Different Uses of Capital

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.

Although all capital is intended to support productive labor, equal amounts of capital put very different amounts of labor to work. The amount depends on how the capital is used. The value added to the country’s annual output of land and labor also varies according to how the capital is used.

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.

Capital can be employed in four different ways. First, it can obtain the raw produce society needs each year for use and consumption. Second, it can manufacture and prepare that raw produce for immediate use and consumption. Third, it can transport raw or manufactured goods from places where they are plentiful to places where they are needed. Finally, it can divide either kind of goods into parcels small enough to meet buyers’ occasional demands. The first use includes the capital of all who develop or cultivate land, mines, or fisheries. The second includes the capital of all master manufacturers. The third includes the capital of all wholesale merchants, and the fourth includes that of all retailers. It is difficult to imagine a use of capital that would not fall into one of these four categories.

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.

Each of these four ways of using capital is essential. Each is needed either for the other three to exist or grow, or for the general convenience of 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 capital was used to produce a sufficient abundance of raw materials, no manufacturing or trade 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.

Some raw produce needs a great deal of preparation before it is fit for use or consumption. Unless capital was invested in processing it, such produce would never be produced because there would be no demand for it. Or, if it grew naturally, it would have no value in exchange and could add nothing to society’s wealth.

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 capital was used to transport raw materials or manufactured goods from places with a surplus to places that needed them, neither could be produced beyond what the local community needed. A merchant’s capital exchanges the surplus goods of one place for those of another. This encourages industry and increases enjoyment in both places.

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.

Unless capital were used to divide raw or manufactured goods into small quantities, people would have to buy more than they immediately needed. These small quantities suit the occasional needs of those who want the goods. Without butchers, for example, everyone would have to buy a whole ox or sheep at a time. This would generally be inconvenient for the rich, and much more so for the poor. Suppose a poor worker had to buy a month’s or six months’ provisions at once. He would have to spend much of his stock on goods for immediate consumption, which yield him no income. Otherwise, he could use that stock as capital for his tools or shop furnishings, which do yield him an income. Nothing could be more convenient for him than to buy his necessities as he needs them, day by day or even hour by hour. This allows him to use almost all his stock as capital. He can therefore produce work of greater value. The profit he makes this way more than compensates for the higher price retailers charge to make their own profit. The prejudices of some political writers against shopkeepers and tradesmen have no basis at all. There is no need to tax them or restrict their numbers. Their numbers can never grow enough to hurt the public, though they may grow enough to hurt one another. For example, the quantity of groceries sold in a town is limited by demand there and in the surrounding area. So the capital used in the grocery trade cannot exceed what is needed to buy that quantity. If two grocers share this capital, their competition will tend to make both sell more cheaply than a single grocer would. If twenty shared it, their competition would be all the greater. They would also be less likely to combine to raise prices. Their competition might perhaps ruin some of them. But the people concerned are responsible for looking after themselves, and they can safely be trusted to use their own judgment. Such competition can never hurt either the consumer or the producer. On the contrary, it must tend to make retailers sell more cheaply and pay more for goods than if one or two people monopolized the whole trade. Some retailers may sometimes tempt a vulnerable customer to buy something he does not need. But this harm is too minor to deserve public attention. Nor would restricting the number of retailers necessarily prevent it. Alehouses offer the most suspicious example. Yet it is not their great number that causes a general tendency toward drunkenness among ordinary people. Rather, that tendency arises from other causes and necessarily provides business for many 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.

People who invest their capital in any of these four ways are themselves productive workers. When properly directed, their work becomes part of the object or saleable goods they work on. It generally adds at least the value of their own upkeep and consumption to the price of those goods. The profits of the farmer, manufacturer, merchant, and retailer all come from the price of the goods. The farmer and manufacturer produce the goods, while the merchant and retailer buy and sell them. But equal amounts of capital invested in each of these four ways will directly put very different amounts of productive labor to work. They will also increase the value of the annual output of their society's land and labor by very different amounts.

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 retailer’s capital replaces the capital of the merchant he buys goods from, along with the merchant’s profits. This allows the merchant to continue his business. The retailer himself is the only productive worker his capital directly employs. His profit is the entire value that the use of his capital adds to society’s annual output of land and labor.

