---
id: book-2-chapter-05
title: "OF THE DIFFERENT EMPLOYMENTS OF CAPITALS."
book: "2"
chapter: 5
artifact_type: content
---

CHAPTER V.
OF THE DIFFERENT EMPLOYMENTS OF CAPITALS.



      Though all capitals are destined for the maintenance of productive labour
      only, yet the quantity of that labour which equal capitals are capable of
      putting into motion, varies extremely according to the diversity of their
      employment; as does likewise the value which that employment adds to the
      annual produce of the land and labour of the country.

      A capital may be employed in four different ways; either, first, in
      procuring the rude produce annually required for the use and consumption
      of the society; or, secondly, in manufacturing and preparing that rude
      produce for immediate use and consumption; or, thirdly in transporting
      either the rude or manufactured produce from the places where they abound
      to those where they are wanted; or, lastly, in dividing particular
      portions of either into such small parcels as suit the occasional demands
      of those who want them. In the first way are employed the capitals of all
      those who undertake improvement or cultivation of lands, mines, or
      fisheries; in the second, those of all master manufacturers; in the third,
      those of all wholesale merchants; and in the fourth, those of all
      retailers. It is difficult to conceive that a capital should be employed
      in any way which may not be classed under some one or other of those four.

      Each of those four methods of employing a capital is essentially
      necessary, either to the existence or extension of the other three, or to
      the general conveniency of the society.

      Unless a capital was employed in furnishing rude produce to a certain
      degree of abundance, neither manufactures nor trade of any kind could
      exist.

      Unless a capital was employed in manufacturing that part of the rude
      produce which requires a good deal of preparation before it can be fit for
      use and consumption, it either would never be produced, because there
      could be no demand for it; or if it was produced spontaneously, it would
      be of no value in exchange, and could add nothing to the wealth of the
      society.

      Unless a capital was employed in transporting either the rude or
      manufactured produce from the places where it abounds to those where it is
      wanted, no more of either could be produced than was necessary for the
      consumption of the neighbourhood. The capital of the merchant exchanges
      the surplus produce of one place for that of another, and thus encourages
      the industry, and increases the enjoyments of both.

      Unless a capital was employed in breaking and dividing certain portions
      either of the rude or manufactured produce into such small parcels as suit
      the occasional demands of those who want them, every man would be obliged
      to purchase a greater quantity of the goods he wanted than his immediate
      occasions required. If there was no such trade as a butcher, for example,
      every man would be obliged to purchase a whole ox or a whole sheep at a
      time. This would generally be inconvenient to the rich, and much more so
      to the poor. If a poor workman was obliged to purchase a month’s or six
      months’ provisions at a time, a great part of the stock which he employs
      as a capital in the instruments of his trade, or in the furniture of his
      shop, and which yields him a revenue, he would be forced to place in that
      part of his stock which is reserved for immediate consumption, and which
      yields him no revenue. Nothing can be more convenient for such a person
      than to be able to purchase his subsistence from day to day, or even from
      hour to hour, as he wants it. He is thereby enabled to employ almost his
      whole stock as a capital. He is thus enabled to furnish work to a greater
      value; and the profit which he makes by it in this way much more than
      compensates the additional price which the profit of the retailer imposes
      upon the goods. The prejudices of some political writers against
      shopkeepers and tradesmen are altogether without foundation. So far is it
      from being necessary either to tax them, or to restrict their numbers,
      that they can never be multiplied so as to hurt the public, though they
      may so as to hurt one another. The quantity of grocery goods, for example,
      which can be sold in a particular town, is limited by the demand of that
      town and its neighbourhood. The capital, therefore, which can be employed
      in the grocery trade, cannot exceed what is sufficient to purchase that
      quantity. If this capital is divided between two different grocers, their
      competition will tend to make both of them sell cheaper than if it were in
      the hands of one only; and if it were divided among twenty, their
      competition would be just so much the greater, and the chance of their
      combining together, in order to raise the price, just so much the less.
      Their competition might, perhaps, ruin some of themselves; but to take
      care of this, is the business of the parties concerned, and it may safely
      be trusted to their discretion. It can never hurt either the consumer or
      the producer; on the contrary, it must tend to make the retailers both
      sell cheaper and buy dearer, than if the whole trade was monopolised by
      one or two persons. Some of them, perhaps, may sometimes decoy a weak
      customer to buy what he has no occasion for. This evil, however, is of too
      little importance to deserve the public attention, nor would it
      necessarily be prevented by restricting their numbers. It is not the
      multitude of alehouses, to give the must suspicious example, that
      occasions a general disposition to drunkenness among the common people;
      but that disposition, arising from other causes, necessarily gives
      employment to a multitude of alehouses.

