Introduction

In that rude state of society, in which there is no division of labour, in which exchanges are seldom made, and in which every man provides every thing for himself, it is not necessary that any stock should be accumulated, or stored up before-hand, in order to carry on the business of the society. Every man endeavours to supply, by his own industry, his own occasional wants, as they occur. When he is hungry, he goes to the forest to hunt; when his coat is worn out, he clothes himself with the skin of the first large animal he kills: and when his hut begins to go to ruin, he repairs it, as well as he can, with the trees and the turf that are nearest it.

In a primitive society, there is no division of labor, exchanges are rare, and every man provides everything for himself. In such a society, no stock needs to be accumulated or stored in advance to carry on its business. Each man tries to meet his needs through his own work as they arise. When he is hungry, he goes to the forest to hunt. When his coat wears out, he clothes himself with the skin of the first large animal he kills. When his hut begins to fall apart, he repairs it as best he can with the nearest trees and turf.

But when the division of labour has once been thoroughly introduced, the produce of a man’s own labour can supply but a very small part of his occasional wants. The far greater part of them are supplied by the produce of other men’s labour, which he purchases with the produce, or, what is the same thing, with the price of the produce, of his own. But this purchase cannot be made till such time as the produce of his own labour has not only been completed, but sold. A stock of goods of different kinds, therefore, must be stored up somewhere, sufficient to maintain him, and to supply him with the materials and tools of his work, till such time at least as both these events can be brought about. A weaver cannot apply himself entirely to his peculiar business, unless there is before-hand stored up somewhere, either in his own possession, or in that of some other person, a stock sufficient to maintain him, and to supply him with the materials and tools of his work, till he has not only completed, but sold his web. This accumulation must evidently be previous to his applying his industry for so long a time to such a peculiar business.

But once the division of labour is fully established, a person’s own work can supply only a small part of his various needs. Most of his needs are met by the work of others. He buys what they produce with what he produces himself, or, what amounts to the same thing, with the money he receives for it. But he cannot make these purchases until he has both finished and sold his own product. A stock of different goods must therefore be stored somewhere. It must be enough to support him and supply him with materials and tools until he has finished and sold his product. A weaver cannot devote himself entirely to weaving unless a stock of goods has already been stored somewhere. It may be in his possession or someone else’s. The stock must be enough to support him and supply him with materials and tools until he has both finished and sold his cloth. Clearly, this stock must be accumulated before he devotes his labour to such a specialized trade for so long.

As the accumulation of stock must, in the nature of things, be previous to the division of labour, so labour can be more and more subdivided in proportion only as stock is previously more and more accumulated. The quantity of materials which the same number of people can work up, increases in a great proportion as labour comes to be more and more subdivided; and as the operations of each workman are gradually reduced to a greater degree of simplicity, a variety of new machines come to be invented for facilitating and abridging those operations. As the division of labour advances, therefore, in order to give constant employment to an equal number of workmen, an equal stock of provisions, and a greater stock of materials and tools than what would have been necessary in a ruder state of things, must be accumulated before-hand. But the number of workmen in every branch of business generally increases with the division of labour in that branch; or rather it is the increase of their number which enables them to class and subdivide themselves in this manner.

Stock must naturally be accumulated before labor can be divided. Labor can be divided further only as more stock is accumulated beforehand. As labor is divided further, the same number of people can work up a much greater quantity of materials. Each worker’s tasks also become simpler, and various new machines are invented to make those tasks easier and quicker. Therefore, as the division of labor advances, enough stock must be accumulated beforehand to keep the same number of workers constantly employed. This requires the same stock of provisions, but a greater stock of materials and tools than a less developed state would require. But the number of workers in every branch of business generally increases as labor is divided further in that branch. Or rather, the increase in workers allows them to group themselves and divide their work in this way.

As the accumulation of stock is previously necessary for carrying on this great improvement in the productive powers of labour, so that accumulation naturally leads to this improvement. The person who employs his stock in maintaining labour, necessarily wishes to employ it in such a manner as to produce as great a quantity of work as possible. He endeavours, therefore, both to make among his workmen the most proper distribution of employment, and to furnish them with the best machines which he can either invent or afford to purchase. His abilities, in both these respects, are generally in proportion to the extent of his stock, or to the number of people whom it can employ. The quantity of industry, therefore, not only increases in every country with the increase of the stock which employs it, but, in consequence of that increase, the same quantity of industry produces a much greater quantity of work.

Just as capital must be accumulated before this great improvement in the productivity of labour can occur, that accumulation naturally leads to the improvement. A person who uses capital to support workers naturally wants them to produce as much work as possible. So the employer tries to divide the work among the workers in the best way. The employer also tries to provide them with the best machines that can be invented or afforded. The employer’s ability to do both generally depends on the amount of capital available, or the number of people it can employ. So, in every country, the amount of work increases as the capital used to employ workers increases. As a result of that increase, the same amount of labour also produces much more.

Such are in general the effects of the increase of stock upon industry and its productive powers.

These are generally the effects of increased capital on industry and its ability to produce.

In the following book, I have endeavoured to explain the nature of stock, the effects of its accumulation into capital of different kinds, and the effects of the different employments of those capitals. This book is divided into five chapters. In the first chapter, I have endeavoured to shew what are the different parts or branches into which the stock, either of an individual, or of a great society, naturally divides itself. In the second, I have endeavoured to explain the nature and operation of money, considered as a particular branch of the general stock of the society. The stock which is accumulated into a capital, may either be employed by the person to whom it belongs, or it may be lent to some other person. In the third and fourth chapters, I have endeavoured to examine the manner in which it operates in both these situations. The fifth and last chapter treats of the different effects which the different employments of capital immediately produce upon the quantity, both of national industry, and of the annual produce of land and labour.

In the following book, I have tried to explain the nature of stock and the effects of accumulating it as different kinds of capital. I have also examined the effects of using those capitals in different ways. The book has five chapters. In the first, I have tried to show the natural divisions of stock, whether it belongs to an individual or a large society. In the second, I have tried to explain the nature and operation of money as a particular part of society's overall stock. Stock accumulated as capital may be used by its owner or lent to someone else. In the third and fourth chapters, I have tried to examine how capital operates in both situations. The fifth and final chapter discusses the immediate effects of different uses of capital on the amount of national industry. It also discusses their immediate effects on the annual produce of land and labor.