Capital Accumulation, or Productive and Unproductive Labor

There is one sort of labour which adds to the value of the subject upon which it is bestowed; there is another which has no such effect. The former as it produces a value, may be called productive, the latter, unproductive labour. {Some French authors of great learning and ingenuity have used those words in a different sense. In the last chapter of the fourth book, I shall endeavour to shew that their sense is an improper one.} Thus the labour of a manufacturer adds generally to the value of the materials which he works upon, that of his own maintenance, and of his master’s profit. The labour of a menial servant, on the contrary, adds to the value of nothing. Though the manufacturer has his wages advanced to him by his master, he in reality costs him no expense, the value of those wages being generally restored, together with a profit, in the improved value of the subject upon which his labour is bestowed. But the maintenance of a menial servant never is restored. A man grows rich by employing a multitude of manufacturers; he grows poor by maintaining a multitude or menial servants. The labour of the latter, however, has its value, and deserves its reward as well as that of the former. But the labour of the manufacturer fixes and realizes itself in some particular subject or vendible commodity, which lasts for some time at least after that labour is past. It is, as it were, a certain quantity of labour stocked and stored up, to be employed, if necessary, upon some other occasion. That subject, or, what is the same thing, the price of that subject, can afterwards, if necessary, put into motion a quantity of labour equal to that which had originally produced it. The labour of the menial servant, on the contrary, does not fix or realize itself in any particular subject or vendible commodity. His services generally perish in the very instant of their performance, and seldom leave any trace of value behind them, for which an equal quantity of service could afterwards be procured.

One kind of labor adds value to the thing it is applied to. Another kind has no such effect. The first kind produces value and may be called productive labor. The second may be called unproductive labor. {Some highly learned and ingenious French authors have used these words in a different sense. In the last chapter of the fourth book, I will try to show that their sense is improper.} For example, the labor of a manufacturer generally adds to the value of the materials worked upon. It adds enough to cover the worker’s own upkeep and the employer’s profit. The labor of a domestic servant, by contrast, adds value to nothing. Although the employer pays the manufacturer’s wages in advance, the worker really costs the employer nothing. The improved value of the materials generally repays those wages, along with a profit. But the cost of maintaining a domestic servant is never recovered. A man grows rich by employing many manufacturers. He grows poor by maintaining many domestic servants. The servant’s labor, however, has value and deserves a reward just as much as the manufacturer’s. The manufacturer’s labor is embodied in a particular object or saleable commodity. That commodity lasts for at least some time after the labor is finished. It is, in effect, a quantity of labor stored up for use on another occasion, if necessary. The commodity, or its price, can later, if necessary, set in motion an amount of labor equal to the amount that originally produced it. A domestic servant’s labor, by contrast, is not embodied in any particular object or saleable commodity. The servant’s services generally disappear the moment they are performed. They seldom leave any trace of value that could later obtain an equal amount of service.

The labour of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject, or vendible commodity, which endures after that labour is past, and for which an equal quantity of labour could afterwards be procured. The sovereign, for example, with all the officers both of justice and war who serve under him, the whole army and navy, are unproductive labourers. They are the servants of the public, and are maintained by a part of the annual produce of the industry of other people. Their service, how honourable, how useful, or how necessary soever, produces nothing for which an equal quantity of service can afterwards be procured. The protection, security, and defence, of the commonwealth, the effect of their labour this year, will not purchase its protection, security, and defence, for the year to come. In the same class must be ranked, some both of the gravest and most important, and some of the most frivolous professions; churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera-singers, opera-dancers, etc. The labour of the meanest of these has a certain value, regulated by the very same principles which regulate that of every other sort of labour; and that of the noblest and most useful, produces nothing which could afterwards purchase or procure an equal quantity of labour. Like the declamation of the actor, the harangue of the orator, or the tune of the musician, the work of all of them perishes in the very instant of its production.

The work of some of the most respected groups in society is like that of domestic servants. It produces no value and does not take the form of a lasting object or a marketable commodity. Such an object or commodity would remain after the work was done. It could later be exchanged for an equal amount of labour. The sovereign, for example, is an unproductive labourer. So are all the officers of justice and war who serve under him, and the whole army and navy. They are servants of the public. They are supported by a share of what other people’s work produces each year. However honourable, useful, or necessary their service may be, it produces nothing that can later obtain an equal amount of service. Their work protects, secures, and defends the nation this year. But that protection, security, and defence cannot purchase the same for the coming year. The same class includes some of the most serious and important professions, as well as some of the most frivolous. It includes clergy, lawyers, doctors, writers of all kinds, actors, clowns, musicians, opera singers, and opera dancers. The work of the humblest among them has a certain value. That value is governed by the same principles as the value of every other kind of labour. Yet the work of the noblest and most useful among them produces nothing that could later purchase or obtain an equal amount of labour. Like an actor’s speech, an orator’s address, or a musician’s tune, all their work vanishes the moment it is produced.

Both productive and unproductive labourers, and those who do not labour at all, are all equally maintained by the annual produce of the land and labour of the country. This produce, how great soever, can never be infinite, but must have certain limits. According, therefore, as a smaller or greater proportion of it is in any one year employed in maintaining unproductive hands, the more in the one case, and the less in the other, will remain for the productive, and the next year’s produce will be greater or smaller accordingly; the whole annual produce, if we except the spontaneous productions of the earth, being the effect of productive labour.

Productive workers, unproductive workers, and people who do not work at all are equally supported by the country’s annual output of land and labor. However great this output may be, it can never be infinite. It must have limits. Therefore, the less of it used to support unproductive workers in any year, the more remains for productive workers. The more used to support unproductive workers, the less remains for productive workers. The next year’s output will be greater or smaller accordingly. For all annual output is the result of productive labor, except what the earth produces on its own.

Though the whole annual produce of the land and labour of every country is no doubt ultimately destined for supplying the consumption of its inhabitants, and for procuring a revenue to them; yet when it first comes either from the ground, or from the hands of the productive labourers, it naturally divides itself into two parts. One of them, and frequently the largest, is, in the first place, destined for replacing a capital, or for renewing the provisions, materials, and finished work, which had been withdrawn from a capital; the other for constituting a revenue either to the owner of this capital, as the profit of his stock, or to some other person, as the rent of his land. Thus, of the produce of land, one part replaces the capital of the farmer; the other pays his profit and the rent of the landlord; and thus constitutes a revenue both to the owner of this capital, as the profits of his stock, and to some other person as the rent of his land. Of the produce of a great manufactory, in the same manner, one part, and that always the largest, replaces the capital of the undertaker of the work; the other pays his profit, and thus constitutes a revenue to the owner of this capital.

The entire annual output of every country’s land and labor is ultimately meant to supply its inhabitants’ consumption and provide them with income. But when this output first comes from the land or from productive workers, it naturally divides into two parts. One part, often the larger, is first used to replace capital. It renews the supplies, materials, and finished goods withdrawn from that capital. The other part provides income, either to the capital’s owner as profit or to someone else as rent for land. For example, part of the land’s output replaces the farmer’s capital. The rest pays the farmer’s profit and the landlord’s rent. It thus provides income to both the capital’s owner and the landowner. Similarly, part of a large factory’s output, always the larger part, replaces the factory owner’s capital. The rest pays the owner’s profit, providing income to the owner of that capital.

That part of the annual produce of the land and labour of any country which replaces a capital, never is immediately employed to maintain any but productive hands. It pays the wages of productive labour only. That which is immediately destined for constituting a revenue, either as profit or as rent, may maintain indifferently either productive or unproductive hands.

A country’s land and labour produce goods each year. The portion that replaces capital is never used directly to support anyone except productive workers. It pays only the wages of productive labour. The portion directly intended as income, either as profit or rent, may support either productive or unproductive workers.

Whatever part of his stock a man employs as a capital, he always expects it to be replaced to him with a profit. He employs it, therefore, in maintaining productive hands only; and after having served in the function of a capital to him, it constitutes a revenue to them. Whenever he employs any part of it in maintaining unproductive hands of any kind, that part is from that moment withdrawn from his capital, and placed in his stock reserved for immediate consumption.