      The persons whose capitals are employed in any of those four ways, are
      themselves productive labourers. Their labour, when properly directed,
      fixes and realizes itself in the subject or vendible commodity upon which
      it is bestowed, and generally adds to its price the value at least of
      their own maintenance and consumption. The profits of the farmer, of the
      manufacturer, of the merchant, and retailer, are all drawn from the price
      of the goods which the two first produce, and the two last buy and sell.
      Equal capitals, however, employed in each of those four different ways,
      will immediately put into motion very different quantities of productive
      labour; and augment, too, in very different proportions, the value of the
      annual produce of the land and labour of the society to which they belong.

      The capital of the retailer replaces, together with its profits, that of
      the merchant of whom he purchases goods, and thereby enables him to
      continue his business. The retailer himself is the only productive
      labourer whom it immediately employs. In his profit consists the whole
      value which its employment adds to the annual produce of the land and
      labour of the society.

      The capital of the wholesale merchant replaces, together with their
      profits, the capitals of the farmers and manufacturers of whom he
      purchases the rude and manufactured produce which he deals in, and thereby
      enables them to continue their respective trades. It is by this service
      chiefly that he contributes indirectly to support the productive labour of
      the society, and to increase the value of its annual produce. His capital
      employs, too, the sailors and carriers who transport his goods from one
      place to another; and it augments the price of those goods by the value,
      not only of his profits, but of their wages. This is all the productive
      labour which it immediately puts into motion, and all the value which it
      immediately adds to the annual produce. Its operation in both these
      respects is a good deal superior to that of the capital of the retailer.

      Part of the capital of the master manufacturer is employed as a fixed
      capital in the instruments of his trade, and replaces, together with its
      profits, that of some other artificer of whom he purchases them. Part of
      his circulating capital is employed in purchasing materials, and replaces,
      with their profits, the capitals of the farmers and miners of whom he
      purchases them. But a great part of it is always, either annually, or in a
      much shorter period, distributed among the different workmen whom he
      employs. It augments the value of those materials by their wages, and by
      their masters’ profits upon the whole stock of wages, materials, and
      instruments of trade employed in the business. It puts immediately into
      motion, therefore, a much greater quantity of productive labour, and adds
      a much greater value to the annual produce of the land and labour of the
      society, than an equal capital in the hands of any wholesale merchant.