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.

The wholesale merchant’s capital replaces the capital of the farmers and manufacturers from whom he buys raw and manufactured goods. It also provides them with profits, enabling them to continue their respective trades. This service is his chief indirect contribution to supporting society’s productive labor and increasing the value of its annual output. His capital also employs the sailors and carriers who transport his goods from place to place. It adds to the price of those goods not only his profits but also their wages. This is all the productive labor his capital directly sets in motion and all the value it directly adds to annual output. In both respects, his capital does considerably more than a retailer’s capital.

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.

The manufacturer uses part of his capital as fixed capital to buy the tools of his trade. This repays the capital of the craftspeople who sell him the tools, along with their profits. He uses part of his circulating capital to buy materials. This repays the capital of the farmers and miners who sell him the materials, along with their profits. But a large part of his circulating capital is always paid to his workers, either annually or more often. Their wages increase the value of the materials. So do the manufacturer’s profits on all the money spent on wages, materials, and tools. Therefore, this capital immediately puts much more productive labor to work than an equal amount held by a wholesale merchant. It also adds much more value to society’s annual produce from land and labor.

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.

No equal amount of capital puts more productive labor to work than a farmer’s capital. Both his laborers and his working cattle are productive laborers. In agriculture, nature also works alongside people. Nature’s work costs nothing, but what it produces has value, just like the work of the most expensive workers. The most important farming operations seem intended to direct nature’s fertility toward producing the plants most profitable to people. They also increase that fertility, but that seems less important. A field overgrown with briars and brambles may often produce as much plant growth as the best cultivated vineyard or grain field. Planting and tilling often regulate nature’s active fertility more than they stimulate it. After all their labor, people still leave a great deal of the work to nature. Like manufacturing workers, farm laborers and working cattle produce enough value to replace what they consume, or the capital that employs them. They also produce the capital owner’s profits. But they produce much greater value than this. Besides replacing the farmer’s capital and all its profits, they regularly produce the landlord’s rent. This rent can be seen as the product of the powers of nature that the landlord lets the farmer use. The rent is greater or smaller according to the supposed extent of those powers. In other words, it depends on the supposed natural or improved fertility of the land. It is the work of nature left after everything that can be regarded as human work has been deducted or compensated for. It is seldom less than a quarter, and often more than a third, of the total produce. An equal amount of productive labor in manufacturing can never produce so much. In manufacturing, nature does nothing and people do everything. What is produced must always be in proportion to the strength of the forces that produce it. Capital invested in agriculture therefore puts more productive labor to work than an equal amount invested in manufacturing. It also adds much greater value in proportion to the amount of productive labor it employs. It adds this value to the annual produce of the country’s land and labor, and to the real wealth and income of its inhabitants. Of all the ways to use capital, agriculture is by far the most beneficial 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 invested in agriculture and retail trade in any society must always remain within that society. It is used almost entirely in one specific place, either a farm or a retail shop. The capital must also generally belong to members of the society who live there, though there are some exceptions.

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.

By contrast, a wholesale merchant's capital seems to have no fixed or necessary home. It may move from place to place, wherever it can buy cheaply or sell at a high price.

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.

A manufacturer’s capital must, of course, be located where the manufacturing takes place. But the location of the manufacturing is not always fixed. It may often be far from both the source of the materials and the market for the finished goods. Lyons is far from both the sources of its materials and the markets for its manufactured goods. Fashionable people in Sicily wear silk made in other countries from materials produced in Sicily. Some Spanish wool is made into cloth in Great Britain, and some of that cloth is then 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 matters very little whether the merchant whose capital exports a society’s surplus goods is a native or a foreigner. If the merchant is a foreigner, the society necessarily has just one fewer productive worker than if he were a native. The value of its annual output is also lower by that one man’s profits. The sailors or carriers he employs may still come from his country, the society’s country, or a third country. The same would be true if he were a native. A foreigner’s capital gives the society’s surplus goods just as much value as a native’s capital does. It does this by exchanging them for something in demand at home. It just as effectively replaces the capital of the person who produces the surplus, enabling him to continue his business. This is the main way a wholesale merchant’s capital helps support productive labor and increase the value of his society’s annual output.

