The Natural Growth of Wealth

The great commerce of every civilized society is that carried on between the inhabitants of the town and those of the country. It consists in the exchange of rude for manufactured produce, either immediately, or by the intervention of money, or of some sort of paper which represents money. The country supplies the town with the means of subsistence and the materials of manufacture. The town repays this supply, by sending back a part of the manufactured produce to the inhabitants of the country. The town, in which there neither is nor can be any reproduction of substances, may very properly be said to gain its whole wealth and subsistence from the country. We must not, however, upon this account, imagine that the gain of the town is the loss of the country. The gains of both are mutual and reciprocal, and the division of labour is in this, as in all other cases, advantageous to all the different persons employed in the various occupations into which it is subdivided. The inhabitants of the country purchase of the town a greater quantity of manufactured goods with the produce of a much smaller quantity of their own labour, than they must have employed had they attempted to prepare them themselves. The town affords a market for the surplus produce of the country, or what is over and above the maintenance of the cultivators; and it is there that the inhabitants of the country exchange it for something else which is in demand among them. The greater the number and revenue of the inhabitants of the town, the more extensive is the market which it affords to those of the country; and the more extensive that market, it is always the more advantageous to a great number. The corn which grows within a mile of the town, sells there for the same price with that which comes from twenty miles distance. But the price of the latter must, generally, not only pay the expense of raising it and bringing it to market, but afford, too, the ordinary profits of agriculture to the farmer. The proprietors and cultivators of the country, therefore, which lies in the neighbourhood of the town, over and above the ordinary profits of agriculture, gain, in the price of what they sell, the whole value of the carriage of the like produce that is brought from more distant parts; and they save, besides, the whole value of this carriage in the price of what they buy. Compare the cultivation of the lands in the neighbourhood of any considerable town, with that of those which lie at some distance from it, and you will easily satisfy yourself how much the country is benefited by the commerce of the town. Among all the absurd speculations that have been propagated concerning the balance of trade, it has never been pretended that either the country loses by its commerce with the town, or the town by that with the country which maintains it.

The great trade of every civilized society takes place between the people of the town and those of the countryside. It consists of exchanging raw produce for manufactured goods. The exchange may be direct, or it may involve money or some kind of paper representing money. The countryside supplies the town with food and materials for manufacturing. The town pays for these supplies by sending some of its manufactured goods back to the people of the countryside. The town does not and cannot produce raw materials itself. It may therefore rightly be said to gain all its wealth and means of living from the countryside. But we must not imagine that the town’s gain is the countryside’s loss. Both gain from the exchange. Here, as in every other case, the division of labor benefits everyone employed in its various occupations. With the produce of much less labor, country people can buy more manufactured goods from the town than they could make themselves. The town provides a market for the countryside’s surplus produce, the amount left over after the farmers have supported themselves. There, country people exchange this surplus for other things they need. The more numerous and wealthy the town’s inhabitants, the larger the market they provide for the countryside. And the larger that market, the more it benefits a great number of people. Grain grown within a mile of the town sells there for the same price as grain brought from twenty miles away. But the price of the more distant grain must generally cover not only the cost of growing and transporting it. It must also provide the farmer with the usual profit from farming. Landowners and farmers near the town therefore gain the full cost of transporting similar produce from farther away. They gain this through the price of what they sell, in addition to the usual profits of farming. They also save the full cost of that transportation in the price of what they buy. Compare the farming of land near any sizable town with that of land farther away. You will easily see how much the countryside benefits from trade with the town. Many absurd theories have been spread about the balance of trade. Yet no one has ever claimed that the countryside loses by trading with the town, or that the town loses by trading with the countryside that supports it.