A man always expects any part of his stock used as capital to be returned to him with a profit. He therefore uses it only to support productive workers. After serving as his capital, it becomes income for those workers. Whenever he uses any part of it to support unproductive workers of any kind, that part immediately stops being capital. Instead, it becomes part of his stock reserved for immediate consumption.

Unproductive labourers, and those who do not labour at all, are all maintained by revenue; either, first, by that part of the annual produce which is originally destined for constituting a revenue to some particular persons, either as the rent of land, or as the profits of stock; or, secondly, by that part which, though originally destined for replacing a capital, and for maintaining productive labourers only, yet when it comes into their hands, whatever part of it is over and above their necessary subsistence, may be employed in maintaining indifferently either productive or unproductive hands. Thus, not only the great landlord or the rich merchant, but even the common workman, if his wages are considerable, may maintain a menial servant; or he may sometimes go to a play or a puppet-show, and so contribute his share towards maintaining one set of unproductive labourers; or he may pay some taxes, and thus help to maintain another set, more honourable and useful, indeed, but equally unproductive. No part of the annual produce, however, which had been originally destined to replace a capital, is ever directed towards maintaining unproductive hands, till after it has put into motion its full complement of productive labour, or all that it could put into motion in the way in which it was employed. The workman must have earned his wages by work done, before he can employ any part of them in this manner. That part, too, is generally but a small one. It is his spare revenue only, of which productive labourers have seldom a great deal. They generally have some, however; and in the payment of taxes, the greatness of their number may compensate, in some measure, the smallness of their contribution. The rent of land and the profits of stock are everywhere, therefore, the principal sources from which unproductive hands derive their subsistence. These are the two sorts of revenue of which the owners have generally most to spare. They might both maintain indifferently, either productive or unproductive hands. They seem, however, to have some predilection for the latter. The expense of a great lord feeds generally more idle than industrious people. The rich merchant, though with his capital he maintains industrious people only, yet by his expense, that is, by the employment of his revenue, he feeds commonly the very same sort as the great lord.

Unproductive workers and those who do not work at all are supported by income. This income comes from two sources. The first is the part of the annual produce originally intended as income for particular people, either as land rent or as profits on capital. The second is the part originally intended to replace capital and support only productive workers. Once this part reaches the workers, however, they may use anything beyond their basic living needs to support either productive or unproductive workers. Thus, not only a great landowner or a rich merchant may support a domestic servant. Even an ordinary worker may do so, if his wages are substantial. Or he may sometimes attend a play or puppet show, contributing his share to support one group of unproductive workers. Or he may pay taxes, helping to support another group. These workers are indeed more honorable and useful, but they are equally unproductive. No part of the annual produce originally intended to replace capital is directed toward supporting unproductive workers until it has put its full number of productive workers to work. It must first employ all the productive labor it could in the way it was used. A worker must have earned his wages through work before he can use any part of them in this way. That part is also generally small. It is only his spare income, and productive workers seldom have much of that. They generally have some, however. When they pay taxes, their great numbers may compensate to some extent for the small size of each contribution. Land rent and profits on capital are therefore the main sources of support for unproductive workers everywhere. These are the two kinds of income whose owners generally have the most to spare. Both could be used to support either productive or unproductive workers. Their owners seem, however, to have some preference for the latter. A great lord's spending generally supports more idle people than industrious ones. A rich merchant uses his capital to support only industrious people. Yet his spending, or the use of his income, commonly supports the very same kind of people as the great lord's.

The proportion, therefore, between the productive and unproductive hands, depends very much in every country upon the proportion between that part of the annual produce, which, as soon as it comes either from the ground, or from the hands of the productive labourers, is destined for replacing a capital, and that which is destined for constituting a revenue, either as rent or as profit. This proportion is very different in rich from what it is in poor countries.

Therefore, the ratio of productive to unproductive workers depends greatly on how each country’s annual output is divided. As soon as goods come from the land or from productive workers, some are set aside to replace capital. The rest is set aside to provide income, either as rent or profit. This division is very different in rich and poor countries.

Thus, at present, in the opulent countries of Europe, a very large, frequently the largest, portion of the produce of the land, is destined for replacing the capital of the rich and independent farmer; the other for paying his profits, and the rent of the landlord. But anciently, during the prevalency of the feudal government, a very small portion of the produce was sufficient to replace the capital employed in cultivation. It consisted commonly in a few wretched cattle, maintained altogether by the spontaneous produce of uncultivated land, and which might, therefore, be considered as a part of that spontaneous produce. It generally, too, belonged to the landlord, and was by him advanced to the occupiers of the land. All the rest of the produce properly belonged to him too, either as rent for his land, or as profit upon this paltry capital. The occupiers of land were generally bond-men, whose persons and effects were equally his property. Those who were not bond-men were tenants at will; and though the rent which they paid was often nominally little more than a quit-rent, it really amounted to the whole produce of the land. Their lord could at all times command their labour in peace and their service in war. Though they lived at a distance from his house, they were equally dependent upon him as his retainers who lived in it. But the whole produce of the land undoubtedly belongs to him, who can dispose of the labour and service of all those whom it maintains. In the present state of Europe, the share of the landlord seldom exceeds a third, sometimes not a fourth part of the whole produce of the land. The rent of land, however, in all the improved parts of the country, has been tripled and quadrupled since those ancient times; and this third or fourth part of the annual produce is, it seems, three or four times greater than the whole had been before. In the progress of improvement, rent, though it increases in proportion to the extent, diminishes in proportion to the produce of the land.

Today, in the wealthy countries of Europe, a very large share of the land's produce, often the largest share, replaces the capital invested by the wealthy, independent farmer. The rest pays the farmer's profits and the landlord's rent. But in earlier times, under feudal government, a very small share was enough to replace the capital used in farming. This capital usually consisted of a few miserable cattle. They lived entirely on what grew naturally on uncultivated land, so they could be considered part of that natural produce. The cattle also generally belonged to the landlord, who supplied them to the people occupying the land. All the rest of the produce properly belonged to him too, either as rent for his land or as profit on this meager capital. The people occupying the land were generally bondmen. Both they and their possessions were the landlord's property. Those who were not bondmen were tenants at will. The rent they paid was often officially little more than a quit-rent, a small fixed payment. In reality, though, it amounted to the land's entire produce. Their lord could command their labor at any time in peace and their service in war. Although they lived far from his house, they depended on him as much as the retainers who lived there. But the entire produce of the land undoubtedly belongs to anyone who can command the labor and service of all those whom it supports. In Europe today, the landlord's share seldom exceeds a third of the land's total produce. Sometimes it does not exceed a fourth. Yet rent has tripled or quadrupled since ancient times in all the improved parts of the country. It seems, then, that this third or fourth of the annual produce is three or four times greater than the whole was before. As land is improved, rent increases relative to the area of land but decreases relative to its produce.

In the opulent countries of Europe, great capitals are at present employed in trade and manufactures. In the ancient state, the little trade that was stirring, and the few homely and coarse manufactures that were carried on, required but very small capitals. These, however, must have yielded very large profits. The rate of interest was nowhere less than ten per cent. and their profits must have been sufficient to afford this great interest. At present, the rate of interest, in the improved parts of Europe, is nowhere higher than six per cent.; and in some of the most improved, it is so low as four, three, and two per cent. Though that part of the revenue of the inhabitants which is derived from the profits of stock, is always much greater in rich than in poor countries, it is because the stock is much greater; in proportion to the stock, the profits are generally much less.

In Europe’s wealthy countries, large amounts of capital are now invested in trade and manufacturing. In ancient times, there was little trade, and the few simple, coarse goods that people made required very little capital. Yet this capital must have produced very large profits. The interest rate was nowhere below ten percent, and profits must have been high enough to pay it. Today, the interest rate in the more developed parts of Europe is nowhere higher than six percent. In some of the most developed parts, it is as low as four, three, or two percent. The income people earn from profits on capital is always much greater in rich countries than in poor ones. But that is because there is much more capital. In proportion to the amount invested, profits are generally much lower.