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.

It is more important for a manufacturer’s capital to be invested within the country. It necessarily puts more productive labor to work. It also adds more value to the country’s annual output from its land and labor. But the capital may still be very useful to the country even if invested elsewhere. For example, British manufacturers process flax and hemp imported each year from the Baltic coasts. Their capital is surely very useful to the countries that produce those materials. The flax and hemp are part of those countries’ surplus produce. Unless the surplus was exchanged each year for something in demand there, it would have no value. Its production would soon stop. The merchants who export the flax and hemp replenish the capital of the producers, encouraging them to continue production. The British manufacturers, in turn, replenish the merchants’ capital.

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.

A country, like a person, may often lack enough capital to improve and cultivate all its land. It may also lack enough capital to manufacture and prepare all the land's raw produce for immediate use and consumption. And it may lack enough to transport surplus raw or manufactured goods to distant markets. There, the goods can be exchanged for something in demand at home. Inhabitants of many parts of Great Britain lack enough capital to improve and cultivate all their land. Much of the wool from the southern counties of Scotland is manufactured in Yorkshire because there is not enough capital to manufacture it at home. The wool must be carried a long way over very bad roads. In many small manufacturing towns in Great Britain, the inhabitants lack enough capital to transport their own goods to distant markets where they are wanted and consumed. If there are merchants in these towns, they are really only agents for wealthier merchants in 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.

When a country does not have enough capital for all three purposes, the more it invests in agriculture, the more productive labor it puts to work within the country. It also adds more value to the annual output of the society’s land and labor. After agriculture, capital invested in manufacturing puts the most productive labor to work and adds the most value to annual output. Capital invested in export trade has the least effect 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.

A country without enough capital for all three purposes has not reached the prosperity it seems naturally destined to achieve. But trying to do all three too soon, with insufficient capital, is certainly not the quickest way for a society to acquire enough capital. Nor would it be for an individual. The combined capital of everyone in a nation has limits, just as an individual’s capital does. It can serve only so many purposes. The combined capital of a nation grows in the same way as an individual’s. People continually add to it whatever they save from their income. It is therefore likely to grow fastest when used in the way that provides the greatest income for all the country’s inhabitants. They will then be able to save the most. But the income of all the country’s inhabitants is necessarily proportional to the value of what their land and labor produce each year.

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 American colonies have grown rapidly in wealth and greatness, chiefly because almost all their capital has so far been invested in agriculture. They have no manufacturing except the basic goods made at home that necessarily accompany the growth of agriculture. Women and children make these goods in each family. Merchants living in Great Britain provide the capital for most of America's export and coastal trade. In some provinces, particularly Virginia and Maryland, many retail stores and warehouses also belong to merchants living in the mother country. This is one of the few cases where a society's retail trade is financed by people living outside it. Suppose the Americans stopped imports of European manufactured goods, either by acting together or by some other use of force. This would give a monopoly to those Americans who could make similar goods and divert considerable capital into manufacturing. Instead of speeding up the growth in the value of their annual production, they would slow it down. Instead of promoting their country's progress toward real wealth and greatness, they would obstruct it. This would be even more true if they tried in the same way to gain a monopoly over all their export 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.

Indeed, human prosperity seems hardly ever to have lasted long enough for any great country to acquire enough capital for all three purposes. Perhaps, though, we should believe the remarkable accounts of the wealth and cultivation of China, ancient Egypt, and ancient Indostan. By all accounts, these three countries were the wealthiest that ever existed. Yet they are chiefly renowned for their superiority in agriculture and manufacturing. They do not appear to have been renowned for foreign trade. The ancient Egyptians had a superstitious dislike of the sea. A similar superstition prevails among the Indians, and the Chinese have never excelled in foreign commerce. Foreigners seem always to have exported most of the surplus produce of all three countries. In exchange, they supplied goods 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.