As subsistence is, in the nature of things, prior to conveniency and luxury, so the industry which procures the former, must necessarily be prior to that which ministers to the latter. The cultivation and improvement of the country, therefore, which affords subsistence, must, necessarily, be prior to the increase of the town, which furnishes only the means of conveniency and luxury. It is the surplus produce of the country only, or what is over and above the maintenance of the cultivators, that constitutes the subsistence of the town, which can therefore increase only with the increase of the surplus produce. The town, indeed, may not always derive its whole subsistence from the country in its neighbourhood, or even from the territory to which it belongs, but from very distant countries; and this, though it forms no exception from the general rule, has occasioned considerable variations in the progress of opulence in different ages and nations.

Basic necessities naturally come before comforts and luxuries. So the work that provides necessities must come before the work that provides comforts and luxuries. The countryside provides necessities, while the town provides only the means of comfort and luxury. Therefore, the cultivation and improvement of the countryside must come before the growth of the town. Only the countryside’s surplus produce, what remains after the farmers have provided for themselves, supplies the town’s necessities. The town can therefore grow only as the surplus produce grows. A town may not always get all its necessities from the surrounding countryside or even from its own territory. It may instead get them from very distant countries. Although this is no exception to the general rule, it has led to considerable differences in how wealth has grown across different ages and nations.

That order of things which necessity imposes, in general, though not in every particular country, is in every particular country promoted by the natural inclinations of man. If human institutions had never thwarted those natural inclinations, the towns could nowhere have increased beyond what the improvement and cultivation of the territory in which they were situated could support; till such time, at least, as the whole of that territory was completely cultivated and improved. Upon equal, or nearly equal profits, most men will choose to employ their capitals, rather in the improvement and cultivation of land, than either in manufactures or in foreign trade. The man who employs his capital in land, has it more under his view and command; and his fortune is much less liable to accidents than that of the trader, who is obliged frequently to commit it, not only to the winds and the waves, but to the more uncertain elements of human folly and injustice, by giving great credits, in distant countries, to men with whose character and situation he can seldom be thoroughly acquainted. The capital of the landlord, on the contrary, which is fixed in the improvement of his land, seems to be as well secured as the nature of human affairs can admit of. The beauty of the country, besides, the pleasure of a country life, the tranquillity of mind which it promises, and, wherever the injustice of human laws does not disturb it, the independency which it really affords, have charms that, more or less, attract everybody; and as to cultivate the ground was the original destination of man, so, in every stage of his existence, he seems to retain a predilection for this primitive employment.

The order of things that necessity generally imposes, though not in every country, is encouraged everywhere by natural human inclinations. If human institutions had never blocked those inclinations, towns could not have grown beyond what their surrounding land could support. At least, they could not have done so until all that land had been fully cultivated and improved. When profits are equal or nearly equal, most people prefer to invest their capital in improving and cultivating land. They prefer this to investing in manufacturing or foreign trade. A person who invests capital in land can watch over and control it more closely. His fortune is much less exposed to accidents than a trader’s. A trader must often entrust his fortune not only to the winds and waves, but also to human folly and injustice. These are even less predictable. He does this by extending large amounts of credit in distant countries to people he can seldom know thoroughly, either in character or circumstances. By contrast, a landlord’s capital invested in improving his land seems as secure as human affairs allow. The beauty of the countryside, the pleasure of country life, and the peace of mind it promises also attract everyone, more or less. So does the independence that country life actually provides, wherever unjust human laws do not disturb it. And just as cultivating the ground was humanity’s original purpose, people seem to retain a preference for this ancient occupation at every stage of their existence.

