to his own, equal exactly to what he could purchase. The 
 employer, however, in selling the produce, would receive in 
 silver the entire produce of equivalent labour, in other words 
 he would sell the ten-tenths of workman's produce, and receive 
 the ten-tenths of the silver, out cf which, after paying his work- 
 men nine-tenths of silver, he would have one-tenth remaining 
 vvitii himself as profit. 
 
 But as we know, and as we have proved, that profit enters 
 very imequally into the price ot different things, neither the 
 employer in selling his commodities, nor the workman in spend- 
 ing his wages receives always the produce of labour equivalent 
 to that which produced them. 'J'his shews itself most strik- 
 ingly in the purchase of food. The employer, supposing him to 
 pay his workmen in food, must, in purchasing that food, give 
 the nine-tenths of the produce of his workmen's labour lor the 
 produce of much less labour, in foojl : for a great part of the 
 value of food is coujposed of rent, to countervail which, the 
 purchaser net having any such value added to his own goods, 
 is compelled to offer a larger portion of them, — the produce of a 
 greater quantity of labour than he receives. And if the work- 
 man himself purchases his food, the case is the same; he gives 
 his whole produce excepting the employers one-tenth, that is.
 
 48 
 \w gives nine-teiitlis of his own )abour, in rttnrn for niiicli less 
 liian liiiK'-triiilis ot the lahour of the agiicnUural hibourer. He 
 i(ivt's his wages alone, fur that which is composed of both wages ) 
 and profit, and thongh he receives equaJ xalucj he receives 
 ninch It'ss that) the pro(hice of hibour equivalent to that whicti 
 I>rodnc'L(l his wages; for agricultural produce cannot in an 
 economical point of view, he considered as the produce of any 
 thing hut of the labour ein|iloyed. The land is oidy an appa- 
 ratus ill tlio li:iuds ot man, and whatever he raises Iroin it is the 
 produce of iiis own labour solely and exclusively; ju«t as raa- 
 iiulactures are wholly the produce of the workman's labour, 
 although he works by the assistance of apparatus. Capital and , 
 aj)paratus, both natural and artificial, are mere assistants and \ 
 facilitators f)f hutnan labour, and nuist not ever he considered 
 as pritnary agents or producers, an idea which would involve 
 the whole subject of political economy in inextricable confusion. 
 
 The agricultural labourer is affected of course in the same 
 manner as the n)anufacturing ones. If his employer pay him 
 in his own produce, that is, in food ; he will deduct from the 
 produce of his labour whatever the high profit on agricultural 
 produce enables him to do, and thus the labourer will receive 
 no more food for his labour, than the artizan can purchase with 
 his wages, and both are equally ill off with respect to food. If 
 the farmer pay the labourer his wages in manufactures, he 
 gives him actually the produce of much more labour than he 
 has expended, but which nevertheless will exchange for no more 
 food than he would receive if paid his wages in food ; and if 
 the farmer pay him in money, he will obviously give him the 
 same sum as the artizan receives for equivalent labour. 
 
 Since, therefore equal values are often the produce ot very 
 different portions of labour, it is quite clear that labour can- 
 not be an accurate standard of value. 
 
 FERGUSSON, PRINTER, CORK.