That part of the annual produce, therefore, which, as soon as it comes either from the ground, or from the hands of the productive labourers, is destined for replacing a capital, is not only much greater in rich than in poor countries, but bears a much greater proportion to that which is immediately destined for constituting a revenue either as rent or as profit. The funds destined for the maintenance of productive labour are not only much greater in the former than in the latter, but bear a much greater proportion to those which, though they may be employed to maintain either productive or unproductive hands, have generally a predilection for the latter.

Therefore, more of the annual produce in rich countries is set aside to replace capital than in poor countries. This produce is set aside as soon as it comes from the ground or from productive workers. In rich countries, it also makes up a much larger share compared with the produce set aside immediately as income from rent or profit. The funds set aside to support productive workers are also much greater in rich countries than in poor countries. In rich countries, these funds also make up a much larger share compared with other funds. Those other funds may support either productive or unproductive workers, but generally favor the latter.

The proportion between those different funds necessarily determines in every country the general character of the inhabitants as to industry or idleness. We are more industrious than our forefathers, because, in the present times, the funds destined for the maintenance of industry are much greater in proportion to those which are likely to be employed in the maintenance of idleness, than they were two or three centuries ago. Our ancestors were idle for want of a sufficient encouragement to industry. It is better, says the proverb, to play for nothing, than to work for nothing. In mercantile and manufacturing towns, where the inferior ranks of people are chiefly maintained by the employment of capital, they are in general industrious, sober, and thriving; as in many English, and in most Dutch towns. In those towns which are principally supported by the constant or occasional residence of a court, and in which the inferior ranks of people are chiefly maintained by the spending of revenue, they are in general idle, dissolute, and poor; as at Rome, Versailles, Compeigne, and Fontainbleau. If you except Rouen and Bourdeaux, there is little trade or industry in any of the parliament towns of France; and the inferior ranks of people, being chiefly maintained by the expense of the members of the courts of justice, and of those who come to plead before them, are in general idle and poor. The great trade of Rouen and Bourdeaux seems to be altogether the effect of their situation. Rouen is necessarily the entrepot of almost all the goods which are brought either from foreign countries, or from the maritime provinces of France, for the consumption of the great city of Paris. Bourdeaux is, in the same manner, the entrepot of the wines which grow upon the banks of the Garronne, and of the rivers which run into it, one of the richest wine countries in the world, and which seems to produce the wine fittest for exportation, or best suited to the taste of foreign nations. Such advantageous situations necessarily attract a great capital by the great employment which they afford it; and the employment of this capital is the cause of the industry of those two cities. In the other parliament towns of France, very little more capital seems to be employed than what is necessary for supplying their own consumption; that is, little more than the smallest capital which can be employed in them. The same thing may be said of Paris, Madrid, and Vienna. Of those three cities, Paris is by far the most industrious, but Paris itself is the principal market of all the manufactures established at Paris, and its own consumption is the principal object of all the trade which it carries on. London, Lisbon, and Copenhagen, are, perhaps, the only three cities in Europe, which are both the constant residence of a court, and can at the same time be considered as trading cities, or as cities which trade not only for their own consumption, but for that of other cities and countries. The situation of all the three is extremely advantageous, and naturally fits them to be the entrepots of a great part of the goods destined for the consumption of distant places. In a city where a great revenue is spent, to employ with advantage a capital for any other purpose than for supplying the consumption of that city, is probably more difficult than in one in which the inferior ranks of people have no other maintenance but what they derive from the employment of such a capital. The idleness of the greater part of the people who are maintained by the expense of revenue, corrupts, it is probable, the industry of those who ought to be maintained by the employment of capital, and renders it less advantageous to employ a capital there than in other places. There was little trade or industry in Edinburgh before the Union. When the Scotch parliament was no longer to be assembled in it, when it ceased to be the necessary residence of the principal nobility and gentry of Scotland, it became a city of some trade and industry. It still continues, however, to be the residence of the principal courts of justice in Scotland, of the boards of customs and excise, etc. A considerable revenue, therefore, still continues to be spent in it. In trade and industry, it is much inferior to Glasgow, of which the inhabitants are chiefly maintained by the employment of capital. The inhabitants of a large village, it has sometimes been observed, after having made considerable progress in manufactures, have become idle and poor, in consequence of a great lord’s having taken up his residence in their neighbourhood.

The proportion between these different funds necessarily determines how industrious or idle people generally are in each country. We are more industrious than our forefathers because the funds devoted to supporting industry are now much greater in proportion to those likely to support idleness. Two or three centuries ago, the proportion was smaller. Our ancestors were idle because they lacked sufficient encouragement to work. As the proverb says, it is better to play for nothing than to work for nothing. In trading and manufacturing towns, lower-ranking people are chiefly supported by the employment of capital. They are generally industrious, sober, and prosperous, as in many English towns and most Dutch towns. Other towns are supported mainly by the permanent or occasional residence of a royal court. There, lower-ranking people are chiefly supported by the spending of revenue. They are generally idle, dissolute, and poor, as at Rome, Versailles, Compeigne, and Fontainbleau. Except for Rouen and Bourdeaux, there is little trade or industry in any of the French towns with parliaments, or courts of justice. Lower-ranking people there are chiefly supported by the spending of court members and those who come to plead before them. They are generally idle and poor. The great trade of Rouen and Bourdeaux seems entirely due to their locations. Rouen is necessarily the trading center for almost all goods brought from foreign countries or the coastal provinces of France for consumption in the great city of Paris. Bourdeaux is likewise the trading center for wines grown along the Garronne and its tributaries. This is one of the richest wine regions in the world. It seems to produce the wine best suited to export, or most pleasing to foreign tastes. Such advantageous locations necessarily attract great capital because they offer so much opportunity to employ it. The employment of this capital is the cause of the industry of these two cities. In the other French parliament towns, very little more capital seems to be employed than is needed to supply their own consumption. This is little more than the smallest amount of capital that can be employed there. The same may be said of Paris, Madrid, and Vienna. Of the three, Paris is by far the most industrious. But Paris itself is the principal market for all the manufactured goods produced there. Its own consumption is the principal purpose of all its trade. London, Lisbon, and Copenhagen are perhaps the only three European cities that are both permanent residences of a royal court and trading cities. They trade not only to supply their own consumption, but also to supply other cities and countries. All three have extremely advantageous locations. Their locations naturally suit them to serve as trading centers for many goods destined for consumption in distant places. In a city where a great deal of revenue is spent, it is probably harder to employ capital profitably for any purpose other than supplying the city's own consumption. It is probably easier to do so in a city where lower-ranking people are supported only by the employment of such capital. Most people supported by the spending of revenue are idle. Their idleness probably corrupts the industry of those who ought to be supported by the employment of capital. It also makes employing capital there less profitable than in other places. There was little trade or industry in Edinburgh before the Union. The Scottish parliament then stopped meeting there, and the leading nobility and gentry of Scotland no longer had to live there. Edinburgh became a city with some trade and industry. It is still, however, the home of Scotland's principal courts of justice, its customs and excise boards, and other bodies. A considerable amount of revenue therefore continues to be spent there. In trade and industry, Edinburgh is far behind Glasgow, whose inhabitants are chiefly supported by the employment of capital. It has sometimes been observed that the inhabitants of a large village have made considerable progress in manufacturing, only to become idle and poor after a great lord took up residence nearby.

The proportion between capital and revenue, therefore, seems everywhere to regulate the proportion between industry and idleness. Wherever capital predominates, industry prevails; wherever revenue, idleness. Every increase or diminution of capital, therefore, naturally tends to increase or diminish the real quantity of industry, the number of productive hands, and consequently the exchangeable value of the annual produce of the land and labour of the country, the real wealth and revenue of all its inhabitants.

