I.

BOOK over-run the western provinces of the Roman empire, the performance of contracts was left for many ages to the faith of the contracting parties. The courts of juftice of their kings feldom intermeddled in it. The high rate of interest which took place in those ancient times may perhaps be partly accounted for from this caufe.

When the law prohibits intereft altogether, it does not prevent it. Many people must borrow, and nobody will lend without fuch a confideration for the ufe of their money as is fuitable, not only to what can be made by the use of it, but to the difficulty and danger of evading the law. The high rate of intereft among all Mahometan nations is accounted for by Mr. Montefquieu, not from their poverty, but partly from this, and partly from the difficulty of recovering the money.

The loweft ordinary rate of profit must always be fomething more than what is fufficient to compenfate the occafional loffes to which every employment of ftock is expofed. It is this furplus only which is neat or clear profit. What is called grofs profit comprehends frequently, not only this furplus, but what is retained for compenfating fuch extraordinary loffes. The intereft which the borrower can afford to pay is in proportion to the clear profit only.

The loweft ordinary rate of intereft muft, in the fame manner, be fomething more than fufficient to compenfate the occafional loffes to which lending, even with tolerable prudence, is ex

pofed.

pofed.. Were it not more, charity or friendship c HA P. could be the only motives for lending.

In a country which had acquired its full complement of riches, where in every particular branch of bufinefs there was the greatest quantity of flock that could be employed in it, as the ordinary rate of clear profit would be very small, fo the ufual market rate of intereft which could be afforded out of it, would be fo low as to render it impoffible for any but the very wealthiest people to live upon the interest of their money. All people of finall or middling fortunes would be obliged to fuperintend themselves the employment of their own ftocks. It would be neceffary that almost every man should be a man of business, or engage in fome fort of trade. The province of Holland feems to be approaching near to this ftate. It is there unfashionable not to be a man of bufinefs. Neceffity makes it ufual for almost every man to be fo, and custom every where regulates fashion. As it is ridiculous not to dress, so is it, in fome measure, not to be employed, like other people. As a man of a civil profeffion feems awkward in a camp or a garrifon, and is even in fome danger of being defpifed there, fo does an idle man among men of bufinefs.

The highest ordinary rate of profit may be fuch as, in the price of the greater part of commodities, eats up the whole of what fhould go to the rent of the land, and leaves only what is fufficient to pay the labour of preparing and bring.

IX.

BOOK ing them to market, according to the lowest rate

I.

at which labour can any-where be paid, the bare fubfiftence of the labourer. The workman must always have been fed in fome way or other while he was about the work; but the landlord may not always have been paid. The profits of the trade which the fervants of the Eaft India Company carry on in Bengal may not perhaps be very far from this rate.

The proportion which the ufual market rate of intereft ought to bear to the ordinary rate of clear profit, neceffarily varies as profit rifes or falls. Double intereft is in Great Britain reckoned, what the merchants call, a good, moderate, reasonable profit; terms which I apprehend mean no more than a common and ufual profit. In a country where the ordinary rate of clear profit is eight or ten per cent. it may be reasonable that one half of it should go to intereft, wherever bufinefs is carried on with borrowed money. The stock is at the risk of the borrower, who, as it were, infures it to the lender; and four or five per cent. may, in the greater part of trades, be both a fufficient pro. fit upon the risk of this infurance, and a fufficient recompence for the trouble of employing the stock. But the proportion between interest and clear profit might not be the fame in countries where the ordinary rate of profit was either a good deal lower, or a good deal higher. If it were a good deal lower, one half of it perhaps could not be afforded for intereft; and

more

more might be afforded if it were a good deal CHA P. higher.

In countries which are faft advancing to riches, the low rate of profit may, in the price of many commodities, compenfate the high wages of labour, and enable thofe countries to fell as cheap as their lefs thriving neighbours, among whom the wages of labour may be lower.

In reality high profits tend much more to raise the price of work than high wages. If in the linen manufacture, for example, the wages of the different working people, the flax-dreffers, the spinners, the weavers, &c. fhould, all of them, be advanced two pence a day; it would be neceffary to heighten the price of a piece of linen only by a number of two pences equal to the number of people that had been employed about it, multiplied by the number of days during which they had been fo employed. That part of the price of the commodity which refolved itself into wages would, through all the different ftages of the manufacture, rife only in arithmetical proportion to this rife of wages. But if the profits of all the different employers of thofe working people should be raised five per cent. that part of the price of the commodity which refolved itself into profit, would, through all the different stages of the manufacture, rife in geometrical proportion to this rife of profit. The employer of the flax-dreffers would in selling his flax require an additional five per cent. upon the whole value of the materials and wages which he advanced to his workmen. The employer of

IX.

I.

BOOK the fpinners would require an additional five per cent. both upon the advanced price of the flax and upon the wages of the fpinners. And the employer of the weavers would require a like five per cent. both upon the advanced price of the linen yarn and upon the wages of the weavers. In raifing the price of commodities the rife of wages operates in the fame manner as fimple intereft does in the accumulation of debt. The rife of profit operates like compound interest. Our merchants and master-manufacturers complain much of the bad effects of high wages in raifing the price, and thereby leffening the fale of their goods both at home and abroad. They fay nothing concerning the bad effects of high profits. They are filent with regard to the pernicious effects of their own gains. They complain only of those of other people.

CHAP.