Wealth

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11.Capital, saving and the increase of national wealth

11a.Stock and its division into fixed and circulating capital

See also: Labor 5c

William Harrison, A Description of Elizabethan EnglandVol. 35

• p. 359Great treasure is invested in ships, each worth a thousand pounds or more; subjects profit from merchant shipping.read · scan

Adam Smith, An Inquiry into the Nature and Causes of the Wealth of NationsVol. 10

• p. 212Accumulated stock must precede specialized work to maintain workers and supply materials and tools.read · scan
• p. 212–213Increase of stock increases industry and its productive powers.read · scan
• p. 213Outlines the book on the nature of stock, capital, money and the effects of employing capital on national industry.read · scan
• p. 215–216Distinguishes stock for consumption from capital yielding revenue, and circulating from fixed capital by how each yields profit.read · scan
• p. 216Different trades require different proportions of fixed and circulating capital, illustrated by merchant, artificer, ironworks and farmer.read · scan
• p. 217Society's stock reserved for immediate consumption, such as houses, clothes and furniture, yields no revenue to the public.read · scan
• p. 217–219Divides stock into fixed capital (machines, buildings, land improvements, acquired abilities) and circulating capital, beginning with money.read · scan
• p. 219–220Circulating capital consists of provisions, materials, finished work and money; fixed capital depends on it; riches or poverty depend on supplies to consumption stock.read · scan
• p. 220–221Circulating capital is replenished from land, mines and fisheries; farmer and manufacturer exchange produce through money.read · scan
• p. 221–222Smith explains how stock is employed for present enjoyment or future profit, as fixed or circulating capital, and how the produce of land depends on capital.read · scan
• p. 225–226Smith distinguishes fixed and circulating capital and shows that only money among the circulating parts reduces a society's neat revenue.read · scan
• p. 226–227Money, like machines, is an expensive instrument of commerce that is deducted from neat revenue; revenue consists in goods, not the wheel circulating them.read · scan
• p. 229Money is a valuable part of capital but no part of society's revenue; savings in maintaining it improve neat revenue like savings in fixed capital.read · scan

11b.Saving and spending; productive and unproductive labour

See also: Labor 5b · Progress 5a

Adam Smith, An Inquiry into the Nature and Causes of the Wealth of NationsVol. 10

• p. 232Gold sent abroad is exchanged for foreign goods; if it maintains productive workmen it promotes industry, but if spent on luxuries for the idle it promotes prodigality.read · scan
• p. 258A man grows rich by employing manufacturers and poor by maintaining servants; capital accumulation depends on productive labour.read · scan
• p. 258These orders are maintained from the annual produce of others' industry and add no storable value.read · scan
• p. 259–260Annual produce divides into capital replacement and revenue (profit and rent); the proportion maintaining productive hands determines next year's produce.read · scan
• p. 260Capital is employed to yield profit by maintaining productive hands; revenue from rent and profit maintains unproductive ones, and the rich prefer idle retainers.read · scan
• p. 261–262The proportion of produce replacing capital versus paying rent and profit differs between rich and poor countries; rent has grown since ancient times.read · scan
• p. 262–263Rich countries employ great capitals at low interest and profit rates; funds for productive labour exceed those for unproductive hands.read · scan
• p. 263Capital employed in trade attracts industry, while spent revenue supports idleness, as in Rouen and Bordeaux versus French parliament towns.read · scan
• p. 263–265Capital predominating produces industry and revenue idleness; increase of capital increases productive hands and the real wealth of the country.read · scan
• p. 265–266Capital increases by parsimony, not industry alone; saving is employed to maintain productive hands, while the rich man's spending feeds idle servants.read · scan
• p. 266–267The frugal man creates a perpetual fund for productive labour; the prodigal encroaches on capital and impoverishes his country.read · scan
• p. 267Money only circulates consumable goods; if annual produce diminishes through prodigality, money is exported as effect of decline, not cause.read · scan
• p. 268–269Money increases as a nation's produce grows, as effect not cause of prosperity; real wealth lies in annual produce; the frugal are public benefactors.read · scan
• p. 270Public prodigality maintaining unproductive hands (court, church, armies) can impoverish nations, yet individuals' effort to better their condition usually compensates.read · scan
• p. 271Growth of a nation's produce shows capital has increased through good conduct exceeding misconduct and public extravagance.read · scan
• p. 272Growth in national produce measures increasing wealth.read · scan
• p. 273–274Capital accumulates through private frugality despite government exactions; some modes of expense promote public opulence more than others.read · scan
• p. 274Spending revenue on durable goods accumulates and enriches, whereas spending on immediate consumption leaves no trace.read · scan
• p. 275Durable expenditure by the rich passes down to inferior ranks, improving general accommodation; palaces and collections adorn the whole nation.read · scan
• p. 276Durable expenditure favours accumulation and employs more people productively than lavish hospitality, raising the exchangeable value of national produce.read · scan
• p. 277Durable expense favours frugality, capital growth and productive hands, hence public opulence more than hospitality does.read · scan
• p. 440–441Saving from revenue increases capital and real wealth; annual produce grows only by better productive powers of labour or more labour.read · scan

