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IX.

As the colony increases, the profits of stock gra- CHA P. dually diminish. When the moft fertile and beft fituated lands have been all occupied, less profit can be made by the cultivation of what is inferior both in foil and fituation, and less intereft can be afforded for the stock which is fo employed. In the greater part of our colonies, accordingly, both the legal and the market rate of interest have been confiderably reduced during the course of the prefent century. As riches, improvement, and population have increased, intereft has declined. The wages of labour do not fink with the profits of ftock. The demand for labour increases with the increase of stock whatever be its profits; and after thefe are diminished, stock may not only continue to increase, but to increase much fafter than before. It is with industrious nations who are advancing in the acquifition of riches, as with induftrious individuals. A great stock, though with fmall profits, generally increases fafter than a fmall stock with great profits. Money, fays the proverb, makes money. When you have got a little, it is often easy to get more. The great difficulty is to get that little. The connection between the increase of stock and that of induftry, or of the demand for ufeful labour, has partly been explained already, but will be explained more fully hereafter in treating of the accumulation of ftock.

The acquifition of new territory, or of new branches of trade, may fometimes raise the profits of ftock, and with them the intereft of money,

I.

BOOK even in a country which is faft advancing in the acquifition of riches. The stock of the country not being fufficient for the whole acceffion of bufinefs, which fuch acquifitions prefent to the different people among whom it is divided, is applied to thofe particular branches only which afford the greateft profit. Part of what had before been employed in other trades, is neceffarily withdrawn from them, and turned into fome of the new and more profitable ones. In all thofe old trades, therefore, the competition comes to be lefs than before. The market comes to be lefs fully fupplied with many different forts of goods. Their price neceffarily rifes more or lefs, and yields a greater profit to thofe who deal in them, who can, therefore, afford to borrow at a higher intereft. For fome time after the conclufion of the late war, not only private people of the best credit, but fome of the greatest companies in London, commonly borrowed at five per cent. who before that had not been used to pay more than four, and four and a half per cent. The great acceffion both of territory and trade, by our acquifitions in North America and the Weft Indies, will fufficiently account for this, without fuppofing any diminution in the capital ftock of the fociety. So great an acceffion of new bufinefs to be carried on by the old ftock; muft neceffarily have diminished the quantity employed in a great number of particular branches, in which the competition being lefs, the profits must have been greater. Ifhall hereafter have occafion to mention the reafons which

difpofe

IX.

difpofe me to believe that the capital flock of CHA P. Great Britain was not diminished even by the enormous expence of the late war.

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The diminution of the capital stock of the fociety, or of the funds deftined for the maintenance of induftry, however, as it lowers the wages of labour, fo it raifes the profits of stock, and confequently the intereft of money. By the wages of labour being lowered, the owners of what stock remains in the fociety can bring their goods at lefs expence to market than before, and lefs ftock being employed in fupplying the market than before, they can fell them dearer. Their goods coft them lefs, and they get more for them. Their profits, therefore, being augmented at both ends, can well afford a large intereft. The great fortunes fo fuddenly and fo eafily acquired in Bengal and the other British fettlements in the East Indies, may fatisfy us that, as the wages of labour are very low, fo the profits of stock are very high in thofe ruined countries. The intereft of money is proportionably fo. In Bengal, money is frequently lent to the farmers at forty, fifty, and fixty per cent. and the fucceeding crop is mortgaged for the payment. As the profits which can afford fuch an interest must eat up almost the whole rent of the landlord, fo fuch enormous ufury muft in its turn eat up the greater part of those profits. Before the fall of the Roman republic, a ufury of the fame kind feems to have been common in the provinces, under the ruinous adminiftration of their proconfuls. The virtuous Brutus lent

money

BOOK money in Cyprus at eight-and-forty per cent. as we learn from the letters of Cicero.

I.

In a country which had acquired that full complement of riches which the nature of its foil and climate, and its fituation with respect to other countries, allowed it to acquire; which could, therefore, advance no further, and which was not going backwards, both the wages of labour and the profits of stock would probably be very low. In a country fully peopled in proportion to what either its territory could maintain or its stock employ, the competition for employment would neceffarily be fo great as to reduce the wages of labour to what was barely fufficient to keep up the number of labourers, and, the country being already fully peopled, that number could never be augmented. In a country fully stocked in proportion to all the business it had to tranfact, as great a quantity of stock would be employed in every particular branch as the nature and extent of the trade would admit. The competition, therefore, would every-where be as great, and confequently the ordinary profit as low as poffible.

But perhaps no country has ever yet arrived at this degree of opulence. China feems to have been long stationary, and had probably long ago acquired that full complement of riches which is confiftent with the nature of its laws and inftitutions. But this complement may be much inferior to what, with other laws and inftitutions, the nature of its foil, climate, and fituation might admit of. A country which neglects

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or defpifes foreign commerce, and which admits CHA P. the veffels of foreign nations into one or two of IX. its ports only, cannot transact the fame quantity of bufinefs which it might do with different laws and inftitutions. In a country too, where, though the rich or the owners of large capitals enjoy a good deal of fecurity, the poor or the owners of fmall capitals enjoy fcarce any, but are liable, under the pretence of justice, to be pillaged and plundered at any time by the inferior mandarines, the quantity of ftock employed in all the different branches of bufinefs tranfacted within it, can never be equal to what the nature and extent of that bufinefs might admit. In every different branch, the oppreffion of the poor muft establish the monopoly of the rich, who, by engroffing the whole trade to themselves, will be able to make very large profits. Twelve per cent. accordingly is faid to be the common interest of money in China, and the ordinary profits of stock must be sufficient to afford this large interest.

A defect in the law may fometimes raise the rate of interest confiderably above what the condition of the country, as to wealth or poverty, would require. When the law does not enforce the performance of contracts, it puts all borrowers nearly upon the fame footing with bankrupts or people of doubtful credit in better regulated countries. The uncertainty of recovering his money makes the lender exact the fame ufurious interest which is ufually required from bankrupts. Among the barbarous nations who

VOL. II.

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