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An Inquiry Into The Nature And Causes Of The Wealth Of Nations - Chapter 1

1. Introduction And Plan Of The Work

2. Book 1, Chapter 1

3. Chapter 2

4. Chapter 3

5. Chapter 4

6. Chapter 5

7. Chapter 6

8. Chapter 7

9. Chapter 8

10. Chapter 8 continue

11. Chapter 9

12. Chapter 10

13. Chapter 10 continue

14. Chapter 11

15. Chapter 11 continue

16. Chapter 11 continue.

17. Chapter 11 continue..

18. Chapter 11 continue...

19. Conclusion of the Chapter 11

20. Book 2 Introduction

21. Chapter 1

22. Chapter II

23. Chapter II continue

24. Chapter II continue

25. Chapter 3

26. Chapter 4

27. Chapter 5

28. Book 3, Chapter 1

29. Chapter 2

30. Chapter 3

31. Chapter 4

32. Book 4, Chapter 1

33. Chapter 1 continue

34. Chapter 2

35. Chapter 3, Part 1

36. Chapter 3, Part 2

37. Chapter 4

38. Chapter 5

39. Chapter 5 continue

40. Chapter 6

41. Chapter 7, Part 1

42. Chapter 7, Part 2

43. Chapter 7, Part 3

44. Chapter 7, Part 3 continue

45. Chapter 8

46. Chapter 9

47. Book 5, Chapter 1, Part 1

48. Chapter 1, Part 2

49. Chapter 1, Part 3

50. Chapter 1, Part 3 continue

51. Chapter 1, Part 3 continue B

52. Chapter 1, Part 4

53. Chapter 2, Part 1

54. Chapter 2, Part 2

55. Chapter 2, Part 2 continue

56. Chapter 2, Part 2 continue B

57. Chapter 2, Part 2 continue C

58. Chapter 2, Part 2 continue D

59. Chapter 3

60. Chapter 3 continue

Chapter I. Of The Division Of Stock.

When the stock which a man possesses is no more than sufficient to
maintain him for a few days or a few weeks, he seldom thinks of
deriving any revenue from it. He consumes it as sparingly as he can,
and endeavours, by his labour, to acquire something which may supply its
place before it be consumed altogether. His revenue is, in this case,
derived from his labour only. This is the state of the greater part of
the labouring poor in all countries.

But when he possesses stock sufficient to maintain him for months or
years, he naturally endeavours to derive a revenue from the greater
part of it, reserving only so much for his immediate consumption as
may maintain him till this revenue begins to come in. His whole stock,
therefore, is distinguished into two parts. That part which he expects
is to afford him this revenue is called his capital. The other is that
which supplies his immediate consumption, and which consists either,
first, in that portion of his whole stock which was originally reserved
for this purpose; or, secondly, in his revenue, from whatever source
derived, as it gradually comes in; or, thirdly, in such things as had
been purchased by either of these in former years, and which are not yet
entirely consumed, such as a stock of clothes, household furniture, and
the like. In one or other, or all of these three articles, consists the
stock which men commonly reserve for their own immediate consumption.

There are two different ways in which a capital may be employed so as to
yield a revenue or profit to its employer.

First, it maybe employed in raising, manufacturing, or purchasing goods,
and selling them again with a profit. The capital employed in this
manner yields no revenue or profit to its employer, while it either
remains in his possession, or continues in the same shape. The goods
of the merchant yield him no revenue or profit till he sells them for
money, and the money yields him as little till it is again exchanged
for goods. His capital is continually going from him in one shape,
and returning to him in another; and it is only by means of such
circulation, or successive changes, that it can yield him any profit.
Such capitals, therefore, may very properly be called circulating

Secondly, it may be employed in the improvement of land, in the purchase
of useful machines and instruments of trade, or in such like things as
yield a revenue or profit without changing masters, or circulating any
further. Such capitals, therefore, may very properly be called fixed

Different occupations require very different proportions between the
fixed and circulating capitals employed in them.