      No equal capital puts into motion a greater quantity of productive labour
      than that of the farmer. Not only his labouring servants, but his
      labouring cattle, are productive labourers. In agriculture, too, Nature
      labours along with man; and though her labour costs no expense, its
      produce has its value, as well as that of the most expensive workmen. The
      most important operations of agriculture seem intended, not so much to
      increase, though they do that too, as to direct the fertility of Nature
      towards the production of the plants most profitable to man. A field
      overgrown with briars and brambles, may frequently produce as great a
      quantity of vegetables as the best cultivated vineyard or corn field.
      Planting and tillage frequently regulate more than they animate the active
      fertility of Nature; and after all their labour, a great part of the work
      always remains to be done by her. The labourers and labouring cattle,
      therefore, employed in agriculture, not only occasion, like the workmen in
      manufactures, the reproduction of a value equal to their own consumption,
      or to the capital which employs them, together with its owner’s profits,
      but of a much greater value. Over and above the capital of the farmer, and
      all its profits, they regularly occasion the reproduction of the rent of
      the landlord. This rent may be considered as the produce of those powers
      of Nature, the use of which the landlord lends to the farmer. It is
      greater or smaller, according to the supposed extent of those powers, or,
      in other words, according to the supposed natural or improved fertility of
      the land. It is the work of Nature which remains, after deducting or
      compensating every thing which can be regarded as the work of man. It is
      seldom less than a fourth, and frequently more than a third, of the whole
      produce. No equal quantity of productive labour employed in manufactures,
      can ever occasion so great reproduction. In them Nature does nothing; man
      does all; and the reproduction must always be in proportion to the
      strength of the agents that occasion it. The capital employed in
      agriculture, therefore, not only puts into motion a greater quantity of
      productive labour than any equal capital employed in manufactures; but in
      proportion, too, to the quantity of productive labour which it employs, it
      adds a much greater value to the annual produce of the land and labour of
      the country, to the real wealth and revenue of its inhabitants. Of all the
      ways in which a capital can be employed, it is by far the most
      advantageous to society.

      The capitals employed in the agriculture and in the retail trade of any
      society, must always reside within that society. Their employment is
      confined almost to a precise spot, to the farm, and to the shop of the
      retailer. They must generally, too, though there are some exceptions to
      this, belong to resident members of the society.

      The capital of a wholesale merchant, on the contrary, seems to have no
      fixed or necessary residence anywhere, but may wander about from place to
      place, according as it can either buy cheap or sell dear.

      The capital of the manufacturer must, no doubt, reside where the
      manufacture is carried on; but where this shall be, is not always
      necessarily determined. It may frequently be at a great distance, both
      from the place where the materials grow, and from that where the complete
      manufacture is consumed. Lyons is very distant, both from the places which
      afford the materials of its manufactures, and from those which consume
      them. The people of fashion in Sicily are clothed in silks made in other
      countries, from the materials which their own produces. Part of the wool
      of Spain is manufactured in Great Britain, and some part of that cloth is
      afterwards sent back to Spain.

      Whether the merchant whose capital exports the surplus produce of any
      society, be a native or a foreigner, is of very little importance. If he
      is a foreigner, the number of their productive labourers is necessarily
      less than if he had been a native, by one man only; and the value of their
      annual produce, by the profits of that one man. The sailors or carriers
      whom he employs, may still belong indifferently either to his country, or
      to their country, or to some third country, in the same manner as if he
      had been a native. The capital of a foreigner gives a value to their
      surplus produce equally with that of a native, by exchanging it for
      something for which there is a demand at home. It as effectually replaces
      the capital of the person who produces that surplus, and as effectually
      enables him to continue his business, the service by which the capital of
      a wholesale merchant chiefly contributes to support the productive labour,
      and to augment the value of the annual produce of the society to which he
      belongs.

      It is of more consequence that the capital of the manufacturer should
      reside within the country. It necessarily puts into motion a greater
      quantity of productive labour, and adds a greater value to the annual
      produce of the land and labour of the society. It may, however, be very
      useful to the country, though it should not reside within it. The capitals
      of the British manufacturers who work up the flax and hemp annually
      imported from the coasts of the Baltic, are surely very useful to the
      countries which produce them. Those materials are a part of the surplus
      produce of those countries, which, unless it was annually exchanged for
      something which is in demand there, would be of no value, and would soon
      cease to be produced. The merchants who export it, replace the capitals of
      the people who produce it, and thereby encourage them to continue the
      production; and the British manufacturers replace the capitals of those
      merchants.

