of his annual profit. It varies not only from year to year, but from day to day, and almost from hour to hour. To ascertain what is the average profit of all the different trades carried on in a great kingdom, must therefore be much more difficult.

The only rule which can direct us in this difficult and complicated research, is the rate of the interest of money in a given country, and at a given time. According as the usual market-rate of interest varies in any country, we may be assured that the ordinary profits of stock must vary with it, must sink as it sinks, and rise at it rises; whence Adam Smith draws various consequences relative to the progress of wealth in France, England, Holland, and Mexico *,

But this rule is liable to several exceptions, which render its application extremely doubtful and uncertain. According as circumstances augment or diminish capitals, or bad laws derange the monetary system of a country, the profits of stock may be more considerable than they ought to be. Certain it is, in general, that the profits of stock decrease in proportion to the increase of wealth, and augment in proportion to its decline. When a country possesses the sum of capitals which it wants, the profits of stock are very low.

Such is the doctrine of Adam Smith on this part of political economy. Though it does not afford much positive information, and is confined to mere conjectures, it yet furnishes us with one corollary worthy to be treasured up; namely, that the operations of governments, when not conducted with proper know

* Adam Smith's Wealth of Nations, vol. i. book i, chap. 9.

ledge and prudence, may have the most distressing influence on the individual, social, and foreign relations of a country.

If government, by any political, legislative, or administrative regulation, deranges the natural rate of the interest of money, the private interest of all suffers; the land-owner is sacrificed to the capitalist, or the capitalist to the land-owner; agricultural, manufactural, and commercial undertakings are carried on beyond, or stop short of their means; and in both cases labour is a sufferer, and wealth declines.

On the other hand, if government do not avail itself of the new methods which the science of capital has introduced in other countries, the nation over which it rules, labours with equal capitals under an unavoidable disadvantage in its dealings with other nations, and for a great length of time contributes unknowingly to enrich them at his own expence.

The employment of capital is, beyond contradiction, one of the most difficult branches of the science of public administration; it is that which deserves the greatest attention, and on which depends the progress or the decay of public prosperity.

i

CHAP. VI.

Conclusion of the Third Book.

CAPITALS consist in the accumulation of the produce of labour. This accumulation is effected by economy in consumption. In proportion as this accumulation takes place, capitals divide and follow various destinations. Some are destined to produce a revenue, and are called fixed capitals: others are destined to maintain labourers and to furnish the materials of labour; these are called circulating capitals: others, lastly, are destined to be lent out at interest in public or private loans, and constitute a part of the circulating capital.

Of all these employments of capital, the most useful, the best calculated to enrich even an agricultural country, to increase its wealth, and to raise it to the highest degree of prosperity which it can attain, is that which is applied to manufactures and commerce, which gives motion and life to the mercantile system, and seconds its efforts, its combinations, and its speculations. But the more this employment is favourable to the progress of public wealth, the less is its utility to private wealth; and the more it is productive of private wealth, the less it is beneficial to public wealth.

Governments, however, ought not to suppose that it is in their power to put an end to this opposition of

interest. It is grounded in the nature of things: whatever governments may do, capitals always have a great value wherever national wealth declines, and they constantly lose their valve in proportion to the increase of public wealth. All attempts to stem this irresistible tendency will ever prove unavailing; and the remedy will always be worse than the evil. The best thing enlightened and prudent goveruments can do under such circumstances, is to remove the accidental causes which may hasten the decline or impede the progress of national wealth. Their power goes no further. Above all, they ought never to forget that an error on this subject is much more fatal than in taxation, to which they give such serious attention. An error in taxation produces but partial evils, private misfortunes, and local inconveniencies. But an error in matters concerning capitals affects the faculties of the community, attacks the principle of life in the body-politic, and paralyses the whole. May this important consideration enforce the utmost caution, and teach governments, that it is not always enough to wish to do good, that they ought also to know how good is to be effected, and that, in the present state of political economy with regard to capitals, the wisest administration is that which commits the fewest mistakes.

1

BOOK IV.

OF THE VARIOUS SYSTEMS RELATING TO THE CIRCULATION OF THE PRODUCE OF LABOUR BY MEANS OF COMMERCE.

INTRODUCTION.

Ir man be indebted for his subsistence to labour; if it be to the accumulation of capital as the sole means of abridging, facilitating, and improving labour, that he owes his opulence and comforts; it is only through the circulation of the produce of labour by means of commerce, that nations attain wealth, splendour, and power.

"Trade," says D'Avenant," is the living fountain "is whence we draw all our nourishment. It disperses that blood and spirits through all the members by which the body-politic subsists. The price of lands, value of rents, and our commodities and manufactures, rise and fall as it goes well or ill with our foreign trade." *

"The greatness of a state," says David Hume, " and the happiness of its subjects, how independent soever they may be supposed in some respects, are

* Essay on Ways and Means, vol. i. page 16.