The capital of a merchant, for example, is altogether a circulating
capital. He has occasion for no machines or instruments of trade, unless
his shop or warehouse be considered as such.

Some part of the capital of every master artificer or manufacturer must
be fixed in the instruments of his trade. This part, however, is very
small in some, and very great in others, A master tailor requires no
other instruments of trade but a parcel of needles. Those of the master
shoemaker are a little, though but a very little, more expensive. Those
of the weaver rise a good deal above those of the shoemaker. The far
greater part of the capital of all such master artificers, however,
is circulated either in the wages of their workmen, or in the price of
their materials, and repaid, with a profit, by the price of the work.

In other works a much greater fixed capital is required. In a great
iron-work, for example, the furnace for melting the ore, the forge, the
slit-mill, are instruments of trade which cannot be erected without
a very great expense. In coal works, and mines of every kind, the
machinery necessary, both for drawing out the water, and for other
purposes, is frequently still more expensive.

That part of the capital of the farmer which is employed in the
instruments of agriculture is a fixed, that which is employed in
the wages and maintenance of his labouring servants is a circulating
capital. He makes a profit of the one by keeping it in his own
possession, and of the other by parting with it. The price or value of
his labouring cattle is a fixed capital, in the same manner as that
of the instruments of husbandry; their maintenance is a circulating
capital, in the same manner as that of the labouring servants. The
farmer makes his profit by keeping the labouring cattle, and by parting
with their maintenance. Both the price and the maintenance of the cattle
which are bought in and fattened, not for labour, but for sale, are a
circulating capital. The farmer makes his profit by parting with them.
A flock of sheep or a herd of cattle, that, in a breeding country,
is brought in neither for labour nor for sale, but in order to make a
profit by their wool, by their milk, and by their increase, is a fixed
capital. The profit is made by keeping them. Their maintenance is a
circulating capital. The profit is made by parting with it; and it comes
back with both its own profit and the profit upon the whole price of the
cattle, in the price of the wool, the milk, and the increase. The whole
value of the seed, too, is properly a fixed capital. Though it goes
backwards and forwards between the ground and the granary, it never
changes masters, and therefore does not properly circulate. The farmer
makes his profit, not by its sale, but by its increase.

The general stock of any country or society is the same with that of
all its inhabitants or members; and, therefore, naturally divides itself
into the same three portions, each of which has a distinct function or

The first is that portion which is reserved for immediate consumption,
and of which the characteristic is, that it affords no revenue or
profit. It consists in the stock of food, clothes, household furniture,
etc. which have been purchased by their proper consumers, but which are
not yet entirely consumed. The whole stock of mere dwelling-houses,
too, subsisting at anyone time in the country, make a part of this
first portion. The stock that is laid out in a house, if it is to be the
dwelling-house of the proprietor, ceases from that moment to serve in
the function of a capital, or to afford any revenue to its owner. A
dwelling-house, as such, contributes nothing to the revenue of its
inhabitant; and though it is, no doubt, extremely useful to him, it
is as his clothes and household furniture are useful to him, which,
however, make a part of his expense, and not of his revenue. If it is
to be let to a tenant for rent, as the house itself can produce nothing,
the tenant must always pay the rent out of some other revenue, which
he derives, either from labour, or stock, or land. Though a house,
therefore, may yield a revenue to its proprietor, and thereby serve in
the function of a capital to him, it cannot yield any to the public, nor
serve in the function of a capital to it, and the revenue of the whole
body of the people can never be in the smallest degree increased by it.
Clothes and household furniture, in the same manner, sometimes yield a
revenue, and thereby serve in the function of a capital to particular
persons. In countries where masquerades are common, it is a trade to
let out masquerade dresses for a night. Upholsterers frequently let
furniture by the month or by the year. Undertakers let the furniture of
funerals by the day and by the week. Many people let furnished houses,
and get a rent, not only for the use of the house, but for that of the
furniture. The revenue, however, which is derived from such things, must
always be ultimately drawn from some other source of revenue. Of all
parts of the stock, either of an individual or of a society, reserved
for immediate consumption, what is laid out in houses is most slowly
consumed. A stock of clothes may last several years; a stock of
furniture half a century or a century; but a stock of houses, well built
and properly taken care of, may last many centuries. Though the period
of their total consumption, however, is more distant, they are still as
really a stock reserved for immediate consumption as either clothes or
household furniture.