      A particular country, in the same manner as a particular person, may
      frequently not have capital sufficient both to improve and cultivate all
      its lands, to manufacture and prepare their whole rude produce for
      immediate use and consumption, and to transport the surplus part either of
      the rude or manufactured produce to those distant markets, where it can be
      exchanged for something for which there is a demand at home. The
      inhabitants of many different parts of Great Britain have not capital
      sufficient to improve and cultivate all their lands. The wool of the
      southern counties of Scotland is, a great part of it, after a long land
      carriage through very bad roads, manufactured in Yorkshire, for want of a
      capital to manufacture it at home. There are many little manufacturing
      towns in Great Britain, of which the inhabitants have not capital
      sufficient to transport the produce of their own industry to those distant
      markets where there is demand and consumption for it. If there are any
      merchants among them, they are, properly, only the agents of wealthier
      merchants who reside in some of the great commercial cities.

      When the capital of any country is not sufficient for all those three
      purposes, in proportion as a greater share of it is employed in
      agriculture, the greater will be the quantity of productive labour which
      it puts into motion within the country; as will likewise be the value
      which its employment adds to the annual produce of the land and labour of
      the society. After agriculture, the capital employed in manufactures puts
      into motion the greatest quantity of productive labour, and adds the
      greatest value to the annual produce. That which is employed in the trade
      of exportation has the least effect of any of the three.

      The country, indeed, which has not capital sufficient for all those three
      purposes, has not arrived at that degree of opulence for which it seems
      naturally destined. To attempt, however, prematurely, and with an
      insufficient capital, to do all the three, is certainly not the shortest
      way for a society, no more than it would be for an individual, to acquire
      a sufficient one. The capital of all the individuals of a nation has its
      limits, in the same manner as that of a single individual, and is capable
      of executing only certain purposes. The capital of all the individuals of
      a nation is increased in the same manner as that of a single individual,
      by their continually accumulating and adding to it whatever they save out
      of their revenue. It is likely to increase the fastest, therefore, when it
      is employed in the way that affords the greatest revenue to all the
      inhabitants or the country, as they will thus be enabled to make the
      greatest savings. But the revenue of all the inhabitants of the country is
      necessarily in proportion to the value of the annual produce of their land
      and labour.

      It has been the principal cause of the rapid progress of our American
      colonies towards wealth and greatness, that almost their whole capitals
      have hitherto been employed in agriculture. They have no manufactures,
      those household and coarser manufactures excepted, which necessarily
      accompany the progress of agriculture, and which are the work of the women
      and children in every private family. The greater part, both of the
      exportation and coasting trade of America, is carried on by the capitals
      of merchants who reside in Great Britain. Even the stores and warehouses
      from which goods are retailed in some provinces, particularly in Virginia
      and Maryland, belong many of them to merchants who reside in the mother
      country, and afford one of the few instances of the retail trade of a
      society being carried on by the capitals of those who are not resident
      members of it. Were the Americans, either by combination, or by any other
      sort of violence, to stop the importation of European manufactures, and,
      by thus giving a monopoly to such of their own countrymen as could
      manufacture the like goods, divert any considerable part of their capital
      into this employment, they would retard, instead of accelerating, the
      further increase in the value of their annual produce, and would obstruct,
      instead of promoting, the progress of their country towards real wealth
      and greatness. This would be still more the case, were they to attempt, in
      the same manner, to monopolize to themselves their whole exportation
      trade.

      The course of human prosperity, indeed, seems scarce ever to have been of
      so long continuance as to enable any great country to acquire capital
      sufficient for all those three purposes; unless, perhaps, we give credit
      to the wonderful accounts of the wealth and cultivation of China, of those
      of ancient Egypt, and of the ancient state of Indostan. Even those three
      countries, the wealthiest, according to all accounts, that ever were in
      the world, are chiefly renowned for their superiority in agriculture and
      manufactures. They do not appear to have been eminent for foreign trade.
      The ancient Egyptians had a superstitious antipathy to the sea; a
      superstition nearly of the same kind prevails among the Indians; and the
      Chinese have never excelled in foreign commerce. The greater part of the
      surplus produce of all those three countries seems to have been always
      exported by foreigners, who gave in exchange for it something else, for
      which they found a demand there, frequently gold and silver.