Thus, in any country, the same capital can put more or less productive labour to work. It can also add more or less value to the annual produce of the country’s land and labour. The amount depends on how the capital is divided among agriculture, manufacturing, and wholesale trade. It also varies greatly according to the kinds of wholesale trade in which any part of the capital is invested.

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.

All wholesale trade, or buying goods to resell wholesale, can be divided into three kinds. These are domestic trade, foreign trade for domestic consumption, and carrying trade. Domestic trade involves buying goods produced in one part of a country and selling them in another. It includes both inland trade and trade along the coast. Foreign trade for domestic consumption involves buying foreign goods for use at home. Carrying trade involves conducting commerce between foreign countries, or carrying surplus goods from one country 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.

Capital used to buy a country’s products in one region and sell them in another generally replenishes two distinct amounts of capital with each transaction. Both had been invested in that country’s agriculture or manufacturing. This allows both to continue in those uses. When a merchant sends goods from home, they generally bring back at least an equal value in other goods. When both sets of goods are products of domestic industry, each transaction necessarily replenishes two distinct amounts of capital. Both had been used to support productive labor, and this allows both to continue doing so. Capital used to send Scotch manufactured goods to London and bring English grain and manufactured goods back to Edinburgh necessarily replenishes two British amounts of capital with each transaction. Both had been invested in the agriculture or manufacturing 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.

Capital used to buy foreign goods for home consumption also replaces two distinct capitals with each transaction. This happens when the goods are bought with the products of domestic industry. But only one of these capitals supports domestic industry. Consider capital used to send British goods to Portugal and bring Portuguese goods back to Great Britain. Each transaction replaces only one British capital. The other capital is Portuguese. The returns from foreign trade for consumption may be as quick as those from home trade. Even so, the capital used in foreign trade will provide only half as much support for the country’s industry or productive labor.

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.

But money invested in foreign trade for domestic consumption returns much less quickly than money invested in domestic trade. Returns from domestic trade generally come in before the end of the year. Sometimes they come in three or four times a year. Returns from foreign trade for domestic consumption seldom come in before the end of the year. Sometimes they do not come in for two or three years. So capital invested in domestic trade may be sent out and returned twelve times before capital invested in foreign trade for domestic consumption has returned once. If the amounts of capital are equal, the capital invested in domestic trade will therefore encourage and support the country’s industry twenty-four times more than the capital invested in foreign trade.

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.

Foreign goods for consumption at home may sometimes be bought with other foreign goods, rather than with the products of domestic industry. But those other goods must have been bought with domestic products, either directly or through further exchanges. Except through war and conquest, foreign goods can only be acquired in exchange for something produced at home. The exchange may be direct or may involve two or more separate trades. A capital invested in such an indirect foreign trade for home consumption therefore has the same effects as one invested in the most direct trade of that kind. The only difference is that the final returns are likely to take even longer. They depend on the returns from two or three separate foreign trades. Suppose the hemp and flax of Riga are bought with Virginia tobacco, which was bought with British manufactured goods. The merchant must wait for the returns from two separate foreign trades before using the same capital to buy the same quantity of British manufactured goods again. Suppose instead that the Virginia tobacco was bought with Jamaican sugar and rum, which were bought with those manufactured goods. Then the merchant must wait for the returns from three trades. These two or three separate foreign trades may be carried on by two or three different merchants. The second merchant buys the goods imported by the first to export them again. The third does the same with the goods imported by the second. In that case, each merchant will receive the returns on their own capital more quickly. But the final returns on all the capital invested in the trade will be just as slow as before. Whether all the capital invested in such an indirect trade belongs to one merchant or three makes no difference to the country, though it may make a difference to the individual merchants. In either case, three times as much capital must be invested to exchange a given value of British manufactured goods for a given quantity of flax and hemp. Less capital would have been needed if the manufactured goods had been exchanged directly for the flax and hemp. The total capital invested in such an indirect foreign trade for home consumption will therefore generally give less encouragement and support to the country’s productive labor than an equal amount invested 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.