Without the assistance of some artificers, indeed, the cultivation of land cannot be carried on, but with great inconveniency and continual interruption. Smiths, carpenters, wheelwrights and ploughwrights, masons and bricklayers, tanners, shoemakers, and tailors, are people whose service the farmer has frequent occasion for. Such artificers, too, stand occasionally in need of the assistance of one another; and as their residence is not, like that of the farmer, necessarily tied down to a precise spot, they naturally settle in the neighbourhood of one another, and thus form a small town or village. The butcher, the brewer, and the baker, soon join them, together with many other artificers and retailers, necessary or useful for supplying their occasional wants, and who contribute still further to augment the town. The inhabitants of the town, and those of the country, are mutually the servants of one another. The town is a continual fair or market, to which the inhabitants of the country resort, in order to exchange their rude for manufactured produce. It is this commerce which supplies the inhabitants of the town, both with the materials of their work, and the means of their subsistence. The quantity of the finished work which they sell to the inhabitants of the country, necessarily regulates the quantity of the materials and provisions which they buy. Neither their employment nor subsistence, therefore, can augment, but in proportion to the augmentation of the demand from the country for finished work; and this demand can augment only in proportion to the extension of improvement and cultivation. Had human institutions, therefore, never disturbed the natural course of things, the progressive wealth and increase of the towns would, in every political society, be consequential, and in proportion to the improvement and cultivation of the territory of country.

Without the help of certain craftspeople, farming can be carried on only with great inconvenience and constant interruption. Farmers frequently need the services of blacksmiths, carpenters, wheelwrights, plow makers, masons, bricklayers, tanners, shoemakers, and tailors. These craftspeople also occasionally need one another’s help. Unlike farmers, they are not tied to a particular place by their work. So they naturally settle near one another, forming a small town or village. Butchers, brewers, and bakers soon join them. Many other craftspeople and retailers also come to supply their occasional needs, whether necessary or useful. They make the town grow further. The people of the town and the people of the countryside serve one another. The town is a permanent fair or market, where country people exchange raw produce for manufactured goods. This trade supplies the townspeople with both materials for their work and the means of supporting themselves. The amount of finished work they sell to country people necessarily determines how much material and food they buy. Their employment and means of support can therefore grow only as country people demand more finished work. That demand can grow only as more land is improved and cultivated. If human institutions had never disturbed the natural course of things, towns would have grown and become wealthier as a result of improvements in the land. In every political society, their growth and wealth would have increased in proportion to the improvement and cultivation of the countryside.

In our North American colonies, where uncultivated land is still to be had upon easy terms, no manufactures for distant sale have ever yet been established in any of their towns. When an artificer has acquired a little more stock than is necessary for carrying on his own business in supplying the neighbouring country, he does not, in North America, attempt to establish with it a manufacture for more distant sale, but employs it in the purchase and improvement of uncultivated land. From artificer he becomes planter; and neither the large wages nor the easy subsistence which that country affords to artificers, can bribe him rather to work for other people than for himself. He feels that an artificer is the servant of his customers, from whom he derives his subsistence; but that a planter who cultivates his own land, and derives his necessary subsistence from the labour of his own family, is really a master, and independent of all the world.

In our North American colonies, uncultivated land is still available on easy terms. No town in those colonies has yet established manufacturing for distant markets. When a craftsman in North America saves more capital than he needs to supply the surrounding area, he does not use it to manufacture goods for distant markets. Instead, he buys and improves uncultivated land. The craftsman becomes a planter. Craftsmen can earn high wages and make an easy living in North America. But neither can tempt him to work for others rather than for himself. He feels that a craftsman is the servant of his customers, who provide his living. A planter, however, cultivates his own land and lives on what his family produces through its own labor. He is truly his own master, independent of all the world.

In countries, on the contrary, where there is either no uncultivated land, or none that can be had upon easy terms, every artificer who has acquired more stock than he can employ in the occasional jobs of the neighbourhood, endeavours to prepare work for more distant sale. The smith erects some sort of iron, the weaver some sort of linen or woollen manufactory. Those different manufactures come, in process of time, to be gradually subdivided, and thereby improved and refined in a great variety of ways, which may easily be conceived, and which it is therefore unnecessary to explain any farther.

In contrast, some countries have no uncultivated land, or none that can be acquired on easy terms. In those countries, every craftsperson may acquire more capital than they can use for occasional local jobs. When they do, they try to make goods for sale farther away. A blacksmith sets up some kind of ironworks, and a weaver sets up a linen or woolen manufactory. Over time, these different manufactures are gradually divided into more specialized branches. In this way, they are improved and refined in many ways that are easy to imagine. There is therefore no need to explain them further.

