III. diminution of capital, therefore, naturally tends C H A P. to increase or diminish the real quantity of induftry, the number of productive hands, and confequently the exchangeable value of the annual produce of the land and labour of the country, the real wealth and revenue of all its inhabitants. Capitals are increased by parfimony, and diminished by prodigality and misconduct. Whatever a perfon faves from his revenue he adds to his capital, and either employs it himself in maintaining an additional number of productive hands, or enables fome other person to do fo, by lending it to him for an intereft, that is, for a share of the profits. As the capital of an individual can be increased only by what he faves from his annual revenue or his annual gains, fo the capital of a fociety, which is the fame with that of all the individuals who compofe it, can be increafed only in the fame manner. Parfimony, and not induftry, is the immediate caufe of the increafe of capital. Induftry, indeed, provides the fubject which parfimony accumulates. But whatever industry might acquire, if parfimony did not fave and store up, the capital would never be the greater. Parfimony, by increafing the fund which is deftined for the maintenance of productive hands, tends to increase the number of thofe hands whofe labour adds to the value of the fubject upon which it is bestowed. It tends therefore to increase the exchangeable value of the annual pro duce BOOK duce of the land and labour of the country. It II. puts into motion an additional quantity of industry, which gives an additional value to the annual produce. What is annually faved is as regularly confumed as what is annually spent, and nearly in the fame time too; but it is confumed by a different fet of people. That portion of his revenue which a rich man annually spends, is in most cafes confumed by idle guefts, and menial fervants, who leave nothing behind them in return for their confumption. That portion which he annually faves, as for the fake of the profit it is immediately employed as a capital, is confumed in the fame manner, and nearly in the fame time too, but by a different fet of people, by labourers, manufacturers, and artificers, who re-pro-. duce with a profit the value of their annual confumption. His revenue, we fhall fuppofe, is paid him in money. Had he fpent the whole, the food, clothing, and lodging, which the whole could have purchased, would have been diftributed among the former fet of people. By faving a part of it, as that part is for the fake of the profit immediately employed as a capital either by himself or by fome other perfon, the food, clothing, and lodging, which may be purchased with it, are neceffarily referved for the latter. The confumption is the fame, but the confumers are different. By what a frugal man annually faves, he not only affords maintenance to an additional number of productive hands, for that or the ensuing year, С НА III. year, but, like the founder of a public work- CHA P. house, 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 pofitive law, by any truft-right or deed of mortmain. It is always guarded, however, by a very powerful principle, the plain and evident intereft 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 lofs to the person who thus perverts it from its proper deftination. The prodigal perverts it in this manner. By not confining his expence within his income, he encroaches upon his capital. Like him who perverts the revenues of fome pious foundation to profane purposes, he pays the wages of idlenefs with thofe funds which the frugality of his forefathers had, as it were, confecrated to the maintenance of induftry. By diminishing the funds deftined for the employment of productive labour, he neceffarily diminishes, fo far as it depends upon him, the quantity of that labour which adds a value to the subject upon which it is bestowed, and confequently, 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 fome was not compenfated by the frugality of others, the conduct of every prodigal, by feeding the idle with the bread of the induftrious, tends not only BOOK to beggar himself, but to impoverish his coun Though the expence 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 fociety would ftill be the fame. Every year, there would ftill 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 fome diminution in what would otherwife have been the value of the annual produce of the land and labour of the country. This expence, it may be faid indeed, not being in foreign goods, and not occafioning any exportation of gold and filver, the fame quantity of money would remain in the country as before. But if the quantity of food and clothing, which were thus confumed by unproductive, had been distributed among productive hands, they would have re-produced, together with a profit, the full value of their confumption. The fame quantity of money would in this cafe equally have remained in the country, and there would befides have been a reproduction of an equal value of confumable goods. There would have been two values instead of one. The fame quantity of money, befides, cannot long remain in any country in which the value of the annual produce diminishes. The fole use of money is to circulate confumable goods. By means of it, provifions, materials, and finifhed work, III. work, are bought and fold, and diftributed to CHA P. their proper confumers. The quantity of money, therefore, which can be annually employed in any country, must be determined by the value of the confumable goods annually circulated within it. These muft confift either in the immediate produce of the land and labour of the country itself, or in fomething which had been purchased with fome part of that produce. Their value, therefore, muft 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 intereft of whoever poffeffes it, requires that it should be employed. But having no employment at home, it will, in spite of all laws and prohibitions, be fent abroad, and employed in purchafing confumable goods which may be of fome ufe at home. Its annual exportation will in this manner continue for fome time to add fomething to the annual consumption of the country beyond the value of its own annual produce. What in the days of its prosperity had been faved from that annual produce, and employed in purchafing gold and filver, will contribute for fome little time to fupport its confumption in adverfity. The exportation of gold and filver is, in this cafe, not the caufe, but the effect of its declenfion, and may even, for fome little time, alleviate the mifery of that declenfion. VOL. III. The |