      It is thus that the same capital will in any country put into motion a
      greater or smaller quantity of productive labour, and add a greater or
      smaller value to the annual produce of its land and labour, according to
      the different proportions in which it is employed in agriculture,
      manufactures, and wholesale trade. The difference, too, is very great,
      according to the different sorts of wholesale trade in which any part of
      it is employed.

      All wholesale trade, all buying in order to sell again by wholesale, maybe
      reduced to three different sorts: the home trade, the foreign trade of
      consumption, and the carrying trade. The home trade is employed in
      purchasing in one part of the same country, and selling in another, the
      produce of the industry of that country. It comprehends both the inland
      and the coasting trade. The foreign trade of consumption is employed in
      purchasing foreign goods for home consumption. The carrying trade is
      employed in transacting the commerce of foreign countries, or in carrying
      the surplus produce of one to another.

      The capital which is employed in purchasing in one part of the country, in
      order to sell in another, the produce of the industry of that country,
      generally replaces, by every such operation, two distinct capitals, that
      had both been employed in the agriculture or manufactures of that country,
      and thereby enables them to continue that employment. When it sends out
      from the residence of the merchant a certain value of commodities, it
      generally brings back in return at least an equal value of other
      commodities. When both are the produce of domestic industry, it
      necessarily replaces, by every such operation, two distinct capitals,
      which had both been employed in supporting productive labour, and thereby
      enables them to continue that support. The capital which sends Scotch
      manufactures to London, and brings back English corn and manufactures to
      Edinburgh, necessarily replaces, by every such operation, two British
      capitals, which had both been employed in the agriculture or manufactures
      of Great Britain.

      The capital employed in purchasing foreign goods for home consumption,
      when this purchase is made with the produce of domestic industry,
      replaces, too, by every such operation, two distinct capitals; but one of
      them only is employed in supporting domestic industry. The capital which
      sends British goods to Portugal, and brings back Portuguese goods to Great
      Britain, replaces, by every such operation, only one British capital. The
      other is a Portuguese one. Though the returns, therefore, of the foreign
      trade of consumption, should be as quick as those of the home trade, the
      capital employed in it will give but one half of the encouragement to the
      industry or productive labour of the country.

      But the returns of the foreign trade of consumption are very seldom so
      quick as those of the home trade. The returns of the home trade generally
      come in before the end of the year, and sometimes three or four times in
      the year. The returns of the foreign trade of consumption seldom come in
      before the end of the year, and sometimes not till after two or three
      years. A capital, therefore, employed in the home trade, will sometimes
      make twelve operations, or be sent out and returned twelve times, before a
      capital employed in the foreign trade of consumption has made one. If the
      capitals are equal, therefore, the one will give four-and-twenty times
      more encouragement and support to the industry of the country than the
      other.

