More heads are occupied in inventing the most proper machinery for executing the work of each, and it is, therefore, more likely to be invented. There are many commodities, therefore, which, in conscquence of these improvements, come to be produced by so much less labour than before, that the increase of its price is more than compensated by the diminution of its quantity.

CHAPTER IX.

OF THE PROFITS OF STOCK.

HE rise and fall in the profits of stock depend upon the same causes with the rise and fall in the wages of labour, the increasing or declining state of the wealth of the society; but those causes affect the one and the other very differently. f ཟVL

The increase of stock, which raises wages, tends to lower profit. When the stocks of many rich merchants are turned into the same trade, their mutual competition naturally tends to lower its profit; and when there is a like increase of stock in all the different trades carried on in the same society, the same competition must produce the same effect in them all.1

It is not easy, it has already been observed, to ascertain what are the average wages of labour even in a particular place, and at a particular time. We can, even in this case, seldom determine more than what are the most usual wages. But even this can seldom be done with regard to the profits of stock. Profit is so very fluctuating, that the person who carries on a particular trade cannot always tell you himself what is the average of his annual profit. It is affected, not only by every variation of price in the commodities which he deals in, but by the good or bad fortune both of his rivals and of his customers, and by a thousand

1 The rate of profit is not lowered by the competition of capitals, but by the greater accumulation of capital and the diminished demand for it. Wages may bo high, and profits high, because the profitable employments of capital may be numerous. Taxation may be high, and profits may still be high, for the same reason. Rates of interest are plainly de

other accidents to which goods

termined by the abundance or scarcity of money. Whatever profit contains beyond interest, is, as I have said, the wages of superintendence, and this part of profit will be determined by the same causes which determine the wages of labour in particular callings, that is to say, by the amount of competition to which such callings are subject.

when carried either by sea or by land, or even when stored in a warehouse, are liable. It varies, therefore, 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 be much more difficult; and to judge of what it may have been formerly, or in remote periods of time, with any degree of precision, must be altogether impossible.

But though it may be impossible to determine, with any degree of precision, what are or were the average profits of stock, either in the present or in ancient times, some notion may be formed of them \from the interest of money. It may be laid down as a maxim, that wherever a great deal can be made by the use of money, a great deal will commonly be given for the use of it; and that wherever little can be made by it, less will commonly be given for it. According, therefore, 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 as it rises. The progress of interest, therefore, may lead us to form some notion of the progress of profit.

By the 37th of Henry VIII all interest above ten per cent. was declared unlawful. More, it seems, had sometimes been taken before that. In the reign of Edward VI religious zeal prohibited all interest. This prohibition, however, like all others of the same kind, is said to have produced no effect, and probably rather increased than diminished the evil of usury. The statute of Henry VIII was revived by the 13th of Elizabeth, cap. 8, and ten per cent. continued to be the legal rate of interest till the 21st of James I, when it was restricted to eight per cent. It was reduced to six per cent. soon after the Restoration, and by the 12th of Queen Anne to five per cent. All these different statutory regulations seem to have been made with great propriety. They seem to have followed and not to have gone before the market rate of interest, or

1 The wisdom of attempting to regulate the rate of interest by legal enactments was affirmed almost universally in Adam Smith's time. At the present day, it is seen to be as unreasonable as it is to fix any other price, and it has been found out that the plea commonly alleged for the restriction, that it was desirable to protect society against usurers, was not only false, but that the legal restriction

actually assisted the usurer against his debtor, since debtors will borrow, and must needs compensate their creditors for the disrepute and risk which accom pany a breach of the law. The attack on the existing system was ably conducted by Bentham, in his defence of usury; and a few years ago the whole fabric of the usury laws was swept

away.

the rate at which people of good credit usually borrowed. Since the time of Queen Anne, five per cent. seems to have been rather above than below the market rate. Before the late war, the government borrowed at three per cent.; and people of good credit in the capital, and in many other parts of the kingdom, at three and a half, four, and four and a half per cent.

Since the time of Henry VIII1 the wealth and revenue of the country have been continually advancing, and, in the course of their progress, their pace seems rather to have been gradually accelerated than retarded. They seem, not only to have been going on, but to have been going on faster and faster. The wages of labour have been continually increasing during the same period, and in the greater part of the different branches of trade and manufactures the profits of stock have been diminishing.

It generally requires a greater stock to carry on any sort of trade in a great town than in a country village. The great stocks employed in every branch of trade, and the number of rich competitors, generally reduce the rate of profit in the former below what it is in the latter. But the wages of labour are generally higher in a great town than in a country village. In a thriving town the people who have great stocks to employ, frequently cannot get the number of workmen they want, and therefore bid against one another in order to get as many as they can, which raises the wages of labour and lowers the profits of stock. In the remote parts of the country there is frequently not stock sufficient to employ all the people, who therefore bid against one another in order to get employment, which lowers the wages of labour and raises the profits of stock.

