Parsimony, and not industry, is the immediate cause of the
increase of capital. Industry, indeed, provides the subject which
parsimony accumulates. But whatever industry might acquire, if
parsimony did not save and store up, the capital would never be
the greater.
Parsimony, by increasing the fund which is destined for the
maintenance of productive hands, tends to increase the number of
those hands whose labour adds to the value of the subject upon
which it is bestowed. It tends, therefore, to increase the
exchangeable value of the annual produce of the land and labour
of the country. It puts into motion an additional quantity of
industry, which gives an additional value to the annual produce.
What is annually saved is as regularly consumed as what is
annually spent, and nearly in the same time too; but it is
consumed by a different set of people. That portion of his
revenue which a rich man annually spends is in most cases
consumed by idle guests and menial servants, who leave nothing
behind them in return for their consumption. That portion which
he annually saves, as for the sake of the profit it is
immediately employed as a capital, is consumed in the same
manner, and nearly in the same time too, but by a different set
of people, by labourers, manufacturers, and artificers, who
reproduce with a profit the value of their annual consumption.
His revenue, we shall suppose, is paid him in money. Had he spent
the whole, the food, clothing, and lodging, which the whole could
have purchased, would have been distributed among the former set
of people. By saving a part of it, as that part is for the sake
of the profit immediately employed as a capital either by himself
or by some other person, the food, clothing, and lodging, which
may be purchased with it, are necessarily reserved for the
latter. The consumption is the same, but the consumers are
different.
By what a frugal man annually saves, he not only affords
maintenance to an additional number of productive hands, for that
or the ensuing year, but, like the founder of a public workhouse,
he establishes as it were a perpetual fund for the maintenance of
an equal number in all times to come. The perpetual allotment and
destination of this fund, indeed, is not always guarded by any
positive law, by any trust-right or deed of mortmain. It is
always guarded, however, by a very powerful principle, the plain
and evident interest of every individual to whom any share of it
shall ever belong. No part of it can ever afterwards be employed
to maintain any but productive hands without an evident loss to
the person who thus perverts it from its proper destination.
The prodigal perverts it in this manner. By not confining
his expense within his income, he encroaches upon his capital.
Like him who perverts the revenues of some pious foundation to
profane purposes, he pays the wages of idleness with those funds
which the frugality of his forefathers had, as it were,
consecrated to the maintenance of industry. By diminishing the
funds destined for the employment of productive labour, he
necessarily diminishes, so far as it depends upon him, the
quantity of that labour which adds a value to the subject upon
which it is bestowed, and, consequently, the value of the annual
produce of the land and labour of the whole country, the real
wealth and revenue of its inhabitants. If the prodigality of some
was not compensated by the frugality of others, the conduct of
every prodigal, by feeding the idle with the bread of the
industrious, tends not only to beggar himself, but to impoverish
his country.
Though the expense of the prodigal should be altogether in
home-made, and no part of it in foreign commodities, its effect
upon the productive funds of the society would still be the same.
Every year there would still be a certain quantity of food and
clothing, which ought to have maintained productive, employed in
maintaining unproductive hands. Every year, therefore, there
would still be some diminution in what would otherwise have been
the value of the annual produce of the land and labour of the
country.
This expense, it may be said indeed, not being in foreign
goods, and not occasioning any exportation of gold and silver,
the same quantity of money would remain in the country as before.
But if the quantity of food and clothing, which were thus
consumed by unproductive, had been distributed among productive
hands, they would have reproduced, together with a profit, the
full value of their consumption. The same quantity of money would
in this case equally have remained in the country, and there
would besides have been a reproduction of an equal value of
consumable goods. There would have been two values instead of
one.
The same quantity of money, besides, cannot long remain in
any country in which the value of the annual produce diminishes.
The sole use of money is to circulate consumable goods. By means
of it, provisions, materials, and finished work, are bought and
sold, and distributed to their proper consumers. The quantity of
money, therefore, which can be annually employed in any country
must be determined by the value of the consumable goods annually
circulated within it. These must consist either in the immediate
produce of the land and labour of the country itself, or in
something which had been, purchased with some part of that
produce. Their value, therefore, must diminish as the value of
that produce diminishes, and along with it the quantity of money
which can be employed in circulating them. But the money which by
this annual diminution of produce is annually thrown out of
domestic circulation will not be allowed to lie idle. The
interest of whoever possesses it requires that it should be
employed. But having no employment at home, it will, in spite of
all laws and prohibitions, be sent abroad, and employed in
purchasing consumable goods which may be of some use at home. Its
annual exportation will in this manner continue for some time to
add something to the annual consumption of the country beyond the
value of its own annual produce. What in the days of its
prosperity had been saved from that annual produce, and employed
in purchasing gold and silver, will contribute for some little
time to support its consumption in adversity. The exportation of
gold and silver is, in this case, not the cause, but the effect
of its declension, and may even, for some little time, alleviate
the misery of that declension.