Whatever foreign commodity is used to buy foreign goods for domestic consumption, the nature of the trade remains essentially the same. So does the encouragement and support it can give to productive labor in the country conducting the trade. Suppose, for example, that the goods are bought with gold from Brazil or silver from Peru. Like tobacco from Virginia, the gold and silver must have been bought with something. That payment was either a product of the country’s labor or something bought with such a product. Therefore, as far as the country’s productive labor is concerned, foreign trade for domestic consumption using gold and silver has all the advantages and disadvantages of any other equally indirect foreign trade for domestic consumption. It will replace the capital directly employed in supporting that productive labor just as quickly or just as slowly. This trade even seems to have one advantage over any other equally indirect foreign trade. Because gold and silver take up little space and have great value, they cost less to transport than almost any other foreign goods of equal value. Their freight costs are much lower, and their insurance costs are no higher. Also, no goods are less likely to be damaged in transit. Using gold and silver, a country can therefore often buy the same quantity of foreign goods with a smaller amount of the products of its own labor than it could by using any other foreign goods. In this way, the country’s demand can often be met more completely and at a lower cost than in any other way. I will later examine at great length whether this kind of trade, by continually exporting gold and silver, is likely to make the country conducting it poorer in any other way.

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 part of a country's capital used in the carrying trade is entirely withdrawn from supporting productive labor in that country. Instead, it supports productive labor in foreign countries. Each transaction may replenish two separate capitals, but neither belongs to the merchant's country. A Dutch merchant, for example, carries Polish grain to Portugal and brings Portuguese fruit and wine back to Poland. Each such transaction replenishes two capitals. Neither had been used to support productive labor in Holland. One had supported productive labor in Poland, and the other in Portugal. Only the profits regularly return to Holland. They are the entire addition that this trade necessarily makes to the annual produce of Holland's land and labor. When a country conducts its carrying trade with its own ships and sailors, the situation is different. The part of the capital used to pay for shipping goes to a number of the country's productive laborers and puts them to work. Almost all nations with a considerable share of the carrying trade have in fact conducted it this way. The trade probably takes its name from this practice, since the people of those countries carry goods for other countries. But the practice does not seem essential to the nature of the trade. A Dutch merchant, for example, may use his capital to conduct trade between Poland and Portugal. He may carry part of the surplus produce of each country to the other in British ships rather than Dutch ones. We may presume that he actually does this on certain occasions. Because the carrying trade can employ a country's ships and sailors, it has been thought especially advantageous to Great Britain. Its defense and security depend on the number of its sailors and ships. But the same capital could employ as many sailors and ships in foreign trade for consumption. It could even do so in domestic trade conducted by vessels sailing along the coast. The number of sailors and ships that a given capital can employ does not depend on the nature of the trade. It depends partly on the bulk of the goods in proportion to their value. It also depends partly on the distance between the ports where they are carried. Of these two factors, the bulk of the goods matters more. The coal trade from Newcastle to London, for example, employs more ships than all of England's carrying trade. This is so even though the ports are not far apart. Therefore, special incentives may force more of a country's capital into the carrying trade than would naturally go there. But they will not necessarily increase the country's shipping in every case.

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.

Capital invested in a country’s home trade will therefore generally support more productive labor in that country than an equal amount invested in foreign trade for consumption. It will also increase the value of the country’s annual output more. In both respects, capital invested in foreign trade for consumption has an even greater advantage over an equal amount invested in the carrying trade. A country’s wealth must always be proportionate to the value of its annual output. So must its power, insofar as power depends on wealth. Annual output is the source from which all taxes must ultimately be paid. But the main goal of every country’s economic policy is to increase its wealth and power. Therefore, economic policy should not favor or encourage foreign trade for consumption over home trade. Nor should it favor or encourage the carrying trade over either of the other two. It should neither force nor entice more of the country’s capital into either foreign trade for consumption or the carrying trade than would naturally flow into them.

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.

However, each of these branches of trade is not only beneficial but also necessary and unavoidable when it develops naturally, without force or constraint.