The balance between capital and revenue, therefore, seems everywhere to determine the balance between work and idleness. Wherever capital predominates, work prevails. Wherever revenue predominates, idleness prevails. An increase or decrease in capital therefore naturally tends to increase or decrease the actual amount of work and the number of productive workers. It also tends to increase or decrease the exchange value of what the country's land and labor produce each year. This is the real wealth and revenue of all its inhabitants.

Capitals are increased by parsimony, and diminished by prodigality and misconduct.

Capital grows through saving and shrinks through wasteful spending and mismanagement.

Whatever a person saves from his revenue he adds to his capital, and either employs it himself in maintaining an additional number of productive hands, or enables some other person to do so, by lending it to him for an interest, that is, for a share of the profits. As the capital of an individual can be increased only by what he saves from his annual revenue or his annual gains, so the capital of a society, which is the same with that of all the individuals who compose it, can be increased only in the same manner.

Whatever a person saves from their income adds to their capital. They can use it themselves to support more productive workers. Or they can lend it to someone else, enabling that person to do the same. In return, they receive interest, which is a share of the profits. A person can increase their capital only by saving from their annual income or gains. Likewise, a society’s capital is the combined capital of all its members. It can increase only in the same way.

Parsimony, and not industry, is the immediate cause of the increase of capital. Industry, indeed, provides the subject which parsimony accumulates; but whatever industry might acquire, if parsimony did not save and store up, the capital would never be the greater.

Saving, not hard work, is the immediate cause of capital growth. Hard work provides what saving accumulates. But no matter how much hard work produces, capital would never grow unless some of it were saved and stored.

Parsimony, by increasing the fund which is destined for the maintenance of productive hands, tends to increase the number of those hands whose labour adds to the value of the subject upon which it is bestowed. It tends, therefore, to increase the exchangeable value of the annual produce of the land and labour of the country. It puts into motion an additional quantity of industry, which gives an additional value to the annual produce.

Saving increases the funds available to support productive workers. It therefore tends to increase the number of workers whose labor adds value to what they work on. Saving thus tends to increase the exchange value of what the country's land and labor produce each year. It puts more labor to work, adding value to that annual output.

What is annually saved, is as regularly consumed as what is annually spent, and nearly in the same time too: but it is consumed by a different set of people. That portion of his revenue which a rich man annually spends, is, in most cases, consumed by idle guests and menial servants, who leave nothing behind them in return for their consumption. That portion which he annually saves, as, for the sake of the profit, it is immediately employed as a capital, is consumed in the same manner, and nearly in the same time too, but by a different set of people: by labourers, manufacturers, and artificers, who reproduce, with a profit, the value of their annual consumption. His revenue, we shall suppose, is paid him in money. Had he spent the whole, the food, clothing, and lodging, which the whole could have purchased, would have been distributed among the former set of people. By saving a part of it, as that part is, for the sake of the profit, immediately employed as a capital, either by himself or by some other person, the food, clothing, and lodging, which may be purchased with it, are necessarily reserved for the latter. The consumption is the same, but the consumers are different.

What is saved each year is consumed just as regularly as what is spent, and in nearly the same time. But different people consume it. In most cases, the part of a rich man’s income that he spends each year is consumed by idle guests and household servants. They leave nothing behind in return for what they consume. The part he saves each year is immediately put to work as capital to earn a profit. It is consumed in the same way, and in nearly the same time, but by different people. It is consumed by laborers, manufacturers, and craftspeople. They produce goods equal in value to what they consume each year, with a profit on top. Let us suppose his income is paid in money. If he spent all of it, the food, clothing, and lodging it could buy would go to the first group. But he saves part of it. He or someone else immediately puts that part to work as capital to earn a profit. So the food, clothing, and lodging it can buy must be reserved for the second group. The consumption is the same, but the consumers are different.

By what a frugal man annually saves, he not only affords maintenance to an additional number of productive hands, for that of the ensuing year, but like the founder of a public work-house he establishes, as it were, a perpetual fund for the maintenance of an equal number in all times to come. The perpetual allotment and destination of this fund, indeed, is not always guarded by any positive law, by any trust-right or deed of mortmain. It is always guarded, however, by a very powerful principle, the plain and evident interest of every individual to whom any share of it shall ever belong. No part of it can ever afterwards be employed to maintain any but productive hands, without an evident loss to the person who thus perverts it from its proper destination.

What a frugal man saves each year supports additional productive workers in the following year. But, like the founder of a public workhouse, he also establishes, in effect, a permanent fund. This fund supports an equal number of workers for all time to come. The fund’s permanent allocation and purpose are not always protected by a specific law, a trust, or a deed of mortmain. They are always protected, however, by a very powerful principle. It is plainly in the interest of every person who ever owns a share of the fund. No part of the fund can later be used to support anyone but productive workers without an obvious loss to the person who diverts it from its proper purpose.

The prodigal perverts it in this manner: By not confining his expense within his income, he encroaches upon his capital. Like him who perverts the revenues of some pious foundation to profane purposes, he pays the wages of idleness with those funds which the frugality of his forefathers had, as it were, consecrated to the maintenance of industry. By diminishing the funds destined for the employment of productive labour, he necessarily diminishes, so far as it depends upon him, the quantity of that labour which adds a value to the subject upon which it is bestowed, and, consequently, the value of the annual produce of the land and labour of the whole country, the real wealth and revenue of its inhabitants. If the prodigality of some were not compensated by the frugality of others, the conduct of every prodigal, by feeding the idle with the bread of the industrious, would tend not only to beggar himself, but to impoverish his country.

The spendthrift misuses it in this way: He spends more than his income and eats into his capital. He is like someone who diverts the income of a religious foundation to secular purposes. He pays for idleness with funds that his ancestors, through their thrift, had virtually dedicated to supporting productive work. By reducing the funds available to employ productive workers, he necessarily reduces, as far as he can, the amount of productive work done. This work adds value to whatever it is applied to. As a result, he also reduces the annual value produced by the whole country's land and labor. This is the real wealth and income of its inhabitants. If the thrift of some did not offset the wastefulness of others, every spendthrift would feed the idle with the bread of the industrious. His conduct would tend not only to make him poor, but also to impoverish his country.

Though the expense of the prodigal should be altogether in home made, and no part of it in foreign commodities, its effect upon the productive funds of the society would still be the same. Every year there would still be a certain quantity of food and clothing, which ought to have maintained productive, employed in maintaining unproductive hands. Every year, therefore, there would still be some diminution in what would otherwise have been the value of the annual produce of the land and labour of the country.

Even if the spendthrift spent everything on goods made at home and nothing on foreign goods, the effect on society’s productive funds would be the same. Each year, some food and clothing that should have supported productive workers would instead support unproductive workers. Each year, therefore, the value of the country’s annual output from land and labor would still be somewhat lower than it otherwise would have been.

This expense, it may be said, indeed, not being in foreign goods, and not occasioning any exportation of gold and silver, the same quantity of money would remain in the country as before. But if the quantity of food and clothing which were thus consumed by unproductive, had been distributed among productive hands, they would have reproduced, together with a profit, the full value of their consumption. The same quantity of money would, in this case, equally have remained in the country, and there would, besides, have been a reproduction of an equal value of consumable goods. There would have been two values instead of one.

It may be said that this expense did not involve foreign goods or cause gold and silver to be exported. The same amount of money would therefore remain in the country as before. But suppose the food and clothing consumed by unproductive workers had instead been given to productive workers. They would have reproduced the full value of what they consumed, along with a profit. The same amount of money would still have remained in the country. In addition, consumable goods of equal value would have been reproduced. There would have been two values instead of one.