      The foreign goods for home consumption may sometimes be purchased, not
      with the produce of domestic industry but with some other foreign goods.
      These last, however, must have been purchased, either immediately with the
      produce of domestic industry, or with something else that had been
      purchased with it; for, the case of war and conquest excepted, foreign
      goods can never be acquired, but in exchange for something that had been
      produced at home, either immediately, or after two or more different
      exchanges. The effects, therefore, of a capital employed in such a
      round-about foreign trade of consumption, are, in every respect, the same
      as those of one employed in the most direct trade of the same kind, except
      that the final returns are likely to be still more distant, as they must
      depend upon the returns of two or three distinct foreign trades. If the
      hemp and flax of Riga are purchased with the tobacco of Virginia, which
      had been purchased with British manufactures, the merchant must wait for
      the returns of two distinct foreign trades, before he can employ the same
      capital in repurchasing a like quantity of British manufactures. If the
      tobacco of Virginia had been purchased, not with British manufactures, but
      with the sugar and rum of Jamaica, which had been purchased with those
      manufactures, he must wait for the returns of three. If those two or three
      distinct foreign trades should happen to be carried on by two or three
      distinct merchants, of whom the second buys the goods imported by the
      first, and the third buys those imported by the second, in order to export
      them again, each merchant, indeed, will, in this case, receive the returns
      of his own capital more quickly; but the final returns of the whole
      capital employed in the trade will be just as slow as ever. Whether the
      whole capital employed in such a round about trade belong to one merchant
      or to three, can make no difference with regard to the country, though it
      may with regard to the particular merchants. Three times a greater capital
      must in both cases be employed, in order to exchange a certain value of
      British manufactures for a certain quantity of flax and hemp, than would
      have been necessary, had the manufactures and the flax and hemp been
      directly exchanged for one another. The whole capital employed, therefore,
      in such a round-about foreign trade of consumption, will generally give
      less encouragement and support to the productive labour of the country,
      than an equal capital employed in a more direct trade of the same kind.

      Whatever be the foreign commodity with which the foreign goods for home
      consumption are purchased, it can occasion no essential difference, either
      in the nature of the trade, or in the encouragement and support which it
      can give to the productive labour of the country from which it is carried
      on. If they are purchased with the gold of Brazil, for example, or with
      the silver of Peru, this gold and silver, like the tobacco of Virginia,
      must have been purchased with something that either was the produce of the
      industry of the country, or that had been purchased with something else
      that was so. So far, therefore, as the productive labour of the country is
      concerned, the foreign trade of consumption, which is carried on by means
      of gold and silver, has all the advantages and all the inconveniencies of
      any other equally round-about foreign trade of consumption; and will
      replace, just as fast, or just as slow, the capital which is immediately
      employed in supporting that productive labour. It seems even to have one
      advantage over any other equally round-about foreign trade. The
      transportation of those metals from one place to another, on account of
      their small bulk and great value, is less expensive than that of almost
      any other foreign goods of equal value. Their freight is much less, and
      their insurance not greater; and no goods, besides, are less liable to
      suffer by the carriage. An equal quantity of foreign goods, therefore, may
      frequently be purchased with a smaller quantity of the produce of domestic
      industry, by the intervention of gold and silver, than by that of any
      other foreign goods. The demand of the country may frequently, in this
      manner, be supplied more completely, and at a smaller expense, than in any
      other. Whether, by the continual exportation of those metals, a trade of
      this kind is likely to impoverish the country from which it is carried on
      in any other way, I shall have occasion to examine at great length
      hereafter.

      That part of the capital of any country which is employed in the carrying
      trade, is altogether withdrawn from supporting the productive labour of
      that particular country, to support that of some foreign countries. Though
      it may replace, by every operation, two distinct capitals, yet neither of
      them belongs to that particular country. The capital of the Dutch
      merchant, which carries the corn of Poland to Portugal, and brings back
      the fruits and wines of Portugal to Poland, replaces by every such
      operation two capitals, neither of which had been employed in supporting
      the productive labour of Holland; but one of them in supporting that of
      Poland, and the other that of Portugal. The profits only return regularly
      to Holland, and constitute the whole addition which this trade necessarily
      makes to the annual produce of the land and labour of that country. When,
      indeed, the carrying trade of any particular country is carried on with
      the ships and sailors of that country, that part of the capital employed
      in it which pays the freight is distributed among, and puts into motion, a
      certain number of productive labourers of that country. Almost all nations
      that have had any considerable share of the carrying trade have, in fact,
      carried it on in this manner. The trade itself has probably derived its
      name from it, the people of such countries being the carriers to other
      countries. It does not, however, seem essential to the nature of the trade
      that it should be so. A Dutch merchant may, for example, employ his
      capital in transacting the commerce of Poland and Portugal, by carrying
      part of the surplus produce of the one to the other, not in Dutch, but in
      British bottoms. It maybe presumed, that he actually does so upon some
      particular occasions. It is upon this account, however, that the carrying
      trade has been supposed peculiarly advantageous to such a country as Great
      Britain, of which the defence and security depend upon the number of its
      sailors and shipping. But the same capital may employ as many sailors and
      shipping, either in the foreign trade of consumption, or even in the home
      trade, when carried on by coasting vessels, as it could in the carrying
      trade. The number of sailors and shipping which any particular capital can
      employ, does not depend upon the nature of the trade, but partly upon the
      bulk of the goods, in proportion to their value, and partly upon the
      distance of the ports between which they are to be carried; chiefly upon
      the former of those two circumstances. The coal trade from Newcastle to
      London, for example, employs more shipping than all the carrying trade of
      England, though the ports are at no great distance. To force, therefore,
      by extraordinary encouragements, a larger share of the capital of any
      country into the carrying trade, than what would naturally go to it, will
      not always necessarily increase the shipping of that country.

