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IX.

dispose me to believe that the capital stock of CH A P: Great Britain was not diminished even by the enormous expence of the late war.

The diminution of the capital stock of the society, or of the funds destined for the maintenance of industry, however, as it lowers the wages of labour, so it raises the profits of stock, and consequently the interest of money. By the wages of labour being lowered, the owners of what stock remains in the fociety can bring their goods at less expence to market than before, and less stock being employed in supplying the market than before, they can sell them dearer. Their goods cost them less, and they get more for them. Their profits, therefore, being augmented at both ends, can well afford a large interest. The great fortunes fo fuddenly and so easily acquired in Bengal and the other British settlements in the East Indies, may satisfy us that, as the wages of labour are very low, fó the profits of stock are very high in those ruined countries. The interest of money is proportionably so. In Bengal, money is frequently lent to the farmers at forty, fifty, and fixty per cent. and the succeeding crop is mortgaged for the payment. As the profits which can afford such an interest must eat up almost the whole rent of the landlord, fo such enormous usury must in its turn eat up the greater part of those profits. Before the fall of the Roman republic, a ufury of the fame kind seems to have been common in the provinces, under the ruinous administration of their proconfuls. The virtuous Brutus lent

money

BO O K money in Cyprus at eight-and-forty per cent. as 1.

we learn from the letters of Cicero.

In a country which had acquired that full complement of riches which the nature of its foil and climate, and its situation with respect to other countries, allowed it to acquire ; which could, therefore, advance no further, and which was not going backwards, both the wages of la. bour and the profits of stock would probably be very low. In a country fully peopled in proportion to what either its territory could maintain or its stock employ, the competition for employment would necessarily be fo great as to reduce the wages of labour to what was barely fufficient to keep up the number of labourers, and, the country being already fully peopled, that number could never be augmented. In a country fully stocked in proportion to all the business it had to tranfact, as great a quantity of stock would be employed in every particular branch as the nature and extent of the tradewouldadmit. The competition, therefore, would every-where be as great, and consequently the ordinary profit as low as possible.

But perhaps no country has ever yet arrived at this degree of opulence. China feems to have been long stationary, and had probably long ago acquired that full complement of riches which is consistent with the nature of its laws and inftitutions.

But this complement may be much inferior to what, with other laws and inftitu. tions, the nature of its foil, climate, and fituation might admit of. A country which neglects

or

IX.

or despises foreign commerce, and which admits CHA P. the vessels of foreign nations into one or two of its ports only, cannot tranfact the same quantity of business which it might do with different laws and institutions. In a country too, where, though the rich or the owners of large capitals enjoy a good deal of security, the poor or the owners of small capitals enjoy scarce any, but are liable, under the pretence of justice, to be pillaged and plundered at any time by the inferior mandarines, the quantity of stock employed in all the different branches of business transacted within it, can never be equal to what the nature and extent of that business might admit. In every different branch, the oppression of the poor must establish the monopoly of the rich, who, by en. grossing the whole trade to themselves, will be able to make very large profits. Twelve per cent. accordingly is said to be the common in terest of money in China, and the ordinary profits of stock must be sufficient to afford this large interest.

A defect in the law may fometimes raise the rate of intereft confiderably above what the condition of the country, as to wealth or poverty, would require. When the law does not enforce the performance of contracts, it puts all borrowers nearly upon the fame footing with bankrupts or people of doubtful credit in better regulated countries. The uncertainty of recovering his money makes the lender exact the same ufu. rious interest which is usually required from bankrupts. Among the barbarous nations who

VOL. II.

L

over

I.

BOOK over-run the western provinces of the Roman

empire, the performance of contracts was left for many ages to the faith of the contracting parties. The courts of justice of their kivgs seldom intermeddled in it. The high rate of interest which took place in those ancient times may perhaps be partly accounted for from this cause.

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

The lowest ordinary rate of profit must always be something more than what is sufficient to compenfate the occasional loffes to which every employment of stock is exposed. It is this fur. plus only which is neat or clear profit. What is called gross profit comprehends frequently, not only this furplus, but what is retained for compensating such extraordinary losses. The interest which the borrower can afford to

pay portion to the clear profit only.

The lowest ordinary rate of interest must, in the same manner, be something more than sufficient to compensate the occasional losses to which lending, even with tolerable prudence, is ex

is in pro.

posed.

IX.

posed. Were it not more, charity or friendship C HA P. could be the only motives for lending.

In a country which had acquired its full complement of riches, where in every particular branch of bufiness there was the greatest quantity of stock that could be employed in it, as the ordinary rate of clear profit would be very small, so the usual market rate of interest which could be afforded out of it, would be so low as to render it impoffible for any but the very wealthiest people to live upon the interest of their money. All people of small or middling fortunes would be obliged to superintend themselves the employment of their own stocks. It would be necessary that almost every man should be a man of business, or engage in some fort of trade. The province of Holland seems to be approach. ing near to this state. It is there unfashionable not to be a man of business. Necessity makes it usual for almost every man to be fo, and custom every where regulates fashion. As it is ridiculous not to dress, so is it, in some measure, not to be employed, like other people. As a man of a civil profession seems awkward in a camp or a garrison, and is even in some danger of being despised there, so does an idle man among men of business.

The highest ordinary rate of profit may be such as, in the price of the greater part of commodities, eats up the whole of what should go to the rent of the land, and leaves only what is fufficient to pay the labour of preparing and bringL 2

ing

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