The same quantity of money, besides, can not long remain in any country in which the value of the annual produce diminishes. The sole use of money is to circulate consumable goods. By means of it, provisions, materials, and finished work, are bought and sold, and distributed to their proper consumers. The quantity of money, therefore, which can be annually employed in any country, must be determined by the value of the consumable goods annually circulated within it. These must consist, either in the immediate produce of the land and labour of the country itself, or in something which had been purchased with some part of that produce. Their value, therefore, must diminish as the value of that produce diminishes, and along with it the quantity of money which can be employed in circulating them. But the money which, by this annual diminution of produce, is annually thrown out of domestic circulation, will not be allowed to lie idle. The interest of whoever possesses it requires that it should be employed; but having no employment at home, it will, in spite of all laws and prohibitions, be sent abroad, and employed in purchasing consumable goods, which may be of some use at home. Its annual exportation will, in this manner, continue for some time to add something to the annual consumption of the country beyond the value of its own annual produce. What in the days of its prosperity had been saved from that annual produce, and employed in purchasing gold and silver, will contribute, for some little time, to support its consumption in adversity. The exportation of gold and silver is, in this case, not the cause, but the effect of its declension, and may even, for some little time, alleviate the misery of that declension.

Besides, the same amount of money cannot remain for long in a country whose annual output is declining in value. The only use of money is to circulate goods for consumption. Money is used to buy and sell food, materials, and finished goods, and to distribute them to their proper consumers. The amount of money a country can use each year therefore depends on the value of the goods for consumption circulated within it each year. These goods must either come directly from the country's own land and labor or have been bought with some part of their output. Their value must therefore fall as the value of that output falls. So must the amount of money that can be used to circulate them. But the money removed from domestic circulation each year by this decline in output will not be left idle. Its owners have an interest in putting it to use. But since it has no use at home, it will be sent abroad despite all laws and prohibitions. There it will be used to buy goods for consumption that may be of some use at home. In this way, its annual export will for some time add to the country's annual consumption beyond the value of its own annual output. In prosperous times, the country saved part of that output and used it to buy gold and silver. For a short time, these savings will help support its consumption in adversity. In this case, the export of gold and silver is not the cause of the country's decline, but its effect. It may even ease the misery of that decline for a short time.

The quantity of money, on the contrary, must in every country naturally increase as the value of the annual produce increases. The value of the consumable goods annually circulated within the society being greater, will require a greater quantity of money to circulate them. A part of the increased produce, therefore, will naturally be employed in purchasing, wherever it is to be had, the additional quantity of gold and silver necessary for circulating the rest. The increase of those metals will, in this case, be the effect, not the cause, of the public prosperity. Gold and silver are purchased everywhere in the same manner. The food, clothing, and lodging, the revenue and maintenance, of all those whose labour or stock is employed in bringing them from the mine to the market, is the price paid for them in Peru as well as in England. The country which has this price to pay, will never belong without the quantity of those metals which it has occasion for; and no country will ever long retain a quantity which it has no occasion for.

By contrast, the amount of money in every country must naturally increase as the value of its annual production increases. More valuable consumer goods circulate in society each year, so more money is needed to circulate them. Therefore, part of the increased production will naturally be used to buy additional gold and silver wherever they are available. These metals are needed to circulate the rest of the goods. In this case, the increase in gold and silver will be the effect of public prosperity, not its cause. Gold and silver are bought in the same way everywhere. In Peru, as in England, the price paid for them is the food, clothing, housing, income, and support of all those whose labor or capital is used to bring them from the mine to the market. A country able to pay this price will never be without the amount of these metals it needs for long. And no country will ever keep an amount it does not need for long.

Whatever, therefore, we may imagine the real wealth and revenue of a country to consist in, whether in the value of the annual produce of its land and labour, as plain reason seems to dictate, or in the quantity of the precious metals which circulate within it, as vulgar prejudices suppose; in either view of the matter, every prodigal appears to be a public enemy, and every frugal man a public benefactor.

So whatever we imagine a country’s real wealth and income to consist of, the conclusion is the same. Plain reason suggests that wealth consists of the value of what its land and labor produce each year. Common prejudice holds that wealth consists of the amount of precious metals circulating in the country. Either way, every spendthrift appears to be a public enemy, and every thrifty person a public benefactor.

The effects of misconduct are often the same as those of prodigality. Every injudicious and unsuccessful project in agriculture, mines, fisheries, trade, or manufactures, tends in the same manner to diminish the funds destined for the maintenance of productive labour. In every such project, though the capital is consumed by productive hands only, yet as, by the injudicious manner in which they are employed, they do not reproduce the full value of their consumption, there must always be some diminution in what would otherwise have been the productive funds of the society.

Mismanagement often has the same effects as wasteful spending. Every ill-advised and unsuccessful project in agriculture, mining, fishing, trade, or manufacturing reduces the funds available to support productive labor in the same way. In every such project, the capital is consumed only by productive workers. But because the workers are employed unwisely, they do not produce enough to replace the full value of what they consume. As a result, society’s productive funds must always be smaller than they otherwise would have been.

It can seldom happen, indeed, that the circumstances of a great nation can be much affected either by the prodigality or misconduct of individuals; the profusion or imprudence of some being always more than compensated by the frugality and good conduct of others.

Indeed, the wastefulness or misconduct of individuals can rarely have much effect on the circumstances of a great nation. The thrift and good conduct of others always more than make up for the wastefulness or imprudence of some.

With regard to profusion, the principle which prompts to expense is the passion for present enjoyment; which, though sometimes violent and very difficult to be restrained, is in general only momentary and occasional. But the principle which prompts to save, is the desire of bettering our condition; a desire which, though generally calm and dispassionate, comes with us from the womb, and never leaves us till we go into the grave. In the whole interval which separates those two moments, there is scarce, perhaps, a single instance, in which any man is so perfectly and completely satisfied with his situation, as to be without any wish of alteration or improvement of any kind. An augmentation of fortune is the means by which the greater part of men propose and wish to better their condition. It is the means the most vulgar and the most obvious; and the most likely way of augmenting their fortune, is to save and accumulate some part of what they acquire, either regularly and annually, or upon some extraordinary occasion. Though the principle of expense, therefore, prevails in almost all men upon some occasions, and in some men upon almost all occasions; yet in the greater part of men, taking the whole course of their life at an average, the principle of frugality seems not only to predominate, but to predominate very greatly.

The impulse behind extravagant spending is the desire for immediate pleasure. Though sometimes intense and very hard to restrain, this desire is generally brief and occasional. But the impulse to save comes from the desire to improve our condition. Though generally calm and unemotional, this desire is with us from birth and never leaves us until we die. Between those two moments, there is perhaps hardly a single time when anyone is completely satisfied with their situation. We nearly always wish for some change or improvement. Most people hope to improve their condition by increasing their wealth. This is the most common and obvious means. The most likely way to increase wealth is to save and accumulate some of what they earn. They may do this regularly each year or on some exceptional occasion. The impulse to spend therefore prevails in almost everyone on some occasions, and in some people on almost every occasion. Yet, over the course of a lifetime, the impulse to save seems to prevail in most people. It seems to prevail by a very great margin.

With regard to misconduct, the number of prudent and successful undertakings is everywhere much greater than that of injudicious and unsuccessful ones. After all our complaints of the frequency of bankruptcies, the unhappy men who fall into this misfortune, make but a very small part of the whole number engaged in trade, and all other sorts of business; not much more, perhaps, than one in a thousand. Bankruptcy is, perhaps, the greatest and most humiliating calamity which can befal an innocent man. The greater part of men, therefore, are sufficiently careful to avoid it. Some, indeed, do not avoid it; as some do not avoid the gallows.

As for mismanagement, prudent and successful ventures everywhere greatly outnumber unwise and unsuccessful ones. We often complain about how common bankruptcies are. Yet the unfortunate men who go bankrupt make up a very small part of all those engaged in trade and other business. Perhaps not much more than one in a thousand goes bankrupt. Bankruptcy is perhaps the greatest and most humiliating disaster that can befall an innocent man. Most men are therefore careful enough to avoid it. Some, of course, do not avoid bankruptcy, just as some do not escape the gallows.

