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difpofe me to believe that the capital ftock of CHA P. Great Britain was not diminished even by the enormous expence of the late war.
The diminution of the capital stock of the fociety, or of the funds deftined for the maintenance of industry, however, as it lowers the wages of labour, fo it raifes the profits of ftock, and confequently the intereft of money. By the wages of labour being lowered, the owners of what ftock 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 flock 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 thofe 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
BOOK money in Cyprus at eight-and-forty per cent. as we learn from the letters of Cicero.
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 bufinefs 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
or defpifes foreign commerce, and which admits the veffels of foreign nations into one or two of its ports only, cannot tranfact the fame quantity of business 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 stock employed in all the different branches of bufinefs tranfacted within it, can never be equal to what the nature and extent of that business 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 intereft.
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
BOOK over-run the western provinces of the Roman I. 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 ufe 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 stock 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 interest 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. 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 stock that could be employed in it, as the ordinary rate of clear profit would be very fmall, fo the ufual market rate of interest 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 intereft of their money. All people of fmall 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 drefs, fo 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 should go to the rent of the land, and leaves only what is fufficient to pay the labour of preparing and bring