An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader with highlighter txt) 📖

person, a stock

sufficient te 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.

 

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 beforehand. 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.

 

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.

 

Such are in general the effects of the increase of stock upon industry and

its productive powers.

 

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.

 

CHAPTER I.

 

OF THE DIVISION OF STOCK.

 

When the stock which a man possesses is no more than sufficient to maintain

him for a few days or a few weeks, he seldom thinks of deriving any revenue

from it. He consumes it as sparingly as he can, and endeavours, by his

labour, to acquire something which may supply its place before it be

consumed altogether. His revenue is, in this case, derived from his labour

only. This is the state of the greater part of the labouring poor in all

countries.

 

But when he possesses stock sufficient to maintain him for months or years,

he naturally endeavours to derive a revenue from the greater part of it,

reserving only so much for his immediate consumption as may maintain him

till this revenue begins to come in. His whole stock, therefore, is

distinguished into two parts. That part which he expects is to afford him

this revenue is called his capital. The other is that which supplies his

immediate consumption, and which consists either, first, in that portion of

his whole stock which was originally reserved for this purpose; or,

secondly, in his revenue, from whatever source derived, as it gradually

comes in ; or, thirdly, in such things as had been purchased by either of

these in former years, and which are not yet entirely consumed, such as a

stock of clothes, household furniture, and the like. In one or other, or all

of these three articles, consists the stock which men commonly reserve for

their own immediate consumption.

 

There are two different ways in which a capital may be employed so as to

yield a revenue or profit to its employer.

 

First, it maybe employed in raising, manufacturing, or purchasing goods, and

selling them again with a profit. The capital employed in this manner yields

no revenue or profit to its employer, while it either remains in his

possession, or continues in the same shape. The goods of the merchant yield

him no revenue or profit till he sells them for money, and the money yields

him as little till it is again exchanged for goods. His capital is

continually going from him in one shape, and returning to him in another ;

and it is only by means of such circulation, or successive changes, that it

can yield him any profit. Such capitals, therefore, may very properly be

called circulating capitals.

 

Secondly, it may be employed in the improvement of land, in the purchase of

useful machines and instruments of trade, or in such like things as yield a

revenue or profit without changing masters, or circulating any further. Such

capitals, therefore, may very properly be called fixed capitals.

 

Different occupations require very different proportions between the fixed

and circulating capitals employed in them.

 

The capital of a merchant, for example, is altogether a circulating capital.

He has occasion for no machines or instruments of trade, unless his shop or

warehouse be considered as such.

 

Some part of the capital of every master artificer or manufacturer must be

fixed in the instruments of his trade. This part, however, is very small in

some, and very great in others, A master tailor requires no other

instruments of trade but a parcel of needles. Those of the master shoemaker

are a little, though but a very little, more expensive. Those of the weaver

rise a good deal above those of the shoemaker. The far greater part of the

capital of all such master artificers, however, is circulated either in the

wages of their workmen, or in the price of their materials, and repaid, with

a profit, by the price of the work.

 

In other works a much greater fixed capital is required. In a great

iron-work, for example, the furnace for melting the ore, the forge, the

slit-mill, are instruments of trade which cannot be erected without a very

great expense. In coal works, and mines of every kind, the machinery

necessary, both for drawing out the water, and for other purposes, is

frequently still more expensive.

 

That part of the capital of the farmer which is employed in the instruments

of agriculture is a fixed, that which is employed in the wages and

maintenance of his labouring servants is a circulating capital. He makes a

profit of the one by keeping it in his own possession, and of the other by

parting with it. The price or value of his labouring cattle is a fixed

capital, in the same manner as that of the instruments of husbandry; their

maintenance is a circulating capital, in the same manner as that of the

labouring servants. The farmer makes his profit by keeping the labouring

cattle, and by parting with their maintenance. Both the price and the

maintenance of the cattle which are bought in and fattened, not for labour,

but for sale, are a circulating capital. The farmer makes his profit by

parting with them. A flock of sheep or a herd of cattle, that, in a breeding

country, is brought in neither for labour nor for sale, but in order to make

a profit by their wool, by their milk, and by their increase, is a fixed

capital. The profit is made by keeping them. Their maintenance is a

circulating capital. The profit is made by parting with it; and it comes

back with both its own profit and the profit upon the whole price of the

cattle, in the price of the wool, the milk, and the increase. The whole

value of the seed, too, is properly a fixed capital. Though it goes

backwards and forwards between the ground and the granary, it never changes

masters, and therefore does not properly circulate. The farmer makes his

profit, not by its sale, but by its increase.

 

The general stock of any country or society is the same with that of all its

inhabitants or members ; and, therefore, naturally divides itself into the

same three portions, each of which has a distinct function or office.

 

The first is that portion which is reserved for immediate consumption, and

of which the characteristic is, that it affords no revenue or profit. It

consists in the stock of food, clothes, household furniture, etc. which have

been purchased by their proper consumers, but which are not yet entirely

consumed. The whole stock of mere dwelling-houses, too, subsisting at anyone

time in the country, make a part of this first portion. The stock that is

laid out in a house, if it is to be the dwelling-house of the proprietor,

ceases from that moment to serve in the function of a capital, or to afford

any revenue to its owner. A dwelling-house, as such, contributes nothing to

the revenue of its inhabitant ; and though it is, no doubt, extremely useful

to him, it is as his clothes and household furniture are useful to him,

which, however, make a part of his expense, and not of his revenue. If it is

to be let to a tenant for rent, as the house itself can produce nothing, the

tenant must always pay the rent out of some other revenue, which he derives,

either from labour, or stock, or land. Though a house, therefore, may yield

a revenue to its proprietor, and thereby serve in the function of a capital

to him, it cannot yield any to the public, nor serve in the function of a

capital to it, and the revenue of the whole body of the people can never be

in the smallest degree increased by it. Clothes and household furniture, in

the same manner, sometimes yield a revenue, and thereby serve in the

function of a capital to particular persons. In countries where masquerades

are common, it is a trade to let out masquerade dresses for a night.

Upholsterers frequently let furniture by the month or by the year.

Undertakers let the furniture of funerals by the day and by the week. Many

people let furnished houses, and get a rent, not only for the use of the

house, but for that of the furniture. The revenue, however, which is derived

from such things, must always be ultimately drawn from some other source of

revenue. Of all parts of the stock, either of an individual or of a society,

reserved for immediate consumption, what is laid out in houses is most