Great nations are never impoverished by private, though they sometimes are by public prodigality and misconduct. The whole, or almost the whole public revenue is, in most countries, employed in maintaining unproductive hands. Such are the people who compose a numerous and splendid court, a great ecclesiastical establishment, great fleets and armies, who in time of peace produce nothing, and in time of war acquire nothing which can compensate the expense of maintaining them, even while the war lasts. Such people, as they themselves produce nothing, are all maintained by the produce of other men’s labour. When multiplied, therefore, to an unnecessary number, they may in a particular year consume so great a share of this produce, as not to leave a sufficiency for maintaining the productive labourers, who should reproduce it next year. The next year’s produce, therefore, will be less than that of the foregoing; and if the same disorder should continue, that of the third year will be still less than that of the second. Those unproductive hands who should be maintained by a part only of the spare revenue of the people, may consume so great a share of their whole revenue, and thereby oblige so great a number to encroach upon their capitals, upon the funds destined for the maintenance of productive labour, that all the frugality and good conduct of individuals may not be able to compensate the waste and degradation of produce occasioned by this violent and forced encroachment.

Great nations are never impoverished by private extravagance, though public extravagance and mismanagement sometimes impoverish them. In most countries, all or nearly all public revenue is spent supporting unproductive people. These include those who make up a large and splendid royal court, a large church establishment, and large fleets and armies. In peacetime, they produce nothing. In wartime, they gain nothing that can compensate for the cost of supporting them, even while the war lasts. Because they produce nothing themselves, they are all supported by the products of other people’s labor. If their numbers grow beyond what is necessary, they may consume too much of those products in a given year. Too little may remain to support the productive workers who should produce the same amount the next year. The next year’s output will therefore be less than the previous year’s. If the same disorder continues, the third year’s output will be still less than the second year’s. These unproductive people should be supported by only part of the people’s spare income. Yet they may consume so much of the people’s total income that many are forced to draw on their capital. That capital is the fund intended to support productive labor. As a result, all the thrift and good conduct of individuals may not be enough to offset the waste and decline in output caused by this drastic and forced use of capital.

This frugality and good conduct, however, is, upon most occasions, it appears from experience, sufficient to compensate, not only the private prodigality and misconduct of individuals, but the public extravagance of government. The uniform, constant, and uninterrupted effort of every man to better his condition, the principle from which public and national, as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things towards improvement, in spite both of the extravagance of government, and of the greatest errors of administration. Like the unknown principle of animal life, it frequently restores health and vigour to the constitution, in spite not only of the disease, but of the absurd prescriptions of the doctor.

Experience shows, however, that this thrift and good conduct usually make up for the waste and misconduct of individuals. They also make up for the wasteful spending of government. Every person makes a steady, constant effort to improve their condition. This effort is the original source of public and national wealth, as well as private wealth. It is often powerful enough to keep things moving naturally toward improvement. It does so despite government waste and even the greatest errors in governing. Like the mysterious force that sustains animal life, this effort often restores health and strength to the body. It does so despite not only the disease but also the doctor's absurd prescriptions.

The annual produce of the land and labour of any nation can be increased in its value by no other means, but by increasing either the number of its productive labourers, or the productive powers of those labourers who had before been employed. The number of its productive labourers, it is evident, can never be much increased, but in consequence of an increase of capital, or of the funds destined for maintaining them. The productive powers of the same number of labourers cannot be increased, but in consequence either of some addition and improvement to those machines and instruments which facilitate and abridge labour, or of more proper division and distribution of employment. In either case, an additional capital is almost always required. It is by means of an additional capital only, that the undertaker of any work can either provide his workmen with better machinery, or make a more proper distribution of employment among them. When the work to be done consists of a number of parts, to keep every man constantly employed in one way, requires a much greater capital than where every man is occasionally employed in every different part of the work. When we compare, therefore, the state of a nation at two different periods, and find that the annual produce of its land and labour is evidently greater at the latter than at the former, that its lands are better cultivated, its manufactures more numerous and more flourishing, and its trade more extensive; we may be assured that its capital must have increased during the interval between those two periods, and that more must have been added to it by the good conduct of some, than had been taken from it either by the private misconduct of others, or by the public extravagance of government. But we shall find this to have been the case of almost all nations, in all tolerably quiet and peaceable times, even of those who have not enjoyed the most prudent and parsimonious governments. To form a right judgment of it, indeed, we must compare the state of the country at periods somewhat distant from one another. The progress is frequently so gradual, that, at near periods, the improvement is not only not sensible, but, from the declension either of certain branches of industry, or of certain districts of the country, things which sometimes happen, though the country in general is in great prosperity, there frequently arises a suspicion, that the riches and industry of the whole are decaying.

The value of a nation’s annual output from land and labor can increase in only two ways. It can increase by employing more productive workers or by making those already employed more productive. Clearly, the number of productive workers can never increase much without an increase in capital, or funds set aside to support them. The same number of workers can become more productive only through additions and improvements to machines and tools that make work easier and faster, or through a better division and distribution of work. Either way, additional capital is almost always required. Only with additional capital can an employer provide workers with better machinery or distribute work more effectively among them. When a job has several parts, keeping each worker constantly employed on one part requires much more capital. Less capital is needed when each worker sometimes works on every part. Suppose, then, we compare a nation at two different times. We find that its annual output from land and labor is clearly greater at the later time. Its land is better cultivated, its manufactures are more numerous and flourishing, and its trade is more extensive. We can then be sure that its capital must have increased in the interval. Some people’s good conduct must have added more to it than others’ private misconduct or the government’s public extravagance took away. But we shall find that this has happened in almost all nations during all reasonably quiet and peaceful times. It has happened even in nations that have not enjoyed the most prudent and thrifty governments. To judge this properly, however, we must compare a country at times somewhat far apart. Progress is often so gradual that improvement is not noticeable over shorter periods. Certain industries or districts sometimes decline, even when the country as a whole is very prosperous. This often leads people to suspect that the wealth and industry of the whole country are declining.

The annual produce of the land and labour of England, for example, is certainly much greater than it was a little more than a century ago, at the restoration of Charles II. Though at present few people, I believe, doubt of this, yet during this period five years have seldom passed away, in which some book or pamphlet has not been published, written, too, with such abilities as to gain some authority with the public, and pretending to demonstrate that the wealth of the nation was fast declining; that the country was depopulated, agriculture neglected, manufactures decaying, and trade undone. Nor have these publications been all party pamphlets, the wretched offspring of falsehood and venality. Many of them have been written by very candid and very intelligent people, who wrote nothing but what they believed, and for no other reason but because they believed it.

England’s land and labor certainly produce far more each year than they did a little over a century ago, when Charles II was restored to the throne. Few people today, I believe, doubt this. Yet during that period, hardly five years have passed without a book or pamphlet claiming to prove that the nation’s wealth was rapidly declining. These works were written skillfully enough to gain some authority with the public. They claimed that the population was shrinking, agriculture was neglected, manufacturing was decaying, and trade was ruined. Not all these publications were party pamphlets, the wretched products of lies and corruption. Many were written by very honest and intelligent people. They wrote only what they believed, and for no reason other than that they believed it.

The annual produce of the land and labour of England, again, was certainly much greater at the Restoration than we can suppose it to have been about a hundred years before, at the accession of Elizabeth. At this period, too, we have all reason to believe, the country was much more advanced in improvement, than it had been about a century before, towards the close of the dissensions between the houses of York and Lancaster. Even then it was, probably, in a better condition than it had been at the Norman conquest: and at the Norman conquest, than during the confusion of the Saxon heptarchy. Even at this early period, it was certainly a more improved country than at the invasion of Julius Caesar, when its inhabitants were nearly in the same state with the savages in North America.

