high rate of profit is necessarily, and in every instance, accompanied by a great degree of prosperity. Countries with every imaginable capability for the profitable employment of industry and stock, may have the misfortune to be subjected to an arbitrary government, which does not respect the right of property; and the insecurity resulting from this circumstance, may be of itself sufficient to paralyse all the exertions of those who are otherwise placed in the most favourable situation for the accumulation of capital and wealth. But I have no hesitation about laying it down as a principle which holds in every case, and from which there is really no exception, that if the governments of any two or more countries be about equally tolerant and liberal, and property in each equally well protected and secured, their comparative prosperity will be in proportion to the rate of profit in each. Wherever profits are high, capital is rapidly augmented, and there is a proportionally rapid increase of wealth and population; but, on the other hand, wherever profits are low, the means of employing additional labour are proportionally limited, and the progress of society rendered so much the slower.

It is not, therefore, by the absolute amount of its capital, but by its power of employing that capital with advantage—a power which will be always correctly measured by the common and average rate of profit that the capacity of any country to increase in wealth and population is to be estimated. Before the laws regulating the rate of profit and the increase of capital had been thoroughly investigated, the

great wealth and commercial prosperity of Holland, where profits, from 1650 downwards, were comparatively low, were considered by Sir Josiah Child, and many later writers on economical subjects, as the natural result, and were consequently regarded by them as a convincing proof, of the superior advantages of low profits and interest. But this was really, as will be afterwards shown, mistaking the effect of heavy taxation for the cause of wealth! A country, whose average rate of profit is considerably less than the average rate of profit in surrounding countries, may, notwithstanding, abound in wealth, and be possessed of immense capital; but it is the height of error to suppose, that this lowness of profits could have facilitated their accumulation. The truth is, that the low rate of profit in Holland during the 18th century, was at once a cause and a symptom of her decline. Sir William Temple, in his Observations on the Netherlands, written about 1670, mentions, that the trade of Holland had then passed its zenith; and it is certain, that the vast capitals of the Dutch merchants had been principally amassed previously to the wars in which the Republic was engaged with Cromwell, Charles II., and Louis XIV., when the rate of profit was much higher than at any subsequent period.

But without referring to the case either of America, or Holland, or any other country, the smallest reflection on the motives which induce men to engage in any branch of industry, is sufficient to show that the advantages derived from it must be always direct

ly as the rate of profit. What is the object which every man has in view when he employs either his capital or his personal powers in any industrious undertaking? Is it not to gain the greatest possible amount of profit on his capital, or the greatest possible reward for his labour? One branch of industry is said to be advantageous, for the single and sufficient reason that it yields a comparatively large profit; and another is, with equal propriety, said to be disadvantageous, because it yields a comparatively small profit. It is always to this standard-to the high or low rate of profit which they yield-that every individual refers in judging of the comparative benefits of different undertakings ;—and what is true of individuals, must be true of States.

No certain conclusion respecting the prosperity of any country can ever be drawn from considering the amount of its commerce or its revenue, or the state of its agriculture or its manufactures. Every branch of industry is liable to be affected by secondary or accidental causes. They are always in a state of flux or reflux; and some of them are frequently seen to flourish when others are very much depressed. The AVERAGE RATE OF PROFIT is the real barometer-the true and infallible criterion of national prosperity. A rise of profits is the effect of industry having become more productive; and it shows that the power of the society to amass capital, and to add to its wealth and population, has been increased, and its progress accelerated: A fall of profits, on the contrary, is the effect of industry having become less pro

ductive, and shows that the power to amass capital has been diminished, and that the progress of the society has been clogged and impeded. However much a particular, and it may be an important branch of industry, is depressed, still, if the average rate of profit is high, we may be assured the particular depression cannot continue, and that the condition of the country is really prosperous. On the other hand, though there should be no distress in any one branch -though agriculture, manufactures, and commerce, should be carried to a greater extent than they have ever been carried before-though a nation should have numerous, powerful, and well-appointed armies and fleets, and though the style of living among the higher classes should be more than ordinarily sumptuous,―still, if the rate of profit has become comparatively low, we may confidently affirm, that the condition of such a nation, however prosperous in appearance, is bad and unsound at bottom; that the plague of poverty is secretly creeping on the mass of her citizens; that the foundations of her power and greatness have been shaken; and that her decline may be confidently anticipated, unless measures can be devised for relieving the pressure on the national resources, by adding to the productiveness of industry, and, consequently, to the rate of profit.

It has been wisely ordered, that the principle which prompts men to save and amass should be as powerful as it is advantageous. "With regard to profusion," says Dr Smith," the principle which prompts to expence is the desire of 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 these two moments, there is scarce, perhaps, a single instance 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 expence, therefore, prevails in almost all men upon some occasions, yet in the greater part of men, taking the whole course of their life at an average, the principle of frugality not only predominates, but predominates very greatly." *

It is this principle which carries society forward. The spirit of parsimony, and the efforts which the frugal and industrious classes make to improve their condition, in most instances balance not only the profusion of individuals, but also the more wasteful profusion and extravagance of governments. The

* Wealth of Nations, Vol. II. p. 19.