The quantity of money, on the contrary, must in every
country naturally increase as the value of the annual produce
increases. The value of the consumable goods annually circulated
within the society being greater will require a greater quantity
of money to circulate them. A part of the increased produce,
therefore, will naturally be employed in purchasing, wherever it
is to be had, the additional quantity of gold and silver
necessary for circulating the rest. The increase of those metals
will in this case be the effect, not the cause, of the public
prosperity. Gold and silver are purchased everywhere in the same
manner. The food, clothing, and lodging, the revenue and
maintenance of all those whose labour or stock is employed in
bringing them from the mine to the market, is the price paid for
them in Peru as well as in England. The country which has this
price to pay will never be long without the quantity of those
metals which it has occasion for; and no country will ever long
retain a quantity which it has no occasion for.
Whatever, therefore, we may imagine the real wealth and
revenue of a country to consist in, whether in the value of the
annual produce of its land and labour, as plain reason seems to
dictate; or in the quantity of the precious metals which
circulate within it, as vulgar prejudices suppose; in either view
of the matter, every prodigal appears to be a public enemy, and
every frugal man a public benefactor.
The effects of misconduct are often the same as those of
prodigality. Every injudicious and unsuccessful project in
agriculture, mines, fisheries, trade, or manufactures, tends in
the same manner to diminish the funds destined for the
maintenance of productive labour. In every such project, though
the capital is consumed by productive hands only, yet, as by the
injudicious manner in which they are employed they do not
reproduce the full value of their consumption, there must always
be some diminution in what would otherwise have been the
productive funds of the society.
It can seldom happen, indeed, that the circumstances of a
great nation can be much affected either by the prodigality or
misconduct of individuals; the profusion or imprudence of some
being always more than compensated by the frugality and good
conduct of others.
With regard to profusion, the principle which prompts to
expense is the passion for present enjoyment; which, though
sometimes violent and very difficult to be restrained, is in
general only momentary and occasional. But the principle which
prompts to save is the desire of bettering our condition, a
desire which, though generally calm and dispassionate, comes with
us from the womb, and never leaves us till we go into the grave.
In the whole interval which separates those two moments, there is
scarce perhaps a single instant in which any man is so perfectly
and completely satisfied with his situation as to be without any
wish of alteration or improvement of any kind. An augmentation of
fortune is the means by which the greater part of men propose and
wish to better their condition. It is the means the most vulgar
and the most obvious; and the most likely way of augmenting their
fortune is to save and accumulate some part of what they acquire,
either regularly and annually, or upon some extraordinary
occasions. Though the principle of expense, therefore, prevails
in almost all men upon some occasions, and in some men upon
almost all occasions, yet in the greater part of men, taking the
whole course of their life at an average, the principle of
frugality seems not only to predominate, but to predominate very
greatly.
With regard to misconduct, the number of prudent and
successful undertakings is everywhere much greater than that of
injudicious and unsuccessful ones. After all our complaints of
the frequency of bankruptcies, the unhappy men who fall into this
misfortune make but a very small part of the whole number engaged
in trade, and all other sorts of business; not much more perhaps
than one in a thousand. Bankruptcy is perhaps the greatest and
most humiliating calamity which can befall an innocent man. The
greater part of men, therefore, are sufficiently careful to avoid
it. Some, indeed, do not avoid it; as some do not avoid the
gallows.
Great nations are never impoverished by private, though they
sometimes are by public prodigality and misconduct. The whole, or
almost the whole public revenue, is in most countries employed in
maintaining unproductive hands. Such are the people who compose a
numerous and splendid court, a great ecclesiastical
establishment, great fleets and armies, who in time of peace
produce nothing, and in time of war acquire nothing which can
compensate the expense of maintaining them, even while the war
lasts. Such people, as they themselves produce nothing, are all
maintained by the produce of other men's labour. When multiplied,
therefore, to an unnecessary number, they may in a particular
year consume so great a share of this produce, as not to leave a
sufficiency for maintaining the productive labourers, who should
reproduce it next year. The next year's produce, therefore, will
be less than that of the foregoing, and if the same disorder
should continue, that of the third year will be still less than
that of the second. Those unproductive hands, who should be
maintained by a part only of the spare revenue of the people, may
consume so great a share of their whole revenue, and thereby
oblige so great a number to encroach upon their capitals, upon
the funds destined for the maintenance of productive labour, that
all the frugality and good conduct of individuals may not be able
to compensate the waste and degradation of produce occasioned by
this violent and forced encroachment.
This frugality and good conduct, however, is upon most
occasions, it appears from experience, sufficient to compensate,
not only the private prodigality and misconduct of individuals,
but the public extravagance of government. The uniform, constant,
and uninterrupted effort of every man to better his condition,
the principle from which public and national, as well as private
opulence is originally derived, is frequently powerful enough to
maintain the natural progress of things towards improvement, in
spite both of the extravagance of government and of the greatest
errors of administration. Like the unknown principle of animal
life, it frequently restores health and vigour to the
constitution, in spite, not only of the disease, but of the
absurd prescriptions of the doctor.
The annual produce of the land and labour of any nation can
be increased in its value by no other means but by increasing
either the number of its productive labourers, or the productive
powers of those labourers who had before been employed. The
number of its productive labourers, it is evident, can never be
much increased, but in consequence of an increase of capital, or
of the funds destined for maintaining them. The productive powers
of the same number of labourers cannot be increased, but in
consequence either of some addition and improvement to those
machines and instruments which facilitate and abridge labour; or
of a more proper division and distribution of employment. In
either case an additional capital is almost always required. It
is by means of an additional capital only that the undertaker of
any work can either provide his workmen with better machinery or