The second of the three portions into which the general stock of
the society divides itself, is the fixed capital; of which the
characteristic is, that it affords a revenue or profit without
circulating or changing masters. It consists chiefly of the four
following articles.

First, of all useful machines and instruments of trade, which facilitate
and abridge labour.

Secondly, of all those profitable buildings which are the means of
procuring a revenue, not only to the proprietor who lets them for a
rent, but to the person who possesses them, and pays that rent for them;
such as shops, warehouses, work-houses, farm-houses, with all their
necessary buildings, stables, granaries, etc. These are very different
from mere dwelling-houses. They are a sort of instruments of trade, and
may be considered in the same light.

Thirdly, of the improvements of land, of what has been profitably laid
out in clearing, draining, inclosing, manuring, and reducing it into the
condition most proper for tillage and culture. An improved farm may
very justly be regarded in the same light as those useful machines
which facilitate and abridge labour, and by means of which an equal
circulating capital can afford a much greater revenue to its employer.
An improved farm is equally advantageous and more durable than any of
those machines, frequently requiring no other repairs than the most
profitable application of the farmer's capital employed in cultivating

Fourthly, of the acquired and useful abilities of all the inhabitants
and members of the society. The acquisition of such talents, by
the maintenance of the acquirer during his education, study, or
apprenticeship, always costs a real expense, which is a capital fixed
and realized, as it were, in his person. Those talents, as they make a
part of his fortune, so do they likewise that of the society to which
he belongs. The improved dexterity of a workman may be considered in
the same light as a machine or instrument of trade which facilitates and
abridges labour, and which, though it costs a certain expense, repays
that expense with a profit.

The third and last of the three portions into which the general stock
of the society naturally divides itself, is the circulating capital,
of which the characteristic is, that it affords a revenue only by
circulating or changing masters. It is composed likewise of four parts.

First, of the money, by means of which all the other three are
circulated and distributed to their proper consumers.

Secondly, of the stock of provisions which are in the possession of the
butcher, the grazier, the farmer, the corn-merchant, the brewer, etc.
and from the sale of which they expect to derive a profit.

Thirdly, of the materials, whether altogether rude, or more or less
manufactured, of clothes, furniture, and building which are not yet made
up into any of those three shapes, but which remain in the hands of
the growers, the manufacturers, the mercers, and drapers, the
timber-merchants, the carpenters and joiners, the brick-makers, etc.

Fourthly, and lastly, of the work which is made up and completed, but
which is still in the hands of the merchant and manufacturer, and not
yet disposed of or distributed to the proper consumers; such as the
finished work which we frequently find ready made in the shops of
the smith, the cabinet-maker, the goldsmith, the jeweller, the
china-merchant, etc. The circulating capital consists, in this manner,
of the provisions, materials, and finished work of all kinds that are
in the hands of their respective dealers, and of the money that is
necessary for circulating and distributing them to those who are finally
to use or to consume them.

Of these four parts, three--provisions, materials, and finished
work, are either annually or in a longer or shorter period, regularly
withdrawn from it, and placed either in the fixed capital, or in the
stock reserved for immediate consumption.

Every fixed capital is both originally derived from, and requires to be
continually supported by, a circulating capital. All useful machines and
instruments of trade are originally derived from a circulating
capital, which furnishes the materials of which they are made, and the
maintenance of the workmen who make them. They require, too, a capital
of the same kind to keep them in constant repair.

No fixed capital can yield any revenue but by means of a circulating
capital The most useful machines and instruments of trade will produce
nothing, without the circulating capital, which affords the materials
they are employed upon, and the maintenance of the workmen who
employ them. Land, however improved, will yield no revenue without a
circulating capital, which maintains the labourers who cultivate and
collect its produce.