In seeking for employment to a capital, manufactures are, upon equal or nearly equal profits, naturally preferred to foreign commerce, for the same reason that agriculture is naturally preferred to manufactures. As the capital of the landlord or farmer is more secure than that of the manufacturer, so the capital of the manufacturer, being at all times more within his view and command, is more secure than that of the foreign merchant. In every period, indeed, of every society, the surplus part both of the rude and manufactured produce, or that for which there is no demand at home, must be sent abroad, in order to be exchanged for something for which there is some demand at home. But whether the capital which carries this surplus produce abroad be a foreign or a domestic one, is of very little importance. If the society has not acquired sufficient capital, both to cultivate all its lands, and to manufacture in the completest manner the whole of its rude produce, there is even a considerable advantage that the rude produce should be exported by a foreign capital, in order that the whole stock of the society may be employed in more useful purposes. The wealth of ancient Egypt, that of China and Indostan, sufficiently demonstrate that a nation may attain a very high degree of opulence, though the greater part of its exportation trade be carried on by foreigners. The progress of our North American and West Indian colonies, would have been much less rapid, had no capital but what belonged to themselves been employed in exporting their surplus produce.

When profits are equal or nearly equal, people naturally prefer to invest capital in manufacturing rather than foreign trade. This is for the same reason that they naturally prefer agriculture to manufacturing. A landlord’s or farmer’s capital is more secure than a manufacturer’s. Similarly, a manufacturer’s capital is more secure than a foreign merchant’s because it is always easier to monitor and control. In every society, at every stage, surplus raw materials and manufactured goods must be sent abroad. These are goods for which there is no demand at home. They must be exchanged for something for which there is demand at home. But it matters very little whether foreign or domestic capital is used to carry these surplus goods abroad. A society may not have enough capital to cultivate all its land and fully manufacture all its raw materials. If so, there is even a considerable advantage in having foreign capital export the raw materials. This allows the society to use all its own capital for more useful purposes. The wealth of ancient Egypt, China, and Indostan clearly shows that a nation can become very rich even when foreigners carry on most of its export trade. Our North American and West Indian colonies would have progressed much less rapidly if they had used only their own capital to export their surplus goods.

According to the natural course of things, therefore, the greater part of the capital of every growing society is, first, directed to agriculture, afterwards to manufactures, and, last of all, to foreign commerce. This order of things is so very natural, that in every society that had any territory, it has always, I believe, been in some degree observed. Some of their lands must have been cultivated before any considerable towns could be established, and some sort of coarse industry of the manufacturing kind must have been carried on in those towns, before they could well think of employing themselves in foreign commerce.

In the natural course of things, then, most of the capital in every growing society goes first to agriculture, then to manufacturing, and finally to foreign trade. This order is so natural that I believe every society with land has followed it to some degree. Some land must have been cultivated before any sizable towns could be established. And those towns must have carried on some kind of basic manufacturing before they could reasonably turn to foreign trade.

But though this natural order of things must have taken place in some degree in every such society, it has, in all the modern states of Europe, been in many respects entirely inverted. The foreign commerce of some of their cities has introduced all their finer manufactures, or such as were fit for distant sale; and manufactures and foreign commerce together have given birth to the principal improvements of agriculture. The manners and customs which the nature of their original government introduced, and which remained after that government was greatly altered, necessarily forced them into this unnatural and retrograde order.

Though this natural order must have developed to some degree in every such society, it has been entirely reversed in many respects in all modern European states. In some cities, foreign trade introduced all the finer manufactures, those suitable for sale in distant markets. Manufacturing and foreign trade together then gave rise to the main improvements in agriculture. Their original form of government introduced certain manners and customs. These remained even after the government had changed greatly. They necessarily forced these states into this unnatural, backward order.