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 an industry produces more than the country needs, the surplus must be sent abroad. It must be exchanged for something people want at home. Without such exports, some of the country’s productive labor must stop, and the value of its annual output must fall. Great Britain’s land and labor generally produce more grain, woolen goods, and hardware than the home market needs. The surplus must therefore be sent abroad and exchanged for something people want at home. Only through such exports can the surplus gain enough value to cover the labor and expense of producing it. Locations near the coast and along navigable rivers are good for industry for one reason. They make it easier to export surplus goods and exchange them for something people there want more.

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 foreign goods bought with surplus domestic produce exceed demand at home, the surplus must be sent abroad again. There, it must be exchanged for something more in demand at home. Each year, Britain buys about 96,000 hogsheads of tobacco in Virginia and Maryland with some of its surplus industrial produce. But Great Britain’s demand perhaps requires no more than 14,000 hogsheads. If the remaining 82,000 could not be sent abroad and exchanged for something more in demand at home, their importation would stop immediately. So would the productive work of all those people in Great Britain now employed making the goods used to buy those 82,000 hogsheads each year. Those goods are part of the produce of Great Britain’s land and labor. They have no market at home. If they also lost their market abroad, they would no longer be produced. Even the most indirect foreign trade for domestic consumption may therefore sometimes be as necessary as the most direct trade. It may be just as necessary to sustain the country’s productive labor and the value of its annual produce.

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.

When a country’s capital grows large enough, it can exceed what the country needs to supply its consumption and support its productive labor. The surplus naturally flows into the carrying trade, where it serves the same purposes for other countries. The carrying trade is a natural result and sign of great national wealth, but it does not seem to be a natural cause of it. Statesmen who have favored the carrying trade with special encouragement seem to have mistaken the result and sign for the cause. Holland has by far the greatest share of Europe’s carrying trade. It is also Europe’s richest country by far, in proportion to its land area and population. England, perhaps the second richest country in Europe, is also thought to have a considerable share of the carrying trade. Yet what is commonly called England’s carrying trade may often prove to be only an indirect form of foreign trade for domestic consumption. Much of the trade carrying goods from the East and West Indies and America to European markets is of this kind. These goods are generally bought either directly with the products of British industry or with something bought with those products. The final returns from these trades are generally used or consumed in Great Britain. The main branches of Great Britain’s carrying trade proper are perhaps the trade conducted in British ships between Mediterranean ports and some similar trade conducted by British merchants between Indian ports.

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 extent of home trade, and the capital that can be employed in it, is necessarily limited. The limit is the value of the surplus goods produced in all the distant parts of the country that need to exchange goods with one another. The extent of foreign trade for consumption is limited by the value of the whole country’s surplus goods and what they can buy. The extent of the carrying trade is limited by the value of the surplus goods of all the countries in the world. Its possible extent is therefore almost infinite compared with the other two, and it can absorb 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.

The owner of capital is motivated solely by private profit when deciding how to use it. The owner may invest in agriculture, manufacturing, or a particular branch of wholesale or retail trade. These uses may put different amounts of productive labor to work. They may also add different amounts of value to the yearly output of a society’s land and labor. But the owner never thinks about these differences. In some countries, agriculture is the most profitable occupation, and farming and improving land are the most direct paths to great wealth. In those countries, individuals will naturally invest their capital in the way most advantageous to the whole society. Yet nowhere in Europe do profits from agriculture seem greater than those from other occupations. In the past few years, promoters across Europe have entertained the public with extravagant accounts of the profits from cultivating and improving land. There is no need to examine their calculations in detail. One simple observation can satisfy us that their conclusions must be false. Every day, we see people make great fortunes in a single lifetime through trade and manufacturing. They often start with very little capital, and sometimes with none. Perhaps not one such fortune has been made in Europe through agriculture during the present century, in the same time and with so little capital. Yet in all the great countries of Europe, much good land still lies uncultivated. Most cultivated land is also far from being improved as much as it could be. Agriculture can therefore absorb much more capital almost everywhere than has ever been invested in it. What features of European policy have given trades in towns such a great advantage over farming in the country? As a result of this advantage, individuals often find it more profitable to invest in distant shipping trades serving Asia and America. They prefer those trades to improving and cultivating the most fertile fields in their own neighborhood. I shall try to explain these features of policy fully in the next two books.