The annual output of England’s land and labour was certainly much greater at the Restoration than we can suppose it was about a hundred years earlier, when Elizabeth came to the throne. We also have every reason to believe that England was much more developed at Elizabeth’s accession than it had been about a century earlier, towards the end of the conflicts between the houses of York and Lancaster. Even then, England was probably in better condition than it had been at the Norman conquest. It was also in better condition at the Norman conquest than during the turmoil of the Saxon heptarchy. Even during that early period, England was certainly more developed than it had been at Julius Caesar’s invasion. At the time of that invasion, its inhabitants were in nearly the same state as the savages in North America.

In each of those periods, however, there was not only much private and public profusion, many expensive and unnecessary wars, great perversion of the annual produce from maintaining productive to maintain unproductive hands; but sometimes, in the confusion of civil discord, such absolute waste and destruction of stock, as might be supposed, not only to retard, as it certainly did, the natural accumulation of riches, but to have left the country, at the end of the period, poorer than at the beginning. Thus, in the happiest and most fortunate period of them all, that which has passed since the Restoration, how many disorders and misfortunes have occurred, which, could they have been foreseen, not only the impoverishment, but the total ruin of the country would have been expected from them? The fire and the plague of London, the two Dutch wars, the disorders of the revolution, the war in Ireland, the four expensive French wars of 1688, 1701, 1742, and 1756, together with the two rebellions of 1715 and 1745. In the course of the four French wars, the nation has contracted more than £145,000,000 of debt, over and above all the other extraordinary annual expense which they occasioned; so that the whole cannot be computed at less than £200,000,000. So great a share of the annual produce of the land and labour of the country, has, since the Revolution, been employed upon different occasions, in maintaining an extraordinary number of unproductive hands. But had not those wars given this particular direction to so large a capital, the greater part of it would naturally have been employed in maintaining productive hands, whose labour would have replaced, with a profit, the whole value of their consumption. The value of the annual produce of the land and labour of the country would have been considerably increased by it every year, and every years increase would have augmented still more that of the following year. More houses would have been built, more lands would have been improved, and those which had been improved before would have been better cultivated; more manufactures would have been established, and those which had been established before would have been more extended; and to what height the real wealth and revenue of the country might by this time have been raised, it is not perhaps very easy even to imagine.

In each of those periods, however, private individuals and the government spent extravagantly, and fought many costly, unnecessary wars. Much of the annual output was diverted from supporting productive workers to supporting unproductive people. At times, civil discord also caused such complete waste and destruction of capital that the country might have been expected to end the period poorer than it began. The destruction certainly slowed the natural accumulation of wealth. The happiest and most fortunate period of all was the one since the Restoration. Yet how many upheavals and misfortunes occurred during that time? Had they been foreseen, they would have been expected not only to impoverish the country but to ruin it completely. They included the fire and plague of London, the two Dutch wars, the upheavals of the Revolution, and the war in Ireland. There were also the four expensive French wars of 1688, 1701, 1742, and 1756, and the two rebellions of 1715 and 1745. During the four French wars, the nation took on more than £145,000,000 of debt. This was in addition to all the other extraordinary annual expenses caused by the wars. The total cost therefore cannot be put at less than £200,000,000. Since the Revolution, a very large share of the country's annual output from land and labour has supported unusually large numbers of unproductive people on various occasions. But had those wars not directed so much capital to that purpose, most of it would naturally have supported productive workers. Their labour would have replaced the full value of what they consumed, with a profit. The value of the country's annual output from land and labour would have risen considerably each year. Each year's increase would have made the following year's increase still greater. More houses would have been built, and more land would have been improved. Land already improved would have been better cultivated. More manufacturing businesses would have been established, and existing ones would have expanded. It is perhaps not easy even to imagine how high the country's real wealth and income might have risen by now.

But though the profusion of government must undoubtedly have retarded the natural progress of England towards wealth and improvement, it has not been able to stop it. The annual produce of its land and labour is undoubtedly much greater at present than it was either at the Restoration or at the Revolution. The capital, therefore, annually employed in cultivating this land, and in maintaining this labour, must likewise be much greater. In the midst of all the exactions of government, this capital has been silently and gradually accumulated by the private frugality and good conduct of individuals, by their universal, continual, and uninterrupted effort to better their own condition. It is this effort, protected by law, and allowed by liberty to exert itself in the manner that is most advantageous, which has maintained the progress of England towards opulence and improvement in almost all former times, and which, it is to be hoped, will do so in all future times. England, however, as it has never been blessed with a very parsimonious government, so parsimony has at no time been the characteristic virtue of its inhabitants. It is the highest impertinence and presumption, therefore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expense, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves always, and without any exception, the greatest spendthrifts in the society. Let them look well after their own expense, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of the subject never will.

Although government extravagance has undoubtedly slowed England’s natural progress toward wealth and improvement, it has not stopped it. The annual output of England’s land and labor is undoubtedly much greater now than at either the Restoration or the Revolution. The capital invested each year in cultivating the land and supporting the workers must therefore also be much greater. Despite everything the government has taken, this capital has quietly and gradually accumulated. It has come from individuals’ thrift and good conduct, and their universal, continuous, and uninterrupted effort to improve their condition. The law protects this effort, and liberty allows people to pursue it in the most advantageous way. This effort has sustained England’s progress toward wealth and improvement in almost all past times. We may hope it will do so in all future times. England has never been blessed with a very thrifty government. Nor has thrift ever been a characteristic virtue of its inhabitants. It is therefore the height of arrogance and presumption for kings and ministers to claim to oversee private people’s finances. It is equally presumptuous for them to restrict private spending through sumptuary laws or bans on imported luxuries. Kings and ministers are themselves always, without exception, the greatest spendthrifts in society. Let them take care of their own spending, and they can safely trust private people to take care of theirs. If their own extravagance does not ruin the state, their subjects’ extravagance never will.

As frugality increases, and prodigality diminishes, the public capital, so the conduct of those whose expense just equals their revenue, without either accumulating or encroaching, neither increases nor diminishes it. Some modes of expense, however, seem to contribute more to the growth of public opulence than others.

Just as thrift increases public capital and wasteful spending reduces it, some people do neither. Those who spend exactly what they earn neither add to public capital nor reduce it. Some kinds of spending, however, seem to contribute more than others to the growth of public wealth.

The revenue of an individual may be spent, either in things which are consumed immediately, and in which one day’s expense can neither alleviate nor support that of another; or it may be spent in things mere durable, which can therefore be accumulated, and in which every day’s expense may, as he chooses, either alleviate, or support and heighten, the effect of that of the following day. A man of fortune, for example, may either spend his revenue in a profuse and sumptuous table, and in maintaining a great number of menial servants, and a multitude of dogs and horses; or, contenting himself with a frugal table, and few attendants, he may lay out the greater part of it in adorning his house or his country villa, in useful or ornamental buildings, in useful or ornamental furniture, in collecting books, statues, pictures; or in things more frivolous, jewels, baubles, ingenious trinkets of different kinds; or, what is most trifling of all, in amassing a great wardrobe of fine clothes, like the favourite and minister of a great prince who died a few years ago. Were two men of equal fortune to spend their revenue, the one chiefly in the one way, the other in the other, the magnificence of the person whose expense had been chiefly in durable commodities, would be continually increasing, every day’s expense contributing something to support and heighten the effect of that of the following day; that of the other, on the contrary, would be no greater at the end of the period than at the beginning. The former too would, at the end of the period, be the richer man of the two. He would have a stock of goods of some kind or other, which, though it might not be worth all that it cost, would always be worth something. No trace or vestige of the expense of the latter would remain, and the effects of ten or twenty years’ profusion would be as completely annihilated as if they had never existed.