In Scotland, though the legal rate of interest is the same as in England, the market rate is rather higher. People of the best credit there seldom borrow under five per cent. Even private bankers in Edinburgh give four per cent. upon their promissory notes, of which payment either in whole or in part may be demanded at pleasure. Private bankers in London give no interest for the money which is deposited with them. There are few trades which cannot be carried on with a smaller stock in Scotland than in England. The common rate of profit, therefore, must be somewhat greater. The wages of labour, it has already been observed, are lower in Scotland than in England. The country too is not only much poorer, but the steps

It is more correct to say, since the conclusion of Elizabeth's reign.

by which it advances to a better condition, for it is evidently advancing, scem to be much slower and more tardy.'

The legal rate of interest in France has not, during the course of the present century, been always regulated by the market rate.* In 1720 interest was reduced from the twentieth to the fiftieth penny, or from five to two per cent. In 1724 it was raised to the thirtieth penny, or to 3 per cent. In 1725 it was again raised to the twentieth penny, or to five per cent. In 1766, during the administration of M. Laverdy, it was reduced to the twenty-fifth penny, or to four per cent. The Abbé Terray raised it afterwards to the old rate of five per cent. The supposed purpose of many of those violent reductions of interest was to prepare the way for reducing that of the public debts; a purpose which has sometimes been executed. France is perhaps in the present times not so rich a country as England; and though the legal rate of interest has in France frequently been lower than in England, the market rate has generally been higher; for there, as in other countries, they have several very safe and easy methods of evading the law. The profits of trade, I have been assured by British merchants who had traded in both countries, are higher in France than in England; and it is no doubt upon this account that many British subjects choose rather to employ their capitals in a country where trade is in disgrace than in one where it is highly respected. The wages of labour are lower in France than in England. When you go from Scotland to England, the difference which you may remark between the dress and countenance of the common people in the one country and in the other sufficiently indicates the difference in their condition. The contrast is still greater when you return from France. France, though no doubt a richer country than Scotland, seems not to be going forward so fast. It is a common and even a popular opinion in the country that it is going backwards; an opinion which, I apprehend, is ill founded even with regard to France, but which nobody can possibly entertain with regard to Scotland, who sees the country now and who saw it twenty or thirty years ago.

1 Up to the conclusion of the eighteenth century Scotland contributed very little to the public revenue, the produce of the customs being absorbed in local charges and the cost of collection. See Macpherson's History of Commerce, vol. iv.

passim. For an exact account of the growth of the Scottish linen manufacture, see The Linen Trade, Ancient and Modern, by Mr. Alexander Warden.

* See Denisart, Article Taux des Intérêts, tom. iii. p. 18.

The province of Holland, on the other hand, in proportion to the extent of its territory and the number of its people, is a richer country than England. The government there borrow at two per cent., and private people of good credit at three. The wages of labour are said to be higher in Holland than in England, and the Dutch, it is well known, trade upon lower profits than any people in Europe. The trade of Holland, it has been pretended by some people, is decaying, and it may perhaps be true that some particular branches of it are so. But these symptoms seem to indicate sufficiently that there is no general decay. When profit diminishes, merchants are very apt to complain that trade decays; though the diminution of profit is the natural effect of its prosperity, or of a greater stock being employed in it than before. During the late war the Dutch gained the whole carrying trade of France, of which they still retain a very large share. The great property which they possess both in the French and English funds, about forty millions, it is said, in the latter (in which I suspect, however, there is a considerable exaggeration); 2 the great sums which they lend to private people in countries where the rate of interest is higher than in their own, are circumstances which no doubt demonstrate the redundancy of their stock, or that it has increased beyond what they can employ with tolerable profit in the proper business of their own country: but they do not demonstrate that that business has decreased. As the capital of a private man, though acquired by a particular trade, may increase beyond what he can employ in it, and yet that trade continue to increase too; so may likewise the capital of a great nation. In our North American and West Indian colonies, not only the wages of labour, but the interest of money, and consequently the profits of stock, are higher than in England. In the different

This low rate of profit in Holland is ascribed, by Mr. Macculloch and others, to the oppressiveness of taxation. But heavy taxation, if it be not compensated by parsimony, has a tendency to heighten the rate of profit, by diminishing the amount of capital. It is more reasonable to conclude that the parsimony of the Dutch led to the accumulation of capital, and that their wilful narrowing of the market for Eastern produce, by limiting its annual amount artificially, induced a low rate of profit on the principal articles in which they traded. At any rate, it is

not easy to understand the connexion botwoon honvy taxation and low rates of profit. A high rate of profit on a few transactions is a poor substitute for a low rate of profit on a multitude of transactions.

2 Mr. Macculloch states, that in 1762 the amount of the public funds standing in the names of foreigners and their agents was nearly £15,000,000. In 1806 it was £18,598,606. It is said by Mr. Fairman, 'On the Funds,' that these investments have rapidly declined since the peace of 1815.