      The capital, therefore, employed in the home trade of any country, will
      generally give encouragement and support to a greater quantity of
      productive labour in that country, and increase the value of its annual
      produce, more than an equal capital employed in the foreign trade of
      consumption; and the capital employed in this latter trade has, in both
      these respects, a still greater advantage over an equal capital employed
      in the carrying trade. The riches, and so far as power depends upon
      riches, the power of every country must always be in proportion to the
      value of its annual produce, the fund from which all taxes must ultimately
      be paid. But the great object of the political economy of every country,
      is to increase the riches and power of that country. It ought, therefore,
      to give no preference nor superior encouragement to the foreign trade of
      consumption above the home trade, nor to the carrying trade above either
      of the other two. It ought neither to force nor to allure into either of
      those two channels a greater share of the capital of the country, than
      what would naturally flow into them of its own accord.

      Each of those different branches of trade, however, is not only
      advantageous, but necessary and unavoidable, when the course of things,
      without any constraint or violence, naturally introduces it.

      When the produce of any particular branch of industry exceeds what the
      demand of the country requires, the surplus must be sent abroad, and
      exchanged for something for which there is a demand at home. Without such
      exportation, a part of the productive labour of the country must cease,
      and the value of its annual produce diminish. The land and labour of Great
      Britain produce generally more corn, woollens, and hardware, than the
      demand of the home market requires. The surplus part of them, therefore,
      must be sent abroad, and exchanged for something for which there is a
      demand at home. It is only by means of such exportation, that this surplus
      can acquire a value sufficient to compensate the labour and expense of
      producing it. The neighbourhood of the sea-coast, and the banks of all
      navigable rivers, are advantageous situations for industry, only because
      they facilitate the exportation and exchange of such surplus produce for
      something else which is more in demand there.

      When the foreign goods which are thus purchased with the surplus produce
      of domestic industry exceed the demand of the home market, the surplus
      part of them must be sent abroad again, and exchanged for something more
      in demand at home. About 96,000 hogsheads of tobacco are annually
      purchased in Virginia and Maryland with a part of the surplus produce of
      British industry. But the demand of Great Britain does not require,
      perhaps, more than 14,000. If the remaining 82,000, therefore, could not
      be sent abroad, and exchanged for something more in demand at home, the
      importation of them must cease immediately, and with it the productive
      labour of all those inhabitants of Great Britain who are at present
      employed in preparing the goods with which these 82,000 hogsheads are
      annually purchased. Those goods, which are part of the produce of the land
      and labour of Great Britain, having no market at home, and being deprived
      of that which they had abroad, must cease to be produced. The most
      round-about foreign trade of consumption, therefore, may, upon some
      occasions, be as necessary for supporting the productive labour of the
      country, and the value of its annual produce, as the most direct.