Edmund Burke, Reflections on the Revolution in FranceVol. 24

• p. 293The landlord's idle expenditure of surplus stimulates industry; monks' spending is as useful as anyone's, so transferring property gains nothing.read · scan

11c.The four employments of capital and their order of advantage

See also: Labor 5c · Progress 5a

Adam Smith, An Inquiry into the Nature and Causes of the Wealth of NationsVol. 10

• p. 287–288Capital is employed in four ways (agriculture, manufacture, wholesale transport, retail), each necessary to the others and to society.read · scan
• p. 288Retail trade is useful, especially to the poor; competition among many shopkeepers lowers prices and prevents combination, so prejudice against tradesmen is unfounded.read · scan
• p. 288–289Competition among retailers benefits consumer and producer against monopoly; each capital adds different value to the annual produce.read · scan
• p. 290Wholesale merchant's and manufacturer's capitals replace others' capitals and add value to annual produce, the manufacturer's more than the merchant's.read · scan
• p. 290Agricultural capital adds the greatest value to a country's real wealth, yielding rent besides profit, so it is most advantageous to society.read · scan
• p. 291–292Agricultural and retail capitals are fixed in a society, the wholesale merchant's mobile; whether a merchant is foreign matters little.read · scan
• p. 292–293Smith argues manufacturers' capital, even when foreign, sustains productive labour and the value of annual produce; countries lacking capital rely on wealthier merchants.read · scan
• p. 293Capital employed in agriculture, then manufactures, then export trade puts most productive labour in motion; capital grows by saving from revenue.read · scan
• p. 294American colonies prospered by putting capital into agriculture; forcing manufactures or monopoly would retard their progress to real wealth, as with China, Egypt, Indostan.read · scan
• p. 295–296Classifies wholesale trade into home, foreign consumption and carrying trade, showing how many domestic capitals each replaces and so supports industry.read · scan
• p. 296Slow returns of foreign and round-about trade give less encouragement to domestic productive labour than quick home-trade returns.read · scan
• p. 297Trade carried on with gold and silver is like any round-about foreign trade, though metals are cheaper to transport.read · scan
• p. 298Carrying trade withdraws capital from supporting the home country's productive labour, returning only profits; shipping employed depends on bulk of goods, not trade type.read · scan
• p. 298–300Home-trade best supports industry, then foreign consumption, then carrying trade; political economy should not force capital into any channel beyond its natural flow.read · scan
• p. 300Surplus produce must be exported and exchanged, or productive labour ceases; even round-about trade, like Virginia tobacco re-exports, may be necessary.read · scan
• p. 301–302Carrying trade is effect and symptom of great national wealth, not its cause; statesmen mistake one for the other, as Holland shows.read · scan
• p. 302Owners of capital seek only private profit; agriculture's profits are no greater than trade's, yet it could absorb far more capital.read · scan
• p. 304Commerce between town and country is reciprocal; the town's market for surplus produce benefits nearby cultivation, raising profits.read · scan
• p. 304–305Smith argues subsistence from agriculture precedes town commerce, and capital naturally goes first to land as the securest investment.read · scan
• p. 306Town growth depends on demand from country improvement; town and country exchange manufactured for rude produce in mutual commerce.read · scan
• p. 307In colonies with cheap land artificers become planters rather than manufacturers; elsewhere surplus stock goes into manufactures for distant sale.read · scan
• p. 307–308Capital naturally goes first to agriculture, then manufactures, last foreign commerce; nations can grow rich though foreigners carry their exports.read · scan
• p. 308In modern Europe the natural order of agriculture, manufactures, commerce was inverted; foreign commerce gave rise to manufactures and agricultural improvement.read · scan

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