To maintain and augment the stock which maybe reserved for immediate
consumption, is the sole end and purpose both of the fixed and
circulating capitals. It is this stock which feeds, clothes, and lodges
the people. Their riches or poverty depend upon the abundant or sparing
supplies which those two capitals can afford to the stock reserved for
immediate consumption.

So great a part of the circulating capital being continually withdrawn
from it, in order to be placed in the other two branches of the general
stock of the society, it must in its turn require continual supplies
without which it would soon cease to exist. These supplies are
principally drawn from three sources; the produce of land, of mines,
and of fisheries. These afford continual supplies of provisions and
materials, of which part is afterwards wrought up into finished work
and by which are replaced the provisions, materials, and finished work,
continually withdrawn from the circulating capital. From mines, too, is
drawn what is necessary for maintaining and augmenting that part of it
which consists in money. For though, in the ordinary course of business,
this part is not, like the other three, necessarily withdrawn from it,
in order to be placed in the other two branches of the general stock of
the society, it must, however, like all other things, be wasted and
worn out at last, and sometimes, too, be either lost or sent abroad,
and must, therefore, require continual, though no doubt much smaller

Lands, mines, and fisheries, require all both a fixed and circulating
capital to cultivate them; and their produce replaces, with a profit not
only those capitals, but all the others in the society. Thus the farmer
annually replaces to the manufacturer the provisions which he had
consumed, and the materials which he had wrought up the year before; and
the manufacturer replaces to the farmer the finished work which he had
wasted and worn out in the same time. This is the real exchange that
is annually made between those two orders of people, though it seldom
happens that the rude produce of the one, and the manufactured produce
of the other, are directly bartered for one another; because it seldom
happens that the farmer sells his corn and his cattle, his flax and his
wool, to the very same person of whom he chuses to purchase the
clothes, furniture, and instruments of trade, which he wants. He sells,
therefore, his rude produce for money, with which he can purchase,
wherever it is to be had, the manufactured produce he has occasion for.
Land even replaces, in part at least, the capitals with which fisheries
and mines are cultivated. It is the produce of land which draws the fish
from the waters; and it is the produce of the surface of the earth which
extracts the minerals from its bowels.

The produce of land, mines, and fisheries, when their natural fertility
is equal, is in proportion to the extent and proper application of the
capitals employed about them. When the capitals are equal, and equally
well applied, it is in proportion to their natural fertility.

In all countries where there is a tolerable security, every man of
common understanding will endeavour to employ whatever stock he can
command, in procuring either present enjoyment or future profit. If it
is employed in procuring present enjoyment, it is a stock reserved for
immediate consumption. If it is employed in procuring future profit, it
must procure this profit either by staying with him, or by going from
him. In the one case it is a fixed, in the other it is a circulating
capital. A man must be perfectly crazy, who, where there is a tolerable
security, does not employ all the stock which he commands, whether it
be his own, or borrowed of other people, in some one or other of those
three ways.

In those unfortunate countries, indeed, where men are continually afraid
of the violence of their superiors, they frequently bury or conceal a
great part of their stock, in order to have it always at hand to carry
with them to some place of safety, in case of their being threatened
with any of those disasters to which they consider themselves at all
times exposed. This is said to be a common practice in Turkey, in
Indostan, and, I believe, in most other governments of Asia. It seems to
have been a common practice among our ancestors during the violence of
the feudal government. Treasure-trove was, in these times, considered
as no contemptible part of the revenue of the greatest sovereigns in
Europe. It consisted in such treasure as was found concealed in the
earth, and to which no particular person could prove any right. This was
regarded, in those times, as so important an object, that it was always
considered as belonging to the sovereign, and neither to the finder nor
to the proprietor of the land, unless the right to it had been conveyed
to the latter by an express clause in his charter. It was put upon the
same footing with gold and silver mines, which, without a special clause
in the charter, were never supposed to be comprehended in the general
grant of the lands, though mines of lead, copper, tin, and coal were, as
things of smaller consequence.

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