      When the capital stock of any country is increased to such a degree that
      it cannot be all employed in supplying the consumption, and supporting the
      productive labour of that particular country, the surplus part of it
      naturally disgorges itself into the carrying trade, and is employed in
      performing the same offices to other countries. The carrying trade is the
      natural effect and symptom of great national wealth; but it does not seem
      to be the natural cause of it. Those statesmen who have been disposed to
      favour it with particular encouragement, seem to have mistaken the effect
      and symptom for the cause. Holland, in proportion to the extent of the
      land and the number of its inhabitants, by far the richest country in
      Europe, has accordingly the greatest share of the carrying trade of
      Europe. England, perhaps the second richest country of Europe, is likewise
      supposed to have a considerable share in it; though what commonly passes
      for the carrying trade of England will frequently, perhaps, be found to be
      no more than a round-about foreign trade of consumption. Such are, in a
      great measure, the trades which carry the goods of the East and West
      Indies and of America to the different European markets. Those goods are
      generally purchased, either immediately with the produce of British
      industry, or with something else which had been purchased with that
      produce, and the final returns of those trades are generally used or
      consumed in Great Britain. The trade which is carried on in British
      bottoms between the different ports of the Mediterranean, and some trade
      of the same kind carried on by British merchants between the different
      ports of India, make, perhaps, the principal branches of what is properly
      the carrying trade of Great Britain.

      The extent of the home trade, and of the capital which can be employed in
      it, is necessarily limited by the value of the surplus produce of all
      those distant places within the country which have occasion to exchange
      their respective productions with one another; that of the foreign trade
      of consumption, by the value of the surplus produce of the whole country,
      and of what can be purchased with it; that of the carrying trade, by the
      value of the surplus produce of all the different countries in the world.
      Its possible extent, therefore, is in a manner infinite in comparison of
      that of the other two, and is capable of absorbing the greatest capitals.

      The consideration of his own private profit is the sole motive which
      determines the owner of any capital to employ it either in agriculture, in
      manufactures, or in some particular branch of the wholesale or retail
      trade. The different quantities of productive labour which it may put into
      motion, and the different values which it may add to the annual produce of
      the land and labour of the society, according as it is employed in one or
      other of those different ways, never enter into his thoughts. In
      countries, therefore, where agriculture is the most profitable of all
      employments, and farming and improving the most direct roads to a splendid
      fortune, the capitals of individuals will naturally be employed in the
      manner most advantageous to the whole society. The profits of agriculture,
      however, seem to have no superiority over those of other employments in
      any part of Europe. Projectors, indeed, in every corner of it, have,
      within these few years, amused the public with most magnificent accounts
      of the profits to be made by the cultivation and improvement of land.
      Without entering into any particular discussion of their calculations, a
      very simple observation may satisfy us that the result of them must be
      false. We see, every day, the most splendid fortunes, that have been
      acquired in the course of a single life, by trade and manufactures,
      frequently from a very small capital, sometimes from no capital. A single
      instance of such a fortune, acquired by agriculture in the same time, and
      from such a capital, has not, perhaps, occurred in Europe, during the
      course of the present century. In all the great countries of Europe,
      however, much good land still remains uncultivated; and the greater part
      of what is cultivated, is far from being improved to the degree of which
      it is capable. Agriculture, therefore, is almost everywhere capable of
      absorbing a much greater capital than has ever yet been employed in it.
      What circumstances in the policy of Europe have given the trades which are
      carried on in towns so great an advantage over that which is carried on in
      the country, that private persons frequently find it more for their
      advantage to employ their capitals in the most distant carrying trades of
      Asia and America than in the improvement and cultivation of the most
      fertile fields in their own neighbourhood, I shall endeavour to explain at
      full length in the two following books.



BOOK III.
OF THE DIFFERENT PROGRESS OF OPULENCE IN
DIFFERENT NATIONS