A person may spend their income on things consumed immediately. One day’s spending on such things can neither ease nor add to the expense of another day. Or a person may spend it on more durable things that can be accumulated. Each day’s spending can then, as the person chooses, either reduce the need for spending the next day or add to and increase its effect. For example, a wealthy man may spend his income on lavish meals, many household servants, and numerous dogs and horses. Or he may settle for simple meals and few servants. He may then spend most of his income decorating his house or country villa. He may spend it on useful or decorative buildings and furniture, or on collecting books, statues, and paintings. He may also spend it on more frivolous things, such as jewels, baubles, and clever trinkets of various kinds. Or, most trivial of all, he may amass a large wardrobe of fine clothes. A great prince’s favorite and minister, who died a few years ago, did just that. Suppose two men of equal fortune spent their incomes, one chiefly in the first way and the other in the second. The splendor of the man who spent chiefly on durable goods would keep increasing. Each day’s spending would add something to support and increase the effect of the next day’s spending. The other man’s splendor, by contrast, would be no greater at the end of the period than at the beginning. The first man would also be richer at the end of the period. He would have a stock of goods of some kind. Though the goods might not be worth all they had cost, they would always be worth something. No trace of the other man’s spending would remain. The effects of ten or twenty years of lavish spending would have vanished completely, as if they had never existed.

As the one mode of expense is more favourable than the other to the opulence of an individual, so is it likewise to that of a nation. The houses, the furniture, the clothing of the rich, in a little time, become useful to the inferior and middling ranks of people. They are able to purchase them when their superiors grow weary of them; and the general accommodation of the whole people is thus gradually improved, when this mode of expense becomes universal among men of fortune. In countries which have long been rich, you will frequently find the inferior ranks of people in possession both of houses and furniture perfectly good and entire, but of which neither the one could have been built, nor the other have been made for their use. What was formerly a seat of the family of Seymour, is now an inn upon the Bath road. The marriage-bed of James I. of Great Britain, which his queen brought with her from Denmark, as a present fit for a sovereign to make to a sovereign, was, a few years ago, the ornament of an alehouse at Dunfermline. In some ancient cities, which either have been long stationary, or have gone somewhat to decay, you will sometimes scarce find a single house which could have been built for its present inhabitants. If you go into those houses, too, you will frequently find many excellent, though antiquated pieces of furniture, which are still very fit for use, and which could as little have been made for them. Noble palaces, magnificent villas, great collections of books, statues, pictures, and other curiosities, are frequently both an ornament and an honour, not only to the neighbourhood, but to the whole country to which they belong. Versailles is an ornament and an honour to France, Stowe and Wilton to England. Italy still continues to command some sort of veneration, by the number of monuments of this kind which it possesses, though the wealth which produced them has decayed, and though the genius which planned them seems to be extinguished, perhaps from not having the same employment.

Just as one way of spending is better than the other for an individual’s wealth, it is also better for a nation’s wealth. The houses, furniture, and clothing of the rich soon become useful to people of the lower and middle ranks. They can buy these things when their owners grow tired of them. When all wealthy people spend in this way, living conditions gradually improve for everyone. In countries that have long been rich, people of the lower ranks often own houses and furniture that are still in perfectly good condition. Yet those houses and furnishings could not have been built or made for them. What was once a home of the Seymour family is now an inn on the Bath road. James I of Great Britain’s marriage bed stood in an alehouse at Dunfermline a few years ago. His queen had brought it from Denmark as a gift worthy of one sovereign to another. In some old cities that have long ceased to grow or have declined somewhat, hardly any house could have been built for its present inhabitants. Inside, you will often find excellent but old-fashioned furniture that is still quite usable. This furniture, too, could hardly have been made for its present owners. Grand palaces, magnificent villas, and great collections of books, statues, pictures, and other curiosities often adorn and bring honour to more than their immediate surroundings. They can do the same for the whole country in which they are found. Versailles is an ornament and an honour to France, as Stowe and Wilton are to England. Italy still commands a certain respect because of its many monuments of this kind. Yet the wealth that produced them has declined, and the genius that designed them seems to have died out, perhaps because it no longer has the same work to do.

The expense, too, which is laid out in durable commodities, is favourable not only to accumulation, but to frugality. If a person should at any time exceed in it, he can easily reform without exposing himself to the censure of the public. To reduce very much the number of his servants, to reform his table from great profusion to great frugality, to lay down his equipage after he has once set it up, are changes which cannot escape the observation of his neighbours, and which are supposed to imply some acknowledgment of preceding bad conduct. Few, therefore, of those who have once been so unfortunate as to launch out too far into this sort of expense, have afterwards the courage to reform, till ruin and bankruptcy oblige them. But if a person has, at any time, been at too great an expense in building, in furniture, in books, or pictures, no imprudence can be inferred from his changing his conduct. These are things in which further expense is frequently rendered unnecessary by former expense; and when a person stops short, he appears to do so, not because he has exceeded his fortune, but because he has satisfied his fancy.

Spending on durable goods encourages not only accumulation but also thrift. If someone spends too much on them, he can easily change his habits without inviting public criticism. But other changes cannot escape his neighbours' notice. He might greatly reduce the number of his servants, replace lavish meals with frugal ones, or give up his carriage after acquiring it. Such changes are taken as an admission that he has behaved badly in the past. Therefore, few people who have been unfortunate enough to spend too much in this way later have the courage to change. They do so only when ruin and bankruptcy force them to. But suppose someone has spent too much on buildings, furniture, books, or pictures. No one can infer that he was imprudent simply because he changes his habits. Past spending on these things often makes further spending unnecessary. So when he stops, he appears to have done so not because he has exceeded his means, but because he has satisfied his desires.

The expense, besides, that is laid out in durable commodities, gives maintenance, commonly, to a greater number of people than that which is employed in the most profuse hospitality. Of two or three hundred weight of provisions, which may sometimes be served up at a great festival, one half, perhaps, is thrown to the dunghill, and there is always a great deal wasted and abused. But if the expense of this entertainment had been employed in setting to work masons, carpenters, upholsterers, mechanics, etc. a quantity of provisions of equal value would have been distributed among a still greater number of people, who would have bought them in pennyworths and pound weights, and not have lost or thrown away a single ounce of them. In the one way, besides, this expense maintains productive, in the other unproductive hands. In the one way, therefore, it increases, in the other it does not increase the exchangeable value of the annual produce of the land and labour of the country.

Besides, money spent on durable goods usually supports more people than money spent on the most lavish hospitality. Two or three hundredweight of food may sometimes be served at a great feast. Perhaps half of it is thrown on the dung heap, and much is always wasted or misused. But suppose the money spent on the feast had instead been used to employ masons, carpenters, upholsterers, mechanics, and others. Food of equal value would have been distributed among an even greater number of people. They would have bought it in small amounts and by the pound, and would not have wasted or thrown away a single ounce. Besides, spending money on durable goods supports productive workers, while spending it on lavish hospitality supports unproductive workers. The first kind of spending therefore increases the exchangeable value of the country’s annual output of land and labor. The second kind does not.

I would not, however, by all this, be understood to mean, that the one species of expense always betokens a more liberal or generous spirit than the other. When a man of fortune spends his revenue chiefly in hospitality, he shares the greater part of it with his friends and companions; but when he employs it in purchasing such durable commodities, he often spends the whole upon his own person, and gives nothing to any body without an equivalent. The latter species of expense, therefore, especially when directed towards frivolous objects, the little ornaments of dress and furniture, jewels, trinkets, gew-gaws, frequently indicates, not only a trifling, but a base and selfish disposition. All that I mean is, that the one sort of expense, as it always occasions some accumulation of valuable commodities, as it is more favourable to private frugality, and, consequently, to the increase of the public capital, and as it maintains productive rather than unproductive hands, conduces more than the other to the growth of public opulence.

However, I do not mean that one kind of spending always shows a more generous spirit than the other. When a wealthy man spends most of his income on hospitality, he shares most of it with his friends and companions. But when he spends it on durable goods, he often spends it all on himself. He gives nothing to anyone without receiving something in return. This kind of spending often shows not only a frivolous character, but also a mean and selfish one. This is especially true when the money goes toward frivolous things like little ornaments for clothing and furniture, jewels, trinkets, and knickknacks. I mean only that spending on durable goods does more to increase public wealth than spending on hospitality. It always results in some accumulation of valuable goods. It also encourages private saving and therefore increases the capital of the nation. And it supports productive rather than unproductive workers.